SANTARUSSANTARUS 2 0 0 5 A N N U A L R E P O R T

To be a highly successful specialty pharmaceutical company with expertise in the development and commercialization of proprietary products that treat gastrointestinal diseases and disorders and enhance the quality of life for patients.

In February 2006, Santarus received

FDA approval of a New Drug

Application (NDA) for ZEGERID®

(omeprazole/sodium bicarbonate)

Capsules, the third of four NDAs

approved for the ZEGERID family of

products since mid-2004. We believe

our immediate-release capsule

product offers a differentiated

alternative in the $12.8 billion U.S.

prescription market for proton pump

inhibitors (PPIs).

SANTARUSMISSION

1.

To Our Stockholders:

In 2005 Santarus took a number of major steps in executing on its overall mission to become a highly successful specialty pharmaceutical company with the approval of ZEGERID Powder for Oral Suspension 40 mg and the submission of New Drug Applications (NDAs) for ZEGERID Capsules and ZEGERID Chewable Tablets.

Importantly, we believe we now have the necessary components for market success, most notably an established sales and marketing infrastructure, including a well-trained sales force, a competitive position within managed care organizations, and U.S. Food and Drug Administration (FDA) approval of ZEGERID Capsules. While our ZEGERID Powder for Oral Suspension product allowed us to begin to establish the ZEGERID brand and create relationships with physicians who are high-prescribers of PPIs, we believe the capsule dosage form allows us to be more competitive, as approximately 98% of PPI prescriptions are written for capsules and swallowable tablets.

The U.S. PPI prescription market, including five delayed-release PPI brands, had sales of $12.8 billion in 2005, according to the independent pharmaceutical market research firm IMS Health. We are looking forward to offering physicians and their patients the first and only immediate-release PPI in a convenient capsule formulation.

We filed NDAs with the FDA for ZEGERID Capsules and ZEGERID Chewable Tablets during the second quarter of 2005. Submitting one NDA is a major achievement for any pharmaceutical company; submitting two within a 30-day period was remarkable for a company of our size.

The FDA approved ZEGERID Capsules in February 2006 and ZEGERID with Magnesium Hydroxide Chewable Tablets in March 2006 for all of the indications we were seeking. All of our NDAs have been approved within the initial 10-month review period under the Prescription Drug User Fee Act (PDUFA) guidelines, which we believe reflects the capabilities of our clinical, product development and regulatory teams and the overall quality of our submissions. Given the market’s preference for capsules and swallowable tablets, our focus in the near term is on successfully commercializing ZEGERID Capsules.

In late 2004 when we launched ZEGERID Powder for Oral Suspension 20 mg, the first product in our ZEGERID family, we had experienced sales representatives, but they were new to our company and our product and many were new to their physician customer base.

Santarus has come a long way since then.

The day we received FDA approval for ZEGERID Capsules coincided with the start of our annual national sales meeting, and enthusiasm for ZEGERID Capsules could not have been higher. We speak for our entire sales and marketing team in conveying our excitement for this new product.

We launched ZEGERID Capsules in late March 2006 with our existing sales organization of approximately 200 sales representatives and 170 sales representatives from Otsuka America

Right: David F. Hale, Chairman

Pharmaceutical products known as proton pump inhibitors (PPIs) are widely prescribed for the treatment of a variety of diseases and disorders of the upper digestive tract. All currently marketed oral PPIs are delayed-release products with the exception of ZEGERID Capsules and ZEGERID Powder for Oral Suspension, which are the first and only immediate-release oral PPIs. Instead of an enteric coating, ZEGERID utilizes one or more antacids to neutralize stomach acid and protect the PPI, omeprazole, from gastric acid degradation and allow for its rapid absorption and suppression of gastric acid.

Left: Gerald T. Proehl, President and Chief Executive Officer

2.

Pharmaceutical, Inc., our co-promotion partner. This combined sales force is focusing on 26,000 physicians who are among the highest prescribers of PPIs in the U.S. Based on independent market research, we believe these physicians accounted for PPI prescriptions valued at approximately $4.4 billion in 2005.

Our success in reaching targeted physicians is evident in the fact that to date, more than 16,000 physicians have written at least one prescription for ZEGERID. With the launch of ZEGERID Capsules, our goal is to increase the frequency that targeted physicians write ZEGERID prescriptions and to establish ZEGERID Capsules as a differentiated alternative to the delayed-release PPIs.

We have made significant progress with third-party reimbursement coverage, and have achieved a claims approved rate for reimbursement of ZEGERID Powder for Oral Suspension prescriptions which is similar to that of our well-established competitors. Nearly all of our existing contracts provide coverage for ZEGERID Capsules in addition to ZEGERID Powder for Oral Suspension without further negotiation. We will continue to focus our efforts on improving ZEGERID’s reimbursement coverage, including negotiating to move ZEGERID to Tier 2 status in more plans as contracts come up for renewal over the next 12 to 24 months.

Several articles authored by key opinion leaders and a journal supplement have been published in peer-reviewed medical journals that provide information about ZEGERID on a physician-to-physician basis. Our clinical team is planning additional clinical trials to further differentiate our ZEGERID family of products. With additional clinical data, we anticipate an increase in the number of published articles that discuss ZEGERID and the benefits of its immediate-release profile.

We have entered 2006 recognizing the critical importance of successfully launching ZEGERID Capsules and believe we are well prepared for the launch. We have a differentiated PPI product, an established sales and marketing infrastructure and increased brand awareness in our targeted physician group. We are looking forward to providing physicians and their patients with an immediate-release PPI in their preferred dosage form.

We want to thank our Santarus colleagues for their dedication and commitment. On behalf of the Santarus board and management team, we also want to thank our stockholders for your continued support, and we look forward to reporting on our progress in the months to come.

Our sales organization is focusing on 26,000 physicians who are among the highest prescribers of PPIs in the U.S. Based on independent market research, we believe these physicians accounted for PPI prescriptions valued at approximately $4.4 billion in 2005. Our success in reaching targeted physicians is evident in the fact that to date, more than 16,000 physicians have written at least one prescription for ZEGERID.

“We have entered 2006 recognizing the critical importance of successfully launching ZEGERID Capsules and believe we are well prepared for the launch. We have a differentiated PPI product, an established sales and marketing infrastructure and increased brand awareness in our targeted physician group. We are looking forward to providing physicians and their patients with an immediate-release PPI in their preferred dosage form.”

Sincerely,

Gerald T. ProehlPresident and Chief Executive Officer

David F. HaleChairman

B

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C

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H

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A. JULIE A. DEMEULESSenior Vice President, Human Resources

C. MICHAEL D. STEP Senior Vice President, Corporate Development

E. CAREY J. FOX, J.D.Vice President, General Counsel

G. GERALD T. PROEHLPresident, Chief Executive Officer and Director

B. WARREN E. HALL Senior Vice President, Manufacturing and Product Development

D. WILLIAM C. DENBY, IIISenior Vice President, Commercial Operations

F. E. DAVID BALLARD II, M.D. Vice President, Clinical Research and Medical Affairs

H.DEBRA P. CRAWFORD Senior Vice President, Chief Financial Officer

EXECUTIVE OFFICERS

4.

“ ZEGERID products offer a pharmacological profile that is distinct from other oral PPI products, all of which are delayed-release drugs. ZEGERID products are immediate-release drugs that reach maximal plasma levels rapidly (in approximately 30 minutes), have a median 24-hour gastric pH > 4 ranging from 12.2 to 18.6 hours after repeated once-daily dosing (depending on the strength and dosage form), and offer convenient once-a-day dosing. We were pleased to have data from two of our clinical trials conducted in 2003 and 2004 published in peer-reviewed gastroenterology journals in the first half of 2005. In addition, a number of excellent ZEGERID review articles authored by physicians who are key opinion leaders in the field of acid-related disorders were published in peer-reviewed journals in late 2005.”

In 2001 we signed an exclusive, worldwide license agreement with the University of Missouri for intellectual property relating to immediate-release PPIs. We have made rapid progress in developing the ZEGERID family of products, with ZEGERID Powder for Oral Suspension 20 mg approved by the FDA in mid-2004, the 40 mg suspension product approved in late 2004 and ZEGERID Capsules and ZEGERID with Magnesium Hydroxide Chewable Tablets approved in early 2006.

Our ZEGERID products are proprietary immediate-release formulations of the PPI omeprazole and are commercially available in powder for oral suspension and capsule forms. ZEGERID is approved to treat heartburn and other symptoms associated with gastroesophageal reflux disease (GERD), erosive esophagitis, and duodenal and gastric ulcers. ZEGERID Powder for Oral Suspension 40 mg is also indicated for the reduction of risk of upper GI bleeding in critically ill patients.

PPIs enjoy widespread use due to their potent acid suppression, favorable safety profile and once-a-day dosing. However, all currently marketed PPIs, other than ZEGERID, are avail-able for oral use only in delayed-release, enteric coated formulations. While the enteric coating

protects the PPI from acid degradation, it also delays absorption.

We have developed our ZEGERID family of products to provide distinct features*:

Immediate-Release – Our ZEGERID products reach maximal plasma levels in approximately 30 minutes as compared to delayed-release PPIs whose enteric coatings delay absorption and initial acid suppression.Duration of Acid Control – Clinical data indicate that ZEGERID products provide a duration of acid control similar to delayed-release PPIs and, thus, allow for once-a-day dosing.Nocturnal Acid Control – ZEGERID Powder for Oral Suspension has demonstrated effective acid control during the night when dosed at bedtime in two clinical studies.Variety of Formulations – ZEGERID products are currently available in capsule and powder for oral suspension formulations, and we have also developed a chewable tablet formulation.We plan to pursue expanded indications and uses for our ZEGERID products based on their specific features and benefits.

In a specialty pharmaceutical company it is important to have a strong pharmaceutical development and manufacturing team. Enhanced formulations, stable drugs with long shelf-life and ease of manufacturing are all important to make a successful pharmaceutical product. Pictured: Left, Laura Gallo, Pharmaceutical Technology Engineer and Right, Laura Weston, Director, Pharmaceutical Technology.

ZEGERID – A DISTINCTIVE PHARMACOLOGICAL PROFILE

Gregg Checani, M.D., Director, Medical Information & Drug Safety

*Please see important safety information on page 6.

The clinical relevence of this data is unknown.

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

038-2 0 6 14 22 30

pH 3.5

pH 5.0

pH 6.0

pH 6.5

Antacid buffer raises pH to >7 within 1 minute

Effect of 20 mEq sodium bicarbonate in powder for suspension (in vitro model)Minutes

ZEGERID Antacid Effect on pH

ZEGERID utilizes sodium bicarbonate to neutralize stomach acid to allow for the rapid absorption of the PPI, omeprazole.

pH

0 1 2 3 4 5 6

Zegerid Immediate-Release 40 mg

Prilosec® Delayed-Release 40 mg

ZEGERID Immediate-Release Profile

Hours

Plas

ma

Om

epra

zole

(ng/

mL)

1/2

ZEGERID Capsules show similar effects in general to the suspension.

(n=24)

1800

1600

1400

1200

1000

800

600

400

200

0

Maximal blood levels of omeprazole with ZEGERID Powder for Oral Suspension reached in 30 minutes vs.1 -2 hours with Prilosec delayed release capsules.

.

Median values for the time gastric pH>4 during a 24-hour period for patients taking ZEGERID Powder for Oral Suspension and Capsules, 20 mgand 40 mg doses, ranged from 12.2 to 18.6 hours on Day 7.

ZEGERID Duration of Effect

18.6 h0 2 4 6 8 10 12 14 16 18 20 22 24

Value represents median time pH > 4 as measured on Day 7.Hours

ZEGERID 40 mg Powder for Oral Suspension

61*

92*

*p < 0.001 for both comparisons

% o

f Pat

ient

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ith N

AB

In this randomized, open-label crossover study (n=49), ZEGERID Powder for Oral Suspension had a statistically significant lower incidence of NAB than two market-leading PPI products.

Day 7

ZEGERID Demonstrated a Lower Incidence of Nocturnal Acid Breakthrough (NAB)

ZEGERID40 mg

Prevacid®

40 mg

100908070605040302010

0

92 *

Nexium®

40 mg

5.

WORKING WITH THE MEDICAL COMMUNITY MAKING THE CASE FOR AN IMMEDIATE-RELEASE PPI

“ Our scientific affairs liaison team works to increase knowledge about ZEGERID products within the medical community by serving as a resource for healthcare professionals. We provide clinical and scientific information to build a better understanding of ZEGERID and its clinical features. Our scientific affairs liaisons have advanced degrees in the medical or biological sciences and, therefore, are able to discuss our products and related information on a scientific level.”

David Kriesel Director, Scientific Affairs

6.

ZEGERID Capsules and ZEGERID Powder for Oral Suspension are indicated for: • heartburn and other symptoms

associated with gastroesophageal reflux disease (GERD)

• short-term treatment of active duodenal ulcer

• short-term treatment (4-8 weeks) of active benign gastric ulcer

• short-term treatment (4-8 weeks) of erosive esophagitis which has been diagnosed by endoscopy

• maintenance of healing of erosive esophagitis (controlled studies do not extend beyond 12 months)

In addition, ZEGERID Powder for Oral Suspension 40 mg is the only PPI product approved for reduction of risk of upper GI bleeding in critically ill patients.

In March 2006, we received FDA approval of ZEGERID with Magnesium Hydroxide Chewable Tablets for the same indications as ZEGERD Capsules. We are evaluating the positioning and launch timing

of the chewable tablet dosage form. Given the general market preference for the capsule dosage form, our commercial launch plan is based on a strategy to maximize our resources to best position ZEGERID Capsules for success.

Product Description

ZEGERID contains a combination of omeprazole, a PPI, and one or more antacids, which raise the gastric pH and thus protect the omeprazole from acid degradation.

Important Safety Information

The most frequently reported adverse events with ZEGERID are headache, diarrhea, and abdominal pain. In critically ill patients treated with ZEGERID, adverse events generally reflected the serious, underlying medical condition of the patients, and were similar for patients treated with ZEGERID and with the competitor (acid-controlling) drug. Symptomatic response to therapy does not preclude the presence of gastric malignancy. Atrophic gastritis has been noted occasionally in gastric

corpus biopsies from patients treated long term with omeprazole.

ZEGERID Capsules contain 300 mg of sodium per dose in the form of sodium bicarbonate (1100 mg/13 mEq), and ZEGERID Powder for Oral Suspension contains 460 mg of sodium per dose in the form of sodium bicarbonate (1680 mg/20 mEq). The chewable tablet dosage form contains 600 mg (7 mEq) of sodium bicarbonate. This should be taken into consideration for patients on a sodium-restricted diet. Sodium bicarbonate is contraindicated in patients with metabolic alkalosis and hypocalcemia. The chewable tablet dosage form also contains 700 mg (24 mEq) of magnesium hydroxide. The use of magnesium hydroxide is associated with diarrhea, abdominal cramping, chalky taste, diueresis, dehydration, nausea and vomiting. ZEGERID is contraindicated in patients with known hypersensitivity to any component of the formulation. Full prescribing and safety information is available at www.Zegerid.com.

ZEGERID PRODUCT FAMILY

Fred Oliver, ZEGERID Patient

Fred Oliver has suffered from GERD for many years with heartburn and other symptoms during the day and at night. Over time, the severity of his reflux has resulted in a condition in his lower esophagus called esophageal strictures, a gradual narrowing of the esophagus, which can lead to swallowing difficulties. Prior to taking ZEGERID, Fred had two procedures to dilate his esophagus to relieve his swallowing difficulties. Fred’s physician prescribed ZEGERID Powder for Oral Suspension to control his GERD symptoms.** Talk to your doctor or healthcare professional to see if ZEGERID is right for you. For full prescribing and safety information, visit www.Zegerid.com.

7.

8.

With the launch of ZEGERID Capsules, Santarus offers ZEGERID in two dosage forms (capsules and powder for oral suspension) and at two dosage strengths, 40 mg and 20 mg. In the PPI market, over 90 percent of prescriptions are written at the highest dosage strength of the leading branded PPI products, and we expect that, over time, prescriptions for ZEGERID Capsules and ZEGERID Powder for Oral Suspension will follow this same trend. ZEGERID is packaged with a 30-day supply of capsules per bottle and for the suspension, a 30-day supply of single dose packets per carton.

We are launching ZEGERID Capsules with a combined sales force with our co-promotion partner, Otsuka America, of approximately 370 sales representatives who are targeting 26,000 of the highest PPI-prescribing physicians in the U.S. We plan to continue building on the ZEGERID brand recognition we have established in the marketplace, and with the introduction of ZEGERID Capsules, seek to strengthen our competitive position as the first and only immediate-release oral PPI.

9.

Commercial shipments of ZEGERID Capsules commenced in late March 2006 with a launch campaign focused on “Rapid Release. Continued Control.” Our sales and promotional activities highlight ZEGERID’s differentiated clinical features and are focused on high-prescribing physicians.

Our sales organization is continuing coordinated weekly sales calls by the Santarus and Otsuka America representatives to a target group of 10,000 physicians who are high prescribers of PPIs. We believe that within this physician group, our combined frequency call rate is comparable to that of our larger competitors and may translate into increased awareness and more ZEGERID prescriptions. We are continuing to contact a group of approximately 16,000 additional high-prescribing physicians with a less frequent call pattern and with our pro-motional marketing programs, which are directed to all of our targeted physicians.

There are other promotional activities that complement our sales activities for the ZEGERID Capsule launch:

• Product sampling initially is expected to be quite heavy as our sales representatives provide samples to physician offices. Following the initial sampling, we allow physician usage to determine the “pull-through” of ZEGERID samples.

• During the launch of ZEGERID Capsules, we are advertising in nine medical journals, featuring the ZEGERID product family in two-page ads.

• Our ZEGERID promotional speaker program is continuing with new speaker materials, and we are training a number of additional physician advocates. We believe that the effectiveness of physician-to-physician communication about ZEGERID is increasing awareness of ZEGERID’s distinct pharma-cological profile.

• We are implementing a new patient savings program aimed at increasing trial time by providing savings on initial prescriptions, and we plan to continue our point-of-service coupon program that reduces the copay by up to $30 for first-time ZEGERID patients, which comes close to eliminating the average copay for ZEGERID on a patient’s first prescription.

The approval of ZEGERID Capsules was a major milestone for our company and a significant addition to our family of ZEGERID products. We now offer physicians and their patients the first and only immediate-release PPI in a convenient capsule dosage form, which is the PPI dosage form strongly preferred by physicians.

ZEGERID products are the first and only immediate-release oral PPI products which have a distinctive pharmacological profile, rapidly reaching maximal plasma levels and providing 24-hour acid control. ZEGERID offers nighttime or daytime acid control. Dosing of ZEGERID is convenient, once-a-day at bedtime or daytime, at least one hour before a meal on an empty stomach.

ZEGERID CAPSULES COMMERCIAL LAUNCHTHE FIRST AND ONLY IMMEDIATE-RELEASE PPI CAPSULE

10.

The success of any company depends on the dedication of its employees. Santarus district sales managers have been leaders in the sales and promotion of ZEGERID Powder for Oral Suspension. Our sales organization has had more than a year of experience selling ZEGERID Powder for Oral Suspension and has established relationships with target physicians. Pictured from left to right, selected District Sales Managers: Mark Garnett, David Bartini, Carmen Stefano, Russell Bex, and Andrew Odenwald.

FOCUS IN SALES AND MARKETING.

To fulfill our mission to become a successful specialty pharmaceutical company, we look for currently marketed or late-stage products or compounds that have demonstrated safety and efficacy in clinical testing. We seek to improve these products or compounds, or expand the market for them with new formulations, enhanced delivery systems and expanded indications. We believe this strategy will allow us to more rapidly commercialize our products with potentially reduced development risk and cost as compared with the development of early-stage new chemical entities.

Our commercial sales organization is targeting the highest PPI-prescribing physicians in the U.S. with a focus on approximately 26,000 gastroenterologists

and primary care physicians. Based on independent market research, we believe this group collectively wrote approximately $4.4 billion of PPI prescriptions in 2005. By concentrating our efforts on this group of high-volume PPI prescribers, we believe we can more effectively promote our ZEGERID products with a relatively small and focused sales and marketing organization. We also believe the relationships that our sales organization has formed with target physicians since the late 2004 launch of ZEGERID Powder for Oral Suspension will be important to the successful launch of ZEGERID Capsules in the year to come.

Our commercial organization includes approximately 200 field sales represent-atives with an average of five years of pharmaceutical sales experience, posi-tioned in major metropolitan areas across

the U.S. Many of our representatives have experience with GI products, including PPIs. In addition to our field sales representatives, our sales manage-ment team includes experienced district sales managers and regional sales directors.

To complement our commercial sales organization, in 2004 we entered into a co-promotion agreement with Otsuka America, under which their approxi-mately 170 field sales representatives co-promote ZEGERID Capsules and ZEGERID Powder for Oral Suspension to our targeted physicians in the first position sales call.

In addition to our sales activities, we use a variety of marketing programs to extend the reach of our marketing message about ZEGERID, including speaker programs, journal advertising, electronic media and product sampling.

COMMERCIAL ORGANIZATIONSALES AND MARKETING

Since the inclusion of a product on a formulary can lead to its sharply increased usage in a managed care organization’s patient population, our managed care team works to secure the best possible formulary position for the ZEGERID family of products.

11.

The process for obtaining formulary coverage can be lengthy and time-consuming. Through significant effort, we have made progress in the contracting for ZEGERID Powder for Oral Suspension. In most cases, our existing contracts provide reimbursement coverage for the ZEGERID family of products and will provide coverage for ZEGERID Capsules, in addition to ZEGERID Powder for Oral Suspension, without further negotiation. Pictured: Douglas Van Weelde, Senior Director, Account Management.

MAKING PROGRESS IN MANAGED CARE CONTRACTING.

Our ability to sell our products depends in large part on the extent to which reimbursement for the cost of our ZEGERID products is available from private health insurers, managed care organizations, government entities and others. Most managed care organi-zations negotiate the price of medical services and products. Drug products are placed on formulary lists according to the price negotiated between man-aged care companies and a drug manu-facturer. Generic drugs are generally placed on Tier 1. Tier 2, Tier 3 or higher Tiers are generally reserved for branded pharmaceutical products at negotiated discounts. Since the inclusion of a product on a formulary can lead to its sharply increased usage in a managed care organization’s patient population, our managed care team

works to secure the best possible formulary position for the ZEGERID family of products.

To address this critical aspect of our business, we have hired a staff of experi-enced national and regional account managers who seek formulary accept-ance for our ZEGERID products. Our account managers meet with private health insurers, managed care organi-zations, pharmacy benefit managers, government entities and other third-party payors, seeking reimbursement coverage for our products.

We are pleased with the results produced by our managed care account team in a short period of time. As of February 2006, the “claims approved rate” for ZEGERID Powder for Oral Suspension was comparable to that of the branded delayed-release PPI products, all of which have been on the market for five years or more. The claims approved rate reflects the percent of time that a

prescription is approved for reimburse-ment by an insurer or managed care plan after being presented for payment.

We believe that the launch of ZEGERID Capsules may improve our ability to contract with managed care providers and our contracting leverage may increase as we build volume in our capsules sales.

ZEGERID Capsules were launched with a wholesale acquisition cost, or WAC, of $3.24 per 40 mg or 20 mg dose. At this price, Santarus believes ZEGERID Capsules will offer an attractive value to physicians and their patients as the lowest priced branded PPI capsule or swallowable tablet, representing an approximately 23 percent savings compared to the market-leading PPI.

Currently, ZEGERID is on Tier 3 on most insurance plans. Over time our goal is to improve ZEGERID’s status on more plans as contracts come up for nego-tiation and renewal over the next 12 to 24 months.

MANAGED CARECOMMERCIAL ORGANIZATIONSALES AND MARKETING

SELECTED FINANCIAL DATA

2005 2004 2003 2002 2001

Cash, cash equivalents and short-term investments $ 69,367 $ 114,008 $ 45,648 $ 11,804 $ 22,281Working capital 59,572 94,346 42,376 7,697 21,526Total assets 79,935 122,216 48,188 14,207 24,332Deferred revenue, less current portion 8,571 11,429 — — — Long-term debt, less current portion — 38 224 479 —Redeemable convertible preferred stock — — 57,625 — — Total stockholders’ equity (deficit) 54,520 85,843 (13,751) 9,074 23,288

As of December 31,

Balance Sheet Data:(in thousands)

2005 2004 2003 2002 2001

Revenues:Product sales, net $ 13,667 $ 634 $ — $ — $ —Sublicense and co-promotion revenue 12,857 714 — 8,000 —

Total revenues 26,524 1,348 — 8,000 —Costs and expenses: Cost of sales 2,129 1,968 — — —License fees and royalties 3,414 5,089 1,000 1,400 1,294Research and development 10,402 23,199 13,176 15,398 5,672Selling, general and administrative 77,653 48,306 6,548 6,034 3,241Stock-based compensation 2,628 5,672 2,252 277 87

Total costs and expenses 96,226 84,234 22,976 23,109 10,294

Loss from operations (69,702) (82,886) (22,976) (15,109) (10,294)Interest and other income, net 4,716 1,391 465 414 726

Net loss (64,986) (81,495) (22,511) (14,695) (9,568)Accretion to redemption value of redeemable convertible preferred stock — (1,124) (2,940) — —Beneficial conversion of short-term notes payable to related parties — — — — (135)

Net loss attributable to common stockholders $ (64,986) $ (82,619) $ (25,451) $ (14,695) $ (9,703)

Basic and diluted net loss per share $ (1.66) $ (3.30) $ (13.71) $ (9.13) $ (7.08)

Weighted average shares outstanding to calculate basic and diluted net loss per share 39,188 25,017 1,857 1,610 1,371

Year Ended December 31,

Statement of Operations Data:(in thousands, except per share data)

The selected statement of operations data for the years ended December 31, 2002 and 2001, and the selected balance sheet data as of December 31, 2003, 2002 and 2001, are derived from audited financial statements, which have been audited by our independent registered public accounting firm for such years and as of such dates, which are not included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2005. The selected statement of operations data for the years ended December 31, 2005, 2004 and 2003 and the selected balance sheet data as of December 31, 2005 and 2004, are derived from the audited financial statements for such years and as of such dates, which are included in the Form 10-K. You should read these selected financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included in the Form 10-K, which accompanies this report.

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SELECTED FINANCIAL DATA

13.

Safe Harbor StatementAny statements in this report about our expectations, beliefs, plans, objectives, assumptions or future events or performance that are not historical facts are forward-looking statements. You can identify these forward-looking statements by the use of words or phrases such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should” or “would.” Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties inherent in our business including, without limitation, statements about our ability to create market demand for and generate revenues from our products; unexpected adverse side effects or inadequate therapeutic efficacy of our products that could delay or prevent product development or commercialization, or that could result in product recalls or product liability claims; the scope and validity of patent protection for our products and our ability to commercialize our products without infringing the patent rights of others; competition from other pharmaceutical or biotechnology companies; the progress and timing of our clinical trials; other difficulties or delays in development, testing, obtaining regulatory approvals, manufacturing and marketing of our products; our ability to obtain additional financing to support our operations; and other risks detailed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2005, which accompanies this report.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. This caution is made under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995.

Product InformationFull prescribing information for Santarus products may be obtained from Santarus Medical Information by calling toll free at (888) 778-0887 or by visiting Santarus’ web site at www.santarus.com or www.zegerid.com.

Santarus® and ZEGERID® are registered trademarks of Santarus, Inc. Each other trademark, trade name or service mark appearing in this annual report belongs to its holder.© 2006 Santarus, Inc. All rights reserved.Some photographs not specifically identified in this report are solely for illustrative purposes, and are not intended to represent any particular person, situation or organization, present or past. Any resemblance to an actual person(s), situation(s) or organization(s) is purely coincidental.

David F. HaleChairman of the BoardPresident and Chief Executive OfficerCancerVax Corporation

Gerald T. ProehlPresident and Chief Executive Officer Santarus, Inc.

Daniel D. BurgessChief Operating Officer and Chief Financial OfficerHollis-Eden Pharmaceuticals, Inc.

Michael G. Carter, M.B., Ch.B., F.R.C.P. (U.K.)Former International Medical and Marketing DirectorZeneca, PLC

Michael E. HermanGeneral Partner, Herman Family Trading CompanyFormer President, Kansas City Royals Baseball Club and the Ewing Marion Kauffman Foundation

Ted W. Love, M.D.Chairman and Chief Executive OfficerNuvelo, Inc.

Kent SnyderPresident and Chief Executive OfficerSenomyx, Inc.

Gerald T. ProehlPresident and Chief Executive Officer

E. David Ballard II, M.D. Vice President, Clinical Research and Medical Affairs

Debra P. CrawfordSenior Vice President, Chief Financial Officer, Treasurer and Secretary

Julie A. DeMeulesSenior Vice President, Human Resources

William C. Denby, IIISenior Vice President, Commercial Operations

Carey J. Fox, J.D. Vice President, General Counsel

Warren E. HallSenior Vice President, Manufacturing and Product Development

Michael D. StepSenior Vice President, Corporate Development

Corporate HeadquartersSantarus, Inc.10590 West Ocean Air DriveSuite 200San Diego, CA 92130

Corporate CounselLatham & Watkins LLP

Patent CounselWilson Sonsini Goodrich & Rosati

Independent RegisteredPublic Accounting FirmErnst & Young LLP

Transfer AgentAmerican Stock Transfer and Trust Company

SEC Form 10-KA copy of the Company’s Annual Report on Form 10-K is available, without charge, upon written request to:

Investor RelationsSantarus, Inc.Phone: 858-314-5700Fax: 858-314-5701E-mail: contact@santarus.com

Annual MeetingThe Annual Meeting of Stockholders of Santarus, Inc. will be held at 1:00 p.m. on June 7, 2006 at the Homewood Suites by Hilton®

11025 Vista Sorrento Parkway, San Diego, CA 92130. All stockholders are cordially invited to attend.

Market InformationThe Company’s common stock trades on the NASDAQ National Market under the symbol “SNTS.”

Board of Directors Corporate Officers General Information

CORPORATE INFORMATION

10590 West Ocean Air Drive, Suite 200, San Diego, California 92130

Tel: (858) 314-5700 Fax: (858) 314-5701