Drug Royalty's Third Quarter Report.

TORONTO--(BUSINESS WIRE)--July 14, 1997--Drug Royalty Corporation (TSE: DRI) -- Drug Royalty Corporation Inc. announced that for the nine month period ending May 31, 1997, cash flow from operations was $1.4 million ($0.04 per share) compared with $1.2 million ($0.05 per share) in the prior year period.

The company's cash position improved to $35 million from $13 million a year ago, which strategically positions the company for larger royalty opportunities.

For the three month period, cash flow from operations was $329,288 ($0.01 per share) compared with $410,013 ($0.02 per share) in the prior year period. Royalty revenue for the three month period was $499,554 compared with $555,958 in 1996. Royalty revenue includes royalties on U.S. sales of pharmaceutical products by Dura Pharmaceuticals Inc., on sales of GMDP by Peptech in Russia, on sales of paclitaxel by Phytogen Life Sciences to Mylan, and on contract revenues received by Cambridge Antibody Technology in the U.K.. The prior year period includes royalty revenue of $315,655 from Ethical and a revenue gain of $100,000 related to the sale of royalty interests to Ethical.

The underlying trend in the nine month results is a 182 percent increase in royalty revenue from Dura, which more than offsets the loss of revenue from the sale of the Ethical interests for $16.1 million, at the end of fiscal 1996.

The following notable developments were reported by Drug Royalty's strategic partners in the quarter:

- Dura Pharmaceuticals, Inc. reported record revenue for the first quarter ended March 31, 1997.

Revenues from sales of respiratory pharmaceuticals rose 141 percent to $40.9 million from $18.6 million over the same period in the prior year. The increase is primarily the result of the increased size of the sales force and new product introductions. Dura commenced sales of Ceclorr CD in the fourth quarter of 1996 and has doubled sales of this product in the first quarter of 1997.

- Dura recently announced that it signed agreements to acquire the intranasal steroid products Nasarel(TM) and Nasalide(TM) (flunisolide) Nasal Solutions from Syntex (USA), Inc. a member of the Roche Group. Dura believes that combined first year sales for these two products could be $25-$30 million. These products are a strategic fit within Dura's respiratory focus. Drug Royalty receives royalties on sales of Dura's products in selected US sales territories.

- Dura announced it has filed a registration with the SEC for a public offering of $200 million of subordinated notes convertible into common stock for expansion purposes.

- Cambridge Antibody Technology (C.A.T.) announced the rheumatoid arthritis program developed with Knoll (BASF), has begun clinical trials in Europe. This is the first stage of a major clinical development program that will also include the U.S. and Japan. The program may be expanded to include other chronic inflammatory disorders such as Crohn's disease. Knoll is committing substantial funds to the project. Drug Royalty receives a royalty percentage on all revenues received by C.A.T., including milestones under this agreement.

- C.A.T. also announced they are on target to commence clinical trials of their ophthalmic fibrosis antibody program by the end of 1997. Their Tumour Necrosis Therapy (TNT) program, using the human TNT antibody candidate isolated by C.A.T., is in the manufacturing stage with their partner, Techniclone, and clinical trials will start in 1998. "We are pleased with the commercial and clinical progress of our existing partners," said Ian Lennox, President and Chief Executive Officer of Drug Royalty. "In looking ahead, we have strengthened our management team and reaffirmed our determination to become a leading royalty firm through the creation and acquisition of royalty interests in the global pharmaceutical industry," added Lennox. "Management is active in assessing new opportunities and expects additional investments in 1997."

The following management changes occurred in the third quarter:

- Judy Blumstock was appointed Director, Bio/Pharmaceutical Research. Ms. Blumstock has been with Drug Royalty since 1993 and has played an important role in due diligence of potential investment opportunities. In her new role, Ms. Blumstock will investigate investment opportunities including the purchase of existing royalty interests.

- Shameze Rampertab has joined Drug Royalty as Director, Financial Services. Mr. Rampertab received a B.Sc. from the University of Toronto, an M.B.A. from McMaster University, and is a Chartered Accountant. Mr. Rampertab will be responsible for financial reporting, accounting, and administration.

Drug Royalty Corporation Inc. provides shareholders with a means of participating in the global pharmaceutical industry by acquiring royalty rights in emerging and existing drugs and medical technologies. Drug Royalty's common shares trade on The Toronto Stock Exchange under the symbol DRI. -0-

                   DRUG ROYALTY CORPORATION INC.


                         3 Months Ended        9 Months Ended
                       ------------------   -------------------
                       May 31,    May 31,   May 31,    May 31,
                        1997       1996      1997       1996
                       -------- ---------   --------  ---------
Revenues
Royalties          $  499,554 $  555,958  $1,839,446  $1,740,607
Gains on sale of
  royalty interest          -    100,000           -     100,000
Interest and other
  revenue             258,807    160,417     858,476     600,602
                   ---------- ----------  -----------  ----------
                      758,361    816,375   2,697,922   2,441,209
Expenses
General and
  administration      517,907    406,362   1,429,830   1,201,460
Amortization and
  provisions          266,137    346,433     917,657   1,118,077
                   ---------- ----------  -----------  ----------
                      784,044    752,795   2,347,487   2,319,537
                   ---------- ----------  -----------  ----------

Earnings (Loss) before
  Income
 Taxes                (25,683)    63,580     350,435     121,672

Provision (Recovery)
  for Income
 Taxes                (88,834)         -     (83,834)          -
                   ---------- ----------  -----------  ----------

Net Earnings for the
 Period                63,151     63,580     434,269     121,672

Retained Earnings
  (Deficit)
 Beginning of
  Period            6,220,254 (3,195,347)  5,849,136  (3,253,439)
                   ---------- ----------  -----------  ----------

Retained Earnings
  (Deficit)
 End of Period    $ 6,283,405$(3,131,767)$ 6,283,405 $(3,131,767)
                   ---------- ----------  -----------  ----------
                   ---------- ----------  -----------  ----------

Basic Earnings
  Per Share       $    0.00  $      0.00 $      0.01 $      0.00

Cash Flow from
  Operations      $ 329,288  $   410,013 $ 1,351,926 $ 1,239,749

Basic Cash Flow
  from
 Operations Per
   Share          $    0.01  $      0.02 $      0.04 $      0.05

Weighted Average
  Number
 of Shares
  Outstanding    31,274,798   25,815,798  31,274,798  25,815,798

                         As at May 31, 1997  As at May 31, 1996
                         ------------------  -------------------
Cash and Cash Equivalents     $34,579,660    $12,930,626
Working Capital               $33,507,568    $12,825,207
Corporate Investments         $1,016,440               -
Royalty Interests             $6,378,811     $11,109,793
Shareholders' Equity          $41,091,626    $23,973,635

Prior year amounts have been reclassified to conform with the current year presentation.

CONTACT: Drug Royalty Corporation Inc.

Ian Lennox, 416/863-1865

416/863-5161 (fax)

or

Drug Royalty Corporation Inc.

Jim Webster, 416/ 863-1865

416/863-5161 (fax)