Drug Royalty's second quarter report.

TORONTO--(BUSINESS WIRE)--March 25, 1997--Drug Royalty Corporation Inc. (TSE:DRI) today announced that for the six month period ending February 28, 1997, cash flow from operations was $1,022,63 ($0.03 per share) compared with $829,735 ($0.03 per share) in the prior year period.

The company's cash position at February 28, 1997 was $34.9 million versus $12.4 million a year ago.

For the three month period, cash flow from operations was $760,954 ($0.02 per share) compared with $497,444 ($0.02 per share) in the prior year period. Royalty revenue increased 50% to $977,938, compared with $652,420 in the prior year period. Royalty revenues in the quarter reflect a payment received from strategic partner Peptech Limited from Allergan Inc. under its option/license agreement with Allergan. Royalty revenues also include royalties on sales of pharmaceutical products by Dura Pharmaceuticals Inc., on contract revenues received by Cambridge Antibody Technology (C.A.T.), and a licensing fee from Searle Canada.

In the second quarter, Drug Royalty announced that it had sublicensed to Searle Canada the exclusive Canadian rights to a range of hormone replacement patches acquired from Ethical Holdings plc. for an upfront fee and royalty interests. Searle Canada is Drug Royalty's eighth partner with a strategic interest in women's health and HRT. The Canadian market for HRT products is expected to grow significantly as the baby boom population ages and an increased number of women enter menopause.

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

--Dura Pharmaceuticals, Inc. announced record revenue for the year ended December 31, 1996. Revenues from sales of respiratory pharmaceuticals rose 105% to $80 million from $39 million in 1995. The increase is attributed primarily to new product acquisitions and introductions and greater productivity of the sales force. Dura commenced sales of Ceclor(SYMBOL 226 \f "Symbol")CD and Keftab in the fourth quarter of 1996 and the response for these products has been excellent. Drug Royalty receives royalties on sales of Dura's products in selected US sales territories.

--C.A.T. announced that it has been successful in achieving a London Stock Exchange listing in an Initial Public Offering which values the company at 109 million. The IPO funds of 41 million will be used to increase the number of scientists it employs and to develop the four main drugs it is working on including treatments for cancer, inflammation and fibrotic disease. The Medical Research council and 3i are among C.A.T.'s major shareholders. Eli Lilly and Genentech also have stakes. Drug Royalty owns shares and warrants in C.A.T.

--C.A.T. also entered into a collaborative agreement with Eli Lilly & Co. during the quarter. Under the terms of the agreement, Eli Lilly will receive a license to C.A.T.'s large human single-chain antibody libraries and associated technologies for research purposes. Lilly will also receive options to develop select antibody-based therapeutics and diagnostics. C.A.T. will receive upfront license fees and could receive additional fees, milestone payments and royalties on products that may result from the collaboration. C.A.T. will also receive rights to develop antibody-based therapeutics to certain selected targets provided by Lilly. As part of the agreement Lilly made an equity investment in C.A.T. Drug Royalty receives a royalty percentage on all revenues received by C.A.T.

On March 17, 1997 Ed Rygiel stepped down as Chief Executive Officer of Drug Royalty. He will remain as Chairman of the Board. Ian Lennox has assumed the role of President and Chief Executive Officer. Ian has been a director of Drug Royalty since April 1996 and is formerly President of Monsanto Canada Inc., a leading life sciences and chemical company based in St. Louis, Mo.

Lennox has gained extensive operational experience across several of Monsanto's businesses in the United States, Latin America and Canada.

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     6 Months Ended
                  Feb. 28,   Feb. 29,   Feb. 28,   Feb. 29,
                    1997       1996       1997        1996

Revenues
Royalties   $    977,938   $652,420   $1,339,891 $ 1,184,648
Interest
 and other
 revenue         276,274    234,559      599,670     440,177
               1,254,212    886,979    1,939,561   1,624,825
Expenses
General and
 administration  493,258    389,535      911,922     795,090
Amortization
 and provisions   406,679   477,810      651,521     771,643
                  899,937   867,345    1,563,443   1,566,733

Earnings before
 Income Taxes     354,275    19,634      376,118      58,092

Provision for
 Income Taxes           -         -        5,000           -

Net Earnings for the
 Period       354,275        19,634      371,118      58,092

Retained Earnings (Deficit)
 Beginning
 of Period  5,865,979    (3,214,981)   5,849,136  (3,253,439)

Retained Earnings
 (Deficit) End of
 Period   $ 6,220,254  $ (3,195,347)  $6,220,254 $(3,195,347)

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

Cash Flow from
 Operations  $760,954  $    497,444   $1,022,639     $829,735

Basic Cash
 Flow from
 Operations
 Per Share      $0.02        $0.02         $0.03       $ 0.03

Weighted Average
 Number
 of Shares
 Out-
 standing  31,230,798   25,851,798     31,230,798  25,851,798

                     As at Feb. 28, 1997    As at Feb. 29, 1996
Cash and Cash
 Equivalents             $34,939,838             $12,355,617
Working Capital          $33,288,205             $12,419,409
Corporate Investments    $ 1,016,441                       -
Royalty Interests        $ 6,640,596             $11,446,463
Shareholders' Equity     $40,975,674             $23,910,055

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)