Drug Royalty Reports 1997 First Quarter Results.

TORONTO--(BUSINESS WIRE)--Jan. 7, 1997--Drug Royalty Corporation Inc. (TSE: DRI) announced today that first quarter cash flow from operations was $261,685 or $0.01 per share, compared with $332,291 or $0.01 per share in the prior year period.

Working capital of $32.7 million amounted to $1.05 per share as at November 30, 1996. Cash and cash equivalents were $34.6 million. Net earnings for the quarter ended November 30, 1996 were $16,843 compared with earnings of $38,458 in the same period last year. Total revenue decreased 7 percent to $685,349, primarily reflecting the sale of royalty interests in Ethical Holdings plc. at the end of August and lower payments from Cambridge Antibody Technology due to the absence of significant milestones or licensing fees in the quarter. Royalty revenue from Dura Pharmaceuticals more than doubled from the prior year.

During the quarter we reported that we sublicensed, in return for a royalty interest, the exclusive Canadian rights to Ethical's sustained-release morphine products to Paladin Labs Inc. in conjunction with a marketing and distribution agreement with Pharmascience Inc., Canada's third largest Canadian-owned generic company. Pharmascience is a leader in the therapeutic area of chronic pain under the Statex brand name. Drug Royalty also acquired the right to purchase 100,000 shares in Paladin. Paladin is a Vancouver Stock Exchange listed company which is controlled by Pharmascience.

Drug Royalty has royalty interests in 30 drug products in various stages of development through strategic partnerships with both private and public pharmaceutical companies. Highlights of strategic partners' activities during the quarter include:

-- Dura Pharmaceuticals reported that it raised US$160 million in additional equity capital for the purposes of internal expansion and acquiring new products. Dura began launching the patented antibiotic Ceclor(R) CD in November and commenced promoting sales of Keftab in September. Because of a lag period in reporting to Drug Royalty, royalty payments to Drug royalty only partially reflect sales of these new products. We expect continued growth in our royalty revenues from Dura in 1997.

-- Peptech(UK) Limited announced that its wholly-owned Russian operating company has initiated first commercial sales of the Company's proprietary drug GMDP, which is approved for sale in Russia as Likopid(R). GMDP is currently being developed by Peptech for a number of indications, in particular for the skin disorder psoriasis, for which it is under option to license with strategic development partner Allergan, Inc. Drug Royalty is entitled to receive 3 percent of direct sales made by Peptech(UK) or its affiliates.

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

DRUG ROYALTY CORPORATION INC.

                           3 Months Ended   3 Months Ended
(Unaudited)                Nov. 30, 1996     Nov. 30, 1995

Revenue
Royalties                    $   361,953    $ 532,229
Interest                         323,396      205,618
                               ---------    ---------
                                 685,349      737,847
                               ---------    ---------

Expenses
General and administration       418,664      405,556
Amortization and provisions      244,842      293,833
                               ---------    ---------
                                 663,506      699,389
                               ---------    ---------

Earnings Before income taxes      21,843       38,458

Provision for income taxes         5,000          -
                               ---------    ---------
Net Earnings                      16,843       38,458

Retained Earnings (Deficit) - Beginning
of the Quarter                 5,849,136   (3,253,439)
                               ---------    ---------

Retained Earnings (Deficit) - End
of the Quarter                $5,865,979  $(3,214,981)
                               ---------    ---------
                               ---------    ---------

Basic Earnings per Share      $     0.00  $      0.00

Cash Flow from Operations     $  261,685  $   332,291

Cash Flow from Operations
  Per Share                   $     0.01  $      0.01

Weighted Average Number
 of Shares Outstanding        31,130,798   25,815,798


                           As at Nov. 30,   As at Nov. 30,
                               1996             1995

    Working Capital(x)       $32,671,319  $11,921,965
    Corporate Investments    $   763,542  $      -
    Royalty Interests        $ 7,042,430  $11,918,869
    Shareholders' Equity     $40,521,395  $23,890,421


(x) Cash and short term investments amounted to $34.6 million at
November 30, 1996.

CONTACT: Drug Royalty Corporation

Jim Webster, 416/863-1865

416/863-5161 (FAX)

or

Drug Royalty Corporation

Harry Loveys, 416/863-1865

416/863-5161 (FAX)