Taro Pharmaceutical Reports Third Quarter Results.

HAWTHORNE, N.Y.--(BUSINESS WIRE)--Nov. 5, 1998--

Continued Sales Growth and Profitability During 1998;

New Product Approvals Contribute to Sales Gains and Increased Margins

Taro Pharmaceutical Industries Ltd. (Nasdaq/NM:TAROF) Thursday reported financial results for the third quarter and the nine months ended Sept. 30, 1998.

Upward Trend in Sales and Profitability in 1998

Third quarter 1998 net sales increased to $17,227,000, compared with $16,684,000 for the third quarter of 1997. The third quarter sales of $17,227,000 increased from 1998 second quarter sales of $16,260,000, and from $13,499,000 in the first quarter of 1998.

Net income was $667,000, or 7 cents per diluted share, compared with $752,000, or 7 cents per diluted share for the third quarter of 1997. The third quarter income of $667,000, or 7 cents per diluted share, increased from 1998 second quarter net income of $320,000, or 3 cents per diluted share in the second quarter, and $89,000, or 1 cent per diluted share in the first quarter of 1998.

Increased Gross Profit in Third Quarter and Nine-Month Period

R&D expenditures remained substantial at $2,152,000, but decreased as a percentage of sales to 12 percent for the third quarter of 1998, from $2,429,000, or 15 percent of sales for the third quarter of 1997. The company's gross profit for the third quarter of 1998 was $9,519,000, or 55 percent of sales, compared with $8,683,000, or 52 percent of sales for the third quarter of 1997.

For the nine months ended Sept. 30, 1998, net sales were a record $46,986,000, compared with $44,937,000 for the same period in 1997. R&D expenditures were $6,869,000, or 15 percent of sales, compared with $6,702,000, or 15 percent of sales, for the prior-year period. Gross profit for the nine months ended Sept. 30, 1998, was $25,805,000, or 55 percent of sales, compared with $23,308,000, or 52 percent of sales for the same period in 1997.

"The company's increased gross profit margin, traditionally one of the highest in the generic industry, is the result of new product sales as well as increased manufacturing efficiencies that we expect to carry into the fourth quarter and beyond," said Barrie Levitt M.D., chairman of the company.

New Products Contribute to Increased Gross Profit

In late August 1998, the company's Abbreviated New Drug Applications (ANDAs) for Hydrocortisone Valerate Cream and Ointment 0.2 percent were approved by the U.S. Food and Drug Administration (FDA). Sales of this product in the last month of the third quarter contributed to the increase in gross profit.

Earlier in the third quarter, the company received approval from the FDA for its ANDA for Desoximetasone Gel USP, 0.05 percent. Hydrocortisone Valerate Cream and Ointment and Desoximetasone Gel are the latest additions to Taro's extensive line of topical corticosteroids. The company has received approval for five ANDAs to date in 1998.

Future Outlook

The company has multiple regulatory filings pending in Canada, Israel and various other countries, and eight ANDAs currently submitted to the FDA.

The company also remains committed to its proprietary drug and delivery system programs, and continues to make considerable progress in this area.

"The company expects that its past and current commitment to R&D will lead to significant new product approvals in the United States, Canada, Israel and elsewhere," concluded Levitt.

Taro Pharmaceutical Industries is a multinational pharmaceutical company whose research and development program has resulted in the company being the first generic marketer of several branded drugs as well as the developer of several novel pharmaceutical compounds.

For further information on Taro Pharmaceutical Industries, visit the company's Web site at http://www.taropharma.com.

To receive additional information on Taro via fax at no charge, dial 800/PRO-INFO and enter company code TAROF.

Certain statements in this release, including but not limited to, success in various markets by the company's products, the results expected from research and development, and expected approvals by the U.S. Food and Drug Administration, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Taro Pharmaceutical Industries believes the expectations reflected in such forward-looking statements to be based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the company's expectations include industry and market conditions, slower than anticipated penetration of new markets, changes in the company's financial position, regulatory actions, and other risks detailed from time to time in the company's SEC reports, including its Annual Report on Form 20-F for the last fiscal year ended Dec. 31, 1997. -0-

                  TARO PHARMACEUTICAL INDUSTRIES LTD.
                  SUMMARY CONSOLIDATED BALANCE SHEETS
                        (dollars in thousands)

                                             Sept. 30,     Dec. 31,
                                               1998          1997
                                            (Unaudited)   (Audited)
Assets
Current Assets:
Cash and Cash Equivalents                       $498         $806
Restricted Short-Term Bank Deposits            1,980        1,900
Accounts Receivable                           24,010       21,443
Inventories                                   16,812       14,795
Total Current Assets                          43,300       38,944
Property, Plant and Equipment, net            29,517       28,731
Other Assets                                   5,302        5,415
TOTAL ASSETS                                 $78,119      $73,090
Liabilities and Shareholders' Equity
Current Liabilities:
Short-Term Bank Credits                      $18,218      $11,139
Current Maturities of Long-Term Liabilities    2,287        2,533
Accounts Payable and Accrued Expenses         12,278       14,852
Total Current Liabilities                     32,783       28,524
Long-Term Liabilities                         16,762       16,115
Deferred Taxes and Other Liabilities             996        1,043
Total Liabilities                             50,541       45,682
Minority Interest                                100          100
Shareholders' Equity                          27,478       27,308
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $78,119      $73,090



                  TARO PHARMACEUTICAL INDUSTRIES LTD.
               SUMMARY CONSOLIDATED STATEMENTS OF INCOME
             (dollars in thousands, except per share data)
                              (Unaudited)

                           Three Months Ended      Nine Months Ended
                                Sept. 30,               Sept. 30,
                             1998        1997        1998       1997

SALES                     $17,227     $16,684     $46,986     $44,937
Cost of Sales               7,708       8,001      21,181      21,629
Gross Profit                9,519       8,683      25,805      23,308
Operating Expenses:
 Selling and
  Administrative            5,278       4,490      15,185      13,355
 Operating Income
  before Research and
  Development               4,241       4,193      10,620       9,953
 Research and
  Development               2,152       2,429       6,869       6,702
Operating Income            2,089       1,764       3,751       3,251
Financial Expenses - Net      931         627       2,279       1,530
                            1,158       1,137       1,472       1,721
Other Income - Net              1           4          47          13
                            1,159       1,141       1,519       1,734
Taxes on Income               475         388         443         509
                              684         753       1,076       1,225
Minority Share
 in Profit (Loss)
 of Subsidiaries               17           1           0         (9)

NET INCOME                   $667        $752      $1,076      $1,234
Earnings per
 Ordinary Share
Basic Earnings              $0.07       $0.08       $0.11       $0.12
Diluted Earnings            $0.07       $0.07       $0.11       $0.12
Weighted average
 number of shares-
BASIC EPS              10,005,992   9,984,081  10,004,552   9,977,325
DILUTED EPS            10,102,203  10,324,311  10,106,707  10,514,622