Taro Pharmaceuticals Reports Record Fourth Quarter, Year-End Results for 2000.

Business Editors

HAWTHORNE, N.Y.--(BUSINESS WIRE)--Feb. 22, 2001

Taro Pharmaceuticals (Nasdaq/NMS:TARO):

Highlights:

-- Q4 2000 Sales Increase 34% to $29.9 Million

-- Q4 2000 Net Income Increases 105% to $3.5 Million, or $0.29 per Diluted
Share, from $1.7 Million, or $0.15 per Diluted Share, in Q4 99

-- Q4 Gross Profit Increases 36% to $18.0 Million

-- 2000 Sales up 24% to $103.8 Million

-- 2000 Net Income Increases 81% to $10.0 Million, or $0.84 per Diluted Share,
from $5.5 Million, or $0.51 per Diluted Share, in 1999

Taro Pharmaceutical Industries Ltd. (Nasdaq/NMS:TARO) today reported record fourth-quarter results and record sales and earnings for the year ended December 31, 2000.

The Company reported sales of $29,951,000 for the fourth quarter, a 34% increase from sales of $22,282,000 for the fourth quarter of 1999. Gross profit for the fourth quarter of 2000 was $18,014,000, or 60% of sales, an increase of 36% from $13,199,000, or 59% of sales, for the fourth quarter of 1999.

Net income for the fourth quarter was a record $3,514,000, or $0.33 per basic share and $0.29 per diluted share, compared with $1,714,000, or $0.17 per basic share and $0.15 per diluted share, for the fourth quarter of 1999.

"Taro continued to reach higher performance levels in 2000, the first year in which we exceeded $100 million in annual sales. The growth was driven by continued success in our U.S. generic pharmaceutical business," stated Barrie Levitt, M.D., Chairman of the Company. "We expanded our U.S. market share of oral prescription products such as carbamazepine tablets, bioequivalent to Novartis' Tegretol(R), and warfarin sodium tablets, bioequivalent to Dupont's Coumadin(R). These gains were achieved while maintaining our position as a leading supplier of topical dermatologic products in the North American generic pharmaceuticals market."

SG&A expenses in the fourth quarter of 2000 were $8,980,000, or 30% of sales, compared with $7,822,000, or 35% of sales, in the fourth quarter of 1999. SG&A includes a number of marketing campaigns aimed at increasing the generic substitution rate of Taro's warfarin sodium tablets in the U.S. and Canada. In addition, it includes the Company's investment in its UK subsidiary and associated start-up sales & marketing expenses.

R&D expenditures in the fourth quarter of 2000 were $3,866,000, or 13% of sales, compared with $3,014,000, or 14% of sales, for the fourth quarter of 1999. Operating income before R&D expenditures was $9,034,000, or 30% of sales, compared with $5,377,000, or 24% of sales, in the fourth quarter of 1999.

"Taro will continue to support its strong R&D program in order to keep introducing new products into the U.S., Israeli, Canadian and European markets," Dr. Levitt stated.

Year-End Results

The Company reported net sales of $103,797,000 for the year ended December 31, 2000, compared with $83,785,000, a 24% increase from the prior year. R&D expenditures were $14,593,000, or 14% of sales, compared with expenditures of $11,728,000, or 14% of sales, for the previous year. The gross profit margin for the year ended December 31, 2000 was 60%, up from 58% in the prior year.

Net income for 2000 was $10,027,000, or $0.94 per basic share and $0.84 per diluted share, compared with $5,539,000, or $0.55 per basic share and $0.51 per diluted share, for 1999. Fully diluted shares increased from 10,762,423 in 1999, to 11,932,010 in 2000. The increase results primarily from the rise in the share price during 2000, which would enable the Company to purchase fewer shares in the open market with the proceeds from options, should they be exercised.

Seven FDA Approvals in 2000

During 2000, Taro received seven FDA approvals, including the Company's first New Drug Application approval (NDA) for Clotrimazole Three-Day Cream 2%, an over-the-counter treatment for vaginal yeast infections. Taro markets Clotrimazole Three-Day Cream 2% under its own label and as a private-label product.

The Company also received six approvals for Abbreviated New Drug Applications (ANDAs) for two topical products and four oral dosage form products.

The topical products were Diflorasone Diacetate Cream, bioequivalent to Dermik Laboratories' Psorcon(R) Cream, with a U.S. market estimated at $15 million, and Clobetasol Propionate Emollient Cream, bioequivalent to Glaxo Wellcome, Inc.'s Temovate(R) E Cream, with a U.S. market estimated at $17 million. These two products were important line extensions that contributed to the Company's increased distribution and sales in 2000.

Two of the oral dosage form products were Carbamazepine Suspension and Carbamazepine Chewable Tablets, bioequivalent to Novartis' Tegretol(R) Suspension and Chewable Tablets, respectively. The combined market for these two line extension products is estimated by industry sources to be $32 million. The Company will begin marketing these products in 2001.

The additional oral product approvals were for Clorazepate Dipotassium Tablets in three strengths, bioequivalent to Abbott Laboratories' Tranxene(R) Tablets, with an estimated U.S. market size of approximately $100 million, and Nortriptyline Hydrochloride Capsules in four strengths, bioequivalent to Sandoz Pharmaceuticals' Pamelor(R) Capsules, with the U.S. market size estimated at $34 million.

First Generic Warfarin Approval in Canada

In the third quarter of 2000, Taro received approval from the Therapeutic Products Program of Health Canada (TPP) for its Abbreviated New Drug Submission (ANDS) for nine strengths of Warfarin Sodium Tablets. Taro's Warfarin Sodium Tablets are bioequivalent to DuPont Pharma's Coumadin(R) and its market in Canada is estimated at CDN$42 million (US$28 million).

Taro's Warfarin Sodium Tablets are the first generic warfarin sodium tablets to receive approval from Canada's TPP.

Proprietary R&D Program

Taro's NonSpil(TM) spill-resistant delivery system was granted its second U.S. patent during the second quarter of 2000. This patent strengthens Taro's existing U.S. patent protection for the technology, and was issued less than a month after the Company received an Israeli patent for the delivery system.

Patents for the NonSpil(TM) technology have also been issued to Taro in Australia and South Africa, with additional patent applications pending that relate to the delivery system in the U.S. and worldwide. The Company continues to work towards the commercialization of the delivery system, which has applications in a multitude of OTC and prescription products in pediatrics, geriatrics, and other clinical applications.

T2000, Taro's non-sedating anticonvulsant for the treatment of epilepsy, was granted an additional U.S. patent during the third quarter of 2000, providing for new compounds and more efficient processes for the synthesis of certain compounds. T2000 is currently in Phase I clinical testing in humans in Canada. The Company emphasizes that most drugs that enter clinical trials do not ultimately obtain regulatory approval, and there can be no assurance that T2000 will ever be of medical or commercial value. Only if Phase II and III clinical studies are successfully completed can Taro submit a New Drug Application in the U.S. and its equivalents elsewhere. This process will last at least several years.

Establishment of UK Subsidiary

In the first quarter of 2000, Taro established a company in the UK, which serves as Taro's European headquarters. Taro has assembled a team of experienced pharmaceutical executives to manage the UK operation. Taro currently markets several products in the UK, with many products in its pipeline for the UK and Europe.

Future Outlook

"Taro is currently creating a business development infrastructure that will allow the Company to pursue opportunities for growth and expansion in the U.S. and worldwide," stated Dr. Levitt. "During 2001, Taro will continue to focus on its core competencies, maintaining its position as a leading manufacturer of topical dermatological products in the U.S. market, while continuing to support its growing oral prescription business. We will continue to invest in our generic and proprietary R&D programs which are the foundation for further international expansion."

Taro has multiple regulatory filings in Canada and Israel, and nine ANDAs currently submitted to the FDA. Industry sources estimate the current annual markets in the U.S. for the drugs targeted by these ANDAs have an aggregate value exceeding $750,000,000.

Taro Pharmaceutical Industries Ltd. is a multinational, science-based pharmaceutical company dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products.

For further information on Taro Pharmaceutical Industries Ltd., please visit the Company's website at www.taro.com.

For further information on Taro Pharmaceutical Industries Ltd., at no charge, dial 1-800-PRO-INFO and enter company code 104 or ticker symbol TARO.

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Taro Pharmaceutical Industries Ltd. 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 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 December 31, 1999.

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

                                            December 31,  December 31,
                                               2000          1999
Assets

Current Assets:
Cash and Cash Equivalents                   $   7,245     $   3,003
Restricted Short-Term Bank Deposits             2,307         2,109
Accounts Receivable                            42,576        27,405
Inventories                                    19,618        18,208
Total Current Assets                           71,746        50,725

Property, Plant and Equipment, net             41,827        34,624
Other Assets                                    6,899         5,608
TOTAL ASSETS                                $ 120,472     $  90,957


Liabilities and Shareholders' Equity

Current Liabilities:
Short-Term Bank Credits                     $   2,170     $   6,204
Current Maturities of Long-Term Liabilities     6,321         5,192
Accounts Payable and Accrued Expenses          19,686        13,365
Total Current Liabilities                      28,177        24,761

Long-Term Liabilities                          38,250        23,328
Deferred Taxes and Other Liabilities            3,664         2,168
Total Liabilities                              70,091        50,257
Minority Interest                                 168           148
Shareholders' Equity                           50,213        40,552
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $ 120,472      $ 90,957


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

                             Three Months Ended        Year Ended
                                 December 31,          December 31,
                               2000       1999       2000       1999

SALES                       $ 29,951   $ 22,282   $103,797   $ 83,785
Cost of Sales                 11,937      9,083     41,206     35,314
Gross Profit                  18,014     13,199     62,591     48,471
Operating Expenses:
 Selling and Administrative    8,980      7,822     31,902     25,933
 Operating Income before
  Research and Development     9,034      5,377     30,689     22,538

 Research and Development      3,866      3,014     14,593     11,728

Operating Income               5,168      2,363     16,096     10,810
Financial Expenses - Net       1,199      1,062      3,859      3,869
                               3,969      1,301     12,237      6,941
Other Income - Net               173         62        344         94
                               4,142      1,363     12,581      7,035
Taxes on Income                  651       (355)     2,538      1,471
                               3,491      1,718     10,043      5,564
Minority Share in profits
 (losses) of Subsidiaries        (23)         4         16         25

NET INCOME                  $  3,514   $  1,714   $ 10,027   $  5,539

Earnings per Ordinary Share $   0.33   $   0.17   $   0.94   $   0.55
Diluted earnings per
 Ordinary Share             $   0.29   $   0.15   $   0.84   $   0.51

Weighted average number
 of shares-
BASIC EPS                 10,732,091 10,176,663 10,709,905 10,075,349
DILUTED EPS               12,289,282 11,968,961 11,932,010 10,762,423