Taro Pharmaceuticals Reports Record Second Quarter and Six Month Financial Results.

Business Editors

HAWTHORNE, N.Y.--(BUSINESS WIRE)--July 20, 2000

Taro Pharmaceutical Industries Ltd. (Nasdaq/NMS:TARO):

Second Quarter Highlights:

-- Q2 Sales Increase to a Record $24.4 Million, a 16% Gain Over

Q2 1999

-- Q2 Net Income Increases to a Record $2.1 Million, or $0.18

Per Diluted Share, from $1.3 Million, or $0.13 Per Diluted

Share

-- Q2 Operating Income Before R&D Expense Increases 11%

to $6.7 Million from $6.0 Million in Q2 1999

-- Gross Profit Margin Increases to 60% from 58% in Q2 1999

-- Taro Receives Six FDA Approvals in Q2

-- Two New Patents Issued for NonSpil(TM) Drug Delivery System

Taro Pharmaceutical Industries Ltd. (Nasdaq/NMS:TARO) today reported record results for the Company's second quarter and six months ended June 30, 2000.

Second Quarter Results

Second quarter 2000 net sales increased 16% to $24.4 million from $21.0 million in the second quarter of 1999. Net income for the quarter increased 55% to $2.1 million, or $0.18 per diluted share, compared with $1.3 million, or $0.13 per diluted share, for the second quarter of 1999.

The Company's gross profit increased in the second quarter of 2000 to $14.6 million, or 60% of sales, up from $12.2 million, or 58% of sales, for the second quarter of the prior year. The increase in gross profit reflects both new product introductions and increased manufacturing efficiencies from the Company's continuing capital improvement program.

Operating income before R&D expense increased 11% to $6.7 million from $6.0 million in the second quarter of 1999. Selling, general and administrative expenses increased to $7.9 million, or 33% of sales, from $6.2 million, or 30% of sales, for the second quarter of 1999. SG&A increased as the result of expenses associated with the initiation of operations in the UK, as well as promotional expenses related to expanding distribution of the Company's products in the U.S. R&D expenses were $3.4 million, or 14% of sales, versus $3.1 million, or 15% of sales, for the second quarter of 1999.

"Taro's increase in sales and profit margins results from the Company's substantial long-term investments in R&D and continued focus on increasing manufacturing efficiencies," stated Barrie Levitt, M.D., Chairman of the Company. "Taro's commitment to its R&D program is producing strong financial gains as seen in both our new product approvals and expanded presence in the U.S. These successes have allowed Taro to expand into the UK and Europe in 2000."

Six Month Results

For the six-month period ended June 30, 2000, sales increased 18% to $46.6 million, compared with $39.4 million for the same period in 1999. Net income for the six-month period increased 70% to $3.7 million, or $0.32 per diluted share, compared with $2.2 million, or $0.21 per diluted share, for the same period in 1999.

Selling, general and administrative expenses for the six-month period were $14.7 million, or 32% of sales, compared with $11.7 million, or 30% of sales, for the same period in 1999. R&D expenses were $6.9 million, or 15% of sales, compared with $6.0 million, or 15% of sales, for the same period in 1999.

The Company's gross profit increased to $28 million, or 60% of sales, for the six months ended June 30, 2000, compared with $22.9 million, or 58% of sales, for the same period in 1999. Operating income before R&D expense was $13.3 million, or 29% of sales, compared to $11.2 million, or 28% of sales, for the same period of 1999.

NonSpil(TM) Patents Issued

In the second quarter of 2000, an Israeli patent was issued for Taro's NonSpil(TM) drug delivery system. In addition, a second U.S. patent was issued for the delivery system. Taro's NonSpil(TM) is a spill-resistant liquid delivery system that can be used with a wide variety of both over-the-counter and prescription drugs.

The NonSpil(TM) has potential applications in pediatric medicine, where accuracy in dosage and spill prevention are important, and in geriatric patients who may have difficulty swallowing pills or holding a spoon steadily.

Taro is currently formulating various over-the-counter and prescription products for use in the NonSpil(TM) delivery system. Additional patent applications relating to Taro's spill-resistant technology are pending in the United States and worldwide.

Proprietary Research

In addition to its work on the NonSpil(TM) drug delivery system, Taro is currently in Phase I testing for T2000, the Company's patented novel anticonvulsant. The drug is a non-sedating, long-acting barbiturate that may require less frequent administration than other commonly used treatments for epilepsy and seizure disorders.

Six Approvals in the Second Quarter

The Company received six FDA approvals in the second quarter of 2000, including an FDA approval for its New Drug Application for over-the-counter Clotrimazole Three-Day Vaginal Cream.

Taro also received ANDA approval for Diflorasone Diacetate Cream, all three strengths of Clorazepate Dipotassium Tablets, all four strengths of Nortriptyline Hydrochloride Capsules, and Clobetasol Emollient Cream, as well as a supplemental ANDA approval for an additional strength of Etodolac Tablets.

Future Outlook

"Taro will continue to expand its generic product offering while investing in its proprietary initiatives," stated Dr. Levitt. "We will continue to support our R&D programs and our global marketing organization in order to expand our presence in existing markets, and to establish ourselves in new markets."

The Company has multiple regulatory filings in Canada and Israel, and nine current submissions to the FDA.

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.taropharma.com.

To receive additional 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 STATEMENTS OF INCOME

           (US dollars in thousands, except per share data)


                           Three Months Ended       Six Months Ended
                                June 30,                June 30,
                            2000       1999         2000        1999


SALES                   $  24,412   $  21,003   $  46,644   $  39,435
Cost of Sales               9,814       8,797      18,603      16,565
Gross Profit               14,598      12,206      28,041      22,870
Operating Expenses:
 Selling and
  Administrative            7,943       6,198      14,699      11,700
 Operating Income
  before Research
  and Development           6,655       6,008      13,342      11,170

 Research and Development   3,395       3,150       6,927       6,026

Operating Income            3,260       2,858       6,415       5,144
Financial Expenses - Net      710         846       1,668       1,796
                            2,550       2,012       4,747       3,348

Other Income - Net            160           9         163          10
                            2,710       2,021       4,910       3,358

Taxes on Income               628         673       1,183       1,166
                            2,082       1,348       3,727       2,192

Minority Share in profits
 of Subsidiaries                8          10          25          18

NET INCOME              $   2,074   $   1,338   $   3,702   $   2,174

Basic Earnings per
 Ordinary Share         $    0.19   $    0.13   $    0.34   $    0.21
Diluted Earnings per
 Ordinary Share         $    0.18   $    0.13   $    0.32   $    0.21

Weighted average
 number of shares-
BASIC EPS              10,709,664  10,041,628  10,702,127  10,050,923
DILUTED EPS            11,632,153  10,347,284  11,737,061  10,249,598


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


                                               JUNE 30,     DEC. 31,
                                                 2000        1999
                                             (Unaudited)   (Audited)
Assets

Current Assets:
Cash and Cash Equivalents                      $ 2,676     $ 3,003
Restricted Short-Term Bank Deposits              2,172       2,109
Accounts Receivable                             32,829      27,405
Inventories                                     18,580      18,208
Total Current Assets                            56,257      50,725

Property, Plant and Equipment, net              37,699      34,624
Other Assets                                     5,555       5,608
TOTAL ASSETS                                   $99,511     $90,957

Liabilities and Shareholders' Equity

Current Liabilities:
Short-Term Bank Credits                        $ 8,504     $ 6,204
Current Maturities of Long-Term Liabilities      5,136       5,192
Accounts Payable and Accrued Expenses           14,536      13,365
Total Current Liabilities                       28,176      24,761

Long-Term Liabilities                           25,168      23,328
Deferred Taxes and Other Liabilities             2,183       2,168
Total Liabilities                               55,527      50,257
Minority Interest                                  173         148
Shareholders' Equity                            43,811      40,552
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                          $99,511     $90,957