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

Business Editors & Health/Medical Writers

HAWTHORNE, N.Y.--(BUSINESS WIRE)--July 19, 2001

Taro Pharmaceuticals (Nasdaq/NMS:TARO)

Second Quarter Highlights:

-- Q2 Sales Increase to a Record $36.4 Million, a 49% Gain Over Q2 2000

-- Q2 Net Income Increases to a Record $6.1 Million, or $0.48 Per Diluted
Share, from $2.1 Million, or $0.18 Per Diluted Share in Q2 2000

-- Q2 Operating Income Before R&D Expense Increases 86% to $12.3 Million from
$6.7 Million in Q2 2000

-- Gross Profit Margin Increases to 65% from 60% in Q2 2000

-- Taro Receives Three ANDA Approvals in Q2 2001

-- Taro Receives First Generic Approval for Clotrimazole and Betamethasone
Dipropionate Cream, USP ("CB Cream")

-- 100% Stock Dividend Announced in Q2 2001

Taro Pharmaceutical Industries Ltd. (Nasdaq/NMS:TARO) today reported record results for the Company's second quarter and six months ended June 30, 2001.

The Company's results for the second quarter and six-month period do not reflect the stock dividend announced on June 28, 2001.

Second Quarter Results

Second quarter 2001 net sales increased 49% to $36.4 million from $24.4 million in the second quarter of 2000. Net income for the quarter increased 192% to $6.1 million, or $0.48 per diluted share, compared with $2.1 million, or $0.18 per diluted share, for the second quarter of 2000.

The Company's gross profit increased in the second quarter of 2001 to $23.8 million, or 65% of sales, up from $14.6 million, or 60% of sales, for the second quarter of the prior year. The increase in gross profit primarily reflects the Company's introduction of CB Cream in late May 2001.

Operating income before R&D expense increased 86% to $12.3 million from $6.7 million in the second quarter of 2000. Selling, general and administrative expenses increased to $11.4 million, or 31% of sales, from $7.9 million, or 33% of sales, for the second quarter of 2000. SG&A increased as the result of increased promotional expenses related to the introduction of CB Cream and expanding distribution of the Company's full product line in the U.S. R&D expenses were $4.9 million, or 13% of sales, versus $3.4 million, or 14% of sales, for the second quarter of 2000.

"This is our twenty-second consecutive quarter of record sales and our twelfth consecutive quarter of record earnings," stated Barrie Levitt, M.D., Chairman of the Company. "Receiving the first generic approval for Lotrisone(R) Cream is another milestone in maintaining Taro's position as a leader in the U.S. topical dermatological market."

Six Month Results

For the six-month period ended June 30, 2001, sales increased 39% to $64.7 million, compared with $46.6 million for the same period in 2000. Net income for the six-month period increased 139% to $8.8 million, or $0.70 per diluted share, compared with $3.7 million, or $0.32 per diluted share, for the same period in 2000.

Selling, general and administrative expenses for the six-month period were $20.3 million, or 31% of sales, compared with $14.7 million, or 32% of sales, for the same period in 2000. R&D expenses were $8.9 million, or 14% of sales, compared with $6.9 million, or 15% of sales, for the same period in 2000.

The Company's gross profit increased to $40.8 million, or 63% of sales, for the six months ended June 30, 2001, compared with $28.0 million, or 60% of sales, for the same period in 2000. Operating income before R&D expense was $20.6 million, or 32% of sales, compared to $13.3 million, or 29% of sales, for the same period of 2000.

Three Approvals in the Second Quarter

The Company received three Abbreviated New Drug Application (ANDA) approvals during the second quarter of 2001, two for solid dosage form cardiovascular products and one for a topical dermatological product.

In April of 2001, Taro received approval from the FDA of its ANDA for Amiodarone Hydrochloride Tablets, 200 mg, bioequivalent to Wyeth-Ayerst Laboratories' Cordarone(R). Amiodarone is a cardiovascular drug indicated for life-threatening ventricular arrhythmias. The U.S. market for Amiodarone Tablets, 200 mg is estimated by industry sources to be over $100 million.

Also in April, the Company received a tentative approval from the FDA of its ANDA for Enalapril Maleate and Hydrochlorothiazide Tablets USP ("Enalapril HCTZ"), in two strengths. Enalapril HCTZ is a cardiovascular drug used in the treatment of hypertension, with a diuretic component. The U.S. market for Enalapril HCTZ is estimated by industry sources to be over $50 million.

In late May, Taro received FDA approval for CB Cream, the first generic equivalent in the U.S. market for Schering Plough's Lotrisone(R)Cream. CB Cream is a combination antifungal/corticosteroid and is used to treat a variety of dermatological conditions. The U.S. market for CB Cream is estimated by industry sources to be over $100 million.

"We expect that Clotrimazole and Betamethasone Dipropionate Cream will have a significant impact on our 2001 results, despite the entry of an additional generic competitor," stated Dr. Levitt.

Proprietary Research

Taro continues to work on NonSpil(TM), a patented, spill-resistant liquid delivery system which has potential applications in a wide variety of both prescription and over-the-counter pharmaceutical products. The Company holds several patents relating to the delivery system and has additional patents pending in the U.S. and worldwide.

The Company also continues development of T2000, its patented novel anticonvulsant. Taro is currently in Phase I clinical testing for T2000, which is a non-sedating, long-acting barbiturate that may require less frequent administration than other commonly used treatments for epilepsy and seizure disorders.

100% Stock Dividend

On June 28, the Company announced a two-for-one stock split to be effected in the form of a stock dividend. Shareholders of record at the close of business on Thursday, July 12, 2001 will receive one Ordinary Share for each Ordinary Share then held. The stock dividend will be paid at the close of business on Thursday, July 26, 2001 and trading will begin on a post-dividend basis on Friday, July 27, 2001.

Future Outlook

"Taro will continue to expand its generic product offering while investing in its branded and proprietary initiatives," stated Dr. Levitt. "We remain committed to our R&D programs and our global marketing organization for the expansion of our presence in existing markets, and to establish ourselves in new markets as well."

The Company has multiple regulatory filings in Canada and Israel, and ten current submissions to the FDA, including one tentative approval. The market size of the branded products targeted by these ten ANDA filings is estimated by industry sources to be over $500 million.

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.

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, additional competition in 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, 2000.

                  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,
                      2001          2000          2001          2000

SALES             $  36,360     $  24,412     $  64,728     $  46,644
Cost of Sales        12,582         9,814        23,927        18,603
Gross Profit         23,778        14,598        40,801        28,041
Operating Expenses:
  Selling and
   Administrative    11,432         7,943        20,250        14,699
  Operating income
   before Research
   and Development   12,346         6,655        20,551        13,342

  Research and
   Development        4,898         3,395         8,912         6,927

Operating Income      7,448         3,260        11,639         6,415
Financial Expenses
 -- Net               1,090           710         1,832         1,668
                      6,358         2,550         9,807         4,747
Other Income
 -- Net                 184           160           161           163
                      6,542         2,710         9,968         4,910
Taxes on Income         469           628         1,134         1,183
                      6,073         2,082         8,834         3,727
Minority Share in
 profits of
 Subsidiary              13             8             3            25


NET INCOME           $6,060        $2,074        $8,831        $3,702

Earnings per
 Ordinary Share       $0.56         $0.19         $0.82         $0.35
Diluted earnings per
 Ordinary Share       $0.48         $0.18         $0.70         $0.32


Weighted average
 number of shares-
BASIC EPS        10,861,200    10,709,664    10,823,479    10,702,127
DILUTED EPS      12,686,984    11,632,153    12,593,776    11,737,061


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

                                      JUNE 30              DECEMBER 31
                                        2001                    2000
Assets

Current Assets:
Cash and Cash Equivalents              $3,108                  $7,245
Restricted short-term bank
 deposits                               2,362                   2,307
Accounts Receivable -- Trade           46,849                  38,670
Accounts Receivable -- Other
 and prepaid expenses                   5,429                   3,898
Inventories                            29,077                  19,618
Total Current Assets                   86,825                  71,738

Property, Plant and
 Equipment, net                        47,318                  41,827
Other Assets                            6,816                   6,881
TOTAL ASSETS                         $140,959                $120,446


Liabilities and Shareholders' Equity

Current Liabilities:
Short-Term Bank Credits                $4,883                  $2,170
Current Maturities of
 Long-Term Liabilities                  5,946                   6,321
Accounts Payable and
 Accrued Expenses                      19,561                  19,659
Total Current Liabilities              30,390                  28,150

Long-Term Liabilities                  47,729                  38,250
Deferred Taxes and Other
 Liabilities                            3,572                   3,664
Total Liabilities                      81,691                  70,064
Minority Interest                         171                     168
Shareholders' Equity                   59,097                  50,214
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                $140,959                $120,446