MYLAN LABORATORIES INC, 10-K, EX-13, 2000-06-23

MYLAN LABORATORIES INC
10-K, EX-13, 2000-06-23
PHARMACEUTICAL PREPARATIONS

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Mylan Laboratories Inc. 2000 Annual Report

Building a Stronger Mylan

Description of Business

------------------------
Mylan Laboratories Inc. is a diversied pharmaceutical company with a core
generic business, a growing branded presence and varied drug delivery
capabilities. Our product portfolio consists of numerous prescription generic
and proprietary nished pharmaceutical, wound care and dermatological products.
These products include solid oral dosage forms, as well as suspensions, liquids,
injectables, transdermals and topicals, many of which are packaged in
specialized systems.

Milan Puskar

Chairman and Chief Executive Officer

Letter To Shareholders

-----------------------
Mylan Laboratories Inc.

It's about having the right tools and the right blueprint.

Dear Shareholder,

In 1998, I set an aggressive financial target for net sales of $1 billion
by March 2001 with a 35% contribution from our brand product division, Bertek
Pharmaceuticals. At that time, the brand business represented 11% of net sales
and 14% gross margin contribution. I am pleased to report that as of the close
of fiscal 2000, Mylan reported net sales of $790 million and record net earnings
of $154 million with 15% net sales and 19% gross margin contribution from our
brand products.

Total brand sales increased 47% to $122 million in fiscal 2000, compared to
$83 million the previous year. This increase is largely attributable to our
acquisition of Penederm, in fiscal 1999. In fiscal 2000, Bertek's portfolio of
dermatology products grew to $46 million in net sales.

Penederm has now been integrated in the Mylan family of companies and as of
August 1999, it has become the Bertek Pharmaceuticals Inc. Dermatology R&D
division.

Research is the foundation upon which every pharmaceutical company is
built. Through the dedicated professional efforts of our research and
development team, Mylan has laid the groundwork to remain a leader in the
generic pharmaceutical marketplace and it is this same foundation of strength
and expertise upon which we intend to aggressively build our presence in the
brand pharmaceutical business to balance our portfolio and reduce our earnings
variability.

I am confident in our ability to increase the growth in our brand division.
However, the development curve of achieving a 35% brand and 65% generic
contribution may take longer than we had originally anticipated. Presently, we
are conducting a complete strategic review whereby we can identify any weakness
and take the necessary steps to further implement our brand strategy.

We have been aggressively exploring opportunities to grow the brand
division in three specific therapeutic categories: dermatology, cardiology and
neurology.

We continue to proceed with our in-house research and development projects
while also pursuing product licensing and/or product and company acquisitions
for opportunities.

This past year, Bertek signed an exclusive marketing agreement with Amide
Pharmaceuticals Inc. whereby Amide will supply AB rated Digoxin to Bertek for
sales and marketing under the brand name Digitektrademark. Digitektrademark is
the generic equivalent to Glaxo Wellcome's LanoxinRegistration Mark. Our
office-based sales force will be detailing the product to the primary care and
institutional arena.

<PAGE>
Although we are committed to our brand strategy, we intend to remain a
leader in the generic industry. As we enter the twenty-first century, generic
pharmaceuticals will play an increasingly important role in our health care
system by making safe and effective drugs more affordable for all Americans.
Throughout the next five years, patents on products representing over $25
billion dollars will be expiring; and where applicable, we are well positioned
to participate in these markets. We are highly focused on these opportunities
and we are uniquely positioned to take advantage of the positive growth trends
in the generic pharmaceutical industry.

We intend to leverage our traditional strengths, which are development,
manufacturing and distribution to take advantage of these opportunities. The
brand pharmaceutical companies use drug delivery technology as a means of
extending patent life and differentiating their products and thereby increasing
market share. Mylan development has been successful in achieving various forms
of extended-release technology. We have made a commitment to complex drug
formulation and technology and we have the manufacturing capabilities for these
sophisticated dosage forms. Some examples that were introduced this past year
include Extended Phenytoin Sodium Capsules, Verapamil HCl ER Capsules, Carbidopa
and Levodopa ER Tablets and the Estradiol Transdermal System.

We are investing more than ever to accelerate the flow of new products into
our pipeline, which was evident in our strong generic approval record in fiscal
2000. We received final or tentative approval for 23 Abbreviated New Drug
Applications (ANDAs) and two supplemental ANDAs for additional product
strengths. These 25 approvals encompass 21 different products or chemical
entities.

In addition to our in-house product development, we also added five
products to our generic portfolio via strategic alliances with other
pharmaceutical companies. Mylan's alliance with Pfizer Inc. is indicative of the
importance of planning, timing and opportunity. This agreement enabled Mylan to
receive all three dosage strengths of Nifedipine, generic ProcardiaRegistration
Mark XL, from Pfizer for entry into the market. Mylan now sells all three
strengths in the generic market and the consumer benefits from a lower cost,
drug alternative.

<PAGE>
At the close of our fiscal year, Mylan Pharmaceuticals, the generic
division, was marketing 115 products in over 410 sizes and/or dosage strengths
to wholesalers, pharmacies, HMO's and national accounts throughout the U.S.
Presently, we have approximately 24 ANDAs filed awaiting FDA approval and we
have targeted an additional 20 products to be filed with the agency this fiscal
year.

Throughout this past year, we have seen many mergers in the generic
pharmaceutical industry. We expect there will be others. Despite the changing
landscape in our industry, the generic division of Mylan continues to maintain
its leadership position. Our new product introductions, 10% increase in unit
volume, and prior pricing increases have all contributed to the growth of our
generic segment.

Two products for which Mylan increased prices, Lorazepam and Clorazepate,
were a catalyst for an investigation by the Federal Trade Commission (FTC).
Mylan has devoted significant resources over the past year to vigorously
defending the unprecedented lawsuit brought by the FTC in December 1998 and
related suits. Several of the related suits were dismissed during the past year.
Additional motions are pending. We continue, along with our attorneys, to
concentrate our efforts in developing further support for our defenses. Mylan
has taken testimony from many industry participants and state agencies.
Thousands of documents have been collected and scrutinized. We believe we are
well positioned going into the next stages of the litigation - expert discovery
and summary judgment.

We face challenges unrelated to developing and manufacturing quality
pharmaceutical products. Poorly conceived statutory and regulatory policies of
federal and state governments create barriers to market entry for generic
medicines and restrict consumer access to our more affordable products. The
policies result from a comprehensive strategy by multinational drug companies to
protect their monopolies by ensuring market exclusivity for products even after
their patents have expired. Efforts to unfairly extend patents, restrict
formularies to preclude generic medications, challenge generic safety and
efficacy with bogus claims, and litigate against generic manufacturers to delay
market entry by approved generic products are just a few of the tactics employed
by these multi-national drug giants.

Mylan has committed to its shareholders and customers that we will also
vigorously compete in the statutory and regulatory arenas to defend the
principles of an open and competitive marketplace, and to ensure that consumer
access to affordable medicine is protected.

<PAGE>
To keep that commitment, we have made important investments in programs to
ensure that elected officials understand the impact of policies that restrict
consumer access to generic medicines. I am pleased to report to you that we are
making significant progress in our battle to preserve and protect fair and open
competitive markets for generic medicines.

In fact, Mylan has significantly improved the perceptions of federal and
state policy makers of the importance of a strengthened generic pharmaceutical
industry. As a result, there is increasing awareness that government policies
aimed at helping generic drug manufacturers ultimately benefit consumers. There
also is growing appreciation for the fact that our industry is exceptionally
price competitive, in stark contrast to the market of the multinational drug
company monopolies. Mylan is also committed to working with consumer groups
across America to ensure that they are armed with facts about the economic and
health benefits of generic medicine. Our network is expanding, providing a
louder voice for the generic industry before federal and state policy makers. We
will continue our commitment to make sure that members of Congress, state
legislators, regulators, the media, and consumers join our crusade for a
stronger, more robust pharmaceutical market where generic drugs can play a
bigger role as the best solution to contain runaway prescription drug costs.

(picture)
Richard F. Moldin
President and Chief Operating Officer

(picture)
Douglas J. Leech
Director

<PAGE>
On March 24, 2000, I announced the appointment of Richard F. Moldin as our
new President and Chief Operating Officer. Richard knows the business, he knows
the issues and he knows a lot of people in our industry. He is respected as a
businessman and leader and has been involved in the pharmaceutical field since
1971. I feel Richard is the right person at the right time, and we are very
pleased that he has joined the Mylan team.

During this past year, Mylan also experienced a change to the Board of
Directors. Robert Smiley, a Director since 1972, decided to step aside effective
December 31, 1999. Bob's long years of service have been a great asset to Mylan.
He has been conscientious and diligent in carrying out his duties as a Director
with his ultimate concern always being this company and its shareholders. We
will miss his expertise and his candor, but we are very pleased that Bob will
continue to serve Mylan as Corporate Secretary.

Douglas J. Leech comes to the board with 25 years of experience in public
accounting and banking to fill the void created by Bob's resignation. Currently,
Douglas is Chairman, President and CEO of Centra Bank, Inc. of Morgantown, West
Virginia. His financial expertise makes him a perfect candidate to serve as
Chairman of the Audit Committee of the Board of Directors. We are very pleased
that Douglas has agreed to become a member of the Mylan board.

I believe we have what it takes to build a stronger Mylan:

- We have the foundation - our exceptional research and development program,
- The right blueprints - our strategy of continued generic leadership and

expanded brand growth,
- The right tools - our operational expertise and unsurpassed quality, - The
right resources - our dedicated team of employees that now exceeds

2,300 talented men and women.

I am extremely proud of the Mylan team whose hard work assures the
continued growth and success of Mylan and I thank them for their efforts. I
would also like to thank you, our shareholders. This year was difficult. We also
believe the future will be difficult but we remain positioned for success in the
ever-changing environment in which we operate. Thank you for your continued
support.

Milan Puskar

Chairman and Chief Executive Officer

<PAGE>

Mylan Pharmaceuticals Inc. Generic Product Line

Generic Name Trade Name

------------ ---------------

Ace Inhibitor

(UDL) Captopril Capoten®
Adrenal Cortical Steroid
* Prednisolone Syrup Prelone® Syrup
Analgesic
Propoxyphene Compound Darvon®
Compound-65
Propoxyphene HCl Darvon®
(UDL) Propoxyphene HCl
and Acetaminophen Wygesic®

(UDL) Propoxyphene Napsylate

and Acetaminophen Darvocet-N® 100
Anti-Inflammatory
* Diclofenac Potassium Cataflam®
Etodolac (Capsules) Lodine®
Etodolac (Tablets) Lodine®
(UDL) Fenoprofen Calcium Nalfon®
(UDL) Flurbiprofen Ansaid®
Ibuprofen Motrin®
Rufen®
(UDL) Indomethacin Indocin®
Ketoprofen Orudis®
Ketorolac Tromethamine Toradol®
Meclofenamate Sodium Meclomen®
(UDL) Naproxen Naprosyn®
Naproxen Sodium Anaprox®
(UDL) Piroxicam Feldene®
(UDL) Sulindac Clinoril®
Tolmetin Sodium (Capsules) Tolectin® DS
Tolmetin Sodium (Tablets) Tolectin® 600

Antiangina

Nitroglycerin Transdermal System
(Patches) Transderm Nitro®
(UDL) Verapamil HCl Isoptin®
Antianxiety
(UDL) Alprazolam Xanax®
Clorazepate Dipotassium Tranxene®
(UDL) Diazepam Valium®
(UDL) Lorazepam Ativan®
Antibiotic

Cefaclor (Capsules) Ceclor®
Cefaclor (Powders) Ceclor®
Cephalexin Keflex®
(UDL) Doxycycline Hyclate (Capsules) Vibramycin®
(UDL) Doxycycline Hyclate (Tablets) Vibra-Tabs®
Erythromycin Ethylsuccinate E.E.S. 400®
Erythromycin Stearate Erythrocin® Stearate
Tetracycline HCl Achromycin V®
Sumycin®
Anticonvulsant

(UDL) Clonazepam Klonopin®
(UDL) Extended Phenytoin Sodium Dilantin® Kapseals®
Antidepressant

(UDL) Amitriptyline HCl Elavil®
Chlordiazepoxide and
Amitriptyline HCl Limbitrol®
Clomipramine HCl Anafranil®
(UDL) Doxepin HCl Sinequan®
Maprotiline HCl Ludiomil®
(UDL) Nortriptyline HCl Pamelor®
Perphenazine and
Amitriptyline HCl Triavil®

Antidiabetic

(UDL) Chlorpropamide Diabinese®
(UDL) Glipizide Glucotrol®
* Glyburide Glynase® Pres-Tab®
Tolazamide Tolinase®
(UDL) Tolbutamide Orinase®
Antidiarrheal
(UDL) Diphenoxylate HCl and

Atropine Sulfate Lomotil®
(UDL) Loperamide HCl Imodium®
Antiemetic

(UDL) Prochlorperazine Maleate Compazine®
Antifungal
* Ketoconazole Nizoral®
Antigout
(UDL) Allopurinol Zyloprim®
Probenecid Benemid®
Antihypertensive
(UDL) Amiloride HCl and

Hydrochlorothiazide Moduretic®
Atenolol and Chlorthalidone Tenoretic®
Captopril and
Hydrochlorothiazide Capozide®
(UDL) Clonidine HCl Catapres®
Guanfacine Tenex®
(UDL) Methyldopa Aldomet®
Methyldopa and
Hydrochlorothiazide Aldoril®
(UDL) Prazosin HCl Minipress®
Propranolol HCl and
Hydrochlorothiazide Inderide®
(UDL) Spironolactone and

Hydrochlorothiazide Aldactazide®

<PAGE>
(UDL) Triamterene and
Hydrochlorothiazide

(Capsules) Dyazide®
(UDL) Triamterene and
Hydrochlorothiazide

(Tablets) Maxzide®-25MG
Maxzide®
* Terazosin HCl Hytrin®
Antihyperlipidemic
Gemfibrozil Lopid®
Antimalarial
Hydroxychloroquine Sulfate Plaquenil®
Antineoplastic
(UDL) Methotrexate Methotrexate®
Rheumatrex®
Antiparkinson

(UDL)* Carbidopa and Levodopa ER Sinemet® CR
Antipsychotic
(UDL)* Clozapine Clozaril®
Fluphenazine HCl Prolixin®
Haloperidol Haldol®
(UDL) Thioridazine HCl Mellaril®
(UDL) Thiothixene Navane®
(UDL) Trifluoperazine HCl Stelazine®
Antiviral

Acyclovir (Capsules) Zovirax®
Acyclovir (Tablets) Zovirax®
Beta Blocker

Acebutolol HCl Sectral®
(UDL)* Atenolol Tenormin®
(UDL) Metoprolol Tartrate Lopressor®
Pindolol Visken®

(UDL) Nadolol Corgard®
(UDL) Propranolol HCl Inderal®
Timolol Maleate Blocadren®
Bronchodilator
(UDL)* Albuterol Proventil®
Ventolin®
(UDL) Albuterol Sulfate Syrup Ventolin® Syrup
Calcium Channel Blocker

(UDL) Diltiazem HCl Cardizem®
(UDL) Diltiazem HCl ER Cardizem SR®
(UDL) Diltiazem HCl ER Dilacor XR®
Nicardipine Cardene®
* Nifedipine ER Procardia® XL
(UDL) Verapamil HCl ER (Tablets) Isoptin® SR
(UDL)* Verapamil HCl ER (Capsules) Verelan®
Diuretic

Bumetanide Bumex®
(UDL) Chlorothiazide Diuril®
(UDL) Chlorthalidone Hygroton®
* Hydrochlorothiazide Microzide®
(UDL) Furosemide Lasix®
(UDL) Indapamide Lozol®
Methyclothiazide Enduron®
(UDL) Spironolactone Aldactone®
Estrogen Replacement

* Estradiol Estrace®
* Estradiol Transdermal System Climara®
* Estropipate Ogen®
Gastrointestinal Antispadmodic

(UDL)* Dicyclomine HCl Bentyl®
Hemorrheologic Agent
(UDL) Pentoxifylline ER Trental®
Histamine H2 Antagonist
(UDL) Cimetidine Tagamet®
Ranitidine Zantac®
Hypnotic Agent

(UDL) Flurazepam HCl Dalmane®
(UDL) Temazepam Restoril®
Immunosuppresive

* Azathioprine Imuran®
Laxative
(UDL) Lactulose Solution Chronulac®
Skeletal Muscle Relaxant
(UDL) Cyclobenzaprine HCl Flexeril®
Orphenadrine Citrate ER Norflex TM
Orphenadrine Citrate,
Aspirin and Caffeine Norgesic TM
NorgesicTM Forte

Urinary Anti-infective

(UDL) Nitrofurantoin Macrodantin®

Unit-dose packaging is available

Select products are available in convenient unit-dose packaging from UDL
Laboratories, Inc., a division of Mylan Laboratories Inc. UDL Laboratories is a
national manufacturer, repackager and marketer of multisource and single-source
pharmaceutical products in unit-dose form for the institutional health care
marketplace.

The Mylan products available in unit-dose are identified with a UDL logo (UDL)
adjacent to the product listing.

*Indicates fiscal 2000 introduction

<PAGE>

Bertek Pharmaceuticals Inc. Brand Product Line

Dermatology

Bertek Pharmaceuticals Inc. provides dermatologic products targeted to the
treatment of acne vulgaris and for the topical treatment of fungal infections.

Acticin® is a topical scabicidal agent for the treatment of infestation with
Sarcoptes scabiei (scabies). It offers proven permethrin safety and efficacy in
a smooth formula that makes it easy to apply. It also offers a cost savings.

Treatment with permethrin cream may lead to generally mild and transient burning
and stinging, and pruritus following application, and may exacerbate conditions
such as pruritus, edema, and erythema associated with scabies.

Avita® Cream and Gel are members of the new generation of retinoid products
indicated for the treatment of acne vulgaris. Avita is uniquely formulated using
the patented TopiCare delivery system, which consists of a portfolio of liquid
polymers ("Polyolprepolymers") that are designed to hold skin care agents at
targeted levels on and in the upper layers of the skin. These compounds have
been shown to enhance delivery of a variety of skin care agents resulting in
improved efficacy, longer duration of action, reduced irritation, or lower
percent of cosmetic active required. Avita Cream 0.025% demonstrated a high
level of efficacy in a low concentration cream. Avita Gel 0.025% is for a
rapidly growing group of patients preferring gel forms of topical retinoids. It
has been shown to cause low irritation.

As with all topical retinoids, the skin of certain sensitive individuals
may become excessively red, edematous, blistered, or crusted.

Mentax® is a topical antifungal cream indicated for the treatment of
interdigital tinea pedis (athlete's foot), tinea corporis (ringworm), and tinea
cruris (jock itch). Mentax contains butenafine HCl, a benzylamine, the first of
this new class of antifungal agents. Mentax is applied directly to the skin and
is effective with once-a-day dosing, unlike many other leading topical
antifungal drugs. In clinical studies with more than 1,300 patients, Mentax
exhibited excellent results - high rates of cure with virtually no safety issues
or side effects. During U.S. clinical trials against tinea pedis, tinea corporis
and tinea cruris, no Mentax-treated patients discontinued therapy due to adverse
reactions.

The incidence of local adverse reactions was approximately 1%, primarily
mild-to-moderate burning/stinging.

Cardiovascular

Bertek Pharmaceuticals Inc. offers cardiovascular care products for the
treatment of hypertension, angina, and atrial fibrillation.

The newest addition to our cardiovascular line is Digitek® (Digoxin Tablets,
USP), the first proven, bioequivalent, cost-effective alternative to
Lanoxin®* for the treatment of chronic atrial fibrillation. Digitek is
supplied in 0.125mg and 0.25mg Tablets.

Digitalis glycosides are contraindicated in patients with ventricular
fibrillation or in patients with a known hypersensitivity to digoxin.

Bertek offers Maxzide® (Triamterine/Hydrochlorothiazide) and ClorpresTM
(Clonidine HCl and Chlorthalidone) diuretics for the treatment of hypertension.
JNC VI recommends diuretics as primary therapy for all hypertensive patients,
"..diuretics should be considered the agent of first choice in the absence of
conditions that prohibit their use."

Maxzide adverse reactions: drowsiness, insomnia, muscle cramps, weakness,
headache, GI disturbances, dizziness, orthostatic hypotension, hyperurcemia,
impotence, renal stones, tachycardia, dyspnea, dry mouth, depression, anxiety,
urine discoloration and elevated liver enzymes.

The most common associated reactions of Clorpres are: dry mouth, drowsiness,
dizziness, sedation and constipation. Headache and fatigue have been reported.
Generally these effects tend to diminish with the continued therapy.

For angina patients Bertek Pharmaceuticals Inc. offers Nitrek®
(Nitroglycerin Transdermal System), a small translucent patch that is almost
imperceptible on any skin tone, providing reliable adhesion even while swimming,
exercising, or showering

Adverse reactions to nitroglycerin are generally dose-related and almost all of
these reactions are the result of nitroglycerin's activity as a vasodilator.
Headache, which may be severe, is the most common side effect.

* Lanoxin® is a registered trademark of Glaxo Wellcome, Inc.

Antibacterial

Bertek Pharmaceuticals Inc. offers antibacterial products for the treatment
of lower respiratory infections, burn and chronic wounds.

Sulfamylon® Cream is a soft, white, nonstaining, water-miscible, topical
antimicrobial cream indicated for use as adjunctive antimicrobial burn therapy
for patients with second and third degree burns. Sulfamylon Cream is effective
in combating P. aeruginosa, as well as other bacterial organisms. Sulfamylon
resistant bacterial strains are rare, even after 30 years of use. Sulfamylon
Cream has exceptional tissue and eschar penetrating characteristics.

Sulfamylon for 5% Topical Solution is indicated for use as an adjunctive topical
antimicrobial agent to control bacterial infection when used under moist
dressings over meshed autografts on excised burn wounds.

Sulfamylon Cream and 5% Topical Solution are contraindicated in patients who are
hypersensitive to mafenide acetate. Mafenide acetate and its metabolite,
p-carboxybenzenesulfonamide, inhibit carbonic anhydrase, which may result in
metabolic acidosis, usually compensated by hyperventilation. Fatal hemolyctic
anemia with disseminated intravascular coagulation, presumably related to a
glucose-6-phosphate dehydrogenase deficiency, has been reported following
mafenide acetate therapy.

Zagam® (Sparfloxacin), the first of the aminodifluroquinilones, is indicated
for the treatment of acute exacerbations of chronic bronchitis and community
acquired pneumonia. Zagam is a unique fluroquinilone that offers advantages with
difficult to treat patients, smokers, the elderly, alcoholics, and patients with
COPD. For the difficult to treat patient, "take your best shot with the power of
Zagam."

The most common adverse events occurring in clinical trials were
photosensitivity reactions, diarrhea, nausea, headache, dyspepsia, and
dizziness. Sparfloxacin should not be used in patients with known QTc
prolongation or in patients receiving QTc prolongation drugs.

<PAGE>
Wound Care

Bertek Pharmaceuticals Inc. is a market leader and innovator in burn and chronic
wound care products. Our Institutional division markets these products to
long-term care facilities, hospitals, and burn centers, in a manner that
emphasizes education-oriented product promotion and overall patient care. Bertek
has a longstanding commitment to listening to our customers' needs and
maintaining strong, loyal partnerships with the health-care providers we serve.

Biobrane® (sheet dressings and gloves) are biosynthetic wound dressings
constructed of a silicon film with a nylon fabric partially imbedded into the
film. The fabric presents to the wound bed a complex 3-D structure of
trifilament thread to which collagen has been chemically bound. Blood/sera clot
in the nylon matrix, thereby firmly adhering the dressing to the wound until
epithelialization occurs.

If in the rare instance a patient shows evidence of an allergic reaction
to the product, it should be removed and its use discontinued. Biobrane®-L
is a dressing with a less complex nylon fabric structure for use when less
aggressive adherence is required. The lower weight monofilament thread utilized
in Biobrane-L presents a shallow, less complex matrix to the wound bed, thereby
reducing the degree of clot integration and adherence. If in the rare instance a
patient shows evidence of an allergic reaction to the product, it should be
removed and its use discontinued.

Flexzan® is a sterile, ultra-thin, highly conformable, semi-occlusive
polyurethane foam adhesive dressing which protects wounds from contamination and
trauma while maintaining a moist wound healing environment. It is constructed of
an open cell foam with a closed cell outer surface. Excess wound moisture is
absorbed into the cells of the foam and allowed to evaporate through the outer
surface, helping prevent fluid accumulation under the dressing. Flexzan should
not be used on third degree burns or on wounds showing clinical signs of
infection.

Flexzan® Extra is light tan in color with the patterned adhesive optimized
to adhere to very moist skin surfaces.

Flexderm® is a sterile hydrogel polymer sheet dressing which protects a
wound against dehydration and exogenous contamination while providing a moist
environment conducive to optimal wound healing. Flexderm absorbs exudate from
the wound while providing cooling, pain relieving protection and does not adhere
to the wound bed upon removal.

Granulex® is an aerosol topical wound spray used as an aid in the management
of pressure ulcers. Topical application stimulates the capillary beds of chronic
wounds and helps prevent the deterioration of Stage I ulcers into deeper stages.
Granulex also helps promote tissue granulation in deeper chronic ulcers (Stage
II, III, IV), and contains trypsin, a mild debriding agent which helps keep the
wound site free of necrotic tissue once debrided. Granulex should not be sprayed
on fresh arterial clots or in the eyes.

Hydrocol® is a sterile, occlusive hydrocolloid wound dressing which
interacts with wound exudate to absorb excess drainage yet is able to be removed
without damaging newly formed tissue. The dressing protects the wound from
bacteria, urine and feces, and other exogenous contamination. A unique design,
tapered borders, rounded corners, and a low-friction film backing help prevent
edge roll-up and extend dressing wear time. Hydrocol is not indicated for use on
third degree burns or on individuals with known sensi tivity to the dressing or
its components.

Proderm® is a non-prescription topical wound spray which stimulates the
capillary beds of pressure ulcers to help prevent the deterioration of Stage I
ulcers to deeper stages. Proderm also helps promote tissue granulation in deeper
chronic ulcers. Avoid spraying in eyes or nostrils.

Sorbsan® is a unique calcium alginate dressing which, via ion exchange,
transforms into a highly absorbent, readily conformable, easy-to-use hydrophilic
sodium alginate gel when in contact with sodium-rich wound exudate. Indicated
for use on all infected or non-infected wet wounds, Sorbsan is virtually
painless upon application and removal, and is easily changed by medical
professionals and patients alike. Sorbsan is not intended to be surgically
implanted or used on third degree burns.

<PAGE>

Contents
14 Selected Financial Data

15 Management's Discussion and Analysis of Operations and Financial Position
22 Consolidated Balance Sheets
24 Consolidated Statements of Earnings
25 Consolidated Statements of Shareholders' Equity
26 Consolidated Statements of Cash Flows
28 Notes to Consolidated Financial Statements
40 Independent Auditors' Report
41 Market Information
42 Shareholder Information

<PAGE>

Selected Financial Data
Mylan Laboratories Inc.

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended March 31, ............. 2000 1999 1998 1997 1996 1995 1994 1993
Total revenues ................... $ 790,145 $ 721,123 $ 555,423 $ 440,192 $ 392,860 $ 396,120 $ 251,773 $ 211,964

Net earnings ..................... $ 154,246 $ 115,409 $ 100,777 $ 63,127 $ 102,325 $ 120,869 $ 73,067 $ 70,621

Earnings per common share-basic .. $ 1.19 $ .92 $ .83 $ .52 $ .86 $ 1.02 $ .62 $ .61
Earnings per common share-diluted $ 1.18 $ .91 $ .82 $ .51 $ .85 $ 1.01 $ .61 $ .60

Shares used in computation-basic . 129,220 125,584 122,094 121,926 119,530 118,963 118,423 115,651
Shares used in computation-diluted 130,224 127,156 123,043 122,727 120,706 119,912 119,502 116,986

March 31,
Working capital .................. $ 598,976 $ 475,398 $ 379,726 $ 323,942 $ 351,536 $ 296,990 $ 197,164 $ 159,748

Total assets ..................... $1,341,230 $1,206,661 $ 847,753 $ 777,580 $ 692,009 $ 546,201 $ 403,325 $ 351,105

Long-term obligations ............ $ 30,630 $ 26,827 $ 26,218 $ 32,593 $ 18,002 $ 7,122 $ 4,609 $ 5,125

Shareholders' equity ............. $1,203,722 $1,059,905 $ 744,465 $ 659,740 $ 616,441 $ 482,728 $ 379,969 $ 295,972

Book value per share-diluted ..... $ 9.24 $ 8.34 $ 6.05 $ 5.38 $ 5.11 $ 4.03 $ 3.18 $ 2.53

</TABLE>
Amounts in thousands except per share data.

From April 1, 1992, through July 1992, the Company had a quarterly dividend
program totaling $.067 per share per year. From October 1992 to July 1993, the
Company had a quarterly dividend program totaling $.08 per share per year. From
October 1993 to July 1994, the Company had a quarterly dividend program totaling
$.107 per share per year. From October 1994 to July 1995, the Company had a
quarterly dividend program totaling $.133 per share per year. Since October
1995, the Company has had a quarterly dividend program totaling $.16 per share
per year. In addition, the Company paid a special one-time dividend of $.067 per
share on January 13, 1995.

The above financial data gives retroactive effect to the three-for-two stock
split effective August 15, 1995.

<PAGE>

Management's Discussion and Analysis of Operations and Financial Position
Mylan Laboratories Inc.

Overview

Mylan Laboratories Inc. (the "Company") posted record net earnings of
$154.2 million for the year ended March 31, 2000, compared to $115.4 million in
fiscal 1999 and $100.8 million in fiscal 1998. Net earnings for fiscal 1999 were
reduced by $29.0 million as a result of a one-time charge for acquired
in-process research and development.

The favorable earnings trend realized over the past three years is a result
of strategic initiatives undertaken by the Company. The Company set out to
accelerate the expansion of its branded operations. While continuing in-house
research and development projects, additional expansion would be obtained
through product acquisitions, with the acquisition of Penederm and its
dermatology product line in October 1998 being the most significant acquisition
to date. The branded segment now represents 15% of the Company's net sales
compared to 10% in fiscal 1998 and contributes 19% of the Company's gross margin
compared to 14% just two years ago.

The Company continues to examine additional opportunities to expand the
branded segment. The existing product line alone will not be sufficient to
provide continued annual sales growth comparable to that which was realized in
the past two years. However, the newly expanded sales force provides a solid
foundation capable of growing current market share and launching new innovative
health care products and product line extensions.

The generic segment continues to maintain its leadership role within the
industry. The 17 new product additions and prior pricing increases, as well as a
10% unit volume increase, were the primary causes for growth in fiscal 2000 and
were the result of strategic initiatives taken in previous years. The Company
expanded its ability to bring new products to market through strategic alliances
with other pharmaceutical companies. Five of the new products added in fiscal
2000 were the result of such alliances. The Company also determined, after
extensive evaluation, that changes were necessary in its generic pricing
practices; therefore, a series of price increases was implemented.

Clorazepate and lorazepam were among 29 products for which the Company
raised prices beginning in late fiscal 1998 and continuing throughout fiscal
1999. The increases on these two specific products were a catalyst for an
investigation by the Federal Trade Commission ("FTC") which led to a suit filed
in December 1998 (See note S to the consolidated financial statements).

Despite record financial results, obstacles continuing to challenge the
generic segment include consumer acceptance of generic substitutes and price
deterioration. In fiscal 2000, the Company estimates that price deterioration
reduced net earnings by approximately $56.1 million with more than half
attributable to two products, clorazepate and lorazepam. Patent litigation by
branded pharmaceutical companies and an increasingly difficult regulatory
environment present additional challenges in the generic industry.

<PAGE>

Results of Operations
Net Sales and Gross Margin

The following table outlines net sales, gross margin (net sales less cost of
sales), gross margin as a percentage of net sales and the corresponding change
from the previous year: (dollars in millions)

Percent

Change

Year ended March 31, 2000 1999 1998 2000 1999
Generic Segment:
Net sales ...... $ 667.8 $ 638.1 $ 474.5 5% 34%
Gross margin ... 345.3 329.5 207.5 5% 59%
% of net sales . 52% 52% 44%
Branded Segment:
Net sales ...... $ 122.3 $ 83.0 $ 54.1 47% 53%
Gross margin ... 83.0 54.8 32.8 51% 67%
% of net sales . 68% 66% 61%
Company Totals:
Net sales ...... $ 790.1 $ 721.1 $ 528.6 10% 36%
Gross margin ... 428.3 384.3 240.3 11% 60%
% of net sales . 54% 53% 45%

With regards to the Company's generic product line, 13 products were added
in fiscal 1998 accounting for $61.5 million in net sales in fiscal 1998 and nine
products were added in fiscal 1999 with aggregate net sales of $37.1 million in
fiscal 1999. In fiscal 2000, the Company added 17 new products which resulted in
aggregate net sales of $42.6 million. Five of the 17 new products added in
fiscal 2000 accounted for over 90% of the aggregate net sales for new products.

In fiscal 2000, five of the products added resulted from strategic
alliances with other pharmaceutical companies. Due to royalty arrangements,
these products typically have lower gross margin percentages than products
developed internally and manufactured by the Company. For both fiscal 1999 and
1998, two of the new products added were the result of strategic alliances.

During the second half of fiscal 1998, the Company raised prices on seven
generic products. Throughout fiscal 1999, the Company raised prices on 22
additional products. These selective price increases increased net sales by $47
million and gross margin by $37 million in fiscal 1998 and increased net sales
by $130 million and gross margin by $109 million in fiscal 1999.

Two of the 29 products, clorazepate and lorazepam accounted for $49 million
of net sales in fiscal 1998 and $151 million in net sales in fiscal 1999.
Despite a marginal increase in volume for these two products in fiscal 2000, net
sales dropped to $104 million as a result of price deterioration. The remaining
27 products resulted in increased net sales of $39 million and gross margin of
$34 million in fiscal 2000.

In addition to the items previously mentioned, the Company estimates that
price deterioration in the generic industry resulted in reductions in net sales
and gross margin of approximately $32 million in fiscal 1998, $39 million in
fiscal 1999 and $41 million in fiscal 2000. Such reductions were substantially
offset by increased volume, favorable mix variances and production efficiencies
which generally result from higher volumes. Total unit volume of generic product
shipments, excluding unit dose shipments, was 7.3 billion in 1998, 8.0 billion
in 1999 and 8.8 billion in fiscal 2000.

<PAGE>

The Company expects significant price deterioration on clorazepate and
lorazepam during fiscal 2001. The Company also expects increases in the cost of
raw materials for these products. Accordingly, net sales and gross margin for
these products in the fiscal year ending March 31, 2001, are expected to be less
than that recognized by the Company in fiscal 2000.

Net sales for the Company's branded segment increased 47% in fiscal 2000
and 53% in fiscal 1999. The primary reason for the significant increases in each
of the last two years was the acquisition of Penederm in October 1998. The
acquisition of Penederm expanded the Company's branded presence in one of its
targeted markets, dermatology. Dermatology products accounted for approximately
38% of net sales for the branded segment in fiscal 2000.

As the Company has made a concerted effort to expand its branded segment in
fiscal 2000 and 1999, the emphasis within the branded segment continues to shift
from wound care products to dermatology and other physician-based products.
Wound care products represented less than 8% of branded net sales in fiscal 2000
compared to 15% in the prior year.

The accounts receivable balance of the Company increased as of March 3
1, 2000, as compared to March 31, 1999, due to buying patterns of its customers
and the associated payments.

Research and Development

Research and development expenditures were $49.1 million, $61.8 million and
$46.3 million in fiscal years 2000, 1999 and 1998.

The following table outlines the allocation of research and
development expenditures: (dollars in millions)
Year ended March 31, 2000 1999 1998
Generic related projects $22.3 $25.7 $22.0
Innovative compound projects 20.5 29.2 18.4
Transdermal systems 6.3 6.9 5.9

During fiscal 1999, the Company entered into an agreement with Genpharm
Inc. to develop 15 branded and generic products. The initial milestone payment
in fiscal 1999 for this agreement was allocated evenly to generic and innovative
compound projects. This expenditure represents the majority of the fluctuation
in expenditures for generic related projects between fiscal years.

In addition to the Genpharm agreement in fiscal 1999, expenditures for
innovative compound projects were affected by the arbitration award in which the
Company recorded approximately $10.0 million in funding obligations to VivoRx.
Charges related to the Company's funding of VivoRx were $6.3 million in fiscal
1998. In addition to these items, the increase in research and development
expenditures in fiscal 1999 and fiscal 2000, as compared to fiscal 1998, are
principally due to the research and development expenses of Penederm, which was
acquired in fiscal 1999.

The Company is actively pursuing and is involved in joint development
projects in an effort to broaden its scope of capabilities in bringing to market
both generic and innovative products. Some of these arrangements provide for
payments by the Company upon the attainment of certain milestones. While such
arrangements help to reduce the Company's financial risk for unsuccessful
projects, fulfillment of milestones or other payment obligations may result in
fluctuations in research and development expense.

Acquired In-Process Research and Development

In connection with its acquisition of Penederm in October 1998, the Company
allocated $29.0 million of the purchase price to in-process research and
development in fiscal 1999 (See note B to the consolidated financial
statements).

17
<PAGE>
Selling and Administrative

Selling and administrative expenses were $156.2 million in fiscal 2000, $125.0
million in fiscal 1999 and $96.7 million in fiscal 1998. These amounts represent
20%, 17% and 18% of net sales in fiscal years 2000, 1999 and 1998.

The following table identifies the major components of selling and
administrative expenses: (in millions)
Year ended March 31, 2000 1999 1998
Sales and Marketing Expenses:
Generic:
Payroll and related $ 5.0 $ 4.9 $ 4.5
Advertising and promotions 8.8 12.7 16.3
Branded:
Payroll and related 19.1 12.8 9.4
Advertising and promotions 19.4 9.2 4.7
Other sales and marketing 12.1 9.9 8.4
Total Sales and Marketing Expenses $64.4 $49.5 $43.3
Administrative Expenses:
Payroll and related $30.7 $27.5 $21.9
Legal and professional fees 31.2 22.2 12.0
Goodwill amortization 6.4 4.0 1.6
Other administrative 23.5 21.8 17.9
Total Administrative Expenses $91.8 $75.5 $53.4

Generic advertising and promotions, which for the most part represent the cost
of stocking fees to customers to assist in the conversion and promotion of new
generic products, decreased from fiscal 1998 to fiscal 1999 and again in the
current year as such costs relate to the launch of specific products.
Promotional costs associated with products launched in fiscal 2000 were not
significant.

The increase in branded sales and marketing expenses from fiscal 1999 to 2000
primarily relates to a full year of expenses for Penederm compared to only six
months of expenses that were recorded in fiscal 1999. In addition, branded
payroll and related expenses increased in fiscal 2000 due to the addition of
direct sales representatives and customer support personnel. Branded advertising
and promotions increased significantly due to promotion expenses for two
dermatology products.

Administrative expenses increased from fiscal 1999 to fiscal 2000 due to the
additional six months of expenses for Penederm, amortization expense related to
the acquisition of Penederm and increased legal and professional fees. The
increase in legal and professional fees primarily relates to the FTC litigation
initiated in December 1998, and was ongoing for all of fiscal 2000. The fiscal
1999 increase was also impacted by litigation associated with the Company's
investment in VivoRx.

Equity in Earnings of Somerset

In fiscal 2000, the Company incurred a loss of $4.2 million in its investment in
Somerset. Equity in earnings of Somerset was $5.5 million in fiscal 1999 and
$10.3 million in fiscal 1998. The loss in the current year resulted from lower
sales due to generic competition and increased research and development
expenditures. Somerset continues its research and development efforts to develop
alternative indications for its sole commercial product, EldeprylRegistration
Mark. Unless such new indications are developed and approved for
commercialization, the Company's earnings will continue to be adversely affected
by Somerset's expected losses (See note E to the consolidated financial
statements).

18
<PAGE>
Other Income

Other income was $24.0 million in fiscal 2000, $18.3 million in fiscal 1999 and
$14.0 million in fiscal 1998. Other income was favorably impacted by increasing
interest rates and significantly higher cash and investment balances throughout
fiscal 2000. The Company recorded earnings on its investment in a limited
partnership of $15.4 million, $19.8 million and $6.6 million in fiscal years
2000, 1999 and 1998. In addition, the Company recorded a gain of $3.9 million on
the sale of an investment in fiscal 2000. Provisions to reduce the carrying
value of strategic alliances and non-publicly traded companies included in Other
assets totaled approximately $9.4 million, $12.5 million and $2.5 million in
fiscal years 2000, 1999 and 1998.

Income Taxes

The effective tax rate for fiscal 2000 was 36.5% compared to 40.0% in fiscal
1999 and 32.1% in fiscal 1998. Approximately 5% of the fiscal 1999 tax rate is
the result of the $29.0 million charge for acquired in-process research and
development which is not deductible for tax purposes. Other factors for the
increased rates in fiscal 2000 and fiscal 1999 are an increase in nondeductible
amortization expense and a reduction in tax favored dividends. For fiscal 2001,
the Company anticipates a slight increase in its effective tax rate due to
Somerset's expected loss and marginally higher state taxes. Liquidity and
Capital Resources Working capital increased from $475.4 million in fiscal 1999
to $599.0 million in fiscal 2000 and the ratio of current assets to current
liabilities increased from 5.9 to 1 to 7.8 to 1 for this same time period.

Net cash provided from operating activities was $119.2 million in fiscal
2000, $163.4 million in fiscal 1999 and $52.7 million in fiscal 1998. Fiscal
2000 operating activities were positively affected by net earnings, depreciation
and amortization and the increase in allowances on accounts receivable. These
increases were partially offset by changes in deferred taxes and the increase in
accounts receivable.

The Company's expenditures for property, plant and equipment was $28.8
million in fiscal 2000, $16.7 million in fiscal 1999 and $28.9 million in fiscal
1998. The funds in the current year were primarily used to complete an addition
to one of its generic manufacturing facilities and to construct a sales and
administrative building. Capital expenditures have been paid for with the
operating funds of the Company. Capital expenditures to complete current
projects along with the other planned capital projects are expected to be
financed through the operating funds of the Company.

Other investing activities which used cash relate to investments for
product acquisitions, equity investments in privately held companies and a net
increase in the purchase of investment securities.

Payments on long-term obligations primarily relate to installment
payments made on certain product acquisitions. The Company paid cash dividends
of $.16 per share in fiscal years 2000, 1999 and 1998 which totaled $60.0
million.

The Company is involved in litigation with the FTC and various parties
with related suits. While the Company believes that it has meritorious defenses
to the claims in these matters, an adverse result in these suits could have a
material adverse effect on the liquidity and capital resources of the Company
(See note S to the consolidated financial statements).

The Company's current cash position may not necessarily be indicative of
its position in future periods. As described in both the "Overview" and "Results
of Operations," the Company has experienced price deterioration on certain
generic products on which it increased prices and anticipates that it will
experience further price deterioration on these and other products in the
future. In addition, the Company continues to incur significant legal fees and
costs defending against various lawsuits which will also impact future cash
flows (See "Forward Looking Statements" for additional information concerning
future periods).

19
<PAGE>
Year 2000
The Company to date has not experienced any major disruptions related to the
Year 2000 date change. The Company will continue to monitor critical systems,
along with those of its customers and suppliers, to ensure uninterrupted
operations. The direct incremental cost of Year 2000 remediation was
insignificant to the Company's operations.

Other Matters

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No.133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No.133 establishes accounting and
reporting standards for derivative instruments, including certain derivatives
embedded in other contracts, and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities on the balance sheet
at fair value. As amended, this statement is effective for fiscal years
beginning after June 15, 2000. The Company is currently evaluating the impact
that SFAS No. 13 3 will have on its financial position and its results of
operations.

Market Risk

The Company is exposed to market risk primarily from changes in market values on
its investments in marketable debt and equity securities, including marketable
securities owned indirectly through certain pooled asset funds. Market prices on
debt securities generally bear an inverse relationship with changes in interest
rates. The Company also invests in overnight deposits and money market funds and
marketable securities with maturities of less than three months. These
instruments are classified as cash equivalents for financial reporting purposes
and have minimal or no interest rate risk due to their short term nature. The
Company also invests in nonpublic securities, often in consideration of its
strategic interests. The Company does not consider these investments to be
market risk sensitive.

The Company attempts to mitigate its exposure to market risk by assessing the
relative proportion of its investments in cash and cash equivalents and the
relatively stable and risk minimized returns available on such investments
withthe risks attendant to its investments in other debt and equity securities.
The Company's objective in managing its exposure to changes in the market value
of its investments in debt and equity securities is to balance the risk of the
impact of such changes on earnings and cash flows with the Company's
expectations for investment returns. The Company's pooled asset funds and
certain of its other investments in debt and equity securities are managed by
professional portfolio managers. The Company was not a party to any forward or
derivative option contract related to interest rates or equity security prices
during fiscal 2000.

The fair market value of the debt securities held by the Company at March 31,
2000, was $80.9 million, of which $59.3 million had maturities of less than one
year (the market values of which are generally less sensitive to interest rate
fluctuations than is the case with longer term debt instruments). The fair
market value of equity securities held by the Company at March 31, 2000, was
$71.8 million. Such investments collectively represent 11% of the Company's
total assets as of March 31, 2000, and 42% of the aggregate value of debt and
equity securities and cash and cash equivalents held by the Company at such
date. Assuming an instantaneous 10% decrease in the market value of the
Company's debt and equity securities, the change in the aggregate fair market
value of these securities would be $15.3 million.

Forward Looking Statements

Various statements in this Report state or suggest that the Company expects to
increase revenues and to continue to be profitable in the future by employing
various strategies which include continuing to seek, among other things, to
introduce new lines of generic equivalent products, to enter into alliances with
other manufactures, to strengthen the development of branded products and to
increase prices on select generic equivalent products in its line. These are
forward-looking statements. The Company's actual results could differ materially
from those projected or suggested in any forward-looking statement due to
various important factors, including, but not limited to, the following:

20
<PAGE>
Although the Company is expanding its presence in the branded segment of
the pharmaceutical market, its results of operations have historically depended,
and continue to depend, to a significant extent, on its ability to develop and
bring to the market new generic equivalent products. Generally, following the
expiration of patents and other market exclusivity periods, the first
manufacturers to bring a generic equivalent to the market achieve higher
revenues and gross profits than competitors that subsequently enter the market.
As competing products enter the market, prices, sales volume and profit margins
of the first generic equivalents decline significantly. Furthermore, in recent
years, the Company has increased prices on selected older generic equivalent
products, including in some cases generic equivalents that had been largely
abandoned by competitors. These price increases have provided incentive to other
generic manufacturers to reenter the market for many of these products. This
additional competition has resulted in significant price deterioration on many
of these products, which has negatively impacted the Company's revenues and
margins. Additional price deterioration can be expected on these products in the
future (See "Results of OperationsNNet Sales and Gross Margin").

In addition to suffering price deterioration on its generic equivalent
products generally, the Company's results of operation for fiscal 2000 continued
to be impacted by delays in its ability to introduce new generic equivalent
products due to litigation initiated by branded manufacturers under the
Hatch-Waxman Act to extend the exclusivity periods on drugs on which patents
were expiring. The failure of Congress or the courts to address the present
abuses of the Hatch-Waxman Act could diminish the commercial success of new
products introduced by the Company, resulting in both lower revenues and gross
margins.

The Company is seeking to strengthen its development of branded products.
Obtaining approval from the FDA to market new (branded) pharmaceutical products
in the United States is a lengthy, complex and expensive process. Products that
appear to be promising in the research laboratories may fail to survive the
testing phase due to ineffectiveness or as a result of unforeseen side effects.
Even if the Company is successful in obtaining approval for new products, no
assurance can be given that such products will be accepted in the medical
community as being as effective as alternative forms of treatment for indicated
conditions.

The Company's principal customers include wholesale drug distributors
and major drug store chains. A continuation of the consolidation that has been
experienced in these pharmaceutical distribution networks in recent years is
likely to result in an increase in pricing pressures on pharmaceutical
manufacturers.

The Company is involved in numerous lawsuits, including anti-trust and
anti-competition litigation brought by the Federal Trade Commission and the
attorneys general for 33 states, as well as more than 25 putative class action
lawsuits alleging the same conduct. An unfavorable outcome in these suits could
have a potentially adverse effect on the Company's financial position and
results of operation or, in certain circumstances, the manner in which the
Company is permitted to conduct its future operations.

21
<PAGE>

Consolidated Balance Sheets
Mylan Laboratories Inc.
<TABLE>
<S> <C> <C>

(dollars in thousands except per share data)
March 31, 2000 1999

Assets
Current assets

Cash and cash equivalents ..................................... $ 203,493 $ 189,849
Marketable securities ......................................... 99,557 69,872
Accounts receivable ........................................... 197,760 148,896
Inventories ................................................... 145,869 136,493
Deferred income tax benefit ................................... 30,792 18,199
Other current assets .......................................... 9,275 8,450
Total current assets .......................................... 686,746 571,759

Property, plant and equipment - net of accumulated depreciation 168,000 154,636
Intangible assets - net of accumulated amortization ........... 332,142 339,603
Other assets .................................................. 124,881 106,549
Investment in and advances to Somerset ........................ 29,461 34,114

Total assets .................................................. $1,341,230 $1,206,661

</TABLE>

See notes to consolidated financial statements.

22
<PAGE>
(dollars in thousands except per share data)
March 31,
<TABLE>
<S> <C> <C>

2000 1999

Liabilities and shareholders' equity
Current liabilities

Trade accounts payable $ 17,981 $ 12,142
Current portion of long-term obligations 9,874 16,941
Income taxes payable 7,858 821
Other current liabilities 46,863 61,279
Cash dividend payable 5,194 5,178
Total current liabilities 87,770 96,361

Long-term obligations 30,630 26,827
Deferred income tax liability 19,108 23,568

Shareholders' equity

Preferred stock, par value $.50 per share,
authorized 5,000,000 shares, issued
and outstanding - none- - -

Common stock, par value $.50 per share, authorized
300,000,000 shares, issued 130,277,568 at March 31, 2000 and
129,968,514 at March 31, 1999 65,139 64,984

Additional paid-in capital 316,393 311,995
Retained earnings 823,570 690,003
Accumulated other comprehensive earnings 6,936 1,105
1,212,038 1,068,087
Less treasury stock at cost - 893,498 shares at
March 31, 2000 and 888,578 shares at March 31, 1999 8,316 8,182
Total shareholders' equity 1,203,722 1,059,905

Total liabilities and shareholders' equity $1,341,230 $1,206,661

</TABLE>
23
<PAGE>

Consolidated Statements of Earnings
Mylan Laboratories Inc.

(amounts in thousands except per share data)
Year ended March 31, 2000 1999 1998
Net sales $ 790,145 $721,123 $528,601

Other revenues -- -- 26,822

Total revenues 790,145 721,123 555,423

Cost and expenses

Cost of sales 361,818 336,846 288,290
Research and development 49,121 61,843 46,278
Acquired in-process research and development -- 29,000 --
Selling and administrative 156,247 124,964 96,708
567,186 552,653 431,276

Equity in (loss) earnings of Somerset (4,193) 5,482 10,282
Other income 23,977 18,342 13,960
Earnings before income taxes 242,743 192,294 148,389
Income taxes 88,497 76,885 47,612
Net earnings $ 154,246 $115,409 100,777

Earnings per common share
Basic $ 1.19 $ .92 $ .83
Diluted $ 1.18 $ .91 $ .82
Weighted average common shares outstanding
Basic 129,220 125,584 122,094

Diluted 130,224 127,156 123,043

See notes to consolidated financial statements.

24
<PAGE>

Consolidated Statements of Shareholders' Equity
Mylan Laboratories Inc.

Accumulated
Common Stock Treasury Stock Additional Other Total Comprehensive
(dollars in thousands except -------------------- ----------------- Paid-In Retained Comprehensive Shareholders'
per share data) Shares Amount Shares Amount Capital Earnings (Loss)Earnings Equity Earnings
April 1, 1997 122,814,956 $ 61,407 (752,950) $ (3,732) $ 89,262 $513,750 $ (947) $659,740 --

Net earnings -- -- -- -- -- 100,777 -- 100,777 $100,777
Net unrealized gain on
marketable securities -- -- -- -- -- -- 2,517 2,517 2,517
Stock options exercised 235,216 118 (513) (12) 3,143 (141) -- 3,108 --
Purchase of treasury stock -- -- (144,900) (2,459) -- -- -- (2,459) --
Reissuance of treasury stock -- -- 48,505 321 -- -- -- 321 --
Cash dividend $.16 per share -- -- -- -- (19,539) -- (19,539) --
March 31, 1998 123,050,172 61,525 (849,858) (5,882) 92,405 594,847 1,570 744,465 103,294

Net earnings -- -- -- -- -- 115,409 -- 115,409 115,409
Net unrealized loss on
marketable securities -- -- -- -- -- -- (465) (465) (465)
Stock options exercised 1,013,313 507 (85,270) (2,642) 16,916 (141) -- 14,640 --
Reissuance of treasury stock -- -- 46,550 342 -- -- -- 342 --
Cash dividend $.16 per share -- -- -- -- -- (20,112) -- (20,112) --
Penederm acquisition 5,905,029 2,952 -- -- 202,674 -- -- 205,626 --
March 31, 1999 129,968,514 64,984 (888,578) (8,182) 311,995 690,003 1,105 1,059,905 114,944

Net earnings -- -- -- -- -- 154,246 -- 154,246 154,246
Net unrealized gain on
marketable securities -- -- -- -- -- -- 5,831 5,831 5,831
Stock options exercised 309,054 155 (4,920) (134) 4,398 -- -- 4,419 --
Cash dividend $.16 per share -- -- -- -- -- (20,679) -- (20,679) --
March 31, 2000 130,277,568 $ 65,139 (893,498) $ (8,316) $316,393 $ 823,570 $ 6,936 $1,203,722 $160,077

See notes to consolidated financial statements.
</TABLE>

25
<PAGE>

Consolidated Statements of Cash Flows
Mylan Laboratories Inc.
<TABLE>
<S> <C> <C> <C>

(dollars in thousands except supplemental disclosure)
Year ended March 31, 2000 1999 1998
Cash flows from operating activities
Net earnings ............................................................ $ 154,246 $115,409 $ 100,777
Adjustments to reconcile net earnings to net cash provided from operating
activities:
Depreciation and amortization ....................................... 35,706 26,911 21,708
Deferred income tax benefit ......................................... (23,267) (10,314) (3,207)
Equity in loss (earnings) of Somerset ............................... 4,193 (5,482) (10,282)
Cash received from Somerset ......................................... 460 1,089 5,674
Allowances on accounts receivable ................................... 33,628 19,300 8,754
Acquired in-process research and development ........................ -- 29,000 --
Other noncash items ................................................. 6,226 (646) 1,574
Changes in operating assets and liabilities:
Accounts receivable ............................................... (82,092) (30,411) (30,565)
Inventories ....................................................... (9,534) 11,328 (45,007)
Trade accounts payable ............................................ 5,839 (4,282) (2,082)
Income taxes ...................................................... 11,389 8,549 (8,949)
Other operating assets and liabilities ............................ (17,578) 2,998 14,255
Net cash provided from operating activities ............................. 119,216 163,449 52,650
Cash flows from investing activities
Additions to property, plant and equipment .............................. (28,788) (16,736) (28,853)
Increase in intangible and other assets ................................. (23,779) (7,915) (7,984)
Purchase of investment securities ....................................... (200,939) (79,816) (16,785)
Proceeds from investment securities ..................................... 180,706 50,151 17,309
Cash acquired net of acquisition costs .................................. -- 1,396 --
Net cash used in investing activities ................................... (72,800) (52,920) (36,313)

</TABLE>

See notes to consolidated financial statements.

26
<PAGE>

Consolidated Statements of Cash Flows
Mylan Laboratories Inc.
<TABLE>
<S> <C> <C> <C>
(dollars in thousands except supplemental disclosure)
Year ended March 31, 2000 1999 1998
Cash flows from financing activities
Payments on long-term obligations $ (15,696) $(14,740) $ (19,198)
Cash dividends paid (20,663) (19,833) (19,525)
Repurchase of common stock -- -- (2,459)

Proceeds from exercise of stock options 3,587 10,137 2,445
Net cash used in financing activities (32,772) (24,436) (38,737)

Net increase (decrease) in cash and cash equivalents 13,644 86,093 (22,400)
Cash and cash equivalents - beginning of year 189,849 103,756 126,156

Cash and cash equivalents - end of year $ 203,493 $189,849 $103,756
</TABLE>
Supplemental Disclosure

For purposes of presentation in the balance sheets and the statements of cash
flows, cash, overnight deposits and money market funds, and marketable
securities with original maturities of less than three months have been
classified as cash and cash equivalents.

Cash payments for interest were $1,418,000 in 2000, $1,800,000 in 1999,
and $3,426,000 in 1998. Cash payments for income taxes were $100,374,000 in
2000, $78,650,000 in 1999, and $59,770,000 in 1998.

Certain stock option transactions result in a reduction of income taxes
payable and a corresponding increase in additional paid-in capital. The amounts
for the years ended March 31, 2000, 1999, and 1998 were $719,000, $4,302,000,
and $652,000, respectively.

In consideration for the exercise of stock options, the Company received
and recorded into treasury stock 4,920 shares valued at $134,000 in fiscal 2000,
85,270 shares valued at $2,642,000 in fiscal 1999, and 513 shares valued at
$12,000 in fiscal 1998.

During scal 1999, the Company acquired all of the outstanding stock of
Penederm (See note B). The purchase price of approximately $207,938,000 was

satised principally through the issuance of the Company's common
stock.
In connection with product license agreements, the Company recorded
intangible assets and the related obligations, in excess of amounts paid, of
$2,250,000 in fiscal 2000 and $22,300,000 in fiscal 1999.

27
<PAGE>

Notes to Consolidated Financial Statements
Mylan Laboratories Inc.

note

(A)

Summary of Significant Accounting Policies

1) Nature of Operations and Principles of Consolidation

The consolidated financial statements include the accounts of Mylan Laboratories
Inc. ("the Company") and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation. The Company is
engaged in the development, manufacture and distribution of pharmaceutical
products for resale by others. The principal markets for these products are
proprietary and ethical pharmaceutical wholesalers and distributors, drug store
chains, drug manufacturers, and public and governmental agencies within the
United States.

2) Marketable Securities

The Company's investments are classified as "available for sale" and are
recorded at market value with net unrealized gains and losses, net of income
taxes, reflected in accumulated other comprehensive earnings in shareholders'
equity. Net gains and losses on sales of securities available for sale are
computed on a specific security basis and included in other income.

3) Accounts Receivable and Revenue Recognition

The Company recognizes revenue from product sales upon shipment to customers.
Provisions for estimated discounts, rebates, price adjustments, returns and
other adjustments are provided for in the same period as the related sales are
recorded.

Accounts receivable are presented net of provisions which amounted to
$77,212,000 and $43,584,000 at March 31, 2000, and 1999, respectively.

4) Inventories

Inventories are stated at the lower of cost (principally, first-in, first-out)
or market.

5) Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is provided in
amounts sufficient to relate the cost of depreciable assets to operations over
their estimated service lives, principally on a straight-line basis.

6) Intangible Assets

Intangible assets are stated at cost. Amortization is provided for on a
straight-line basis over estimated useful lives not to exceed forty years.
Intangible assets are periodically reviewed to determine recoverability by
comparing carrying value to expected future cash flows.

7) Research and Development

Research and development expenses are charged to operations as incurred.

8) Advertising Costs

Advertising costs are expensed as incurred and amounted to $6,063,000,
$5,683,000 and $3,526,000 in fiscal 2000, 1999, and 1998.

9) Income Taxes

Income taxes have been provided for using an asset and liability approach in
which deferred income taxes reflect the tax consequences on future years of
events that have already been recognized by the Company in the financial
statements or tax returns. Changes in enacted tax rates or laws will result in
adjustments to the recorded tax assets or liabilities in the period that the tax
law is enacted.

10) Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk
consist principally of interest-bearing investments and accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. Four of the Company's customers accounted for 15%, 15%,
11% and 10% of net sales in fiscal 2000. Three of the Company's customers
accounted for 15%, 14% and 11% of net sales in fiscal 1999 and 13%, 12% and 11%
in fiscal 1998. Approximately 62% and 56% of the accounts receivable balances
represent amounts due from four customers at March 31, 2000, and 1999,
respectively.

29
<PAGE>
The Company invests its excess cash in deposits primarily with major
banks and other high quality short-term liquid money market instruments
(commercial paper, government and government agency notes and bills, etc.).
These investments generally mature within twelve months. The Company maintains
deposit balances at banks in excess of federally insured amounts, including a
deposit in a newly formed regional bank at March 31, 2000.

11) Earnings per Common Share

Basic earnings per common share is computed by dividing net earnings by the
weighted average common shares outstanding for the period. Diluted earnings per
common share is computed by dividing net earnings by the weighted average common
shares outstanding adjusted for the dilutive effect of stock options granted
under the Company's stock option plans, unless they are antidilutive (See note
P).

A reconciliation of diluted earnings per common share is as follows:
(in thousands except per share amounts)

Year ended March 31, 2000 1999 1998
Net earnings $154,246 $115,409 $100,777
Weighted average common shares outstanding 129,220 125,584 122,094
Dilutive effect of stock options 1,004 1,572 949
Diluted weighted average common shares outstanding 130,224 127,156 123,043
Diluted earnings per common share $ 1.18 $.91 $.82

12) Accounting Standards

13) Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

14) Reclassification

Certain prior year amounts have been reclassified to conform to the 2000
presentation.

note
(B)
Acquisitions

On October 2, 1998, a wholly-owned subsidiary of the Company acquired 100% of
the outstanding stock of Penederm Inc. ("Penederm"). Penederm primarily develops
and markets patented topical prescription products. Penederm maintains
administrative and research and development facilities in Foster City,
California.

The business combination has been accounted for under the purchase
method of accounting. Payment of approximately $207,938,000 was made principally
through the issuance of 5,905,029 shares of the Company's common stock and the
assumption of 877,367 stock options granted prior to the transaction. Goodwill
and various intangible assets acquired totaled approximately $193,000,000 and
are being amortized on a straight-line basis over periods not to exceed 20
years.

The Company allocated a portion of the purchase price to in-process
research and development ("IPR&D"). IPR&D represents ongoing research and
development projects acquired by the Company which have not yet been approved by
the Food and Drug Administration ("FDA") and would have no alternative future
use. The Company used independent professional valuation consultants to assess
and allocate values to IPR&D.

29
<PAGE>
The Company acquired five IPR&D projects of which two were significant
to the IPR&Dvaluation. One project is for the treatment of inflammatory fungal
conditions while the other project is for a nail antifungal product. In
assessing the value to be allocated to only these two projects, it was estimated
that they were 42% complete and would require approximately $9,100,000 of
additional Company funding to complete. Estimated future cash flows for each
project were discounted to their present value using a rate of 31%. These
discounted cash flow projections were then adjusted by the estimated completion
percentage for each project. The total value allocated to all IPR&D projects was
$29,000,000.

At the date of acquisition, the Company believes that the assumptions used
in the valuaton process were reasonable. No assurance can be given, however,
that the underlying assumptions used in the valuation of these projects will be
realized. Pharmaceutical product development has inherent risks in the
formulation, manufacture, approval process and marketplace environment which
could affect or prevent each of these projects from achieving commercial
success.

The results of Penederm's operations have been included in the Company's
Consolidated Statements of Earnings from the date of acquisition. Unaudited pro
forma information assuming the acquisition had occurred on April 1, 1997, is as
follows, excluding the one-time charge of $29,000,000 relating to acquired
IPR&D: (in thousands except per share amounts)

Year ended March 31, 1999 1998
Total revenues $731,641 $565,378
Net earnings $140,948 $ 85,532
Diluted earnings per common share $ 1.08 $ .66
Diluted weighted average common shares outstanding 130,241 129,075

The pro forma financial information is presented for comparative
purposes only and does not purport to be indicative of the operating results or
financial position that would have occurred had the acquisition been consummated
at the beginning of the periods presented, nor is such information necessarily
indicative of the future operating results of the combined company after the
acquisition.

The Company purchased various product and marketing rights with an
aggregate purchase price of $12,250,000 and $30,300,000 in fiscal 2000 and 1999.
The purchase agreements require fixed payments and royalties on product sales in
future periods (See note J).

note

(C)

Inventories

Inventories consist of the following components: (in thousands)

March 31, 2000 1999
Raw materials $ 64,020 $ 57,414
Work in process 28,459 20,813
Finished goods 53,390 58,266
$ 145,869 $136,493
note

(D)

Property, Plant and Equipment

Property, plant and equipment consists of the following components:
(in thousands)

March 31, Useful Lives 2000 1999
Land and land improvements -- 7,560 $6,583
Buildings and improvements 20 - 40 88,001 86,898
Machinery and equipment 5 - 10 151,308 137,716
Construction in progress -- 26,712 13,596
273,581 244,793
Less accumulated depreciation 105,581 90,157
$ 168,000 $154,636

30
<PAGE>
note

(E)

Investment in and Advances to Somerset The Company owns 50% of the
outstanding common stock of Somerset Pharmaceuticals, Inc. ("Somerset") and uses
the equity method of accounting for its investment.

Equity in loss/earnings of Somerset includes the Company's 50%
portion

of Somerset's financial results and expense for amortization of
intangible assets resulting from the acquisition of Somerset. Such intangible
assets are amortized over a 15 year period. Amortization expense amounted to
$924,000 in fiscal 2000, 1999, and 1998. Additionally, the Company's charges to
Somerset for management services and product development activities are included
in Somerset's financial results.

Condensed audited balance sheet information of Somerset is as follows:

(in thousands)

December 31, 1999 1998 1997
Current assets $65,511 $70,929 $53,973
Non-current assets 1,509 2,040 3,466
Current liabilities 14,459 16,584 15,660
Payable to owners 527 595 1,433

Condensed audited income statement information of Somerset is as
follows:

(in thousands)

Year ended December 31, 1999 1998 1997
Net sales $ 18,403 $ 43,557 $66,956
Cost and expenses 23,622 19,316 30,055
Income taxes (1,395) 9,635 12,924
Net (loss) earnings $ (3,824) $ 14,606 $23,977

The above information represents 100% of Somerset's operations of which the
Company has a 50% interest.

Somerset's marketing exclusivity for Eldepryl® under the Orphan Drug
Act expired on June 6, 1996. Somerset has experienced increased competition
since August 1996 due to the approval of several generic tablet forms of
EldeprylRegistration Mark by the FDA. This has resulted in a decrease in sales
and net earnings.

In 1997, Somerset was notified by the Internal Revenue Service ("IRS") that
it had initiated a challenge related to issues concerning Somerset's Code
Section 936 credit for tax years 1993 through 1995. As of December 31, 1999, the
proposed adjustments by the IRS amounted to approximately $34,000,000 of
additional income tax and interest charges over amounts accrued. The $20,000,000
increase over the prior year is primarily due to losses incurred by Somerset in
1999 and the anticipation of losses in the near future which would not allow
Somerset to utilize Puerto Rican tax credits. Management of Somerset believes it
has appropriately claimed the Code Section 936 credit and intends to vigorously
defend its position on this matter.

note

(F)

Marketable Securities

The amortized cost and estimated market values of marketable securities at
March 31, 2000 and 1999 are as follows: (in thousands)

Gross Gross
Amortized Unrealized UnrealizedMarket
March 31, 2000 Cost Gains Losses Value
Debt securities $81,133 $ 168 $ 405 $80,896
Equity securities 7,753 11,508 600 18,661
88,886 11,676 1,005 99,557

March 31, 1999
Debt securities 60,071 303 187 60,187
Equity securities 8,101 2,144 560 9,685
$68,172 $ 2,447 $ 747 $69,872

31
<PAGE>

Maturities of debt securities at market value as of March 31, 2000, are as
follows:

(in thousands)

Mature in one year or less $59,253
Mature after one year through five years 7,207
Mature after five years 14,436
$ 80,896

Proceeds from sales of marketable securities were $183,633,000, $50,151,000, and
$17,233,000 during fiscal 2000, 1999 and 1998. Gross gains of $4,504,000,
$942,000, and $767,000 and gross losses of $1,414,000, $205,000 and $82,000 were
realized during fiscal 2000, 1999 and 1998. The cost of investments sold is
determined by the specific identification method.

note

(G)

Intangible Assets

Intangible assets consist of the following components: (in thousands)

March 31, Useful Lives 2000 1999
Patents and technologies 10 - 20 $ 123,052 $ 122,985
License fees and agreements 2 - 12 49,911 36,686
MaxzideRegistration Mark intangibles 256 9,666 69,666
Goodwill 20 - 40 128,008 128,480
Other 5 - 20 28,462 28,462
399,099 386,279
Less accumulated amortization 66,957 46,676
$ 332,142 $ 339,603

The Maxzide® intangibles relate to trademark, tradedress and marketing
rights. The balance in Other consists principally of an assembled workforce,
non- compete agreements, customer lists and contracts. Goodwill, patents and
technologies and various other intangible assets of approximately $193,000,000
were acquired in the Penederm transaction in fiscal 1999 (See note B).

note

(H)

Other Assets

Other assets consist of the following components: (in thousands)

March 31, 2000 1999
Pooled asset funds $ 60,839 $ 46,611
Cash surrender value 33,773 29,742
Other investments 30,269 30,196
$ 124,881 $106,549

Pooled asset funds primarily include the Company's interest in one
limited partnership fund which consists of common and preferred stocks, bonds,
and money market funds. Earnings on these investments included in Other income
amounted to $15,378,000 in 2000, $19,530,000 in 1999, and $6,572,000 in 1998. At
March 31, 2000, and 1999, the carrying amounts of these investments approximated
fair value.

Cash surrender value is related to insurance policies on certain
officers and key employees and the value of split dollar life insurance
agreements with certain current and former executive officers of the Company.

Other investments are comprised principally of investments in
non-publicly traded equity securities and are accounted for under the cost
method. Management periodically reviews the carrying value of these investments
for impairment. Adjustments of $9,450,000 and $12,525,000 were made in fiscal
2000 and 1999 to reduce the carrying value of these investments to their
estimated fair value and are recorded as reductions to Other income.

32
<PAGE>
note

Other Current Liabilities

Other current liabilities consist of the following components: (in thousands)

March 31, 2000 1999
Payroll and employee benefit plan accruals $14,286 $ 20,672
VivoRx funding 1,545 10,302
Medicaid 8,151 8,305
Legal and professional 4,786 3,811
Royalties 8,763 4,958
Product license fees 4,165 8,802
Other 5,167 4,429
$46,863 $ 61,279

In fiscal 1999, the Company recorded an arbitration award for
research and development funding which is identified here as VivoRx funding.

note
(J)

Long-Term Obligations

Long-term obligations include accruals for postretirement compensation pursuant
to agreements with certain key employees and directors of approximately
$15,400,000, and $13,463,000 at March 31, 2000, and 1999. Under these
agreements, benefits are to be paid over periods of 10 to 15 years commencing at
retirement.

The Company's obligation on 10.5% senior promissory notes is $3,000,000 and
$4,000,000 at March 31, 2000, and 1999. Future principal payments on these notes
are $1,000,000 in fiscal 2001 and $2,000,000 in fiscal 2002. At March 31, 2000,
and 1999, the Company was in compliance with all of its debt covenants.

The present value of the Company's obligations for product acquisitions was
$11,121,000 at March 31, 2000, and $24,605,000 at March 31, 1999. Future
payments, including minimum royalty payments for these agreements, will be
approximately $2,000,000 in fiscal 2001, $3,750,000 in fiscal 2002 and
$2,000,000 in fiscal 2003.

During fiscal 2000, the Company recorded $9,238,000 in deferred revenue
relating to a license and supply agreement. Revenue will be recognized ratably
over the next five years.

note

(K)

Income Taxes

Income taxes consist of the following components: (in thousands)

Year ended March 31, 2000 1999 1998
Federal:
Current $ 97,957 $77,546 $45,601
Deferred (21,596) (9,617) (2,993)
76,361 67,929 42,608
State:
Current 13,807 9,653 5,218
Deferred (1,671) (697) (214)
12,136 8,956 5,004
Income taxes 88,497 76,885 47,612
Pre-tax earnings $ 242,743 $192,294 $148,389
Effective tax rate 36.5% 40.0% 32.1%

33
<PAGE>

Temporary differences and carryforwards which give rise to the deferred tax
assets and liabilities are as follows: (in thousands)

March 31, 2000 1999
Deferred tax assets:
Employee benefits $ 6,651 $5,090
Contractual agreements 7,964 -
Intangible assets 2,043 3,627
Asset allowances 31,241 17,841
Inventory 1,084 1,069
Investments 10,481 5,411
Tax loss carryforwards 12,708 18,198
Tax credit carryforwards 5,596 3,683
Other - 266
Total deferred tax assets 77,768 55,185
Deferred tax liabilities:
Plant and equipment 11,017 10,373
Intangible assets 41,205 43,675
Investments 13,862 6,506
Total deferred tax liabilities 66,084 60,554
Deferred tax asset (liability) - net $ 11,684 $ (5,369)
Classification in the consolidated balance sheets:
Deferred income tax benefit - current $ 30,792 $ 18,199
Deferred income tax liability - non-current 19,108 23,568
Deferred tax asset (liability) - net $ 11,684 $ (5,369)

Deferred tax assets relating to net operating loss carryforwards and
research and development tax credit carryforwards were acquired during fiscal
1999 upon the acquisition of Penederm. Future utilization of these assets is
subject to certain limitations set forth in the Internal Revenue Code. In fiscal
2000, the Company utilized acquired net operating loss carryforwards and credit
carryforwards to reduce its current tax liability by approximately $4,800,000.
The Company has approximately $36,300,000 of acquired federal tax loss
carryforwards and $2,146,000 of acquired federal and state tax credits remaining
to offset future taxable income. The loss carryforwards and tax credits expire
in fiscal years 2007 through 2013.

The Company also has $1,650,000 of federal research and development tax
credits that are deferred until fiscal 2001 based upon recent tax law changes.
A$1,800,000 tax credit against Puerto Rican local income tax is also available
for future years.

A reconciliation of the statutory tax rate to the effective tax rate is
as follows:

Year ended March 31, 2000 1999 1998
Statutory tax rate 35.0% 35.0% 35.0%
IPR&D -- 5.3% --
State income taxes-net 3.1% 3.1% 2.3%
Nondeductible amortization 1.0% 0.8% 0.6%
Tax exempt earnings-primarily dividends -- (1.1%) (2.4%)
Tax credits (2.7%) (2.6%) (3.0%)
Other items 0.1% (0.5%) (0.4%)
Effective tax rate 36.5% 40.0% 32.1%

Tax credits result principally from the Company's operations in Puerto
Rico and from qualified research and development expenditures.

State income taxes include provisions for tollgate tax resulting from
the future repatriation of funds from the Company's operation in Puerto Rico to
the United States. Such provisions have been made to the minimum extent provided
under Puerto Rican tax law based on the Company's intent to reinvest Puerto
Rican source earnings in qualifying investments within Puerto Rico.

The Company's federal tax returns have been audited by the IRS
through March 31, 1996.

34
<PAGE>
note
(L)
Common Stock

On August 23, 1996, the Company's Board of Directors adopted a Shareholder
Rights Plan ("the Rights Plan"). The Rights Plan was adopted to provide the
Company's Directors with sufficient time to assess and evaluate any takeover bid
and explore and develop a reasonable response. Effective November 8, 1999, the
Rights Plan was amended to eliminate the special rights held by continuing
directors. The Rights Plan will expire on September 5, 2006, unless a triggering
event has occurred.

note

(M)

Commitments

The Company has entered into various product licensing agreements. In some of
these arrangements, the Company provides funding for the development of the
product, through milestone payments, in exchange for marketing and distribution
rights to the product. In the event all projects are successful, milestone
payments totaling $18,800,000 would be paid over the next five years.

note

(N)

Other Revenues

Under the terms of the Company's supply and distribution agreement with Genpharm
Inc. ("Genpharm") relating to sales of ranitidine HCl tablets, the Company also
benefitted from an agreement between Genpharm and Novopharm Limited
("Novopharm"). The Company recognized revenue of $26,822,000 in fiscal 1998 in
connection with the Genpharm Novopharm agreement (See note S). note O

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents approximate fair value due to
the short-term maturity of these instruments. Marketable securities are recorded
at fair value based on quoted market prices. The carrying value of other
financial instruments approximates their fair value based on other appropriate
valuation techniques.

note

(P)

Stock Option Plans

On January 23, 1997, the Board of Directors adopted the "Mylan Laboratories Inc.
1997 Incentive Stock Option Plan" ("the Plan") which was approved by the
shareholders on July 24, 1997. Under the Plan, the Company may grant up to
10,000,000 shares of its common stock to officers, employees, and nonemployee
consultants and agents as either incentive stock options or nonqualified stock
options. Options, which may be granted at not less than fair market value on the
date of the grant, may be exercised within ten years from the date of grant.
Nonqualified stock options generally vest on date of grant. Incentive stock
options granted have the following vesting schedule: 25% two years from the date
of grant, 25% at the end of year three and the remaining 50% at the end of year
four. As of March 31, 2000, 7,279,150 shares are available for future grants.

On June 23, 1992, the Board of Directors adopted the "1992 Nonemployee
Director Stock Option Plan" ("the Directors' Plan") which was approved by the
shareholders on April 7, 1993. A total of 600,000 shares of the Company's common
stock are reserved for issuance upon exercise of stock options which may be
granted at not less than fair market value on the date of grant. Options may be
exercised within ten years from the date of grant. As of March 31, 2000, 382,500
shares have been granted pursuant to the Directors' Plan.

35
<PAGE>
Additional stock options are outstanding from the expired 1986 Incentive
Stock Option Plan and other plans acquired through

acquisitions.
A summary of the activity resulting from all plans is as follows:

Weighted average
Number of shares exercise price
under option per share
Outstanding as of April 1, 1997 2,570,877 $12.10
Options granted 1,322,000 17.08
Options exercised (235,216) 11.09
Options cancelled (41,175) 14.17
Outstanding as of March 31, 1998 3,616,486 $13.96
Options acquired - Penederm 877,367 15.30
Options granted 186,500 19.74
Options exercised (1,013,313) 12.16
Options cancelled (117,886) 16.96
Outstanding as of March 31, 1999 3,549,154 $15.11
Options granted 1,410,100 25.50
Options exercised (309,054) 12.04
Options cancelled (53,419) 18.34
Outstanding as of March 31, 2000 4,596,781 $18.44

Options outstanding Options exercisable
----------------------------- --------------------------------
Weighted
average Weighted Weighted
Range of Number remaining average Number average
exercise price outstanding as contractual life exercise price exercisable as exercise price
per share of 3/31/2000 (years) per share of 3/31/2000 per share
$ 0.81- $11.58 266,341 3.15 $ 7.77 266,341 $ 7.77
12.00- $12.00 976,653 2.23 12.00 976,653 12.00
12.32- $16.69 949,971 7.05 16.19 577,972 16.11
16.73- $21.14 728,091 7.03 17.95 672,591 17.96
22.88- $25.00 474,671 8.59 23.18 65,571 24.88
26.06- $30.15 1,201,054 9.91 26.25 64,054 29.64
$ 0.81- $30.15 4,596,781 6.70 $18.44 2,623,182 $14.76

</TABLE>

At March 31, 2000, options were exercisable for 2,623,182 shares at a
weighted average exercise price of $14.76 per share. The corresponding amounts
were 2,665,904 shares at $14.12 per share at March 31, 1999, and 2,557,856
shares at $13.20 per share at March 31, 1998.

In accordance with the provisions of SFAS No. 123 "Accounting for
Stock-Based Compensation," the Company will continue to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and, accordingly, does not recognize compensation costs for its
existing stock option plans. If the Company had elected to recognize
compensation costs based on the alternative fair value method prescribed by SFAS
No. 123, net earnings and earnings per share (on both a basic and diluted basis)
would have been reduced by $1,430,000, or $.01 per share, $1,613,000, or $.01
per share and $6,489,000, or $.04 per share for the years ended March 31, 2000,
1999 and 1998. These calculations only take into account options issued since
April 1, 1995.

36
<PAGE>
The weighted average fair value of options granted during the years
ended March 31, 2000, 1999 and 1998 was $9.93, $9.37 and $6.47. The fair value
was estimated using the Black-Scholes option pricing model based on the
following assumptions:

March 31, 2000 1999 1998
Volatility 34% 42% 35%
Risk-free interest rate 6.2% 5.0% 6.1%
Dividend yield 0.6% 1.0% 1.0%
Expected term of options (in years) 5.2 5.2 5.4

note
(Q)

Employee Benefits

The Company maintains profit sharing and 401(k) retirement plans covering
essentially all of its employees.

Contributions to the profit sharing plans are made at the discretion of
the Board of Directors. Contributions to the 401(k) plans are based upon
employee contributions or service hours. Total contributions to all plans for
the years

ended March 31, 2000, 1999 and 1998 were $6,342,000, $4,776,000 and
$3,889,000 respectively.

In fiscal 1999, the Company adopted a plan covering substantially all of
its employees to provide for limited reimbursement of supplemental
postretirement medical coverage. The plan provides benefits to employees
retiring after April 5, 1998, who meet minimum age and service requirements. The
Company has provided for the costs of these benefits, which are not material.
The future obligation related to these benefits is insignificant.

The Company provides supplemental life insurance benefits to certain
management level employees. Such benefits require annual funding and may require
accelerated funding in the event of a change in control of the Company.

note

(R)

Segment Reporting

The Company has two reportable operating segments, Generic and Branded
Pharmaceuticals, based on differences in products, marketing and regulatory
approval.

Generic pharmaceutical products are off-patented products,
therapeutically equivalent to a branded name product, marketed to pharmaceutical
wholesalers and distributors, drug store chains and public and governmental
agencies by multiple suppliers. These products have been approved by the FDA
through an Abbreviated New Drug Application process.

Branded pharmaceutical products are generally, when new, patent
protected products marketed directly to health care professionals by a single
provider. These products have been approved by the FDA primarily through a New
Drug Application process.

The accounting policies of the operating segments are the same as those
described in note A. In the following table, segment revenues represent sales to
unrelated third parties with corresponding corporate wide cost of sales used to
determine segment profits. Segment profits represent earnings from continuing
operations before a provision for income taxes.

37
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C>
Corporate/
March 31, (dollars in thousands) Generic Branded Other Consolidated
Total revenues 2000 $ 667,808 $ 122,337 -- $ 790,145
1999 638,122 83,001 -- 721,123
1998 501,320 54,103 -- 555,423
Segment profit (1) 2000 261,238 15,630 $ (34,125) 242,743
1999 226,153 14,941 (48,800) 192,294
1998 143,309 6,728 (1,648) 148,389
Segment assets (2) 2000 464,277 259,196 617,757 1,341,230
1999 396,293 257,860 552,508 1,206,661
1998 398,189 126,878 322,686 847,753
Property, plant and

equipment additions 2000 23,376 5,157 255 28,788
1999 11,646 3,991 1,099 16,736
1998 24,843 3,925 85 28,853
Deprecation and

amortization (1)&(2) 2000 12,919 15,540 7,247 35,706
1999 11,452 10,246 5,213 26,911
1998 10,950 8,084 2,674 21,708

</TABLE>

(1)Segment profit represents segment gross profit less direct research and
development, sales and marketing, and administrative expenses. Corporate
and Other Segment profit represents consolidated non-operating income less
corporate expenses, including legal expenditures, IPR&D and goodwill
amortization.

(2)Generic and Branded Segment assets include property, plant and equipment,
trade accounts receivable, inventory and intangible assets other than
goodwill. Corporate and Other Segment assets includes consolidated cash and
cash equivalents, marketable securities,the Company's investment in
Somerset and other assets, goodwill and all income tax related assets.

note

(S)

Contingencies

The Company is involved in various legal proceedings that are considered normal
to its business. While it is not feasible to predict the ultimate outcome of
such proceedings, it is the opinion of management that the ultimate outcome will
not have a material adverse effect on the Company's operations or its financial
position.

The Company had an agreement with Genpharm where it benefitted from the
sale of ranitidine HCl tablets by Novopharm under a separate agreement between
Genpharm and Novopharm (See note N). Based on an independent audit, Genpharm
initiated a lawsuit against Novopharm to resolve contract interpretation issues
and collect additional funds due. In response to Genpharm's suit, Novopharm
filed counterclaims against both Genpharm and the Company claiming damages of up
to $60,000,000. The Company believes the counte rclaims against Genpharm and the
Company are without merit and will vigorously defend its position.

In June 1998, the Company filed suit in the Los Angeles Superior Court
against American Bioscience, Inc. ("ABI"), American Pharmaceutical Partners,
Inc. ("APP") and certain of their directors and officers. The Company's suit
seeks various legal and equitable remedies. The Los Angeles Superior Court
issued a preliminary injunction order which, among other things, prohibits the
defendants from transferring or disposing of funds, assets, technology or
property without the Company's consent or commingling as sets, property,
technology or personnel with those of another company. In June 1999, the
defendants filed an answer to and cross-complaint against the Company. The
cross-complaint alleges violations of California state laws, interference with
contractual relations and prospective economic advantage, fraud, slander, libel
and other allegations. The cross-complainants seek unspecified compensatory and
punitive damages. The Company believes the cross-complaints are without merit
and intends to vigorously defend its position.

38
<PAGE>
A subsidiary of the Company was involved in a dispute with KaiGai
Pharmaceuticals, Co., Ltd. ("KaiGai") relating to a license and supply contract
for nitroglycerin transdermal patches which both parties claim was breached by
the other. KaiGai sought damages in excess of $20,000,000. The dispute was
subject to binding arbitration, and, in November 1999, the arbitration panel
denied KaiGai's request for damages. KaiGai filed an appeal and the Company has
filed a moton to dismiss the appeal due to the appeal not being filed within the
permitted time period.

In November 1999, the Company and a state agency entered into a
settlement concerning certain contract pricing matters. The settlement was
satisfied without a significant effect on the Company's financial position or
results of operations.

On December 22, 1998, the Federal Trade Commission ("FTC") filed suit in
U.S. District Court for the District of Columbia (the "Court") against the
Company. The FTC's complaint alleges the Company engaged in restraint of trade,
monopolization, attempted monopolization and conspiracy to monopolize, arising
out of certain agreements involving the supply of raw materials used to
manufacture two drugs. The FTC also sued in the same case the foreign supplier
of the raw materials, the supplier's parent company and its United States
distributor. Under the terms of the agreements related to these raw materials,
the Company has agreed to indemnify these parties.

The Company is a party to other suits involving the Attorneys General
from 33 states and more than 25 putative class actions that allege the same
conduct alleged in the FTC suit as well as alleged violations of state consumer
protection laws. A qui tam action was commenced by a private party in the U.S.
District Court for the District of South Carolina, purportedly on behalf of the
United States, alleging violations of the False Claims Act and other statutes.

The relief sought by the FTC includes an injunction barring the Company
from engaging in the challenged conduct, recision of certain agreements and
disgorgement in excess of $120,000,000. The states and private parties seek
similar relief, treble damages and attorneys' fees. The Company's motions to
dismiss several of the private actions have been granted.

A class action suit was filed alleging violations of federal securities
laws by the Company and certain directors and officers of the Company. Without
specifying a dollar amount, the suit sought compensatory damages. The Company's
motion to dismiss the federal securities case was granted on December 22, 1999.
The case is on appeal.

The Company had filed motions to dismiss the FTC complaint and
significant portions of the State Attorneys General complaints. In July 1999,
the Court denied the Company's motion to dismiss the FTC complaint. The Company
filed a motion requesting the Court to certify its ruling with respect to the
jurisdictional issue for expedited appeal to the U.S. Court of Appeals for the
District of Columbia. This motion was denied. The Court granted in part and
denied in part the Company's motion to dismiss portions of the State Attorneys
General complaints. In so doing, the Court limited certain theories of recovery
asserted by the states. Some states filed a motion with the Court requesting
that it reconsider certain claims that were dismissed, and, in December 1999,
the Court reinstated certain claims.

In February 2000, the Company received notice of threatened litigation
by another generic manufacturer. The potential complaint is based on similar
factors alleged in the FTC litigation relating to the generic product
clorazepate.

The Company believes that it has meritorious defenses to the claims in
these FTC matters and intends to vigorously defend them. Although the Company
believes it has meritorious defenses to the claims, an adverse result in these
suits could have a material adverse effect on the Company's financial position
and results of its operations.

39
<PAGE>

Board of Directors and Shareholders
Mylan Laboratories Inc.
Pittsburgh, Pennsylvania

Independent Auditors' Report
Mylan Laboratories Inc.
We have audited the accompanying consolidated balance sheets of Mylan
Laboratories Inc. and subsidiaries as of March 31, 2000 and 1999, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 2000, appearing on
pages 22 through 39. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Mylan Laboratories Inc. and
subsidiaries as of March 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
2000, in conformity with generally accepted accounting principles in the United
States of America.

Deloitte & Touche LLP
Pittsburgh, Pennsylvania

May 10, 2000

40
<PAGE>

Market Information
Mylan Laboratories Inc.
<TABLE>
<S> <C> <C> <C> <C> <C>

Quarterly Financial Data
(Amounts in thousands 1st 2nd 3rd 4th
except per share amounts) Quarter Quarter Quarter Quarter Year
Fiscal 2000
Total revenues $ 177,095 $ 194,489 $203,877 $ 214,684 $790,145
Gross profit 96,247 110,812 111,152 110,116 428,327
Net earnings 31,953 37,066 40,434 44,793 154,246
Earnings per share-basic .25 .29 .31 .35 1.19
Earnings per share-diluted .25 .28 .31 .34 1.18

Fiscal 1999
Total revenues $ 166,718 $ 177,592 $186,195 $ 190,618 $ 721,123
Gross profit 85,154 92,044 99,716 107,363 384,277
Net earnings 34,182 37,215 8,154 35,858 115,409
Earnings per share-basic .28 .30 .06 .28 .92
Earnings per share-diluted .28 .30 .06 .27 .91

</TABLE>

Market Prices
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
Fiscal 2000
High 28 3\8 30 5\16 25 5\8 30
Low 21 5\8 17 1\16 17 3\16 22 1\2

Fiscal 1999
High 32 3\4 35 1\8 35 15\16 32
Low 22 1\16 22 1\8 24 5\16 26 1\4

New York Stock Exchange Symbol: MYL
On May 1, 2000, the Company had approximately 99,112 shareholders.

Split Date
Amount Split Price Presplit Price
July 20, 1979 5/4 10 3\4 13 1\2
November 13, 1981 2/1 13 1\2 27 1\8
June 30, 1983 2/1 16 1\4 32 1\2
March 1, 1984 3/2 14 21
July 31, 1984 3/2 19 7\8 29 3\4
February 15, 1985 2/1 17 7\8 35 3\4
August 1, 1986 3/2 14 21
August 1, 1992 2/1 21 3\4 43 1\2
August 15, 1995 3/2 21 31 1\2

41
<PAGE>

Shareholder Information
Mylan Laboratories Inc.

Notice of Annual Meeting

The annual meeting of the Company's shareholders will be held on Thursday, July
27, 2000 at 10:00 a.m. at the David L. Lawrence Convention Center, South Hall,
1001 Penn Avenue, Pittsburgh, Pennsylvania. A formal notice, together with a
proxy statement and form of proxy, will be mailed to shareholders entitled to
vote in advance of the meeting.

Stockholder Information

Questions concerning stock ownership may be directed to Investor Relations at
Corporate headquarters.

Press Release Information

Press releases and other information are available on the internet at Mylan's
homepage at www.mylan.com.

Form 10-K Annual Report

A copy of the Mylan Laboratories Inc. Annual Report to the Securities and
Exchange Commission on Form 10-K is available by contacting Investor Relations
at the Company's headquarters.

Dividend Payments

Quarterly dividends on Mylan common stock are paid in January, April, July, and
October. The record date is established by the Company prior to each dividend
payment. The Company also offers an Automatic Dividend Reinvestment and Stock
Purchase Plan. For further information, contact Investor Relations at the
Company's headquarters.

Corporate Headquarters

Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
(412) 232-0100
http://www.mylan.com

Registrar and Transfer Agent

American Stock Transfer &
Trust Company
40 Wall Street
New York, New York 10005
Certied Public Accountants

Deloitte &Touche LLP
Pittsburgh, Pennsylvania

Financial Consultants
PDA Associates, Inc.
Ironia, New Jersey

Securities Traded
New York Stock Exchange
Mylan Laboratories Inc.

Common Stock Symbol: MYL

42
<PAGE>

Board of Directors and Corporate Officers

-----------------------------------------
Board of Directors

----------------------
Milan Puskar Chairman of the Board and C.E.O.

Dana G. Barnett

Executive Vice President of the Company

Laurence S. DeLynn
Retail Consultant

Morgantown, West Virginia

John C. Gaisford, M.D.
Director of Burn Research
West Penn Hospital
Pittsburgh, Pennsylvania

Douglas J. Leech
Chairman, President and C.E.O.
Centra Bank, Inc. and
Centra Financial Holdings, Inc.
Morgantown, West Virginia

Patricia A. Sunseri
Vice President-Investor and
Public Relations of the Company

C.B. Todd

Retired Pharmaceutical Executive

Executive Officers

----------------------

Milan Puskar
Chairman and C.E.O.

Richard F. Moldin
President and C.O.O.

Dana G. Barnett
Executive Vice President

Louis J. DeBone
Senior Vice President

Roger L. Foster, Esq.
Vice President and General Counsel

Roderick P. Jackson
Senior Vice President

Donald C. Schilling
Vice President-Finance and C.F.O.

Robert W. Smiley, Esq.
Secretary

Patricia A. Sunseri
Vice President-Investor and
Public Relations

Design:John Brady Design Consultants Inc., Pittsburgh, Pennsylvania

For more information

I would like more information on:

Dividend Reinvestment Stock Purchase Program
Pharmaceutical Product Identification Guide
Generic Development and Approval Brochure

Name
Address

City/State/Zip
Phone

Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street

Pittsburgh, Pennsylvania 15222
www.mylan.com