ANDRX CORP, S-1, 1996-12-06

ANDRX CORP
S-1, 1996-12-06
PHARMACEUTICAL PREPARATIONS

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As filed with the Securities and Exchange Commission on December 6, 1996
Registration Statement No. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 DRAFT: 12/04/96

-----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ANDRX CORPORATION
(Exact name of registrant as specified in its charter)

FLORIDA 2834 65-0366879
------- ---- ----------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

Dr. Elliot F. Hahn
President
Andrx Corporation
4001 Southwest 47th Avenue 4001 Southwest 47th Avenue
Suite 201 Suite 201
Ft. Lauderdale, Florida 33314 Ft. Lauderdale, Florida 33314
(954) 584-0300 (954) 584-0300
- -------------------------------- -----------------------------------
(Address, including zip code, and (Address, including zip code, and
telephone number including area telephone number including area code,
code, of registrant's principal registrant's principal executive
executive offices) offices)

-------------------------
COPIES OF COMMUNICATIONS TO:
Dale S. Bergman, P.A.
Broad and Cassel
201 South Biscayne Boulevard
Miami Center, Suite 3000
Miami, Florida 33131
Telephone: (305) 373-9454

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [X]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]

<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value
per share.......................... 1,205,530 $13.625 $16,425,347 $3,285
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A), OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
<TABLE>
<CAPTION>

ANDRX CORPORATION
(CROSS REFERENCE SHEET)
Furnished Pursuant to Item 501(b) of Regulation S-K

REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ----------------------- ----------------------
<S> <C>
Forepart of the Registration Statement and Facing Page of the Registration Statement; Cross
Outside Front Cover Page of Prospectus. Reference Sheet; Outside Front Cover Page

Inside Front and Outside Back Cover Pages Inside Front Cover Page; Outside Back Cover
of Prospectus. Page

Summary Information, Risk Factors and Prospectus Summary; Risk Factors
Ratio of Earnings to Fixed Charges.

Use of Proceeds. Use of Proceeds

Determination of Offering Price. *

Dilution. Dilution

Selling Security Holders. Selling Shareholders

Plan of Distribution. Plan of Distribution

Description of Securities to be Registered. Description of Securities

Interests of Named Experts and Counsel. *

Information with Respect to the Registrant
1. Description of Business Prospectus Summary; Risk Factors; Manage-
ment's Discussion and Analysis of Financial
Condition and Results of Operations; Business

2. Description of Property Business

3. Legal Proceedings Business

4. Market Price of and Dividends on the Outside Front Cover Page; Prospectus Summary;
Registrant's Common Equity and Dividend Policy; Price Range of Common Stock;
Related Stockholder Matters Description of Capital Stock; Shares Eligible for
Future Sale

5. Financial Statements Consolidated Financial Statements

6. Selected Financial Data Selected Consolidated Financial Data

7. Supplementary Financial Information *

8. Management's Discussion and Analysis Management's Discussion and Analysis of Finan-
of Financial Condition and Results of cial Condition and Results of Operations
Operations

9. Changes in and Disagreements with *
Accountants on Accounting and
Financial Disclosure

10. Directors and Executive Officers Management

11. Executive Compensation Management

12. Security Ownership of Certain Benefi- Principal Shareholders
cial Owners and Management

13. Certain Relationships and Related Management; Certain Transactions
Transactions

Disclosure of Commission Position on *
Indemnification for Securities Act Liabili-
ties
</TABLE>

- -------------------------
* Not applicable or answer thereto is negative

<PAGE>

Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

Subject to Completion, Dated December 6, 1996

1,205,530 SHARES

[ANDRX LOGO]

COMMON STOCK

This Prospectus covers an aggregate of 1,205,530 shares of Common
Stock, par value $.001 per share (the "Common Stock"), of Andrx Corporation, a
Florida corporation ("Andrx" or the "Company"), on behalf of certain selling
shareholders (the "Selling Shareholders"). Of such 1,205,530 shares, (i) 602,618
shares were heretofore issued in private offerings consummated in December 1993,
January 1994 and May 1995, (ii) 502,428 shares are issuable pursuant to warrants
(the "Investor Warrants") issued in connection with the private offerings
consummated in December 1993 and January 1994, (iii) 50,242 shares are issuable
upon the exercise of an option granted to the placement agent of the December
1993 and January 1994 private offerings (the "Agent's Option") to purchase
50,242 shares of Common Stock and 50,242 Investor Warrants (the "Agent's
Warrants"), and (iv) the remaining 50,242 shares are issuable upon exercise of
the Agent's Warrants. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Shareholders. See "Selling Shareholders."
The Company will receive proceeds only upon the exercise of the Investor
Warrants, the Agent's Option and the Agent's Warrants by the holders thereof.
See "Use of Proceeds."

The Selling Shareholders may sell the Common Stock offered hereby for
their own accounts in open market or block transactions or otherwise in
accordance with the rules of The Nasdaq National Market, or in private
transactions, at prices related to the prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling shares
to or through broker-dealers, and such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Shareholders of the purchasers of shares for whom such broker-dealers may act as
agent or to whom they sell as principal or both. Upon any sale of shares of
Common Stock offered hereby, the Selling Shareholders and participating
broker-dealers or selling agents may be deemed to be "underwriters" as that term
is defined in the Securities Act of 1933, as amended (the "Securities Act"), in
which event any discounts, concessions or commissions they receive, which are
not expected to exceed those customary in the types of transactions involved, or
any profit on resales of such Common Stock by them, may be deemed to be
underwriting commissions or discounts under the Securities Act. The Company has
been advised by the Selling Shareholders that there currently are no
underwriting arrangements with respect to the sale of the shares of Common
Stock. To the extent required, the specific shares of Common Stock to be sold,
names of the Selling Shareholders, purchase price, public offering price, names
of any such broker-dealer or selling agent and any applicable discount or
commission with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution."

The Common Stock is listed for quotation on The Nasdaq National Market
under the symbol "ADRX." On December 5, 1996, the last sale price of the Common
Stock as reported by The Nasdaq National Market was $13.375 per share. See
"Price Range of Common Stock."

-------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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

The date of this Prospectus is , 1996

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and the Regional Offices of the
Commission located in the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and at 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of those filings can be obtained from the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and may also be obtained from the
website that the Commission maintains at http://www.sec.gov.

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<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO 1,539,787 SHARES OF
COMMON STOCK ISSUABLE UPON THE EXERCISE OF OUTSTANDING OPTIONS AND WARRANTS,
INCLUDING THE INVESTOR WARRANTS, THE AGENT'S OPTION AND THE AGENT'S WARRANTS.

THE COMPANY

Andrx is engaged in the formulation and commercialization of
controlled-release oral pharmaceuticals utilizing the Company's proprietary drug
delivery technologies. Pharmaceutical companies are increasingly utilizing
controlled-release drug delivery technologies to improve drug therapy.
Controlled-release drug delivery technologies generally provide more consistent
and appropriate drug levels in the bloodstream than immediate-release dosage
forms and may improve drug efficacy and reduce side effects by releasing drug
dosages at specific times and in specific locations in the body. These
technologies also allow for the development of "patient-friendly" dosage forms,
which reduce the frequency of drug administration, thus improving patient
compliance. Controlled-release pharmaceuticals can be especially beneficial for
certain patient populations, such as the elderly, who often require several
medications with differing dosing regimens.

To date, the Company has developed six distinct drug delivery
technologies that are patented or for which patent applications have been filed.
The Company believes that its technologies are relatively flexible and can be
modified to apply to a variety of pharmaceutical products. The Company also
believes that major pharmaceutical companies often do not possess
controlled-release drug delivery technology expertise and rely upon third
parties such as Andrx to develop such technologies for their product candidates.
The market for advanced drug delivery systems is large and is growing rapidly.
Based on published data, the market for orally-administered drugs that utilize
sustained and controlled-release drug delivery systems is projected to increase
to approximately $15 billion in 2000 from approximately $4 billion in 1993.

The Company is applying its proprietary drug delivery technologies and
formulation skills initially to the development of generic versions of selected
high sales volume, controlled-release brand name pharmaceuticals, for which
marketing exclusivity or patent rights have expired or are near expiration. In
late 1995, the Company submitted Abbreviated New Drug Applications ("ANDAs") to
the U.S. Food and Drug Administration (the "FDA") covering generic versions of
Cardizem CD/registered trademark/ and Dilacor XR/registered trademark/.
According to data from IMS America, the brand name versions of these drugs had
combined 1995 U.S. sales in excess of $870 million. The Company currently has 15
additional generic controlled-release drugs under development, the brand name
versions of which had combined 1995 U.S. sales in excess of $4 billion. Of these
product candidates, 11 are in various phases of bioequivalence studies and four
are in formulation development.

-3-
<PAGE>
To expedite product development and reduce the Company's development
costs, the Company has entered into collaborative arrangements with major
generic pharmaceutical companies. Andrx is a 50% partner in a joint venture
known as ANCIRC with Watson Pharmaceuticals, Inc. ("Watson") for the development
of up to eight controlled-release generic pharmaceuticals and has entered into
development and licensing agreements with Mylan Laboratories, Inc. ("Mylan"),
Zenith Laboratories, Inc., a subsidiary of IVAX Corporation ("IVAX"), and Watson
for four additional controlled-release products. Watson owns approximately 15.6%
of the Company's presently outstanding Common Stock.

Generic pharmaceuticals are therapeutic equivalents of brand name drugs
for which marketing exclusivity or patent rights have expired. According to data
from IMS America, U.S. sales of generic pharmaceuticals exceeded $6.3 billion in
1994 and have grown at an average rate of 32% since 1992. The Company believes
that the market for generic pharmaceuticals has grown and will continue to grow
because of various factors, including the aging of the U.S. population,
continuing efforts to contain health care costs by governmental agencies, health
care institutions and third party payors, and the increasing awareness and
acceptance of generic drugs by physicians, pharmacists and consumers.

Andrx believes that the drug delivery technologies it uses for the
development of generic controlled-release pharmaceuticals will also have
application to the development of brand name controlled-release pharmaceuticals.
To commercialize this opportunity, Andrx plans to work with brand name
pharmaceutical companies in two basic ways: (i) by developing controlled-release
formulations of existing immediate-release drugs and (ii) by applying its drug
delivery technologies to the formulation of new drugs under development by these
pharmaceutical companies. In addition to the potential for improving drug
efficacy, the Company believes that its drug delivery technologies will provide
pharmaceutical companies with the opportunity to enhance the commercial value of
their new drug product candidates. In April 1996, the Company entered into its
first collaboration for the development of a brand name controlled-release
pharmaceutical through its agreement with Sepracor, Inc. ("Sepracor"). Pursuant
to this agreement, Andrx is using one of its controlled-release drug delivery
technologies to formulate a once-a-day version of terfenadine carboxylate, an
antihistamine being developed by Sepracor. A twice-a-day version of this drug
was approved by the FDA in 1996, and is marketed in the U.S. under the brand
name Allegra/registered trademark/ by Hoechst Marion Roussel, Inc. ("HMR").

In addition to developing controlled-release pharmaceuticals, the
Company markets and distributes generic drugs manufactured by third parties.
These operations, which commenced in late 1992, generated 1995 revenues of $50.5
million. To date, substantially all of the Company's revenues have been
generated by its distribution operations. The Company's customer base consists
primarily of independent pharmacies, regional pharmacy chains which do not
maintain their own central warehousing facilities and pharmacy buying groups.
The Company currently utilizes gross profit from its generic pharmaceutical
distribution operations

-4-

<PAGE>
to offset a portion of the Company's overall administrative costs. These
operations also provide Andrx with an ability to directly observe and
participate in developments and trends in the generic pharmaceutical industry.
The Company plans to use its distribution operations to assist in the marketing
of generic controlled-release products developed by the Company and its
collaborative partners.

The Company was incorporated on August 28, 1992 under the name "Andrx
Pharmaceuticals, Inc.", commenced operations and assumed its present name in
November of that year. The Company's executive offices are located at 4001
Southwest 47th Avenue, Suite 201, Ft. Lauderdale, Florida 33314, and the
Company's telephone number is (954) 584-0300. Unless the context otherwise
requires, references herein to "Andrx" or the "Company" are to Andrx Corporation
and its subsidiaries.
<TABLE>
<CAPTION>

THE OFFERING
<S> <C>
Common Stock offered................................. 1,205,530 shares, of which 602,618 shares are
presently outstanding, 502,428 shares are
issuable upon the exercise of the Investor
Warrants, 50,242 shares are issuable upon
exercise of the Agent's Option and 50,242
shares are issuable upon exercise of the Agent's
Warrants.

Common Stock to be outstanding
after the offering................................. 13,985,071 shares(1)

Use of proceeds...................................... The Company will not receive any proceeds
from the sale of the shares of Common Stock
by the Selling Shareholders. The Company
will only receive proceeds upon the exercise of
the Investor Warrants, the Agent's Option and
the Agent's Warrants by the holders thereof,
which proceeds, if any, will be used for
working capital requirements and other general
corporate purposes. See "Use of Proceeds."

Nasdaq National Market symbol........................ ADRX
</TABLE>

- -------------------------
(1) Assumes the Investor Warrants, the Agent's Option and the Agent's
Warrants are exercised in full.

-5-

SUMMARY CONSOLIDATED FINANCIAL DATA

AUGUST 28, 1992 NINE MONTHS ENDED
(INCEPTION) YEAR ENDED DECEMBER 31, SEPTEMBER 30,
THROUGH -------------------------------- ------------------
DEC. 31, 1992 1993 1994 1995 1995 1996
------------- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Distribution revenues, net........ $243,200 $5,654,500 $25,915,500 $50,467,800 $35,008,300 $61,097,000
Research and development services
to joint venture................ -- -- 375,300 2,528,700 1,722,300 1,829,300
Licensing revenues................ -- 225,000 155,500 165,000 165,000 --
---------- --------- ---------- ---------- ---------- ----------

Total revenues...................... 243,200 5,879,500 26,446,300 53,161,500 36,895,600 62,926,300
---------- --------- ---------- ---------- ---------- ----------

Cost of revenues:
Distribution revenues............. 219,000 5,257,900 21,362,400 41,780,900 28,922,600 50,975,300
Research and development services
to joint venture................ -- -- 375,300 2,528,700 1,722,300 1,829,300
---------- --------- ----------- ---------- ---------- ----------

Total cost of revenues.............. 219,000 5,257,900 21,737,700 44,309,600 30,644,900 52,804,600
---------- --------- ---------- ---------- ---------- ----------

Gross profit........................ 24,200 621,600 4,708,600 8,851,900 6,250,700 10,121,700

Selling, general and administrative
expenses.......................... 169,700 1,706,300 5,389,800 8,647,200 5,944,400 9,333,000
Research and development expenses... -- 959,900 2,109,600 3,254,700 1,638,800 2,499,400
Equity in losses of joint venture... -- -- 315,800 1,839,700 1,298,000 1,384,000
---------- ---------- ---------- ---------- ----------- ----------

Loss from operations................ (145,500) (2,044,600) (3,106,600) (4,889,700) (2,630,500) (3,094,700)
Other income (expense), net......... 100 300 2,100 (297,300) (253,900) 191,700
---------- ----------- ----------- ----------- ----------- -----------

Net loss............................ $(145,400) $(2,044,300) $(3,104,500) $(5,187,000) $(2,884,400) $(2,903,000)
========== =========== =========== =========== =========== ===========

Net loss per share.................. $ (0.03) $ (0.26) $ (0.35) $ (0.55) $ (0.31) $ (0.25)
========== =========== =========== =========== =========== ===========

Weighted average shares of
Common Stock outstanding............ 4,681,400 7,745,100 8,758,400 9,446,800 9,252,100 11,734,000
========== =========== =========== =========== =========== ===========
</TABLE>

SEPTEMBER 30, 1996
------------------
BALANCE SHEET DATA:

Cash, cash equivalents and
investments available for sale.... $33,965,300
Total assets........................ 66,074,500
Short-term borrowings............... 7,820,100
Total shareholders' equity.......... 43,435,200

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<PAGE>

FORWARD-LOOKING STATEMENTS

Andrx Corporation and subsidiaries ("Andrx" or the "Company") cautions
readers that certain important factors may affect the Company's actual results
and could cause such results to differ materially from any forward-looking
statements which may be deemed to have been made in this Prospectus or which are
otherwise made by or on behalf of the Company. For this purpose, any statements
contained in this Prospectus that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "will", "expect", "believe", "anticipate",
"intend", "could", "estimate", or "continue" or the negative other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Factors which may effect the Company's results include, but are not
limited to, the risks and uncertainties associated with a drug delivery company
which has not commercialized its first product, including a history of net
losses, unproven technology, lack of manufacturing experience, current and
potential competitors with significant technical and marketing resources, need
for future capital and dependence on collaborative partners and on key
personnel. Additionally, the Company is subject to the risks and uncertainties
associated with all drug delivery companies, including compliance with
government regulations and the possibility of patent infringement litigation.
The Company is also subject to other risks detailed herein or detailed from time
to time in the Company's Commission filings. Factors that could cause or
contribute to such difference include, but are not limited to, those discussed
in "Risk Factors" below, as well as those discussed elsewhere in this prospectus
and in the Company's filings with the Commission.

RISK FACTORS

AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY IS
SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.

HISTORY OF LOSSES AND UNCERTAINTY OF FUTURE RESULTS. The Company has
not generated any earnings to date and incurred net losses of approximately $2.0
million, $3.1 million and $5.2 million during 1993, 1994 and 1995, respectively,
and $2.9 million during each of the nine months ended September 30, 1995 and
1996. As of September 30, 1996, the Company had an accumulated deficit of
approximately $13.4 million. The Company expects negative cash flow and net
losses to continue at least through 1997. Substantially all of the Company's
revenues have been generated from the distribution of generic pharmaceuticals
manufactured by third parties. None of the controlled-release products being
developed by the Company have been approved by the FDA for marketing. To achieve
profitable operations, Andrx must expand its generic pharmaceutical distribution
operations to cover its operating overhead or either alone or through
collaborative arrangements with joint venture partners and/or licensees
successfully develop, manufacture and market pharmaceuticals utilizing its
proprietary drug delivery technologies. The time required to reach profitability
is highly uncertain and no assurance can

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<PAGE>

be given that the Company will be able to achieve profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

UNPROVEN TECHNOLOGY; NO COMMERCIALIZED PRODUCTS. The Company is
focusing its product formulation efforts on the development of generic versions
of controlled-release pharmaceuticals utilizing the Company's proprietary drug
delivery technologies. Except for licensing fees received for certain products
under development, the Company has not generated revenues from its product
development activities. The Company's product candidates are in various stages
of development, and the period necessary to achieve market success for any
individual product is uncertain and may be lengthy. The Company has filed ANDAs
for generic versions of Cardizem CD/registered trademark/ and Dilacor
XR/registered trademark/, both of which are once-a-day versions of diltiazem
hydrochloride, but the Company has not received FDA approvals to market such
product candidates. There can be no assurance that the Company's product
development efforts will be successfully completed, that required regulatory
approvals will be obtained, that products under development or products
submitted to the FDA will be approved by the FDA or that any approved products
can be manufactured at an acceptable cost with appropriate quality or
successfully marketed by the Company or its collaborators. See
"Business--Product Development."

NEED FOR ADDITIONAL CAPITAL. The Company anticipates that its existing
capital resources will be sufficient to enable it to maintain its current and
planned operations through the end of 1997. The Company expects negative cash
flow and net losses to continue at least through 1997 because it will use
substantial funds for its product development efforts, including formulation of
and bioequivalence studies for its product candidates and the establishment of
commercial-scale manufacturing operations. The Company may need additional
funding in order to complete research and development for its product candidates
and to commercialize these products after receipt of FDA approvals. Additional
funding, whether obtained through public or private debt or equity financings,
or from collaborative arrangements, may not be available when needed or may not
be available on terms acceptable to the Company, if at all. If additional
financing is not available, the Company may be required to delay, scale back or
eliminate some or all of its research and development programs or to license to
third parties products or technologies that the Company would otherwise seek to
develop itself. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."

PATENTS AND PROPRIETARY RIGHTS. Andrx believes that patent and trade
secret protection, particularly of its drug delivery technologies, is important
to its business and that its future will depend in part on its ability to obtain
patents, maintain trade secret protection and operate without infringing on the
rights of others. Andrx has been issued ten U.S. patents relating to its
controlled-release drug delivery technologies and has filed five additional U.S.
patent applications and various foreign patent applications relating to its drug
delivery technologies. The Company expects to apply for additional U.S. and
foreign patents in the future. The issuance of a patent is not conclusive as to
its validity or as to the enforceable scope of the claims of the patent. There
is no assurance that the Company's patents or any future patents will prevent
other companies from developing similar or functionally equivalent products or
from successfully challenging the validity of the Company's patents.
Furthermore, there is no assurance that (i) any of the Company's future
processes or products will be patentable; (ii) any pending or additional

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<PAGE>

patents will be issued in any or all appropriate jurisdictions; (iii) the
Company's processes or products will not infringe upon the patents of third
parties; or (iv) the Company will have the resources to defend against charges
of patent infringement or protect its own patent rights against third parties.
The inability of the Company to protect its patent rights or infringement by the
Company of the patent or proprietary rights of others could have a material
adverse effect on the Company's results of operations and financial position.

Andrx also relies on trade secrets and proprietary knowledge, which it
generally seeks to protect by confidentiality and non-disclosure agreements with
employees, consultants, licensees and pharmaceutical companies. There can be no
assurance, however, that these agreements will not be breached, that the Company
will have adequate remedies for any breach or that the Company's trade secrets
will not otherwise become known by competitors.

PATENT LITIGATION. There has been substantial litigation in the
pharmaceutical, biomedical and biotechnology industries with respect to the
manufacture, use and sale of new products that are the subject of patent rights.
Most of the brand name controlled-release products, of which the Company is
developing generic versions, are covered by one or more patents. Under the Drug
Price Competition and Patent Restoration Act of 1984 (the "Waxman-Hatch
amendments"), when a drug developer files an ANDA for a generic drug, and the
developer believes that an unexpired patent which has been listed with the FDA
as covering that brand name product will not be infringed by the developer's
product or is invalid or unenforceable, the developer must so certify to the
FDA. That certification must also be provided to the patent holder, who may
challenge the developer's certification of non-infringement, invalidity or
unenforceability by filing a suit for patent infringement. If a suit is filed
within 45 days of the patent holder's receipt of such certification, the FDA can
review and approve the ANDA, but is precluded from granting final marketing
approval of the product until a final judgment in the action has been rendered
or 30 months from the date the certification was received, whichever is sooner.
Should a patent holder commence a lawsuit with respect to alleged patent
infringement by the Company, the uncertainties inherent in patent litigation
make the outcome of such litigation difficult to predict. To date, two such
actions have been commenced against Andrx, and it is anticipated that additional
actions may be filed by other parties as Andrx files additional ANDAs. The
Company evaluates the probability of patent infringement litigation with respect
to its ANDA submissions on a case by case basis and, accordingly, as of
September 30, 1996, has provided a total of approximately $1.7 million for
litigation costs in connection with the two ANDAs submitted in late 1995. The
delay in obtaining FDA approval to market the Company's product candidates as a
result of litigation, as well as the expense of such litigation, whether or not
the Company is successful, could have a material adverse effect on the Company's
results of operations and financial position.

-9-

<PAGE>
the patent to HMR, and HMR (collectively, "Hoechst") commenced a lawsuit in the
United States District Court, Southern District of Florida (the "Hoechst
Litigation"), alleging that Andrx's product infringes upon one of the six
patents listed as covering Cardizem CD/registered trademark/. Andrx has also
developed and filed an ANDA for a generic product which the Company believes is
bioequivalent to the once-a-day controlled-release version of diltiazem
hydrochloride marketed under the brand name Dilacor XR/registered trademark/ by
Rhone-Poulenc Rorer Pharmaceuticals Inc. ("RPR"). In connection therewith, the
Company certified to the FDA that its product does not infringe upon the patent
listed as covering that brand name product and sent the required notices to the
holder of that patent and the holder of the NDA. In May 1996, Jagotec AG and
Jago AG, who licensed the patent to RPR, Rhone-Poulenc Rorer, Inc. and RPR
(collectively, "Rhone") commenced a lawsuit in the United States District Court,
Southern District of Florida (the "RPR Litigation"), alleging that the Company's
product infringes a patent listed as covering Dilacor XR/registered trademark/.
While the Company believes that its products do not infringe upon the patents in
question, the uncertainties inherent in patent litigation make the outcome of
such litigation difficult to predict. There can be no assurance that the Company
will prevail in either the Hoechst Litigation or the RPR Litigation. An adverse
outcome in either the Hoechst Litigation or the RPR Litigation would have a
material adverse effect on the Company's business and financial position.

DEPENDENCE ON COLLABORATIVE PARTNERS. The Company is a 50% partner in a
joint venture with Watson and has entered into development and licensing
agreements with several major generic pharmaceutical companies to support the
commercialization of its generic controlled-release pharmaceuticals. The Company
shares the costs of the joint venture and, pursuant to the development and
licensing agreements, the licensee typically funds all of the costs of
developing the licensed product. The Company has no control over the resources
which its collaborative partners will devote to development of licensed
products, and there can be no assurance that the Company's collaborative
partners will pursue the commercialization of a licensed product on a timely
basis or that products to be developed pursuant to the Company's collaborative
arrangements will be approved for marketing by the FDA. Further, even if
licensed products are approved, Andrx will be dependent upon its joint venture
partner to manufacture and its licensees to manufacture and market the products.
Andrx is exploring, and intends to continue to explore, additional collaborative
and licensing opportunities. There can be no assurance that the licensees can
successfully market any products or that the Company will be able to negotiate
acceptable collaborative arrangements in the future or that any current or
future collaborative arrangement will ultimately be successful. See
"Business--Collaborative Arrangements."

SUPERVISION OF DEVELOPMENT. The agreements with Watson governing the
ANCIRC joint venture require Dr. Chih-Ming J. Chen, the Company's Chief
Scientist, to personally supervise the development of all ANCIRC products and to
devote such time and effort as may be necessary to such activities until at
least five products have been successfully developed by ANCIRC. If Dr. Chen
fails to perform such supervisory services prior to ANCIRC developing five
products (other than by reason of his death or disability) Watson has the option
(i) to require the Company to repurchase Watson's interests in ANCIRC and the
Company for an amount equal to Watson's investments therein, plus interest
compounded at 15% per annum, or (ii) to assume the rights of the Company to
develop and market the products. Once ANCIRC has developed three products,
Watson is limited to the option set forth in clause (ii) of the preceding
sentence. If

-10-

<PAGE>

Watson were to successfully allege that Dr. Chen was not performing supervisory
services and were to demand that the Company repurchase its investment, there
can be no assurance that the Company would have the financial resources to do so
or that such demand would not have a material adverse effect on the Company. In
addition, the development and licensing agreements entered into by the Company
require Dr. Chen to supervise the development of the products that are the
subject of each of the agreements. Dr. Chen's responsibilities under all the
foregoing agreements may effectively limit the number of products that the
Company may be able to add to its development program. See "Business--Product
Development."

DEPENDENCE UPON MANAGEMENT AND KEY PERSONNEL. The Company's success for
the foreseeable future will be dependent upon the services of Dr. Chih-Ming J.
Chen, Alan P. Cohen and Dr. Elliot F. Hahn, the Company's Chief Scientist,
Chairman of the Board and President, respectively. Each of these individuals is
party to an employment agreement with the Company. The Company has secured $4.0
million in key man life insurance covering Dr. Chen and $2.0 million in key man
life insurance covering each of Mr. Cohen and Dr. Hahn. The loss of the services
of any of these three officers would have a material adverse effect on the
Company and its prospects.

The Company's success will also be dependent in large part on its
ability to attract and retain highly qualified scientific, technical and
business personnel experienced in the development, manufacture and marketing of
generic drugs. Competition for such personnel is intense, and there can be no
assurance that the Company will be able to attract or retain a sufficient number
of such persons. See "Management."

LACK OF MANUFACTURING EXPERIENCE. The Company currently has a
laboratory and pilot manufacturing facility encompassing approximately 8,000
square feet. The Company is in the process of constructing an approximately
31,000 square foot facility which will be used for manufacturing commercial
quantities of generic versions of Cardizem CD/registered trademark/ and Dilacor
XR/registered trademark/, for which ANDAs have already been filed. The Company
believes that such facility will be sufficient for these products. The Company's
facility has been inspected by the FDA with regard to both ANDA submissions, and
the FDA has advised the Company that it cannot determine if the manufacturing
site is in compliance with current Good Manufacturing Practices ("cGMP") because
the facility is not ready for scale-up production. An additional inspection will
be performed by the FDA to assure successful process validation after ANDA
approval and before initiation of commercial distribution of these products.
There can be no assurance that the Company's facility will ultimately be found
to be in compliance with cGMP or other regulatory requirements. Failure to
comply could result in significant delays in the development, approval and
distribution of its planned products, as well as significant additional expense
to comply with cGMP or other regulatory requirements. The Company currently has
only a limited number of personnel experienced in the commercial manufacture of
pharmaceuticals. Accordingly, before the Company commences manufacturing its
product candidates in commercial quantities, significant expenditures and
additional personnel will be required. There can be no assurance that the
Company will be able to establish a successful manufacturing operation. The
Company will be dependent on other companies to manufacture most of the product
candidates currently

-11-

<PAGE>

undergoing bioequivalency studies. See "Business--Collaborative Arrangements,"
"--Manufacturing" and "--Government Regulation."

MANAGEMENT OF EXPANDING OPERATIONS. The Company has experienced
significant expansion of its generic pharmaceutical distribution operations
which has required expansion, upgrading and improvement of the Company's
administrative, operational and management systems, controls and resources.
Management of the Company's growth, as well as commencement of manufacturing and
marketing of the Company's product candidates, will require continued expansion
and improvement of the Company's systems and controls and an increase in the
Company's manufacturing, marketing and sales operations. There can be no
assurance that the Company can successfully manage its growth. The Company
intends to market directly certain products it develops as well as the products
developed by the ANCIRC joint venture. The Company has no experience with
marketing its own products. There can be no assurance that the Company can
successfully market its products.

COMPETITION. The pharmaceutical industry is highly competitive and is
affected by new technologies, new developments with respect to existing
technologies and products, governmental regulations, health care legislation,
availability of financing and other factors. Many of the Company's competitors
have longer operating histories and greater financial, marketing and other
resources than the Company. The Company expects that it will be subject to
competition from numerous other entities that currently operate, or intend to
operate, in the pharmaceutical industry, including companies that are engaged in
the development of controlled-release technologies and products and other
manufacturers that may decide to undertake in-house development of these
products. The Company initially is concentrating its development efforts on
generic controlled-release pharmaceuticals. Typically, selling prices of
immediate-release drugs have declined and profit margins have narrowed after
generic equivalents of brand name products are first introduced and the number
of competitive products has increased. Similarly, the maintenance of particular
levels of profitability for the Company's generic controlled-release products
will depend, in large part, on the Company's ability to introduce new products
before its competitors and on the intensity of competition. In its generic
pharmaceutical distribution business, the Company competes with a number of
large wholesalers and other distributors of generic pharmaceuticals. See
"Business--Competition."

GOVERNMENT REGULATION. All pharmaceutical manufacturers doing business
in the U.S. and in foreign countries are subject to extensive federal, state,
local and foreign regulations. Drug manufacturers are required to obtain FDA
approval or authorization before marketing their product candidates. The FDA
approval process is costly and time consuming. No assurances can be given that
the Company's bioequivalence studies and other data will result in FDA approval
of ANDAs. ANDAs will be required for the Company's generic versions of
controlled-release drugs. No assurances can be given that any of the Company's
drugs will be suitable for, or approved as, ANDA filings. Certain ANDA
procedures for generic controlled-release drugs and other products are presently
the subject of petitions filed by brand name drug manufacturers, which seek
changes from the FDA in the approval process for generic drugs. These requested
changes include, among other things, tighter standards for certain
bioequivalence studies and disallowance of the use by a generic drug
manufacturer in its ANDA of proprietary data

-12-

<PAGE>

submitted by the original manufacturer as part of an original new drug
application. The Company is unable to predict at this time whether the FDA will
make any changes to its ANDA procedures as a result of such petitions or the
effect that such changes may have on the Company. Any changes in FDA regulations
which make ANDA approvals more difficult may have a material adverse effect on
the Company's business. Patent certification requirements for generic
controlled-release drugs could also result in significant delays in obtaining
FDA approval if patent infringement litigation is instituted by the holder or
holders of the brand name patents. Delays in obtaining FDA approval of ANDAs can
also result from a marketing exclusivity period and/or an extension of patent
terms available for brand name drugs. If the Company's drugs are ineligible to
use abbreviated application procedures, as will be the case with
controlled-release versions of immediate-release drugs, the FDA approval process
may require time consuming and expensive clinical studies.

The FDA also regulates the development, manufacture, distribution,
labeling and promotion of prescription drugs, requires that certain records be
kept and reports be made, mandates registration of drug manufacturers and
listing of their products and has the authority to inspect manufacturing
facilities for compliance with cGMP standards. As a wholesale distributor of
generic pharmaceuticals manufactured by third parties, the Company is subject to
state licensure and other requirements pertaining to the wholesale distribution
of prescription drugs. Failure to comply with licensing and other requirements
could have a materially adverse effect on the Company because substantially all
the Company's revenues to date have been from its generic pharmaceutical
distribution operations. Other requirements exist for controlled drugs, such as
narcotics, which are regulated by the U.S. Drug Enforcement Administration (the
"DEA"). Further, the FDA has the authority to withdraw approvals of previously
approved drugs for cause, to request recalls of products, to debar companies and
individuals from future ANDA submissions and, through action in court, to seize
products, institute criminal prosecution or close manufacturing plants in
response to violations. The DEA has similar authority. Such requirements or FDA
or DEA actions could materially and adversely affect the Company's business.

The Company has filed ANDAs for two of its products, the generic
versions of Cardizem CD/registered trademark/ and Dilacor XR/registered
trademark/. There can be no assurance that the Company will receive approvals
for these two ANDAs or for any subsequent ANDAs or other product approval
requests filed with the FDA. Even if regulatory approvals are obtained, the
Company will be required to comply with post-approval requirements for the
manufacturing and marketing of its products. See "Business--Government
Regulation."

UNCERTAINTY OF AVAILABILITY OF HEALTH CARE REIMBURSEMENTS. The ability
of the Company to maintain profitability in its generic distribution business or
to commercialize its product candidates depends in part on the extent to which
reimbursement for the cost of such products will be available from government
health administration authorities, private health insurers and other
organizations. Third party payors are attempting to control costs by limiting
the level of reimbursement for medical products, including pharmaceuticals,
which may adversely effect the pricing of the Company's product candidates.
Moreover, health care reform has been, and may continue to be, an area of
national and state focus, which could result in the adoption of measures

-13-

<PAGE>

which could adversely affect the pricing of pharmaceuticals or the amount of
reimbursement available from third party payors. There can be no assurance that
health care reimbursement laws or policies will not materially adversely affect
the Company's ability to sell its products profitably or prevent the Company
from realizing an appropriate return on its investment in product development.

PRODUCT LIABILITY INSURANCE. The design, development and manufacture of
the Company's products involve an inherent risk of product liability claims. The
Company has obtained product liability insurance that covers substantially all
products marketed by the Company in its generic drug distribution operations, as
well as bioequivalence studies for controlled-release product candidates. The
Company believes that its product liability insurance is adequate for its
current operations, and will seek to increase its coverage prior to the
commercial introduction of its product candidates. There can be no assurance
that the coverage limits of the Company's insurance will be sufficient to offset
potential claims. Product liability insurance is expensive and difficult to
procure and may not be available in the future on acceptable terms or in
sufficient amounts, if available at all. A successful claim against the Company
in excess of its insurance coverage could have a material adverse effect upon
the Company's results of operations and financial position.

POSSIBLE VOLATILITY OF STOCK PRICE. The market prices for securities of
companies engaged in pharmaceutical development activities historically have
been highly volatile. In addition, announcements of technological innovations or
new commercial products by the Company or its competitors, delays in the
development or approval of the Company's product candidates, developments or
disputes concerning patent or proprietary rights, publicity regarding actual or
potential medical results relating to products under development by the Company
or its competitors, regulatory developments in both the U.S. and foreign
countries, public concern as to the safety of drug technologies and economic and
other external factors, as well as period-to-period fluctuations in financial
results, may have a significant impact on the market price of the Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE. The Company has 13,382,159 shares of
Common Stock outstanding. Of these shares, 10,334,774 shares are deemed to be
"restricted securities" as such term is defined under Rule 144 promulgated
pursuant to the Securities Act. Of such shares 602,618 shares are being
registered pursuant to the Registration Statement of which this Prospectus forms
a part and will generally be capable of public sale without restriction. As of
the date of the Prospectus, 8,709,099 of the remaining restricted shares are
presently eligible for sale in the public market pursuant to Rule 144, subject
to the volume limitations and other restrictions contained therein. The
remaining 1,625,675 restricted shares will become eligible for sale subject to
the restrictions of Rule 144 at varying times from February 1997 to December
1997.

As of the date of this Prospectus, options and warrants to purchase
1,539,787 shares of Common Stock are issued and outstanding including the
Investor Warrants, the Agent's Option and the Agent's Warrants. An aggregate of
602,912 shares of Common Stock issuable upon exercise of such securities are
registered pursuant to the Registration Statement of which this

-14-

<PAGE>

Prospectus forms a part and will generally be capable of public sale without
restriction. The remaining 936,875 shares of Common Stock issuable upon exercise
of options issued pursuant to the Company's Stock Incentive Plan were previously
registered pursuant to a Registration Statement on Form S-8. In addition, the
Company has granted to Watson certain demand and piggy-back registration rights
under the Securities Act exercisable commencing in June 1997 with respect to
2,091,796 shares of Common Stock held by Watson and the 337,079 shares of Common
Stock underlying warrants issued to Watson (the "Watson Warrants"). Future sales
of the shares of Common Stock held by existing shareholders, or the perception
that such sales may occur, could have an adverse effect on the price of the
Common Stock. See "Certain Transactions" and "Shares Eligible for Future Sale."

ANTITAKEOVER EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS AND CERTAIN
PROVISIONS OF FLORIDA LAW. Certain provisions of the Company's Amended and
Restated Articles of Incorporation (the "Articles") and Bylaws may be deemed to
have antitakeover effects and may delay, defer or prevent a takeover attempt of
the Company.

In addition, Florida has enacted legislation that may deter or
frustrate takeovers of Florida corporations. The Florida Control Share Act
generally provides that shares acquired in a "control share acquisition" will
not possess any voting rights unless such voting rights are approved by a
majority of the corporation's disinterested shareholders. A "control share
acquisition" is an acquisition, directly or indirectly, by any person of
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding "control shares" of a publicly held Florida
corporation. "Control shares" are shares, which, except for the Florida Control
Share Act, would have voting power that, when added to all other shares owned by
a person or in respect to which such person may exercise or direct the exercise
of voting power, would entitle such person, immediately after acquisition of
such shares, directly or indirectly, alone or as a part of a group, to exercise
or direct the exercise of voting power in the election of directors within any
of the following ranges: (a) at least 20% but less than 33-1/3% of all voting
power, (b) at least 33-1/3% but less than a majority of all voting power; or (c)
a majority or more of all voting power. The Florida Affiliated Transactions Act
generally requires supermajority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). See "Description of Securities."

NO DIVIDENDS. The Company has not paid any dividends on its Common
Stock and anticipates for the foreseeable future that all earnings, if any, will
be retained for the operation and expansion of the Company's business. See
"Dividend Policy."

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Shareholders. See "Selling Shareholders." The
Company will receive proceeds only upon the exercise of the Investor Warrants,
the Agent's Option and the Agent's Warrants by the holders thereof.

-15-

If all of the Investor Warrants are exercised (each Investor Warrant
entitling the holder thereof to purchase one share of Common Stock at $7.25 per
share), the proceeds generated therefrom will be $3,642,603. If the Agent's
Option is exercised in its entirety (the Agent's Option entitling the holder
thereof to purchase 50,242 shares of Common Stock and 50,242 Investor Warrants
at a price of $8.90 for each share of Common Stock), the proceeds generated
therefrom will be $447,153.80. If all of the Agent's Warrants are exercised
(each Agent's Warrant entitling the holder thereof to purchase one share of
Common Stock at an exercise price of $7.25 per share), the proceeds generated
therefrom will be $364,254.50. There can be no assurance as to when, if ever,
any or all of such securities will be exercised.

Proceeds, if any, received from the exercise of the Investor Warrants,
the Agent's Option and the Agent's Warrants will be used for working capital
requirements and other general corporate purposes.

DIVIDEND POLICY

The Company has not paid dividends on its Common Stock and does not
intend to pay dividends for the foreseeable future. The Company intends to
retain earnings, if any, to finance the development and expansion of its
business. Payment of dividends in the future will depend, among other things,
upon the Company's ability to generate earnings, its need for capital and its
overall financial condition.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been listed for trading on The Nasdaq
National Market under the symbol "ADRX" since June 14, 1996. The following table
sets forth, for the calendar quarters indicated, the range of high and low sale
prices per share of Common Stock as reported by The Nasdaq National Market:

HIGH LOW
---- ---
1996
- ----
<S> <C> <C>
Second Quarter (Commencing June 14, 1996)...................................... $ 17.50 $ 12.00
Third Quarter.................................................................. 15.50 11.00
Fourth Quarter (through December 2, 1996)...................................... 15.75 12.75
</TABLE>

On December 5, 1996, the last sale price of the Common Stock as
reported by The Nasdaq National Market was $13.375 per share.

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<PAGE>
<TABLE>
<CAPTION>
CAPITALIZATION

The following table sets forth short-term borrowings and the
capitalization of the Company as of September 30, 1996. This table should be
read in conjunction with the Company's Consolidated Financial Statements and the
Notes thereto included elsewhere in the Prospectus.

SEPTEMBER 30, 1996
------------------
<S> <C>

Short-term borrowings(1)....................................................... $ 7,820,100
==========
Shareholders' equity:
Preferred Stock, $.001 par value, 1,000,000 shares
authorized, no shares issued and outstanding............................... --
Common Stock, $.001 par value, 25,000,000 shares
authorized; 13,344,600 shares issued and
outstanding................................................................ 13,300
Additional paid-in capital................................................... 56,787,200
Accumulated deficit.......................................................... (13,384,200)
Unrealized gain on investments available for sale............................ 18,900
----------
Total shareholders' equity..................................................... 43,435,200
----------
Total capitalization........................................................... $43,435,200
===========
</TABLE>

- ------------------------
(1) See Note 5 of Notes to Consolidated Financial Statements.

-17-

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data of the Company for
the period August 28, 1992 (inception) through December 31, 1992, the years
ended December 31, 1993, 1994 and 1995 and as of December 31, 1992, 1993, 1994
and 1995 are derived from the Company's consolidated financial statements and
have been audited by Arthur Andersen LLP, independent certified public
accountants. The statement of operations data for the nine months ended
September 30, 1995 and 1996 and the selected balance sheet data as of September
30, 1996 are derived from unaudited interim consolidated financial statements
contained elsewhere herein. The unaudited interim consolidated financial
statements include all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for a fair presentation of
the financial position and the results of operations for these periods.
Operating results for the nine months ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. This financial data should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto, the unaudited interim
consolidated financial statements and the other financial information appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 28, 1992 NINE MONTHS ENDED
(INCEPTION) YEAR ENDED DECEMBER 31, SEPTEMBER 30,
THROUGH -------------------------------- ------------------
DEC. 31, 1992 1993 1994 1995 1995 1996
------------- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Distribution revenues, net........ $243,200 $5,654,500 $25,915,500 $50,467,800 $35,008,300 $61,097,000
Research and development services
to joint venture................. -- -- 375,300 2,528,700 1,722,300 1,829,300
Licensing revenues................ -- 225,000 155,500 165,000 165,000 --
------- ---------- ----------- ----------- ----------- -----------
Total revenues...................... 243,200 5,879,500 26,446,300 53,161,500 36,895,600 62,926,300
------- --------- ---------- ---------- ---------- ----------
Cost of revenues:
Distribution revenues............. 219,000 5,257,900 21,362,400 41,780,900 28,922,600 50,975,300
Research and development services
to joint venture................. -- -- 375,300 2,528,700 1,722,300 1,829,300
------- ---------- ----------- ---------- ---------- ----------
Total cost of revenues.............. 219,000 5,257,900 21,737,700 44,309,600 30,644,900 52,804,600
------- ---------- ---------- ---------- ---------- ----------
Gross profit........................ 24,200 621,600 4,708,600 8,851,900 6,250,700 10,121,700

Selling, general and
administrative expenses........... 169,700 1,706,300 5,389,800 8,647,200 5,944,400 9,333,000
Research and development expenses... -- 959,900 2,109,600 3,254,700 1,638,800 2,499,400
Equity in losses of joint venture... -- -- 315,800 1,839,700 1,298,000 1,384,000
------- ------------ ---------- ---------- ---------- ----------
Loss from operations................ (145,500) (2,044,600) (3,106,600) (4,889,700) (2,630,500) (3,094,700)
Interest income (expense), net...... 100 300 2,100 (297,300) (253,900) 191,700
--------- ----------- ----------- ------------ ----------- -----------
Net loss............................ $(145,400) $(2,044,300) $(3,104,500) $(5,187,000)$(2,884,400) $(2,903,000)
========= =========== =========== =========== ========== ===========
Net loss per share.................. $ (0.03) $ (0.26) $ (0.35) $ (0.55) $ (0.31) $ (0.25)
========= =========== =========== ========== ========== ===========
Weighted average shares of
Common Stock outstanding.......... 4,681,400 7,745,100 8,758,400 9,446,800 9,252,100 11,734,000
========= ========= ========= ========= ========= ==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- -------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
investments available for sale.... $131,300 $2,770,200 $ 3,845,800 $13,841,400 $33,965,300
Total assets........................ 695,000 6,837,100 16,006,000 36,148,700 66,074,500
Short-term borrowings............... -- 68,100 2,635,100 6,101,000 7,820,100
Total shareholders' equity.......... 373,800 3,926,700 8,097,100 18,324,500 43,435,200
</TABLE>

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<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

Andrx was organized in August 1992 and, in November 1992, commenced
marketing and distributing generic pharmaceuticals manufactured by third
parties. In February 1993, the Company began to engage in the development of
generic controlled-release oral pharmaceuticals utilizing its proprietary drug
delivery technologies. To date, the distribution operations have generated
substantially all of the Company's revenues and the Company expects that
revenues from the distribution of generic pharmaceuticals will continue to
comprise substantially all of its revenues until the Company receives FDA
approvals for the marketing of its products and meaningful revenues are achieved
from a product developed by the Company. The Company expects to generate
negative cash flow and net losses at least through 1997.

To expedite product development and reduce the Company's development
costs, the Company has entered into collaborative agreements with major
pharmaceutical companies. The Company is a 50% partner in the ANCIRC joint
venture with Watson for the development of up to eight controlled-release drugs
and has entered into development and licensing agreements with Mylan, IVAX and
Watson for four additional controlled-release drugs. Capital contributions to,
and net income or losses from, ANCIRC are allocated equally between the Company
and Watson. The Company generates revenues from research and development
services provided to ANCIRC, which services are rendered at cost, resulting in
no gross profit.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995

Total revenues for the nine months ended September 30, 1996 ("1996
Period") were approximately $62.9 million, an increase of approximately $26.0
million or 70.6% as compared to total revenues of approximately $36.9 million
for the nine months ended September 30, 1995 ("1995 Period"). Distribution
revenues were approximately $61.1 million in the 1996 Period, an increase of
approximately $26.1 million or 74.5% from approximately $35.0 million in the
1995 Period. The increase in distribution revenues reflects the Company's
increased penetration of the generic market. Revenues generated by research and
development services to ANCIRC increased to approximately $1.8 million in the
1996 Period from approximately $1.7 million in the 1995 Period. This increase
resulted from an increase in the Company's research and development efforts on
ANCIRC products.

Gross profit on the distribution of generic pharmaceutical products was
16.6% as a percentage of distribution revenues in the 1996 Period, as compared
to 17.4% in the 1995 Period. The decrease in gross profits as a percentage of
distribution revenues is the result of continuing competition and pricing
pressures within the generic industry. The Company expects that such

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<PAGE>

competition and pressures could continue to decrease the Company's gross profit
percentage in future periods.

Selling, general and administrative expenses were approximately $9.3
million in the 1996 Period, an increase of approximately $3.4 million or 57.0%
as compared to approximately $5.9 million in the 1995 Period. This increase was
primarily attributable to an increase in selling activities to support the
increase in distribution revenues. Selling, general and administrative expenses
were 14.8% of total revenues in the 1996 Period, as compared to 16.1% in the
1995 Period.

Research and development expenses were approximately $2.5 million in
the 1996 Period, as compared to $1.6 million in the 1995 Period. Research and
development expenses in the 1996 Period include a $450,000 provision for
anticipated additional litigation costs in connection with the Company's ANDA
submitted in late 1995 for the generic version of Cardizem CD/registered
trademark/. Additionally, research and development expenses in the 1996 Period
include the expenses related to the establishment of a commercial-scale
manufacturing facility. Research and development expenses exclude cost of
revenues for services rendered to ANCIRC of approximately $1.8 million in the
1996 Period and approximately $1.7 million in 1995 Period.

The Company's equity in losses of joint venture was approximately $1.4
million in the 1996 Period as compared to approximately $1.3 million in the 1995
Period. The Company's share of ANCIRC's losses was decreased from 60% to 50%
effective October 30, 1995 in connection with an amendment to the ANCIRC
agreement. ANCIRC's losses increased to $2.8 million in the 1996 Period as
compared to $2.2 million in the 1995 Period due to the increase in the research
and development services rendered by the Company and Watson to ANCIRC during the
1996 Period.

Interest income (expense), net primarily consists of interest expense
and interest income. Interest expense was approximately $570,000 in the 1996
Period as compared to $447,000 in the 1995 Period. Although the interest rate on
the Company's bank borrowings decreased effective January 1996, interest expense
increased in the 1996 Period as compared to the 1995 Period, due to the higher
average level of borrowings during the 1996 Period. Such higher level of
borrowings were required to finance the higher average level of working capital
supporting the growth of the distribution operations. Interest income was
approximately $762,000 in the 1996 Period as compared to approximately $129,000
in the 1995 Period. The increase in interest income is the result of the net
increase in cash, cash equivalents and investments available for sale during
1995 and 1996, primarily from the sale of shares of the Company's Common Stock.

For 1996 and 1995, the Company was not required to provide for federal
or state income taxes due to its net losses. As of September 30, 1996, the net
operating loss carryforward was approximately $12.6 million for financial
reporting purposes and approximately $10.3 million for federal income tax
purposes, which if not utilized will begin to expire in 2008.

-20-

<PAGE>

1995 AS COMPARED TO 1994

Total revenues in 1995 were approximately $53.2 million, an increase of
approximately $26.7 million, or 101.0%, from revenues of approximately $26.4
million in 1994. Distribution revenues were approximately $50.5 million in 1995,
an increase of approximately $24.6 million, or 94.7%, from approximately $25.9
million in 1994. The increase in distribution revenues reflects the Company's
increased penetration of the generic market. Revenues generated by research and
development services to ANCIRC increased to approximately $2.5 million in 1995
from approximately $375,000 in 1994. This increase resulted from a full year of
ANCIRC activities for 1995.

Gross profit on the distribution of generic pharmaceutical products was
17.2% as a percentage of distribution revenues in 1995, as compared to 17.6% in
1994. The decrease in gross profits as a percentage of distribution revenues is
the result of continuing competition and pricing pressures within the generic
industry. The Company expects that such competition and pressures could continue
to decrease the Company's gross profit percentage in future periods.

Selling, general and administrative expenses were approximately $8.6
million in 1995, an increase of approximately $3.3 million, or 60.4%, compared
to approximately $5.4 million in 1994. This increase was attributable to an
increase in selling activities to support the increase in distribution revenues.
Selling, general and administrative expenses were 16.3% of total revenues in
1995, as compared to 20.4% in 1994. During 1994, the Company incurred
approximately $500,000 of expenses related to an unconsummated initial public
offering.

Research and development expenses increased to approximately $3.3
million in 1995, an increase of approximately $1.1 million, or 54.3%, from
approximately $2.1 million in 1994. Research and development expenses include
the Company's continued research and development programs and the completion of
development and the filing of ANDAs for generic versions of Cardizem
CD/registered trademark/ and Dilacor XR/registered trademark/. Research and
development expenses also include a $1.2 million provision for anticipated
litigation costs in connection with the Company's ANDAs submitted in late 1995
for generic versions of Cardizem CD/registered trademark/ and Dilacor
XR/registered trademark/. The filing of an ANDA for a generic version of a brand
name pharmaceutical may result in litigation alleging infringement of patents
covering the brand name pharmaceutical. Even though the Company believes that
its drug delivery technologies do not infringe on any patent rights held by
others, the Company evaluates the probability of patent infringement litigation
with respect to its ANDA submissions on a case by case basis and, accordingly,
will reserve for anticipated legal expenses as it deems appropriate. Research
and development expenses exclude cost of sales of services rendered to ANCIRC of
approximately $2.5 million in 1995 and approximately $375,000 in 1994.

The Company's share of losses in ANCIRC was approximately $1.8 million
in 1995 as compared to approximately $316,000 in 1994. The increase in the
ANCIRC losses of approximately $1.5 million in 1995 is the result of a full year
of ANCIRC activities.

Interest income (expense), net primarily consists of interest expense
and interest income. Interest expense was approximately $636,000 in 1995 as
compared to approximately $104,000

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<PAGE>

in 1994. The increase was due to the increase in bank borrowings to fund the
working capital requirements for the Company's generic pharmaceutical
distribution operations. Interest income was approximately $250,000 in 1995 as
compared to approximately $122,000 in 1994. The increase in interest income is
the result of the net increase in cash balances during 1995, primarily from the
sale of shares of Common Stock to Watson in August and December 1995 for net
proceeds of approximately $13.6 million.

For 1994 and 1995, the Company was not required to provide for federal
or state income taxes due to its net losses. As of December 31, 1995, the net
operating loss carry forward was approximately $10.0 million for financial
reporting purposes and approximately $8.1 million for federal tax purposes,
which, if not utilized, will expire beginning in 2008.

1994 AS COMPARED TO 1993

Total revenues in 1994 were approximately $26.4 million, an increase of
approximately $20.6 million from revenues of approximately $5.9 million in 1993.
Distribution revenues were approximately $25.9 million in 1994 as compared to
$5.7 million in 1993. The increase in distribution revenues reflects the
Company's increased penetration of the generic market. The ANCIRC joint venture
commenced operations in July 1994 and generated approximately $375,000 of
revenues for the Company from research and development services during the year.

Gross profit on the distribution of generic pharmaceutical products was
17.6% as a percentage of distribution revenues in 1994 as compared to 7.0% in
1993. In 1993, the Company's first full year of distribution operations, the
Company did not have sufficient distribution volume to obtain allowances and
other favorable terms from its suppliers, which negatively impacted gross
profit.

Selling, general and administrative expenses were approximately $5.4
million in 1994, an increase of approximately $3.7 million, from approximately
$1.7 million in 1993. This increase was primarily attributable to an increase in
selling costs related to the increase in distribution revenues, as well as
approximately $500,000 in expenses related to an unconsummated initial public
offering. Selling, general and administrative expenses were 20.4% of total
revenues in 1994, as compared to 29.0% in 1993.

Research and development expenses were approximately $2.1 million in
1994, an increase of approximately $1.1 million, as compared to approximately
$1.0 millon in 1993.

The Company's share of losses in ANCIRC was approximately $316,000 in
1994.

Interest income (expense), net was approximately $2,100 in 1994. This
amount includes approximately $104,000 of interest expense relating to
borrowings under the revolving line of credit which commenced in July 1994, net
of interest income of approximately $122,000. Interest income resulted from the
return on invested proceeds from a private placement in December 1993 and the
sale of securities to Watson in July 1994.

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<PAGE>

For 1993 and 1994, the Company was not required to provide for federal
or state income taxes due to its net losses.

LIQUIDITY AND CAPITAL RESOURCES

In June 1996, the Company consummated its initial public offering,
which generated gross proceeds of $30.4 million. Prior thereto, the Company had
financed its operations primarily through private placements of equity
securities which generated proceeds of $27.9 million and, to a lesser extent,
through bank borrowings. At September 30, 1996, Andrx had $34.0 million of cash,
cash equivalents and investments available for sale and $36.1 million of working
capital.

Net cash used in operating activities was $5.4 million and $7.4 million
in the 1996 Period and the 1995 Period, respectively. The net cash used in
operating activities in both these periods was primarily attributed to research
and development and increases in accounts receivable and inventories, which were
offset by the increases in accounts payable and accrued liabilities. The
decrease in net cash used in operating activities in the 1996 Period as compared
to the 1995 Period was attributed to a larger increase in accounts payable and
accrued liabilities which was offset to a lesser extent by the increases in
accounts receivable and inventories. Research and development spending includes
the Company's contributions to ANCIRC. In 1996, the Company expects to
contribute approximately $2.5 million to ANCIRC.

Net cash used in investing activities was $32.3 million and $1.1
million in the 1996 Period and 1995 Period, respectively. In June 1996, the
Company invested $28.2 million in short-term investment grade interest bearing
securities. Additionally, in the 1996 Period the Company invested $4.2 million
in capital expenditures as compared to $1.1 million in the 1995 Period. The
capital expenditures in the 1996 Period were primarily for the procurement of
manufacturing equipment and construction of the Company's commercial-scale
manufacturing facility and in the 1995 Period were primarily for the purchase of
laboratory equipment for the Company's research and development programs.

Net cash provided by financing activities was $29.7 million and $5.9
million in the 1996 Period and the 1995 Period, respectively. Net cash provided
by financing activities in the 1996 Period consisted primarily of $27.4 million
in net proceeds from the Company's initial public offering, $600,000 from the
issuance of shares in connection with the exercise of stock options and warrants
and net cash drawn under the Company's revolving line of credit of $1.4 million.
Net cash provided by financing activities in the 1995 Period consisted primarily
of proceeds from the issuance of common stock of $2.8 million and net cash drawn
under the Company's revolving line of credit of $3.2 million.

The Company had an outstanding short-term borrowing balance under its
distribution subsidiary's revolving line of credit of $7.5 million as of
September 30, 1996 as compared to $6.1 million as of December 31, 1995.
Borrowings under the line of credit are only available for financing the
Company's distribution operations, are secured by all of the assets of that
operation and are subject to a borrowing base related to the value of that
operation's accounts

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<PAGE>

receivable and inventories. The agreement requires compliance by the Company
with certain covenants including the maintenance of minimum working capital and
net worth levels and, prior to the October 1996 amendment described below,
restricted the payment of dividends to the Company by, repayment of loans or
advances by the Company to, and certain asset transfers from, the Company's
distribution subsidiary. In January 1996, the maximum amount available under the
revolving line of credit was increased from $8.0 million to $10.0 million and
the interest rate was decreased from the prime rate (8.25% as of September 30,
1996) plus 2.0% to the prime rate plus 1.5%. In October, 1996, the Company
further amended the line of credit agreement whereby, amongst other things, the
interest rate was decreased from the prime rate plus 1.5% to the prime rate plus
1.0%, and the unused commitment fee was reduced from .5% to .25%. Additionally,
the amendment provides for, under certain circumstances, the payment of
dividends, repayments and advances from the Company's distribution subsidiary to
Andrx. As of September 30, 1996, approximately $1.0 million was available for
such distributions.

The Company anticipates that its existing capital resources will be
sufficient to enable it to maintain its current and planned operations through
the end of 1997. The Company expects negative cash flow and net losses to
continue at least through 1997 because it will use substantial funds for its
product development efforts, including the formulation of and bioequivalence
studies for its generic controlled-release product candidates, and for the
establishment of commercial-scale manufacturing operations. The Company
anticipates that during 1996 and 1997, approximately $15.0 million will be used
for research and product development activities (including the Company's share
of the funding of the ANCIRC joint venture) and approximately $10.0 million will
be used for capital expenditures relating to product development, primarily the
establishment of commercial-scale manufacturing operations for the
commercialization of the Company's generic versions of Cardizem CD/registered
trademark/ and Dilacor XR/registered trademark/. The Company may need additional
funding in order to complete research and development for its product candidates
and to commercialize these products after receipt of FDA approvals. Additional
funding, whether obtained through public or private debt or equity financing, or
from collaborative arrangements, may not be available when needed or may not be
available on terms favorable to the Company, if at all. If additional financing
is not available, the Company may be required to delay, scale back or eliminate
some or all of its research and development programs or to license to third
parties products or technologies that the Company would otherwise seek to
develop itself.

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<PAGE>

BUSINESS

OVERVIEW

The Company is applying its proprietary drug delivery technologies and
formulation skills initially to the development of generic versions of selected
high sales volume, controlled-release brand name pharmaceuticals, for which
marketing exclusivity or patent rights have expired or are near expiration. In
late 1995, the Company submitted ANDAs to the FDA covering generic versions of
Cardizem CD/registered trademark/ and Dilacor XR/registered trademark/.
According to data from IMS America, the brand name versions of these drugs had
combined 1995 U.S. sales in excess of $870 million. The Company currently has 15
additional generic controlled-release products under development, the brand name
versions of which had combined 1995 U.S. sales in excess of $3 billion. Of these
product candidates, 11 are in various phases of bioequivalence studies and four
are in formulation development.

To expedite product development and reduce the Company's development
costs, the Company has entered into collaborative arrangements with major
generic pharmaceutical companies. Andrx is a 50% partner in the ANCIRC joint
venture with Watson for the development of up to eight controlled-release
generic drugs and has entered into development and licensing agreements with
Mylan, IVAX and Watson for four additional controlled-release products. Watson
owns approximately 15.6% of the Company's presently outstanding Common Stock.
Andrx has also entered into an agreement with another pharmaceutical company to
apply one of its technologies to that company's marketed product in an attempt
to develop a once-a-day version of that product. If that company then wishes to
utilize Andrx's technology in connection with its product, the parties will
attempt to negotiate a license agreement.

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<PAGE>

terfenadine carboxylate, an antihistamine being developed by Sepracor. A
twice-a-day version of this drug is the subject of an NDA under review by the
FDA.

In addition to developing controlled-release pharmaceuticals, the
Company markets and distributes generic drugs manufactured by third parties.
These operations, which commenced in late 1992, generated 1995 revenues of $50.5
million. To date, substantially all of the Company's revenues have been
generated by its distribution operations. The Company's customer base consists
primarily of independent pharmacies, regional pharmacy chains which do not
maintain their own central warehousing facilities and pharmacy buying groups.
These operations provide Andrx with an ability to directly observe and
participate in developments and trends in the generic pharmaceutical industry.
The Company plans to use its distribution operations to assist in the marketing
of generic controlled-release products developed by the Company and its
collaborative partners.

NEED FOR CONTROLLED-RELEASE DRUG DELIVERY TECHNOLOGY

To date, most orally administered prescription pharmaceutical products
have been available only in immediate-release formulations. These formulations,
although efficacious, may at times result in unwanted side effects due to high
initial drug concentrations in the blood and may be inconvenient to patients
requiring multiple drug administrations each day. Over the last decade, new
controlled-release drug delivery technologies have been developed to eliminate
or reduce certain disadvantages of immediate-release drugs. Controlled-release
drug delivery technologies generally provide more consistent and appropriate
drug levels in the bloodstream than immediate-release dosage forms, and may
improve drug efficacy and reduce side effects by releasing drug dosages at
specific times and in specific locations in the body. These technologies also
allow for the development of "patient-friendly" dosage forms which reduce the
frequency of drug administration, thereby offering improved patient compliance.
Controlled-release pharmaceuticals can be especially beneficial for certain
patient populations, such as the elderly, who often require several medications
with differing dosing regimens.

The market for advanced drug delivery systems is large and is growing
rapidly. Based on published data, the market for orally-administered drugs that
utilize sustained and controlled-release drug delivery systems is projected to
increase to approximately $15 billion in 2000 from approximately $4 billion in
1993.

GENERIC PHARMACEUTICAL MARKET

Generic pharmaceuticals are therapeutic equivalents of brand name drugs
for which patents or marketing exclusivity rights have expired. According to
data from IMS America, the sales of generic pharmaceuticals exceeded $6.3
billion in 1994 and have grown at an average rate of 32% since 1992. The market
for generic drugs has grown in recent years due to a number of factors,
including the expiration of patents on a number of brand name drugs with
significant revenues, the availability of an abbreviated testing and approval
process, the ability of the pharmacist to substitute generic drugs for brand
name drugs and increased acceptance of the quality of these drugs. In addition,
reimbursement trends affecting the pharmaceutical industry,

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<PAGE>

including large volume purchasers, preferred provider organizations and health
maintenance organizations, are increasing the demand for lower cost
pharmaceuticals.

ANDRX'S PROPRIETARY DRUG DELIVERY TECHNOLOGIES

Andrx is developing and applying multiple drug delivery technologies to
control the release characteristics of a variety of orally-administered drugs.
To date, the Company has developed six distinct drug delivery technologies that
are patented or for which patent applications have been filed. These
controlled-release technologies were designed specifically for a drug that was
being formulated. The Company believes that its technologies are relatively
flexible and can be modified to apply to a variety of pharmaceutical products.

The Company's drug delivery technologies utilize a variety of polymers
and other materials to encapsulate or entrap the active drug compound and to
release the drug at varying rates at predetermined locations in the
gastrointestinal tract. In developing an appropriate drug delivery technology
for a particular drug candidate, Andrx considers such factors as: (i) the
desired release rates of the drug; (ii) the physico-chemical properties of the
drug; (iii) the physiology of the gastrointestinal tract and the manner in which
the drug will be absorbed during passage through the gastrointestinal tract; and
(iv) the effect of food on the absorption rate and transit time of the drug.

The following summarizes the Company's drug delivery technologies.

DRUG DELIVERY TECHNOLOGY DESCRIPTION
------------------------ -----------

PELLETIZED PULSATILE PPDS is designed for use with products
DELIVERY SYSTEM ("PPDS") that require a pulsed release of the
drug. This technology uses pellets that
are coated with specific polymers and
agents to control the release rate of the
microencapsulated drug. By varying the
proportion and composition of the polymer
mixtures, the release rate of the drug
may be specifically controlled. PPDS
technology is employed in the Company's
generic version of Cardizem CD/registered
trademark/.

SOLUBILITY MODULATING SMHS is designed for products
HYDROGEL SYSTEM ("SMHS") utilizing a hydrogel-based dosage system
that provides for sustained release
without the need to use special coatings
or structures which add to the cost of
manufacture. This technology avoids the
"initial burst effect" commonly observed
with other sustained-release hydrogel
formulations. SMHS technology is employed
in the Company's generic version of
Dilacor XR/registered trademark/.

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<PAGE>

DRUG DELIVERY TECHNOLOGY DESCRIPTION
------------------------ -----------

SINGLE COMPOSITION OSMOTIC SCOT utilizes various osmotic modulating
TABLET SYSTEM ("SCOT") agents as well as polymer coatings to
provide a zero-order release of a drug (a
constant rate of release). SCOT
technology is being employed in the
development of the Company's generic
versions of Procardia XL/registered
trademark/, Glucotrol XL/registered
trademark/, Efidac/24/registered
trademark/ and Covera HS/registered
trademark/.

DELAYED PULSATILE DPHS is designed for use with hydrogel
HYDROGEL SYSTEM ("DPHS") matrix products that are characterized by
an initial zero-order release of drug
followed by a rapid release. This release
profile is achieved by the blending of
selected hydrogel polymers to achieve a
delayed pulse. DPHS technology is being
employed in the development of the
Company's generic version of Adalat
CC/registered trademark/.

PELTAB SYSTEM ("PELTAB") Peltab utilizes polymer-coated drug
pellets or drug crystals which are
manufactured into tablets. In order to
provide a controlled release, a water
insoluble polymer is used to coat
discrete drug pellets or drug crystals
which then can resist the action of
fluids in the gastrointestinal tract.
This technology incorporates a strong
polymer coating enabling the coated
pellets to be compressed into tablets
without significant breakage. Peltab
technology is being employed in the
development of the Company's generic
version of K-Dur/registered trademark/.

PORTAB SYSTEM ("PORTAB") Portab is designed for controlled-release
dosage forms which utilize an osmotic
core typically containing a water soluble
drug. The core includes a water swellable
component and a continuous polymer
coating. The purpose of the swelling
agent is to expand the core and thereby
create microporous channels through which
the drug is released. None of the
Company's current product candidates
employ Portab technology.

The Company has obtained ten U.S. patents and has filed five additional
U.S. patent applications and various foreign patent applications relating to its
drug delivery technologies. Andrx is applying several other proprietary
controlled-release drug delivery technologies in its product development
programs and continues to develop new technologies for which it may seek patent
protection.

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<PAGE>
PRODUCT DEVELOPMENT

GENERIC CONTROLLED-RELEASE PHARMACEUTICALS

The Company's product development strategy has been to apply its
proprietary drug delivery technologies and formulation skills initially to the
development of generic versions of selected high sales volume,
controlled-release brand name pharmaceuticals, for which marketing exclusivity
or patent rights have expired or are near expiration. In late 1995, the Company
submitted ANDAs covering generic versions of Cardizem CD/registered trademark/
and Dilacor XR/registered trademark/. The brand name versions of these drugs had
combined 1995 U.S. sales in excess of $870 million. The Company currently has 15
additional generic versions of brand name controlled-release drugs under
development, the brand name versions of which had combined 1995 U.S. sales in
excess of $4 billion. Of these product candidates, 11 are in various phases of
bioequivalence studies and four are in various phases of formulation
development.

The following table sets forth certain information with respect to the
Company's product candidates.
<TABLE>
<CAPTION>

ANDRX DRUG
APPROXIMATE 1995 DELIVERY COLLABORATIVE ARRANGEMENTS(3)
U.S. SALES TECHNOLOGY ----------------------------
DEVELOPMENT STATUS/BRAND NAME ($IN MILLIONS)(1) EMPLOYED(2) U.S. INTERNATIONAL
- ----------------------------- ----------------- ----------- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
ANDA FILED:
Cardizem CD/registered trademark/ $759 PPDS -- YSP
Dilacor XR/registered trademark/ 113 SMHS -- Purzer
BIOEQUIVALENCE STUDIES:
Procardia XL/registered trademark/ 1,101 SCOT ANCIRC ANCIRC
Trental/registered trademark/ 194 Proprietary ANCIRC ANCIRC
Adalat CC/registered trademark/ 187 DPHS ANCIRC ANCIRC
K-Dur/registered trademark/ 140 Peltab IVAX YSP
Seldane D/registered trademark/ 139 Proprietary Mylan YSP
Oruvail/registered trademark/ 133 Proprietary ANCIRC ANCIRC
Verelan/registered trademark/ 126 Proprietary Watson --
Glucotrol XL/registered trademark/ 78 SCOT ANCIRC ANCIRC
Efidac/24/registered trademark/ 10 SCOT ANCIRC ANCIRC
Sudafed/registered trademark/ 12-hour 8 Proprietary Watson --
Tiazac/registered trademark/ n/a(4) Proprietary -- --
FORMULATION:
Prilosec/registered trademark/ 1,191 Proprietary -- --
Voltaren XR/registered trademark/ n/a(5) Proprietary ANCIRC ANCIRC
Covera HS/registered trademark/ n/a(5) SCOT ANCIRC ANCIRC
Naprelan/registered trademark/ n/a(5) Proprietary -- --
<FN>
- --------------------
(1) Represents aggregate sales for all dosage strengths. Source: IMS America.

(2) Proprietary means that Andrx is applying a drug delivery technology other
than the six drug delivery technologies described above.

(3) For a description of these collaborative arrangements, see "--Collaborative Arrangements."

(4) Tiazac/registered trademark/ received FDA approval in September 1995 and was launched in
January 1996. Accordingly, 1995 sales data are not applicable.

(5) These products received FDA approval and were launched in 1996. Accordingly, 1995 sales data are not applicable.
</FN>
</TABLE>

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<PAGE>
PRODUCT DESCRIPTIONS

CARDIZEM CD/registered trademark/ is a once-a-day controlled-release
formulation of diltiazem hydrochloride, a calcium channel blocking agent,
indicated for hypertension and for the management of chronic stable angina.
Cardizem CD/registered trademark/ is marketed by HMR.

DILACOR XR/registered trademark/ is a once-a-day controlled-release
version of diltiazem hydrochloride, a calcium channel blocking agent indicated
for hypertension and for the management of chronic stable angina. Dilacor
XR/registered trademark/ is marketed by RPR.

PROCARDIA XL/registered trademark/ is a once-a-day controlled-release
version of nifedipine, a calcium channel blocking agent indicated for
hypertension, vasospastic angina and chronic stable angina. Procardia
XL/registered trademark/ is marketed by the Pratt Pharmaceuticals division of
Pfizer, Inc.

TRENTAL/registered trademark/ is a controlled-release tablet form of
pentoxifylline which is administered three times daily and is indicated for use
in patients with chronic occlusion of arteries of the limbs. It acts to improve
the flow properties of blood by decreasing its viscosity. The patent on
Trental/registered trademark/, which is marketed by HMR, will expire in April
1997.

ADALAT CC/registered trademark/ is a once-a-day controlled-release
formulation of nifedipine, a calcium channel blocking agent indicated for
hypertension. Adalat CC/registered trademark/ is marketed by Miles, Inc.

K-DUR/registered trademark/ is a controlled-release form of potassium
chloride indicated as an electrolyte replenisher. K-Dur/registered trademark/ is
marketed by Key Pharmaceuticals, Inc.

SELDANE D/registered trademark/ is a twice-a-day controlled-release
antihistamine and decongestant, which combines an immediate-release formulation
of terfenadine with a controlled-release formulation of pseudoephedrine
hydrochloride. Seldane D/registered trademark/ is marketed by HMR.

ORUVAIL/registered trademark/ is a once-a-day controlled-release
version of ketoprofen. The product is indicated for the management of the signs
and symptoms of rheumatoid arthritis and osteoarthritis. Marketing exclusivity
for Oruvail/registered trademark/, which is marketed by Wyeth-Ayerst
Laboratories, a division of American Home Products Corporation, will expire in
September 1996.

VERELAN/registered trademark/ is a once-a-day controlled-release
version of verapamil hydrochloride, a calcium channel blocking agent indicated
for the prophylactic management of hypertension. Verelan/registered trademark/
is marketed by Lederle Laboratories and Wyeth-Ayerst Laboratories, divisions of
American Home Products Corporation.

GLUCOTROL XL/registered trademark/ is a once-a-day controlled-release
formulation of glipizide, a blood-glucose lowering agent indicated as an adjunct
to diet for the control of hyperglycemia in diabetes patients. Marketing
exclusivity for Glucotrol XL/registered trademark/, which is marketed by the
Pratt Pharmaceuticals division of Pfizer, Inc., will expire in April 1997.

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<PAGE>

EFIDAC/24/registered trademark/ is a once-a-day controlled-release
formulation of pseudoephedrine hydrochloride. Efidac/24/registered trademark/,
which is marketed by Ciba-Geigy Corporation, is an over-the-counter product
indicated for the temporary relief of nasal congestion.

SUDAFED/registered trademark/ 12-HOUR, a twice-a-day controlled-release
formulation of pseudoephedrine hydrochloride, is an over-the-counter product
indicated for the temporary relief of nasal congestion. Sudafed/registered
trademark/ 12-hour is marketed by Warner Wellcome Consumer Health Care.

TIAZAC/registered trademark/ is a once-a-day controlled-release
formulation of diltiazem hydrochloride indicated for hypertension. Marketing
exclusivity for Tiazac/registered trademark/, which is marketed by Forest
Laboratories, Inc., will expire in September 1998.

PRILOSEC/registered trademark/ is a once-a-day controlled-release
formulation of omeprazole. This product inhibits gastric acid secretion and is
indicated for the treatment of duodenal ulcers and gastrointestinal reflux
disease. The patent on Prilosec/registered trademark/, which is marketed by the
Astra/Merck Group of Merck and Co., Inc., will expire in April 2001.

VOLTAREN XR/registered trademark/ is a once-a-day controlled version of
diclofenac sodium, indicated for the treatment of acute and chronic arthritis.
Marketing exclusivity for Voltaren XR/registered trademark/, which is marketed
by Geigy Pharmaceuticals, will expire in March 1999.

COVERA HS/registered trademark/ is a once-a-day controlled-release
version of verapamil, a calcium channel blocking agent designed for bedtime
dosing and indicated for the prophylactic management of hypertension and chronic
stable angina. Marketing exclusivity for Covera HS/registered trademark/, which
is marketed by G.D. Searle and Co., will expire in February 1999.

NAPRELAN/registered trademark/ is a once-a-day controlled-release
version of naproxen sodium, indicated for the treatment of arthritis. Marketing
exclusivity for Naprelan/registered trademark/, which is marketed by Wyeth
Ayerst Laboratories, a division of American Home Products Corporation, will
expire in January 1999.

GENERIC PHARMACEUTICAL DEVELOPMENT PROCESS

When developing generic pharmaceuticals, the Company is required to
prove that the generic product candidate will exhibit IN VIVO release
characteristics equivalent to those of the brand name pharmaceutical. For a
controlled-release pharmaceutical, the drug delivery technology utilized to
replicate the release rates of the brand name pharmaceutical must do so without
infringing any unexpired patents. The process by which generic
controlled-release products are developed for manufacture and sale in the U.S.
may be categorized into three basic stages: (i) formulation development; (ii)
bioequivalence studies; and (iii) an ANDA filing with the FDA.

During formulation development, the Company attempts to develop its own
version of the brand name drug. In creating a formulation, the Company utilizes
or adapts its drug delivery technologies to the product candidate or develops a
new drug delivery technology for that product

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<PAGE>

candidate. The Company's formulation is then evaluated in IN VITRO dissolution
studies to determine whether human bioequivalence studies should be conducted.

Once a suitable formulation has been developed, human bioequivalence
studies are conducted which compare the Company's formulation to the brand name
drug. Because bioequivalence studies can be relatively expensive to perform, the
Company often conducts a preliminary bioequivalence study in which it
manufactures a small batch of its product for testing in a limited number of
human subjects (typically six to eight). If the formulation yields a blood level
profile comparable to the brand name drug, full-scale bioequivalence studies may
be performed, which require the manufacture of at least 100,000 dosage units and
usually involves 24 or more human subjects. These studies are conducted to
determine the plasma concentrations of the drug in human subjects under fasted
and fed conditions as well as under multiple dose administration. If successful,
the studies will demonstrate that the rate and extent of absorption of the
generic version is equivalent to that of the brand name drug. If the studies
demonstrate that the blood level profiles of the Company's product are not
comparable to the brand name drug, the Company will either modify its
formulation or alter the drug delivery technology employed.

After the Company's formulation has been shown to be bioequivalent to
the brand name drug, an ANDA is prepared for submission to the FDA. This ANDA
includes the results of the bioequivalence studies and other data such as IN
VITRO specifications for the Company's formulation, stability data, analytical
data, methods validation and manufacturing procedures and controls. See
"--Government Regulation."

BRAND NAME CONTROLLED-RELEASE PHARMACEUTICALS

Andrx believes that the drug delivery technologies it uses for the
development of generic controlled-release pharmaceuticals will also have
application to the development of brand name controlled-release pharmaceuticals.
To develop and commercialize this opportunity, Andrx is exploring possible
applications for its technologies and plans to utilize clinical research
organizations and work with brand name pharmaceutical companies in two basic
ways: (i) by developing controlled-release formulations of existing
immediate-release drugs and (ii) by applying its drug delivery technologies to
the formulation of new drugs under development by these pharmaceutical
companies. The first category provides a way for drug manufacturers to either
increase or preserve the value of their existing immediate-release drugs. By
developing a controlled-release drug formulation, the pharmaceutical
manufacturer has the potential to improve drug efficacy and reduce the cost of
therapy by simplifying drug administration regimens. Additionally, by developing
a controlled-release formulation of an immediate-release drug, the
pharmaceutical manufacturer may be able to receive several additional years of
marketing exclusivity before generic equivalents may be approved. The second
category is of significant importance to pharmaceutical manufacturers because
drug candidates often require easy administration (e.g., one or two doses per
day instead of four to six) to become commercially acceptable or to develop
brand loyalty by patients and physicians. Furthermore, many new drug candidates,
such as proteins and peptides, that are developed by pharmaceutical

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<PAGE>

and biotechnology companies, are expected to require advanced drug delivery
technologies in order for these drugs to be administered in oral form instead of
by injection.

SEPRACOR. In April 1996, the Company entered into its first
collaboration for the development of a brand name controlled-release
pharmaceutical through its agreement with Sepracor. Pursuant to this agreement
Andrx is using one of its controlled-release drug delivery technologies to
formulate a once-a-day version of terfenadine carboxylate, an antihistamine. A
twice-a-day version of this product, which Sepracor has licensed in the U.S. to
HMR, was approved by the FDA in 1996 and is marketed in the U.S. under the brand
name Allegra/registered trademark/. Under the development agreement with
Sepracor, the Company is responsible for developing a formulation of the product
and transferring such technology to Sepracor who will be responsible for
obtaining FDA approvals for the product and the manufacturing and marketing of
the product. The Company will receive certain fees under the development
agreement and will be entitled to receive royalties from the sale or license of
the product.

In addition, the Company has entered into an agreement with another
pharmaceutical company to apply one of its technologies to that company's brand
name marketed product in an attempt to develop a once-a-day version of that
product. If that company then wishes to utilize Andrx's technology in connection
with its product, the parties will attempt to negotiate a license agreement.

COLLABORATIVE ARRANGEMENTS

ANCIRC JOINT VENTURE

In July 1994, the Company entered into a joint venture with Circa
Pharmaceuticals, Inc. ("Circa") for the development of up to six generic
controlled-release products. In July 1995, Circa was acquired by Watson. Since
it acquired Circa, Watson has expanded its relationship with Andrx to include up
to eight generic controlled-release products (the "ANCIRC Products") and has
made equity investments in the Company (including Common Stock purchased from
certain principal shareholders) in the aggregate of approximately $21.6 million.
Watson owns approximately 15.6% of the Company's presently outstanding Common
Stock. See "Certain Transactions--Transactions with Watson" and "Principal
Shareholders."

In July 1994, the Company and Watson identified six product candidates
for development by ANCIRC. Until three products have been successfully
developed, the Company and Watson will agree on a substitute product candidate
for any product candidate which is not successfully developed. Once three
products are successfully developed, the parties will not be required to

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agree upon more than two additional substitute product candidates. In October
1995, the agreement with Watson was amended to provide that the Company and
Watson will agree on two additional product candidates to be developed by
ANCIRC. Those product candidates have now been identified as Voltaren
XR/registered trademark/ and Covera HS/registered trademark/. The Company has
agreed that Dr. Chih- Ming J. Chen, its Chief Scientist, will personally
supervise the development of all of the ANCIRC Products until at least five
products have been successfully developed. Dr. Chen is also required to
supervise the development of the products that are subject to the development
and licensing agreements referred to below. See "Risk Factors--Dependence on
Collaborative Partners."

ANCIRC is a 50/50 joint venture between the Company and Watson with
both the capital contributions and net income or losses allocated equally
between the Company and Watson. Each of the Company and Watson has designated
three representatives who together constitute the management committee of
ANCIRC. This management committee is responsible for reviewing each partner's
progress on the various projects on which they are working, preparing budgets
for each quarter, issuing capital calls to each of the Company and Watson when
necessary, approving expenditures and resolving any disputes which may arise
between the partners. The Company has made investments in ANCIRC totaling $3.5
million through September 30, 1996. The Company is responsible for contributing
50% of any addition capital contributions required by ANCIRC, subject to a
limitation on each party's capital contribution to an additional $2.05 million
from October 1, 1996 through July 1997. Capital contributions are utilized by
ANCIRC to pay for services rendered by the Company and Watson to ANCIRC.

Under its research and development services agreement with ANCIRC, the
Company is responsible for the development of formulations for each of the
ANCIRC Products. When the Company has developed a formulation which the Company
and Watson believe is promising, Watson is responsible, under its manufacturing
and regulatory approval agreement with ANCIRC, for the manufacture of such
quantities of the ANCIRC Product as may be necessary for ANCIRC to conduct
bioequivalence studies required for an ANDA submission. If such studies are
successful, Watson is also responsible for obtaining the necessary regulatory
approvals for that ANCIRC Product and to manufacture that product in commercial
quantities. Following regulatory approval, Andrx is responsible for marketing
the ANCIRC Product throughout the U.S. pursuant to a distribution and marketing
agreement with ANCIRC. The costs of developing, manufacturing and marketing the
ANCIRC Products are charged to ANCIRC on an agreed-upon basis at least quarterly
and ANCIRC then pays or reimburses both the Company and Watson for their
respective services.

DEVELOPMENT AND LICENSING AGREEMENTS

The Company has entered into development and licensing agreements
covering generic pharmaceuticals with three U.S. and two foreign pharmaceutical
companies. Pursuant to such agreements, the licensees typically will fund the
cost of product development and will pay the Company royalties in exchange for a
license to manufacture and market the products for a specified period in a
specified territory. Management believes that such arrangements offer a variety
of benefits, including providing an additional source of funding for product
development
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<PAGE>
and affording the Company the ability to have certain of its generic
controlled-release products sold through the distribution networks of these
major pharmaceutical companies. The Company may terminate a development and
licensing agreement if the licensee fails to market the licensed product, in
which case all rights revert to the Company. In addition, the Company has
entered into an agreement with Sepracor to formulate a once-a-day version of a
new drug being developed by Sepracor. See "--Product Development--Brand Name
Controlled-Release Pharmaceuticals."

IVAX. In June 1993, the Company entered into a development and
licensing agreement with IVAX for a generic version of K-Dur/registered
trademark/ to be marketed in the U.S. Under this agreement, the Company is
responsible for developing a formulation, and IVAX is responsible for performing
the bioequivalence studies, preparing the ANDA and manufacturing and marketing
the product. The development and licensing agreement grants IVAX the right to
market the product for a period of five years from receipt of ANDA approval
(which period may be extended for an additional five years at the sole
discretion of IVAX). The Company has received certain fees and milestone
payments under the development and licensing agreement and will be entitled to
receive royalties from the sale of the licensed product.

WATSON. In September and December 1993, the Company entered into two
development and licensing agreements with Watson for generic versions of
Verelan/registered trademark/ and Sudafed/registered trademark/ 12-hour to be
marketed in the U.S. and Canada. Under these agreements, the Company is
responsible for the development of the licensed products and the transfer of the
technology to Watson which, together with the Company's assistance, is
responsible for the scale-up batches for pilot and bioequivalence studies,
preparing the regulatory applications and manufacturing and marketing the
licensed products. Each development and licensing agreement is for a term equal
to the life of the licensed product. The Company received certain milestone
payments under the development and licensing agreement for the generic version
of Verelan/registered trademark/. If this agreement is terminated other than due
to a decision to terminate, or a breach of the agreement, by Watson, these
milestone payments and any product development costs paid to the Company are
refundable to Watson if the Company successfully commercializes such product
within three years from the date the development and license agreement is
terminated. The development and licensing agreement for the generic version of
Sudafed/registered trademark/ 12-hour does not provide for milestone payments,
although the Company will be entitled to receive a share of profits from the
sale of this product.

MYLAN. In November 1993, the Company entered into a development and
licensing agreement with Mylan for a generic version of Seldane D/registered
trademark/ to be marketed in the U.S., Canada and Mexico. Under this agreement,
the Company is responsible for the development of the licensed product and the
transfer of such technology to Mylan which, together with the Company's
assistance, is responsible for scale-up batches for pilot and bioequivalence
studies, preparing regulatory applications and manufacturing and marketing the
licensed product. The development and licensing agreement grants Mylan the right
to market the product for a period of five years from receipt of ANDA approval
(which period may be extended for an additional five years at the sole
discretion of Mylan). The Company has received certain fees and milestone
payments under this agreement and will be entitled to receive royalties from the
sale of the licensed products.
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<PAGE>
YSP. In July 1993, the Company entered into a development and licensing
agreement with a Taiwanese pharmaceutical manufacturer, Yung Shin Pharmaceutical
Ind., Co., Ltd. ("YSP") for generic versions of Cardizem CD/registered
trademark/, Seldane D/registered trademark/ and K-Dur/registered trademark/ to
be marketed in Taiwan, China and Southeast Asia (except Japan and Korea). Under
this agreement, the Company is responsible for the development of the licensed
products, including scale-up batches for pilot and bioequivalence studies, and
the transfer of such technology to YSP which, together with the Company's
assistance, is responsible for preparing the necessary regulatory applications
in the licensed territories and manufacturing and marketing the licensed
products. The development and licensing agreement grants YSP the right to market
the product for a period of ten years from receipt of the first government
approval in the covered territories to market each product (which period may be
extended for an additional five years at the sole discretion of YSP). The
Company has received certain fees and milestone payments under this agreement
and will be entitled to receive royalties from the sale of the licensed
products.

PURZER. In January 1994, the Company entered into a development and
licensing agreement with a second Taiwanese pharmaceutical manufacturer, Purzer
Pharmaceutical Co., Ltd. ("Purzer") for a generic version of Dilacor
XR/registered trademark/ and three over-the-counter products to be marketed in
Russia and Asia, except Japan. This agreement is similar to the agreement with
YSP.

From time to time the Company also considers licensing or other
agreements to obtain rights to patents or technology which the Company believes
may have commercial value. In 1994, the Company entered into an agreement with
The UAB Research Foundation to license technology relating to the use of
dilazep, an orally administered drug to be used in the treatment of cancer. The
development of this and similar technologies is a different and significantly
more expensive process than the development of products using the Company's
controlled release technologies. Therefore, in order to facilitate development
of these projects, the Company plans, in most cases, to enter into collaborative
arrangements with pharmaceutical companies and others to undertake these
development efforts. Currently there are no such agreements in place.

GENERIC PHARMACEUTICAL DISTRIBUTION OPERATIONS

In addition to its controlled-release drug development activities,
Andrx markets and distributes generic pharmaceuticals manufactured by third
parties. The Company purchases generic pharmaceuticals directly from
manufacturers and wholesalers and markets them through its in-house
telemarketing staff primarily to independent pharmacies, regional pharmacy
chains which do not maintain their own central warehousing facilities and
pharmacy buying groups. The Company currently has a telemarketing staff of
approximately 75 persons, supplemented by five sales executives who are
responsible for national accounts.

The Company currently utilizes gross profit from its generic
pharmaceutical distribution operations to offset a portion of the Company's
overall administrative costs. These operations also provide Andrx with an
ability to directly observe and participate in developments and trends in the
generic pharmaceutical industry. The Company plans to use its distribution
operations to assist in the marketing of generic controlled-release products
developed by the Company and its collaborative partners. The following table
sets forth distribution revenues and gross profit of the Company's generic
pharmaceutical distribution operations for 1993, 1994, 1995 and the nine months
ended September 30, 1996 and the approximate number of customer accounts and
products offered at the end of each such year and period.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
1993 1994 1995 SEPTEMBER 30, 1996
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Distribution revenues............ $5,654,500 $25,915,500 $50,467,800 $61,097,000
Gross profit..................... $ 396,600 $ 4,553,100 $ 8,686,900 $10,121,700
</TABLE>

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<PAGE>
The Company concentrates on high-volume generic prescription drugs in
capsule or tablet form. These products typically provide higher gross margins,
are subject to more rapid inventory turnover and require less warehouse space
than liquids, creams and many over-the-counter products. By focusing on these
products, the Company believes that it is able to control inventory investments,
minimize overhead and operate in an efficient and cost-effective manner.

The Company purchases its generic products for resale from a number of
major pharmaceutical manufacturers and wholesalers. The Company believes that it
is not dependent upon any particular supplier and that alternative sources of
supply for most of its products are available if required.

Based on industry sources, there are approximately 23,000 independent
pharmacies nationwide. The Company offers this customer group competitive
pricing, quality products and responsive customer service. The Company believes
these are the critical elements to competing effectively in this market. The
Company plans to expand its generic pharmaceutical distribution operations by
further increasing its customer base to include larger regional and national
pharmacy chains.

MANUFACTURING

The Company currently has a laboratory and pilot manufacturing facility
encompassing approximately 8,000 square feet. The Company is in the process of
constructing an approximately 31,000 square foot facility which will be used for
manufacturing commercial quantities of the Company's generic versions of
Cardizem CD/registered trademark/ and Dilacor XR/registered trademark/, for
which ANDAs have already been filed. The Company has hired a Vice President of
Manufacturing Operations, a plant manager and other employees who will oversee
construction of the Company's manufacturing facility. The Company currently has
only a limited number of personnel experienced in the commercial manufacture of
pharmaceuticals. Accordingly, before the Company commences manufacturing its
product candidates in commercial quantities, significant expenditures and
additional personnel will be required.

The Company will be dependent on Watson to manufacture the products
subject to the ANCIRC joint venture and on other companies with which it has
development and licensing agreements to manufacture other products. See
"--Collaborative Arrangements."

COMPETITION

The pharmaceutical industry is highly competitive and is affected by
new technologies, governmental regulations, health care legislation,
availability of financing and other factors. Many of the Company's competitors
have longer operating histories and greater financial, marketing and other
resources than the Company.

The Company expects that it will be subject to competition from
numerous other entities that currently operate, or intend to operate, in the
pharmaceutical industry. These include companies that are engaged in the
development of controlled-release technologies and products,

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<PAGE>
as well as other pharmaceutical manufacturers that may decide to undertake
in-house development of these products. The Company is initially concentrating
its efforts on generic controlled-release pharmaceuticals. Typically, selling
prices of immediate-release generic drugs have declined and profit margins have
narrowed after generic equivalents of brand name products are first introduced
and the number of competitive products has increased. Similarly, the maintenance
of particular levels of profitability for the Company's generic
controlled-release products will depend, in large part, on the Company's ability
to introduce new products before its competitors and on the intensity of
competition with respect to existing products.

In its generic pharmaceutical distribution business, the Company
competes with a number of large wholesalers and other distributors of generic
pharmaceuticals, many of which have substantially greater financial, marketing
and other resources than the Company.

PATENTS AND PROPRIETARY RIGHTS

Andrx believes that patent and trade secret protection, particularly of
its drug delivery and formulation technologies, is important to its business and
that its future will depend in part on its ability to obtain patents, maintain
trade secret protection and operate without infringing the proprietary rights of
others.

Andrx has been issued ten U.S. patents and has five additional U.S.
patent applications and various foreign patent applications relating to its drug
delivery technologies. The Company expects to apply for additional U.S. and
foreign patents in the future. The issuance of a patent is not conclusive as to
its validity or as to the enforceable scope of the claims of the patent. There
is no assurance that the Company's patents or any future patents will prevent
other companies from developing similar or functionally equivalent products or
from successfully challenging the validity of Company's patents. Furthermore,
there is no assurance that (i) any of the Company's future processes or products
will be patentable; (ii) any pending or additional patents will be issued in any
or all appropriate jurisdictions; (iii) the Company's processes or products will
not infringe upon the patents of third parties; or (iv) the Company will have
the resources to defend against charges of infringement by or protect its own
patent rights against third parties. The inability of the Company to protect its
patent rights or infringement by the Company of the patent or proprietary rights
of others could have a material adverse effect on the Company's results of
operations and financial position.

There has been substantial litigation in the pharmaceutical, biomedical
and biotechnology industries with respect to the manufacture, use and sale of
new products that are the subject of conflicting patent rights. Most of the
brand name controlled-release products of which the Company is developing
generic versions are covered by one or more patents. Under the

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<PAGE>
Waxman-Hatch amendments, when a drug developer files an ANDA for a generic drug,
and the developer believes that an unexpired patent which has been listed with
the FDA as covering that brand name product will not be infringed by the
developer's product or is invalid or unenforceable, the developer must so
certify to the FDA. That certification must also be provided to the patent
holder, who may challenge the developer's certification of non-infringement,
invalidity or unenforceability by filing a suit for patent infringement. If a
suit is filed within 45 days of the patent holder's receipt of such
certification, the FDA can review and approve the ANDA, but is precluded from
granting final marketing approval of the product until a final judgment in the
action has been rendered or 30 months from the date the certification was
received, whichever is sooner. Should a patent holder commence a lawsuit with
respect to alleged patent infringement by the Company, the uncertainties
inherent in patent litigation make the outcome of such litigation difficult to
predict. To date, two such actions have been commenced against Andrx, and it is
anticipated that additional actions will be filed as Andrx files additional
ANDAs. The Company evaluates the probability of patent infringement litigation
with respect to its ANDA submissions on a case by case basis and, accordingly,
as of September 30, 1996, has provided a total of approximately $1.7 million for
litigation costs in connection with the two ANDAs submitted in late 1995. The
delay in obtaining FDA approval to market the Company's product candidates as a
result of litigation, as well as the expense of such litigation, whether or not
the Company is successful could have a material adverse effect on the Company's
results of operations and financial position.

Andrx has developed and filed an ANDA for a generic product which the
Company believes is bioequivalent to the once-a-day controlled-release
formulation of diltiazem hydrochloride marketed by HMR under the brand name
Cardizem CD/registered trademark/. In connection therewith, Andrx certified to
the FDA that its product does not infringe upon any of the patents listed as
covering that brand name product and sent the required notices to the holders of
each of those patents. In January 1996, Hoechst commenced the Hoechst
Litigation, alleging that Andrx's product infringes upon one of the six patents
listed as covering Cardizem CD/registered trademark/. Andrx has also developed
and filed an ANDA for a generic product which the Company believes is
bioequivalent to the once-a-day controlled-release version of diltiazem
hydrochloride marketed under the brand name Dilacor XR/registered trademark/ by
RPR. In connection therewith, Andrx certified to the FDA that its product does
not infringe upon the patent listed as covering that brand name product and sent
the required notices to the holder of that patent and the holder of the NDA. In
May 1996, Rhone commenced the RPR Litigation in the United States District
Court, Southern District of Florida, alleging that Andrx's product infringes a
patent listed as covering Dilacor XR/registered trademark/. While the Company
believes that its products do not infringe upon the patents in question, the
uncertainties inherent in patent litigation make the outcome of such litigation
difficult to predict. There can be no assurance that the Company will prevail in
either the Hoechst Litigation or the RPR Litigation. An adverse outcome in
either the Hoechst Litigation or the RPR Litigation would have a material
adverse effect on the Company's business and financial position.

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<PAGE>
GOVERNMENT REGULATION

All pharmaceutical manufacturers are subject to extensive regulation by
the federal government, principally the FDA, and, to a lesser extent, by state
and local governments. The Federal Food, Drug and Cosmetic Act (the "FDCA") and
other federal statutes and regulations govern or influence the development,
testing, manufacture, safety, labeling, storage, recordkeeping, approval,
advertising, promotion, sale and distribution of prescription pharmaceutical
products. Pharmaceutical manufacturers are also subject to certain recordkeeping
and reporting requirements, establishment registration and product listing and
FDA inspections.

The Waxman-Hatch amendments to the FDCA established abbreviated
application procedures for obtaining FDA approval for generic versions of brand
name prescription drugs (the "Listed Drugs") that are off-patent or whose
marketing exclusivity has expired. Approval to manufacture and market generic
drugs is obtained by filing ANDAs. As a substitute for clinical studies, the FDA
requires data demonstrating that the ANDA drug formulation is bioequivalent to a
previously approved Listed Drugs, among other requirements.

The advantage of the ANDA approval mechanism is that an ANDA applicant
is not required to conduct preclinical and clinical studies to demonstrate that
the product is safe and effective for its intended use. The Company has filed
two ANDAs with the FDA for generic versions of Cardizem CD/registered trademark/
and Dilacor XR/registered trademark/ (both diltiazem hydrochloride, a
prescription drug indicated for hypertension), and intends to file additional
ANDAs to obtain approval to market its other generic controlled-release
products. No assurances exist that ANDAs will be suitable or available for the
Company's products, or that the Company's proposed products will receive FDA
approval on a timely basis, if at all.

Patent certification requirements for generic controlled-release drugs
could also result in significant delays in obtaining FDA approvals. First, where
patents covering the Listed Drugs are alleged to be invalid, unenforceable or
not infringed, patent infringement litigation may be instituted by the holder or
holders of the brand name drug patents against the Company. Second, the first
company to file an ANDA for a given drug which is successful in certifying that
an unexpired patent covering the reference brand name drug is invalid,
unenforceable, or will not be infringed by its product, can be awarded 180 days
of market exclusivity during which the FDA may not approve any other ANDAs for
that drug. A successful certification results if the patent owner (who must be
notified of the certification) does not commence an infringement action within
45 days of having been so notified, or, having brought a timely infringement
action, receives an adverse final court decision.

While the Waxman-Hatch amendments codify the ANDA mechanism for generic
drugs, it also fosters pharmaceutical innovation through incentives that include
market exclusivity and patent term extension. First, the Waxman-Hatch amendments
provide two distinct market exclusivity provisions which either preclude the
submission or delay the approval of an abbreviated drug application. A five-year
marketing exclusivity period is provided for new chemical compounds, and a
three-year marketing exclusivity period is provided for applications containing
new clinical investigations essential to an approval, such as new indications or
new

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<PAGE>
delivery technologies. The three-year marketing exclusivity period would be
applicable to the development of a novel drug delivery system. The marketing
exclusivity provisions apply equally to patented and non-patented drug products.

Second, the Waxman-Hatch amendments provide for patent term extensions
to compensate for patent protection lost due to time taken in conducting FDA
required clinical studies or during FDA review of data submissions. Patent term
extension may not exceed five additional years nor may the total period of
patent protection following FDA marketing approval be extended beyond 14 years.
In addition, by virtue of the Uruguay Round Agreements Act of 1994 that ratified
the General Agreement on Tariffs and Trade ("GATT"), certain brand name drug
patent terms have been extended to 20 years from the date of filing of the
pertinent patent application (which can be longer than the former 17-year patent
term). This can further delay ANDA effective dates. Patent term extensions may
delay the ability of the Company to use its proprietary technology, in the
future, to market new extended release products, file section 505(b)(2) NDAs
referencing approved products (see below), and file ANDAs based on listed drugs
when those approved products or listed drugs have acquired patent term
extensions.

With respect to any drug with active ingredients not previously
approved by the FDA, a prospective manufacturer must submit a full NDA,
including complete reports of preclinical, clinical and other studies to prove
that product's safety and efficacy for its intended use. An NDA may also need to
be submitted for a drug with a previously approved active ingredient if, among
other things, the drug will be used to treat an indication for which the drug
was not previously approved, if the method of delivery is changed or if the
abbreviated procedure discussed above is otherwise not available. A manufacturer
intending to conduct clinical trials for a new drug compound as part of an NDA
is required first to submit investigational new drug applications to the FDA
containing information relating to preclinical and planned clinical studies. The
full NDA process is expensive and time consuming. Controlled or extended-release
versions of approved immediate-release drugs will require the filing of an NDA.
The FDA will not accept ANDAs when the delivery system or duration of drug
availability differ significantly from the listed drug. However, the FDCA
provides for NDA submissions that may rely in whole or in part on publicly
available clinical data on safety and efficacy under section 505(b)(2) of the
FDCA. The Company may be able to rely on existing publicly available safety and
efficacy data in filing NDAs for extended-release products when such data exists
for an approved immediate-release version of the same chemical entity. However,
there is no guarantee that the FDA will accept such applications under section
505(b)(2), or that such existing data will be publicly available or useful.
Further, utilizing the section 505(b)(2) application process is uncertain,
because neither the Company nor the FDA have had significant experience with it.
Additionally, under the Prescription Drug User Fee Act of 1992, all NDAs require
the payment of a substantial fee upon filing, and other fees must be paid
annually after approval. No assurances exist that, if approval of an NDA is
required, such approval can be obtained in a timely manner, if at all.
Manufacturers of marketed drugs must conform to the FDA's cGMP standards or risk
sanctions such as the suspension of manufacturing or the seizure of drug
products and the refusal to approve additional marketing applications. The FDA
conducts periodic inspections to implement these rules. The Company's commercial
manufacturing facility is currently under construction. The Company's
manufacturing facility has been inspected by the FDA with regard to both ANDA

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<PAGE>
submissions and the FDA has advised the Company that it cannot determine if the
manufacturing site is in compliance with cGMP because the facility is not ready
for scale-up production. An additional inspection will be performed by the FDA
to assure successful process validation after ANDA approval and before
initiation of commercial distribution of these products. There can be no
assurance that the Company's facility will be found to be in compliance with
cGMP or other regulatory requirements. Failure to comply could result in
significant delays in the development and testing of the Company's planned
products, as well as increased costs.

Noncompliance with applicable requirements can also result in total or
partial injunctions against production and/or distribution, refusal of the
government to enter into supply contracts or to approve NDAs or ANDAs, criminal
prosecution and product recalls. The FDA also has the authority to revoke for
cause drug approvals previously granted.

Under the Generic Drug Enforcement Act, ANDA applicants (including
officers, directors and employees) who are convicted of a crime involving
dishonest or fraudulent activity (even outside the FDA regulatory context) are
subject to debarment. Debarment is disqualification from submitting or
participating in the submission of future ANDAs for a period of years or
permanently. The Generic Drug Enforcement Act also authorizes the FDA to refuse
to accept ANDAs from any company which employs or uses the services of a
debarred individual.

Products marketed outside the United States which are manufactured in
the United States are subject to certain FDA regulations, as well as regulations
by the country in which the products are to be sold.

The Prescription Drug Marketing Act ("PDMA"), which amends various
sections of the FDCA, requires, among other things, state licensing of wholesale
distributors of prescription drugs under federal guidelines that include minimum
standards for storage, handling and recordkeeping. It also requires certain
wholesale distributors, including the Company, to provide to each wholesale
distributor a statement identifying each sale of the drug before the sale to
such wholesale distributor, among other requirements. It also sets forth civil
and criminal penalties for violations of these and other provisions. Various
sections of the PDMA are still being implemented by the FDA and the states.
Nevertheless, failure to comply with the wholesale distribution provisions and
other requirements of the PDMA could have a materially adverse effect on the
Company.

The Company is governed by federal, state and local laws of general
applicability, such as laws regulating working conditions and environmental
protection. The Company is also licensed by, registered with, and subject to
periodic inspection and regulation by, the DEA and Florida state agencies,
pursuant to federal and state legislation relating to drugs and narcotics.
Certain drugs that the Company may develop in the future may be subject to
regulations under the Controlled Substances Act and related statutes.

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<PAGE>
PRODUCT LIABILITY INSURANCE

The design, development and manufacture of the Company's products
involve an inherent risk of product liability claims. The Company has obtained
product liability insurance that covers substantially all products marketed by
the Company in its generic drug distribution operations, as well as
bioequivalence studies for controlled-release products candidates. The Company
believes that its product liability insurance is adequate for its current
operations, and will seek to increase its coverage prior to the commercial
introduction of its product candidates. There can be no assurance that the
coverage limits of the Company's insurance will be sufficient to offset
potential claims. Product liability insurance is expensive and difficult to
procure and may not be available in the future on acceptable terms or in
sufficient amounts, if available at all. A successful claim against the Company
in excess of its insurance coverage could have a material adverse effect upon
the Company's results of operations and financial condition.

FACILITIES

The Company leases approximately 60,000 square feet in a facility in
Fort Lauderdale, Florida, which houses the Company's executive offices,
warehousing and shipping facilities, a laboratory and pilot manufacturing plant
and a commercial-scale manufacturing facility under construction. The facility
is occupied pursuant to leases expiring between August 1998 and March 31, 2003
at a total annual rent of approximately $430,000. Each of the leases afford the
Company two five-year renewal options, and require the Company to pay certain
increases in common area costs. The Company is presently constructing a 31,000
square foot facility for the manufacture of the generic versions of Cardizem
CD/registered trademark/ and Dilacor XR/registered trademark/. The Company has
an option on approximately 15,000 square feet of adjacent space, which option it
anticipates exercising during the next 12 months.

The Company also leases approximately 18,500 square feet of office
space in Davie, Florida which house its non-warehouse distribution staff. Such
space is occupied pursuant to a lease expiring in November 1997, at an annual
rent of $220,000, including common area maintenance costs and real estate taxes,
and affords the Company two six-month renewal options.

The Company believes that the foregoing facilities plus additional
space available to it in the area will be adequate for its needs in the
foreseeable future.

EMPLOYEES

As of November 15, 1996, the Company had 217 employees, of whom 13 were
involved in corporate administration and 157 in the Company's distribution
operations. The remaining 47 employees were involved in research and
pharmaceutical development, including 27 scientists, 18 of whom hold Ph.D.,
masters or medical degrees.

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<PAGE>
LEGAL PROCEEDINGS

On May 17, 1996, the Company's Director of Production resigned from his
position and, in connection therewith, claimed that he was entitled to receive,
pursuant to the terms of his employment arrangement with the Company, a royalty
equal to 1% of gross revenues from certain products under development by the
Company. The Company contested this claim and has not received any
communications from the former employee in over 90 days. The Company believes
that the employee's resignation will not have a material adverse effect on the
Company's business. If an action is commenced, there can be no assurance that it
would not be adversely decided to the Company or, if adversely decided, that
such action would not have an adverse effect on the Company's results of
operations and financial position.

SCIENTIFIC ADVISORY BOARD

The Company has established a scientific advisory board ("SAB") which
is comprised of certain members of the medical, health care, pharmaceutical and
scientific communities. The Company generally consults with members of the SAB
from time to time on an individual basis to obtain their ideas, insights, input
and other assistance in helping the Company achieve its goals. Members of the
SAB, who have agreed to serve in such capacity for a three-year period, receive
options to purchase 3,000 shares of Common Stock under the Stock Incentive Plan.
Such options are granted at fair market value on the date of grant and vest over
a three-year period. Certain members of the SAB may, from time to time, render
consulting services to the Company for which they may be separately compensated.

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Set forth below is certain information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>

NAME AGE POSITION
---- --- --------
<S> <C> <C>
Alan P. Cohen(1) 42 Chairman of the Board and Chief Executive Officer
Elliot F. Hahn, Ph.D.(1) 52 President and Director
Chih-Ming J. Chen, Ph.D.(1) 45 Vice President, Chief Scientist and Director
Scott Lodin 40 Vice President, General Counsel and Secretary
Angelo C. Malahias 35 Vice President and Chief Financial Officer
Randy Glover 54 Vice President of Manufacturing Operations
Rep. Elaine Bloom(2) 59 Director
Paul M. Donofrio(3) 36 Director
Irwin C. Gerson(3) 66 Director
Elliot Levine(2) 60 Director
Michael A. Schwartz, Ph.D.(3) 66 Director
Melvin Sharoky, M.D.(1) 46 Director

</TABLE>
- --------------------

(1) Member of Executive Committee.

(2) Member of Audit Committee.

(3) Member of Compensation Committee.

ALAN P. COHEN is Chairman of the Board, Chief Executive Officer and a
director of Andrx, which he founded in August 1992. He holds several degrees
from the University of Florida and is a registered pharmacist. In 1984, Mr.
Cohen founded Best Generics, Inc., a generic drug distribution firm ("Best"),
which was sold to IVAX in 1988. Mr. Cohen served as President of Best from April
1989 until June 1990. Alan P. Cohen and certain members of his family control
Corner Drugstore, a privately-held retail drugstore chain, which also is a
shareholder and customer of the Company. Corner Drugstore filed for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in December 1994.
See "Certain Transactions--Transactions with Corner Drugstore." In addition, see
"Certain Transactions--Transactions with PSG" with respect to losses incurred by
the Company in connection with a loan to and certain receivables from Pharmacy
Services Group, Inc. ("PSG"), a pharmacy benefits management and mail order
marketing company which was controlled by a former principal shareholder of the
Company, Corner Drugstore and a non-affiliated third party.

-45-
<PAGE>
DR. ELLIOT F. HAHN has been President and a director of Andrx since
February 1993. From June 1990 to February 1993, Dr. Hahn was employed as Vice
President, Scientific Affairs of IVAX, where he was involved in the evaluation
and international licensing of product opportunities and was responsible for
maintaining the intellectual property of IVAX. From 1988 to 1993, Dr. Hahn also
served as the Vice President of Research of Baker Norton Pharmaceuticals, a
subsidiary of IVAX. Prior to that, he was an Associate Professor at The
Rockefeller University from 1977 to 1988. From 1972 until 1977, Dr. Hahn was an
Assistant Professor at Albert Einstein College of Medicine and a member of the
Institute for Steroid Research at Montefiore Hospital in New York City. Since
1988, he has been an adjunct Associate Professor at the University of Miami
School of Medicine. Dr. Hahn holds a B.S. degree from City College of New York
and a Ph.D. degree in chemistry from Cornell University.

DR. CHIH-MING J. CHEN has served as the Company's Vice President, Chief
Scientist and a director since November 1992. In January 1992, Dr. Chen formed
his own company, ASAN Labs, Inc., which was acquired by the Company in November
1992. Dr. Chen served as the Director of Product Development at IVAX from 1988
to 1992, where he was the leader of a research team which specialized in the
development of drug formulations, including several controlled-release products.
After graduating with a Ph.D. degree in pharmaceutics from Ohio State University
in 1981, Dr. Chen worked at Bristol-Myers and Berlex Labs.

SCOTT LODIN joined Andrx in January 1994 and is its Vice President,
General Counsel and Secretary. From 1983 until joining Andrx, Mr. Lodin was an
attorney with Hughes, Hubbard & Reed and a predecessor firm in Miami, Florida,
where he practiced primarily in the areas of corporate and commercial law.

ANGELO C. MALAHIAS joined Andrx as its Vice President and Chief
Financial Officer in January 1996. From January 1995 to January 1996, Mr.
Malahias was Vice President and Chief Financial Officer of Circa, where he also
served as Corporate Controller from July 1994 to January 1995. From 1983 to July
1994 he was employed by KPMG Peat Marwick LLP. Mr. Malahias is a certified
public accountant.

RANDY GLOVER joined Andrx in March 1996 as Vice President of
Manufacturing Operations, with responsibilities for all aspects of
manufacturing. From 1991 to 1996, he was Vice President of Manufacturing at IVAX
with responsibility for seven generic pharmaceutical manufacturing plants. From
1982 to 1991, Mr. Glover held senior manufacturing management positions with Key
Pharmaceuticals, Inc. and Schering-Plough in Florida and Puerto Rico and was
employed by the FDA from 1965 to 1981.

REPRESENTATIVE ELAINE BLOOM, a director of Andrx since October 1993, is
the former Speaker Pro-Tempore of the Florida House of Representatives, of which
she has been a member from 1974 to 1978 and since 1986. She currently chairs the
Joint Legislative Management Committee and serves on the Health Care, Aging and
Human Services and Government Operations Committees.

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<PAGE>
PAUL M. DONOFRIO, a director of Andrx since November 1995, has been a
Vice President, Investment Banking, at Dillon, Read & Co. since December 1994,
specializing in health care. Mr. Donofrio served in the same capacity with
Kidder, Peabody & Co. from 1990 to 1994.

IRWIN C. GERSON, a director of Andrx since November 1993, has been the
Chairman of the Lowe McAdams Healthcare division of the Interpublic Group
(formerly William Douglas McAdams, Inc.), a health care marketing,
communications and public relations company, since 1987. Mr. Gerson is a member
of the board of trustees of academic institutions, including Long Island
University, Albany College of Pharmacy and is Chairman of the Council of
Overseers of the Arnold and Marie Schwartz College of Pharmacy. Mr. Gerson is
also a director of Cytoclonal Pharmaceutics, Inc., a biotechnology company.

ELLIOT LEVINE, a director of Andrx since January 1994, was Executive
Vice President and Chief Financial Officer of Cheyenne Software, a developer and
marketer of proprietary network software products, from September 1989 through
November 1996. From February 1988 to September 1989, Mr. Levine was president of
VTX Electronics, a distributor of electronic networking products, and, from
March 1986 to February 1988, he was a Managing Director of Ladenburg, Thalmann &
Co. Inc., an investment banking firm.

DR. MICHAEL A. SCHWARTZ, a director of Andrx since November 1993, is
currently Dean Emeritus and a Professor at the College of Pharmacy at the
University of Florida having served as Dean of that college from April 1978
through May 1996.

DR. MELVIN SHAROKY, a director of Andrx since November 1995, has been
the President and a director of Watson since July 1995 and the President and
Chief Executive Officer of Circa since February 1993. From June 1988 to January,
1993, Dr. Sharoky was employed in various other executive capacities at Circa.

The Company's Articles provide that the Board of Directors is divided
into three classes and directors serve staggered three-year terms. Dr. Chih-Ming
J. Chen, Irwin C. Gerson and Dr. Michael A. Schwartz will hold office until the
annual meeting of shareholders to be held in 1997, Dr. Elliot F. Hahn, Elaine
Bloom and Elliot Levine will hold office until the 1998 annual meeting and Alan
P. Cohen, Paul M. Donofrio and Dr. Melvin Sharoky will hold office until the
1999 annual meeting.

DIRECTOR COMPENSATION

Non-employee directors do not receive cash compensation for their
services although they receive stock options under the Stock Incentive Plan.
Non-employee directors of the Company are each granted an option to purchase
7,000 shares of Common Stock on June 1 of each year. The initial 7,000 share
annual grants, which were made to existing non-employee directors on June 1,
1996, were adjusted based on prior options granted to give effect to prior
periods of service. Each new non-employee director will be granted an option on
the date such person becomes a director (the "Appointment Date") to purchase
that number of shares equal to 7,000 multiplied by a fraction, the numerator of
which is the number of full months between the

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<PAGE>
Appointment Date and the following June 1, and the denominator of which is
twelve. These options become exercisable in ten equal monthly installments
(unless such director's term commences after June 1, in which case the options
shall vest equally over the number of full months they serve as a director until
the following June 1), beginning the first day of the month following the date
of grant, provided the optionee has continuously served as a non-employee
director. All options granted to employee directors are granted at fair market
value on the date of the grant and expire ten years from the date of the grant.
The following sets forth information with respect to options granted to
non-employee directors under the Stock Incentive Plan.

<TABLE>
<CAPTION>
NUMBER OF
NAME OF OPTIONEE SHARES EXERCISE PRICE EXPIRATION DATE
- ---------------- ------ -------------- ---------------
<S> <C> <C> <C>
Elaine Bloom.......................... 2,500 $3.00 May 12, 2003
9,000 $6.50 August 7, 2004
5,875 $12.00 May 31, 2006

Paul M. Donofrio...................... 2,500 $11.00 November 11, 2005
5,750 $12.00 May 31, 2006

Irwin C. Gerson....................... 2,500 $3.00 May 12, 2003
9,000 $6.50 August 7, 2004
5,875 $12.00 May 31, 2006

Elliot Levine......................... 2,500 $8.00 January 23, 2004
9,000 $6.50 August 7, 2004
4,000 $12.00 May 31, 2006

Michael Schwartz, Ph.D................ 2,500 $3.00 May 12, 2003
9,000 $6.50 August 7, 2004
5,875 $12.00 May 31, 2006

Melvin Sharoky, M.D................... 2,500 $11.00 November 11, 2005
5,750 $12.00 May 31, 2006
</TABLE>

INDEMNIFICATION AGREEMENTS

The Company has entered into an indemnification agreement with each of
its directors and executive officers. Each indemnification agreement provides
that the Company will indemnify such person against certain liabilities
(including settlements) and expenses actually and reasonably incurred by him or
her in connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by or in the right of the Company) to
which he or she is, or is threatened to be, made a party by reason of his or her
status as a director, officer or agent of the Company, provided that such
director or executive officer acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal proceedings, had no reasonable cause

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<PAGE>
to believe his or her conduct was unlawful. With respect to any action brought
by or in the right of the Company, a director or executive officer will also be
indemnified, to the extent not prohibited by applicable law, against expenses
and amounts paid in settlement, and certain liabilities if so determined by a
court of competent jurisdiction, actually and reasonably incurred by him or her
in connection with such action if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information concerning compensation for
1995 received by the Chief Executive Officer (the "CEO") and such other
executive officers whose annual salary and bonus exceeded $100,000 for 1995
(collectively with the CEO, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------- OTHER ANNUAL SECURITIES
FISCAL SALARY BONUS COMPENSATION UNDERLYING
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS (#)(1)
- --------------------------- ---- --- --- --- --------------
<S> <C> <C> <C> <C>
Alan P. Cohen 1995 124,250 -- 10,601(2) --
Chairman of the Board and CEO

Elliot F. Hahn, Ph.D. 1995 124,250 -- 13,371(2) --
President

Chih-Ming J. Chen, Ph.D. 1995 124,250 108,500(3) 14,909(2) --
Vice President and Chief Scientist

Scott Lodin 1995 111,817 -- -- 10,000
Vice President and General Counsel

<FN>
- ------------------
(1) Represents options to purchase Common Stock granted to the Named Executive
Officer under the Stock Incentive Plan.

(2) Represents an automobile allowance, premiums for a $1 million life insurance
policy, the beneficiary of which is designated by the Named Executive
Officer and the premiums for a disability policy (other than for Mr. Cohen),
the beneficiary of which is designated by the Named Executive Officer.

(3) Represents compensation to Dr. Chen arising from the forgiveness of an interest-bearing
loan made by the Company to Dr. Chen. See "Certain Transactions--Transactions with Dr. Chen."
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS

The Company is party to an employment agreement with each of Mr. Cohen,
Dr. Hahn and Dr. Chen. Under the employment agreements, Mr. Cohen, Dr. Hahn and
Dr. Chen are also entitled to such bonuses and increases as may be awarded by
the Board of Directors. The employment agreements, which expire in February
1998, currently provide for a base salary of $145,000. Each agreement includes
confidentiality and non-competition provisions.

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<PAGE>
The Company has an agreement with Mr. Lodin which provides that in the event Mr.
Lodin's employment is terminated by the Company without cause prior to December
31, 1998, options to purchase 30,000 shares of Common Stock at an exercise price
of $8.00 granted to Mr. Lodin will immediately vest to the extent not previously
vested, and Mr. Lodin will receive a lump-sum payment equal to 100% of his then
annual compensation. Mr. Lodin is also party to a confidentiality agreement with
Andrx.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning individual grants
of stock options made during 1995 to any of the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR OPTION TERMS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ------------
GRANTED (#) IN FISCAL YEAR ($/SH) DATE 5% 10%
----------- -------------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Scott Lodin......... 10,000 4.75 7.25 2006 45,600 115,500

</TABLE>

- ------------------
(1) Based upon the exercise price, which was equal to the fair market value on
the date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
term. the assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Commission and do not represent the
Company's estimate or projection of the future stock price. Actual gains, if
any, are contingent upon the continued employment of the Named Executive
Officer through the expiration date, as well as being dependent upon the
general performance of the Common Stock. The potential realizable values
have not taken into account amounts required to be paid for federal income
taxes.

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<PAGE>
STOCK OPTIONS HELD AT END OF FISCAL 1995

The following table indicates the total number and value of exercisable
and unexercisable stock options held by each of the Named Executive Officers as
of December 31, 1995. No options were exercised by any of the Named Executive
Officers during 1995.
<TABLE>
<CAPTION>

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END($)
EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Chih-Ming J. Chen, Ph.D......... 200,000 -- 900,000 --
Scott Lodin..................... 20,000 20,000 60,000 67,500
</TABLE>

(1) Based on a fair market value of $11.00 per share at December 31, 1995.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

There were no compensation committee interlocks and insider
participation in executive compensation decisions during 1995.

STOCK INCENTIVE PLAN

The Company adopted the Stock Incentive Plan in February 1993 and
amended the Stock Incentive Plan in December 1993, August 1995 and April 1996 to
increase the number of shares reserved for issuance thereunder. Under the
Company's Stock Incentive Plan, 1,250,000 shares of Common Stock are currently
reserved for issuance upon exercise of options, stock appreciation rights,
restricted stock awards, deferred stock awards and performance unit awards. The
Stock Incentive Plan is designed to serve as an incentive for retaining
qualified and competent employees, directors and consultants.

The Compensation Committee of the Company's Board of Directors
administers and interprets the Stock Incentive Plan and is authorized to grant
options and other awards thereunder to all eligible employees of and consultants
to the Company, including officers and directors (whether or not employees) of
the Company. The Stock Incentive Plan provides for the granting of both
"incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended) and non-statutory stock options. Options can be
granted under the Stock Incentive Plan on such terms and at such prices as
determined by the Compensation Committee, except for the per share exercise
price of incentive stock options which will not be less than the fair market
value of the Common Stock on the date of grant and, in the case of an incentive
stock option granted to a 10% shareholder, the per share exercise price will be
not less than 110% of such fair market value. The aggregate fair market value of
the shares covered by incentive stock

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<PAGE>
options granted under the Stock Incentive Plan that become exercisable by a
grantee for the first time in any calendar year is subject to a $100,000 limit,
calculated at the time of grant.

Options granted under the Stock Incentive Plan will be exercisable
after the period or periods specified in the option agreement. Options granted
under the Stock Incentive Plan are not exercisable after the expiration of ten
years from the date of grant and are not transferable other than by will or by
the laws of descent and distribution.

In addition to stock options, the Stock Incentive Plan provides for
awards of stock appreciation rights, restricted stock, deferred stock and
performance units. The Stock Incentive Plan also authorizes the Company to make
loans to recipients of stock options or restricted stock awards to enable them
to exercise their options or purchase their stock and to make payments to
participants to offset the amount of federal, state, local and other taxes
payable with respect to receipt of an award.

As of the date of this Prospectus, the Company has outstanding options
under the Stock Incentive Plan to purchase an aggregate of 936,875 shares of
Common Stock at exercise prices ranging from $3.00 to $14.44, all of which are
non-statutory stock options.

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<PAGE>
CERTAIN TRANSACTIONS

TRANSACTIONS WITH DR. CHEN

In November 1992, the Company entered into an agreement with Dr.
Chih-Ming J. Chen and ASAN Labs, Inc., his wholly-owned company ("ASAN"),
pursuant to which the Company acquired equipment from ASAN and certain patent
rights and "know how" owned by Dr. Chen. Dr. Chen assigned to the Company a
portion of a royalty payable to him pursuant to a separate agreement in
principle he had entered into with a pharmaceutical manufacturer. In
consideration for the foregoing, the Company issued to Dr. Chen 1,737,450 shares
of Common Stock. The terms of the transaction were determined by negotiation
between Dr. Chen and the Company. ASAN's and Dr. Chen's cost for the equipment,
patent rights and "know how" purchased by the Company was approximately
$100,000. In February 1993, the Company also made a non-interest bearing advance
of $50,000 to Dr. Chen with no specified maturity date and at such time the
agreement in principle between Dr. Chen and the pharmaceutical manufacturer was
terminated. In consideration for his agreeing to terminate this agreement, the
Company entered into a new royalty agreement (the "February 1993 Agreement")
with Dr. Chen which provided for payment to Dr. Chen of royalties on two generic
pharmaceuticals under development, the generic version of Cardizem CD/registered
trademark/ and the generic version of Seldane D/registered trademark/. In March
1994, the Company and Dr. Chen entered into an amendment (the "March 1994
Agreement") to the February 1993 Agreement to reduce the amount of royalties
relating to these products to be paid to Dr. Chen. Under the terms of the March
1994 Agreement, Dr. Chen will receive 3.33% of the net revenues received by the
Company from sales of these products, less, in the case of the generic version
of Seldane D/registered trademark/, the Company's investment in this product.
Under the terms of the March 1994 Agreement, the Company also (i) paid Dr. Chen
$50,000; (ii) canceled his obligation to repay the $50,000 advance; and (iii)
agreed to recommend to the Compensation Committee that Dr. Chen be paid a bonus
upon each of the filing of an ANDA relating to the Company's generic version of
Cardizem CD/registered trademark/ and FDA approval of the ANDA. In August 1994,
the bonus arrangement was modified to provide Dr. Chen with a $100,000 loan and
to grant to Dr. Chen ten-year options under the Stock Incentive Plan to purchase
200,000 shares of Common Stock, which options are fully vested. These options
were granted at an exercise price of $6.50 per share, representing the fair
market value on the date of grant. In March 1996, following the filing of an
ANDA relating to the Company's generic version of Dilacor XR/registered
trademark/, the Compensation Committee of the Board of Directors agreed to
forgive Dr. Chen's indebtedness to the Company.

TRANSACTIONS WITH CORNER DRUGSTORE

Alan P. Cohen and certain members of his family control Corner
Drugstore, a privately-held retail drugstore chain, which also is a shareholder
and customer of the Company. Sales to Corner Drugstore and its affiliates, which
are made on an arm's length basis accounted for less than 12%, 3% and 1% of the
Company's revenues during the years ended December 31, 1993, 1994 and 1995,
respectively. Corner Drugstore filed for reorganization under Chapter 11 of the
U.S. Bankruptcy Code in December 1994, at which time the Company was owed
approximately $410,000 by Corner Drugstore for products sold to it by the
Company. This receivable was not collected and was written off by the Company.

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<PAGE>
TRANSACTIONS WITH DR. HAHN

In February 1993, Dr. Elliot F. Hahn joined the Company and in
connection therewith purchased 1,633,500 shares of the Common Stock for
aggregate consideration of $150,000. The Company recognized approximately
$325,000 in compensation expense in connection with Dr. Hahn's purchase of the
shares of Common Stock.

TRANSACTIONS WITH WATSON

In July 1994, the Company and Circa, which was subsequently acquired by
Watson, established the ANCIRC joint venture. The terms of the ANCIRC joint
venture are described in "Business--Collaborative Arrangements--ANCIRC Joint
Venture," except that when established, ANCIRC was owned 60% by Andrx and 40% by
Watson. In connection with the establishment of ANCIRC, the Company sold to
Watson, for aggregate consideration of $6.0 million, (i) 33,708 shares of
Preferred Stock, which in accordance with its terms, converted into 674,160
shares of Common Stock on April 30, 1995 and (ii) the Watson Warrants to
purchase 337,079 shares of Common Stock exercisable through July 1999 at a price
equal to the lesser of $8.90 or the offering price per share of shares sold in
an initial public offering.

In August 1995, Watson purchased an additional 90,909 shares of Common
Stock from the Company at a price of $11.00 per share and Watson was granted a
two-month option to purchase no less than 818,182 nor more than 1,454,545 shares
of Common Stock from the Company, Mr. Cohen, trusts for the benefit of Dr.
Hahn's children (the "Trusts") and Dr. Chen at a price of $11.00 per share (with
no more than 181,818 shares being sold by selling shareholders. Watson exercised
such option in October 1995 and in December 1995 purchased 1,144,903 shares from
the Company, 63,636 shares from Mr. Cohen, 54,546 shares from the Trusts, and
63,636 shares from Dr. Chen. In connection with the exercise of the option by
Watson, the ANCIRC joint venture agreement was amended to provide that the
Company and Watson would agree on two additional product candidates to be
developed by ANCIRC, and to restructure the respective interests of the Company
and Watson in ANCIRC so that ANCIRC became a 50/50 joint venture. The Company
has also granted Watson certain demand and piggyback registration rights under
the Securities Act, exercisable commencing one year after completion of this
offering, with respect to the shares of Common Stock held by Watson and the
shares underlying the Watson Warrants. See "Shares Eligible for Future Sale."

TRANSACTIONS WITH PSG

In September 1994, the Company entered into an agreement to loan
$250,000 to PSG, a pharmacy benefits management and mail order marketing
company. PSG was a customer of the Company's generic pharmaceutical distribution
operations and was controlled by a former principal shareholder of the Company,
Corner Drugstore and a non-affiliated third party. In addition, each of Alan P.
Cohen and Dr. Elliot F. Hahn owned less than 1% of PSG's outstanding stock.
Although a portion of the loan was originally advanced in conjunction with a
proposed joint venture involving PSG, the Company and a third entity, the
Company decided not to proceed with that venture and the loan commitment was
restructured. As restructured,

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<PAGE>
the Company advanced $200,000, restructured $50,000 of the total of $102,000
accounts receivable due from PSG to be included as part of the loan, received
options to acquire 83,333 shares of PSG stock at an exercise price of $3.00 per
share, and was entitled to receive interest at the prime rate plus 1% quarterly,
with the full principal balance due on September 30, 1997. In December 1994,
Andrx renegotiated its note with PSG to provide for, among other things, the
issuance of stock options to acquire up to an additional 40,000 shares of PSG's
stock at an exercise price of $2.50 per share. In consideration for such
additional options, the Company agreed to not declare a default under the note
or to accelerate the note as a result of PSG's failure to fulfill certain
requirements of the original note. During 1995, management of the Company
determined that the outstanding accounts receivable balance of $52,000 due from
PSG and the note receivable for $250,000 were uncollectible, and the Company
wrote off these balances.

APPROVAL OF AFFILIATED TRANSACTIONS

No further transactions between the Company and its executive officers,
directors, principal shareholders or their affiliates are contemplated. The
Company has adopted a policy that any transactions between the Company and its
executive officers, directors, principal shareholders or their affiliates take
place on an arms-length basis and require the approval of a majority of the
independent directors of the Company.

-55-
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the date of this Prospectus by
(i) each of the shareholders of the Company owning more than 5% of the
outstanding shares of Common Stock; (ii) each director of the Company; (iii)
each of the Named Executive Officers; and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>

NUMBER OF SHARES
BENEFICIALLY OWNED (2) PERCENTAGE OF CLASS
---------------------- -------------------
<S> <C> <C>
Alan P. Cohen(3)...................................... 1,865,294 13.9%
Elliot F. Hahn, Ph.D.(4).............................. 1,592,654 11.9
Chih-Ming J. Chen, Ph.D.(5)........................... 1,873,814 13.8
Scott Lodin(6)........................................ 37,500 *
Elaine Bloom(7)....................................... 19,100 *
Paul M. Donofrio(8)................................... 21,083 *
Irwin C. Gerson(9).................................... 21,200 *
Elliot Levine(10)..................................... 30,940 *
Michael A. Schwartz, Ph.D.(11)........................ 16,200 *
Melvin Sharoky, M.D.(12).............................. 12,100 *
Randy Glover.......................................... 5,000 *
Angelo C. Malahias(13)................................ 2,800 *
All directors and executive officers
as a group (12 persons)(14)....................... 5,604,335 40.6

5% OR GREATER HOLDERS

Watson Pharmaceuticals, Inc.(15)
311 Bonnie Circle
Corona, CA 91720...................................... 2,091,790 15.6

Louis Rosenwein(16)
Two World Trade Center, 73rd Floor
New York, NY 10048.................................... 670,940 5.0
</TABLE>

- ----------------------
* less than 1%

(1) Except as indicated, the address of each person named in the table is c/o
Andrx, 4001 Southwest 47th Avenue, Ft. Lauderdale, Florida 33314.

(2) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
listed, which include shares
-56-
<PAGE>
of Common Stock that such persons have the right to acquire a beneficial
interest within 60 days from December 4, 1997.

(3) Includes 200,000 shares of Common Stock held jointly by Mr. Cohen and his
spouse, 153,847 shares held in a family limited partnership, 247,500
shares in trust for the benefit of Mr. Cohen's children, with his father
as trustee, and 62,500 shares of Common Stock owned by a general
partnership of which Mr. Cohen is a general partner.

(4) Includes 790,004 shares of Common Stock held in trust for the benefit of
Dr. Hahn's children, with his spouse as trustee, and 62,500 shares of
Common Stock owned by a general partnership, of which Dr. Hahn is a
general partner.

(5) Includes 200,000 shares of Common Stock held by Dr. Chen's spouse,
307,693 shares held in a family limited partnership, 200,000 shares of
Common Stock held in trust for Dr. Chen's child, with his spouse as
trustee, and 200,000 shares of Common Stock issuable upon the exercise of
stock options.

(6) Includes 32,500 shares of Common Stock issuable upon the exercise of
stock options.

(7) Includes 16,200 shares of Common Stock issuable upon the exercise of
stock options.

(8) Includes 7,100 shares of Common Stock issuable upon the exercise of stock
options.

(9) Includes 16,200 shares of Common Stock issuable upon the exercise of
stock options.

(10) Represents (i) 10,620 shares of Common Stock held jointly with Mr.
Levine's spouse; (ii) 5,620 shares of Common Stock issuable upon the
exercise of Investor Warrants held jointly with Mr. Levine's spouse; and
(iii) 14,700 shares of Common Stock issuable upon the exercise of stock
options.

(11) Represents 16,200 shares of Common Stock issuable upon exercise of stock
options.

(12) Includes 7,100 shares of Common Stock issuable upon exercise of stock
options. Does not include shares of Common Stock beneficially owned by
Watson, in which shares Dr. Sharoky, the President and a director of
Watson, disclaims beneficial ownership.

(13) Includes 800 shares of Common Stock held in trust for the benefit of Mr.
Malahias' children.

(14) Includes (i) the shares of Common Stock described in notes (3) through
(5); and (ii) 315,620 shares of Common Stock issuable upon the exercise
of the stock options and warrants described in notes (5) through (13).

(15) Includes 337,079 shares of Common Stock issuable upon the exercise of the
Watson Warrants.

-57-
<PAGE>
(16) Includes (i) 20,000 shares of Common Stock held in trust for the benefit
of Mr. Rosenwein's children and (ii) 3,875 shares of Common Stock
issuable upon the exercise of stock options.

SELLING SHAREHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of the Common Stock by each Selling Shareholder as of the
date of this Prospectus, based on information made available to the Company by
the Selling Shareholders:
<TABLE>
<CAPTION>

NUMBER OF SHARES PERCENTAGE OF CLASS
NAME OF NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY OWNED -------------------
SELLING SHAREHOLDER BENEFICIALLY OWNED(1) SHARES TO BE REGISTERED AFTER THE OFFERING(2) BEFORE OFFERING AFTER OFFERING
- ------------------- --------------------- ----------------------- --------------------- --------------- --------------

<S> <C> <C> <C> <C> <C>
Clarke and Barbara S. Adams 22,480(3) 22,480(3) 0 * 0%

Eric L. and Janic Albin 5,000 5,000 0 * 0%

Raymond M. Allard 22,480(3) 22,480(3) 0 * 0%

John R. Andres 5,620(4) 5,620(4) 0 * 0%

Neal K. Aronson 5,620(4) 5,620(4) 0 * 0%

Edward E. and Marta L. Bao 11,240(5) 11,240(5) 0 * 0%

David and Maria N. Bernard 5,620(4) 5,620(4) 0 * 0%

Richard M. Binder 11,240(6) 11,240(6) 0 * 0%

E. Wayne Boland 16,860(7) 16,860(7) 0 * 0%

Evelyn B. Brown 2,810(4) 2,810(4) 0 * 0%

G. Thomas Catalona 5,620(4) 5,620(4) 0 * 0%

John and Margaret T. Cirrito 5,620(4) 5,620(4) 0 * 0%

Robert J. Cohen 22,480(3) 22,480(3) 0 * 0%

Lorelei Cole 11,240(5) 11,240(5) 0 * 0%

Concept Mining, Inc. 5,620(4) 5,620(4) 0 * 0%

Sidney Devorsetz 2,248(8) 2,248(8) 0 * 0%

John Doukas 11,240(5) 11,240(5) 0 * 0%

Sheldon Drobny 11,240(5) 11,240(5) 0 * 0%
</TABLE>

-58-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF CLASS
NAME OF NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY OWNED -------------------
SELLING SHAREHOLDER BENEFICIALLY OWNED(1) SHARES TO BE REGISTERED AFTER THE OFFERING(2) BEFORE OFFERING AFTER OFFERING
- ------------------- --------------------- ----------------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Craig W. Effron 7,868(9) 7,868(9) 0 * 0%

Donald B. Feinsod, M.D. 11,240(5) 11,240(5) 0 * 0%

Aaron J. Fischer 11,240(5) 11,240(5) 0 * 0%

James C. Gale and
Judith S. Haselton 22,480(3) 22,480(3) 0 * 0%

Bonnie Gershman Geller IRA 5,620(4) 5,620(4) 0 * 0%

William J. Gilberti, Jr. 2,248(8) 2,248(8) 0 * 0%

Michael Gironta 8,430(10) 8,430(10) 0 * 0%

Michael M. Goldberg 5,620(4) 5,620(4) 0 * 0%

Barbara S. Goldfarb 11,240(5) 11,240(5) 0 * 0%

Ira Goodman 5,620(4) 5,620(4) 0 * 0%

Parry F. and Ivy Goodman 27,906(5) 11,240(5) 16,666 * *

Charles and Donna Greenberg 22,480(3) 22,480(3) 0 * 0%

Gruntal & Co., Incorporated 111,724(11) 111,724(11) 0 * 0%

Joseph Haddad 11,240(5) 11,240(5) 0 * 0%

Rose Haddad 11,240(5) 11,240(5) 0 * 0%

David T. Harrington 5,620(4) 5,620(4) 0 * 0%

Joshua H. Heintz 2,248(8) 2,248(8) 0 * 0%

Lionel G. Hest 8,430(10) 8,430(10) 0 * 0%

Dean G. and Henrietta J. Holefca 11,240(5) 11,240(5) 0 * 0%

Victor Ianno 2,248(8) 2,248(8) 0 * 0%

Michael S. Jacobs 5,620(4) 5,620(4) 0 * 0%

Piper Jaffray As Cust. FBO
Richard E. Dye, IRA 70,000 20,000 50,000 * *

JK Partners 5,620(4) 5,620(4) 0 * 0%

Richard L. Johnston 5,620(4) 5,620(4) 0 * 0%

Marilyn Karpoff 5,620(4) 5,620(4) 0 * 0%

Steven B. Kase 11,240(5) 11,240(5) 0 * 0%
</TABLE>

-59-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF CLASS
NAME OF NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY OWNED -------------------
SELLING SHAREHOLDER BENEFICIALLY OWNED(1) SHARES TO BE REGISTERED AFTER THE OFFERING(2) BEFORE OFFERING AFTER OFFERING
- ------------------- --------------------- ----------------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Melissa R. Katz 2,000 2,000 0 * 0%

David H. Katz 2,000 2,000 0 * 0%

Philip Katz 87,500 47,000 40,500 * *

Adam E. Katz 2,000 2,000 0 * 0%

Vicki Ellen Katz 5,620(4) 5,620(4) 0 * 0%

Alice J. Katz 2,000 2,000 0 * 0%

Alan J. Kluger 12,240(5) 11,240(5) 1,000 * *

Ronald Koenig 5,620(4) 5,620(4) 0 * 0%

Ronald Koenig (IRA) 5,620(4) 5,620(4) 0 * 0%

Brian and Randye Kwait 5,620(4) 5,620(4) 0 * 0%

Richard W. Lee 11,240(5) 11,240(5) 0 * 0%

Gordon M. Lee 11,240 11,240 0 * 0%

Karen and Joseph Levine 22,480(3) 22,480(3) 0 * 0%

Elliot Levine 31,740(12)(13) 11,240(12) 15,500(13) * *

Steven J. Levinson 22,480(3) 22,480(3) 0 * 0%

Thomas B. Low As Trustee for Low
Family Trust Under Agreement
of Trust 11,240(5) 11,240(5) 0 * 0%

Gary and Erin Lyons 11,240(5) 11,240(5) 0 * 0%

Bruce H. Miller, M.D. 46,000 20,000 26,000 * *

Mina Metals Co., Inc. 5,620(4) 5,620(4) 0 * 0%

Giuseppe Lauria and Malka Mor 5,620(4) 5,620(4) 0 * 0%

Paul E. and Ruth E. Nicholson 44,960(14) 44,960(14) 0 * 0%

Bruce G. Nordstrom 5,620(4) 5,620(4) 0 * 0%

Taeho Oh 2,000 2,000 0 * 0%

Dr. Andrew J. Potts 22,480(3) 22,480(3) 0 * 0%

Richardson Pratt, Jr. 11,240(5) 11,240(5) 0 * 0%

Oliver Price 5,620(4) 5,620(4) 0 * 0%
</TABLE>

-60-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF CLASS
NAME OF NUMBER OF SHARES NUMBER OF SHARES BENEFICIALLY OWNED -------------------
SELLING SHAREHOLDER BENEFICIALLY OWNED(1) SHARES TO BE REGISTERED AFTER THE OFFERING(2) BEFORE OFFERING AFTER OFFERING
- ------------------- --------------------- ----------------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Robert J. Reardon 33,720(15) 33,720(15) 0 * 0%

Edward M. Reardon 28,100(16) 28,100(16) 0 * 0%

Barry Richter 11,240(5) 11,240(5) 0 * 0%

Ridgeland Co. 5,620(4) 5,620(4) 0 * 0%

Ronald Ross 6,620(4) 6,620(4) 0 * 0%

Robert Sablowsky 11,240(5) 11,240(5) 0 * 0%

David and Caroll Saks 47,479(3) 22,480(3) 24,999 * *

Richard Samuels 11,240(5) 11,240(5) 0 * 0%

Jerome and Joanne Schachter 11,240(5) 11,240(5) 0 * 0%

Frank J. Schulteis 5,620(4) 5,620(4) 0 * 0%

Stewart A. Shiman 22,480(3) 22,480(3) 0 * 0%

Howard and Phyllis Silverman 22,480(3) 22,480(3) 0 * 0%

Howard and Phyllis Silverman,
Trustees for Mitchel Silverman 5,620(4) 5,620(4) 0 * 0%

Howard and Phyllis Silverman,
Trustees for Karen Silverman 5,620(4) 5,620(4) 0 * 0%

Howard and Phyllis Silverman,
Trustees for Andrew Silverman 5,620(4) 5,620(4) 0 * 0%

Howard and Phyllis Silverman,
Trustees for Aaron A. Alfred 5,620(4) 5,620(4) 0 * 0%

Aric Simons and Corey Simons 11,240(5) 11,240(5) 0 * 0%

George A. Small 5,870(4) 5,620(4) 250 * *

Lynn H. Smith 2,248(8) 2,248(8) 0 * 0%

Spellord Inc. 22,480(3) 22,480(3) 0 * 0%

Arthur Steinberg 5,620(4) 5,620(4) 0 * 0%

Ronald and Jayme Stewart 11,240(5) 11,240(5) 0 * 0%

Francis D. Stinziano 2,248(8) 2,248(8) 0 * 0%

Jill W. Strassman 1,000 1,000 0 * 0%

Walter F. Toombs 56,200(17) 56,200(17) 0 * 0%
</TABLE>

-61-
<PAGE>
<TABLE>
<CAPTION>

David Ward 18,480(3) 18,480(3) 0 * 0%

Jeff Ward 1,000 1,000 0 * 0%

Jennifer A. Ward 1,000 1,000 0 * 0%

Jack Weinstein 5,620(4) 5,620(4) 0 * 0%

Donald Wessell 5,620(4) 5,620(4) 0 * 0%
</TABLE>

- -------------------------
*Less than 1%.

(1) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Common Stock
listed. Includes shares of Common Stock that such persons have the right
to acquire a beneficial interest in within 60 days from December 6, 1996,
including shares of Common Stock issuable upon exercise of the Investor
Warrants, the Agent's Option and the Agent's Warrants.

(2) Assumes that all shares of Common Stock registered for the account of the
Selling Shareholders are sold.

(3) Includes 11,240 shares of Common Stock issuable upon exercise of
Warrants.

(4) Includes 2,810 shares of Common Stock issuable upon exercise of Warrants.

(5) Includes 5,620 shares of Common Stock issuable upon exercise of Warrants.

(6) Includes 5,620 shares of Common Stock issuable upon exercise of Warrants.
Of such shares of Common Stock and Warrants, 2,810 Shares and 2,810
Warrants are held by a Keough account established for the benefit of Mr.
Binder.

(7) Includes 8,430 shares of Common Stock issuable upon exercise of Warrants.

(8) Includes 1,124 shares of Common Stock issuable upon exercise of Warrants.

(9) Includes 3,934 shares of Common Stock issuable upon exercise of Warrants.

(10) Includes 4,215 shares of Common Stock issuable upon exercise of Warrants.

-62-
<PAGE>
(11) Represents shares of Common Stock issuable upon exercise of an option to
purchase 50,242 shares of Common Stock and warrants to purchase
additional shares of Common Stock. Does not include shares of Common
Stock held of record in the accounts of Gruntal & Co. Incorporated
("Gruntal") for the benefit of its customers and, with respect to such
shares, Gruntal disclaims beneficial ownership.

(12) Mr. Levine is a director of the Company. Includes 5,620 shares of Common
Stock issuable upon exercise of Warrants.

(13) Includes number of options to purchase 15,500 shares of Common Stock.

(14) Includes 22,480 shares of Common Stock issuable upon exercise of
Warrants.

(15) Includes 16,860 shares of Common Stock issuable upon exercise of
Warrants.

(16) Includes 14,050 shares of Common Stock issuable upon exercise of
Warrants.

(17) Includes 28,100 shares of Common Stock issuable upon exercise of
Warrants.

-63-
<PAGE>
DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of (i) 25,000,000
shares of Common Stock, par value $.001 per share, 13,382,159 shares of which
are presently outstanding and (ii) 1,000,000 shares of Preferred Stock, par
value $.001 per share (the "Preferred Stock"), none of which are outstanding.

COMMON STOCK

Subject to the rights of the holders of any Preferred Stock that may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and, in the event of liquidation, to
share pro rata in any distribution of the Company's assets after payment or
providing for the payment of liabilities and the liquidation preference of any
outstanding Preferred Stock. Each holder of Common Stock is entitled to one vote
for each share held of record on the applicable record date on all matters
presented to a vote of shareholders, including the election of directors.
Holders of Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. All outstanding shares of Common Stock are, and the shares of Common
Stock issuable upon exercise of the Investor Warrants, the Agent's Option and
the Agent's Warrants will be, when issued, fully paid and nonassessable.

PREFERRED STOCK

The Company's Board of Directors has the authority to issue 1,000,000
shares of Preferred Stock in one or more series and to fix, by resolution,
conditional, full, limited or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights, if
any, and the qualifications, limitations or restrictions thereof, if any,
including the number of shares in such series (which the Board may increase or
decrease as permitted by Florida law), liquidation preferences, dividend rates,
conversion or exchange rights, redemption provisions of the shares constituting
any series and such other special rights and protective provisions with respect
to any class or series as the Board may deem advisable without any further vote
or action by the shareholders. Any shares of Preferred Stock so issued would
have priority over the Common Stock with respect to dividend or liquidation
rights or both and could have voting and other rights of shareholders. The
Company has no present plans to issue shares of Preferred Stock.

INVESTOR WARRANTS, AGENT'S OPTIONS AND AGENT'S WARRANTS

Each Investor Warrant entitles the holder thereof to purchase one share
of Common Stock at an exercise price of $7.25 per share at any time through
December 1998. The Investor Warrants are non-transferrable.

-64-
<PAGE>
Each Agent's Option entitles the holder thereof to purchase one share
of Common Stock and one Agent's Warrant at an exercise price of $8.90 at any
time through December 1998. The Agent's Warrants are identical to the Investor
Warrants.

The number of shares of Common Stock issuable upon exercise of the
Investor Warrants, the Agent's Option and the Agent's Warrants and the exercise
prices of such securities are subject to adjustment upon the occurrence of
certain events, including stock dividends, stock splits and reorganizations.
There will be no adjustment for the payment of any cash dividends by the Company
on its Common Stock.

CERTAIN FLORIDA LEGISLATION

Florida has enacted legislation that may deter or frustrate takeovers of
Florida corporations. The Florida Control Share Act generally provides that
shares acquired in a "control share acquisition" will not possess any voting
rights unless such voting rights are approved by a majority of the corporation's
disinterested shareholders. A "control share acquisition" is an acquisition,
directly or indirectly, by any person of ownership of, or the power to direct
the exercise of voting power with respect to, issued and outstanding "control
shares" of a publicly held Florida corporation. "Control shares" are shares,
which, except for the Florida Control Share Act, would have voting power that,
when added to all other shares owned by a person or in respect to which such
person may exercise or direct the exercise of voting power, would entitle such
person, immediately after acquisition of such shares, directly or indirectly,
alone or as a part of a group, to exercise or direct the exercise of voting
power in the election of directors within any of the following ranges: (i) at
least 20% but less than 33-1/3% of all voting power; (ii) at least 33-1/3% but
less than a majority of all voting power; or (iii) a majority or more of all
voting power. The Florida Affiliated Transactions Act generally requires
supermajority approval by disinterested shareholders of certain specified
transactions between a public corporation and holders of more than 10% of the
outstanding voting shares of the corporation (or their affiliates). Florida law
and the Company's Articles and Bylaws also authorize the Company to indemnify
the Company's directors, officers, employees and agents. In addition, the
Company's Articles and Florida law presently limit the personal liability of
corporate directors for monetary damages, except where the directors (i) breach
their fiduciary duties, and (ii) such breach constitutes or includes certain
violations of criminal law, a transaction from which the directors derived an
improper personal benefit, certain unlawful distributions or certain other
reckless, wanton or willful acts or misconduct.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS

Certain provisions of the Articles and Bylaws of the Company may be
deemed to have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt, including attempts that might result in a premium
being paid over the market price for the shares held by shareholders. The
following provisions may not be amended in the Company's Articles or Bylaws
without the affirmative vote of the holders of two-thirds of the outstanding
shares of Common Stock.

-65-
<PAGE>

CLASSIFIED BOARD OF DIRECTORS. The Articles and Bylaws provide for the
Board of Directors to be divided into three classes serving staggered terms. As
a result, approximately one-third of the Board of Directors will be elected each
year. The Articles and Bylaws also provide that directors may only be removed
for cause and only upon the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock entitled to vote. These
provisions, when coupled with the provision of the Articles and Bylaws
authorizing only the Board of Directors to fill vacant directorships or increase
the size of the Board, may deter a shareholder from removing incumbent directors
and simultaneously gaining control of the Board of Directors by filling the
vacancies created by such removal with its own nominees.

SPECIAL MEETING OF SHAREHOLDERS, PROHIBITION OF ACTION BY UNANIMOUS
CONSENT. The Articles and Bylaws prohibit the taking of shareholder action by
written consent without a meeting and provide that special meetings of
shareholders of the Company be called only by a majority of the Board of
Directors, the Company's Chief Executive Officer or holders of not less than
one-third of the Company's outstanding voting stock.

ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Bylaws provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for election
as directors at an annual or special meeting of shareholders, must provide
timely notice thereof in writing. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder, to be timely, must be received no later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever is
first. The Bylaws also specify certain requirements as to the content and form
of a shareholder's notice. These provisions may preclude shareholders from
bringing matters before the shareholders at an annual or special meeting or from
making nominations for directors at an annual or special meeting.

AMENDMENT OF BYLAWS. Except for the provisions identified above
requiring a two-thirds vote of the outstanding shares to alter, amend or repeal,
the Bylaws may only be altered, amended or repealed by the Board or the
affirmative vote of the holders of at least a majority of the outstanding shares
of capital stock of the Company.

TRANSFER AGENT

The transfer agent for the Common Stock is American Stock Transfer &
Trust Company, New York, New York.

WARRANT AGENT

The Company acts as warrant agent for the Investor Warrants, the
Agent's Option and the Agent's Warrants.

-66-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

The Company has 13,382,159 shares of Common Stock outstanding. Of these
shares, 10,334,774 shares are deemed to be "restricted securities" as such term
is defined under Rule 144 promulgated pursuant to the Securities Act.

In general, under Rule 144 as currently in effect, if a period of at
least two years has elapsed since the later of the date the "restricted shares"
(as that phrase is defined in Rule 144) were acquired from the Company and the
date they were acquired from an Affiliate, then the holder of such restricted
shares (including an Affiliate) is entitled to sell a number of shares within
any three-month period that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock or the average weekly reported volume of
trading of the Common Stock on The Nasdaq National Market during the four
calendar weeks preceding such sale. The holder may only sell such shares through
unsolicited brokers' transactions or directly to market makers. Sales under Rule
144 are also subject to certain requirements pertaining to the manner of such
sales, notices of such sales and the availability of current public information
concerning the Company. An "affiliate" of the Company, as such term is defined
in Rule 144 (an "Affiliate") may sell shares not constituting restricted shares
in accordance with the foregoing volume limitations and other requirements but
without regard to the two-year holding period.

Under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted shares were acquired from the Company
and the date they were acquired from an Affiliate, as applicable, a holder of
such restricted shares who is not an Affiliate at the time of the sale and has
not been an Affiliate for at least three months prior to the sale would be
entitled to sell the shares immediately without regard to the volume limitations
and other conditions described above. The Commission has proposed reducing the
holding periods under Rule 144 and Rule 144(k) to one year and two years,
respectively. There can be no assurance as to when, if ever, such proposal will
be adopted by the Commission.

Of the Company's 10,334,774 shares which are deemed to be "restricted
securities", 605,428 shares are being registered pursuant to the Registration
Statement of which this Prospectus forms a part and such shares together with
the shares of Common Stock issuable upon exercise of the Investor Warrants, the
Agent's Option and the Agent's Warrants which are also being registered
hereunder, generally will be capable of public sale without restriction. As of
the date of this Prospectus, 8,709,099 of the remaining restricted shares are
presently eligible for sale in the public market pursuant to Rule 144, subject
to the volume limitations and other restrictions contained therein. The
remaining 1,625,675 restricted shares will become eligible for sale subject to
the restrictions of Rule 144 at varying times from February 1997 to December
1997.

The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales may
occur, could adversely affect prevailing market prices.

-67-
<PAGE>
PLAN OF DISTRIBUTION

The Selling Shareholders may sell the Common Stock offered hereby for
their own accounts in open market or block transactions or otherwise in
accordance with the rules of The Nasdaq National Market, or in private
transactions, at prices related to the prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling shares
to or through broker-dealers, and such broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the Selling
Shareholders of the purchasers of shares for whom such broker-dealers may act as
agent or to whom they sell as principal or both. Upon any sale of shares of
Common Stock offered hereby, the Selling Shareholders and participating
broker-dealers or selling agents may be deemed to be "underwriters" as that term
is defined in the Securities Act, in which event any discounts, concessions or
commissions they receive, which are not expected to exceed those customary in
the types of transactions involved, or any profit on resales of such Common
Stock by them, may be deemed to be underwriting commissions or discounts under
the Securities Act. The Company has been advised by the Selling Shareholders
that there currently are no underwriting arrangements with respect to the sale
of the shares of Common Stock. To the extent required, the specific shares of
Common Stock to be sold, names of the Selling Shareholders, purchase price,
public offering price, names of any such broker-dealer or selling agent and any
applicable discount or commission with respect to a particular offer will be set
forth in an accompanying Prospectus Supplement.

The Company has agreed to defray certain of the expenses of the
offering made hereby by the Selling Shareholders and to indemnify them against
certain liabilities arising under the Securities Act.

Pursuant to the provisions under the Exchange Act and the rules and
regulations thereunder, any person engaged in a distribution of the Common Stock
offered by this Prospectus may not simultaneously engage in market making
activities with respect to the Common Stock of the Company during the applicable
"cooling off" periods prior to the commencement of such distribution. In
addition, and without limiting the foregoing, the Selling Shareholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of Common Stock by
the Selling Shareholders.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Broad and Cassel, a partnership including
professional associations, Miami, Florida.

EXPERTS

The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent certified public accountants, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said report.

-68-
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement (of
which this Prospectus is a part and which term shall encompass any amendments
thereto) on Form S-1 pursuant to the Securities Act with respect to the Common
Stock being offered in this offering. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain portions of which are omitted as permitted by the
rules and regulations of the Commission. Statements made in this Prospectus as
to the contents of any contract, agreement or other document referred to are not
necessarily complete; with respect to any such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by reference to the
Registration Statement and to the financial statements, schedules and exhibits
filed as a part thereof.

-69-
<PAGE>
<TABLE>
<CAPTION>
ANDRX CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS

PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS OF ANDRX CORPORATION AND SUBSIDIARIES:

<S> <C>
Report of Independent Certified Public Accountants......................................................... F-2

Consolidated Balance Sheets as of December 31, 1994 and 1995
and September 30, 1996 (unaudited)......................................................................... F-3

Consolidated Statements of Operations
for the years ended December 31, 1993, 1994 and 1995
and the nine months ended September 30, 1995 and 1996 (unaudited).......................................... F-4

Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1993, 1994 and 1995
and the nine months ended September 30, 1996 (unaudited)................................................... F-5

Consolidated Statements of Cash Flows
for the years ended December 31, 1993, 1994 and 1995
and the nine months ended September 30, 1995 and 1996 (unaudited).......................................... F-6

Notes to Consolidated Financial Statements................................................................. F-7

FINANCIAL STATEMENTS OF ANCIRC:

Report of Independent Certified Public Accountants......................................................... F-23

Balance Sheets as of December 31, 1994 and 1995
and September 30, 1996 (unaudited)......................................................................... F-24

Statements of Operations
for the period from inception (July 8, 1994) to December 31, 1994, the year
ended December 31, 1995 and the cumulative period from inception (July 8, 1994)
to December 31, 1995 and the nine months ended September 30, 1995 and 1996 and
the cumulative period from inception
(July 8, 1994) to September 30, 1996 (unaudited)........................................................... F-25

Statements of Partners' Deficit
for the period from inception (July 8, 1994) to December 31, 1994 and the year
ended December 31, 1995 and the nine months
ended September 30, 1996 (unaudited)....................................................................... F-26

Statements of Cash Flows
for the period from inception (July 8, 1994) to December 31, 1994, the year
ended December 31, 1995 and the cumulative period from inception (July 8, 1994)
to December 31, 1995 and the nine months ended September 30, 1995 and 1996 and
the cumulative period from inception
(July 8, 1994) to September 30, 1996 (unaudited)........................................................... F-27

Notes to Financial Statements.............................................................................. F-28
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders of
Andrx Corporation:

We have audited the accompanying consolidated balance sheets of Andrx
Corporation and subsidiaries (a Florida corporation) as of December 31, 1994 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. 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. 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Andrx Corporation
and subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
February 20, 1996.
F-2
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------ SEPTEMBER 30,
1994 1995 1996
---- ---- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................................... $3,845,800 $13,841,400 $ 5,783,600
Investments available for sale.................................... -- -- 28,181,700
Accounts receivable, net of allowances of $552,400,
$574,200, and $893,000 (unaudited) as of December 31,
1994, 1995 and September 30, 1996, respectively.................. 4,345,600 8,263,400 11,870,800
Due from joint venture............................................ 363,700 488,500 259,900
Inventories ..................................................... 3,593,000 9,502,000 11,712,100
Prepaid and other current assets.................................. 129,200 130,500 967,600
----------- ----------- -----------
Total current assets............................................. 12,277,300 32,225,800 58,775,700
Property and equipment, net.......................................... 3,207,600 3,831,100 7,253,700
Note receivable-related party........................................ 250,000 -- --
Note receivable-employee............................................. 100,000 -- --
Other assets ..................................................... 171,100 91,800 45,100
----------- ----------- -----------
Total assets.....................................................$16,006,000 $36,148,700 $66,074,500
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Accounts payable.................................................. $4,867,900 $9,860,000 $11,388,200
Accrued liabilities............................................... 286,700 1,724,200 3,411,500
Bank loan ..................................................... 2,551,000 6,077,500 7,527,000
Notes payable..................................................... 84,100 23,500 293,100
Commitment to joint venture....................................... 4,200 139,000 19,500
Unearned revenue.................................................. 115,000 -- --
----------- ----------- -----------
Total current liabilities........................................ 7,908,900 17,824,200 22,639,300
----------- ----------- -----------

Commitments and contingencies (Notes 9 and 14)
Shareholders' equity
Convertible preferred stock; $0.001 par value, 1,000,000 shares
authorized; 33,700, none and none (unaudited) issued and
outstanding as of December 31, 1994 and 1995 and September 30,
1996, respectively............... -- -- --
Common stock; $0.001 par value, 25,000,000 shares
authorized; 8,553,600, 10,727,100 and 13,349,600 (unaudited)
shares issued and outstanding as of December 31, 1994, 1995 and
September 30, 1996, respectively................................. 8,500 10,700 13,300
Additional paid-in capital........................................ 13,382,800 28,795,000 56,787,200
Accumulated deficit............................................... (5,294,200) (10,481,200) (13,384,200)
Unrealized gain on investments available for sale................. -- -- 18,900
----------- ----------- -----------
Total shareholders' equity....................................... 8,097,100 18,324,500 43,435,200
----------- ----------- -----------
Total liabilities and shareholders' equity.......................$16,006,000 $36,148,700 $66,074,500
=========== =========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.

F-3
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Distribution revenues, net......... $ 5,654,500 $ 25,915,500 $ 50,467,800 $ 35,008,300 $ 61,097,000
Research and development services to
joint venture..................... -- 375,300 2,528,700 1,722,300 1,829,300
Licensing revenues................. 225,000 155,500 165,000 165,000 --
----------- ------------ ------------ ------------ ------------
Total revenues.................... 5,879,500 26,446,300 53,161,500 36,895,600 62,926,300
----------- ------------ ------------ ------------ ------------

Cost of revenues
Distribution revenues.............. 5,257,900 21,362,400 41,780,900 28,922,600 50,975,300
Research and development services to
joint venture..................... -- 375,300 2,528,700 1,722,300 1,829,300
----------- ------------ ------------ ------------ ------------
Total cost of revenues............ 5,257,900 21,737,700 44,309,600 30,644,900 52,804,600
----------- ------------ ------------ ------------ ------------
Gross profit...................... 621,600 4,708,600 8,851,900 6,250,700 10,121,700
----------- ------------ ------------ ------------ ------------

Operating expenses
Selling, general and administrative 1,706,300 5,389,800 8,647,200 5,944,400 9,333,000
Research and development........... 959,900 2,109,600 3,254,700 1,638,800 2,499,400
Equity in losses of joint venture.. -- 315,800 1,839,700 1,298,000 1,384,000
----------- ------------ ------------ ------------ ------------
Total operating expenses.......... 2,666,200 7,815,200 13,741,600 8,881,200 13,216,400
----------- ------------ ------------ ------------ ------------
Loss from operations.................. (2,044,600) (3,106,600) (4,889,700) (2,630,500) (3,094,700)
Interest expense...................... -- (104,300) (636,200) (447,200) (570,300)
Interest income....................... 300 121,800 249,800 128,700 762,000
Other income (expense), net........... -- (15,400) 89,100 64,600 --
----------- ------------ ------------ ------------ ------------
Net loss.............................. $(2,044,300) $ (3,104,500) $ (5,187,000) $ (2,884,400) $ (2,903,000)
=========== ============ ============ ============ ============

Net loss per share.................... $ (0.26) $ (0.35) $ (0.55) $ (0.31) $ (0.25)
=========== ============ ============ ============ ============

Weighted average shares of common
stock outstanding.................. 7,745,100 8,758,400 9,446,800 9,252,100 11,734,000
=========== ============ ============ ============ ============

The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-4
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

UNREALIZED
CONVERTIBLE GAIN ON
PREFERRED STOCK COMMON STOCK ADDITIONAL INVESTMENTS TOTAL
--------------- ------------ PAID-IN ACCUMULATED AVAILABLE SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT FOR SALE EQUITY
------ ------ ------ ------ ------- ------- -------- ------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993.... -- $ -- 5,791,500 $5,800 $513,400 $(145,400) $ -- $373,800
Shares of common stock issued in
connection with employment of
the Company's President and a
former employee.......... -- -- 1,708,500 1,700 495,000 -- -- 496,700
Shares of common stock issued in
connection with private
placements............... -- -- 899,500 900 5,086,200 -- -- 5,087,100
Shares of common stock issued
as payment for services.. -- -- 1,900 -- 13,400 -- -- 13,400
Net loss.................... -- -- -- -- -- (2,044,300) -- (2,044,300)
------ ---- ---------- ------- ---------- ----------- ------ ----------

Balance, December 31, 1993.. -- -- 8,401,400 8,400 6,108,000 (2,189,700) -- 3,926,700
Shares of common stock issued
in connection with private
placement................ -- -- 147,200 100 1,242,300 -- -- 1,242,400
Shares of convertible preferred
stock issued in connection with
private placement........ 33,700 -- -- -- 6,000,000 -- -- 6,000,000
Shares of common stock issued as
payment for services..... -- -- 5,000 -- 32,500 -- -- 32,500
Net loss.................... -- -- -- -- -- (3,104,500) -- (3,104,500)
------ ---- ---------- ------- ---------- ----------- ------ ----------

Balance, December 31, 1994.. 33,700 -- 8,553,600 8,500 13,382,800 (5,294,200) -- 8,097,100
Shares of common stock issued in
connection with private
placements............... -- -- 1,338,800 1,300 14,622,600 -- -- 14,623,900
Shares of common stock issued in
connection with conversion of
shares of convertible preferred
stock.................... (33,700) -- 674,200 700 (700) -- -- --
Shares of common stock issued in
connection with exercise of
warrants................. -- -- 154,500 200 772,300 -- -- 772,500
Shares of common stock issued in
connection with exercise of
stock options............ -- -- 6,000 -- 18,000 -- -- 18,000
Net loss.................... -- -- -- -- -- (5,187,000) -- (5,187,000)
------ ---- ---------- ------- ---------- ----------- ------ ----------

Balance, December 31, 1995.. -- -- 10,727,100 10,700 28,795,000 (10,481,200) -- 18,324,500

Shares of common stock issued in
connection with initial public
offering (unaudited)...... -- -- 2,530,000 2,500 27,427,700 -- -- 27,430,200
Shares of common stock issued in
connection with exercise of
warrants (unaudited)...... -- -- 11,200 -- 81,500 -- -- 81,500
Shares of common stock issued in
connection with exercise of
stock options (unaudited). -- -- 81,300 100 483,000 -- -- 483,100
Unrealized gain on investments
available for sale (unaudited) -- -- -- -- -- 18,900 18,900
Net loss (unaudited)........ -- -- -- -- -- (2,903,000) -- (2,903,000)
------ ---- ---------- ------- ---------- ----------- ------ ----------
Balance, September 30, 1996 -- $ -- 13,349,600 $13,300 $56,787,200 $(13,384,200) $18,900 $43,435,200
(unaudited) ====== ==== ========== ======= ========== =========== ====== ==========
</TABLE>

The accompanying notes to the consolidated financial statements
are an integral part of these statements.

F-5
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- -------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net loss................................. $(2,044,300) $(3,104,500) $(5,187,000) $(2,884,400) $(2,903,000)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization......... 51,700 406,000 901,600 620,800 757,000
Provisions for (write-off of) receivables,
net................................. 124,000 485,600 271,800 (85,400) 318,800
Equity in losses of joint venture..... -- 315,800 1,839,700 1,298,000 1,384,000
Contributions to joint venture........ -- (300,000) (1,200,000) (1,200,000) (2,005,500)
Issuance of shares of common stock for
payment of services................. 338,400 32,500 -- -- --
Cancellation of note receivable--employee -- -- 100,000 -- --
Increase in accounts receivable....... (1,750,300) (3,034,300) (3,939,600) (2,152,900) (3,926,200)
(Increase) decrease in due from
joint venture....................... -- (375,300) (629,700) (54,600) 730,600
Increase in inventories............... (1,025,400) (2,313,000) (5,909,000) (2,925,100) (2,210,100)
Increase in prepaid and other
current assets...................... (2,900) (105,000) (1,300) (15,700) (837,100)
(Increase) decrease in other assets... (24,800) (137,300) 79,300 54,900 46,700
Increase in accounts payable and
accrued liabilities................. 2,402,000 2,520,900 6,429,600 61,700 3,215,500
Increase (decrease) in unearned revenue 95,500 19,500 (115,000) (115,000) --
Increase (decrease) in due to related party 50,000 (50,000) -- -- --
--------- --------- ---------- ---------- ----------
Net cash used in operating activities (1,786,100) (5,639,100) (7,359,600) (7,397,700) (5,429,300)
--------- --------- ---------- ---------- ----------

Cash flows from investing activities
Purchase of property and equipment....... (734,000) (2,721,000) (1,525,100) (1,085,500) (4,179,600)
Purchase of equipment, patents and rights
from a related party.................... (100,000) -- -- -- --
Disbursement of note receivable--related party -- (200,000) -- -- --
Disbursement of note receivable--employee -- (100,000) -- -- --
Purchase of investments available for sale, net -- -- -- -- (28,162,800)
--------- --------- ---------- ---------- ----------
Net cash used in investing activities (834,000) (3,021,000) (1,525,100) (1,085,500) (32,342,400)
--------- --------- ---------- ---------- ----------

Cash flows from financing activities
Proceeds from issuance of shares of common stock 5,259,000 1,242,400 14,623,900 2,006,300 27,430,200
Proceeds from issuance of shares of convertible
preferred stock......................... -- 6,000,000 -- -- --
Proceeds from exercise of stock options
and warrants............................ -- -- 790,500 814,100 564,600
Net borrowings under bank loan........... -- 2,551,000 3,526,500 3,175,800 1,449,500
Proceeds from notes payable.............. -- 36,100 30,100 110,600 501,900
Payment on notes payable................. -- (93,800) (90,700) (157,000) (232,300)
--------- --------- ---------- ---------- ----------
Net cash provided by financing activities 5,259,000 9,735,700 18,880,300 5,949,800 29,713,900
--------- --------- ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 2,638,900 1,075,600 9,995,600 (2,533,400) (8,057,800)
Cash and cash equivalents, beginning of period 131,300 2,770,200 3,845,800 3,845,800 13,841,400
--------- --------- ---------- ---------- ----------
Cash and cash equivalents, end of period... $2,770,200 $3,845,800 $13,841,400 $1,312,400 $5,783,600
========== ========== =========== ========== ==========
Supplemental disclosure of cash paid during
the period for
Interest................................ $ -- $ 104,300 $ 636,200 $ 447,200 $ 570,300
========== ========== =========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.

F-6
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995

(1) GENERAL

Andrx Corporation and subsidiaries ("Andrx" or the "Company") was
organized in August 1992, and in November 1992, commenced marketing and
distributing generic pharmaceutical products manufactured by third parties. In
February 1993, the Company began to engage in the development of
controlled-release pharmaceutical products utilizing its proprietary drug
delivery technologies. During 1995, the Company submitted Abbreviated New Drug
Applications ("ANDA") to the United States Food and Drug Administration ("FDA")
for two generic controlled-release pharmaceutical products.

The Company is subject to the risks and uncertainties associated with a
generic pharmaceutical company which has not commercialized its first product,
including a history of net losses, unproven technology, lack of manufacturing
experience, current and potential competitors with significant technical and
marketing resources, need for future capital and dependence on collaborative
partners and on key personnel. Additionally, the Company is subject to the risks
and uncertainties associated with all generic pharmaceutical companies,
including compliance with government regulations and the possibility of patent
infringement litigation.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts
of Andrx and its majority owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

All highly liquid investments with an original maturity of three months
or less when acquired are considered cash equivalents.

INVESTMENTS AVAILABLE FOR SALE

The Company utilizes the provisions of Financial Accounting Standards
Board ("FASB") Statement on Financial Accounting Standards ("SFAS") No. 115
"Accounting for Certain Investments in Debt and Equity Securities". This
statement requires that marketable equity securities and all debt securities be
classified into three categories: (i) held to maturity securities, (ii) trading
securities, and (iii) available for sale securities. The Company's investments
available for sale are classified as available for sale and, accordingly, the
unrealized gain as of September 30, 1996 is reported as a separate component of
shareholders' equity. The cost related to investments available for sale is
determined utilizing the specific identification method.

F-7
<PAGE>

ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

INVENTORIES

Inventories, which consist solely of generic pharmaceutical products
held for distribution, are stated at the lower of cost (first-in, first-out) or
market. Cost is based on purchase price, net of vendor discounts, rebates and
allowances.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation for
laboratory equipment and furniture and fixtures is provided using the
straight-line method over an estimated life of three to five years. Leasehold
improvements are amortized on a straight-line basis over the shorter of the
estimated life of the asset or the term of the lease. The Company will provide
depreciation for manufacturing equipment once it is placed into service.

Costs of major additions for maintenance and repairs which do not
extend the life of the assets are expensed as incurred. Upon sale, disposition,
or retirement of property and equipment, the cost and related accumulated
depreciation are eliminated from the accounts and any resulting gain or loss is
credited or charged to income.

REVENUE RECOGNITION

Distribution revenues and the related cost of revenues are recognized
at the time a product is shipped. Cost of distribution revenues is based on the
purchase price of the product, net of vendor discounts, rebates and allowances.
Research and development services to joint venture and the related cost of
revenues are recognized at the time the services are rendered (see Note 8).
Licensing revenue is recognized when earned in accordance with the terms of the
underlying agreements (see Note 7).

RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses consist of costs related to products
being developed internally as well as costs related to products subject to
licensing agreements. Research and development costs are expensed as incurred.

INCOME TAXES

The Company, at its inception, adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires, among other things,
recognition of future tax benefits measured at enacted rates attributable to the
deductible temporary differences

F-8
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

between the financial statement and income tax bases of assets and liabilities
and to tax net operating loss carryforwards to the extent that the realization
of said benefits is "more likely than not".

STOCK-BASED COMPENSATION

In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". Under the provisions of SFAS No. 123, companies can
either measure the compensation cost of equity instruments issued under employee
compensation plans using a fair value based method, or can continue to recognize
compensation cost using the intrinsic value method under the provisions of
Accounting Principles Board Opinion ("APB") No. 25. However, if the provision of
APB No. 25 are continued, pro forma disclosures of net income or loss and
earnings or loss per share must be presented in the financial statements as if
the fair value method had been applied. The Company intends to continue to
recognize compensation costs under the provisions of APB No. 25, and upon
adoption of SFAS No. 123 as of January 1, 1996, will provide the expanded
disclosure required by SFAS No. 123.

STOCK SPLIT

The accompanying consolidated financial statements have been restated
to give retroactive effect to a 57,915-for-one stock split, effected February
12, 1993.

NET LOSS PER SHARE

Net loss per share is based on the weighted average number of shares of
common stock outstanding.

Pursuant to Securities and Exchange Commission Staff Accounting
Bulletins, common and common equivalent shares issued at prices below the
assumed public offering price during the 12-month period prior to a proposed
public offering are required to be included in the calculation of earnings or
loss per share as if they were outstanding for all periods presented (using the
treasury stock method and the estimated initial public offering price).
Accordingly, the weighted average number of shares of common stock outstanding
for all the years presented have been adjusted to reflect the impact of such
additional common and common equivalent shares issued below the assumed initial
public offering price.

FAIR VALUE OF FINANCIAL INSTRUMENTS

As of December 31, 1995 and 1994, the carrying amount of cash and cash
equivalents, accounts receivable, due from joint venture, prepaid and other
current assets, notes receivable,

F-9
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

accounts payable, accrued liabilities, bank loan, notes payable and commitment
to joint venture approximates fair value due to the short maturity of these
instruments.

CONCENTRATION OF CREDIT RISK

Accounts receivable are principally due from independent pharmacies,
regional pharmacy chains which do not maintain their own warehousing facilities
and pharmacy buying groups. Credit is extended based on an evaluation of the
customer's financial condition and collateral is not required. The Company
performs periodic credit evaluations of its customers and maintains allowances
for potential credit losses. The Company has no significant off-balance sheet
concentration of credit risk.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The unaudited interim consolidated financial statements as of September
30, 1996 and for the nine months ended September 30, 1995 and 1996 have been
prepared on the same basis as the audited consolidated financial statements
included herein. In the opinion of management, such unaudited interim
consolidated financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the results for such
periods. The operating results for the nine months ended September 30, 1996 are
not necessarily indicative of the operating results to be expected for the full
fiscal year or for any future period.

RECLASSIFICATIONS

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

F-10
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(3) PROPERTY AND EQUIPMENT, NET

Property and equipment are summarized as follows:

DECEMBER 31,
1994 1995
-------- ------

Laboratory equipment.............................. $1,802,200 $2,540,900
Manufacturing equipment........................... 968,900 1,425,600
Furniture and fixtures............................ 437,300 529,000
Leasehold improvements............................ 460,400 584,200
------- --------
3,668,800 5,079,700
Less: accumulated depreciation
and amortization........................... (461,200) (1,248,600)
-------- ----------

Property and equipment, net....................... $3,207,600 $3,831,100
========== ==========

(4) INCOME TAXES

For the years ended December 31, 1993, 1994 and 1995, the Company was
not required to provide for federal or state income taxes due to its net losses.
Under the provisions of SFAS No. 109, the Company has provided a valuation
allowance to reserve against 100% of its net operating loss carryforwards given
the Company's history of net losses. As of December 31, 1995, for financial
reporting purposes and federal income tax purposes, the Company has net
operating loss carryforwards of approximately $10,000,000 and $8,100,000,
respectively, which if not utilized, will expire beginning in 2008. Net
operating loss carryforwards are subject to review and possible adjustments by
the Internal Revenue Service and may be limited in the event of certain
cumulative changes in the ownership interest of significant shareholders over a
three-year period in excess of 50%.

(5) BANK LOAN

During 1994, Anda Generics, Inc. ("Generics"), the Company's wholly
owned subsidiary engaged in the distribution of generic pharmaceutical products,
entered into an agreement with a bank which provided a line of credit for
advances up to $4,000,000. The advances are subject to certain limitations
relating to the borrowing base related to the value of the accounts receivable
and inventories of Generics. The loan is guaranteed by the Company. In 1995, the
maximum amount available under the revolving line of credit was increased to
$8,000,000 all of which was available as of December 31, 1995 based on the
underlying collateral. The agreement requires compliance with certain covenants
including the maintenance of minimum working capital and net worth levels. The
loan bore interest at the prime rate (8.25% as of December 31, 1995) plus 2.0%
and is subject to an unused commitment fee of .5% on the unused balance.

F-11
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(5) BANK LOAN--(CONTINUED)

In January 1996, the maximum amount available under the revolving line
of credit was increased to $10,000,000 and the interest rate was decreased to
the prime rate plus 1.5%.

In October 1996, the Company amended its line of credit agreement
whereby, amongst other things, the interest rate was decreased from the prime
rate (8.25% as of September 30, 1996) plus 1.5% to the prime rate plus 1.0%, and
the unused commitment fee was reduced from .5% to .25%. Additionally, the
amendment provides for, under certain circumstances, the payment of dividends,
repayments and advances from the Company's distribution subsidiary to Andrx and
its other subsidiaries. As of September 30, 1996, approximately $1.0 million was
available for such distributions.

(6) NOTES PAYABLE

As of December 31, 1994, the Company had a note payable outstanding to
a vendor in the amount of $55,800. The note bore interest at 8.0% and was due in
eight installments of principal and interest through October 1995. As of
December 31, 1994, the note was included in notes payable in the accompanying
consolidated balance sheet. The note was paid in 1995.

(7) LICENSING AGREEMENTS

In June 1993, the Company entered into a development and licensing
agreement with Zenith Laboratories, Inc., now a wholly-owned subsidiary of IVAX
Corporation ("IVAX"), for a controlled-release product to be marketed in the
United States. Under the development and licensing agreement, the Company is
responsible for developing a formulation, and IVAX is responsible for performing
the bioequivalence studies, preparing the ANDA and manufacturing and marketing
the product. The development and licensing agreement grants IVAX the right to
market the product for a period of five years from receipt of ANDA approval
(which period may be extended for an additional five years at the sole
discretion of IVAX). The Company has received certain fees and milestone
payments under this development and licensing agreement and will be entitled to
receive royalties from the sale of the licensed product.

In September and December 1993, the Company entered into two
development and licensing agreements with Circa Pharmaceutical, Inc., now a
wholly-owned subsidiary of Watson Pharmaceuticals, Inc. ("Watson") for two
generic controlled release products to be marketed in the United States and
Canada. Under the development and licensing agreements, the Company is
responsible for development of the licensed products and the transfer of the
technology to Watson which, together with the Company's assistance, is
responsible for the scale-up of batches for pilot and bioequivalence studies,
preparing the ANDA and manufacturing and marketing the licensed products. The
terms of each development and licensing agreement is for the life of the

F-12
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(7) LICENSING AGREEMENTS--(CONTINUED)

licensed product. The Company received certain milestone payments for one of the
generic controlled-release products. If this agreement is terminated other than
due to a decision to terminate, or a breach of the agreement by Watson, these
milestone payments and any product development costs paid to the Company are
refundable to Watson if the Company successfully commercializes such product
within three years from the date the development and license agreement is
terminated. The Company believes that it has performed its responsibilities
related to the milestone payments received. The Company will be entitled to
receive royalties from the sale of one generic controlled-release product. The
development and licensing agreement for the other generic controlled-release
product does not provide for milestone payments although the Company will be
entitled to receive a share of net profits from the sale of this product.

In November 1993, the Company entered into a development and licensing
agreement with Mylan Laboratories, Inc. ("Mylan") for a generic
controlled-release product to be marketed in the United States, Canada and
Mexico. Under the development and licensing agreement, the Company is
responsible for development of the licensed product and the transfer of the
technology to Mylan which, together with the Company's assistance, is
responsible for the scale-up of batches for pilot and bioequivalence studies,
preparing the ANDA and manufacturing and marketing the licensed products. The
development and licensing agreement grants Mylan the right to market the product
for a period of five years from receipt of ANDA approval (which period may be
extended for an additional five years at the sole discretion of Mylan). The
Company has received certain fees and milestone payments under the development
and licensing agreement and will be entitled to receive royalties from the sale
of the licensed products.

In July 1993, the Company entered into a development and licensing
agreement with a Taiwanese pharmaceutical manufacturer, Yung Shin
Pharmaceuticals, Ind., Co. Ltd. ("YSP") for generic versions of three
controlled-release products to be marketed in Taiwan, China and Southeast Asia
excluding Japan and Korea. Under the development and licensing agreement, the
Company is responsible for development of the licensed products, including
scale-up of batches for pilot and bioequivalence studies and the transfer of the
technology to YSP which, together with the Company's assistance, is responsible
for preparing the necessary regulatory applications and manufacturing and
marketing the licensed products. The development and licensing agreement grants
YSP the right to market the product for a period of ten years from receipt of
the first government approval in the covered territories to market each product
(which period may be extended for an additional five years at the sole
discretion of YSP). The Company has received certain fees and milestone payments
under the development and licensing agreement and will be entitled to receive
royalties from the sale of the licensed products.

F-13
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(7) LINCENSING AGREEMENT--(CONTINUED)

In January 1994, the Company entered into a development and licensing agreement
with a second Taiwanese pharmaceutical manufacturer, Purzer Pharmaceutical Co.,
Ltd. ("Purzer") for a generic controlled-release product and three
over-the-counter products to be marketed in Russia and Asia, excluding Japan.
This development and licensing agreement is similar to that with YSP.

As a result of milestone payments in connection with these licensing agreements,
Andrx received $320,500, $175,000, and $50,000 during the years ended December
31, 1993, 1994 and 1995, respectively, and $225,000, $155,500 and $165,000,
respectively, was recognized as licensing revenue.

(8) JOINT VENTURE

In July 1994, the Company and Watson (collectively, the "Partners"),
formed a joint venture to develop, manufacture and market generic
controlled-release pharmaceutical products (the "joint venture" or "ANCIRC").
Watson also acquired an equity interest in the Company in exchange for a payment
of $6,000,000. In addition, Watson may acquire a further equity interest by
exercise of certain warrants (see Note 11). Andrx Pharmaceuticals, Inc.
("Pharmaceuticals"), a wholly owned subsidiary of the Company, will perform the
research and development formulations for the joint venture products and the
Company will also market and distribute any of ANCIRC's products upon regulatory
approval. Watson will provide the regulatory support for the joint venture
products and manufacture any of ANCIRC's products upon regulatory approval.
Capital contributions and ANCIRC's net income or losses are to be allocated in
proportion to the respective Partners' interest in the joint venture. Such
interests were originally 60% to Andrx and 40% to Watson. On October 30, 1995,
in connection with Watson's purchase of shares of common stock of Andrx (see
Note 11), the Partners amended the joint venture agreement to modify each
Partner's respective interest to 50%. Under the terms of the amendment to the
joint venture agreement, Watson was not required to contribute additional
capital to ANCIRC to equalize the partners' capital accounts as of the amendment
date. The Partners' capital accounts will be equalized in future periods out of
net cash flow or upon liquidation, to the extent funds are available. ANCIRC is
managed by and under the direction of a management committee which is comprised
of six members. Three members are appointed by each Partner. Based on the equal
representation of the management committee and the Company's inability to
unilaterally control the joint venture, the Company utilizes the equity method
to account for this joint venture.

The agreements governing the ANCIRC joint venture require Dr. Chih-Ming
J. Chen, the Company's vice president and chief scientist, to supervise the
development of all ANCIRC products until at least five products have been
successfully developed by ANCIRC. If Dr. Chen fails to perform supervisory
services (other than by reason of his death or disability), Watson

F-14
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(8) JOINT VENTURE--(CONTINUED)

has the option to (i) require the Company to repurchase Watson's interests in
ANCIRC and the Company for an amount equal to Watson's investments therein, plus
interest, or (ii) to assume the rights of the Company to develop and market the
products. Once ANCIRC has developed three products, Watson is limited to the
option set forth in (ii) of the preceding sentence.

Condensed balance sheet and statement of operations information for ANCIRC is as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
-------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash......................................... $500,600 $ 84,900 $517,600
Equipment, net............................... -- -- 26,700
-------- -------- --------
Total assets................................. $500,600 $ 84,900 $544,300
======== ======== ========

Current liabilities.......................... $527,000 $1,285,200 $612,200
Partners' deficit............................ (26,400) (1,200,300) (67,900)
-------- ---------- --------
Total liabilities and Partners' deficit...... $500,600 $ 84,900 $544,300
======== =========== ========
</TABLE>

<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(JULY 8, 1994) TO YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 SEPTEMBER 30,
----------------- ----------------- ------------------------
1995 1996
--------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Research and development
expenses........................ $ 527,100 $ 3,183,700 $ 2,171,800 $ 2,776,400
========= =========== =========== ===========

Net loss.......................... $(526,400) $(3,173,900) $(2,163,300) $(2,767,900)
========== =========== =========== ===========
</TABLE>
During the period from ANCIRC's inception (July 8, 1994) to December
31, 1994, and the year ended December 31, 1995, Pharmaceuticals rendered
research and development services to ANCIRC of $375,300 and $2,528,700,
respectively. These services were provided at cost which includes research and
development overhead allocation of $258,800 and $1,504,700, respectively. As of
December 31, 1994 and 1995, the Company was due $375,300 and $1,005,000,
respectively, from ANCIRC for research and development services rendered. In the
December 31, 1994 and 1995 consolidated balance sheets, such amounts due from
joint venture have been offset by $11,600 and $516,500, respectively,
representing the amount that Andrx is required to fund to the joint venture in
order to receive the full amount due from the joint venture. In February 1996,
the Partners were required to make capital contributions to ANCIRC to fund their
respective capital accounts. The proceeds of these contributions were utilized
by ANCIRC to pay each Partner's outstanding balance for services rendered
through December 31, 1995. Andrx's capital contribution to ANCIRC was $705,500
and ANCIRC paid the Company $1,005,000.

F-15
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(9) COMMITMENTS

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with its chairman of
the board, president, and vice president and chief scientist. These employment
agreements include confidentiality and non-competition provisions and expire in
February 1998.

The following schedule summarizes the future minimum payments under the
Company's employment agreements as of December 31, 1995:

AMOUNT

1996......................... $ 585,200
1997......................... 595,200
1998......................... 91,700
----------
$1,272,100
==========

In January 1996, the Company entered into an employment agreement with
its vice president and chief financial officer which provides for an annual
salary of $120,000. As part of this agreement, the Company granted the officer
options to purchase 40,000 shares of the Company's common stock. These options
vest over a five year period. In the event the officer is terminated without
cause before January 2001, or there is a change in control at the Company, the
officer may be entitled to a lump sum payment and possible acceleration in the
vesting of all or a portion of these options. This officer is subject to a
confidentiality agreement.

PURCHASE COMMITMENTS

The Company has entered into an agreement to purchase certain
controlled-release manufacturing equipment with a future commitment of
$1,164,700.

F-16
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(9) COMMITMENTS--(CONTINUED)

OPERATING LEASES

The Company leases offices and office equipment under operating leases.
The following schedule summarizes future minimum lease payments required under
non-cancelable operating leases with terms greater than one year as of December
31, 1995:

AMOUNT

1996......................... $ 362,100
1997......................... 352,500
1998......................... 308,900
1999......................... 224,800
2000......................... 217,200
Thereafter................... 669,500
----------
$2,135,000
==========

Rent expense amounted to $55,300, $195,900 and $209,800 for the years
ended December 31, 1993, 1994 and 1995, respectively.

(10) RELATED PARTY TRANSACTIONS

In February 1993, the Company entered into a royalty agreement (the
"February 1993 Agreement") with Dr. Chih-Ming J. Chen, the Company's vice
president and chief scientist. The terms of the February 1993 Agreement provide
for the payment of royalties to Dr. Chen upon the sale of generic products which
utilize controlled-release delivery technologies for which the patents on such
technologies were formerly held by Dr. Chen. Such patents were transferred to
the Company in 1993. These products are not currently being sold or marketed.
One of the ANDAs submitted to the FDA in 1995 by the Company relates to a
generic controlled-release pharmaceutical product contemplated in the February
1993 Agreement.

In March 1994, the Company and Dr. Chen entered into an amendment to
the February 1993 Agreement (the "March 1994 Amendment") to change the amount of
the royalties due to Dr. Chen upon the sale of certain products. Under the terms
of the March 1994 Amendment, the Company paid Dr. Chen $50,000 and canceled his
obligation to repay a $50,000 advance made to him during 1993. Accordingly, for
the year ended December 31, 1993, the Company recorded $100,000 of compensation
expense in the accompanying consolidated statement of operation. In August 1994,
Dr. Chen received a $100,000 loan and options to purchase 200,000 shares of the
Company's common stock vesting at certain time frames based upon the ANDAs for
such products. The loan bore interest at 6% and the principal together with the
unpaid accrued interest on the loan was due in October 1997. In 1996, the board
of directors cancelled Dr. Chen's obligation to repay the $100,000 loan and the
related accrued interest as a bonus for the submission of one of the ANDAs in
1995. Accordingly, for the year ended December 31,

F-17
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(10) RELATED PARTY TRANSACTIONS--(CONTINUED)

1995, the Company recorded $107,000 of compensation expense in the accompanying
consolidated statement of operations. As of December 31, 1995, all of these
options granted to Dr. Chen had vested. These options have an exercise price of
$6.50 per share, representing the fair market value on the date of grant as
determined by the board of directors.

In September 1994, the Company entered into an agreement to loan
$250,000 to Pharmacy Services Group, Inc. ("PSG"), a pharmacy benefits
management and mail order marketing company. PSG was a customer of the Company's
distribution operations and was controlled by a former principal shareholder of
the Company. In addition, the Company's chairman of the board and president each
owned less than 1% of PSG's outstanding shares of common stock. Although a
portion of the loan was originally advanced in conjunction with a proposed joint
venture involving PSG, the Company and a third entity, the Company decided not
to proceed with that venture and the loan commitment was restructured. As
restructured, the Company advanced $200,000, restructured $50,000 of the total
$102,000 accounts receivable due from PSG to be included as part of the loan,
received options to acquire 83,333 shares of PSG common stock at an exercise
price of $3.00 per share, and was entitled to receive interest at the prime rate
plus 1% quarterly, with the full principal balance due on September 30, 1997. In
December 1994, Andrx renegotiated its note with PSG to provide for, among other
things, the issuance of stock options to acquire up to an additional 40,000
shares of PSG's stock at an exercise price of $2.50 per share. In consideration
for such additional options, the Company agreed to not declare a default under
the note or to accelerate the note as a result of PSG's failure to fulfill
certain requirements of the original note. During 1995, the management of the
Company determined that the outstanding accounts receivable balance of $52,000
due from PSG and note receivable of $250,000 were uncollectible, and the Company
wrote off these balances due from PSG.

For the years ended December 31, 1993, 1994 and 1995, approximately
$732,500, $851,200 and $578,900, respectively, of distribution revenues were
generated from related parties, which are owned in part by the Company's
chairman of the board. As of December 31, 1994, accounts receivable, net
included $529,600 due from related parties. In November 1994, one of these
related parties filed for Chapter 11 bankruptcy protection. As of December 31,
1994, the account receivable due from this related party was $410,000. As of
December 31, 1994, the management of the Company had established allowances
against this account receivable of $253,000. During 1995, management provided an
additional allowance of $157,000 and wrote off the entire balance.

(11) SHAREHOLDERS' EQUITY

In February 1993, the Company's president and a former employee
purchased 1,708,500 shares of common stock in exchange for $166,700 in cash. The
issuance of these shares of common stock was at a value below the estimated fair
market value at the time of issuance.

F-18
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(11) SHAREHOLDERS' EQUITY--(CONTINUED)

Accordingly, for the year ended December 31, 1993, the Company recorded $330,000
of compensation expense in the accompanying consolidated statement of
operations.

In May 1993, the Company sold 171,158 units ("May Units") in a private
transaction for an aggregate consideration of $1,027,000 (or $6.00 per unit).
Each May Unit consisted of two shares of common stock and one warrant entitling
the holder to purchase an additional share of common stock at an exercise price
of $5.00 per share any time through May 1995. At December 31, 1994, all such
warrants were outstanding. In May 1995, 154,500 of such warrants were exercised
and the Company issued 154,500 shares of common stock at $5.00 per share for a
total consideration of $772,500. The remaining 16,658 warrants expired
unexercised.

In September 1993, the Company sold an aggregate of 202,000 shares of
its common stock for $7.00 per share in a private transaction for an aggregate
consideration of $1,401,000, net of commission and expenses.

In December 1993 and January 1994, the Company sold an aggregate of
44.70 units (the "Placement Units") to various investors. As of December 31,
1993, the Company had sold 31.60 of these units for an aggregate consideration
of $2,659,100, net of commissions and expenses. Each Placement Unit was sold at
$100,000 and consisted of 11,240 shares of common stock and 11,240 warrants (the
"Placement Warrants"). Each Placement Warrant entitles the holder thereof to
purchase one share of common stock through December 1998, at a price of $7.25.
At December 31, 1995, all such warrants remain outstanding. The Company also
granted Gruntal & Co., Incorporated, the placement agent, the option (the
"Agent's Option") to purchase 4.47 Placement Units at a price of $100,000 per
Placement Unit at any time through December 1998.

The Company is party to a registration rights agreement with investors
in the Placement Units. Under the terms of this agreement, the Company has
agreed that, 180 days after the consummation of an initial public offering
("IPO"), it will use its best efforts to register, under the Securities Act of
1933, the shares of common stock included in the Placement Units and issuable
upon exercise of the Placement Warrants. The Company has also agreed to include
the shares of common stock underlying the Agent's Option in such registration
statement. Expenses incurred in connection with such registration shall be,
subject to limited exceptions, borne by the Company.

In July 1994, the Company amended its Certificate of Incorporation and
the Company's shareholders and board of directors adopted resolutions to
increase the number of common shares authorized from 22,500,000 to 25,000,000
and authorized 1,000,000 shares of preferred stock, $.001 par value.

In July 1994, the Company issued 33,700 shares of its convertible
preferred stock and a warrant to acquire up to 337,100 shares of the Company's
common stock to Watson for an aggregate consideration of $6,000,000. The
preferred shares automatically converted into 674,200 shares of common on April
30, 1995. Watson has certain registration rights related to the common stock and
warrants. The warrant is exercisable in whole or in part until July 8, 1999. The
exercise price is the lesser of $8.90 or the public offering price of common
stock

F-19
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(11) SHAREHOLDERS' EQUITY--(CONTINUED)

offered in the IPO of the Company. This issuance was associated with a joint
venture agreement between the Company and Watson. See Note 8 for further
discussion of the joint venture.

The Company issued 1,900 and 5,000 shares of common stock valued at
$13,400 and $32,500, respectively, to vendors, for the years ended December 31,
1993 and 1994, respectively. The fair value of such shares has been included as
a component of selling, general, and administrative expenses in the accompanying
consolidated statements of operations.

In May 1995, the Company issued an aggregate of 103,000 shares of its
common stock at $10.00 per share in a private transaction for aggregate
consideration of $1,030,000.

In August 1995, the Company issued 90,900 shares of common stock in a
private placement transaction with Watson at $11.00 per share for an aggregate
consideration of $1,000,000. Additionally, in December 1995, the Company issued
1,144,900 shares of common stock in a private transaction with Watson at $11.00
per share for an aggregate consideration of $12,593,900. The 1,144,900 shares
issued also provide Watson with price antidilution protection in the event of
private placements before the consummation of an IPO. Watson also has certain
registration rights related to the 1,235,800 shares of common stock purchased
from the Company in 1995. In conjunction with these transactions, the Company
and Watson amended the terms of the joint venture agreement. See Note 8 for
further discussion of the amendment to the joint venture.

(12) STOCK INCENTIVE PLAN

In February 1993, the Company adopted a stock incentive plan (the
"Plan") under which the board of directors or its compensation committee is
authorized to grant stock options, stock appreciation rights, restricted stock,
deferred stock, performance units, loans and tax offset payments or any
combination thereof, to employees, consultants or advisors of the Company. The
Plan as amended, permitted the issuance of 1,000,000 shares of the Company's
common stock. The exercise price at which any stock option may be awarded is to
be determined by the board of directors. Options granted under the Plan must be
exercised within ten years of grant, unless a shorter period is designated at
the time of grant. No options can be awarded under the Plan after February 26,
2003.

In May 1993, each of the directors were issued options to purchase
2,500 shares of the Company's common stock in accordance with the Plan. The Plan
was amended in November 1994 to provide that each outside director is to receive
options to purchase 2,500 shares of the Company's common stock in his or her
first year as a director which vest immediately. In each of the next two years
in which such person serves as a director, he or she is to receive options to
purchase 4,500 shares of the Company's common stock which vest six months after
the commencement of the director's term. Options issued to outside directors
have a ten year term.

In 1996, the board of directors approved an increase in the number of
shares available for grant in the Plan to 1,250,000. In addition, commencing in
1996, non-employee directors

F-20
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(12) STOCK INCENTIVE PLAN--(CONTINUED)

of the Company will each be granted an option on June 1 of each year to purchase
7,000 shares of the Company's common stock.

A summary of the Plan's activity is as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION PRICE
UNDER OPTION PER SHARE
------------ ---------
<S> <C> <C> <C>
Outstanding, January 1, 1993.................................. -- --
Options granted............................................... 265,375 $3.00 - $7.50
Options forfeited............................................. (34,000) 5.00 - 7.50
-------

Outstanding, December 31, 1993................................ 231,375 3.00 - 7.00
Options granted............................................... 405,000 6.50 - 9.00
-------

Outstanding, December 31, 1994................................ 636,375 3.00 - 9.00
Options granted............................................... 210,250 7.25 - 11.00
Options exercised............................................. (6,000) 3.00
Options forfeited............................................. (44,500) 3.00 - 8.00
-------

Outstanding, December 31, 1995................................ 796,125 3.00 - 11.00
Options granted (unaudited)................................... 263,875 11.00 - 14.00
Options exercised (unaudited)................................. (81,250) 3.00 - 8.00
Options forfeited (unaudited)................................. (110,875) 6.50 - 12.00
--------

Outstanding, September 30, 1996 (unaudited)................... 867,875 $3.00 - $14.00
=======
</TABLE>

(13) 401(K) PLAN

In February 1995, the Company adopted a 401(k) retirement plan covering
substantially all employees. Monthly contributions to the retirement plan are
made by the Company based upon the employee contributions to the plan. During
the year ended December 31, 1995, the Company contributed $58,200 to the
retirement plan.

(14) LITIGATION

In January 1996, Hoechst Marion Roussel, Inc. and Carderm Capital, L.P.
(collectively, "Hoechst"), filed suit against the Company claiming patent
infringement as a result of one of the Company's ANDA filings with the FDA. The
Company has responded to this claim by denying infringement, raising various
other defenses and by filing certain counterclaims against Hoechst. While the
Company believes its generic product does not infringe upon any of the patents
held in connection with the branded product and it has meritorious defenses
against this suit, the ultimate resolution of this matter is not currently known
and may delay or prevent the Company from obtaining an approval to market from
the FDA related to this ANDA. Claims of this nature may be made by other
pharmaceutical companies in connection with the Company's

F-21
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1994 AND 1995--(CONTINUED)

(14) LITIGATION--(CONTINUED)

filing of other ANDAs with the FDA. The Company evaluates the probability of
patent infringement litigation with respect to each of its ANDA submissions on a
case by case basis. Accordingly, as of December 31, 1995, the Company has
provided $1,200,000 for estimated litigation costs associated with the two ANDAs
submitted in 1995. Although the Company believes it has adequately provided for
these matters based on the current available information, the Company may incur
additional litigation costs in future years which may be material to the
Company's results of operations and financial position.

(15) SUBSEQUENT EVENTS (UNAUDITED)

In May 1996, Rhone-Poulenc Rorer, Inc., and Jagotec AG (collectively
"RPR"), commenced a lawsuit against the Company claiming patent infringement as
a result of one of the Company's ANDA filings with the FDA. The Company has
responded to this claim by denying infringement and raising various other
defenses. While the Company believes its generic product does not infringe upon
the patent held in connection with the branded product and that it has
meritorious defenses against this suit, the ultimate resolution of this matter
is not currently known and may delay or prevent the Company from obtaining an
approval to market from the FDA related to this ANDA. See Note 14.

In May 1996, an employee of the Company resigned from his position and,
in connection therewith, claimed that he was entitled to receive, pursuant to
the terms of his employment arrangement with the Company, a royalty equal to 1%
of the gross revenues from certain products under development by the Company.
The Company is reviewing the former employee's claim and intends to contest it.

For the nine months ended September 30, 1996, the Company has recorded
provisions for $450,000 for anticipated additional litigation costs related to
the Company's ANDA for its generic version of Cardizem CD/registered trademark/.

F-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of
ANCIRC:

We have audited the accompanying balance sheets of ANCIRC (a New York
general partnership in the development stage) as of December 31, 1994 and 1995,
and the related statements of operations, partners' deficit and cash flows for
the period from inception (July 8, 1994) to December 31, 1994, for the year
ended December 31, 1995 and for the cumulative period from inception (July 8,
1994) to December 31, 1995. These financial statements are the responsibility of
the partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of ANCIRC as of
December 31, 1994 and 1995, and the results of its operations and its cash flows
for the period from inception (July 8, 1994) to December 31, 1994, for the year
ended December 31, 1995 and for the cumulative period from inception (July 8,
1994) to December 31, 1995 in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
January 19, 1996.

F-23
<PAGE>
ANCIRC

(A DEVELOPMENT STAGE PARTNERSHIP)

BALANCE SHEETS
<TABLE>
<CAPTION>

DECEMBER 31,
-------------------------------- SEPTEMBER 30,
1994 1995 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Current assets

Cash and cash equivalents................... $500,600 $84,927 $517,641
-------- ------- --------
Total current assets................... 500,600 84,927 517,641

Equipment, net.................................. -- -- 26,681
-------- ------- --------

Total assets........................... $500,600 $84,927 $544,322
======== ======= ========

LIABILITIES AND PARTNERS' DEFICIT

Current liabilities

Due to joint venture partners............... $526,980 $1,275,830 $596,366

Accounts payable............................ -- 9,415 15,904
-------- ------- --------

Total current liabilities.............. 526,980 1,285,245 612,270
-------- ------- --------
Partners' deficit

SR Six, Inc................................. (15,828) (655,505) (33,974)

Circasub, Inc............................... (10,552) (544,813) (33,974)
-------- ------- --------

Total partners' deficit................ (26,380) (1,200,318) (67,948)
-------- ------- --------

Total liabilities and partners' deficit $500,600 $ 84,927 $544,322
======== ========== ========
</TABLE>

The accompanying notes to financial statements
are an integral part of these balance sheets.

F-24
<PAGE>

ANCIRC
(A DEVELOPMENT STAGE PARTNERSHIP)

STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

CUMULATIVE CUMULATIVE
PERIOD FROM PERIOD FROM PERIOD FROM
INCEPTION INCEPTION NINE MONTHS ENDED INCEPTION
(JULY 8, 1994) TO YEAR ENDED (JULY 8, 1994) TO SEPTEMBER 30, (JULY 8, 1994) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ SEPTEMBER 30,
1994 1995 1995 1995 1996 1996
-------- -------- -------- -------- -------- ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Research and development expenses

Purchased research and
development services..... $422,189 $2,825,305 $3,247,494 $1,922,975 $2,627,577 $5,875,071

Operating supplies........... 83,813 310,638 394,451 168,950 122,942 517,393

Other ....................... 21,140 47,824 68,964 79,831 25,919 94,883
--------- ----------- ----------- ----------- ----------- -----------

Total research and
development expenses... 527,142 3,183,767 3,710,909 2,171,756 2,776,438 6,487,347
--------- ----------- ----------- ----------- ----------- -----------

Loss from operations............ (527,142) (3,183,767) (3,710,909) (2,171,756) (2,776,438) (6,487,347)

Interest income................. 762 9,829 10,591 8,454 8,490 19,081
--------- ----------- ----------- ----------- ----------- -----------

Net loss ....................... $(526,380) $(3,173,938) $(3,700,318) $(2,163,302) $(2,767,948) $(6,468,266)
========= =========== =========== =========== =========== ===========
</TABLE>

The accompanying notes to financial statements are
an integral part of these statements.

F-25
<PAGE>
ANCIRC
(A DEVELOPMENT STAGE PARTNERSHIP)

STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>

SR SIX, INC. CIRCASUB, INC. TOTAL
------------ -------------- -----
<S> <C> <C> <C>
Initial contributions by joint venture partners............... $ 300,000 $ 200,000 $ 500,000

Net loss...................................................... (315,828) (210,552) (526,380)
---------- ---------- ----------
Balance, December 31, 1994.................................... (15,828) (10,552) (26,380)

Additional contribution by joint venture partners............. 1,200,000 800,000 2,000,000

Net loss...................................................... (1,839,677) (1,334,261) (3,173,938)
---------- ---------- ----------
Balance, December 31, 1995.................................... (655,505) (544,813) (1,200,318)

Additional contributions by joint
venture partners (unaudited)................................ 2,005,505 1,894,813 3,900,318

Net loss, nine months ended September 30,
1996 (unaudited)............................................ (1,383,974) (1,383,974) (2,767,948)
---------- ---------- ----------
Balance, September 30, 1996 (unaudited)....................... $ (33,974) $ (33,974) $ (67,948)
========== ========== ==========

</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.

F-26
<PAGE>
ANCIRC
(A DEVELOPMENT STAGE PARTNERSHIP)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM PERIOD FROM
INCEPTION INCEPTION NINE MONTHS ENDED INCEPTION
(JULY 8, 1994) TO YEAR ENDED (JULY 8, 1994) TO SEPTEMBER 30, (JULY 8, 1994) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, ------------------------ SEPTEMBER 30,
1994 1995 1995 1995 1996 1996
-------- -------- -------- -------- -------- ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities
Net loss..................... $(526,380) $(3,173,938) $(3,700,318) $(2,163,302) ($2,767,948) $(6,468,266)
Depreciation................. -- -- -- -- 4,709 4,709
Increase (decrease) in due
to joint venture partners.. 526,980 748,850 1,275,830 46,563 (679,464) 596,366
Increase in accounts payable. -- 9,415 9,415 2,862 6,489 15,904
Increase in other assets..... -- -- -- (78) -- --
---------- ----------- ----------- ----------- ----------- -----------

Cash provided by (used in)
operating activities... 600 (2,415,673) (2,415,073) (2,113,955) (3,436,214) (5,851,287)
---------- ----------- ----------- ----------- ----------- -----------

Cash flows from investing
activities
Purchase of equipment........ -- -- -- -- (31,390) (31,390)
---------- ----------- ----------- ----------- ----------- -----------

Cash used in investing
activities............... -- -- -- -- (31,390) (31,390)
---------- ----------- ----------- ----------- ----------- -----------
Cash flows from financing
activities
Proceeds from contributions by
joint venture partners..... 500,000 2,000,000 2,500,000 2,000,000 3,900,318 6,400,318
---------- ----------- ----------- ----------- ----------- -----------

Cash provided by financing
activities............... 500,000 2,000,000 2,500,000 2,000,000 3,900,318 6,400,318
---------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in cash and cash equivalents. 500,600 (415,673) 84,927 (113,955) 432,714 517,641
Cash and cash equivalents,
beginning of period.......... -- 500,600 -- 500,600 84,927 --
---------- ----------- ----------- ----------- ----------- -----------

Cash and cash equivalents,
end of period................ $500,600 $84,927 $84,927 $386,645 $517,641 $517,641
========== =========== =========== =========== =========== ===========
</TABLE>

The accompanying notes to financial statements are
an integral part of these statements.

F-27
<PAGE>
ANCIRC
(A DEVELOPMENT STAGE PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1995

(1) GENERAL

ANCIRC (a joint venture) was formed on July 8, 1994 by SR Six, Inc., a
wholly owned subsidiary of Andrx Corporation (the "Andrx Partner") and Circasub,
Inc., now a wholly owned subsidiary of Watson Pharmaceuticals, Inc. (the "Watson
Partner"). Under the terms of the joint venture agreement (the "Agreement") as
amended on October 30, 1995 (the "Amendment Date"), the purpose of ANCIRC is to
develop, manufacture and market controlled-release pharmaceutical products. The
Andrx Partner will perform the research and develop formulations for the
products and market and distribute any of ANCIRC's products upon regulatory
approval. The Watson Partner will perform the manufacturing of the products and
provide the regulatory support for ANCIRC's products. To date, the sole activity
of ANCIRC has been research and development. As of December 31, 1995, no
products have been submitted for regulatory approval.

The partnership interests for the period from inception to the
Amendment Date were 60% and 40% for the Andrx Partner and the Watson Partner,
respectively. Effective as of the Amendment Date, the partnership interests are
50% for both the Andrx Partner and the Watson Partner.

ANCIRC is managed by and under the direction of a management committee
which is composed of six members. Three members are appointed by each of the
joint venture partners. The management committee oversees the operations of
ANCIRC and is responsible for making all major decisions.

MANAGEMENT'S PLANS

As of December 31, 1995, since inception (July 8, 1994), ANCIRC has
incurred net losses of $3,700,318. Management anticipates incurring additional
losses in the near term as the focus of ANCIRC's business is research and
development. The joint venture partners are committed to funding the future
operations.

The likelihood of the success of ANCIRC must be considered in light of
the problems, expenses, complications and delays frequently encountered in
connection with the development of new business ventures. These business risks
include dependence on a limited number of key personnel and market acceptance of
ANCIRC's products.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

All highly liquid investments with an original maturity of three months
or less when acquired are considered cash equivalents.

F-28
<PAGE>

ANCIRC
(A DEVELOPMENT STAGE PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1995--(CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, accounts payable and
due to joint venture partners approximate fair value.

PURCHASED RESEARCH AND DEVELOPMENT SERVICES

Purchased research and development services consist of ANCIRC's
research costs, performed and incurred by the joint venture partners, and billed
to ANCIRC. Purchased research and development services are expensed as incurred.

USE OF ESTIMATES

UNAUDITED INTERIM FINANCIAL STATEMENTS

The unaudited interim financial statements as of September 30, 1996 and
for the nine months ended September 30, 1995 and 1996 have been prepared on the
same basis as the audited financial statements included herein. In the opinion
of management, such unaudited interim financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the results for such periods. The operating results for the nine
months ended September 30, 1996 are not necessarily indicative of the operating
results to be expected for the full fiscal year or for any future period.

(3) RELATED PARTY TRANSACTIONS

Expenses reported by ANCIRC primarily represent expenses incurred by
the joint venture partners in research and development related to ANCIRC's
products. As of December 31, 1994 and 1995, ANCIRC had amounts due to the Andrx
Partner of $375,276 and $1,004,986, respectively, and amounts due to the Watson
Partner of $151,704 and $270,844, respectively. Such amounts are included in
"Due to joint venture partners" in the accompanying balance sheets.

F-29
<PAGE>
ANCIRC
(A DEVELOPMENT STAGE PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1995--(CONTINUED)

(4) INCOME TAXES

ANCIRC is organized as a partnership. Accordingly, taxable income or
loss is reported in the tax returns of the individual partners.

(5) PARTNERS' DEFICIT

In December 1994, the Andrx Partner and the Watson Partner contributed
$300,000 and $200,000, respectively, to fund the operations of ANCIRC. In 1995,
the Andrx Partner and the Watson Partner contributed $1,200,000 and $800,000,
respectively, to fund continuing operations. The 1994 and 1995 contributions
were based on the original interest of each partner. As discussed in Note (1),
as of the Amendment Date, the interest of the Andrx Partner and the Watson
Partner were changed to 50%. Under the terms of the Agreement, the Watson
Partner was not required to contribute additional capital to ANCIRC to equalize
the capital accounts as of the Amendment Date. The Partners' capital accounts
will be equalized in future periods out of net cash flow or upon liquidation, to
the extent funds are available.

F-30
<PAGE>
================================================================================
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR SINCE THE DATES AS OF WHICH INFORMATION IS SET FORTH HEREIN. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.

-----------------------
TABLE OF CONTENTS

PAGE
----
Prospectus Summary.......................................................
Forward-Looking Statements...............................................
Available Information....................................................
Risk Factors.............................................................
Use of Proceeds..........................................................
Dividend Policy..........................................................
Price Range of Common Stock..............................................
Capitalization .......................................................
Selected Consolidated Financial Data.....................................
Management's Discussion and Analysis of
Financial Condition and Results of Operations..........................
Business.................................................................
Management...............................................................
Certain Transactions.....................................................
Principal Shareholders...................................................
Selling Shareholders.....................................................
Description of Capital Securities........................................
Shares Eligible for Future Sale..........................................
Plan of Distribution.....................................................
Legal Matters............................................................
Experts..................................................................
Additional Information...................................................
Index to Financial Statements............................................

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

1,205,530 SHARES

[ANDRX LOGO]

COMMON STOCK

----------
PROSPECTUS
----------

__________, 1996

================================================================================
<PAGE>

PART III

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:

Securities and Exchange Commission registration fee......... $3,285
Printing and engraving expenses............................. 15,000
Accounting fees and expenses................................ 15,000
Legal fees and expenses..................................... 30,000
Transfer Agent's fees and expenses.......................... 5,000
Miscellaneous............................................... 2,500
-------
TOTAL..................................................... $70,785
=======

All amounts except the Securities and Exchange Commission registration
fee are estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such statute. The Registrant's Amended and Restated Articles of
Incorporation and Bylaws provide that the Registrant may insure, shall indemnify
and shall advance expenses on behalf of its officers and directors to the
fullest extent not prohibited by law. The Company is also a party to
indemnification agreements with each of its directors and officers. The
Registrant has also agreed to indemnify the Selling Shareholders named in the
Registration Statement against certain liabilities, including liabilities under
the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

1. In May 1993, the Company sold 171,158 units (the "May Units") to 24
persons in a private transaction for aggregate consideration of approximately
$1.0 million or $6.00 per Unit. Each of the purchasers was an individual or
institution whom the Company believed was an "accredited investor" within the
meaning of Rule 501(a) of Regulation D under the Securities Act. Each May Unit
consisted of two shares of Common Stock and one warrant entitling the holder
thereof to purchase an additional share of Common Stock at an exercise price of
$5.00 per share at any time through May 1995. A total of 154,500 shares of
Common Stock were issued upon exercise of these warrants prior to their
expiration.

2. In September 1993, the Company sold an aggregate of 202,000 shares
of Common Stock to 39 persons in a private transaction for aggregate
consideration of approximately $1.4 million or $7.00 per share.

3. In September 1993, the Company issued an aggregate of 1,221 shares
of Common Stock to a pharmaceutical consulting firm and 700 shares of Common
Stock to a law firm in exchange for services rendered having an aggregate value
of approximately $13,000.

4. In December 1993 and January 1994, the Company sold an aggregate of
44.70 Units (the "Placement Units") to 84 persons in a private transaction (the
"December Placement") for an aggregate offering price of approximately $4.5
million or $100,000 per Placement Unit. Each Placement Unit consisted of 11,240
shares of Common Stock and 11,240 warrants (the "Placement Warrants"). Each
Placement Warrant entitles the holder thereof to purchase one share of Common
Stock through December 1998, at a price of $7.25 per share.

5. In July 1994, the Company sold to Circa Pharmaceuticals, Inc.
which is presently a wholly-owned subsidiary of Watson Pharmaceuticals, Inc.
("Watson"), for aggregate consideration of $6.0 million, (i) 33,708 shares of
Convertible Preferred Stock, which in accordance with its terms, converted into
674,160 shares of Common Stock

II-1
<PAGE>
on April 30, 1995, and (ii) a warrant to purchase 337,079 shares of Common Stock
exercisable through July 1999 at a price equal to the lesser of $8.90 per share
or the offering price per share of shares sold in this offering.

6. In August 1994, the Company issued 5,000 shares of Common Stock to a
researcher who transferred his technology and certain patent rights to the
Company, pursuant to a Technology Transfer and Consulting Agreement.

7. In April 1995, the Company issued 6,000 shares of Common Stock to an
individual for $18,000 upon exercise of certain stock options which he had
received in connection with consulting services he rendered to the Company.

8. In May 1995, the Company sold an aggregate of 103,000 shares of
Common Stock to approximately 6 persons in a private transaction, for an
aggregate consideration of approximately $1.0 million or $10.00 per share.

9. In August 1995, the Company sold 90,909 shares of Common Stock to
Watson at a price of $11.00 per share and granted Watson a two-month option to
purchase no less than 818,182 nor more than 1,454,545 additional shares of
Common Stock from the Company at a price of $11.00 per share. In December 1995,
the Company sold 1,144,903 shares to Watson.

All of the above-referenced securities were exempt from the
registration requirements of the Securities Act pursuant to the exemption set
forth in Section 4(2) thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS
<TABLE>
<CAPTION>

EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
3.1 Form of Registrant's Amended and Restated Articles of Incorporation(1)
3.2 Form of Registrant's Amended and Restated Bylaws(1)
4.1 Specimen Common Stock Certificate(1)
5.1 Opinion of Broad and Cassel(2)
10.1 Form of Stock Incentive Plan, as amended(1)*
10.2 Employment Agreement between the Registrant and Alan P Cohen, as amended(1)*
10.3 Employment Agreement between the Registrant and Elliot E Hahn, as amended(1)*
10.4 Employment Agreement between the Registrant and Chih-Ming J. Chen, as amended(1)*
10.5 Severance Agreement between the Registrant and Scott Lodin (1)*
10.6 Royalty Agreement between the Registrant and Chih-Ming J. Chen, as amended(1)*
10.7 Form of Indemnification Agreement between the Registrant and its officers and directors(1)*
10.8 Development and License Agreement dated as of June 28, 1993 by and between Zenith
Laboratories, Inc. and the Registrant(1)(3)
10.9 Technical Transfer Agreement dated as of July 30, 1993 by and between Yung Shin Pharmaceutical
Ind. Co. Ltd. and the Registrant(1)(3)
10.10 Development and License Agreement dated as of September 22, 1993 by and between Circa
Pharmaceuticals, Inc. and the Registrant(1)(3)
10.11 Development and License Agreement dated as of November 10, 1993 by and between Mylan
Pharmaceuticals Inc. and the Registrant(1)(3)
10.12 Development and License Agreement dated as of December 7, 1993 by and between Circa
Pharmaceuticals, Inc. and the Registrant(1)(3)
10.13 Development and License Agreement dated as of January 17, 1994 by and between Purzer
Pharmaceutical Co., Ltd. and the Registrant(1)(3)
10.14 Lease Agreement relating to premises located at 4001 S.W. 47th Avenue, Ft. Lauderdale,
Florida(1)
10.15 Lease Agreement relating to premises located at 4011 S.W. 47th Avenue, Ft. Lauderdale,
Florida(1)
10.16 Lease Agreement relating to premises located at 3436 University Drive, Davie, Florida(1)

II-2
<PAGE>
10.17 Loan and Security Agreement by and between Congress Financial Corporation (Florida) and the
Registrant, as amended(1)
10.18 ANCIRC General Partnership Agreement between Circa Pharmaceuticals, Inc. and the Registrant,
as amended(1)
10.19 Research and Development Services Agreement dated as of July 8, 1994 by and between ANCIRC
and the Registrant, as amended(1)
10.20 Manufacturing and Regulatory Approval Agreement dated as of July 8, 1994 by and between Circa
Pharmaceuticals, Inc. and ANCIRC, as amended(1)
10.21 Distribution and Marketing Agreement dated as of July 8, 1994 between ANCIRC and the
Registrant, as amended(1)
10.22 Patent and Know How License Agreement dated as of July 8, 1994 between ANCIRC and the
Registrant, as amended(1)
10.23 Patent and Know How License Agreement dated as of July 8, 1994 between Circa Pharmaceuticals,
Inc. and ANCIRC, as amended(1)
10.24 Securities Purchase Agreement dated as of July 8, 1994 between the Registrant and Circa
Pharmaceuticals, Inc.(1)
10.25 Securities Purchase Agreement dated as of August 17, 1995 between the Registrant and Watson
Pharmaceuticals, Inc.(1)
10.26 Securities Purchase Agreement dated October 30, 1995 between Circa Pharmaceuticals, Inc. and
the Registrant(1)
10.27 Development Agreement between Sepracor, Inc. and the Registrant(1)(3)
11.1 Net loss per share computations(2)
21.1 Subsidiaries of the Registrant(1)
23.1 Consent of Broad and Cassel (included in its opinion filed as Exhibit 5.1)(2)
23.2 Consent of Arthur Andersen LLP(2)
24.1 Powers of Attorney (included on the signature page of this Registration Statement)(2)
<FN>
- ---------------------------
* Management Compensation Plan or Arrangement

(1) Filed as an Exhibit of the same number to the Company's Registrant Statement on Form S-1 (File No. 333-
03614) and incorporated herein by reference.

(2) Filed herewith.

(3) A request for confidential treatment pursuant to Rule 406 under the Securities Act has been made and granted
for certain portions of this Exhibit.

(b) Financial Statement Schedules:

The following supplemental schedules can be found on the indicated pages
of this Registration Statement.

Report of Independent Certified Public Accountants S-1
Schedule II Valuation and Qualifying Accounts S-2
</FN>
</TABLE>

All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions or are not applicable, and therefore have been omitted.

II-3
<PAGE>

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other that the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933,a s amended,
the Registrant has duly caused this Registrant Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Ft.
Lauderdale, State of Florida, on December 5, 1996.

ANDRX CORPORATION

By: /s/ ALAN P. COHEN
-----------------------------------------
Alan P. Cohen, Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Alan
P. Cohen and Elliot F. Hahn, or any one of them, as his or her true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution
for him or her and in his or her name, place and stead in any and all capacities
to execute in the name of each such person who is then an officer or director of
the Registrant any and all amendments (including post-effective amendments) to
this Registration Statement, and any registration statement relating to the
offering hereunder pursuant to Rule 462 under the Securities Act of 1933, as
amended, and to file the same with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents and each of them full power and authority to
do and perform each and every act and thing required or necessary to be done in
and about the premises as fully as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----

<S> <C> <C>
/s/ ALAN P. COHEN December 5, 1996
- ------------------------------ Chairman of the Board,
Alan P. Cohen Chief Executive Officer
and Director (principal
executive officer)

/s/ ELLIOT F. HAHN President and Director December 5, 1996
- ------------------------------
Elliot F. Hahn, Ph.D.

/s/ CHIH-MING J. CHEN Vice President and Director December 5, 1996
- ------------------------------
Chih-Ming J. Chen, Ph.D.

/s/ ANGELO C. MALAHIAS December 5, 1996
- ------------------------------ Vice President and Chief
Angelo C. Malahias Financial Officer (principal
financial and accounting
officer)

</TABLE>
II-5
<PAGE>
SIGNATURES TITLE DATE
---------- ------ ----

/s/ ELAINE BLOOM Director December 5, 1996
- -------------------------------
Elaine Bloom

/s/ PAUL M. DONOFRIO Director December 5, 1996
- -------------------------------
Paul M. Donofrio

/s/ IRWIN C. GERSON Director December 5, 1996
- -------------------------------
Irwin C. Gerson

/s/ ELLIOT LEVINE Director December 5, 1996
- -------------------------------
Elliot Levine

/s/ MICHAEL SCHWARTZ, PHD Director December 5, 1996
- -------------------------------
Michael Schwartz, Ph.D.

/s/ MELVIN SHAROKY, M.D. Director December 5, 1996
- -------------------------------
Melvin Sharoky, M.D.

II-6

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE

To the Stockholders of
Andrx Corporation

We have audited in accordance with generally accepted auditing
standards, the financial statements as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995 included in this
registration statement, and have issued our report thereon dated February 20,
1996. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
February 20, 1996.

S-1
<PAGE>
SCHEDULE II

ANDRX CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR
THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>

BALANCE AT BALANCE AT
BEGINNING OF END OF
PERIOD ADDITIONS DEDUCTIONS PERIOD
----------- --------- ---------- ----------
<S> <C> <C>
Year ended December 31, 1993,
allowance for doubtful accounts $ -- $124,000 $ -- $124,000
======== ======== ========== ========

Year ended December 31, 1994,
allowance for doubtful accounts $124,000 $485,000 $ (57,200) $552,400
======== ======== ========== ========

Year ended December 31, 1995,
allowance for doubtful accounts $552,400 $546,600 $ (524,800) $574,200
======== ======== ========== ========

</TABLE>

S-2

BROAD AND CASSEL
ATTORNEYS AT LAW
201 SOUTH BISCAYNE BOULEVARD
MIAMI CENTER, SUITE 3000
MIAMI, FLORIDA 33131
(305) 373-9400

December 5, 1996

Andrx Corporation
4001 Southwest 47th Avenue
Suite 201
Fort Lauderdale, Florida 33314

RE: ANDRX CORPORATION (THE "COMPANY")
REGISTRATION STATEMENT ON FORM S-1

Ladies and Gentlemen:

You have requested our opinion with respect to the shares of the
Company's common stock, $.01 par value (the "Shares"), included in the Company's
registration statement on Form S-1 (the "Registration Statement"). The
Registration Statement has been filed with the U.S. Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act").

As counsel to the Company, we have examined the original or certified
copies of such records of the Company, and such agreements, certificates of
public officials, certificates of officers or representatives of the Company and
others, and such other documents as we deem relevant and necessary for the
opinion expressed in this letter. In such examination, we have assumed the
genuineness of all signatures on original documents, and the conformity to
original documents of all copies submitted to us as conformed or photostatic
copies. As to various questions of fact material to such opinion, we have relied
upon statements or certificates of officials and representatives of the Company
and others.

Based on, and subject to the foregoing, we are of the opinion that the
shares of Common Stock included in the Registration Statement either (i) in the
case of outstanding Shares, are duly and validly issued, fully paid and
non-assessable or, (ii) in the case of Shares issuable upon exercise of the
Investor Warrants, Agent's Option or Agent's Warrants, when issued and paid for
pursuant to the terms thereof, will be duly and validly issued, fully paid and
non-assessable.

In rendering this opinion, we advise you that members of this Firm are
members of the Bar of the State of Florida, and we express no opinion herein
concerning the applicability or

<PAGE>

Andrx Corporation
December 5, 1996
Page 2

effect of any laws of any other jurisdiction, except the securities laws of the
United States of America referred to herein.

This opinion has been prepared and is to be construed in accordance
with the Report on Standards for Florida Opinions, dated April 8, 1991, issued
by the Business Law Section of The Florida Bar (the "Report"). The Report is
incorporated by reference into this opinion.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the use of our name in the
Registration Statement. In giving such consent, we do not thereby admit that we
are included within the category of persons whose consent is required under
Section 7 of the Securities Act, or the rules and regulations promulgated
thereunder.

Very truly yours,

/s/ Broad and Cassel

BROAD AND CASSEL

-2-

EXHIBIT 11.1
<TABLE>
<CAPTION>
ANDRX CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE

FOR THE NINE MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- -------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss ............................ $(2,044,300) $(3,104,500) $(5,187,000) $(2,884,400) $(2,903,000)
=========== =========== ============ ============ ============

Actual weighted average shares
of common stock outstanding......... 7,535,500 8,548,800 9,297,900 9,080,500 11,734,000

Impact of shares issued within
12 months of initial public
offering, after application
of the treasury method.............. 103,000 103,000 92,000 101,700 ---

Impact of warrants exercised
within 12 months of initial
public offering, after appli-
cation of the treasury method....... 90,100 90,100 40,400 53,400 ---

Impact of opinions granted within
12 months of initial public
offering, after application of
the treasury method................. 16,500 16,500 16,500 16,500 ---
----------- ----------- ----------- ----------- -----------

Weighted average shares of
common stock outstanding............ 7,745,100 8,758,400 9,446,800 9,252,100 11,734,000
=========== =========== =========== =========== ===========

Net loss per share.................... $ (0.26) $ (0.35) $ (0.55) $ (0.31) $ (0.25)
=========== =========== =========== =========== ===========
</TABLE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the
use of our reports (and to all references to our firm) included in or made a
part of this registration statement.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
December 5, 1996.