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================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)

     [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934

             For the fiscal year ended December 31, 2003

     [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
             THE SECURITIES EXCHANGE ACT OF 1934

             For the transition period from _______________ to _______________

                          Commission File No. 000-31475

                                ANDRX CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

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<CAPTION>

<S>                                                            <C>
                     DELAWARE                                               65-1013859
 ------------------------------------------------              ------------------------------------
 (State or Other Jurisdiction of Incorporation or              (I.R.S. Employer Identification No.)
                   Organization)

                 4955 ORANGE DRIVE
                  DAVIE, FLORIDA                                               33314
     ----------------------------------------                               ----------
     (Address of Principal Executive Offices)                               (Zip Code)

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                                 (954) 584-0300
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:
         ANDRX CORPORATION - ANDRX GROUP COMMON STOCK, $0.001 PAR VALUE
                                (Title of Class)

        RIGHTS TO PURCHASE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
                                (Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]


<PAGE>

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)

                                Yes [X] No [ ]

As of June 30, 2003, the aggregate market value of Andrx common stock held by
non-affiliates (based on the closing price on June 30, 2003 as reported on the
Nasdaq National Market) was approximately $1.4 billion.

There were 72,587,700 shares of Andrx common stock outstanding as of March 1,
2004.


                       DOCUMENTS INCORPORATED BY REFERENCE


Certain information required for Part III of this report is incorporated herein
by reference to the proxy statement for the 2004 annual meeting of stockholders.

================================================================================



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<PAGE>



         As used in this Form 10-K, "Andrx Corporation," "Andrx," "we," "us,"
"our" or the "Company" refer to Andrx Corporation and all of its subsidiaries
taken as a whole. "Management" and "board of directors" refers to our management
and board of directors.

         This Form 10-K contains trademarks held by third parties and us. Our
trademarks, including licensed trademarks, contained within this report include:
Altocor(TM), AndaConnect(R), AndaMeds(TM), AndaNet(R), Anexsia(TM), Cartia
XT(R), Diltia XT(R), Embrex(R), Entex(R), Entex(R) LA, Fortamet(TM), Metformin
XT(TM), SCOT(TM), Taztia(R) XT, VIPConnect(TM) and VIPpharm(TM). Trademarks used
in this report belonging to others include: Accupril(R), Actos(R), Advicor(R),
Cardizem(R) CD, Cardura(R) XL, Claritin-D(R) 24, Claritin-D(R) 12, Claritin
RediTabs(R), Depakote(R), Dilacor XR(R), Glucophage(R), Glucophage XL(R),
Glucotrol XL(R), K-Dur(R), Lotensin(R), Lotensin HCT(R), Mevacor(R),
Monopril(R), Naprelan(R), Ortho Cyclen(R), Ortho Novum(R) 1-35, Ortho Novum(R)
7/7/7, Ortho Tri-Cyclen(R), Oruvail(R), Paxil(R), Pepcid(R), Prozac(R),
Pravochol(R), Prilosec(R), Remeron(R), Tiazac(R), Trental(R), Toprol-XL(R),
Tylenol(R), Ventolin(R), Vicodin(R) HP, Wellbutrin SR(R), Zocor(R) and Zyban(R).

         Our Internet website address is www.andrx.com. Our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all
amendments to those reports are available free of charge on our website, as soon
as reasonably practicable after such material is electronically filed with the
U.S. Securities and Exchange Commission. Our Internet website and the
information contained therein or connected thereto are not intended to be
incorporated into this Annual Report on Form 10-K or any other SEC filings.

         FORWARD-LOOKING STATEMENTS

         Forward-looking statements (statements which are not historical facts)
in this report are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. For this purpose, any statements
contained herein or which are otherwise made by or on behalf of Andrx 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," "to," "plan," "expect," "believe," "anticipate," "intend,"
"could," "would," "estimate," or "continue" or the negative other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Investors are cautioned that all forward-looking statements involve
risk and uncertainties, which may cause actual results to differ materially from
those projected in a forward-looking statement, including but not limited to,
Andrx's dependence on a relatively small number of products; licensing revenues;
the timing and outcome of patent, antitrust and other litigation and future
product launches; whether we will be awarded any marketing exclusivity period
and, if so, the precise dates thereof; government regulation generally;
competition; manufacturing capacities, output and quality processes; our ability
to develop and successfully commercialize new products; the loss of revenues
from existing products; development and marketing expenses that may not result
in commercially successful products; our inability to obtain, or the high cost
of obtaining, licenses for third- party technologies; commercial obstacles to
the successful introduction of brand products generally; exclusion of our brand
products from formularies; the consolidation or loss of customers; our
relationship with our suppliers; the success of our joint ventures; difficulties
in integrating, and potentially significant charges associated with,
acquisitions of technologies, products and businesses; our inability to obtain
sufficient supplies from key suppliers; the impact of returns, allowances and
chargebacks; product liability claims; rising costs and limited availability of
product liability and other insurance; the loss of key personnel; failure to
comply with environmental laws; and the absence of certainty regarding the
receipt of required regulatory approvals or the timing or terms of such
approvals. Further, certain forward-looking statements are based upon
assumptions of future events, which may not prove to be accurate. We are also
subject to other risks detailed herein, including those under the heading Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," or detailed from time to time in this Annual Report or in our other
SEC filings. Subsequent written and oral forward-looking statements attributable
to us or to persons




                                       2
<PAGE>

acting on our behalf are expressly qualified in their entirety by the cautionary
statements set forth in this Annual Report and in our other SEC filings.

         Readers are cautioned not to place reliance on these forward-looking
statements, which are valid only as of the date they were made. We undertake no
obligation to update or revise any forward-looking statements to reflect new
information or the occurrence of unanticipated events or otherwise.





                                       3
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                                     PART I

--------------------------------------------------------------------------------
ITEM 1. BUSINESS
================================================================================

OVERVIEW

     We are a pharmaceutical company that:

     o   develops and commercializes generic versions of controlled-release
         brand name pharmaceuticals, using our proprietary controlled-release
         drug delivery technologies, and generic versions of niche and
         immediate-release pharmaceutical products, including oral
         contraceptives;

     o   distributes pharmaceuticals, primarily generics, manufactured by others
         as well as manufactured by us, primarily to independent pharmacies,
         pharmacy chains, pharmacy buying groups and physicians' offices; and

     o   commercializes brand name pharmaceuticals, in some instances using our
         proprietary controlled-release drug delivery technologies.

         Controlled-release pharmaceuticals generally provide more consistent
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. Controlled-release
pharmaceuticals allow for "patient friendly" dosage forms, which reduce the
number of times a drug must be taken, thus improving patient compliance.

BUSINESS STRATEGY

         We currently plan to continue our business approach of developing and
commercializing generic products, enhancing our distribution operations and
commercializing brand products. We intend to grow these businesses through
internal efforts, strategic alliances and collaborative agreements, as well as
acquisitions, as appropriate.

RESEARCH AND DEVELOPMENT

         Our research and development efforts are currently focused
predominantly on developing generic products using our proprietary
controlled-release drug delivery technologies, as well as niche and
immediate-release products, including oral contraceptives. Total research and
development expenses were approximately $52.2 million, $51.5 million and $52.8
million, in 2003, 2002 and 2001, respectively. We anticipate that research and
development expenses will increase to approximately $55 million during 2004.
From 2001 through 2003, research and development expenses also included the
development of brand products. Research and development expenses for generic
development activities include, among other things, costs relating to personnel,
overhead, laboratories for conducting bioequivalence studies and raw materials
used in developing our products. Historically, research and development expenses
for brand product activities included, among other things, costs related to
personnel, overhead, professional services, filing fees and raw materials, but
primarily included the cost of laboratory services, clinical investigators and
clinical research organizations that were responsible for conducting the
clinical trials required to support a product application with the Food and Drug
Administration (FDA) and preparing New Drug Applications (NDAs). Planned
research and development expenses will be periodically evaluated during 2004 to
take into consideration, among other things, our level of profitability and cash
flows.




                                       4
<PAGE>

STRATEGIC ALLIANCES, COLLABORATION AGREEMENTS AND DISPOSITIONS

         We intend to consider and, as appropriate, enter into strategic
alliances and collaborative agreements with other companies to, among other
things, license or acquire rights to generic or brand products or product
candidates, and possibly to acquire complementary businesses. We also intend to
divest ourselves of products or businesses that are no longer a strategic fit to
our overall business. In 2003, we divested the Massachusetts aerosol
manufacturing operation, the Physicians' Online (POL) web portal and certain
marketing rights for butalbital with acetaminophen and caffeine, as these
operations and products were no longer strategic fits to our overall business.

GENERIC PHARMACEUTICALS

         Our future results of operations will depend in large part upon our
ability to successfully develop, manufacture and market generic pharmaceutical
products in a timely manner, and such products must meet regulatory standards
and receive regulatory approvals (See "REGULATION - PHARMACEUTICALS").

         Historically, we focused our efforts on developing generic versions of
controlled-release patent protected brand pharmaceuticals, using
controlled-release technologies and formulation techniques to develop products
that will mimic the brand product's physiological characteristics, but not
infringe the patents protecting the brand product. Over the past several years,
we have broadened our generic research and development efforts to include
immediate-release and niche pharmaceuticals.

         In connection with our generic products, we generally conduct studies
to establish that our product is bioequivalent to the brand product, and obtain
legal advice that our product does not infringe the NDA owner's or the
innovator's patents or that such patents are invalid or unenforceable and/or
have expired. FDA approval is required before a generic version of a previously
approved drug or certain new dosage forms of an existing drug can be marketed.
Approval for such products generally is sought using an Abbreviated New Drug
Application (ANDA). In most cases, bioavailability and bioequivalence studies,
and not clinical studies, are required in support of an ANDA. Bioavailability
indicates the rate of absorption and levels of concentration of a drug in the
blood stream. Bioequivalence compares the bioavailability of one drug product
with another and, when established, indicates that the rate of absorption and
levels of concentration in the body are substantially equivalent to the
previously approved reference listed drug. An ANDA may be submitted for a drug
product on the basis that it is the equivalent of a previously approved drug
product or, in the case of a new dosage form, that it is suitable for use for
the indications specified without the need to conduct additional safety or
efficacy testing.

         As further detailed below, the law provides a complex, time-consuming
and litigious process for bringing generic versions of brand products to market,
which are covered by existing patents (See "REGULATION - PHARMACEUTICALS-ANDA
PROCESS - GENERIC PHARMACEUTICALS" for a description of this regulatory process
and "PATENT INFRINGEMENT LITIGATION" for a discussion of the litigation
involving our ANDA products).




                                       5
<PAGE>

         If the ANDA applicant is the first to successfully file an application
for a patent-protected product and provides the appropriate patent certification
notice to the FDA, the NDA holder and the patent holder, the applicant may be
awarded a 180-day period of marketing exclusivity against other companies that
subsequently file ANDAs for that same product. Even if a company is granted
marketing exclusivity, the brand product can also be marketed as an authorized
generic during such period. In the event no exclusivity is awarded, or once the
180-day period expires, other companies can immediately begin marketing their
own approved generic version of a product. We believe this period of marketing
exclusivity can provide an opportunity for the successful patent challenger to
build market share, to recoup the expense of patent litigation, to realize
greater gross profit, and in some cases, to gain value by relinquishing or
transferring this marketing exclusivity right to others. In addition, once that
exclusivity period has lapsed, we believe that the marketer of the first
commercialized product may more effectively defend its market share position
against future competition. The ability to secure the benefit of this
exclusivity period, and the extent of the benefit it confers, is dependent upon
a variety of factors, some beyond the ANDA applicant's control, including
whether the brand product will also be marketed as an authorized generic, either
before or during such exclusivity period; the date in which its ANDA was filed,
and consequently, the law pertaining to its ANDA and its exclusivity period; and
the speed and results of litigation involving other ANDA filers (See "REGULATION
- PHARMACEUTICALS-ANDA PROCESS - GENERIC PHARMACEUTICALS") .

         As of March 1, 2004, our marketed generic products include generic
versions of Cardizem CD, Tiazac, Glucophage and Claritin-D 24, all of which we
manufacture, as well as Glucotrol XL, which we presently purchase from Pfizer
and sell as an authorized generic. Our generic version of Cardizem CD and, to a
lesser extent, Tiazac, Claritin-D 24, Glucophage and Glucotrol XL account for a
substantial portion of the revenues and profits we derive from our generic
product portfolio. (See "RISK FACTORS"). Our other generic marketed products
include versions of Claritin RediTabs, Dilacor XR, Entex LA, K-Dur, Lotensin,
Lotensin HCT, Naprelan, Remeron, Tylenol and Codeine Tablets and Vicodin HP. Our
generic Claritin line of products is sold through Perrigo Company as over-the
counter or OTC products. We also manufacture and sell a generic version of
Oruvail, which is part of our ANCIRC joint venture with Watson Pharmaceuticals,
Inc. Additionally, we sell generic versions of Pepcid, Prozac and Mevacor, which
were developed and are manufactured by Carlsbad Technologies, Inc., in
connection with our CARAN joint venture with Carlsbad. We maintain the ability
to sell generic Ventolin (Albuterol Metered Dose Inhalers) manufactured by our
former Massachusetts aerosol manufacturing operation through October 2004.

         We continue to work to expand our generic product line. In 2003, we
launched six generic products, received 13 final product approvals, four
tentative approvals and submitted 12 ANDAs to the FDA, some of which we believe
will be awarded first-to-file exclusivity, and therefore may be entitled to a
180-day period of marketing exclusivity. The FDA issues a "tentative approval"
when it has determined the ANDA to be approvable, but there is a patent or
exclusivity period prohibiting it from granting final approval. We currently
have approximately 30 ANDAs at FDA. Though we generally do not comment on our
pending ANDAs for strategic reasons, information concerning certain of our ANDA
filings becomes publicly known for various reasons, but generally as a result of
the patent infringement litigation that is commenced against us. Those disclosed
ANDAs include our generic versions of Wellbutrin SR/Zyban, for which we believe
we are entitled to a 180-day period of marketing exclusivity on the 150mg
strength, the 50mg strength of Toprol-XL, for which we believe we are entitled
to a 180-day period of marketing exclusivity, Accupril, Paxil, and certain oral
contraceptive products, including Ortho Novum 1-35 and Ortho Novum 7/7/7.




                                       6
<PAGE>


         We generally sell our generic products under the Andrx Pharmaceuticals,
Inc. label through our internal sales team, mainly to warehousing pharmacy
chains, wholesalers, large managed care customers and selected government
agencies. This sales effort is complemented by the efforts of our distribution
operations, which distribute our products, but primarily other manufacturers'
generic products, principally to independent pharmacies, pharmacy chains, buying
groups and physicians' offices.

         Securing and maintaining these customers for generic products is highly
competitive and requires high service levels. When our competitors attempt to
gain market share, significant price erosion often results. Moreover, since a
few warehousing pharmacy chains, wholesalers and managed care customers control
a large share of this market, our business may be adversely affected by the loss
of, or the consolidation of, any of our customers.

         COLLABORATIVE AGREEMENTS AND STRATEGIC ALLIANCES - GENERIC PRODUCTS

         We intend to consider and, as appropriate, enter into collaborative
agreements and strategic alliances with other companies to, among other things,
license or acquire rights to generic products or product candidates, to acquire
complementary businesses and to achieve other business objectives. We have
entered into various collaborative agreements for generic products, including
our:

            o     January 2003 agreement with Perrigo, whereby we agreed to
                  manufacture and supply Perrigo our generic versions of
                  Claritin-D 24, Claritin RediTabs and Claritin-D 12, and
                  Perrigo agreed to market such products as store brand OTC
                  products. This agreement followed the FDA's determination that
                  the Claritin line of products should be sold as OTC products,
                  and not as prescription pharmaceuticals. The FDA approved our
                  generic version of Claritin-D 24 in February 2003, with a
                  180-day period of marketing exclusivity, and Perrigo began
                  marketing it in June 2003. The FDA approved our generic
                  version of Claritin RediTabs in November 2003, and Perrigo
                  began marketing it in January 2004. The FDA approved our
                  generic version of Claritin-D 12 in January 2004, and we hope
                  to place Perrigo in a position to launch this product in 2004;

            o     July 2003 Exclusivity Transfer Agreement with Impax and a
                  subsidiary of Teva, through which we are trying to
                  commercialize the value of our ANDAs for generic versions of
                  Wellbutrin SR/Zyban, whether through the sale of our own
                  products or through the sale of Impax's product, which will be
                  sold by Teva. Under this agreement, Impax and Teva will share
                  certain profits with us from the sale of certain of Impax's
                  products for a 180-day period, and we agreed to share certain
                  profits for a 180-day period with them if our products were
                  marketed. Though the agreement originally extended to both the
                  100mg and 150mg strengths of Wellbutrin SR/Zyban, we have
                  since learned that we did not enjoy a marketing exclusivity
                  period for the 100mg strength, as we were not the first to
                  file an ANDA for that strength. Consequently, we will not
                  share in any of the profits from the sale of Impax's 100mg
                  strength of this product, which was approved for sale in
                  January 2004;

            o     September 2003 agreement with Pfizer and Alza Corporation that
                  resolved patent infringement litigation involving our ANDAs
                  for the 2.5mg, 5mg and 10mg strengths of Glucotrol XL
                  (extended-release glipizide). Pursuant to this settlement,
                  Pfizer and Alza dismissed their lawsuits against us, all of
                  the parties exchanged mutual releases, and we received the
                  right to either market the Glucotrol XL product (or any
                  strength thereof) supplied by Pfizer as an authorized generic
                  and/or to manufacture and market our ANDA product(s) in
                  exchange for a royalty, pursuant to a sublicense for relevant
                  Alza patents. In December 2003, we launched all



                                       7
<PAGE>

                  three strengths of Glucotrol XL, supplied by Pfizer. As we
                  will pay less of a royalty to Pfizer and Alza from the sale of
                  our own ANDA product than the product we acquire from Pfizer,
                  we are working toward FDA approval to give us the ability to
                  launch our own versions of this product in the future;

            o     December 2003 agreement with Teva, whereby we agreed that we
                  would be responsible for the formulation, FDA submissions and
                  manufacture of the oral contraceptive products we presently
                  have pending at the FDA, as well as certain others, and Teva
                  would market such products as part of its larger product line
                  in both the United States and Canada. In January 2004, the FDA
                  issued final approval for our generic version of Ortho
                  Cyclen-28 and tentative approval of our generic version of
                  Ortho Tri-Cyclen. We anticipate launching these products
                  through Teva in 2004. Our currently filed or approved ANDAs
                  are for products that currently generate approximately 50% of
                  total oral contraceptive prescriptions; and

            o     Our October 2002 agreement with Genpharm and KUDCo, pursuant
                  to which we and Genpharm relinquished our shared marketing
                  exclusivity rights to the generic versions of the 10mg and
                  20mg strengths of omeprazole (Prilosec), and accelerated the
                  ability of KUDCo to receive FDA approval of the sale of its
                  product. Under that agreement, we earn a portion of KUDCo's
                  net profits, as defined, from sales of KUDCo's product. That
                  share decreased from 15% to 9% on June 9, 2003, and was
                  further reduced to 6.25% in February 2004, as a result of the
                  December 2003 appellate court decision affirming the lower
                  court decision that our version of generic Prilosec infringed
                  valid patents of AstraZeneca plc. We continue to try to
                  commercialize the value of our ANDA for the 40mg strength of
                  generic Prilosec, which is not covered by our agreement with
                  Genpharm and KUDCo, and for which we believe we continue to
                  have marketing exclusivity rights.

         GENERIC PRODUCT PIPELINE

         We are continually evaluating potential generic product candidates by,
among other things, actively reviewing pharmaceutical patents and looking for
opportunities to challenge those patents where we believe such patents are
invalid, or will not be infringed by the application of our drug delivery
technologies or are expiring. Though the majority of such products have
historically been controlled-release products, we are also seeking to develop
niche and immediate-release pharmaceutical products, including oral
contraceptives, to broaden our product line.

         CUSTOMER ARRANGEMENTS

         Consistent with generic industry practice, we have a return policy that
allows customers to return our products for a variety of reasons at various
times. We may also provide credits, known as shelf stock adjustments, to our
customers for decreases that we make to the selling price of our product, in an
amount approximating the decrease in the value of the inventory owned by our
customers as of the date of that price reduction. We also have indirect customer
arrangements, whereby those customers purchase our products at prices negotiated
with us, but obtain those products through wholesalers they independently
select. In these transactions, we provide a chargeback or credit to the
wholesaler in an amount equal to the difference between our invoice price to the
wholesaler and the contract price for the indirect customer (See "CRITICAL
ACCOUNTING POLICIES AND ESTIMATES - REVENUE RECOGNITION"). We have from time to
time entered into long-term supply agreements with certain customers related to
our generic products.




                                       8
<PAGE>

         JOINT VENTURES

         We have established two unconsolidated joint ventures for the
commercialization of generic products, including:

            o     CARAN, which is a 50/50 joint venture with Carlsbad
                  Technologies, Inc. Through this joint venture, Carlsbad
                  developed and manufactures generic versions of Pepcid, Prozac
                  and Mevacor, which we are currently selling under the Andrx
                  Pharmaceuticals, Inc. label; and

            o     ANCIRC, which is a joint venture with Watson Pharmaceuticals,
                  Inc. for the development, manufacture and sale of certain
                  generic products. We are currently selling one ANCIRC product,
                  a generic version of Oruvail, for which we share profits 50/50
                  with Watson. In November 2000, we became solely responsible
                  for all of the additional costs to develop, manufacture and
                  sell the six remaining ANCIRC products, and Watson became
                  entitled, under certain conditions, to a royalty on the net
                  sales we derive from the commercialization of those products,
                  including our generic versions of Glucotrol XL and Procardia
                  XL. We have the right to elect to discontinue our efforts to
                  develop or market those remaining ANCIRC products at any time.

PHARMACEUTICAL DISTRIBUTION OPERATIONS

         Through our Anda, Anda Pharmaceuticals and Valmed (also known as VIP)
subsidiaries, we distribute predominantly generic pharmaceuticals manufactured
largely by others, as well as our own products. We purchase these
pharmaceuticals and market them primarily through our internal sales
representatives mainly to independent pharmacies, pharmacy chains, pharmacy
buying groups and physicians' offices. We offer next day delivery, competitive
pricing, quality products and responsive customer service for our more than
5,700 shelf-keeping units (SKUs), which we believe are the critical elements to
competing effectively in this market. Our telemarketing staff currently consists
of approximately 220 persons who primarily initiate approximately 80,000 phone
calls per week to approximately 18,000 active accounts, supplemented by sales
executives responsible for national accounts. Our customers can also place
orders through AndaNet, AndaMeds and VIPpharm, our internally developed,
proprietary Internet ordering systems and through AndaConnect and VIPConnect,
which are hand-held Palm-ordering devices. During 2003, approximately 12.5% of
our orders were generated through our order entry Internet sites, and
approximately 5.2% of our orders were generated through AndaConnect and
VIPConnect. These order entry systems complement our internal sales
representatives, who are located in Weston, Florida, Grand Island, New York and
Boca Raton, Florida.

         We presently distribute products out of our facilities in Weston,
Florida and Columbus, Ohio. Our Columbus, Ohio distribution center opened in
2002 and is intended to provide us with additional distribution opportunities
nationally. For the year-ended December 31, 2003, approximately 55% of the
distribution sales were shipped out of our Florida facility, while the balance
of the distribution sales were shipped out of Ohio.

         Our distribution operations are utilized for the sale and marketing of
our own generic products, our collaborative partners' products and products we
purchase from third parties.




                                       9
<PAGE>


BRAND PHARMACEUTICALS

         Our brand products are currently sold under the Andrx Laboratories,
Inc. label primarily to wholesalers, warehousing pharmacy chains and pharmacy
benefit managers (PBMs). Unlike generic products, which are generally
substituted at the pharmacy, brand products need to generate demand through a
sales force dedicated to explaining to physicians the pharmaceutical
characteristics of the product, as well as marketing materials. The cost of
maintaining a sales force and promoting a brand pharmaceutical product is
substantial. We expect that, for the near term, our brand products' selling,
general and administrative expenses will continue to exceed the gross profit
generated by our brand operations.

         As of March 1, 2004, we had approximately 250 primary care sales
representatives covering approximately 325 primary care territories, focusing
primarily on primary care physicians. Though we had as many as approximately 430
sales representatives in 2003, we reduced the amount of representatives and
changed the territories they cover in December 2003. We will review and adjust
the number of sales representatives we maintain based on the needs of our
business and products, which is expected to include Pfizer's Cardura XL product,
which we anticipate will be marketed to urologists as well as primary care
physicians.

         In December 2003, we determined that we would focus our brand research
and development efforts on selected opportunities with other pharmaceutical
companies that will leverage our formulation technologies, as we believe our
proprietary controlled-release drug delivery technologies can improve the
characteristics of products; for example, by decreasing undesired side effects,
improving performance, patient compliance or reducing the frequency of
administration. As a result, we reduced the size of our New Jersey brand
clinical research operations.

         Before that change occurred, we developed our own brand product
formulations and used contract research organizations to conduct and manage
clinical studies and to assist us in the preparation of the NDA for those
products. We generally filed an Investigational New Drug Application (IND) with
FDA before we commenced clinical trials. Because our development efforts
typically involved chemical entities that have been previously approved by FDA,
as opposed to new chemical entities, we utilized the Section 505(b)(2) NDA
approval process, which we believe is less expensive and less risky than the
approval process associated with most NDAs. A Section 505(b)(2) NDA must contain
safety and effectiveness studies, but may rely on published reports or prior FDA
determinations that related products are safe and effective (e.g., approval of a
controlled-release version of a previously approved immediate-release drug
product) for those studies. In most cases, our product may receive marketing
exclusivity rights. Conversely, marketing exclusivity rights awarded to another
product may delay approval of our NDA.

         In June 2002, the FDA approved our first NDA, Altocor, an
extended-release lovastatin for lowering cholesterol. Our NDA for Fortamet, an
extended-release metformin tablet for the control of blood sugar in patients
with Type 2 diabetes, and our NDA for a valproate product for the treatment of
manic episodes associated with bipolar disorder, various seizure disorders and
prophylaxis of migraine headaches have both received approvable letters from the
FDA. Fortamet is intended to compete in the oral glucose-lowering market, which
had 2003 U.S. sales of $5.7 billion and our valproate product is intended to
compete with the Depakote family of brand products, which had 2003 U.S. sales of
$800 million. In the case of our valproate product, we are presently involved in
patent infringement litigation, which will also delay the approval and
commercial sale of our product. Though the Fortamet NDA used immediate-release
Glucophage as its reference listed drug, FDA recently advised us that we must
make a patent certification with respect to the Orange Book patents listed for
Glucophage XR. Accordingly, the timing of the FDA's approval of Fortamet depends
upon whether the NDA holder initiates patent infringement litigation within the
45-day period following its receipt of our patent notice,



                                       10
<PAGE>

among other things. We believe that our product does not infringe such patents
and note that the NDA holder did not initiate patent infringement litigation
against the many ANDAs, including our own, that were filed for Glucophage XR. We
are required to pay Sandoz Inc., formerly known as Geneva Pharmaceuticals, Inc.,
a subsidiary of Novartis, additional milestones of $2.0 million upon FDA
approval and $3.0 million upon the launch of Fortamet, as well as royalties on
net revenues from this product (See "RISK FACTORS" and "REGULATION -
PHARMACEUTICALS-NDA PROCESS - BRAND PHARMACEUTICALS" for a description of this
regulatory process and "RISK FACTORS" and "PATENT INFRINGEMENT LITIGATION" for a
discussion of the litigation involving our NDA products).

         Additionally, we presently sell several brand products we acquired or
obtained the rights to market from third parties, including: i) the Entex line
of cough and cold products we acquired in June 2001 from an affiliate of Elan
Corporation, which are prescription-only products that did not require the
submission and approval of an NDA in order to be marketed; ii) the Anexsia pain
products in-licensed from Mallinkrodt, a Tyco Healthcare company, in September
2001 through an eight-year marketing and supply agreement; and iii) the Embrex
pre-natal vitamin, which we acquired through our acquisition of CTEX
Pharmaceuticals, Inc. The Anexsia and Embrex products and some of the Entex
products have generic versions available in the marketplace. On October 17,
2003, FDA issued a draft compliance policy guide with respect to pharmaceutical
products that are presently permitted to be on the market and sold by
prescription without an approved ANDA or NDA, such as the Entex line of
products. This draft guidance is intended to provide notice that once FDA
approves a version of such product, unapproved drug products, such as our Entex
product line, may be subject to FDA enforcement action at any time, and that FDA
will evaluate each product on a case-by-case basis. In determining whether to
permit a grace period, and how long such grace period will be, FDA indicates
that it will consider factors such as: the effects on the public health of
immediate removal; the difficulty of conducting any required studies, and
preparing and obtaining approval of an application; the burden on affected
parties; FDA's available enforcement resources; and any special circumstances.
Though this guidance is only a draft, we are continuing to assess this matter,
including whether to seek FDA approval to market some or all of the Entex line
of products as prescription products or OTC products, as well as the FDA's
requirements for such submissions.

    COLLABORATIVE AGREEMENTS AND STRATEGIC ALLIANCES - BRAND PRODUCTS

         We believe that our proprietary drug delivery technologies provide the
opportunity to enhance the commercial value of existing drug products and new
drug candidates. We also believe that our sales force can be utilized to promote
or co-promote products developed by others, whether by ourselves or in
conjunction with the marketing or co-marketing of such other company's products.
Moreover, since the development and marketing processes for brand
pharmaceuticals are costlier than those for generic products, and could involve
synergies with products currently being marketed or developed by other
pharmaceutical companies, we will, from time to time, evaluate or seek to enter
into collaborative arrangements with other pharmaceutical companies to increase
revenues, to reduce costs or otherwise gain mutual benefits. We also are
considering acquiring or licensing additional brand products for our sales force
to promote and/or entering into co-promotion or contract sales arrangements with
respect to our products or other companies' products. Examples of our
collaborative agreements include our:

            o     November 2003 supply and distribution agreement with Pfizer to
                  further expand our brand product portfolio. Under the
                  agreement, we acquired the right to market Cardura XL, a
                  sustained-release formulation of doxazosin mesylate, which is
                  the subject of an NDA filed by Pfizer for the treatment of
                  benign prostatic hyperplasia (BPH). In exchange for the right
                  to market the product for five years, we agreed to pay Pfizer
                  $35 million, of which $10 million has been paid (and is
                  refundable under certain circumstances), and $25 million is
                  payable if the FDA approves the product in 2004 with the
                  certain agreed upon minimum labeling claims. We also agreed to
                  (i) purchase certain annual minimum quantities of Cardura XL
                  at an established price



                                       11
<PAGE>

                  for the first three years following the NDA approval totaling
                  approximately $150 million, and (ii) provide a minimum number
                  of annual physician details during the term of the agreement;

            o     December 2003 agreement with Takeda whereby we agreed to
                  co-develop and later manufacture a combination product
                  consisting of Takeda's Actos (pioglitazone) and our
                  extended-release metformin, each of which is administered
                  once-a-day for the treatment of Type 2 diabetes. Takeda will
                  have exclusive worldwide marketing rights for this combination
                  product and will be responsible for regulatory approvals. Upon
                  execution of the agreement, we were entitled to receive $10
                  million as an initial milestone payment. Upon approval of the
                  NDA and the manufacture and marketing of the combination
                  product, we will receive a transfer price for the supply of
                  the combination product and a royalty as well as certain
                  additional performance payments related to Takeda's sale of
                  the combination product; and

            o     1999 agreement granting Sandoz the U.S. and selected
                  international marketing rights for Fortamet and selected
                  international marketing rights for Altocor. In 2001, we
                  reacquired those rights from Sandoz, and in exchange agreed to
                  make certain milestone payments and royalty payments on net
                  sales in the U.S. for Fortamet for the first five years after
                  Fortamet's commercialization. We recorded our first milestone
                  payment of $2.0 million in December 2001, and recorded our
                  second milestone of $3.0 million in the 2002 fourth quarter.
                  Additional milestones of $2.0 million and $3.0 million will be
                  due to Sandoz upon FDA approval and our launch of Fortamet,
                  respectively.


          MANAGED CARE

         In addition to the efforts of our brand sales representatives, the
marketing of our brand products requires us to gain access to health
authorities, pharmacy benefit managers (PBMs) and managed care organizations'
(MCO) formularies (lists of recommended or approved medicines and other
products) and reimbursement lists. It is estimated that over half the U.S.
population now participates in some version of managed care. The purchasing
power of MCOs has been increasing, both due to their growing numbers of enrolled
patients and the consolidation of those organizations into fewer, larger
entities. Because of the size of the patient population covered by MCOs, the
marketing of prescription drugs to them and to the PBMs that serve many of those
organizations is important to our brand business.

         MCOs and PBMs typically develop formularies to reduce their cost for
medications. Inclusion on formularies can be based on the prices and therapeutic
benefits of the available products, but can also be influenced by a variety of
other factors, including rebates offered by pharmaceutical companies and
limitations on the amount of products included within a particular therapeutic
class. Exclusion of a product from a formulary can lead to sharply reduced usage
in the MCO patient population.


OUR PROPRIETARY DRUG DELIVERY TECHNOLOGIES

         Certain of our pharmaceutical products (both generic and brand) utilize
our proprietary controlled-release drug delivery technologies to control the
release characteristics of a variety of orally administered drugs.
Controlled-release products are formulations that release active drug compounds
in the body gradually and predictably over a 12 to 24-hour period and therefore
need be taken only once or twice daily, as opposed to immediate-release products
that have to be taken 3-4 times per day. Controlled-release products typically
provide benefits over immediate-release drugs.




                                       12
<PAGE>


         We have 10 proprietary drug delivery technologies that have been
patented for certain applications or for which we have filed for patent
protection for certain applications. These include:

         o        Pelletized Pulsatile Delivery System

         o        Single Composition Osmotic Tablet System

         o        Solubility Modulating Hydrogel System

         o        Delayed Pulsatile Hydrogel System

         o        Stabilized Pellet Delivery System

         o        Stabilized Tablet Delivery System

         o        Granulated Modulating Hydrogel System

         o        Pelletized Tablet System

         o        Porous Tablet System

         o        Modified Antihistamine/Decongestant Combination System

PATENTS, TRADEMARKS AND LICENSES

         The pharmaceutical industry has traditionally placed considerable
importance on obtaining patent and trade secret protection for significant new
technologies, products and processes, and we believe that patents and other
proprietary rights are important to our business. Our policy is to file patent
applications to protect our products, technologies, inventions and improvements
we consider important to the development of our business. We also rely upon
trade secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain our competitive position.

         We hold numerous U.S. and foreign patents and expect to continue to
file U.S. and foreign patent applications to protect our intellectual property.
As of December 31, 2003, we had 96 patents issued, allowed or applied for in the
U.S. and 127 internationally, and had exclusively licensed additional U.S. and
foreign patents and patent applications from others. Our success depends, in
part, on our ability to obtain U.S. and foreign patent protection for our
products, to preserve our trade secrets and proprietary rights and to operate
without infringing on the proprietary rights of third parties or having third
parties circumvent our rights.

         In addition, companies having competing brand pharmaceutical products
may bring litigation against ANDA or some NDA applicants seeking approval to
manufacture and market generic forms of their brand products. These companies
allege patent infringement or other violations of intellectual property rights
as the basis for filing suit against the applicant, thereby delaying or
preventing the introduction of the ANDA or NDA applicant's product (See "RISK
FACTORS" AND "REGULATION - PHARMACEUTICALS").

RAW MATERIALS

         The active chemical raw materials, essential to our business, are
generally readily available from multiple sources. Certain raw materials used in
the manufacture of our products are, however, available from limited sources,
and in some cases, a single source. We have at times experienced problems as a
result of a lack of raw material availability. Such problems result from the
supplier's delay in providing such materials, delays in getting such materials
through customs, the closure of a particular materials source and the
unavailability of a comparable replacement, and latent defects in the materials
we utilize in certain of our products and product candidates. The impact of such
delays and problems are heightened by the need for FDA to approve changes in raw
materials and raw material suppliers prior to the use of such new material.



                                       13
<PAGE>


MANUFACTURING

         We presently operate manufacturing facilities in Florida. In December
2002, we acquired a 500,000 square foot manufacturing facility in Morrisville,
North Carolina, which we anticipate using in certain of our operations
commencing mid-2005. We are currently expanding our manufacturing capacity, both
by converting portions of our existing Florida facilities into additional
manufacturing space, and by renovating and equipping our North Carolina
facility. The timely completion of these efforts is necessary for us to have
sufficient manufacturing capacity for the anticipated quantities of our existing
products and the products we expect to launch in the coming years.

         Our manufacturing and other processes utilize sophisticated equipment,
which sometimes requires a significant amount of time to obtain and install.
Although we endeavor to properly maintain our equipment and our inventory of
spare parts, our business could suffer if certain manufacturing or other
equipment, or a portion or all of our facilities were to become inoperable for a
period of time. This could occur for various reasons, including catastrophic
events such as hurricane or explosion, but also equipment failures and/or delays
in obtaining components or replacements thereof, delays in receiving FDA
approval of our North Carolina facility, as well as equipment issues,
construction delays or defects and other events, both within and outside of our
control.

         We sometimes file our ANDA or NDA based on study results utilizing
product batches that are smaller than what we anticipate may be required for the
commercial launch of that product. Thus, in order to manufacture these products
for commercial launch, we are required to "scale-up" our manufacturing process
for use on larger equipment, in accordance with FDA regulations. Our business
could suffer if we are unable to successfully scale-up any of our significant
products or if successful scale-up of any such product is delayed or cannot be
achieved.

         We continue to make improvements in the efficiency of our manufacturing
operations in order to meet the market demand for our current products and
position ourselves to plan appropriately for the manufacturing of our future
products. Operating on this basis and meeting the anticipated market demand
requires minimal equipment failures and product rejections. Moreover, because we
manufacture products that employ a variety of technology platforms, certain of
our manufacturing capabilities may at times be over-utilized, while others may
be under-utilized.

         To address these problems, we have, and continue to focus our efforts
on: (i) optimizing our processes and reducing equipment failures and thereby
reducing product rejections; (ii) hiring additional experienced manufacturing
operations personnel, and reducing the turnover of manufacturing operations
personnel; (iii) assuring compliance with FDA's current Good Manufacturing
Practices (cGMP) regulations; (iv) increasing personnel training,
accountability, development and expertise; (v) implementing a more fully
integrated use of our operating systems, in anticipation of our migration to a
JD Edwards Enterprise Resource Planning (ERP) system; (vi) evaluating the
commercial viability of producing certain products that we anticipate will
generate a relatively small amount of profit as compared to the utilization of
resources in order to allow us to optimize our output and maximize our
profitability; (vii) transferring production (or portions thereof) for certain
products to third parties; and (viii) renovating and acquiring additional
facilities to increase or optimize production.





                                       14
<PAGE>


         Our pharmaceutical manufacturing operations are required to comply with
cGMP. cGMP encompasses all aspects of the production process, including
validation and record keeping, in addition to standards for facilities,
equipment and personnel, and involves changing and evolving standards.
Consequently, continuing compliance with cGMP can be a particularly difficult,
extensive and expensive part of our manufacturing operations. Similar cGMP
regulations, and other requirements, apply to products that we manufacture for
sale in certain other countries. On March 3, 2004, following an inspection of
our Davie, Florida manufacturing facility, the FDA issued a Form 483 notice to
us providing observations by the inspector concerning our compliance with cGMP,
including certain observations that were also reflected in the August 2000
Warning Letter. We are currently reviewing each of those observations and, as is
customary, will prepare a written response with an explanation of proposed
corrective action for each of the FDA's observations. (See "RISK FACTORS").

         As a result of all of the foregoing factors, we may at times have
difficulty fulfilling all of the market demand for our products and having
pre-launch quantities of our product candidates available when we obtain FDA
approval to market our products (See "RISK FACTORS").

INFORMATION SYSTEMS

         We have experienced significant expansion of all of our operations,
which has required the expansion, upgrading and improvement of our
administrative, operational and management systems, controls and resources. To
achieve this objective, we began the implementation of a JD Edwards ERP software
package and related hardware in 2002. JD Edwards is a fully integrated software
system that is intended to allow information to be shared and utilized
throughout Andrx. We anticipate that the majority of the JD Edwards software
package will be implemented throughout 2004. Total capital expenditures and
related costs for this project are estimated to be $25 million.

         In 2002, Andrx also began the implementation of the PeopleSoft human
resources and payroll system. PeopleSoft is an enterprise-wide software package
that is intended to enable us to better manage, optimize, and leverage our
employees and thereby achieve a higher level of business performance. The
payroll software modules were successfully implemented among our divisions in
the 2003 first quarter. We estimate the total cost of this project to be $4
million. Implementation of human resources software modules began in 2003 and we
anticipate completion of the modules in 2004.

         Following the completed implementation of these programs, we will
continue to incur costs to support and modify these systems for our expanding or
changing operations. We also intend to enhance the information systems
capabilities of our distribution operations and to invest further in new
technology and systems to enhance customer and supplier relationships and
internal efficiencies.

REGULATION - PHARMACEUTICALS

         ANDA PROCESS - GENERIC PHARMACEUTICALS

         In our generic operations, we apply our proprietary technology
processes and formulations to develop a product that will reproduce the brand
product's physiological characteristics (i.e., the rate and extent of absorption
into the bloodstream), but not infringe upon the patents of the brand owner or
other innovator of the NDA. In connection with this process, we conduct studies
to establish that our product is bioequivalent to the brand product, and obtain
legal advice that our product does not infringe the NDA owner's or the
innovator's patents or that such patents are invalid or unenforceable. FDA
approval is required before a generic version of a



                                       15
<PAGE>

previously approved drug or certain new dosage forms of an existing drug can be
marketed. Approval for such products generally is sought using an ANDA. In most
cases bioavailability and bioequivalence studies must be conducted in support of
the ANDA and clinical studies are not required. Bioavailability indicates the
rate of absorption and levels of concentration of a drug in the blood stream.
Bioequivalence compares the bioavailability of one drug product with another
and, when established, indicates that the rate of absorption and levels of
concentration in the body are substantially equivalent to the previously
approved reference listed drug. An ANDA may be submitted for a drug product on
the basis that it is bioequivalent to a previously approved drug product or, in
the case of a new dosage form, that it is suitable for use for the indications
specified without the need to conduct additional safety or efficacy testing.

         The Drug Price Competition and Patent Restoration Act of 1984, known as
the Waxman-Hatch Amendments, require that we submit an ANDA to the FDA for each
generic product we seek to market. The ANDA contains a substantial amount of
information about the proposed product's formulation, ingredients, chemistry and
manufacturing controls, stability and the bioavailability and bioequivalence
studies conducted on such product, all of which is reviewed by the FDA's Office
of Generic Drugs (OGD). In addition, the ANDA is required to contain the ANDA
applicant's certification concerning each patent that has been listed for the
reference brand product in the Orange Book. If there is no patent listed in the
Orange Book, the ANDA applicant so states by submitting what is referred to as a
Paragraph I certification. If the patent listed in the Orange Book has expired,
the ANDA applicant so states by submitting what is referred to as a Paragraph II
certification. If the ANDA applicant intends to wait until the expiration of the
patent listed in the Orange Book before it intends to market its product, the
ANDA applicant so states by submitting what is referred to as a Paragraph III
certification. And, if the ANDA applicant believes that the listed patent is
invalid or unenforceable, or that its product does not infringe such patent(s),
the ANDA applicant so states by submitting what is referred to as a Paragraph IV
certification in its ANDA.

         If a Paragraph IV certification is made, the ANDA applicant must also
send a notice containing its factual basis for its Paragraph IV certification to
the NDA owner and any patent holder. The NDA owner or patent holder may then
initiate a legal challenge against the ANDA applicant for patent infringement.
Before the December 2003 Amendments to Waxman-Hatch were enacted, if the NDA
owner or patent holder asserted a patent challenge within 45 days of their
receipt of notice of the ANDA applicant's Paragraph IV certification, FDA was
prevented from approving that ANDA until the earlier of 30 months, the
expiration of the patent, or when the infringement case concerning each such
patent was favorably decided in an ANDA applicant's favor or such shorter or
longer period as may be ordered by a court. This prohibition is generally
referred to as the 30-month stay. In some cases, NDA owners and patent holders
obtained additional patents for their products after an ANDA had been filed, but
before that ANDA received final marketing approval, and then initiated a new
patent challenge, which resulted in more than one 30-month stay.

         The December 2003 Amendments to Waxman-Hatch were intended to eliminate
certain unfair advantages of patent holders in the implementation of
Waxman-Hatch. As a result of those amendments, the NDA owner remains entitled to
an automatic 30-month stay if they initiate a patent infringement lawsuit within
45 days of their receipt of notice of our Paragraph IV certification, but only
if their patent infringement lawsuit is directed to patents that were listed in
the Orange Book before the ANDA was filed. An ANDA applicant is now permitted to
take legal action to enjoin or prohibit the listing of certain of these patents
as a counterclaim in response to a claim by the NDA owner that its patent covers
its approved drug product. By granting 30-month stays only with respect to
patent infringement claims for patents that were listed in the Orange Book
before an ANDA was filed, the December 2003 amendments are intended to reduce
the potential for multiple 30-month stays. Some believe, however, that without
the incentive of a 30 month stay to encourage an early resolution of patent
infringement claims, ANDA applicants will be at a greater risk that the NDA
holder will initiate patent litigation shortly before or soon after the generic
version of its product is marketed.



                                       16
<PAGE>

         In addition, an FDA regulation that became effective in August 2003
further defines the types of patents that may be listed in the Orange Book and
requires increased disclosure requirements for listed patents in an effort to
decrease the number of improperly listed patents. While most of these changes
should help prevent improperly listed patents, the effectiveness of this
regulation and the December 2003 amendments is unclear, and is likely to result
in additional litigation.

         If an ANDA applicant is the first to file an ANDA with a Paragraph IV
certification, and provide appropriate notice to the FDA, the NDA holder and all
patentees for a particular generic product, the applicant may be awarded a
180-day period of marketing exclusivity against other companies that
subsequently file ANDAs for that same product. We believe this period of
marketing exclusivity can provide an opportunity for the successful patent
challenger to build its market share, to recoup the expense of patent litigation
and to realize greater profit margins, and in some cases, to gain value by
relinquishing or transferring this marketing exclusivity right to others. In
addition, once that exclusivity period has lapsed, we believe that the marketer
of the first commercialized product may more effectively defend its market share
position against future competition. However, our ability to secure the benefit
of this exclusivity period, and the actual benefit we might experience from the
exclusivity period, depends on a variety of factors, some beyond our control,
such as: the timing of FDA approval; whether other ANDA applicants share that
exclusivity; patent litigation related to our product and competitors' products;
and whether the brand product will also be marketed as a generic (sometimes
referred to as an authorized generic). New court decisions, FDA interpretations,
legislative changes and when an ANDA was filed all affect, among other things,
how this exclusivity period is to be awarded, how it is affected by other ANDA
applicants, and the benefit, if any, which may be obtained from the 180-day
marketing exclusivity period.

         As an example, FDA had previously taken the position that it could
award "shared" 180-day marketing exclusivity if different ANDA applicants were
first-to-file Paragraph IV certifications to different patents listed in the
Orange Book for the same product. This interpretation was recently rejected by a
United States District Court, which determined that exclusivity is to be awarded
on a per product basis rather than on a per patent basis. FDA has announced that
it will challenge that court's ruling, and will continue to rely on its earlier
interpretation for ANDAs filed before December 8, 2003, when the December 2003
Waxman-Hatch amendments prospectively eliminated shared exclusivity. Until this
issue is resolved, it is unclear how the 180-day marketing exclusivity period
will apply to certain of our pending ANDAs. For ANDAs that are filed on or after
December 8, 2003, the 180-day marketing exclusivity period will only be awarded
to the first ANDA applicant(s) to assert a Paragraph IV certification as to any
patent listed in the Orange Book for that product (including multiple ANDA
applicants who file the first Paragraph IV certification on the same day).
However, FDA will award shared 180-day marketing exclusivity to multiple ANDA
applicants who all file the first Paragraph IV certification on the same day.

         The new legislation also modifies the rules governing when generic
products are eligible for 180-day exclusivity periods and when the 180-day
exclusivity period is triggered or forfeited. Prior to the legislation, the
180-day marketing exclusivity period was triggered upon the first commercial
marketing of the ANDA or a court decision holding the patent invalid,
unenforceable or not infringed. For ANDAs accepted for filing before March 2000,
that court decision had to be final and non-appealable, for ANDAs accepted for
filing after March 2000, any court decision, including a district court
decision, could trigger exclusivity, and in all cases, the court decision
trigger did not have to involve the first ANDA applicant, but could be a court
decision by a subsequent ANDA applicant. The new legislation retroactively
applies a final and non-appealable court decision trigger for all ANDAs filed
before December 8, 2003. As for ANDAs filed after December 8, 2003, exclusivity
is only triggered upon the first commercial marketing of the ANDA product, but
that exclusivity may be forfeited under certain circumstances, including, if the
ANDA is not marketed within a certain timeframe after a final and non-



                                       17
<PAGE>

appealable court decision by the first-filer or another ANDA applicant, or if
the FDA does not tentatively approve the first-filer's ANDA within 30 months.

          Regulatory approval of an ANDA may also be affected by the grant of a
period of "pediatric exclusivity." Pediatric exclusivity rewards brand
pharmaceutical companies for conducting research in a pediatric population,
through the grant of an additional six months of exclusivity, which is attached
to any patent or market exclusivity period protecting its product. Thus, where
pediatric exclusivity is requested by a brand company and granted by FDA, final
marketing approval could be delayed by six months.

         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 FDA in the approval process for generic
drugs. We cannot predict at this time whether FDA will make any changes to the
ANDA procedures as a result of such petitions, ongoing rulemakings, or
litigation or the effect that such changes may have on us. Any changes in FDA
regulations, policies or procedures may make ANDA approvals more difficult or
otherwise have a significant adverse effect on our business.

         NDA PROCESS - BRAND PHARMACEUTICALS

         Approval of a new drug occurs in the context of FDA review of an NDA.
The NDA must contain complete pre-clinical, clinical safety and efficacy data,
as well as reference to such data or literature. Before clinical testing can
begin, stringent governmental requirements for pre-clinical evaluation must be
satisfied. Pre-clinical data are typically obtained from studies in animal
species, as well as laboratory studies, and are submitted to FDA in an IND. The
pre-clinical data must provide an adequate basis for evaluating both the safety
and the scientific rationale for the initiation of clinical trials (i.e., trials
in humans) and demonstrate that such studies would not expose subjects to an
unreasonable or significant risk of illness or injury.

         Clinical trials are typically conducted in three sequential phases,
Phase I, Phase II, and Phase III, although the phases may overlap. The process
of completing clinical trials for a new drug typically takes several years and
requires the expenditure of substantial resources. Preparing an NDA involves
considerable data collection, verification, analysis and expense. The approval
process is affected by a number of factors, including the risks and benefits of
a drug product as demonstrated in clinical trials, the severity of the target
disease or health condition and the availability of alternative treatments. FDA
or other health authorities may deny approval of an NDA if the regulatory
criteria are not satisfied, or may require additional testing or information
before an NDA will be approved. The safety and effectiveness testing necessary
to obtain approval of an NDA is time-consuming and expensive.

         We have submitted our internally developed brand name
controlled-release pharmaceutical products using a NDA procedure that is
permitted by Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act. A
Section 505(b)(2) NDA must contain safety and effectiveness studies, but may
rely on published reports or prior FDA determinations that related products are
safe and effective (e.g., approval of a controlled-release version of a
previously approved immediate-release drug product) for those studies. Thus, by
eliminating the need for certain duplicative testing, the Section 505(b)(2) NDA
process may significantly reduce the time and expense of new drug development.




                                       18
<PAGE>


         There are limitations on the use of Section 505(b)(2) NDAs, however.
First, patent listing/certification requirements and marketing exclusivity
awarded to reference or competitor products may result in the lengthy and
uncertain delay of approvals similar to those described above for ANDAs. Second,
there currently is uncertainty concerning the extent to which Section 505(b)(2)
NDAs may rely upon prior FDA findings that reference listed drugs are safe and
effective for approved uses. There may therefore be limitations on a Section
505(b)(2) NDA applicant's ability to innovate without conducting substantial
clinical testing.

         NDA products, including Section 505(b)(2) NDAs, may qualify for
specific patent and marketing exclusivity protections against competitive
products submitted for approval via the Section 505(b)(2) NDA or ANDA processes.

PATENT INFRINGEMENT LITIGATION

         Patent litigation can be a part of the business of bringing some
generic, or even brand, pharmaceuticals to market, and if such action is filed
within the 45-day period prescribed by law, such litigation can result in a
delay in FDA's ability to approve the marketing of a pharmaceutical product.
Numerous patent infringement actions have been filed against us, and we have
been successful in resolving most of such litigation matters, either through a
court decision or through settlement, in a manner that permits our product to be
marketed. Examples include our generic versions of: Dilacor XR, Cardizem CD,
Glucotrol XL, Tiazac, Remeron, Claritin-D 24, Claritin-D 12 and Claritin
RediTabs. We did not successfully resolve our patent infringement litigation
involving our generic version of Prilosec and are currently unable to market
such product. We are continuing to litigate patent issues pertaining to our
generic versions of Wellbutrin SR/Zyban (we obtained a favorable summary
judgment at the trial court, but the Court of Appeals vacated and remanded that
judgment), Naprelan (we prevailed at the trial court, and an appeal is pending),
Paxil, Monopril, Monopril HCT and Toprol XL (no court decision as of March
2004), as well as our brand valproate product (no court decision as of March
2004).

         Patent litigation was also filed against Andrx, and Carlsbad, one of
our joint venture partners, with respect to the generic version of Pepcid that
Carlsbad developed, and we sell. That litigation was resolved through a
settlement.

         We anticipate that additional actions may be filed as we or companies
we collaborate with file additional ANDAs containing Paragraph IV
certifications. Patent litigation may also affect NDAs that we file in the
future.

         The outcome of patent litigation or any litigation is difficult to
predict because of the uncertainties inherent to litigation. Our business could
be harmed by the delay in obtaining FDA approval to market our products as a
result of patent litigation (both with respect to patents listed with FDA when
the ANDA was filed and thereafter), the delay in obtaining judicial decisions in
such litigation, the expense of litigation whether or not we are successful, or
an adverse outcome of such litigation. Moreover, this litigation or other events
may precipitate additional litigation affecting the marketing of our products.

         We often encounter substantial delay in obtaining judicial decisions in
ANDA Paragraph IV litigation. Such delay could cause us to decide in the future
to launch a product prior to final resolution of the pending litigation. The
risk involved in doing so can be substantial because the remedies available to
the owner of a patent for infringement include, among other things, damages
measured by the profits lost by the patent owner and not by the profits earned
by the infringer. Because of the discount pricing typically involved with
generic products, patented brand products generally realize a higher profit
margin than generic products. In the case of a willful infringer, the definition
of which is unclear, such damages may be trebled. We believe that this profit
differential can act as a deterrent to the settlement of patent litigation on
terms that will allow our products to be marketed upon the settlement of patent
litigation. Thus, we have faced, and will continue to be faced with, the
decision of whether, and in what manner, time-frame or other circumstances, we



                                       19
<PAGE>
should launch our product prior to the conclusion of patent litigation, or to
discontinue selling our product in the face of new patent litigation. In making
these determinations, we intend to consider and balance what we then believe are
the relevant considerations and factors, including: (i) the risk that our
product will be found to infringe the brand product, the size of the market, and
the claim for damages that could result from the sale of an infringing product,
and other costs, including inventory; (ii) the potential claim for damages that
could result from the sale of an infringing product against our current capital
resources, and our future capital needs; (iii) the risk of being enjoined from
making such sales and thereby losing our exclusivity rights for such product;
(iv) the possibility that launching the product may increase the incentive for
the owner of the patented brand product to settle the pending litigation on a
basis that would allow us to continue to market our product without further
legal risk; and (v) the lost opportunity cost if we do not have available launch
quantities of our product when the patent litigation is ultimately resolved,
particularly in instances where that court decision starts the 180-day period of
marketing exclusivity for us, and additional competition awaits the expiration
of that period of marketing exclusivity.

         OMEPRAZOLE (PRILOSEC)

         In 1998, we filed an ANDA seeking approval from the FDA to market
omeprazole, our generic version of Prilosec. In May 1998, Astra Zeneca filed
suit under the provisions of the Waxman-Hatch Amendments alleging patent
infringement. The matter was tried in the U.S. District Court for the Southern
District of New York along with the consolidated claims of three other ANDA
applicants. In October 2002, the court entered an order and an opinion finding
that Astra's `505 and `230 patents are valid and that the generic versions of
Prilosec developed by Genpharm, Cheminor and us infringe those patents. The
court also determined that the generic version of Prilosec developed by KUDCo
does not infringe the two patents. The court specifically deferred ruling on the
`281 patent that was asserted solely against our product, and has not issued any
opinion on Astra's claims for willful infringement of the `505 and `230 patents
or on Astra's request for attorneys' fees. We appealed the district court's
opinion to the Federal Circuit Court of Appeals and on December 11, 2003, the
Federal Circuit affirmed the district court's opinion that Astra's patents are
valid and infringed by the products developed by Genpharm, Cheminor and us.
Following the district court decision, but well before the appellate court
decision, Astra advised the district court that it believes it may be entitled
to damages as a result of our decision to build an inventory of our product
prior to the court's determination. Since that statement was made, we are
unaware of any effort on the part of Astra to enforce such claims.

         NAPROXEN SODIUM (NAPRELAN)

         In 1998, we filed an ANDA seeking approval from FDA to market naproxen
sodium, our generic version of Naprelan. Elan sued us for patent infringement in
October 1998. The matter was tried in the U.S. District Court for the Southern
District of Florida and on March 14, 2002, the court issued an order of final
judgment in our favor invalidating the patent in controversy. Elan filed a
motion asking the court to reconsider and reverse its invalidity ruling and we
filed a motion asking that the court issue a ruling on our defenses of
non-infringement. On March 24, 2003, the court entered an order denying both
Elan's motion for reconsideration and our motion to amend the judgment. Elan has
appealed the district court's opinion invalidating our patent and we have
appealed the district court's order dismissing our antitrust counterclaims and
for certain other matters.




                                       20
<PAGE>


         PAROXETINE HYDROCHLORIDE (PAXIL)

         We filed an ANDA seeking FDA approval to market paroxetine
hydrochloride 40mg, our generic version of Paxil 40mg., and in June 2001,
SmithKline Beecham Corporation and Beecham Group plc sued us, and our raw
material supplier, in the U.S. District Court for the Eastern District of
Pennsylvania for patent infringement. We later amended our ANDA to add the 10mg,
20mg and 30mg strengths of paroxetine hydrochloride and in November 2003,
SmithKline filed a new infringement complaint against us in the United States
District Court for the Eastern District Pennsylvania in connection with those
lower strengths. These cases and several other cases related to other companies'
ANDAs for generic versions of Paxil have been consolidated for pre-trial
discovery purposes only.

         VALPROATE (DEPAKOTE)

         In December 1999, we filed an ANDA seeking FDA approval to market
valproate sodium, a generic version of Depakote. In April 2000, Abbott
Laboratories sued us for patent infringement in the U.S. District Court for the
Southern District of Florida in connection with our ANDA for our generic version
of Depakote. As a result of a dispute with the FDA as to what constituted the
active ingredient in our product, we withdrew our ANDA and filed a 505(b)(2)
application in March 2003. In May 2003, Abbott filed suit against us in
connection with our new application. Both the ANDA and NDA cases were
consolidated, but the lawsuit pertaining to our ANDA product was dismissed
without prejudice. Consequently, the trial will only pertain to our NDA product.

         BUPROPION HYDROCHLORIDE (WELLBUTRIN SR/ZYBAN)

         In June 1999, we filed an ANDA seeking FDA approval to market bupropion
hydrochloride, our generic versions of Wellbutrin SR/Zyban. In September 1999,
GlaxoSmithKline filed suit against us in the U.S. District Court for the
Southern District of Florida claiming patent infringement. In February 2002, the
U.S. District Court for the Southern District of Florida granted our motion for
summary judgment of non-infringement with respect to Wellbutrin SR/Zyban and
denied Glaxo's cross-motion for summary judgment. Glaxo appealed the district
court's decision and in September 2003, the U.S. Court of Appeals for the
Federal Circuit vacated the summary judgment in favor of us and remanded the
case back to the U.S. District Court for the Southern District of Florida for
further proceedings.

         LORATADINE (CLARITIN-D 24/REDITABS/D 12)

         We filed ANDAs with FDA seeking approval for our generic versions of
Claritin-D 24, Claritin RediTabs and Claritin-D 12 in September 1999, September
2000 and July 2001, respectively. Schering-Plough sued us in the U.S. District
Court for New Jersey claiming that our ANDA for Claritin-D 24 infringed two of
its patents, a metabolite patent and a formulation patent, and with respect to
Claritin RediTabs and D 12, claiming infringement only of the metabolite patent.
The district court entered final summary judgment in our favor with respect to
the metabolite patent, finding the patent invalid. Schering-Plough appealed that
judgment and in August 2003, the U.S. Court of Appeals for the Federal Circuit
affirmed the lower court's opinion. This decision is final. With respect to the
formulation patent at issue for the D 24 product, in October 2003, the parties
reached a settlement calling for the dismissal of the litigation, with prejudice
and the payment of a non-material amount by us.




                                       21
<PAGE>


         GLIPIZIDE (GLUCOTROL XL)

         We filed an ANDA for our generic version of Glucotrol XL in April 2001,
and in July 2001, were sued in the U.S. District Court for the Southern District
of Florida by Pfizer and Alza Corporation for alleged infringement of several
patents. In September 2003, the parties reached a settlement and entered into a
sublicense/supply agreement. As a result of this settlement, all claims by
Pfizer and Alza against us were dismissed.

         FOSINOPRIL SODIUM AND FOSINOPRIL HCTZ (MONOPRIL AND MONOPRIL HCT)

         In February 2003, we filed ANDAs seeking FDA approval to market
fosinopril sodium tablets that are bioequivalent to monopril and fosinopril
sodium hydrochlorathiazide tablets that are bioequivalent to Monopril HCT. On
April 10, 2003, Bristol-Myers Squibb Company and E.R. Squibb and Sons, LLC filed
identical suits against us in the U.S. District Court for the Southern District
of New York and Florida for alleged patent infringement. The New York action has
been dismissed and transferred to Florida. Trial is scheduled to commence in
April 2004.

         METOPROLOL SUCCINATE (TOPROL-XL)

         In 2003, we filed an ANDA seeking FDA approval to market metoprolol
succinate extended-release tablets in 50mg strength, our generic version of
Toprol-XL. In February 2004, AstraZeneca AB, Aktiebolaget Hassle and AstraZeneca
LP sued us for patent infringement in the U.S. District Court for the District
of Delaware.

SEASONALITY

         There are no significant seasonal aspects to our business, except that
shipments of pharmaceutical products indicated for cold and flu symptoms are
typically higher during the fourth quarter as customers supplement inventories
in anticipation of the cold and flu season.

PERSONNEL

         As of December 31, 2003, Andrx had approximately 2,100 employees. The
following chart generally reflects the areas in which such personnel are
engaged:


<TABLE>
<CAPTION>
                                                                                              Corporate &
                                                                                              Information
                                       Distribution         Generic             Brand           Systems           Total
                                       --------------    ---------------      ----------    ----------------    ----------
<S>                                    <C>                <C>                 <C>            <C>                <C>
Sales & Marketing                                220                 10             330                   -           560
Research and Development                           -                138              13                   -           151
Manufacturing                                      -                310               -                   -           310
Quality and Regulatory Affairs                     -                294               8                   -           302
Administration                                   175                 85              18                 154           432
Warehouse/Shipping/Maintenance                   190                153               2                   -           345
                                       --------------    ---------------      ----------    ----------------    ----------
                                                 585                990             371                 154         2,100
                                       ==============    ===============      ==========    ================    ==========

</TABLE>



                                       22
<PAGE>

                                  RISK FACTORS

         YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER
INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN THIS FORM 10-K. ANY OF
THESE RISKS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS, FINANCIAL
CONDITION AND CASH FLOWS. ANY OF THESE EVENTS COULD ALSO CAUSE THE MARKET PRICE
OF OUR COMMON STOCK TO DECLINE.

RISKS RELATING TO ANDRX

         AS WE ARE DEPENDENT ON A SMALL NUMBER OF PRODUCTS, A LOSS OF REVENUES
FROM CERTAIN PRODUCTS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS,
FINANCIAL CONDITION AND CASH FLOWS.

         Currently, our overall level of profitability depends in large part on
a relatively small number of products. If the revenues and profitability we
derive from these products, and particularly our generic version of Cardizem CD,
and to a lesser extent our generic versions of Tiazac, Claritin-D 24, Glucophage
and Glucotrol XL (which we currently purchase from Pfizer), were to be reduced
as a result of pressure from competitive products, price reductions and/or
reduced market share, loss of exclusivity protection (if applicable in the
future), unexpected side effects or regulatory proceedings, it could adversely
affect our results of operations, financial condition and cash flows. For
example, as new competitors to Cardizem CD and Tiazac arise, which may occur by
mid-2004, this increased competition or other factors may significantly affect
net sales and gross profit of our generic version of Cardizem CD and/or Tiazac
and their significant contribution to our results of operations.

         THE PHARMACEUTICAL INDUSTRY IS HIGHLY COMPETITIVE WITH RESPECT TO
MARKET SHARE, AND IS AFFECTED BY NEW TECHNOLOGIES, FINANCING AND NUMEROUS OTHER
FACTORS.

         Our competitors vary depending upon our operations, and many of our
competitors have longer operating histories and greater financial, research and
development, marketing and other resources than we do. We expect to be subject
to competition from numerous other entities that currently operate or intend to
operate in the pharmaceutical industry. We also face competition for the
acquisition or licensing of new product opportunities from other companies.

         Our sales efforts for generic products compete with domestic and
international companies and generic divisions of large brand pharmaceutical
companies. Some of these companies are already engaged in the development of
controlled-release and immediate-release drug delivery technologies and
products, and offer a wider variety of generic products to their customers. In
other instances, our competition may arise from manufacturers who decide to
undertake development of these products or from companies whose brand products
are losing patent and other bases for marketing exclusivity. Generally, there is
a unit price decline as the number of generic competitors increases. The timing
of these price decreases is unpredictable and can result in significantly
reduced profitability for a generic product. In addition, our generic products
may be affected by competition involving the corresponding brand product,
including the introduction and promotion of either alternative brand versions or
OTC versions of such products.

         In the sales efforts for our brand products, we compete with large
domestic and international brand pharmaceutical companies with significantly
larger and more experienced sales forces and significantly greater financial
resources to support their products. As these pharmaceutical companies compete
aggressively to have their products included in formularies, our lack of a broad
range of brand products places us at a competitive disadvantage when competing
for inclusion on some MCO formularies. Our brand sales may also be affected by
the introduction of new brand products in the same therapeutic class and by the
advent of generic competition for our products.



                                       23
<PAGE>

         In our pharmaceutical distribution business, we compete with a number
of large wholesalers and other distributors of pharmaceuticals, including
McKesson Corporation, AmerisourceBergen Corporation and Cardinal Health, Inc.,
which market both brand and generic pharmaceutical products to their customers.
We believe that increased competition, the growing role of MCOs, the formation
of buying groups and competition between manufacturers could result in increased
price erosion and competition for market share.

IF WE ARE UNABLE TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE NEW PRODUCTS, OUR
PROFITABILITY WILL DECLINE.

         Our future results of operations will depend to a significant extent
upon our ability to successfully develop and successfully commercialize new
generic products and brand products, in a timely manner. We can encounter
numerous difficulties in developing and commercializing new products, including:

         o        scaling-up production to commercial levels;

         o        remaining in compliance with all regulatory standards;

         o        securing, on commercially reasonable terms, the active
                  pharmaceutical ingredients and other ingredients required for
                  our products;

         o        receiving requisite regulatory approvals for these products in
                  a timely manner;

         o        avoiding the commercialization delays which result from the
                  listing of one or more patents in the Orange Book (resulting
                  in one or more 30-month stays, depending upon when the ANDA or
                  NDA is filed) or from the pediatric or marketing exclusivity
                  rights belonging to others; and

         o        successfully defending legal actions brought by our direct
                  competitors or others who seek to prevent or delay the
                  commercialization of our product.

         These and other difficulties may delay or prevent the marketing of our
products, including products being developed in collaboration with others. We
cannot guarantee that any investment we make in developing products will be
recouped, even if we are successful in commercializing those products.

LITIGATION CLAIMING THAT WE INFRINGE THE PROPRIETARY RIGHTS OF THIRD PARTIES,
AND OUR OTHER LITIGATION MAY DELAY OR PREVENT US FROM MANUFACTURING AND SELLING
SOME OF OUR PRODUCTS OR RESULT IN SUBSTANTIAL DAMAGES CLAIMS.

         The manufacture, use and sale of generic and brand products have been
the subject of substantial litigation in the pharmaceutical industry,
particularly in the context of Paragraph IV litigation involving the ANDAs and
NDAs we have filed with the FDA. These lawsuits can, and have, delayed or
prevented the marketing of our ANDA and NDA products and we anticipate that
additional actions may be commenced in the future.

         The outcome of patent litigation is difficult to predict because of the
uncertainties inherent to litigation. Our results of operations, financial
condition and cash flows could be adversely affected by a delay in obtaining FDA
approval to market our products as a result of patent litigation, a delay in
obtaining judicial decisions in such litigation, the expense of litigation
whether or not we are successful, the resulting diversion of management's and
our technical personnel's attention, or an adverse outcome in such litigation,
which could prevent us from commercializing any affected products or result in
substantial damages imposed on us or a substantial financial settlement paid by
us.




                                       24
<PAGE>


         Moreover, we often encounter substantial delays in obtaining judicial
decisions in connection with patent litigation. During this delay, additional
competition may arise, the brand product may be offered as a licensed generic or
an over-the-counter product, other brand products may be introduced and promoted
to prescribers instead of or in addition to the brand, additional exclusivities
may be awarded to the brand product, additional patents that cover the brand
product may issue or be listed in the Orange Book, the labeling of the brand
product may change or other matters occur that could delay generic competition
or lessen our economic opportunity for our product.

         As we could invest a significant amount of time and expense in the
development of our generic products only to be subject to significant additional
delay and changes in the economic prospects for our product, we may be faced
with the decision whether we should commercialize our product prior to final
resolution of our pending litigation. The risk involved in marketing these
products can be substantial because the remedies available to the owner of a
patent for infringement could include, among other things, damages measured by
the profits lost by the patent owner and not by the profits earned by the
infringer. Because of the discount pricing typically involved with generic
products, patented brand products generally realize a significantly higher
profit margin than generic products. In the case of a willful infringer, the
definition of which is unclear, these damages may even be trebled. This profit
differential can act as a disincentive to the patent owner to settle patent
litigation on terms that could allow our products to be marketed upon the
settlement of such litigation. Thus, in order to reap the economic benefits of
some of our products, we may decide to risk an amount, which exceeds the profit
we anticipate making on our product, or even the selling price for such product.

         In addition to the risks associated with patent litigation described
above, we are also involved in the other litigation matters more particularly
described in Item 3 "LITIGATION." An adverse judgment in any of our pending or
future litigation matters could adversely affect our results of operations,
financial condition and cash flows. Our failure to prevail in any of the
litigation matters reflected in Item 3 "LITIGATION," particularly the antitrust
matters therein described, as well as Item 1 - "PATENT INFRINGEMENT LITIGATION"
could result in material damages or adversely affect our results of operations,
financial condition and cash flows.

OUR BUSINESS COULD SUFFER AS A RESULT OF MANUFACTURING ISSUES.

         The continued increase in the amount of products we market and have
pending at the FDA requires us to continue to expand our manufacturing
capabilities, including making changes to our manufacturing facilities in
Florida, and readying our North Carolina facility, which we purchased in
December 2002. The timely completion of these efforts is necessary for us to
have sufficient manufacturing capacity for the anticipated quantities of our
existing products and the products we expect to market in the future, and will
require significant levels of capital investment. Our inability to complete our
construction and conversion projects, or adequately equip the facilities in a
timely manner, could adversely affect our results of operations, financial
condition and cash flows.

         Our manufacturing and other processes utilize sophisticated equipment,
which sometimes requires a significant amount of time to obtain and install.
Although we endeavor to properly maintain our equipment and spare parts on hand,
our business could suffer if certain manufacturing or other equipment, or a
portion or all of our facilities were to become inoperable for a period of time.
This could occur for various reasons, including catastrophic events such as
hurricane or explosion, but also equipment failures and/or delays in obtaining
components or replacements thereof, delays in receiving FDA approval of our
North Carolina facility, as well as equipment issues, construction delays or
defects and other events, both within and outside of our control.




                                       25
<PAGE>


         We sometimes file an ANDA or NDA based on study results utilizing
product batches that are smaller than what we anticipate may be required for the
commercial launch of that product. Thus, in order to manufacture these products
for commercial launch, we must "scale-up" our manufacturing process for use on
larger equipment, in accordance with FDA regulations. Our results of operations,
financial condition and cash flows could be adversely affected if we are unable
to successfully scale-up any of our significant products or if successful
scale-up of any such product is delayed.

         We have at times operated some of our manufacturing facilities on a
24-hour a day, 7-day a week production cycle in order to meet the market demand
for current and anticipated products. Operating on that basis and meeting the
anticipated market demand requires minimal equipment failures and product
rejections. However, because we manufacture products that employ a variety of
technology platforms, some of our manufacturing capabilities may at times be
over-utilized, while others may be under-utilized, resulting in inefficiencies,
equipment failures and rejection lots. As discussed in this report, we are
working to improve the efficiencies of our manufacturing process. Until our
manufacturing processes are optimized, and our manufacturing facilities are
expanded, we may have difficulty at times fulfilling all of the market demand
for our existing and future products, which could adversely affect our results
of operations, financial condition and cash flows (See RISK FACTORS - RISKS
RELATING TO THE PHARMACEUTICAL INDUSTRY GENERALLY AND TO ANDRX SPECIFICALLY).

IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR TECHNOLOGY, OUR BUSINESS COULD
SUFFER.

         Our success with the products that we develop will depend, in part, on
our ability to obtain patent protection for these products. We currently have a
number of U.S. and foreign patents issued and pending. We cannot be sure that we
will receive patents for any of our patent applications. If our current and
future patent applications are not approved or, if approved, such patents are
not upheld in a court of law or are circumvented by our competitors, it may
reduce our ability to competitively market our products.

         We also rely on trade secrets and proprietary know-how that we seek to
protect, in part, through confidentiality agreements with our partners,
customers, employees and consultants. It is possible that one or more of these
agreements will be breached or that they will not be fully enforceable in every
instance, and that we will not have adequate remedies for any such breach. It is
also possible that our trade secrets will become known or independently
developed by our competitors.

         If we are unable to adequately protect our technology, our results of
operations, financial condition and cash flows could be adversely affected.

WE MAY NEED TO RELY ON LICENSES TO PROPRIETARY TECHNOLOGIES, WHICH MAY BE
DIFFICULT OR EXPENSIVE TO OBTAIN.

         We may need to obtain licenses to patents and other proprietary rights
held by third parties to develop, manufacture and market products. If we are
unable to obtain these licenses or unable to obtain these licenses on
commercially reasonable terms in a timely manner, our ability to commercially
exploit one or more of our products may be inhibited or prevented.




                                       26
<PAGE>


WE MAY HAVE TO PAY ADDITIONAL TAX AS A RESULT OF AUDITS BY THE INTERNAL REVENUE
SERVICE.

         Our federal income tax returns for the years 1999 to 2002 are currently
under audit by the Internal Revenue Service. Despite our belief that our tax
return positions are supportable, our policy is to establish reserves for taxes
that may become payable in future years as a result of an examination by tax
authorities. While it is difficult to predict the final outcome of any
particular tax matter, we believe that our tax reserves provide an adequate
allowance for such contingencies. The tax reserves are analyzed periodically and
adjustments are made to the tax reserves, as events occur to warrant such
adjustment. Our effective tax rate and cash flow could be materially impacted by
the ultimate resolution of our tax positions.

OUR OPERATIONS COULD BE DISRUPTED IF OUR INFORMATION SYSTEMS FAIL OR IF WE ARE
UNSUCCESSFUL IN IMPLEMENTING NECESSARY UPGRADES.

         Our business depends on the efficient and uninterrupted operation of
our computer and communications software and hardware systems and our other
information technology. We are in the process of implementing significant
upgrades to our information systems, including the implementation and validation
of our JD Edwards ERP software. If our systems were to fail or we were unable to
successfully expand the capacity of these systems or to integrate new
technologies into our existing systems, our operations and financial results
could suffer.

THE LOSS OF OUR KEY PERSONNEL COULD CAUSE OUR BUSINESS TO SUFFER.

         The success of our present and future operations will depend, to a
significant extent, upon the experience, abilities and continued service of key
personnel, including senior corporate and divisional executive officers. We
cannot be assured that we will be able to attract and retain key personnel, and
our failure to do so could adversely affect our results of operations, financial
condition and cash flows.

SALES OF OUR BRAND PRODUCTS FACE VARIOUS OBSTACLES.

         Net sales of our brand products could be adversely affected by low
prescription levels during the early stages of a brand product's launch, generic
introductions, seasonality (for cough and cold products), the dedication of our
sales force's efforts to a particular product and the corresponding decrease in
attention then given to our other products, our ability to effectively expand
our sales force or to target all or a portion of such force to different medical
practitioners, and other factors.

         Our lack of a broad range of brand products can place us at a
competitive disadvantage when competing for inclusion on certain MCO and PBM
formularies, which could adversely affect our results of operations, financial
condition and cash flows. In the event we are unable to have our brand products
included on a wide variety of formularies, our brand products may not be widely
used by the MCO patient population, which is substantial.

         Another obstacle we face in our brand business involves the Altocor
name. Kos Pharmaceuticals alleges that there is a likelihood of confusion
between Kos' trademark, Advicor, and Altocor, for which we have applied for a
registered trademark. Though the U.S. District Court of New Jersey denied Kos'
motion for a preliminary injunction prohibiting our use of the Altocor name in
September 2003, Kos has appealed that ruling to the U.S. Court of Appeals for
the Third Circuit. Should we be required to change the Altocor name, our sales
and marketing efforts for this product would be impaired, and could adversely
affect our results of operations and cash flows.



                                       27
<PAGE>

         In addition, the continued commercial viability of our Entex product
line is uncertain. On October 17, 2003, FDA issued a draft compliance policy
guide with respect to pharmaceutical products that are presently permitted to be
on the market and sold by prescription without an approved ANDA or NDA, such as
the Entex line of products. This draft guidance is intended to provide notice
that once FDA approves a version of such product, unapproved drug products such
as our Entex product line may be subject to FDA enforcement action at any time,
and that FDA will evaluate each product on a case-by-case basis. In determining
whether to permit a grace period, and how long such grace period will be, FDA
indicates that it will consider factors such as: (1) the effects on the public
health of immediate removal, (2) the difficulty of conducting any required
studies, and preparing and obtaining approval of an application, (3) the burden
on affected parties, (4) FDA's available enforcement resources, and (5) any
special circumstances. Though this guidance is only a draft, we are continuing
to assess this matter, including whether to seek FDA approval to market some or
all of the Entex line of products as prescription products or OTC products, as
well as the FDA's requirements for such submissions. If we are required to stop
selling the Entex line of products or such products are required to be sold as
OTC products, our results of operations and cash flows would be adversely
affected.

OUR POLICIES REGARDING RETURNS, ALLOWANCES AND CHARGEBACKS MAY REDUCE OUR
REVENUES IN FUTURE FISCAL PERIODS.

         Consistent with practices in the generic products industry, we have a
liberal return policy and have been willing to give customers post-sale
inventory allowances. Under these arrangements, from time to time, we provide
credits, known as shelf stock adjustments, to our customers for decreases that
we make to the selling price of our products, in an amount approximating the
decrease in the value of the inventory held by our customers as of the date of
that price reduction. Due to the competitive nature of the generic products
industry, prices to customers are subject to frequent and significant declines.
As a result, we may provide significant credits to our customers who are then
holding inventories of these products, which could reduce revenue and gross
profit for the period the credit is provided. We also have indirect customer
arrangements, whereby those customers purchase our products at prices negotiated
with us, but obtain those products through wholesalers they independently
select. In these transactions, we provide a chargeback or credit to the
wholesaler in an amount equal to the difference between our invoice price to the
wholesaler and the contract price for the indirect customer.

         It is also a common practice in the pharmaceutical industry for brand
manufacturers to offer customers buy-in allowances on initial purchases prior to
promotion activities by the manufacturer. Purchases by customers are generally
subject to the right of return or exchange as a result of there being a limited
number of large customers. For example, in connection with Altocor, substantial
incentives were granted to customers in connection with the product launch,
including the right of return of initial stocking after nine months.

         Although we establish reserves based on our prior experience and our
best estimates of the impact that these policies may have in subsequent periods,
we cannot ensure that our reserves are adequate or that actual product returns,
allowances and chargebacks will not exceed our estimates and adversely affect
our revenues.




                                       28
<PAGE>

OUR SALES OF GENERIC PRODUCTS MAY SUFFER IF THE USE OF SUCH PRODUCTS IS LIMITED
THROUGH LEGISLATIVE, REGULATORY AND OTHER EFFORTS.

         Pharmaceutical companies increasingly have used state and federal
legislative, regulatory and other means to delay generic product competition.
These efforts have included:

         o        pursuing new patents that could extend patent protection for
                  their brand products and delay the launch of generic
                  competition;

         o        pursuing pediatric exclusivity for their brand products;

         o        using the Citizen Petition process to request amendments to
                  FDA standards;

         o        seeking changes to U.S. Pharmacopeia, an organization that
                  publishes industry recognized compendia of drug standards;

         o        attaching patent extension amendments to unrelated federal
                  legislation; and

         o        engaging in state-by-state initiatives to enact legislation
                  that restricts the substitution of certain generic products.

         If pharmaceutical companies are successful in limiting the use of
generic products through these or other means or in securing changes in FDA
regulations, policies or procedures, the approval of our generic products may be
adversely affected, which could adversely affect our results of operations,
financial condition and cash flows.

SALES OF OUR GENERIC AND BRAND PRODUCTS MAY BE ADVERSELY AFFECTED BY THE
CONSOLIDATION OR LOSS OF OUR CUSTOMERS.

         Approximately three wholesale drug distributors and 15 major retail
drug store chains comprise a significant part of the distribution network for
both brand and generic pharmaceutical products in the U.S. This distribution
network is continuing to undergo significant consolidation marked by mergers and
acquisitions among wholesalers and the growth of large retail drug store chains
that control a significant share of the market. As a result of this
concentration of our customer base, the loss of any of these customers, or
significant defaults in payment or reductions in purchases from these customers,
could adversely affect our results of operations, financial condition and cash
flows.

IF WE ARE UNABLE TO OBTAIN SUFFICIENT SUPPLIES FROM KEY SUPPLIERS THAT IN SOME
CASES MAY BE THE ONLY SOURCE OF RAW MATERIALS, OUR ABILITY TO DELIVER OUR
PRODUCTS TO THE MARKET MAY BE IMPAIRED.

         Some of the raw materials used in the manufacture of our generic and
brand products are available from limited sources and, in some cases, a single
source. Any curtailment in the availability of these raw materials could be
accompanied by production or other delays and, in the case of products for which
only one raw material supplier exists or has been approved by the FDA, could
result in a material loss of sales, with consequential adverse effects on our
results of operations, financial condition and cash flows. In addition, because
raw material sources for pharmaceutical products must generally be identified
and approved by regulatory authorities, changes in raw material suppliers may
result in production delays, higher raw material costs and loss of sales and
customers. We also obtain a portion of our raw materials from foreign suppliers,
and our arrangements with these suppliers are subject to, among other risks, FDA
approval, governmental clearances, export duties, political instability,
currency fluctuations and restrictions on the transfer of funds abroad.



                                       29
<PAGE>

         We have at times experienced problems as a result of a lack of raw
materials availability. These problems result from the supplier's delay in
providing these materials, delays in getting these materials through customs,
the closure of a particular materials source and the unavailability of a
comparable replacement, and defects in the materials received by us. While we
have improved our efforts to actively identify alternative and redundant sources
of raw materials and negotiated lower prices for current raw materials, any
inability to obtain raw materials on a timely basis, or any significant price
increases that cannot be passed on to customers, could adversely affect our
results of operations, financial condition and cash flows.

OUR DISTRIBUTION BUSINESS CONCENTRATES ON GENERIC PRODUCTS AND IS THEREFORE
SUBJECT TO THE RISKS OF THE GENERIC INDUSTRY.

         Our ability to provide consistent, sequential quarterly growth is
affected, in large part, by our participation in the launch of new products by
us and other generic manufacturers and the subsequent advent and extent of
competition encountered by these products. This competition can result in
significant and rapid declines in the prices of these products and a
corresponding decrease in the net sales of our distribution operations. Our
margins can also be affected by the risks inherent to the generic industry.


WE MAY HAVE DIFFICULTY IMPLEMENTING IN A TIMELY MANNER THE INTERNAL CONTROLS
ASSESSMENT PROCEDURES NECESSARY TO ALLOW OUR MANAGEMENT TO REPORT ON THE
EFFECTIVENESS OF OUR INTERNAL CONTROLS.

Pursuant to Section 404 of Sarbanes-Oxley, we will be required to furnish an
internal controls report of management's assessment of the effectiveness of our
internal controls as part of our Annual Report on Form 10-K for the fiscal year
ending December 31, 2004. Our auditors will then be required to attest to, and
report on, our assessment. In order to issue our report, our management must
document both the design for our internal controls and the testing processes
that support management's evaluation and conclusion. Our management has begun
the necessary processes and procedures for issuing its report on our internal
controls. Moreover, in the event we make a significant acquisition, we will face
significant challenges in implementing the required processes and procedures in
our acquired operations. There can be no assurance that we will be able to
complete the work necessary for our management to issue its management report in
a timely manner, or that management will be able to report that our internal
controls over financial reporting are effective.

OUR BUSINESS COULD SUFFER IF WE EXPERIENCE DIFFICULTIES IN INTEGRATING ANY
TECHNOLOGIES, PRODUCTS AND BUSINESSES WE ACQUIRE, OR IF WE INCUR SIGNIFICANT
CHARGES TO EARNINGS WITH RESPECT TO SUCH ACQUISITIONS.

         We regularly review potential acquisitions of technologies, products
and businesses. Acquisitions typically entail many risks and could result in
difficulties in integrating the operations and personnel of companies that we
acquire and the technologies and products that we acquire. If we are not able to
successfully integrate our acquisitions, we may not obtain the advantages that
the acquisitions were intended to create, which could adversely affect our
results of operations, financial condition and cash flows. In addition, in
connection with acquisitions, we could experience disruption in our business or
employee base. There is also a risk that key employees of companies that we
acquire or key employees necessary to successfully commercialize technologies
and products that we acquire may seek employment elsewhere, including with our
competitors.

         As a result of acquiring businesses or products or entering into other
significant transactions, we may incur significant charges to earnings for
merger and related expenses, including transaction costs, closure costs and
acquired in-process research and development charges. These costs may include
substantial fees for investment bankers, attorneys, accountants and other
advisors and severance and other closure costs associated with the elimination
of duplicate or discontinued products, operations and facilities. Charges that
we may incur in connection with acquisitions could adversely affect our results
of operations for a particular quarter or annual period.

OUR BUSINESS COULD SUFFER FROM RISING INSURANCE COSTS, THE UNAVAILABILITY OF
INSURANCE OR OTHER EVENTS.

         The cost of insurance, including directors and officers, workers'
compensation, product liability, business interruption and general liability
insurance, rose significantly in 2003 and may continue to increase in 2004. In
response, we may increase deductibles and/or decrease some coverages to mitigate
these costs. These increases, and our increased risk due to increased
deductibles and reduced coverages, could adversely affect our results of
operations, financial condition and cash flows.




                                       30
<PAGE>


         The design, development, manufacture, sale and utilization of our
products and the products we distribute involve an inherent risk of product
liability claims and represent a continuing risk, as no reasonable amount of
insurance can fully protect against all such risks because of the potential
liability inherent in the business of producing or distributing pharmaceuticals
for human consumption or use. Although we currently maintain product liability
insurance in amounts we believe to be commercially reasonable, product liability
insurance is expensive and may not be available in the future on acceptable
terms or in sufficient amounts, if it is available at all, particularly for
certain classes of products. A claim brought against us, even if covered by our
insurance policies, could adversely affect our results of operations, financial
condition and cash flows.

         Moreover, since we currently operate only one manufacturing facility,
any disruption of our ability to manufacture our pharmaceutical products could
adversely affect our results of operations, financial condition and cash flows.
Business interruption insurance is expensive and may not be available in amounts
that will fully protect us from such occurrences, whether caused by casualties,
such as hurricanes or fire, or other events, which may or may not be within our
control.

WE HAVE ENTERED INTO A CONSENT DECREE WITH THE SEC, AND FUTURE SEC
INVESTIGATIONS COULD RESULT IN THE IMPOSITION OF SEVERE PENALTIES.

         On May 6, 2003, we entered into an administrative consent Order with
the SEC pursuant to which, without admitting or denying the SEC's findings, we
agreed to cease and desist from committing or causing any future violations of
certain of the reporting provisions of the Securities Exchange Act of 1934. The
order related to the SEC's finding that Cybear had improperly recognized
approximately $1.3 million in revenue (representing approximately $27,000 in
gross profit) pursuant to a joint venture between Andrx and Cybear. In a
separate matter addressed in the same consent Order, the SEC found that the
Company's allowance for doubtful accounts receivable was understated due to the
unauthorized actions of an employee who had altered certain of the Company's
accounts receivable records. A future violation of the SEC consent decree could
result in the imposition of fines or other sanctions that could have a material
adverse effect on our business and results of operations.

RISKS RELATING TO THE PHARMACEUTICAL INDUSTRY GENERALLY AND TO ANDRX
SPECIFICALLY

OUR FAILURE TO COMPLY WITH FDA, DRUG ENFORCEMENT ADMINISTRATION (DEA), LICENSURE
AND OTHER REGULATORY REQUIREMENTS COULD ADVERSELY AFFECT OUR BUSINESS.

         All pharmaceutical companies, including Andrx, are subject to
extensive, complex, costly and evolving regulation by the federal government,
principally the FDA, and, to a lesser extent, by DEA and state government
agencies. The Federal Food, Drug and Cosmetic Act, the Controlled Substances
Act, the Prescription Drug Marketing Act and other federal and state statutes
and regulations govern or influence the testing, manufacturing, packaging,
labeling, storage, purchase, record keeping, safety, approval, marketing,
advertising, promotion, sale and distribution of our products and those that we
distribute. The process of complying with these statutes and regulations is
rigorous, time-consuming and costly, and our failure to comply could adversely
affect our results of operations, financial condition and cash flows.




                                       31
<PAGE>


         Under these regulations, we are subject to periodic inspection of our
facilities, procedures and operations and/or the testing of our products by the
FDA, the DEA and other authorities, which conduct periodic inspections to
confirm that we are in compliance with all applicable regulations. In addition,
the FDA conducts pre-approval and post-approval reviews and plant inspections to
determine whether our facilities and manufacturing techniques are in compliance
with cGMP and other FDA regulations. Following these inspections, the FDA may
provide inspectional observations on a Form 483 and issue warning letters that
could cause us to modify activities identified during the inspection. A Form 483
notice is generally issued at the conclusion of an FDA inspection and lists
conditions the FDA inspectors believe may violate cGMP or other FDA regulations.
FDA guidelines specify that a warning letter is issued only for violations of
"regulatory significance" for which the failure to adequately and promptly
achieve correction may be expected to result in an enforcement action.

         We have received Form 483 notices in the past and a Warning Letter in
August 2000, and we address those observations in the normal course of business.
On March 3, 2004, following an inspection of our Davie, Florida manufacturing
facility, the FDA issued a Form 483 notice to us providing observations by the
inspector concerning our compliance with cGMP, including certain observations
that were also reflected in the August 2000 Warning Letter. We are currently
reviewing each of those observations and, as is customary, will prepare a
written response with an explanation of proposed corrective action for each of
the FDA's observations.

         We cannot assure you that the FDA will not seek to impose sanctions
against us for violations of applicable statutes and regulations. The range of
possible sanctions includes, among others, FDA issuance of adverse publicity,
product recalls or seizures, fines, total or partial suspension of production
and/or distribution, suspension of the FDA's review of product applications,
enforcement actions, injunctions and civil or criminal prosecution. Any such
sanctions, if imposed, could adversely affect our results of operations,
financial condition and cash flows. Under some circumstances, the FDA also has
the authority to revoke previously granted drug approvals. Sanctions similar to
those enumerated above may be available to the FDA under a consent decree,
depending upon the actual terms of such decree. Although we have instituted
internal compliance programs, if these programs do not meet regulatory agency
standards or if compliance is deemed deficient in any significant way, it could
be detrimental to our business. Some of our vendors are subject to similar
regulation and periodic inspections. We cannot predict the extent to which we
may be affected by legislative and regulatory developments.

         We are also subject to numerous and increasingly stringent federal,
state and local environmental laws and regulations concerning, among other
things, the generation, handling, storage, transportation, treatment and
disposal of toxic and hazardous substances and the discharge of pollutants into
the air and water. Environmental permits and controls are required for some of
our operations, and these permits are subject to modification, renewal and
revocation by the issuing authorities. Our environmental capital expenditures
and costs for environmental compliance may increase in the future as a result of
changes in environmental laws and regulations or increased manufacturing
activities at any of our facilities. We could be adversely affected by any
failure to comply with environmental laws, including the costs of undertaking a
clean up at a site to which our wastes were transported.

THE FDA APPROVAL PROCESS IS COMPLEX, COSTLY AND TIME-CONSUMING, AND THERE IS NO
ASSURANCE THAT OUR PRODUCTS WILL RECEIVE FDA APPROVAL OR ENJOY THE BENEFITS OF
THE 180-DAY EXCLUSIVITY PERIOD.

         Pharmaceutical manufacturers are generally required to obtain approval
from the FDA, and possibly other regulatory agencies, before manufacturing,
marketing and shipping their products. This approval process is often costly,
time-consuming and litigious. We cannot assure you that our drug applications
will be timely approved by the FDA or any other regulatory agency, if at all.



                                       32
<PAGE>

         For generic products, FDA approval is required before a generic version
of a previously approved drug or certain new dosage forms of an existing drug
can be marketed, generally using an ANDA. However, if some of our generic
products do not qualify for ANDA approval, as may be the case with some of our
controlled-release formulations, we may be required to proceed under the
lengthier and costlier approval process typically associated with brand
products. We may invest a substantial amount of time and money in the
development of a generic product only to be subject to significant delay and the
uncertain results of patent litigation, or issues relating to the manufacture of
our product, which may adversely affect our ability to commercialize our
product.

         If we are the first ANDA with a Paragraph IV certification accepted for
filing by the FDA, and timely provide notice of our Paragraph IV certification
to the NDA owner and any patent holders, we may be eligible to receive 180 days
of marketing exclusivity. Our ability to secure the benefit of this exclusivity
period depends on a variety of factors, some of which are beyond our control,
which may decrease the value of the exclusivity period for some of our ANDA
filings.

         For brand products, the FDA approval process necessitates the filing of
an NDA, which typically involves time-consuming and costly safety and
effectiveness testing. We currently intend to seek approval for most of our
brand name controlled-release pharmaceutical products using a type of NDA
referred to as a Section 505(b)(2) NDA, which enables the applicant to rely on
published reports for safety and effectiveness studies, thus reducing the time
and expense of new drug development. There are limitations on the use of Section
505(b)(2) NDAs, however. Patent listing/certification requirements and marketing
exclusivity awarded to reference or competitor products may result in delays in
the approval process similar to those described above for ANDAs. There is also a
great deal of uncertainty concerning the extent to which Section 505(b)(2) NDAs
may rely upon prior FDA findings that reference drugs are safe and effective for
approved uses, and what additional clinical and other testing is necessary to
obtain approval of such applications.

WE AND OTHER DRUG MANUFACTURERS MAY BE THE TARGET OF GOVERNMENTAL INVESTIGATIONS
INTO PRICING AND RELATED LITIGATION

         Various federal and state Medicaid agencies and other enforcement
officials are investigating the effects of pharmaceutical industry pricing
practices such as how average wholesale price (AWP) is calculated and how
pharmaceutical manufacturers report their "best price" on a drug under the
federal Medicaid rebate program. AWP is a standard pricing measure (calculated
by a third-party such as First Data Bank) used throughout the industry as a
basis for calculating drug prices under contracts with health plans and
pharmacies and rebates with pharmaceutical manufacturers.

         In connection with the proposed implementation of 42 CFR Part
447.534(h) on January 1, 2004, we received correspondence from, or on behalf of,
the Attorneys General for ten states and Puerto Rico, notifying us that they
were currently investigating allegations of fraudulent pricing practices by us
related to average manufacturer price and best price calculations. The proposed
rule would have allowed drug manufacturers to establish, among other things, a
3-year recordkeeping requirement for information pertaining to average
manufacturer price and best price calculations, with the exception that such
3-year limit would not apply if the drug manufacturer is aware of a government
investigation related to its average manufacturer price and best price
calculations. The proposed rule was replaced with by a rule requiring that such
records be maintained for a 10-year period.

         In the past, a putative class action lawsuit was filed against us
relating to the AWP of pharmaceutical products. That lawsuit alleged that we and
other unnamed pharmaceutical companies have been and, continue to be, conspiring
to report fictitious AWP, in violations of the law. The plaintiffs dismissed
that lawsuit, with prejudice.

         Although we have no knowledge of the specific allegations, if any, that
have been made against us in connection with these pricing issues or other
information concerning the investigations being conducted in the industry, our
business, financial condition or results of operations could be materially
adversely affected by any such actions.

WE ARE SUBJECT TO POST-MARKETING ACTIONS

         Studies and/or monitoring of the proper utilization, safety and
efficacy of pharmaceuticals are conducted by industry participants (including
us), government agencies and others. Such studies and monitoring can call into
question the utilization, safety and efficacy of previously marketed products,
including those marketed by us in our brand and generic operations, and may
result in the discontinuation of their marketing or changes in the manner in
which they are labeled and prescribed. FDA has the authority to withdraw
approvals of previously approved pharmaceutical drugs as a result of such
post-marketing actions and for other reasons. The DEA and state agencies also
have similar authority. Our business, financial condition or results of
operations could be materially adversely affected by any such actions.

WE ARE SUBJECT TO THERAPEUTIC EQUIVALENT SUBSTITUTION, MEDICAID REIMBURSEMENT
AND PRICE REPORTING

         The cost of pharmaceutical products continues to be a subject of
investigation and action by governmental agencies, legislative bodies and
private organizations in the U.S. and other countries. In the U.S., most states
have enacted legislation requiring or permitting a dispensing pharmacist to
substitute a generic equivalent to the prescribed drug.



                                       33
<PAGE>


         Federal legislation requires pharmaceutical manufacturers to pay to
state Medicaid agencies prescribed rebates on drugs to enable them to be
eligible for reimbursement under Medicaid programs. Federal and state
governments continue to pursue efforts to reduce spending in Medicaid programs,
including restrictions on amounts agencies will reimburse for certain products.
In addition, some states are seeking rebates in excess of the amounts required
by federal law, and there are federal legislative proposals to expand current
Medicaid rebates. We also must give discounts or rebates on purchases or
reimbursements of pharmaceutical products by certain other federal and state
agencies and programs. Our ability to earn sufficient returns on our products
depends, in part, on the availability of reimbursements from third party payers,
such as health insurers, governmental health administration authorities and
other organizations and the amount of rebates payable under Medicaid programs.

FEDERAL REGULATION OF ARRANGEMENTS BETWEEN MANUFACTURERS OF BRAND AND GENERIC
PRODUCTS COULD ADVERSELY AFFECT OUR BUSINESS.

         We may be required to notify the FTC of agreements that we enter into
with other pharmaceutical companies, either pursuant to legislation enacted in
January 2004 and guidelines issued by the FTC prescribing certain notifications
that must be sent to the FTC whenever brand and generic drug manufacturers have
entered into agreements, or pursuant to the Consent Decree which we entered into
with the FTC in May 2001. Under either scenario, the law by which the FTC or the
courts in litigation commenced by private litigants will evaluate such
agreements is extremely unclear. For example, under the approach taken by the
FTC and by the U.S. Court of Appeals for the 11th Circuit, where most of the our
business operations are conducted, the lawfulness of certain such agreements is
to be determined by a rule of reason standard, while in the U.S. Court of
Appeals for the 6th Circuit, where we also conduct business, some types of such
agreements are considered to be per se unlawful. As a result, the manner in
which we seek to resolve intellectual property litigation with branded
pharmaceutical companies or to commercialize our or other's ANDAs or exclusivity
rights could be the subject of additional private-party litigation against
pharmaceutical companies, additional investigations or proceedings by the FTC or
other governmental authorities, or uncertainties concerning the appropriateness
of proposed transactions which make commercial sense, but which may potentially
have asserted anticompetitive implications.

THE CHANGING UNITED STATES HEALTHCARE ENVIRONMENT MAY IMPACT OUR REVENUE AND
INCOME.
         Our products and services are intended to function within the structure
of the healthcare financing and reimbursement system currently existing in the
United States. In recent years, the healthcare industry has undergone
significant changes in an effort to reduce costs and government spending. These
changes include an increased reliance on managed care, cuts in Medicare funding
affecting our healthcare provider customer base, consolidation of competitors,
suppliers and customers, and the development of large, sophisticated purchasing
groups. We expect the healthcare industry to continue to change significantly in
the future. Some of these potential changes, such as a reduction in governmental
support of healthcare services or adverse changes in legislation or regulations
governing prescription drug pricing, healthcare services or mandated benefits,
may cause healthcare industry participants to greatly reduce the amount of our
products and services they purchase or the price they are willing to pay for our
products and services. Changes in pharmaceutical manufacturers' pricing or
distribution policies could also significantly reduce our income. Federal
legislation was recently enacted giving Medicare beneficiaries a prescription
drug benefit in 2006 and drug discounts prior to 2006. Although the
implementation details of this legislation are not known at this time, this
legislation eventually could have an adverse effect on our revenue and income.




                                       34
<PAGE>


RISKS ASSOCIATED WITH INVESTMENT IN OUR COMMON STOCK

OUR STOCK PRICE HAS EXPERIENCED VOLATILITY, WHICH MAY AFFECT OUR STOCKHOLDERS'
ABILITY TO SELL THEIR STOCK AT AN ADVANTAGEOUS PRICE AND COULD IMPACT THE MARKET
VALUE.

         The market price of our common stock has been and may continue to be
volatile. For example, through March 1, 2004, the market price of our common
stock has fluctuated during the past 12 months between $7.68 per share and
$30.26 per share. Therefore, this volatility may affect a stockholder's ability
to sell our stock at an advantageous price. Market price fluctuations in our
stock may be due to acquisitions or other material public announcements, along
with a variety of additional factors, including:

         o        new product introductions;

         o        the purchasing practices of our customers;

         o        changes in the degree of competition for our products;

         o        the announcement of technological innovations or new
                  commercial products by our competitors or us;

         o        changes in governmental regulation affecting our business
                  environment;

         o        any future issuances of our common stock or other securities;

         o        regulatory issues, including receipt of new drug approvals
                  from the FDA, compliance with FDA or other agency regulations
                  or the lack or failure of either of the foregoing;

         o        the issuance of new patents or other proprietary rights;

         o        the announcement of earnings;

         o        the publication of earnings estimates or other research
                  reports and speculation in the press or investment community;

         o        the loss of key personnel;

         o        the inability to acquire sufficient supplies of finished
                  products or raw materials;

         o        litigation and/or threats of litigation;

         o        failure or delay in meeting milestones in collaborative
                  arrangements expected to result in revenues;

         o        unanticipated expenses from joint ventures not under our
                  control;

         o        publicity regarding actual or potential clinical results with
                  respect to products we have under development or with respect
                  to any consent decree to which we are, or may become, subject;

         o        any outbreak or escalation of hostilities;

         o        political developments or proposed legislation in the
                  pharmaceutical or healthcare industry; and

         o        general market and economic conditions.




                                       35
<PAGE>

         These and similar factors have had and could in the future have a
significant impact on the market price of our common stock. In addition, the
stock markets in general, including the Nasdaq National Market, have experienced
extreme price and trading fluctuations. These fluctuations have resulted in
volatility in the market prices of securities that often have been unrelated or
disproportionate to changes in operating performance. These broad market
fluctuations may affect adversely the market prices of our common stock.

INVESTORS SHOULD NOT LOOK TO DIVIDENDS AS A SOURCE OF INCOME.

         We have never paid any cash dividends on our common stock and do not
intend to pay cash dividends in the foreseeable future. We are prohibited from
paying dividends under our senior credit facility without the consent of the
agent and the lenders parties thereto. Consequently, any economic return to a
stockholder will be derived, if at all, from appreciation in the price of our
stock, and not as a result of dividend payments.

WE MAY ISSUE ADDITIONAL SECURITIES, WHICH WOULD LEAD TO DILUTION OF OUR ISSUED
AND OUTSTANDING COMMON STOCK.

         Our board of directors has the authority to issue shares of our common
stock and shares of preferred stock or other securities convertible into shares
of our common stock. Under many circumstances, such issuances would not require
the approval of our stockholders. Any such preferred stock could contain
dividend rights, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences or other rights superior to the
rights of holders of our common stock. In March 2003, our Board of Directors
approved the issuance of a stockholder rights plan and authorized the issuance
of Series A Junior Participating Preferred Stock, of which there are currently
no shares outstanding.

OUR STOCKHOLDER RIGHTS PLAN MAY DETER A THIRD PARTY FROM ACQUIRING US.

         Our board of directors has adopted a stockholder rights plan, the
purpose of which is to protect stockholders against unsolicited attempts to
acquire control of us that do not offer a fair price to all of our stockholders.
The rights plan may have the effect of dissuading a potential acquirer from
making an offer for our common stock at a price that represents a premium to the
then current trading price.

DELAWARE LAW AND OUR CHARTER DOCUMENTS CONTAIN PROVISIONS THAT COULD DISCOURAGE
OR PREVENT A POTENTIAL TAKEOVER OF OUR COMPANY THAT MIGHT OTHERWISE RESULT IN
OUR STOCKHOLDERS RECEIVING A PREMIUM OVER THE MARKET PRICE OF THEIR SHARES.

         Some provisions in our certificate of incorporation and bylaws may have
anti-takeover effects and may delay, defer or prevent a takeover attempt of us.
We are also subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prevents us from engaging in a "business
combination" with a person who is an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless prescribed approvals, are obtained. The
application of Section 203 also could have the effect of delaying or preventing
a change of control of us.




                                       36
<PAGE>

EXECUTIVE OFFICERS

         The Board of Directors appoints our executive officers each year. As of
March 1, 2004, our executive officers were as follows:


<TABLE>
<CAPTION>

                                                                                                    Executive
           Name               Age                           Position                              Officer Since
---------------------------- ----- ------------------------------------------------------------ ------------------

<S>                           <C>  <C>                                                               <C>
Thomas P. Rice                52   Andrx Corporation - Chief Executive Officer and a Director           2004

Angelo C. Malahias            42   Andrx Corporation - President                                        1996

Scott Lodin                   48   Andrx Corporation - Executive Vice President,                        1994
                                   General Counsel and Secretary

John M. Hanson                51   Andrx Corporation - Senior Vice President and                        2004
                                   Chief Financial Officer

Ian J. Watkins                41   Andrx Corporation - Senior Vice President of                         2003
                                   Human Resources

Elliot F. Hahn, Ph.D.         59   Andrx Corporation - Chairman Emeritus and a Director                 1993

Lawrence J. Rosenthal         58   Andrx Pharmaceuticals, Inc. - President                              2002

Daniel H. Movens              45   Anda, Inc. - President                                               2002

</TABLE>


         THOMAS P. RICE, Andrx Corporation Chief Executive Officer, was
appointed CEO on February 3, 2004, and has been a director of Andrx since April
1, 2003. In 1997, Mr. Rice was appointed a Director of Chesapeake Biological
Laboratories, Inc., a provider of contract manufacturing services for sterile,
injectible pharmaceuticals, and assumed the position of President and Chief
Executive Officer in January 1999. In 1996, he co-founded Columbia Investments
LLC, which invests in emerging service companies. From 1993 to January 1996, Mr.
Rice was Executive Vice President and Chief Operating Officer of Circa
Pharmaceuticals, Inc. and from 1993 to January 1995, Chief Financial Officer of
Circa. Mr. Rice was previously employed by Deloitte & Touche LLP from 1978 to
1985.

         ANGELO C. MALAHIAS, Andrx Corporation President has been with Andrx
since 1996. Prior to his appointment as President in February 2004, Mr. Malahias
served as Executive Vice President and Chief Financial Officer. Mr. Malahias was
a director of Cybear, from April 1999 until our September 2000 reorganization.
Mr. Malahias was Vice President and Chief Financial Officer of Circa
Pharmaceuticals, Inc. from January 1995 to January 1996, where he also served as
Corporate Controller from July 1994 to January 1995. Mr. Malahias was previously
employed by KPMG LLP from 1983 to July 1994.




                                       37
<PAGE>


         SCOTT LODIN, Andrx Corporation Executive Vice President, General
Counsel and Secretary has been with Andrx since January 1994. Mr. Lodin was the
Secretary and a director of Cybear Inc. from February 1997 until the September
2000 reorganization. Prior to joining Andrx, Mr. Lodin was Special Counsel to
Hughes, Hubbard & Reed and a predecessor firm where he practiced primarily in
the areas of corporate and commercial law.

         JOHN M. HANSON, Andrx Corporation Senior Vice President and Chief
Financial Officer has been with Andrx since April 2003. Prior to his appointment
as Chief Financial Officer in February 2004, Mr. Hanson served as Vice
President, Finance. From November 2000 through June 2001, Mr. Hanson served as
Chief Financial Officer of Mylan Laboratories, Inc. and from September 1996
through October 2000, Mr. Hanson served as Chief Financial Officer of
Zenith-Goldline Pharmaceuticals, Inc., the U.S. generic products subsidiary of
Ivax Corporation. Mr. Hanson was previously employed by Arthur Andersen LLP from
1984 to 1995 and is a certified public accountant.

         IAN J. WATKINS, Andrx Corporation Senior Vice President, Human
Resources has been with Andrx since April 2003. Mr. Watkins served as Corporate
Vice President of Human Resources of Bausch and Lomb, Inc., an ophthalmic
healthcare company from November 1999 through December 2002. From 1996 to
November 1999, Mr. Watkins served as Vice President of Human Resources for
Bausch & Lomb's Europe, Middle East and Africa Region.

         DR. ELLIOT F. HAHN, Andrx Chairman Emeritus, has been with Andrx since
February 1993 as a director, and served as our President from February 1993
through March 2003, as our CEO from October 2001 through June 2002, and as
Chairman of the Board of Directors from June 2002 through March 2003. Dr. Hahn
was Vice President, Scientific Affairs of IVAX Corporation, from June 1990
through February 1993, as well as the Vice President of Research of Baker Norton
Pharmaceuticals, a subsidiary of IVAX, from 1988 through 1993.

         LAWRENCE J. ROSENTHAL, Andrx Pharmaceuticals, Inc. President has been
with Andrx since January 1999. From 1999 through 2003, Mr. Rosenthal served as
Executive Vice President of Sales and Marketing for Andrx Pharmaceuticals, Inc.
From 1986 through January 1999, Mr. Rosenthal was employed at Teva
Pharmaceuticals, Inc., last serving as its Vice President of Sales and
Marketing.

         DANIEL H. MOVENS, Anda, Inc. President has been with Andrx in a number
of positions of increasing responsibility since 1995, including Anda, Inc.
Executive Vice President of Operations since 2002. For 15 years before joining
Andrx, Mr. Movens was in the retail pharmacy industry, working in independent
pharmacies and pharmacy chains.

         On May 6, 2003, Mr. Lodin entered into an administrative consent Order
with the SEC pursuant to which, without admitting or denying the SEC's findings,
agreed to cease and desist from committing or causing any future violations of
certain of the reporting provisions of the Securities Exchange Act of 1934. The
Order related to the SEC's finding that Cybear had improperly recognized
approximately $1.3 million in revenue (representing approximately $27,000 in
gross profit) pursuant to a joint venture between Andrx and Cybear. The SEC's
Order found that these amounts were improperly recognized in Cybear's March 31,
2000 and June 30, 2000 Forms 10-Q, and in the July 31, 2000 joint proxy
statement/prospectus with respect to the reorganization completed in September
2000.

         Andrx officers, directors and certain other employees from time to time
may enter into "Rule 10b5-1 Plans". Under an appropriate Rule 10b5-1 Plan, such
individuals may instruct a third party, such as a brokerage firm, to engage in
specific securities transactions in the future based on a formula without
further action by the stockholder, provided that the plan satisfies the legal
requirements of Rule 10b5-1 under the Securities Exchange Act of 1934 as
amended.



                                       38
<PAGE>



--------------------------------------------------------------------------------
ITEM 2.  PROPERTIES
================================================================================

         The following table presents the facilities that we own or lease as of
December 31, 2003, and indicates their location and primary uses.


<TABLE>
<CAPTION>

                          Square
      Location            Footage        Status        Annual Rent                         Primary Uses
---------------------   ------------    ----------    --------------     --------------------------------------------------
<S>                         <C>         <C>             <C>              <C>
FLORIDA

Davie                       245,000     Owned                   N/A      Manufacturing, Warehousing & Administration
Davie                       134,300     Leased          $ 1,483,000      Manufacturing & Warehousing
Weston                      160,000     Leased            1,468,000      Distribution, Sales & Marketing and
                                                                           Administration
Weston                      129,000     Leased            1,230,000      R & D, Manufacturing & Warehousing
Weston                       28,000     Leased              522,000      Sales & Marketing and Administration
Boca Raton                   38,100     Leased              767,000      Sales and Internet Operations
Hollywood                    16,100     Leased              267,000      Unoccupied
Sunrise                     114,000     Leased            1,140,000      Warehousing
Plantation                   12,800     Leased              315,000      Administration

NEW YORK

Grand Island                 11,000     Owned                   N/A      Sales
Tarrytown                     6,500     Leased              151,000      Subleased to a third party


MISSISSIPPI

Madison                      28,000     Leased              187,000      Administration and Warehousing

MASSACHUSETTS

Canton                      110,000     Leased            1,284,000      50,000 square feet unoccupied
                                                                         60,000 square feet subleased to third party
OHIO

Columbus                    355,000     Leased            1,373,000      Distribution and Warehousing

NEW JERSEY

Hackensack                    8,100     Leased              222,000      Clinical Development

NORTH CAROLINA

Morrisville                 500,000     Owned                   N/A      Future Manufacturing

PUERTO RICO

San Juan                      1,000     Leased               11,000      Distribution Administration

</TABLE>




                                       39
<PAGE>

--------------------------------------------------------------------------------
ITEM 3.  LEGAL PROCEEDINGS
================================================================================

         See also "ITEM 1 - PATENT INFRINGEMENT LITIGATION" of this report for a
description of certain patent and other litigation.

         Under the provisions of the Waxman-Hatch Amendments, ANDA applicants
 that make a Paragraph IV certification to the effect that their proposed
 generic product does not infringe the valid patent rights of the referenced
 brand product are often sued by the manufacturer of the referenced brand
 product for alleged patent infringement litigation. We have had many such
 cases, including:

         CARDIZEM CD ANTITRUST LITIGATION

         Beginning in August 1998, several putative class action lawsuits were
filed against Aventis and us arising from a 1997 stipulation entered into
between Aventis and us in connection with a patent infringement suit brought by
Aventis with regard to its product, Cardizem CD. The actions pending in federal
court have been consolidated for multi-district litigation purposes in the U.S.
District Court for the Eastern District of Michigan. The complaint in each
action alleges that we and Aventis, by way of the 1997 stipulation, engaged in
alleged state antitrust and other statutory and common law violations that
allegedly gave Aventis and us a near monopoly in the U.S. market for Cardizem CD
and a generic version of that pharmaceutical product. According to the
complaints, the monopoly possessed by the defendants enables Aventis to
perpetuate its ability to fix the price of Cardizem CD at an artificially high
price, free from generic competition, with the result that direct purchasers
such as pharmacies, as well as indirect purchasers such as medical patients who
have been issued prescriptions for Cardizem CD are forced to overpay for the
drug. Each complaint seeks compensatory damages on behalf of each class member
in an unspecified amount and, in some cases, treble damages, as well as costs
and counsel fees, disgorgement, injunctive relief and other remedies. In June
2000, the District Court granted summary judgment to plaintiffs finding that the
1997 stipulation was a per se violation of antitrust laws. We and Aventis
appealed the judgment to the U.S. Court of Appeals for the Sixth Circuit. In
June 2003, the U.S. Court of Appeals for the Sixth Circuit affirmed the district
court's order, which determined that the 1997 stipulation and Agreement between
us and Aventis was a per se violation of the federal antitrust laws. We are
seeking legal review by the U.S. Supreme Court.

         On May 14, 2001, the State Attorney Generals for the States of New York
and Michigan, joined by 13 additional states and the District of Columbia, filed
suit against us and Aventis in the same federal court in which the above
described consolidated Cardizem CD antitrust class action litigation is being
conducted. The attorney generals' suit is brought on behalf of their government
entities and consumers resident in their jurisdictions who allegedly were
damaged as a result of the 1997 Stipulation. Subsequently, an amended complaint
was filed adding 12 additional states and Puerto Rico to the action. The lawsuit
essentially reiterates the claims asserted against us in the aforementioned
Cardizem CD antitrust class action litigation and seeks the same relief sought
in that litigation.

         On July 26, 2001, Blue Cross Blue Shield of Michigan, joined by three
other Blue Cross Blue Shield plans (one in Minnesota and two in New York), filed
suit against us and Aventis in the U.S. District Court for the Eastern District
of Michigan on behalf of themselves and as claim adjustors for their self-funded
customers to recover damages allegedly caused by the 1997 Stipulation. The
complaint essentially repeats the claims asserted against us that are being
litigated in the above-described consolidated Cardizem CD antitrust class action
litigation and seeks substantially the same relief sought in that litigation.




                                       40
<PAGE>

         In addition to the consolidated proceedings in the U.S. District Court
for the Eastern District of Michigan, there are two actions pending in state
courts in Florida and two actions pending in state courts in Kansas. These
actions are currently stayed.

         On November 26, 2002, the Court approved a settlement between the
direct purchasers and us and Aventis. In January 2003, we announced we had
reached a settlement with the indirect purchasers and state attorneys general.
On October 21, 2003, the district court granted final approval of the proposed
settlement between us and Aventis and the indirect purchasers class and the
state attorney general plaintiffs for all 50 states. This order is currently on
appeal, purportedly on behalf of a class of Tennessee residents, which Andrx is
opposing.

         In addition to that appeal, the remaining claims in this litigation are
the claims of four Blue Cross Blue Shield entities that chose to opt-out from
the indirect purchaser class settlement; and the claims of the various retail
chain customers who chose to opt-out from the direct purchaser class settlement.
We are attempting to resolve the claims of these other two opt-out plaintiffs on
reasonable terms and conditions.

         TIAZAC RELATED SECURITIES CLAIMS

         Several securities fraud class action complaints were filed in March
2002 alleging that certain of our officers and directors and us engaged in
securities fraud and/or made material misrepresentations regarding the
regulatory status of the Company's ANDA for a generic version of Tiazac. The
amended class action complaint sought a class period for those persons or
institutions that acquired Andrx common stock from April 30, 2001 through
February 21, 2002. In November 2002, the U.S. District Court for the Southern
District of Florida granted in part our motion to dismiss the amended
consolidated class action complaint and determined that all but one of the
statements allegedly made in violation of the federal securities laws should be
dismissed as a matter of law. The Court's decision reduced the class period to
six weeks commencing January 9, 2002, and ending February 21, 2002. The Court
also later granted our motion to strike all allegations of insider trading from
the complaint. In December 2003, defendant's motion for summary judgment was
granted and a final judgment was entered in favor of defendants. Plaintiffs have
filed a notice of appeal of the motion to dismiss and the summary judgment
orders.

         In October 2002, two shareholder derivative complaints (related to the
Tiazac class action referred to above) were filed against certain current and
former officers and directors of Andrx, as well as Andrx (as a nominal
defendant), in the Circuit Court of Broward County, Florida. These complaints
alleged that, during the period from May 2001 through November 2001, the
individual defendants were in possession of material non-public information
relating to the regulatory status of our ANDA for a generic version of Tiazac
and used such information to sell shares of Andrx common stock at prices higher
than they could have obtained had the information been made public, thereby
reaping insider trader profits. The complaints seek the imposition of a
constructive trust in our favor for the more than $204 million in profits that
the individual defendants received from their allegedly illegal sales of our
stock during such period. As a result of the summary judgment in our favor in
the Tiazac securities fraud litigation, plaintiffs voluntarily dismissed this
action.




                                       41
<PAGE>


         WELLBUTRIN RELATED SECURITIES CLAIMS

         Seven complaints were filed against us and certain of our officers and
directors for alleged material misrepresentations regarding the expiration
period for our bioequivalent versions of Wellbutrin SR/Zyban and that our launch
quantities might expire before FDA approval of the product. All of these cases
were consolidated and on October 20, 2003, plaintiffs filed a consolidated
amended class action complaint in the U.S. District Court for the Southern
District of Florida against us and Richard Lane alleging a class period from
March 1, 2002 through March 4, 2003. In March 2004, the U.S. District Court for
the Southern District of Florida granted our Motion to Dismiss and granted the
plaintiffs 20 days to file an amended complaint.

         FAMOTIDINE (PEPCID)

         As part of the CARAN joint venture between Carlsbad and us, Carlsbad
developed and is manufacturing for our distribution, famotidine, a generic
version of Pepcid. In July 2001, Richter Gedeon Vegyeszeti Gyar RT sued us,
Carlsbad and seven other defendants for patent infringement in the U.S. District
Court for the Eastern District of New York. Carlsbad has agreed to indemnify us
from any liability arising out of this lawsuit. We understand that the parties
to this lawsuit are working on settlement terms.

         LEMELSON PATENT LITIGATION

         On November 23, 2001, the Lemelson Medical, Education & Research
Foundation, LP filed an action in the U.S. District Court for the District of
Arizona alleging patent infringement against us and others involving "machine
vision" or "computer image analysis." On March 20, 2002, the court stayed the
proceedings, pending the resolution of another suit that involves the same
patents, but does not involve us. On January 23, 2004, the United States
District Court for the District of Nevada issued an Order determining that
certain Lemelson patents, including the patents asserted against us, were
unenforceable. The Lemelson Foundation has moved to amend or alter the judgment
entered in that case.

         ALTOCOR TRADEMARK OPPOSITION AND TRADEMARK INFRINGEMENT LITIGATION

         On August 13, 2003 Kos filed a complaint in the U.S. District Court for
the District of New Jersey alleging trademark infringement and unfair
competition and seeking to enjoin us from using the Altocor name. On September
18, 2003 the district court denied Kos' motion for preliminary injunction. Kos
appealed this decision to the U.S. Court of Appeals for the Third Circuit, which
heard this matter on March 9, 2004. The foregoing proceeding is separate from
the proceeding pending before the U.S. Patent and Trademark Office (USPTO) with
respect to Kos' trademark opposition to our Altocor trademark. Kos has filed a
motion to suspend the USPTO proceeding in light of its lawsuit, but the USPTO
has not ruled on Kos' motion.

         PPA LITIGATION

         Beginning in October 2001, a number of product liability lawsuits were
filed against us and others for personal injuries allegedly arising out of the
use of phenylpropanolamine (PPA). The actions have been consolidated and
transferred to the U.S. District Court for the Western District of Washington.
We were named in the suits because of our Entex product line, which we acquired
from Elan in June 2001. While PPA was at one time contained in Elan's Entex
products, we reformulated the Entex products containing PPA upon their
acquisition from Elan and eliminated PPA as an active ingredient in the
products. We believe that we will be fully indemnified by Elan for the defense
of all such cases and for any liability that may arise associated with the
products we purchased from Elan. Several of these cases have been voluntarily
dismissed by the plaintiffs.




                                       42
<PAGE>


         ALPHARMA BREACH OF CONTRACT LITIGATION

         On September 26, 2003 Alpharma USPD Inc. filed a complaint against one
of our subsidiaries (Armstrong Pharmaceuticals, Inc.) in the United States
District Court for the Southern District of New York. Alpharma alleges that the
contractual breach by Armstrong resulted in the recall of Epinephrine Mist, a
product manufactured by Armstrong for Alpharma. In the complaint, Alpharma seeks
to recover $18 million in damages for breach of contract, $17.4 million in
damages for negligent misrepresentations (many of which preceded our
involvement), and $50 million in punitive damages. We believe that at least part
of the cause of the recall is attributable to Alpharma. We also believe that we
are entitled to indemnification for at least part of these claims from Celltech
Manufacturing, Inc., formerly known as Medeva Pharmaceuticals Manufacturing,
Inc., from whom we purchased Armstrong in March 2001. On January 22, 2004,
Alpharma filed an amended complaint, which added Celltech and us as additional
named defendants. We dispute both the basis for liability and the amount of
damages owed. We are not in a position to determine the ultimate outcome of this
matter. In October 2003, we sold our Armstrong subsidiary, but we have retained
all potential liabilities associated with the Alpharma claim.

         BURNETT EMPLOYMENT DISPUTE

         On October 19, 1993, Terrill Hill Burnett, a former employee of POL,
filed an action in the U.S. District Court for the Southern District of New York
against POL and some of the original shareholders thereof, alleging POL breached
her employment contract, securities and common law fraud with respect to the
sale of shares of common stock, breach of fiduciary duty, negligent
misrepresentation and gender discrimination, and seeking damages in excess of $1
million, plus punitive damages. The district court has dismissed all of these
claims, except those for breach of contract and damages based on quantum meruit.
POL's motion for partial summary judgment regarding the issue of damages has
been denied and trial is tentatively set for May 2004.


--------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
================================================================================

         No matters were submitted to a vote of stockholders during the fourth
quarter of the fiscal year covered by this report.




                                       43
<PAGE>


                                     PART II

--------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
================================================================================

(A)      MARKET INFORMATION

         Andrx common stock is listed on the Nasdaq National Market under the
ticker symbol "ADRX".

         On May 17, 2002, each share of Cybear Group common stock (Nasdaq
symbol: CYBA) was converted into 0.00964 of a share of Andrx common stock
resulting in the issuance of approximately 65,000 shares of Andrx common stock.
For the calendar quarters indicated, the table below sets forth the high and low
sales prices per share of Andrx common stock, as reported on the Nasdaq National
Market, based on published financial resources.

                                                  Andrx Common Stock
                                                     Market Price
                                         --------------------------------------
                                               HIGH                  LOW
                                         -----------------     ----------------
         2003
         First Quarter                        $ 16.83               $  7.68
         Second Quarter                         24.20                 11.10
         Third Quarter                          25.90                 16.32
         Fourth Quarter                         24.05                 17.00

         2002
         First Quarter                        $ 71.27               $ 31.13
         Second Quarter                         48.20                 25.80
         Third Quarter                          27.89                 16.61
         Fourth Quarter                         23.19                 10.75

         See Note 13 to Notes to Consolidated Financial Statements included in
Item 8 of this report with respect to a stockholder rights plan adopted in March
2003.

(B)      HOLDERS

         As of March 1, 2004, there were approximately 273 holders of record of
Andrx common stock. We believe the number of beneficial owners of our Andrx
common stock is in excess of 54,000.

(C)      DIVIDENDS

         We have never paid any cash dividends on our common stock and do not
intend to pay cash dividends for the foreseeable future. We intend to retain
earnings, if any, to finance the development and expansion of our businesses. We
are prohibited from paying dividends under our senior credit facility without
the consent of the agent and the lenders parties thereto. Payment of cash
dividends in the future will depend, among other things, upon our ability to
generate earnings, our need for capital and our overall financial condition.

(D)      SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

         The section under the heading "Executive Compensation" entitled "Equity
Compensation Plan Information" to be included in our 2004 proxy statement for
the 2004 annual meeting of stockholders is hereby incorporated by reference. For
additional information concerning our capitalization, see Notes to the
Consolidated Financial Statements included in Item 8 of this report.



                                       44
<PAGE>



--------------------------------------------------------------------------------
ITEM 6.  SELECTED FINANCIAL DATA
================================================================================

         Selected Financial Data is incorporated by reference from Item 7
included herein.



                                       45
<PAGE>

--------------------------------------------------------------------------------
ITEM 7.  MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
================================================================================

OVERVIEW

         OUR BUSINESS

         We are a pharmaceutical company that:

         o        develops and commercializes generic versions of
                  controlled-release brand name pharmaceuticals, using our
                  proprietary controlled-release drug delivery technologies, and
                  generic versions of niche and immediate-release pharmaceutical
                  products, including oral contraceptives;

         o        distributes pharmaceuticals, primarily generics, manufactured
                  by others as well as manufactured by us, primarily to
                  independent pharmacies, pharmacy chains, pharmacy buying
                  groups and physicians' offices; and

         o        commercializes brand pharmaceuticals, in some instances using
                  our proprietary controlled-release drug delivery technologies.

         Controlled-release pharmaceuticals generally provide more consistent
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. Controlled-release
pharmaceuticals allow for "patient friendly" dosage forms, which reduce the
number of times a drug must be taken, thus improving patient compliance.

         2003

         In 2003, we for the first time achieved revenues exceeding $1 billion,
led by the strong performances of our distribution business and our generic
business, both of which achieved record revenues. Our distribution business
reported sales of $657 million, a 23% increase from 2002. Our generic business
launched six products, filed 12 ANDAs, some of which we believe will be awarded
first-to-file exclusivity, received four tentative and 13 final product
approvals, and generated over $255 million in revenues. We also had significant
licensing revenues from our 2002 agreement relating to KUDCo's generic version
of Prilosec, and entered into agreements with:

         o        Perrigo, to commercialize our generic Claritin products, which
                  are being sold in the over-the-counter (OTC) market;

         o        Pfizer, in conjunction with our legal settlement, which
                  allowed us to more quickly market all strengths of generic
                  Glucotrol XL;

         o        Teva, to increase the value of our oral contraceptive product
                  line by marketing them as part of Teva's broader product line;

         o        Impax and Teva, to commercialize the value of our ANDAs for
                  generic versions of Wellbutrin SR/Zyban;

         o        Pfizer, to market Cardura XL through our brand business; and

         o        Takeda, to co-develop and manufacture a combination product
                  consisting of Takeda's Actos (pioglitazone) and our
                  extended-release metformin.



                                       46
<PAGE>

         Our brand business contributed 4% of total revenues in 2003 and
continued to operate at a significant loss. In December 2003, we reorganized our
brand business by reducing the size and focus of our research and development
group, as we intend to focus on more selected opportunities that leverage our
formulation technologies, and we reduced the number of our brand sales
representatives by approximately 100 to 250 and changed the territories they
cover. These changes are intended to improve our brand operations and its
contribution to our overall business.

         In 2003, we incurred charges of $18.4 million directly to cost of goods
sold, related to the production of products and product candidates, including
$5.7 million in write-offs of pre-launch inventories of our version of generic
Wellbutrin SR/Zyban, $4.7 million directly to cost of goods sold related to
under-utilization and inefficiencies at our Florida and North Carolina
manufacturing facilities, and we wrote-off $3.9 million in manufacturing
machinery and equipment at our Florida operations. While substantial progress
has been made, we will continue to focus on further improving our pharmaceutical
manufacturing operations.

         KEY PERFORMANCE FACTORS

         In our generic business, increased revenues will result primarily from
the launch of our new products and whether and to what extent we will be
entitled to market exclusivity with respect to such products, offset by price
erosion of our existing products. In our distribution business, growth will
continue to be primarily a function of our participation in the distribution of
new generic products launched by others, offset by the net price declines
typically associated with the distribution of generic products over time. In our
brand business, revenue growth will depend primarily upon our ability to
stimulate prescription demand for Altocor, and later Fortamet and Cardura XL.

         Our operating results are highly dependent on a limited number of
products, particularly the net revenues from our generic versions of Cardizem
CD, and, to a lesser extent, our generic versions of OTC Claritin products,
Glucophage and Tiazac; net sales of generic Glucotrol XL, purchased from Pfizer;
net sales of our Altocor brand product and licensing revenue related to KUDCo's
sales of generic Prilosec. Licensing revenues from KUDCo, which was significant
in 2003, will decrease substantially in 2004, as expected. Future operating
results will also be dependant upon our ability to generate revenues from our
generic Wellbutrin SR/Zyban (either through the launch of our product or through
our Exclusivity Agreement with Impax and a subsidiary of Teva) and Prilosec
filings, as well as future generic and brand product introductions. The value
and timing of those product introductions depends on a number of factors,
including successful scale-up, final FDA marketing approval, satisfactory
resolution of patent litigation, our manufacturing capabilities and capacities,
competition and various other factors described in this annual report and in
our other SEC filings.

         CASH REQUIREMENTS

         We believe we can fund our 2004 operating cash requirements and planned
capital expenditures from operations. Our most significant 2004 cash requirement
is the planned spending of approximately $100 million for facilities, machinery
and equipment related to the renovation of our North Carolina and Florida
manufacturing facilities. We will pay Sandoz additional milestones of $2.0
million and $3.0 million upon the approval and launch, respectively, of
Fortamet. Under our agreement with Pfizer, we will pay an additional $25 million
milestone in the event that the Cardura XL NDA is approved with certain minimum
labeling requirements, and we will purchase a minimum of $21 million of product
from Pfizer during the first 12-month period following that approval. We have
additional minimum purchase requirements for Cardura XL of approximately $130
million in the following 24-month period as well.




                                       47
<PAGE>

         We had $205.1 million in cash, cash equivalents and investments
available-for-sale at December 31, 2003. In addition, we have a $185 million
secured credit facility, of which $172 million is currently available pursuant
to the borrowing base limits, to provide additional funds if necessary. No
amounts were outstanding under this credit facility as of December 31, 2003.


<TABLE>
<CAPTION>

                                                                               Payment Due by Period
                                                                                  ($ in Thousands)
                                                  ---------------------------------------------------------------------------------
                                                                    Less Than            1-3               3-5           More Than
          Contractual Obligations                     Total           1 Year            Years             Years           5 Years
                                                    ---------       ----------        ----------        ---------        ---------
<S>                                                   <C>             <C>               <C>               <C>              <C>
Long-term debt obligations                          $      --       $       --        $       --        $      --        $      --
Capital lease obligations                               2,597              981             1,592               24               --
Operating lease obligations                            70,162           11,313            20,086           15,822           22,941
Purchase obligations                                  282,000           95,000           176,000           11,000               --
Other long-term liabilities reflected
     on the Consolidated Balance Sheet                 11,079               --            11,079               --               --
                                                    ---------       ----------        ----------        ---------        ---------
TOTAL                                               $ 365,838       $  107,294        $  208,757        $  26,846        $  22,941
                                                    =========       ==========        ==========        =========        =========

</TABLE>

         FORWARD LOOKING STATEMENTS

         Forward-looking statements (statements which are not historical facts)
in this report are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. For this purpose, any statements
contained herein or which are otherwise made by us or on our behalf 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,"
"to," " plan," "expect," "believe," "anticipate," "intend," "could," "would,"
"estimate," or "continue" or the negative other variations thereof or comparable
terminology are intended to identify forward-looking statements. Investors are
cautioned that all forward-looking statements involve risk and uncertainties,
including but not limited to, our dependence on a relatively small number of
products; licensing revenues; the timing and outcome of patent, antitrust and
other litigation; the timing and commercial success of future generic product
launches; whether we will be awarded any market exclusivity period and, if so,
the precise dates thereof; government regulation generally; competition;
manufacturing capacities, output and quality processes; our ability to develop
and successfully commercialize new products; the loss of revenues from existing
products; development and marketing expenses that may not result in commercially
successful products; our inability to obtain, or the high cost of obtaining,
licenses for third party technologies; commercial obstacles to the successful
introduction of brand products generally, including Fortamet and Cardura XL;
exclusion of our brand products from formularies; the consolidation or loss of
customers; our relationship to our suppliers; the success of our joint ventures;
difficulties in integrating, and potentially significant charges associated
with, acquisitions of technologies, products and businesses; the inability to
obtain sufficient supplies from key suppliers; the impact of returns, allowances
and chargebacks; product liability claims; rising costs and limited availability
of product liability and other insurance; the loss of key personnel; failure to
comply with environmental laws; and the absence of certainty regarding the
receipt of required regulatory approvals or the timing or terms of such
approvals. We are also subject to other risks detailed herein or detailed from
time to time in our filings with the U.S. Securities and Exchange Commission.

         Readers are cautioned not to place reliance on the forward-looking
statements contained in this report. We undertake no obligation to update or
revise any forward-looking statements to reflect new information, the occurrence
or non-occurrence of future events or otherwise.




                                       48
<PAGE>


         2000 EQUITY REORGANIZATION AND 2002 CONVERSION OF CYBEAR COMMON STOCK

         Andrx was organized in August 1992 as a Florida Corporation. On
September 7, 2000, we completed a reorganization whereby Andrx acquired the
outstanding equity of its Cybear Inc. subsidiary that it did not own,
reincorporated in Delaware, and created two new classes of common stock: (i)
Andrx Common Stock to track the performance of the Andrx Group, which then
included Andrx Corporation and its majority owned subsidiaries, other than its
ownership of the Cybear Group and (ii) Cybear common stock to track the
performance of the Cybear Group. Cybear Group then included (i) Cybear Inc. and
its subsidiaries, (ii) certain potential future Internet businesses of Andrx
Corporation, and (iii) certain operating assets of AHT Corporation.
Mediconsult.com, Inc. and its subsidiaries were added to the Cybear group
following our acquisition by merger of Mediconsult.com, Inc. in April 2001.

         On May 17, 2002, each share of Cybear common stock was converted into
0.00964 of a share of Andrx common stock resulting in the issuance of
approximately 65,000 shares of common stock. The 2002 Cybear conversion included
a 25% premium on the value of Cybear common stock as provided by the terms of
our Certificate of Incorporation. Subsequent to the conversion we have only one
class of common stock outstanding.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


         Our significant accounting policies are described in Note 2 to the
Consolidated Financial Statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these consolidated financial statements requires us to make estimates and
judgments that effect the reported amounts of assets, liabilities, revenues and
expenses, and the related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate our estimates, including but not limited to those
related to:

         o        revenue recognition,

         o        allowance for doubtful accounts receivable,

         o        inventories and cost of goods sold,

         o        useful life or impairment of goodwill,

         o        useful life or impairment of other intangible assets,

         o        litigation settlements and related accruals,

         o        income taxes, and

         o        self-insurance programs.

         We base our estimates on, among other things, currently available
information, our historical experience and on various assumptions, the results
of which form the basis of making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Although we
believe that that these assumptions are reasonable under the circumstances,
estimates would differ if different assumptions were utilized and these
estimates may prove in the future to have been inaccurate.

         We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:




                                       49
<PAGE>


         REVENUE RECOGNITION

         Revenues from our distributed products and from our generic products
and the related cost of goods sold are recognized at the time the product is
received by our customers. Estimated sales returns and allowances related to the
sales to our customers are provided in the same period as the related sales are
recorded based on currently available information and are continuously monitored
and evaluated.

         Revenues from our brand products are recognized for products received
by customers that Andrx reasonably estimates will be pulled through the
distribution channel taking into account, among other things, historical and
projected prescription data, provided by external, independent sources,
incentives granted to customers, customers' right of return, generic
introductions and inventory levels in the distribution channel, which we
periodically evaluate. As a result, we had $5.7 million and $18.2 million in
deferred revenue in the December 31, 2003 and 2002 Consolidated Balance Sheets,
respectively.

         Allowances against sales for estimated returns, chargebacks, rebates
and other sales allowances are established by us concurrently with the
recognition of net revenue. These allowances are established based upon
consideration of a variety of factors, including, but not limited to, historical
return experience by product type, the number and timing of competitive products
approved for sale, both historical and projected, the estimated size of the
market for the product, estimated customer inventory levels by product and
current and projected economic conditions, including historical and anticipated
price declines. However, actual product returns, chargebacks, rebates and other
sales allowances incurred are dependent upon future events. We periodically
monitor the factors that influence sales allowances and make adjustments to
these provisions when we believe that actual product returns, chargebacks,
rebates and other sales allowances may differ from established allowances. If
conditions in future periods change, additional allowances may be required,
potentially in significant amounts. Net revenues from sales of our generic and
brand products may be affected by the level of provisions for estimated sales
returns, chargebacks, rebates and other sales allowances.

         In the pharmaceutical industry, the practice is generally to grant
customers the right to return or exchange purchased goods. In the generic
pharmaceutical industry, this practice has resulted in generic manufacturers
issuing credits (also known as shelf-stock adjustments) to customers based on
the customers' existing inventory following decreases in the market price of the
related generic pharmaceutical product. The determination to grant an inventory
credit to a customer following a price decrease is generally at our discretion,
and not pursuant to contractual arrangements with customers. Shelf-stock
adjustments occur frequently, potentially in significant amounts. We accrue an
estimate for sales allowances in the same period the sale is recognized.
Accordingly, net revenues from sales of our generic products are affected by the
level of provisions for estimated shelf-stock adjustments. In order to make such
accrual, we make significant accounting estimates, including estimates of the
quantities shipped by customers and product still on customers' shelves, and
estimates of the price declines that will occur before the products pull through
the distribution channel. We periodically review and, as necessary, adjust such
estimates. As a result, if conditions in future periods change, additional
allowances or reversals may be required. Such additional allowances or reversals
could be significant.




                                       50
<PAGE>


         In our brand business, we make significant estimates for sales
returns and allowances, which are dependent on our ability to promote to
physicians, create demand for our products, pull products through the
distribution channel and estimate returns, future levels of prescriptions for
our products and the inventory levels in the distribution channel. It is a
common pharmaceutical industry practice for brand manufacturers to offer
customers, among other things, buy-in allowances on initial purchases prior to
promotion activities by the manufacturer. In addition, we conduct a significant
amount of our sales with a limited number of large pharmaceutical wholesalers
and warehousing pharmacy chains that have a right to return or exchange product
they purchased. In 2003, approximately 59% of the brand products shipments were
made to three customers. As there are a limited number of large customers and we
do not have a substantial and unique brand product line, these customers can and
do exert significant leverage on us relative to, among other things, product
returns and other concessions. As a result, we make significant estimates
related to sales returns and allowances in connection with the recognition of
revenues, and periodically review such estimates. Our policy is to recognize net
revenues to the extent we can reasonably estimate returns and the product being
pulled through the distribution channel. If conditions change in future periods,
additional allowances or reversals may be required. Such additional allowances
could be significant.

         From time to time we enter into collaborative arrangements under which
we may manufacture products that are marketed by other parties. The arrangements
generally define the way that the parties share profits from the product sales.
We recognize revenue from these arrangements based on information supplied by
the other parties related to shipment of the product to and acceptance by their
customers, less their estimates for sales returns and allowances. The net
revenues we report are subject to several estimates by such parties similar to
those we experience with the sales of our products. We periodically monitor the
factors that influence sales returns and allowances and conduct inquiries of
the other parties regarding these estimates. Such estimates are revised as
changes become known. In addition, we receive periodic reports by the other
parties that support the amount of revenue that we recognize. Amounts recognized
are then compared to the cash subsequently remitted to us.

         We have an arrangement with Perrigo whereby we agreed to manufacture
and supply Perrigo with our generic versions of Claritin-D 12, Claritin-D 24 and
Claritin RediTabs, and Perrigo agreed to market such products as store brand OTC
products. In June 2003, Perrigo launched our OTC generic version of Claritin-D
24 and in January 2004, our OTC generic version of Claritin RediTabs. Under the
terms of the arrangement, we will manufacture and Perrigo will package and
market these products, and the parties will share the net profits, as defined,
from product sales. We recognize revenue from such sales after Perrigo has
shipped and the customer has received and accepted the product, less estimates
by Perrigo for product returns and other customary allowances. The net revenues
reported by us are subject to numerous estimates by Perrigo, such as returns and
other sales allowances and certain related expenses.

         Licensing and royalty fees are recognized when the obligations
associated with the earning of the licensing or royalty fee have been satisfied.
Our accounting policy is to review each contract, and if appropriate, we defer
up-front and milestone payments, whether or not they are refundable, and
recognize them over the obligation period. Revenue recognition is deferred until
all significant contingencies have been resolved.




                                       51
<PAGE>


         In October 2002, we entered into an agreement with Genpharm and KUDCo,
pursuant to which Andrx and Genpharm relinquished any marketing exclusivity
rights to the 10mg and 20mg strengths of omeprazole (generic Prilosec), thereby
accelerating the ability of KUDCo to receive final FDA marketing approval for
its version of that product, which KUDCo received on November 1, 2002. Pursuant
to the agreement with KUDCo, the licensing rate earned by Andrx was 15% until
June 9, 2003, when the rate decreased to 9% and was further reduced to 6.25% in
February 2004, as a result of the December 2003 appellate court decision
affirming the lower court decision that Andrx's generic Prilosec product
infringed patents issued to AstraZeneca plc. We will be entitled to receive the
6.25% licensing rate for 24 months. Additional competition from the August 2003
launch of two additional generic versions of Prilosec and the September 2003
launch of an OTC version of Prilosec has resulted in reduced sales for KUDCo's
version of generic Prilosec, thereby reducing licensing revenues for Andrx. Such
licensing fees may also cease if either Andrx or Genpharm becomes lawfully
permitted to launch its own generic version of Prilosec. Licensing revenues from
KUDCo for the years ended 2003 and 2002 were $76.7 million and $16.6 million,
respectively. The licensing fee amounts due to us are subject to numerous
estimates by KUDCo, including shelf-stock adjustments, returns, discounts,
rebate and other sales allowances and related expenses.

         ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE

         We maintain an allowance for doubtful accounts receivable for estimated
losses resulting from our inability to collect from customers. As of December
31, 2003, our accounts receivable, net totaled $138.8 million, including an
allowance for doubtful accounts receivable of $7.7 million. Accounts receivable
generated from our distribution operations are principally due from independent
pharmacies, pharmacy chains, pharmacy buying groups and physicians' offices.
Accounts receivable generated from our generic and brand product sales
operations are principally due from large warehousing pharmacy chains,
wholesalers and large pharmacy benefit managers. In extending credit, we attempt
to assess our ability to collect by, among other things, evaluating the
customer's financial condition, both initially and on an ongoing basis.
Collateral is generally not required. In evaluating the adequacy of our
allowance for doubtful accounts receivable, we primarily analyze accounts
receivable balances, the percentage of accounts receivable by aging category,
and historical bad debts and also consider, among other things, customer
concentrations, customer credit-worthiness, and changes in customer payment
terms or payment patterns. If the financial conditions of our customers were to
deteriorate, resulting in an impairment of their ability to make payments or our
ability to collect, an increase to the allowance may be required. Also, should
actual collections of accounts receivable be different than our estimates
included in the determination of our allowance, the allowance would be increased
or decreased through charges or credits to selling, general and administrative
(SG&A) expenses in the Consolidated Statements of Income in the period in which
such changes in collection become known. If conditions change in future periods,
additional allowances or reversals may be required. Such additional allowances
could be significant.

         In August 2002, we learned that an employee had made numerous improper
entries that affected the aging of certain customer accounts receivable and,
accordingly, the adequacy of our allowance for doubtful accounts receivable.
After extensive investigation and analysis, including discussions with certain
customers regarding past due amounts, management determined that our provision
for doubtful accounts receivable included in SG&A was understated for the years
ended 2001, 2000 and 1999, by an aggregate amount of $4.0 million. After
consideration of all of the facts and circumstances, we recognized the full
amount of the $4.0 million prior period misstatement in the second quarter of
2002, as we believed it was not material to any period affected.




                                       52
<PAGE>


         Activity in the allowance for doubtful accounts receivable is as
follows:

<TABLE>
<CAPTION>

                                                        Years Ended December 31,
                                                           ($ In Thousands)
                                           --------------------------------------------------
                                             2003                 2002                 2001
                                           --------             --------             --------
<S>                                        <C>                  <C>                  <C>
Beginning of year                          $ 15,495             $  7,663             $  7,077
Provision for doubtful accounts
  receivable                                  4,340               13,178                1,357
Writeoffs, net of recoveries                (12,101)              (5,346)                (771)
                                           --------             --------             --------

End of year                                $  7,734             $ 15,495             $  7,663
                                           ========             ========             ========

</TABLE>

         The provision for doubtful accounts receivable in 2002 of approximately
$13.2 million includes $4.0 million related to prior years as discussed above
and additional provisions for the first and second quarters of 2002, of $1.4
million related to this matter. Since August 2002, we have continued aggressive
follow-up with our customers and have collected a significant amount of past due
balances. However, as certain other amounts were not collected and continue to
age, we recorded additional provisions in the third and fourth quarters of 2002,
as the likelihood of collection of those accounts decreased. We wrote off a
significant portion of past due accounts in 2003 at the conclusion of our
vigorous efforts to collect these balances. Additional provisions or reversals
may result in future periods as actual collections may differ from our current
estimates.

         INVENTORIES AND COST OF GOODS SOLD

         Inventories consist primarily of finished goods held for distribution,
and raw materials, work-in-process and finished goods of our generic and brand
products. As of December 31, 2003, we had $209.9 million in inventories.
Inventories are stated at the lower of cost (first-in, first-out) or market.
Cost of inventories held for distribution is based on purchase price, net of
vendor discounts, rebates and other allowances, but excludes shipping,
warehousing and distribution costs, which are expensed as incurred and reported
as SG&A expenses. In evaluating whether inventory is stated at the lower of cost
or market, management considers such factors as the amount of inventory on hand
and in the distribution channel, the estimated time required to sell such
inventory, remaining shelf life and current and expected market conditions,
including levels of competition. As appropriate, provisions through cost of
goods sold are made to reduce inventories to their net realizable value. If
conditions change in future periods, additional allowances may be required. Such
additional allowances could be significant. From time to time, we have made, are
in the process of making or may make commercial quantities of our product
candidates prior to the date by which we anticipate that such products will
receive FDA final marketing approval and/or satisfactory resolution of the
patent infringement litigation, if any, involving them (i.e. pre-launch
inventory). Production of pre-launch inventories involves the risk that such
product(s) may not be approved for marketing by the FDA on a timely basis or
ever and/or that the results of related litigation may not be satisfactory. If
this risk were to occur or the launch of such product is significantly
postponed, additional allowances may be required. Such additional allowances
could be significant.




                                       53
<PAGE>

         For the year ended December 31, 2003, cost of goods sold includes
charges totaling $18.4 million for the write-off of inventory for our products
and product candidates, which is inclusive of $5.7 million for our version of
generic Wellbutrin SR/Zyban placed into production after December 31, 2002. Cost
of goods sold also includes charges of $12.1 million relating to the write-down
of certain assets, inventory and under-utilization and inefficiencies from the
Massachusetts aerosol manufacturing operation which was sold in October 2003. We
also incurred charges of $3.9 million for the write-off of certain manufacturing
machinery and equipment at our Florida manufacturing operations and $4.7 million
related to under-utilization and inefficiencies at our Florida manufacturing
facilities, as well as start-up costs for our Morrisville, North Carolina
facility, which we are renovating. As of December 31, 2003, we had approximately
$12.2 million of raw materials, work-in-process and finished goods inventories
pending final FDA approval and/or satisfactory resolution of litigation, of
which $5.0 million represents inventory for products that have been approved by
the FDA subsequent to December 31, 2003.

         USEFUL LIFE OR IMPAIRMENT OF GOODWILL

         Under the purchase method of accounting for acquisitions, goodwill
represents the excess of purchase price over the fair value of the net assets
acquired. As of December 31, 2003, we had $34.0 million of goodwill consisting
of $26.3 million from the acquisition of CTEX Pharmaceuticals, Inc. in January
2001, and $7.7 million from the acquisition of Valmed Pharmaceuticals, Inc. in
March 2000. Prior to 2002, we measured impairment of goodwill using the
undiscounted cash flow method whenever events and circumstances warranted
revised estimates of useful lives or recognition of an impairment of goodwill.
The undiscounted cash flow method compared the net book value being tested to
the estimated aggregate undiscounted cash flows. If the net book value exceeded
the estimated aggregate undiscounted cash flows, the excess carrying amount of
goodwill would be written-off. With the adoption of Statement of Financial
Accounting Standards (SFAS) No. 142 in 2002, goodwill is subject to at least an
annual assessment for impairment in value by applying a fair value based test.
Any applicable impairment loss is the amount, if any, by which the implied fair
value of goodwill is less than the carrying value. Accordingly, if there is a
change in the value of the goodwill we acquired, impairment charges may be
required. Such additional charges could be significant. We may or may not
maintain acquired businesses as discreet operating units. In the event that we
integrate an acquisition into our other operations as we did with CTEX into our
brand business, the acquired business and its related goodwill are combined with
our other operations. Consequently, the potential impairment is evaluated in
relation to the business unit as a whole.

         USEFUL LIFE OR IMPAIRMENT OF OTHER INTANGIBLE ASSETS

         Brand product rights purchased from other pharmaceutical companies or
acquired through the allocation of purchase price upon the acquisition of
another entity (included in other intangible assets), are being amortized over
periods ranging from three to 10 years. Other intangible assets also include
patents relating to our electronic prescription process, which are being
amortized over a period of 14 years. We established the amortization period
based on an estimate of the period the assets would generate positive cash
flows. If conditions change, we may be required to decrease the estimated
amortization period. Amortization is provided using the straight-line method
over the estimated useful life. Intangible assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If conditions in future periods change,
additional allowances may be required, which could be significant.




                                       54
<PAGE>


         During 2002, we recorded a charge of $7.8 million for the impairment of
goodwill and certain intangible assets related to Physicians' Online (POL). That
charge was the result of our decision not to commit additional resources, to
seek the sale of POL and an evaluation of the goodwill and intangible assets
arising from the acquisition of Mediconsult and the subsequent integration of
Internet operations into Andrx. As a result, we believed that the future
benefits previously associated with this transaction no longer existed under our
current operations. In December 2003, we sold our POL web portal operations for
$2.0 million.

         As of December 31, 2003, we had $13.7 million of other intangible
assets, net which consisted primarily of $1.2 million related to patents for our
electronic prescription process and $11.0 million and $1.5 million for product
rights related to the Entex and Anexsia product lines, respectively. An
impairment charge could potentially occur with respect to the unamortized
portion of our Entex product rights and Entex inventories ($11.0 million and
$396,000, respectively, as of December 31, 2003), as a result of FDA's October
17, 2003 draft compliance policy guide with respect to pharmaceutical products
that are presently permitted to be on the market and sold by prescription
without an approved ANDA or NDA, such as the Entex line of products. This draft
guidance is intended to provide notice that once FDA approves a version of such
product, unapproved drug products such as our Entex product line may be subject
to FDA enforcement action at any time, and that FDA will evaluate each product
on a case-by-case basis. In determining whether to permit a grace period, and
how long such grace period will be, FDA indicates that it will consider factors
such as: (i) the effects on the public health of immediate removal; (ii) the
difficulty of conducting any required studies, and preparing and obtaining
approval of an application; (iii) the burden on affected parties; (iv) FDA's
available enforcement resources; and (v) any special circumstances. We are
continuing to assess this matter, including whether to seek FDA approval for
marketing some or all of the Entex line of products as prescription or OTC
products, and the requirements imposed by FDA for NDA and ANDA submissions.

         LITIGATION SETTLEMENTS AND RELATED ACCRUALS

         We account for the exposure of our various litigation matters under the
provisions of SFAS No. 5 "Accounting for Contingencies", which requires, among
other things, an exposure to be accrued when it becomes probable and
estimatable. We disclose possible significant exposure for legal matters in
Note 16 and litigation settlements and other charges in Note 17 of our Notes to
Consolidated Financial Statements. No accrual or disclosure of legal exposures
judged to be remote is required. To the extent possible, the exposure to legal
matters is evaluated and estimated, based on currently available information and
following consultation with legal counsel. The ultimate outcome of any
litigation may be significantly different than the amounts estimated, given the
uncertainties inherent in complex litigation.

         During 2003, we incurred an $8.8 million charge relating to various
previously announced legal claims and the negotiated settlement of an obligation
to one of our law firms with respect to our generic version of Tiazac. The 2002
period includes, among other things, a litigation settlement charge of $65.0
million, which we recorded in anticipation of reaching a settlement on certain
litigation. This contingency became probable and estimatable in June 2002, as a
result of mediation discussions between Andrx, Aventis S.A. and the various
classes of plaintiffs in the Cardizem CD antitrust litigation that was pending
for multidistrict proceedings in the United States District Court for the
Eastern District of Michigan. In July 2002, Andrx and Aventis entered into a
settlement, which is now binding, with the direct purchaser class of plaintiffs.
In January 2003, Andrx and Aventis entered into a settlement, which has now been
approved by the District Court, with the indirect purchaser class of plaintiffs,
as well as with the attorneys general for all 50 states, the District of
Columbia and Puerto Rico. The respective payments made or to be made by Andrx
and Aventis under these agreements have not been disclosed. The litigation is
still ongoing for the remaining group of litigants, including those who timely
choose to opt out of the settlements described above, and an indirect purchaser
who has appealed the District Court's approval of the settlement, purportedly on



                                       55
<PAGE>
behalf of a class of Tennessee residents. If not settled, Andrx anticipates that
these matters may take several years to be resolved, and an adverse judgment
could have a material adverse effect on our business and consolidated financial
statements. Andrx intends to litigate vigorously any outstanding related cases
that it cannot settle on a reasonable basis. Any portion of the accrued
litigation settlements charge that was not paid as of December 31, 2003, is
included in accrued expenses and other liabilities in our December 31, 2003
Consolidated Balance Sheet.

         INCOME TAXES

         The provisions of SFAS No. 109, "Accounting for Income Taxes", require,
among other things, recognition of future tax benefits measured at enacted rates
attributable to the deductible temporary differences between the financial
statement and income tax bases of assets and liabilities and to benefit deferred
tax assets to the extent that the realization of such benefits is "more likely
than not". Under the provisions of SFAS No. 109, deferred income tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in
effect for the year in which the differences are expected to reverse.

         We record a valuation allowance to reduce our deferred income tax
assets to the amount that is more likely than not to be realized. As of December
31, 2003, we had deferred income tax assets totaling $65.2 million. We have
considered our ability to carry back certain net operating losses, future
taxable income and ongoing prudent and feasible tax planning strategies and have
determined that no valuation allowance is necessary on our deferred income tax
assets. In the event that we were to determine that we would not be able to
realize all or part of our deferred income tax assets in the future, an
adjustment to the valuation allowance would be charged to the Consolidated
Statement of Income in the period such determination was made. We previously
recorded a valuation allowance of $7.2 million on certain Cybear net operating
loss carryforwards. Due to a later change in circumstances during 2002, we
determined that it is more likely than not that the net operating loss
carryforwards would be utilized, and we reversed this $7.2 million valuation
allowance.

         Our future effective tax rate is based on estimates of expected income,
statutory tax rates and tax planning opportunities. Significant judgment is
required in determining our effective tax rate and the ultimate resolution of
our tax return positions. Despite our belief that our tax return positions are
supportable, our policy is to establish reserves for taxes that may become
payable in future years as a result of examination by tax authorities. We
believe our tax reserves provide an adequate allowance for such contingencies.
The tax reserves are analyzed periodically and adjustments are made to the tax
reserves, as events occur to warrant such adjustment. Our federal income tax
returns for the years 1999 to 2002 are currently under audit by the Internal
Revenue Service. Our effective tax rate and cash flows could be materially
impacted by the ultimate resolution of our tax positions.

         SELF-INSURANCE PROGRAMS

         We maintain self-insured retentions and deductibles for some of our
insurance programs and limit our exposure to claims by maintaining stop-loss
and/or aggregate liability coverages. The estimate of our claims liability,
which may be material, contains uncertainty since we must use judgment to
estimate the ultimate costs that will be incurred to settle reported claims and
unreported claims for incidents incurred but not reported as of the balance
sheet date. When estimating our liability for such claims, we consider a number
of factors, including, but not limited to, self-insured retentions, deductibles,
historical claim experience, demographic factors, severity factors and maximum
claims exposure. If actual claims exceed these estimates, additional charges may
be required.




                                       56
<PAGE>



                       ANDRX CORPORATION AND SUBSIDIARIES


CONSOLIDATED SELECTED FINANCIAL DATA

         The following summary historical financial information is based on our
consolidated audited financial statements, including the consolidated audited
financial statements for the years ended December 31, 2003, 2002 and 2001,
included elsewhere herein. Our consolidated audited financial statements for the
years ended December 31, 2003, 2002 and 2001, have been audited by Ernst & Young
LLP, our current independent auditors. Our consolidated financial statements for
the years ended December 31, 2000 and 1999, were audited by Arthur Andersen LLP,
our former independent auditors.

<TABLE>
<CAPTION>

                                                                            Years Ended December 31,
                                                             ($ in Thousands, Except for Share and Per Share Amounts)
                                                 ----------------------------------------------------------------------------------
                                                    2003              2002              2001             2000              1999
                                                 -----------       -----------       -----------      -----------       -----------
<S>                                              <C>               <C>               <C>              <C>               <C>
STATEMENTS OF OPERATIONS DATA (1)

Revenues
   Distributed products                          $   657,098       $   534,618       $   495,241      $   329,110       $   262,402
   Andrx products                                    301,652           209,407           229,003          175,428           134,796
   Stipulation fees                                       --                --                --               --            70,733
   Licensing and royalties                            80,080            17,340            13,648           14,966             8,059
   Other                                               7,508             9,615            11,149              456                --
                                                 -----------       -----------       -----------      -----------       -----------
Total revenues                                     1,046,338           770,980           749,041          519,960           475,990
                                                 -----------       -----------       -----------      -----------       -----------

Operating expenses
   Cost of goods sold                                700,401           620,069           479,595          301,475           235,346
   Selling, general and administrative (2)           217,085           193,253           145,321           82,510            70,010
   Research and development                           52,235            51,479            52,846           45,467            25,327
   Litigation settlements and other charges            8,750            72,833            14,759            7,322                --
                                                 -----------       -----------       -----------      -----------       -----------
Total operating expenses                             978,471           937,634           692,521          436,774           330,683
                                                 -----------       -----------       -----------      -----------       -----------

Income (loss) from operations                         67,867          (166,654)           56,520           83,186           145,307

Other income (expense)
   Equity in earnings (losses) of joint
    ventures                                           5,135             3,697             1,025           (1,202)             (370)
   Interest income                                     2,242             5,420            11,386           13,039             3,603
   Interest expense                                   (2,641)             (200)               --             (767)           (1,661)
   Gain on sale of assets                              5,605             5,094                --               --                --
   Minority interest in Cybear                            --                --                --            4,146             1,937
   Gain on sales of Cybear shares                         --                --                --               --               643
                                                 -----------       -----------       -----------      -----------       -----------
Income (loss) before income taxes                     78,208          (152,643)           68,931           98,402           149,459
Income taxes (benefit)                                30,031           (60,826)           31,385           39,870            55,405
                                                 -----------       -----------       -----------      -----------       -----------
Net income (loss)                                $    48,177       $   (91,817)      $    37,546      $    58,532       $    94,054
                                                 ===========       ===========       ===========      ===========       ===========

</TABLE>





                                   (Continued)



                                       57
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

CONSOLIDATED SELECTED FINANCIAL DATA (CONTINUED)


<TABLE>
<CAPTION>

                                                                                Years Ended December 31,
                                                                ($ in Thousands, Except for Share and Per Share Amounts)
                                               ------------------------------------------------------------------------------------
                                                    2003            2002              2001              2000               1999
                                               ------------     ------------      ------------      --------------     ------------
<S>                                            <C>              <C>               <C>               <C>                      <C>
EARNINGS (LOSS) PER SHARE

ANDRX GROUP COMMON STOCK (3)(4)

Net income (loss) allocated to
    Andrx Group (including Cybear Group from
         January 1, 1999 through September
         6, 2000 and  May 18, 2002 through
         December 31, 2003)                    $     48,177     $    (85,873)     $     72,862      $       66,873     $     94,054
Premium on Conversion of Cybear common stock             --             (526)               --                  --               --
                                               ------------     ------------      ------------      --------------     ------------

Total net income (loss) allocated to Andrx     $     48,177     $    (86,399)     $     72,862      $       66,873     $     94,054
                                               ============     ============      ============      ==============     ============

Net income (loss) per share of
   Andrx Group common stock
         Basic                                 $       0.67     $      (1.22)     $       1.04      $         0.99     $       1.52
                                               ============     ============      ============      ==============     ============
         Diluted                               $       0.66     $      (1.22)     $       1.01      $         0.95     $       1.45
                                               ============     ============      ============      ==============     ============

Weighted average shares of Andrx Group
   common stock outstanding
         Basic                                   71,892,000       70,876,000        69,998,000          67,756,000       61,980,000
                                               ============     ============      ============      ==============     ============
         Diluted                                 72,655,000       70,876,000        72,243,000          70,456,000       64,953,000
                                               ============     ============      ============      ==============     ============

CYBEAR GROUP COMMON STOCK (4) (5)

Net loss allocated to Cybear Group
      (from September 7, 2000 through
      May 17, 2002)                                             $     (5,944)     $    (35,316)     $       (8,341)
Premium on Conversion of Cybear common stock                             526                --                  --
                                                                ------------      ------------      --------------

Total net loss allocated to Cybear Group                        $     (5,418)     $    (35,316)     $       (8,341)
                                                                ============      ============      ==============

Basic and diluted net loss per share
      of Cybear Group common stock                              $      (0.80)     $      (6.09)     $        (2.19)
                                                                ============      ============      ==============

Basic and diluted weighted average
   shares of Cybear Group common stock
   outstanding                                                     6,743,000         5,802,000           3,801,000
                                                                ============      ============      ==============

</TABLE>


         (1)      Certain prior year amounts have been reclassified to conform
                  with the current year presentation.

         (2)      In 2002, Andrx adopted Statement of Financial Accounting
                  Standards No. 142 "Goodwill and Other Intangible Assets" which
                  resulted in goodwill no longer being subject to amortization.
                  Goodwill amortization expense in 2001, 2000, and 1999, was
                  $4,967, $1,850 and $115, respectively.

         (3)      Andrx Group share and per share amounts reflect Andrx's May
                  1999 and March 2000 two-for-one stock splits of Andrx common
                  stock effected in the form of 100% stock dividends.

         (4)      Effective May 17, 2002, all outstanding shares of Cybear
                  common stock were converted to Andrx common stock. For periods
                  subsequent to the May 2002 conversion, Andrx will only report
                  earnings (loss) per share for Andrx common stock which
                  includes all of the former Cybear operating results from the
                  effective date of the May 2002 conversion and will no longer
                  report separate earnings (loss) per share for the former
                  Cybear common stock.

         (5)      The basic and diluted weighted average shares of Cybear common
                  stock outstanding and diluted net loss per share of Cybear
                  common stock, included herein for the period from January 1,
                  2002 to May 17, 2002, and years ended December 31, 2001 and
                  2000, reflect the July 31, 2001 one-for-four reverse stock
                  split for Cybear common stock.



                                       58
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

CONSOLIDATED SELECTED FINANCIAL DATA (CONTINUED)

<Table>
<Caption>

                                                                                  December 31,
                                                                               ($ in Thousands)
                                               --------------------------------------------------------------------------------
                                                 2003              2002              2001              2000              1999
                                               --------          --------          --------          --------          --------
<S>                                            <C>               <C>               <C>               <C>               <C>
BALANCE SHEET DATA

   Cash, cash equivalents and
      investments available-for-sale           $205,123          $ 97,394          $245,424          $336,809          $123,418
   Accounts receivable, net                     138,849           127,698           129,900            92,960            72,032
   Inventories                                  209,910           140,625           161,691           101,219            78,771
   Working capital                              354,822           291,848           446,835           453,860           179,829
   Property, plant and equipment, net           239,173           227,864           139,898            77,773            39,874
   Total assets                                 958,446           789,479           789,214           669,416           357,954
   Short-term borrowings                             --                --                --                --            20,226
   Retained earnings                            132,215            84,038           176,381           138,835            80,303
   Total stockholders' equity                   622,901           565,707           647,894           559,797           220,972


</TABLE>



                                       59
<PAGE>

ANDRX CORPORATION AND SUBSIDIARIES

RESULTS OF OPERATIONS

REVENUES AND GROSS PROFIT (LOSS)



<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                                                ($ in Thousands)
                                       -------------------------------------------------------------------
                                           2003                       2002                        2001
                                       -----------                 -----------                 -----------
<S>                                    <C>                         <C>                         <C>
DISTRIBUTED PRODUCTS
Revenues                               $   657,098                 $   534,618                 $   495,241
Gross profit                               120,229                     100,968                      84,949
Gross margin                                  18.3%                       18.9%                       17.2%

ANDRX PRODUCTS - GENERIC
Revenues                               $   255,014                 $   183,873                 $   197,940
Gross profit                               119,440                      37,848                     145,666
Gross margin                                  46.8%                       20.6%                       73.6%

ANDRX PRODUCTS - BRAND
Revenues                               $    46,638                 $    25,534                 $    31,063
Gross profit                                33,794                      12,271                      18,900
Gross margin                                  72.5%                       48.1%                       60.8%

ANDRX PRODUCTS-TOTAL
Revenues                               $   301,652                 $   209,407                 $   229,003
Gross profit                               153,234                      50,119                     164,566
Gross margin                                  50.8%                       23.9%                       71.9%

TOTAL PRODUCT SALES
Revenues                               $   958,750                 $   744,025                 $   724,244
Gross profit                               273,463                     151,087                     249,515
Gross margin                                  28.5%                       20.3%                       34.5%

LICENSING AND ROYALTIES
Revenues                               $    80,080                 $    17,340                 $    13,648
Gross margin                                 100.0%                      100.0%                      100.0%

OTHER
Revenues                               $     7,508                 $     9,615                 $    11,149
Gross profit (loss)                         (7,606)                    (17,516)                      6,283
Gross margin (loss)                         (101.3%)                    (182.2%)                      56.4%

TOTALS
Revenues                               $ 1,046,338                 $   770,980                 $   749,041
Gross profit                               345,937                     150,911                     269,446
Gross margin                                  33.1%                       19.6%                       36.0%

</TABLE>


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

         For 2003, we generated net income of $48.2 million, compared to a net
loss of $91.8 million for 2002. For 2002, of the $91.8 million of net loss,
$86.4 million of total net loss was allocated to Andrx common stock and $5.4
million of total net loss was allocated to the former Cybear common stock.



                                       60
<PAGE>

DISTRIBUTED PRODUCTS

         Revenues from distributed products increased by 22.9% to $657.1 million
for 2003, compared to $534.6 million for 2002. The increase generally reflects
our participation in the distribution of new generic products introduced by
generic manufacturers, and an increase in sales to existing and new customers,
offset by the overall price declines common to generic products. In 2003,
revenues from distributed products generated $120.2 million of gross profit with
a gross margin of 18.3%, compared to $101.0 million of gross profit with a gross
margin of 18.9% for 2002. When we participate in the distribution of generic
products which face little or no competition, we generally record higher sales
revenues and lower gross margins. When such products encounter additional
competition, the resulting lower price generally cause us to record lower sales,
but higher margins, as we generally are able to purchase such products at more
favorable prices.

ANDRX PRODUCTS REVENUES

         GENERIC PRODUCTS

         For 2003, revenues from our generic products increased by 38.7% to
$255.0 million, compared to $183.9 million in 2002. For 2002, revenues from our
generic products include sales of our generic versions of Cardizem CD, Dilacor
XR, Glucophage, K-Dur, Ventolin (albuterol metered dose inhalers) and Naprelan.
For 2003, revenues include sales of those products as well as the 2003 launches
of our generic versions of Tiazac, Claritin-D 24, which is marketed by Perrigo
as an OTC product, and from generic Glucotrol XL, which we obtain from Pfizer.
The increase in revenues from our generic products for 2003, compared to 2002,
results primarily from the launches of these additional products, which include
initial stockings, offset by price declines from our other generic products. Due
to a relatively stable competitive environment, our generic version of Cardizem
CD continues to generate significant levels of revenue and gross profit and
materially contributes to our overall current level of operating results. In
October 2003, we sold our Massachusetts aerosol manufacturing operation that
makes our generic version of Ventolin (albuterol metered dose inhalers). As we
retained a supply relationship with the purchaser of that operation, we will
continue to generate revenues from this product, which will be recorded under
revenues from distributed products.

         In 2003, our generic products generated $119.4 million of gross profit
with a gross margin of 46.8%, compared to $37.8 million of gross profit with a
gross margin of 20.6% in 2002. The increase in gross margin from our generic
products for 2003, compared to 2002, results primarily from the launches of our
additional generic products, partially offset by price declines from our other
generic products and reduced charges to cost of goods sold for pre-launch
inventories. The 2002 period includes charges to cost of goods sold of $41.0
million to fully reserve pre-launch inventories of our generic version of
Prilosec (which was not launched) as well as a $34.7 million charge related to
production of generic products and pre-launch inventories of our generic
products, including Wellbutrin SR/Zyban. Cost of goods sold for 2003 includes
charges of $18.4 million related to production of our products and product
candidates and $3.9 million for the write-off of certain manufacturing machinery
and equipment at our Florida manufacturing operations, a significant portion of
which related to the manufacture of generic Prilosec. We have experienced and,
in the near term, expect to continue to experience, significant charges to cost
of goods sold as a result of production and utilization issues at our
manufacturing facilities related to the expansion of manufacturing facilities in
anticipation of new product launches and other factors. In 2003, we incurred
costs of approximately $4.7 million related to under-utilization and
inefficiencies at our Florida manufacturing facilities and our North Carolina
facility, which we are renovating. In the 2002 period, we incurred $5.8 million
of charges to cost of goods sold related to under-utilization issues at our
Florida manufacturing facilities, including costs associated with our Weston,
Florida facility, which we had intended to use for manufacturing, but which we
are now using for R&D and other non-manufacturing operations.



                                       61
<PAGE>


         BRAND PRODUCTS

         For 2003, revenues from our brand products increased by 82.7% to $46.6
million from $25.5 million in 2002. 2003 revenues include sales generated from
our Altocor (lipid lowering), Entex (cough and cold), including two reformulated
versions thereof, Anexsia (pain) and Embrex (prenatal vitamins) product lines.
The increase in revenues for 2003 compared to 2002 was primarily the result of a
full year of sales of Altocor, which we began marketing in July 2002, partially
offset by decreases in revenues from the Entex, Embrex and Anexsia product
lines, which were affected by various factors, including the advent of generic
competition.

         In 2003, our brand products generated $33.8 million of gross profit
with a gross margin of 72.5%, compared to $12.3 million of gross profit with a
gross margin of 48.1% for 2002. The increase in gross profit and gross margin
for 2003 resulted primarily from a full year of Altocor sales in 2003. Gross
margins were also affected by, among other things, inventory charges of
approximately $1.5 million and $4.8 million, respectively (through cost of goods
sold) in 2003 and 2002, for production failures and inventory expiration issues.
Cost of goods sold in 2003 and 2002 also included royalties accrued on the
revenues generated from the Entex and Anexsia product lines, as well as
amortization of the marketing rights we acquired for the Embrex, Entex and
Anexsia products, calculated on a straight-line basis.

LICENSING AND ROYALTIES

         In 2003, we recorded $80.1 million in licensing and royalties revenue,
compared to $17.3 million in 2002. Licensing and royalties revenue for 2003 and
2002 includes $76.7 million and $16.6 million, respectively, from the agreement
with KUDCo (for relinquishing exclusivity rights to the 10mg and 20mg strengths
of generic Prilosec). The licensing rate due from KUDCo reduced from 15% to 9%
on June 9, 2003, and was further reduced in February 2004 to 6.25% as a result
of the December 2003 appellate court decision affirming the district court
decision that our generic Prilosec product infringed patents issued to
AstraZeneca. Licensing revenues for Andrx were further reduced in 2003, as a
result of competitors' launches of two additional generic versions of Prilosec
in August 2003, and the launch of an OTC version of generic Prilosec in
September 2003, which resulted in reduced sales for KUDCo's generic version of
Prilosec.

OTHER REVENUES

         We recorded $7.5 million of other revenues in 2003, compared to $9.6
million in 2002. Other revenues for 2003 primarily represented revenues from the
contract manufacture and sale of albuterol metered dose inhalers from our
Massachusetts aerosol manufacturing operation and from our Internet operations,
primarily the POL web portal. We sold our Massachusetts aerosol manufacturing
operation in October 2003 and our POL web portal in December 2003.




                                       62
<PAGE>


         During 2003 and 2002, we recorded to cost of goods sold of other
revenues, charges of $7.9 million and $11.8 million, respectively, related to an
excess facilities lease, related leasehold improvements, excess aerosol product
inventories, and equipment and severance at our Massachusetts aerosol
manufacturing operation. During 2003 and 2002, we also recorded charges to cost
of goods sold related to excess capacity at the Massachusetts aerosol
manufacturing operation of $4.3 million and $7.9 million, respectively.

SG&A

         SG&A expenses were $217.1 million, or 20.7% of total revenues for 2003,
compared to $193.3 million, or 25.1% of total revenues for 2002. For both
periods, SG&A expenses included expenses related to the administration,
marketing, sale, distribution and warehousing of distributed products and our
brand and generic products, royalties to our former Co-Chairman and Chief
Scientific Officer related to sales of our generic version of Cardizem CD,
corporate overhead and legal costs (primarily patent infringement and antitrust
matters related to our ANDA filings). The increase in SG&A expenses in 2003,
compared to 2002, was primarily due to the increase in sales and marketing costs
for our brand products, the expansion of our distribution business, including
the opening of our Ohio distribution center, and increases in insurance expense
and other corporate overhead, offset by a decrease in operating expenses related
to our former Internet business. SG&A expenses for 2002 include a $4.0 million
allowance for doubtful accounts receivable recorded in connection with an
understatement of our provisions for doubtful accounts receivable for the years
ended December 31, 2001, 2000 and 1999, due to the unauthorized actions of a
single employee who had made numerous improper entries that affected the
adequacy of our allowance for doubtful accounts receivable. Also included in
SG&A for 2002 is an increase in the provision for doubtful accounts receivable
of $1.4 million related to this matter for the first and second quarters of
2002.

         We employed an average of approximately 385 brand sales representatives
in 2003, compared to an average of approximately 290 in 2002. In addition, the
average direct cost of an Andrx brand sales representative, including training
costs, was approximately $125,000 in 2003, compared to $105,000 in 2002. In
December 2003, we reorganized our brand sales force structure to comprise 325
primary care sales territories and reduced the number of brand sales
representatives by approximately 100 to 250 brand sales representatives. In
connection with this reorganization, we recorded a charge of approximately $1.1
million for severance and outplacement services for the reduction in brand sales
personnel. We will review and adjust the number of sales representatives we
maintain based on the needs of our business and our products, particularly for
our expected launch of Pfizer's Cardura XL product. In our distribution
operations, we employed approximately 200 sales representatives and sales
support staff in both 2003 and 2002.

RESEARCH AND DEVELOPMENT

         R&D expenses were $52.2 million for 2003, compared to $51.5 million for
2002. R&D expenses in 2003 primarily reflect our continued research, development
and commercialization efforts in our generic (ANDA) product development program.
We filed 12 ANDAs in 2003. We also filed two NDAs (a valproate product and
Fortamet) and later received approvable letters from FDA. As of December 31,
2003, we had a total of 30 ANDA and two NDA submissions pending at the FDA. R&D
expenses for 2002 include a milestone payable to Geneva Pharmaceuticals, Inc.
(now known as Sandoz Inc. ("Sandoz")) of $3.0 million for Fortamet.

         In our generic R&D operations, we seek to research and develop generic
formulations of currently marketed products. We estimate that the average cost
of developing a controlled-release generic product (excluding legal costs) is
approximately $2.0 million and the average cost of developing a niche or
immediate-release generic product is approximately $1.0 million. R&D expenses
for generic research and development activities include, among other things,
costs



                                       63
<PAGE>

relating to personnel, overhead, laboratories for conducting bioequivalence
studies and raw materials used in developing the products.

         Our research and development efforts are currently focused on
developing controlled-release generic products, using our proprietary
controlled-release drug delivery technologies, as well as niche and
immediate-release generic products, including oral contraceptives. The reduced
focus on brand R&D resulted in a reduction in personnel and the recording of a
charge of approximately $1.4 million for severance and outplacement services in
the fourth quarter of 2003.

         Our current brand R&D consists primarily of the development of a
combination product of Actos (pioglitazone), which is marketed by Takeda, and an
extended-release metformin product, each of which is administered once-a-day for
the treatment of Type 2 diabetes. Pursuant to our December 2003 agreement with
Takeda, we are responsible for the formulation and manufacture of the
combination product and Takeda is responsible for obtaining regulatory approvals
for, and marketing the product. We have received a milestone payment under this
agreement and have deferred recognition of the related revenue because the
amount to be retained by us is contingent upon the occurrence of certain future
events. We are also entitled to receive significant additional milestone
payments from Takeda upon the occurrence of certain specified events, as well as
a transfer price for product manufactured by us and a royalty and certain
additional performance payments related to Takeda's sale of the combination
product.

LITIGATION SETTLEMENTS AND OTHER CHARGES

         Litigation settlements and other charges were $8.8 million in 2003
compared to $72.8 million in 2002. The 2003 charges related to various
previously disclosed legal claims, including a negotiated settlement of an
obligation to one of our law firms with respect to our generic version of
Tiazac. The 2002 charges included a $65.0 million charge in anticipation of
reaching a settlement on certain litigation related to Cardizem CD. This
contingency became probable and estimatable in June 2002 as a result of
mediation discussions between Andrx, Aventis and the various classes of
plaintiffs in the Cardizem CD antitrust litigation that was pending for
multidistrict proceedings in the United States District Court for the Eastern
District of Michigan. In connection therewith, in July 2002, we entered into a
settlement, which is now binding, with the direct purchaser class of plaintiffs
and Aventis. In January 2003, we entered into a settlement, which has been
approved by the District Court, with the indirect purchaser class of plaintiffs,
the attorneys general for all 50 states, the District of Columbia and Puerto
Rico, and Aventis. The respective payments made or to be made by Andrx and
Aventis under these agreements have not been disclosed. The litigation is still
ongoing for the remaining group of litigants, including those who chose to opt
out of the settlements described above and a member of the indirect purchaser
class who has appealed the District Court's approval of the settlement,
purportedly on behalf of a class of Tennessee residents. Any portion of the
accrued litigation settlements charge that was not paid as of December 31, 2003,
is included in accrued expenses and other liabilities in the December 31, 2003
Consolidated Balance Sheet.

         The 2002 period also included a charge of $7.8 million related to a
write-off of goodwill and certain intangible assets for the physician's network
and trademarks created during the Mediconsult acquisition. Such charges were the
result of management's decision in the fourth quarter of 2002 not to commit
additional resources to POL and an evaluation of the goodwill and intangible
assets arising from the acquisition of Mediconsult and the subsequent
integration of Internet operations into Andrx. We sold the POL web portal in
December 2003.



                                       64
<PAGE>

EQUITY IN EARNINGS OF JOINT VENTURES

         We recorded $5.1 million of equity in earnings of our unconsolidated
joint ventures in 2003, compared to $3.7 million in 2002. For 2003 and 2002,
equity in earnings of our joint ventures was generated by ANCIRC's net sales of
its generic versions of Oruvail and, to a lesser extent, Trental, and CARAN's
net sales of its generic versions of Mevacor and, to a lesser extent, Pepcid and
Prozac. ANCIRC is a 50/50 joint venture with Watson Pharmaceuticals, Inc. and
CARAN is a 50/50 joint venture with Carlsbad Technologies, Inc.

INTEREST INCOME

         We recorded interest income of $2.2 million in 2003, compared to $5.4
million in 2002. The decrease in interest income is primarily the result of the
lower average level of cash, cash equivalents and investments available-for-sale
maintained and lower interest rates on these investments during 2003, compared
to 2002. We invest in taxable, tax-advantaged and tax-free investment grade
securities.

INTEREST EXPENSE

         We incurred interest expense of $2.6 million in 2003, compared to
$200,000 in 2002. Interest expense in 2003 was primarily related to the unused
line fee and amortization of issuance costs related to our secured line of
credit entered into in December 2002 and financing charges on capital lease
obligations. For 2003 and 2002, interest expense also included financing charges
on certain insurance premiums.

GAIN ON SALE OF ASSETS

         Gain on sale of assets for 2003 includes a gain on the sale of the POL
web portal of $344,000, a gain of $875,000 on the sale of certain brand
marketing rights and a gain of $3.7 million associated with the sale of the
Massachusetts aerosol manufacturing operation. In 2002, gain on sale of assets
includes a $5.1 million gain from the June 2002 sale of the Histex cough and
cold line of products.

INCOME TAXES

         For 2003, we provided $30.0 million for income taxes or 38.4% of income
before income taxes. This provision exceeded the expected annual effective
federal statutory rate of 35%, primarily due to the effect of state income
taxes. For 2002, we recorded an income tax benefit of $60.8 million, or 39.8% of
loss before income taxes. Such tax benefit for 2002 included the reversal of a
$7.2 million valuation allowance on deferred income tax assets relating to
certain net operating loss carryforwards.

WEIGHTED AVERAGE SHARES OUTSTANDING

         The basic and diluted weighted average shares of Andrx common stock
outstanding was 71.9 million and 72.7 million, respectively, in 2003, and the
basic and diluted weighted average shares outstanding were both 70.9 million in
2002. The basic weighted average share computations for 2003 and 2002 include
the weighted average number of shares of common stock outstanding during the
period, as well as the vested portion of restricted stock units. For 2003
diluted per share calculations include weighted average shares of common stock
outstanding plus dilutive common stock equivalents (stock options and the
unvested portion of restricted stock units, computed using the treasury stock
method). For 2003, the dilutive common stock equivalents consist of stock
options and unvested restricted stock units in which the exercise price or
issuance price, respectively, were in excess of the average market price for the
respective period. For 2002, all potential common stock equivalents were
excluded from the diluted share computation as we reported a net loss and,




                                       65
<PAGE>

accordingly, such potential common stock equivalents were anti-dilutive. The
increase in the basic weighted average number of shares of Andrx common stock
outstanding in 2003, compared to 2002, was attributable to exercises of stock
options and issuances of shares under our employee stock purchase plan.

         The basic and diluted weighted average shares of Cybear common stock
outstanding were 6.7 million for the period from January 1, 2002 to May 17, 2002
(at which date such shares were converted into Andrx common stock). All common
stock equivalents were excluded from the diluted share computation as Cybear was
allocated a net loss, and accordingly, such stock equivalents were
anti-dilutive. After May 17, 2002, no Cybear common stock was outstanding as a
result of its conversion to Andrx common stock.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

         For 2002, we recorded a net loss of $91.8 million, compared to net
income of $37.5 million for 2001. For 2002, of the $91.8 million of net loss,
$86.4 million of total net loss was allocated to Andrx common stock and $5.4
million of total net loss was allocated to the former Cybear common stock. For
2001, of the $37.5 million of net income, $72.9 million of total net income was
allocated to Andrx common stock and $35.3 million of total net loss was
allocated to the Cybear common stock.

TOTAL REVENUES AND COST OF GOODS SOLD

DISTRIBUTED PRODUCTS

         Revenues from distributed products increased by 8.0% to $534.6 million
for 2002, compared to $495.2 million for 2001. The increase in sales from
distributed products reflects the participation in the distribution of generic
products introduced by generic manufacturers, and an increase in sales to
existing and new customers, generally offset by overall price declines, as is
common with generic products. For 2001, sales from distributed products include
approximately $41.3 million of our participation in the distribution of generic
Prozac, which enjoyed marketing exclusivity from August 2001 through February
2002. In February 2002, after the expiration of generic Prozac's marketing
exclusivity period, numerous competitors entered the market and the price
declined in excess of 90%, resulting in $5.7 million in 2002 net revenues from
the distribution of generic Prozac manufactured by other pharmaceutical
companies.

         In 2002, net revenues of distributed products generated $101.0 million
of gross profit with a gross margin of 18.9%, compared to $84.9 million of gross
profit with a gross margin of 17.2% for 2001. When we participate in the
distribution of generic products that face little or no competition, we will
generally record higher sales revenues and lower gross margins. When such
products encounter additional competition, we will generally record lower sales,
as prices will decrease, but higher margins, as our ability to purchase such
products at favorable prices will generally increase. The 2001 year included the
high dollar volume net sales, but low gross margin distribution of generic
Prozac, during its August 2001 through February 2002 180-day marketing
exclusivity period.




                                       66
<PAGE>


ANDRX PRODUCT REVENUES

         GENERIC PRODUCTS

         For 2002, revenues from our generic products decreased by 7.1% to
$183.9 million, compared to $197.9 million in 2001. For 2002 and 2001, net
revenues from our generic products include sales of our generic versions of
Cardizem CD, Dilacor XR, Ventolin metered dose inhalers and, commencing in 2002,
net sales of our generic versions of Glucophage, K-Dur and Naprelan. The
decrease in net sales of our generic products for 2002 compared to 2001 related
to a significant decline in net sales of our generic version of Ventolin and a
decline in net revenues of our generic version of Cardizem CD, partially offset
by 2002 product launches. Net revenues of our generic version of Ventolin were
$14.2 million during 2002, compared to $50.9 million in 2001, and the
significant decrease began during the fourth quarter of 2001 and continued
throughout 2002, as a result of a marked increase in competition. Our generic
version of Cardizem CD continues to generate significant levels of net sales and
gross profits and materially contributes to our overall current level of
operating results. Net sales of our generic products in 2002 include a $721,000
allowance for a November 2002 voluntary recall of the 120mg Diltia XT capsules.

         In 2002, our generic products generated $37.8 million of gross profit
with a gross margin of 20.6%, compared to $145.7 million of gross profit with a
gross margin of 73.6% in 2001. Primary contributors to this decrease in gross
profit and gross margins were the October 2002 district court determination that
the generic version of Prilosec developed by us infringes certain patents owned
by AstraZeneca and production and utilization issues. Accordingly, we recorded a
charge of $41.0 million in 2002 to cost of goods sold to fully reserve
pre-launch inventories of our generic version of Prilosec, as well as a $34.7
million charge related to production of currently marketed generic products and
pre-launch inventories of our generic products, including Wellbutrin SR/Zyban.
As a result of the expansion of manufacturing facilities in anticipation of new
product launches, we recorded charges to cost of goods sold of approximately
$4.9 million related to under-utilization and inefficiencies at our Davie,
Florida manufacturing facilities, and $867,000 related to start-up costs for our
Weston, Florida manufacturing facility, which we had intended to use for
manufacturing, but which will now be for R&D and other non-manufacturing
operations.

         BRAND PRODUCTS

         For 2002, revenues from our brand products decreased by 17.8% to $25.5
million from $31.1 million in 2001. Net sales of our brand products during 2002
include sales generated from Altocor, our first internally developed brand
product, Entex (cough and cold), Histex (cough and cold) through June 28, 2002
when the product rights were sold, Anexsia (pain) product lines and Embrex
(prenatal vitamins). The decrease in net sales in 2002, compared to 2001, was
primarily the result of a lower level of net sales from the cough and cold
product lines, and the absence of net sales from the Histex product line after
its June 28, 2002 sale, offset by net sales from Anexsia, which we began
marketing in the fourth quarter of 2001 and Altocor, which we began marketing in
the third quarter of 2002. Net sales from the cough and cold product lines in
2002 were affected by, among other things, competition from generic
introductions.




                                       67
<PAGE>


         In 2002, our brand products generated $12.3 million of gross profit
with a gross margin of 48.1%, compared to $18.9 million of gross profit with a
gross margin of 60.8% for 2001. As a result of our estimate of demand for our
brand products and the obsolescence of certain products due to aging and
reformulations caused by generic introductions, we provided inventory charges of
approximately $1.8 million and $4.1 million through cost of goods sold in 2002
and 2001, respectively. Also included in brand cost of goods sold in 2002, is a
charge of $3.0 million related to production failures. Cost of goods sold in
2002 and 2001 included royalties accrued on the net revenues generated from the
Entex and Anexsia product lines, as well as amortization of the marketing rights
Andrx acquired for the Histex, Embrex, Entex and Anexsia products, calculated on
a straight-line basis. The decrease in the 2002 gross margin also includes the
effect of a change in the brand product mix.

LICENSING AND ROYALTIES

         In 2002, we recorded $17.3 million in licensing and royalties revenue,
compared to $13.6 million in 2001. Licensing and royalties revenue for 2002
includes $16.6 million of revenues from the agreement with KUDCo, whereby we and
Genpharm relinquished our shared exclusivity rights and thereby accelerated
KUDCo's ability to receive final FDA marketing approval for its 10mg and 20mg
versions of generic Prilosec. Licensing and royalties revenues for 2001
primarily represented $13.0 million of fees from an agreement with Sandoz, which
was terminated in October 2001. In connection with such termination, we
reacquired from Sandoz the marketing rights for certain of our brand products
under development.

OTHER REVENUES

         We recorded $9.6 million of other revenues in 2002, compared to $11.1
million in 2001. Other revenues for 2002 primarily represented revenues from the
contract manufacture of albuterol metered dose inhalers by our Massachusetts
facility and revenues generated by our Internet operations, primarily the POL
web portal. We sold both our Massachusetts aerosol manufacturing operation and
our POL web portal in 2003.

         During the fourth quarter of 2002, included in cost of goods sold of
other revenues, we recorded a charge of $11.8 million related to an excess
facilities lease, related leasehold improvements, excess aerosol product
inventories, equipment and severance at our Massachusetts aerosol manufacturing
operation. During 2002, we also recorded a $7.9 million charge to cost of goods
sold related to excess capacity from the Massachusetts aerosol manufacturing
operation.

SG&A

         SG&A expenses were $193.3 million, or 25.1% of total revenues for 2002,
compared to $145.3 million, or 19.4% of total revenues for 2001. SG&A expenses
included expenses related to the administration, marketing, selling and
warehousing of distributed and Andrx products, the brand sales and marketing
efforts, royalties to our former Co-Chairman and former Chief Scientific Officer
related to sales of our generic version of Cardizem CD, as well as corporate
overhead and legal costs, primarily patent infringement matters and antitrust
related to our ANDA filings. The increase in SG&A expenses in 2002, compared to
2001, was due primarily to an increase in the brand sales and marketing costs,
the expansion of the distribution business including the opening of our Ohio
distribution center, increases in legal costs, insurance premiums, allowances
for doubtful accounts receivable, and corporate overhead, offset by a decrease
in Internet operating expenses. We had approximately 400 sales representatives
at December 31, 2002. In the 2002 second quarter, we recorded a $4.0 million
charge to the allowance for doubtful accounts receivable relating to the periods
prior to January 1, 2002, and $1.4 million related to the first and second
quarters of 2002, as we believed such charges were not material to any period
affected. Operating expenses related to our Internet operations are classified
as SG&A for all periods



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presented except cost of goods sold, and cost included in litigation settlement
and other charges, which include goodwill, the write-off of computer software
licenses and other intangible assets, allowance for possible loss on subleasing
facilities, merger costs, agreement termination costs and an allowance for a
note receivable.

R&D

         R&D expenses were $51.5 million, or 24.6% of Andrx product sales in
2002, compared to $52.8 million, or 23.1% of Andrx product sales in 2001. R&D
expenses in 2002 and 2001 reflect our development and commercialization efforts
in our generic (ANDA) and brand product (NDA) product development programs.
During 2002, ANDAs were accepted by the FDA as filed for 11 products.
Additionally, during 2002, we submitted an NDA to the FDA for an
extended-release metformin, which was accepted as filed, and we initiated NDA
clinical studies for use of Altocor at doses higher than those currently
approved. In 2002 and 2001, brand R&D expenses included $3.0 million and $2.0
million, respectively, of milestones payable to Sandoz in connection with the
October 2001 agreement, whereby we reacquired from Sandoz the marketing rights
for certain Andrx brand products under development.

LITIGATION SETTLEMENTS AND OTHER CHARGES

         Beginning in August 1998, several putative, or self-appointed, class
action lawsuits were filed against Andrx and Aventis arising from the
stipulation entered into between Andrx and Aventis in connection with a patent
infringement suit brought by Aventis with regard to its product, Cardizem CD. In
anticipation of potentially reaching settlements with all plaintiffs in the
related litigations, we recorded an estimated litigation settlements charge of
$65.0 million in 2002. Such contingency became estimable in 2002 as a result of
the mediation discussions among the various parties to the Cardizem CD antitrust
litigation.

         During the fourth quarter of 2002, we recorded a charge of $7.8 million
related to a write-off of goodwill and certain intangible assets for the
physician's network and trademarks created during the Mediconsult acquisition.
Such charges were the result of management's decision in the fourth quarter of
2002 not to commit additional resources to POL, an evaluation of the goodwill
and intangible assets arising from the acquisition of Mediconsult and the
subsequent integration of Internet operations into Andrx. As a result, we
believed that the future benefits previously associated with this transaction no
longer existed under our operating plan. We sold the POL web portal in December
2003.

         Litigation settlements and other charges were $14.8 million in 2001,
comprised of $9.3 million associated with the write-off of the remaining net
goodwill created in the Cybear reorganization, $2.0 million associated with the
write-off of the remaining net goodwill created with the acquisition of
Telegraph Consulting Corporation by our Cybear subsidiary in 1999, $1.7 million
associated with the write-off of certain computer software licenses that we no
longer intend to commercialize, and a $1.8 million allowance associated with the
loss we expect to incur in subleasing all or portions of our facilities. As a
result of changes in Cybear's business, subsequent to the Cybear reorganization
and the Telegraph acquisition and other considerations, management evaluated the
future benefits previously associated with the Cybear reorganization and
Telegraph, and determined that goodwill no longer exists.

EQUITY IN EARNINGS OF JOINT VENTURES

         We recorded $3.7 million of equity in earnings of our unconsolidated
joint ventures in 2002, compared to $1.0 million in 2001. For 2002 and 2001,
equity in earnings of our joint ventures results from the net sales of the
ANCIRC generic versions of Oruvail and Trental and the CARAN generic versions of
Pepcid and Prozac, offset by the R&D expenses at CARAN.




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INTEREST INCOME

         We recorded interest income of $5.4 million in 2002, compared to $11.4
million in 2001. The decrease in interest income is primarily the result of the
lower average level of cash, cash equivalents and investments available-for-sale
maintained and lower interest rates on these investments during 2002, compared
to 2001. We invest in taxable, tax-advantaged and tax-free investment grade
securities.

INTEREST EXPENSE

         We incurred interest expense of $200,000 in 2002, primarily from
financing charges on certain insurance policies. There was no interest expense
for 2001.

GAIN ON SALE OF ASSETS

         On June 28, 2002, we sold the Histex cough and cold line of products.
This transaction resulted in a pre-tax net gain of $5.1 million primarily from
the extinguishment of liabilities.

INCOME TAXES

         For 2002, we recorded an income tax benefit of $60.8 million, or 39.8%
of loss before income taxes. Such tax benefit for 2002 included the reversal of
a $7.2 million valuation allowance on deferred income tax assets relating to
certain net operating loss carryforwards. For 2001, we provided $31.4 million
for income taxes or 45.5% of income before income taxes. For 2001, we provided
for income taxes in excess of the expected annual effective federal statutory
rate of 35%, primarily due to the effect of state income taxes, amortization and
write-offs of non-deductible goodwill and intangible assets that are not
deductible for tax purposes. In connection with the Cybear reorganization, we
changed our method of accounting for allocating income taxes within the
consolidated group from the pro rata method to the separate return method.
Applying the pro rata method for the period from January 1, 2002 through May 7,
2002, and the year ended December 31, 2001 would have resulted in an income tax
benefit allocation from Andrx to its Cybear subsidiary of approximately $2.0
million and $7.6 million, respectively.

WEIGHTED AVERAGE SHARES OUTSTANDING

         The basic and diluted weighted average shares of Andrx common stock
outstanding was 70.9 million in 2002, compared to 70.0 million and 72.2 million,
respectively, in 2001. For 2002, all potential common stock equivalents and the
unamortized restricted stock unit grants were excluded from the diluted share
computation, as we reported a net loss and, accordingly, such items were
anti-dilutive. The increase in the basic weighted average number of shares of
Andrx common stock outstanding in 2002, compared to 2001, was attributable to
exercises of stock options and issuances of shares under our employee stock
purchase plan, which commenced on January 1, 2002, and approximately 65,000
shares of Andrx common stock issued in connection with the conversion of Cybear
common stock to Andrx common stock on May 17, 2002. All share and per share
amounts of Andrx common stock give effect to the May 1999 and March 2000
two-for-one stock splits of Andrx common stock effected in the form of 100%
stock dividends.




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         The basic and diluted weighted average shares of Cybear common stock
outstanding were 6.7 million for the period from January 1, 2002 to May 17, 2002
(at which date such shares were converted into Andrx common stock), and 5.8
million for 2001. All common stock equivalents were excluded from the diluted
share computation as Cybear was allocated a net loss, and accordingly, such
stock equivalents were anti-dilutive. After May 17, 2002, no Cybear common stock
was outstanding as a result of its conversion to Andrx common stock. For 2001,
Cybear common stock includes the 2.9 million shares issued in conjunction with
the acquisition of Mediconsult. The basic and diluted weighted average shares of
Cybear common stock included herein give effect to the July 2001 one-for-four
reverse stock split of Cybear common stock.

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2003, we had $205.1 million in cash, cash
equivalents and investments available-for-sale, and $354.8 million of working
capital.

OPERATING ACTIVITIES

         In 2003, net cash provided by operating activities was $143.2 million,
compared to net cash used in operating activities of $44.0 million in 2002, and
net cash provided by operating activities of $27.6 million in 2001.

         In 2003, net cash provided by operating activities of $143.2 million
includes net income of $48.2 million, increases in accounts payable and accrued
and other liabilities of $68.0 million, offset by increases in accounts
receivable of $15.6 million, inventories of $72.3 million, prepaid and other
assets of $6.2 million. In addition, 2003 also includes an income tax refund of
$51.7 million, deferred income tax provision of $30.0 million, depreciation and
amortization of $29.1 million, a provision for doubtful accounts receivable of
$4.3 million, other non-cash impairment charges related to our Internet and
Massachusetts aerosol manufacturing operations and machinery and equipment
write-offs in Florida of $12.1 million, income tax benefits on exercises of
stock options of $3.1 million and amortization expense of restricted stock units
of $1.5 million, offset by a gain on the sale of assets of $5.6 million and
equity in earnings of joint ventures of $5.1 million. The increases in accounts
receivable, inventories and accounts payable and accrued expenses were primarily
related to the launch of generic Glucotrol XL, purchased from Pfizer. Our levels
of inventories and accounts payable and accrued expenses are influenced by
purchasing opportunities in our distribution business.

         In 2002, net cash used in operating activities of $44.0 million
included a net loss of $91.8 million, increases in accounts receivable of $13.2
million and prepaid and other assets of $4.0 million, offset by a decrease in
inventories of $11.6 million, increases in accounts payable and accrued and
other liabilities of $28.3 million. In addition, 2002 also included a gain on
the sale of Histex product line of $5.1 million, equity in earnings of joint
ventures of $3.7 million and deferred income tax benefit of $25.8 million,
income taxes paid of $838,000 offset by depreciation and amortization of $22.1
million, a provision for doubtful accounts receivable of $13.2 million, other
non-cash impairment charges related to our Internet and aerosol operations of
$19.6 million, income tax benefits on exercises of stock options of $5.4 million
and amortization expense of restricted stock units of $295,000.

         In 2001, net cash provided by operating activities of $27.6 million
included net income of $37.5 million, income tax benefits on exercises of stock
options of $18.4 million, an increase in accounts payable and accrued and other
liabilities of $21.9 million, and a decrease in prepaid and other assets of $6.2
million, offset by increases in accounts receivable of $35.0 million,
inventories of $41.0 million, and income taxes paid of $9.5 million. In
addition, 2001 also included depreciation and amortization of $22.0 million, a
provision for doubtful accounts receivable of $1.4 million, and $14.8 million of
other non-cash impairment charges related to our



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Internet and aerosol manufacturing operations, offset by equity in earnings of
joint ventures of $1.0 million and a deferred income tax benefit of $8.0
million.

INVESTING ACTIVITIES

         Net cash used in investing activities was $72.2 million in 2003,
compared to net cash provided by investing activities of $11.1 million in 2002,
and net cash used in investing activities of $90.0 million in 2001.

         In 2003, net cash used in investing activities of $72.2 million
consisted of $39.5 million in purchases of property, plant and equipment, $33.2
million in purchases of investments available-for-sale, and $10.1 million in
acquisition of brand product rights, offset by $5.9 million in proceeds from the
sale of assets and $4.6 million in proceeds from distributions of joint
ventures. Our purchases of property, plant and equipment are primarily from
capital investments in our manufacturing and R&D facilities in Florida and the
renovation of our North Carolina manufacturing facility. We anticipate
significant capital expenditures in 2004 for facilities, machinery and equipment
related to our North Carolina and Florida manufacturing facilities.

         In 2002, net cash provided by investing activities of $11.1 million
consisted of $121.0 million in maturities of investments available for sale,
$1.6 million in proceeds from the sale of Histex product line and $949,000 in
proceeds from distributions of joint ventures, offset by $112.3 million in
purchases of property, plant and equipment and $100,000 for the acquisition of
brand product rights

         In 2001, net cash used in investing activities of $90.0 million
consisted of: $75.1 million in purchases of property and equipment; $16.9
million in the acquisition of brand product rights; $14.8 million in the
acquisition of CTEX, net of cash acquired; $18.2 million in the acquisition of
certain assets of Massachusetts aerosol manufacturing operation; and $3.2
million in advances to and transaction costs associated with the Mediconsult
acquisition; offset by $38.3 million in maturities of investments available for
sale.

FINANCING ACTIVITIES

         Net cash provided by financing activities was $3.8 million in 2003,
$6.0 million in 2002 and $9.1 million in 2001.

         In 2003, net cash provided by financing activities of $3.8 million
consisted of $3.4 million in proceeds from issuances of shares of Andrx common
stock from exercises of Andrx stock options, $1.2 million in proceeds from
issuances of shares of Andrx common stock under the employee stock purchase
plan, which commenced on January 1, 2002, offset by $843,000 in principal
payments on capital lease obligations.

         In 2002, net cash provided by financing activities of $6.0 million
consisted of $4.3 million in proceeds from issuances of shares of Andrx common
stock from exercises of Andrx stock options, $1.9 million in proceeds from
issuances of shares of Andrx common stock under the employee stock purchase
plan, which commenced on January 1, 2002, offset by $146,000 in principal
payments on capital lease obligations.

         In 2001, net cash provided by financing activities consisted of $9.1
million in proceeds from issuance of shares of Andrx common stock from exercises
of Andrx stock options.




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         On December 30, 2002, we entered into a four-year secured revolving
line of credit facility, for up to an aggregate amount of $185.0 million, none
of which was outstanding at December 31, 2003. Borrowings available under the
credit facility are limited to defined values of eligible accounts receivable,
inventories, property, plant and equipment and reasonable reserves established
by the lenders. Interest accrues on the average outstanding principal balance
under the credit facility and a fee accrues on the unused portion of the credit
facility. Andrx and its subsidiaries granted the lenders a first priority
security interest in substantially all of their respective assets, including
accounts receivable, inventories, deposit accounts, property, plant and
equipment and general intangibles, and real estate owned at the date of the
credit facility. The credit facility contains certain financial covenants and we
are currently in compliance with all the required covenants. However, the
borrowing base limits our borrowing availability to approximately $172 million
as of December 31, 2003. We are considering amending the terms of or replacing
the credit facility to more appropriately serve our liquidity needs.

         We anticipate that our cash requirements will continue to increase due
to the completion of construction of our R&D and manufacturing facilities,
including the acquisition of related equipment, at our Florida and North
Carolina facilities. In 2004, we expect to incur approximately $100 million in
capital expenditures, which we intend to pay for with cash generated from our
operations. We will periodically review our level of capital expenditure
spending based on our level of profitability and cash flow. Additionally, we
will pay a $25 million milestone to Pfizer upon FDA approval of their Cardura XL
NDA provided certain minimum labeling requirements are met. In that event, we
will purchase approximately $21 million of Cardura XL from Pfizer during the
following 12 months. Absent an acquisition or other presently unforeseen
circumstances, we anticipate that our existing capital resources will be
sufficient to enable us to maintain our operations for the foreseeable future
without drawing on our credit facility.

OUTLOOK

         As noted elsewhere in this MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, investors are cautioned that all
forward-looking statements involve risk and uncertainties, including those
identified elsewhere in this report under RISK FACTORS. Accordingly, investors
are cautioned not to place reliance on those forward-looking statements,
including those made in this OUTLOOK section of MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

ANDRX GENERIC PRODUCTS

         The generic pharmaceutical industry is highly competitive and selling
prices are often subject to significant and rapid declines from competition
among existing or new generic products entering the market. In our sales efforts
for our generic products, we compete with domestic and international companies
and generic divisions of large brand pharmaceutical companies. Many of these
competitors offer a wider variety of generic products to their customers. As
patents and other bases for market exclusivity expire, generic competitors enter
the marketplace, possibly including the brand product sold as an authorized
generic. As the number of generic competitors increase and they compete for
market share, a unit price decline generally results. The timing of these price
decreases is difficult to predict and can result in significantly curtailed
profitability for a generic product. Revenues and gross profits from our generic
products may also be affected by competition involving the corresponding brand
product, including the introduction and promotion of alternative brand or OTC
versions of such products. We anticipate that our net revenues and gross profit
will be significantly affected by sales of our generic version of Cardizem CD,
and to a lesser extent, by sales of our generic OTC version of Claritin-D 24,
generic Tiazac and generic Glucotrol XL, purchased from Pfizer.



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         We believe that our controlled-release products may face more modest
competition than other generic products due to the limited number of competitors
having the scientific expertise, legal expertise and financial resources
necessary to develop these products and bring them to market. We also believe
that, for various reasons, our generic niche products may also face less
competition than most generic products. These competitive barriers, combined
with the synergistic value derived from our pharmaceutical distribution
operations, may better position Andrx to compete in the highly competitive,
generic product marketplace.

         Currently, our overall level of profitability remains dependent, to a
great extent, on a relatively small number of products and our ability to
successfully manufacture sufficient quantities of these products on a timely
basis. If these products, and particularly our generic version of Cardizem CD,
and to a lesser extent, Tiazac, were to experience increased competition, the
resulting price reductions and/or reduced market share would significantly
adversely affect these products' contribution to our results of operations and
our operating results. Publicly available information indicates that competition
for our generic versions of Cardizem CD and Tiazac could occur by mid-2004 if
not sooner. Sales of our generic products may also decrease as a result of the
occurrence of the matters set forth in the "RISK FACTORS" section of this
report. Under our arrangement with Perrigo, we will share the net profits as
defined derived from the manufacture of our generic versions of Claritin-D 12,
Claritin-D 24 and Claritin RediTabs products and Perrigo's marketing and sale of
those products as "store brand" OTC products. Perrigo commenced sales of our OTC
generic version of Claritin-D 24 in June 2003, and our generic OTC version of
Claritin RediTabs in January 2004. Our OTC generic version of Claritin-D 12 was
approved in January 2004 and we hope to place Perrigo in a position to launch
this product in 2004 subject to our manufacturing capacities. Future revenues
and profits with respect to these products will be dependent upon a number of
factors, including our manufacturing capacity, market competition for the OTC
Claritin products, the introduction of additional OTC generic Claritin products,
particularly store brand products, as well as other factors.

         We are continuing to work towards resolving the FDA and USP issues
affecting ANDAs for our generic versions of Wellbutrin SR/Zyban. In July 2003,
we entered into an Exclusivity Agreement with Impax and a subsidiary of Teva
pertaining to the pending ANDAs for generic versions of Wellbutrin SR/Zyban.
Though the agreement originally extended to both the 100mg and 150mg strengths
of Wellbutrin SR/Zyban, we have since learned that we did not enjoy a marketing
exclusivity period for the 100mg strength, as we were not the first to file an
ANDA for that strength. Consequently, we will not share in any of the profits
from the sale of Impax's 100mg strength of this product, which was approved for
sale in January 2004. The Exclusivity Agreement provides, among other things,
that we will continue to seek to launch our own versions of Wellbutrin SR/Zyban.
If we are unable to do so within a defined period of time, and Impax is able to
market its ANDA products, we will enable Impax to launch the Impax products
through Teva. Impax and Teva will then share certain payments with us relating
to the sale of the Impax products for a 180-day period. Should we launch our own
products prior to the launch of the Impax products, we will share with Impax and
Teva certain payments relating to the sale of our products for a 180-day period.
At this time, our product has not been approved by the FDA and we do not have
any lower court decision on whether our product infringes the brand product's
patents, and the Impax product has been tentatively approved by the FDA and the
appellate court has determined that Impax's product does not infringe the brand
product's patents. Though we cannot at this time predict or advise whether or
when the FDA and USP issues and litigation involving our ANDAs will be
satisfactorily resolved and whether or when our or Impax's products will be
introduced, we anticipate that we will be able to commercialize the value of our
ANDAs and that generic versions of these products will become available to
consumers.




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         Pursuant to our September 2003 agreements with Pfizer and Alza, which
resolved patent infringement litigation involving our ANDAs for the 2.5mg, 5mg
and 10mg strengths of Glucotrol XL (extended-release glipizide), we received the
right to either market Pfizer's Glucotrol XL product (or any strength thereof)
as a generic or our own ANDA product(s), in exchange for a royalty. We launched
all three strengths of Glucotrol XL, supplied by Pfizer, during the fourth
quarter of 2003. As we will pay less of a royalty to Pfizer and Alza from the
sale of our own ANDA product than the product we acquire from Pfizer, we are
working towards FDA approval to give us the ability to launch our ANDA products
in the future.

         We are planning to launch our generic versions of Ortho Tri-Cyclen
(tentatively approved by FDA) and Ortho Cyclen-28 (which has been approved by
the FDA), through Teva in 2004. Our other ANDAs at the FDA for oral
contraceptive products include, but are not limited to, generic versions of
OrthoNovum 1-35 and OrthoNovum 7/7/7. Though limited in number, our currently
filed or approved ANDAs are for products that currently generate approximately
50% of total oral contraceptive prescriptions.

         We also have other undisclosed products that we anticipate launching in
2004.

         Future growth in the generic products business will be generated from
the launch of new products. We continue to invest in R&D and currently have
approximately 30 ANDAs pending at the FDA. However, the launch of our generic
product candidates is dependent upon a number of factors, both within and
outside our control. Factors outside our control include new Orange Book patent
listings and related patent infringement litigation and the expiration of
others' exclusivity rights, which affect the timing of our receipt of FDA
marketing approval, and the timing and outcome of our patent litigation. The
revenues and gross profits to be generated by these new products will also be
affected by the amount of generic competition they encounter, once launched,
particularly after the expiration of any 180-day exclusivity period that we
might have, either alone or on a shared basis and whether there is an
"authorized generic." We have made, are in the process of making or will make
commercial quantities of certain new products prior to the date on which we
anticipate that such products will receive FDA final marketing approval and/or
satisfactory resolution of any patent infringement litigation involving such
products. The commercial production of these products involves the risk that
such product(s) may not be successfully scaled-up or approved for marketing by
the FDA on a timely basis or ever and/or that the outcome of such litigation may
not be satisfactory. When an exclusivity period is involved, this is a
particularly difficult determination. The risks notwithstanding, we plan to
continue to scale-up and build pre-launch inventories of certain products (or,
in the case of Wellbutrin SR/Zyban, extend funding for Impax's preparation for
the launch of its generic version of Wellbutrin SR/Zyban) that have not yet
received final FDA marketing approval or for which patent infringement
litigation may be pending, when we believe that such action is appropriate in
relation to the commercial value of the product launch opportunity.

DISTRIBUTED PRODUCTS

         Our pharmaceutical distribution operations have a history of
consistent, quarterly sequential growth as a result of, among other things,
introduction of generic products manufactured predominantly by others, but also
by us and our continued penetration of the market servicing independent
pharmacies, pharmacy chains, pharmacy buying groups and physicians' offices.

         Our growth is affected, in large part, by our participation in the
launch of new generic products by other generic manufacturers, and the advent
and extent of competition encountered by these products, and the other products
we distributed. According to published data, there are numerous brand products
having substantial annual sales expected to be launched as new generic products
in the next few years. Sales prices for generic products typically decline with
the onset of competition from new generic manufacturers particularly after such
products were sold during an initial marketing exclusivity period. Consequently,
growth in revenues will



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continue to be primarily a function of new generic products launched by other
generic manufacturers, offset by the overall level of net price declines on
existing distributed products. Nevertheless, we believe our distribution
operations will continue to grow at a rate generally consistent with the growth
of the overall generic industry. Our pharmaceutical distribution operations
compete with a number of large wholesalers that market, among other things, both
brand and generic pharmaceutical products to their customers and may therefore
offer broader marketing programs. We also compete with other pharmaceutical
distributors. Though the distribution of pharmaceutical products is historically
a relatively low gross margin industry, we believe that consolidation among
wholesalers (who already had far greater financial and other resources than
Andrx), the growing role of managed care organizations, the formation of buying
groups and competition between distributors could result in further pressure on
margins.

         Our distribution operations play a significant role in the sale of our
current generic products and, we believe, will continue to play a significant
role in our new product launches. For external reporting purposes, this
segment's financial results do not include its participation in the distribution
of our generic products. Such revenues are classified as Andrx product sales in
our Consolidated Statements of Income.

ANDRX BRAND PRODUCTS

         With Altocor's launch in the third quarter of 2002, we entered a highly
competitive market against brand pharmaceutical manufacturers having
significantly larger and more experienced sales forces and significantly greater
financial resources dedicated to advertising and promotion. We anticipate that
until a profitable sales level of prescriptions is achieved (currently from
Altocor, our primary brand product), brand revenues and consequently gross
profits will not be sufficient for our brand operations to achieve profitability
during 2004. Overall prescription levels for Altocor for January 2004 were lower
than those of December 2003. Until a profitable sales level is achieved, whether
through increased prescriptions or revenues from additional brand products, the
costs of our brand operations will exceed our gross profit from brand products.

         In October 2003, we received an approvable letter from the FDA for the
500mg and 1000mg strengths of Fortamet (extended-release metformin), our second
internally developed brand product. Though our Fortamet NDA used
immediate-release Glucophage as its reference listed drug, FDA recently advised
us that we must make a patent certification with respect to the Orange Book
patents listed for Glucophage XR. Accordingly, the timing of the FDA's approval
of Fortamet depends upon whether the NDA holder initiates patent infringement
litigation within the 45-day period following its receipt of our patent notice,
among other things. We believe our product does not infringe such patents and
note that the NDA holder did not initiate patent infringement litigation against
the many ANDAs, including our own, filed for Glucophage XR. If litigation is not
commenced, we plan to launch this product in 2004.

         In November 2003, we acquired the right to market Cardura XL for five
years for $35 million, provided the FDA grants approval for the product in 2004
with certain agreed upon minimum labeling requirements, and agreed to annually
provide a minimum number of physician details and to purchase approximately $150
million of Cardura XL in the first three years following FDA approval of the
product. We have paid Pfizer $10 million to date, which is refundable under
certain circumstances, and we will pay Pfizer an additional $25 million if the
FDA approves the product in 2004 with agreed upon minimum labeling requirements.
We anticipate that the FDA will approve Pfizer's Cardura XL product in mid to
late 2004.




                                       76
<PAGE>


         We are continuing to pursue opportunities that will leverage or
otherwise optimize our brand sales force, including the possible launch of
Fortamet and Pfizer's Cardura XL product. We will also from time to time
evaluate or seek to enter collaborative arrangements with other pharmaceutical
companies that can increase revenues, reduce the costs associated with our brand
operations or otherwise use our controlled-release technologies or our sales
force to gain mutual benefits, such as acquiring or licensing additional brand
products for our sales force to promote or co-promote or using contract sales
arrangements with respect to the products we are marketing. In connection with
these efforts, and the levels of profit or loss that we anticipate we will
generate, we will continue to assess the size of our brand sales force and the
other costs of our brand operations.

         Net revenues of our other brand products are recognized to the extent
we estimate shipments to customers are being pulled through the distribution
channel. These other brand products are generally not protected by patents and
net sales of our other brand products can be adversely affected by generic
introductions, as well as seasonality (for cough and cold brand products) and
the dedication of the sales force's efforts to Altocor and other products.

         In November 2003, we launched reformulations of two Entex products
affected by generic competition. We anticipate that these reformulated products
will increase the revenues generated by our Entex line of products in the first
quarter of 2004, compared to the first quarter of 2003. As a result of the
October 17, 2003, draft FDA compliance policy guide with respect to
pharmaceutical products presently permitted to be on the market and sold by
prescription without an approved ANDA or NDA, such as our Entex line of
products, we will continue to periodically assess the unamortized portion of our
Entex product rights and Entex inventories ($11.0 million and $396,000,
respectively, as of December 31, 2003.

         LICENSING AND ROYALTIES

         Pursuant to our KUDCo agreement, the licensing rate earned by Andrx was
reduced in February 2004 from 9% to 6.25%, as a result of the December 2003
appellate court decision that Andrx's generic version of Prilosec infringed
patents issued to AstraZeneca. We are entitled to the 6.25% licensing rate for
24 months. We expect our licensing revenues from our KUDCo agreement will
decrease significantly in future periods due to the decrease in the licensing
rate due to us, as well as anticipated additional competition in the generic
Prilosec marketplace.

         We may obtain revenues from our Exclusivity Agreement with Impax and a
subsidiary of Teva in 2004, in the event that we enable Impax to launch the
150mg strength of generic Wellbutrin SR/Zyban through Teva. The revenues would
be for a 180-day period. The amount and timing is dependent upon a variety of
factors.

         OTHER REVENUES

         Given the sale in October 2003 of our Massachusetts aerosol
manufacturing operation and the sale in December 2003 of our POL web portal, we
will not have further revenues with respect to those assets. In 2003, we
recorded $7.5 million of other revenues of which, $3.8 million was from contract
manufacturing services at our Massachusetts aerosol manufacturing operation and
$2.5 million was generated from our agreement with Aventis, relating to our POL
web portal.




                                       77
<PAGE>


         COST OF GOODS SOLD

         We continue to make improvements in the efficiency of our manufacturing
operations in order to meet the market demand for our current and anticipated
products. These improvements include: (i) optimizing our processes and reducing
equipment failures and thereby reducing product rejections; (ii) hiring
additional experienced manufacturing operations personnel, and reducing the
turnover of manufacturing operations personnel; (iii) assuring compliance with
FDA's current Good Manufacturing Practices regulations (cGMP); (iv) increasing
personnel training, accountability, development and expertise; (v) implementing
a more fully integrated use of our operating systems, in anticipation of our
migration to a JD Edwards Enterprise Resource Planning (ERP) system; (vi)
evaluating the commercial viability of producing certain products that we
anticipate will generate a relatively small amount of profit compared to the
utilization of resources in order to allow us to optimize our output and
maximize our profitability; (vii) transferring production (or portions thereof)
for certain products to third parties; and (viii) renovating and acquiring
additional facilities to increase or optimize production. Because we manufacture
products that employ a variety of technology platforms, certain of our
manufacturing capabilities may at times be over-utilized, while others may be
under-utilized.

         As a result of all of the foregoing factors, we may at times have
difficulty fulfilling all of the market demand for our products and having
pre-launch quantities of our product candidates available when we obtain FDA
approval to market our products. Until all of our efforts come to fruition, we
will continue to incur costs related to inefficiencies at and under-utilization
of our manufacturing facilities. We will also incur additional charges directly
to cost of goods sold in the manufacture of our products and product
commercialization activities.

         SG&A EXPENSES

         Our SG&A expenses are related to the level of sales and the sales
product mix, which includes distributed products, our generic products and our
brand products. SG&A expenses related to our distribution business are primarily
variable in nature, and increase or decrease with our distribution revenues.
SG&A expenses related to our generics business are relatively flat and do not
vary significantly with the level of generic revenues. SG&A expenses related to
our brand business increase or decrease as a result of our sales and marketing
efforts. We anticipate that our SG&A expenses will continue to increase in 2004,
primarily as a result of the increases in distribution revenues, promotional
expenses related to the brand products we hope to launch, as well as corporate
overhead. We currently maintain a brand sales force of approximately 250 sales
representatives. We will periodically review and adjust the number of sales
representatives we maintain based on the needs of our business and our products,
which may include the launch of our Fortamet and Pfizer's Cardura XL product.
Brand product promotional expenses, which are expensed as incurred, will be
periodically evaluated throughout 2004.

         R&D EXPENSES

         We anticipate that R&D expenses for 2004 will increase to approximately
$55 million from approximately $52.2 million for 2003, and will focus primarily
on generic product R&D. R&D expenses will be periodically evaluated throughout
2004 following consideration of, among other things, our level of profitability.

         INCOME TAXES

         We believe our combined federal and state effective tax rate for 2004
will be approximately 38%.





                                       78
<PAGE>


         EARNINGS GUIDANCE

         Our policy is not to provide specific earnings projections or guidance,
and not to comment on research analyst reports, including earnings estimates or
consensus. Through public disclosures such as our press releases and periodic
SEC reports, including this Form 10-K, we attempt to provide sufficient
disclosure of both our current status and future prospects, using the Safe
Harbor provision for forward-looking statements prescribed in the Private
Securities Litigation Reform Act of 1995, to allow the investment community to
properly evaluate us and our prospects for performance. There can be no
assurance that research analysts in using publicly available information will
generate research reports or earnings estimates consistent with our actual
internal plan or that such estimates will not vary significantly from analyst to
analyst. Accordingly, even if we execute our own plans, our actual performance
may be substantially different than what is reflected in any individual research
analyst's reports or earnings estimate or the consensus of such estimates.

         We are evaluating whether to issue our earnings press release
simultaneously with the filing of our Form 10-Q in future periods.

RECENT ACCOUNTING PRONOUNCEMENTS

         COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

         In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS No. 146"). The provisions of
this pronouncement require that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred and nullifies
the guidance of Emerging Issues Tasks Force ("EITF") 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in Restructuring)", which recognized
a liability for an exit cost at the date of an entity's commitment to an exit
plan. The provisions of SFAS No. 146 require that the initial measurement of a
liability be at fair value. SFAS No. 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002. Adoption of the
provisions of SFAS No. 146 had no significant impact on our consolidated
financial statements.

         ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" ("SFAS No. 148"). SFAS No.
148 amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition to the fair value method of accounting for
stock-based employee compensation and to require disclosure in the summary of
significant accounting policies of the effects of an entity's accounting policy
with respect to stock-based employee compensation on reported net income and
earnings per share in annual and interim financial statements. SFAS No. 148 does
not amend SFAS No. 123 to require companies to account for their employee
stock-based awards using the fair value method. However, the disclosure
provisions are required for all companies with stock-based employee
compensation, regardless of whether they utilize the fair value method of
accounting described in SFAS No. 123 or the intrinsic value method described in
APB No. 25, "Accounting for Stock Issued to Employees." The disclosure
requirements of SFAS No. 148 are included herein. We currently intend to
continue to account for employee stock-based compensation in accordance with APB
No. 25.





                                       79
<PAGE>



        We account for our stock-based compensation plans under the recognition
and measurement principles of APB No. 25 and related interpretations. Options
granted under those plans are to employees or members of the Board of Directors
with an exercise price equal to the market value of the underlying common stock
on the date of grant. Accordingly, no stock-based employee compensation expense
is reflected in the Consolidated Statements of Income. For restricted stock unit
grants, the fair value on the date of the grant is fixed and is amortized on a
straight-line basis over the related period of service and such amortization
expense is included in SG&A.

         VARIABLE INTEREST ENTITIES

         In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN No. 46"), which is intended to clarify the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support. In December 2003, the FASB issued a revision to
FIN No. 46, which partially delayed its effective date for public companies
until the period ending after March 15, 2004, but permitted earlier adoption for
some or all of their investments. FIN No. 46 requires a company to consolidate
variable interest entities ("VIEs"), if that Company has a variable interest (or
combination of variable interest) that will absorb a majority of the entity's
expected losses, receive a majority of the entity's expected returns or both.
The company that is required to consolidated the VIE is the primary beneficiary.
The adoption of FIN No. 46 for provisions effective during 2003 did not have an
impact on the Company's consolidated financial statements, since the Company
does not have any VIEs. The Company expects that the adoption of the provisions
effective for the period ending after March 15, 2004, will also not have an
impact on the Company's consolidated financial statements.

         AMENDMENT OF SFAS NO. 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
         ACTIVITIES

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). The
provisions of SFAS No. 149 amend and clarify financial accounting and reporting
for derivative instruments embedded in other contracts, collectively referred to
as derivatives, and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The provisions of SFAS No. 149
are effective for contracts entered into or modified after June 30, 2003, except
under certain circumstances as contained in SFAS No. 149. Adoption of the
provisions of SFAS No. 149 had no effect on our consolidated financial
statements, since we do not have any derivative financial instruments and do not
engage in hedging activities.

         ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF
         BOTH LIABILITIES AND EQUITY

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS No. 150"). The provisions of SFAS No. 150 establish standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability or an
asset in some circumstances. The provisions of SFAS No. 150 are effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
are effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of non-public
entities and certain other specific deferrals. Adoption of the provisions of
SFAS No. 150 had no effect on our consolidated financial statements, since we do
not have any financial instruments with characteristics of both liabilities and
equity.



                                       80
<PAGE>

         REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES

         In May 2003, the EITF finalized EITF 00-21, "Revenue Arrangements with
Multiple Deliverables" ("EITF 00-21"). This pronouncement addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. Specifically, this issue
addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting. This pronouncement is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. Adoption of the provisions of EITF 00-21 did not have a
significant effect on our consolidated financial statements.

         REVENUE RECOGNITION

         In December 2003, the SEC published Staff Accounting Bulletin ("SAB")
No. 104, "Revenue Recognition." This SAB updates portions of the SEC staff's
interpretive guidance provided in SAB 101 and included in Topic 13 of the
Codification of Staff Accounting Bulletins. SAB 104 deletes interpretative
material no longer necessary, and conforms the interpretive material retained,
because of pronouncements issued by the FASB's EITF on various revenue
recognition topics, including EITF 00-21. SAB 104 also incorporates into the SAB
Codification certain sections of the SEC staff's "Revenue Recognition in
Financial Statements - Frequently Asked Questions and Answers" ("FAQ"). To the
extent not incorporated into the SAB codification, the SEC staff's FAQ on SAB
101 (Topic 13) has been rescinded. Adoption of the provisions of SAB 104 did not
have a significant effect on our consolidated financial statements.


LITIGATION

See Item 1 - "PATENT INFRINGEMENT LITIGATION" and Item 3 - "LEGAL PROCEEDINGS".



                                       81
<PAGE>

--------------------------------------------------------------------------------
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
================================================================================

         We invest cash balances in excess of operating requirements in cash
equivalents and short-term marketable securities, generally money market funds,
corporate debt and government securities with an average maturity of less than
one year. Our investments are investment-grade securities and deposits are with
investment-grade financial institutions. All marketable securities are
considered available-for-sale. The primary objective of our cash investment
activities is to preserve principal while at the same time maximizing the income
we receive from our invested cash without significantly increasing risk of loss.
Our marketable securities are subject to interest rate risk and will decrease in
value if market interest rates increase. However, because of the short-term
nature of the marketable securities, we do not believe that interest rate
fluctuations would materially impair the principal amount of our investments. We
believe that the realization of losses due to a change in interest rates is
unlikely as we expect to hold our investments to maturity.

         During the year ended December 31, 2003, the effects of changes in
interest rates on the fair market value of our marketable investment securities
and our earnings were not material. Further, we believe that the impact on the
fair market value of our securities and our earnings from a hypothetical 10%
change in interest rates would not be significant.

         Borrowings under our revolving credit facility are also interest rate
sensitive, because the applicable rate varies with changes in the prime rate of
lending or the average Eurodollar rate. We had no debt outstanding at December
31, 2003. If we incur indebtedness under our credit facility in the future, we
cannot assure you that interest rate fluctuations will not harm our business.

         We do not use derivative financial instruments in our investment
portfolio. We have operated primarily in the United States. Accordingly, we do
not have any material exposure to foreign currency rate fluctuations.




                                       82
<PAGE>



--------------------------------------------------------------------------------
ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
================================================================================



ANDRX CORPORATION AND SUBSIDIARIES                                    PAGES
                                                                     --------

Report of Independent Certified Public Accountants                      84

Consolidated Balance Sheets as of December 31, 2003 and 2002            85

Consolidated Statements of Income                                       86
   for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Stockholders' Equity                         87
   for the years ended December 31, 2003, 2002 and 2001

Consolidated Statements of Cash Flows                                 88-89
   for the years ended December 31, 2003, 2002 and 2001

Notes to Consolidated Financial Statements                            90-141




                                       83
<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




To the Stockholders and the Board of Directors of Andrx Corporation:

         We have audited the accompanying consolidated balance sheets of Andrx
Corporation and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2003. 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 auditing standards generally
accepted in the United States. 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 consolidated financial position of Andrx
Corporation and subsidiaries as of December 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States.

         As discussed in Note 2, in 2002, the Company changed the composition of
its reportable segments and, as required by the adoption of Statement of
Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets",
the Company changed its method of accounting for goodwill.

                                                      /s/ ERNST & YOUNG LLP

Fort Lauderdale, Florida,
February 25, 2004






                                       84
<PAGE>
                       ANDRX CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                                                                                  December 31,
                                                                                      -----------------------------------
                                                                                          2003                  2002
                                                                                      ------------           ------------
<S>                                                                                   <C>                    <C>
ASSETS
Current assets
   Cash and cash equivalents                                                          $    110,248           $     35,521
   Investments available-for-sale, at market value                                          94,875                 61,873
   Accounts receivable, net of allowance for doubtful accounts of $7,734 and
        $15,495 at December 31, 2003 and 2002, respectively                                138,849                127,698
   Inventories                                                                             209,910                140,625
   Income taxes receivable                                                                      --                 33,710
   Deferred income tax assets, net                                                          65,153                 68,148
   Prepaid and other current assets                                                         29,790                 32,360
                                                                                      ------------           ------------
          Total current assets                                                             648,825                499,935
Property, plant and equipment, net                                                         239,173                227,864
Goodwill                                                                                    33,981                 33,981
Other intangible assets, net                                                                13,721                 15,604
Other assets                                                                                22,746                 12,095
                                                                                      ------------           ------------
          Total assets                                                                $    958,446           $    789,479
                                                                                      ============           ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Accounts payable                                                                   $    149,762           $     80,671
   Accrued expenses and other liabilities                                                  144,241                127,416
                                                                                      ------------           ------------
          Total current liabilities                                                        294,003                208,087
Deferred income tax liabilities                                                             28,933                 12,590
Obligations under capital leases and other obligations                                      12,609                  3,095
                                                                                      ------------           ------------
          Total liabilities                                                                335,545                223,772
                                                                                      ------------           ------------

Commitments and contingencies

Stockholders' equity
   Convertible preferred stock; $0.001 par value, 1,000,000 shares
         authorized; none issued and outstanding                                                --                     --
   Common stocks:
         Andrx Group common stock; $0.001 par value, 100,000,000 shares
               authorized; issued and outstanding 72,331,600 shares and
               71,501,200 shares at December 31, 2003 and 2002, respectively                    72                     72
         Cybear Group common stock; $0.001 par value, 50,000,000
               shares authorized; none issued and outstanding                                   --                     --
   Additional paid-in capital                                                              498,366                487,928
   Restricted stock units, net                                                              (7,761)                (6,525)
   Retained earnings                                                                       132,215                 84,038
   Accumulated other comprehensive income, net of income taxes                                   9                    194
                                                                                      ------------           ------------
          Total stockholders' equity                                                       622,901                565,707
                                                                                      ------------           ------------

          Total liabilities and stockholders' equity                                  $    958,446           $    789,479
                                                                                      ============           ============

</TABLE>


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



                                       85
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
               (in thousands, except share and per share amounts)


<TABLE>
<CAPTION>

                                                                                  Years Ended December 31,
                                                                  ----------------------------------------------------------
                                                                      2003                   2002                  2001
                                                                  ------------           ------------           ------------
<S>                                                               <C>                    <C>                    <C>
Revenues
   Distributed products                                           $    657,098           $    534,618           $    495,241
   Andrx products                                                      301,652                209,407                229,003
   Licensing and royalties                                              80,080                 17,340                 13,648
   Other                                                                 7,508                  9,615                 11,149
                                                                  ------------           ------------           ------------
Total revenues                                                       1,046,338                770,980                749,041
                                                                  ------------           ------------           ------------

Operating expenses
   Cost of goods sold                                                  700,401                620,069                479,595
   Selling, general and administrative                                 217,085                193,253                145,321
   Research and development                                             52,235                 51,479                 52,846
   Litigation settlements and other charges                              8,750                 72,833                 14,759
                                                                  ------------           ------------           ------------
Total operating expenses                                               978,471                937,634                692,521
                                                                  ------------           ------------           ------------

Income (loss) from operations                                           67,867               (166,654)                56,520
Other income (expense)
   Equity in earnings of joint ventures                                  5,135                  3,697                  1,025
   Interest income                                                       2,242                  5,420                 11,386
   Interest expense                                                     (2,641)                  (200)                    --
   Gain on sale of assets                                                5,605                  5,094                     --
                                                                  ------------           ------------           ------------
Income (loss) before income taxes                                       78,208               (152,643)                68,931
Provision (benefit) for income taxes                                    30,031                (60,826)                31,385
                                                                  ------------           ------------           ------------

Net income (loss)                                                 $     48,177           $    (91,817)          $     37,546
                                                                  ============           ============           ============

EARNINGS (LOSS) PER SHARE

ANDRX GROUP COMMON STOCK:

Net income (loss) allocated to Andrx Group
  (including Cybear Group commencing May 18, 2002)                $     48,177           $    (85,873)          $     72,862
Premium on conversion of Cybear Group common stock                          --                   (526)                    --
                                                                  ------------           ------------           ------------
Total net income (loss) allocated to Andrx Group                  $     48,177           $    (86,399)          $     72,862
                                                                  ============           ============           ============

Net income (loss) per share of Andrx Group common stock:
   Basic                                                          $       0.67           $      (1.22)          $       1.04
                                                                  ============           ============           ============
   Diluted                                                        $       0.66           $      (1.22)          $       1.01
                                                                  ============           ============           ============

Weighted average shares of Andrx Group common
 stock outstanding:
   Basic                                                            71,892,000             70,876,000             69,998,000
                                                                  ============           ============           ============
   Diluted                                                          72,655,000             70,876,000             72,243,000
                                                                  ============           ============           ============

CYBEAR GROUP COMMON STOCK:

Net loss allocated to Cybear Group
  (through May 17, 2002)                                                                 $     (5,944)          $    (35,316)
Premium on conversion of Cybear Group common stock                                                526                     --
                                                                                         ------------           ------------
Total net loss allocated to Cybear Group                                                 $     (5,418)          $    (35,316)
                                                                                         ============           ============

Basic and diluted net loss per share of Cybear
  Group common stock                                                                     $      (0.80)          $      (6.09)
                                                                                         ============           ============

Basic and diluted weighted average shares of
  Cybear Group common stock outstanding                                                     6,743,000              5,802,000
                                                                                         ============           ============

</TABLE>

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



                                       86
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    (in thousands, except for share amounts)


<TABLE>
<CAPTION>

                                                 Common Stocks                                             Additional
                                ----------------------------------------                                     Other
                                     Andrx Group       Cybear Group       Additional Resticted               Compre-    Compre-
                                -------------------  -------------------   Paid-in     Stock      Retained   hensive    hensive
                                  Shares     Amount    Shares     Amount   Capital   Units, Net   Earnings   Income  Income (Loss)
                                ----------   ------  ----------   ------   --------  ----------   --------   ------  ------------
<S>                             <C>           <C>     <C>          <C>     <C>         <C>        <C>         <C>      <C>
Balance, December 31, 2000      69,311,200    $69     3,801,000    $  4    $420,685    $    --    $138,835    $ 204

Shares of Andrx common
  stock issued in
  connection with
  CTEX Pharmaceuticals,
  Inc. acquisition                 291,400     --            --      --      18,166         --          --       --

Shares of Andrx common
  stock issued in
  connection with
  exercises of stock
  options                          881,000      1            --      --       9,059         --          --       --

Shares of Cybear common
  stock issued in
  connection with
  Mediconsult.com,
  Inc. acquisition                      --     --     2,942,000       3       4,762         --          --       --

Income tax benefit on
  exercises of Andrx
  stock options                         --     --            --      --      18,363         --          --       --

Unrealized gain on
  investments available-
  for-sale, net of
  income taxes of $225                  --     --            --      --          --         --          --      197    $    197

Net income                              --     --            --      --          --         --      37,546       --      37,546
                                                                                                                       --------

Comprehensive income                                                                                                   $ 37,743
                                ----------    ---    ----------    ----    --------    -------    --------    -----    ========
Balance, December 31, 2001      70,483,600     70     6,743,000       7     471,035         --     176,381      401

Shares of Andrx common
  stock issued in
  connection with
  exercises of stock
  options                          863,500      2            --      --       4,332         --          --       --

Income tax benefit on
  exercises of Andrx
  stock options                         --     --            --      --       5,350         --          --       --

Shares of Andrx common
  stock issued in
  connection with the
  employee stock purchase
  plan                              89,100     --            --      --       1,851         --          --       --

Shares of Andrx common
  stock issued upon
  conversion of
  Cybear common stock               65,000     --    (6,743,000)     (7)        533         --        (526)      --

Issuance of restricted
  stock units                           --     --            --      --       6,820     (6,820)         --       --

Compensation expense
  on amortization of
  restricted stock units                --     --            --      --          --        295          --       --

CTEX Pharmaceuticals, Inc.
  acquisition adjustment                --     --            --      --      (1,993)        --          --       --

Unrealized loss on
  investments available-
  for-sale, net of
  income tax benefit of $110            --     --            --      --          --         --          --     (207)   $   (207)


Net loss                                --     --            --      --          --         --     (91,817)      --     (91,817)
                                                                                                                       --------

Comprehensive loss                                                                                                     $(92,024)
                                ----------    ---    ----------    ----    --------    -------    --------    -----    ========

Balance, December 31, 2002      71,501,200     72            --      --     487,928     (6,525)     84,038      194

Shares of Andrx common
  stock issued in
  connection with
  exercises of stock options       730,200     --            --      --       3,360         --          --       --

Income tax benefit on
  exercises of Andrx
  stock options                         --     --            --      --       3,135         --          --       --

Shares of Andrx common
  stock issued in
  connection with the
  employee stock purchase
  plan                             100,200     --            --      --       1,233         --          --       --

Issuance of restricted
  stock units, net                      --     --            --      --       2,710     (2,710)         --       --

Compensation expense on
  amortization of
  restricted stock
  units, net                            --     --            --      --          --      1,474          --       --

Unrealized loss on
  investments available-
  for-sale, net of
  income tax benefit of $109            --     --            --      --          --         --          --     (185)       (185)


Net income                              --     --            --      --          --         --      48,177       --      48,177
                                                                                                                       --------

Comprehensive income                                                                                                   $ 47,992
                                                                                                                       ========
                                ----------    ---    ----------    ----    --------    -------    --------    -----
Balance, December 31, 2003      72,331,600    $72            --    $ --    $498,366    $(7,761)   $132,215    $   9
                                ==========    ===    ==========    ====    ========    =======    ========    =====


</TABLE>

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



                                       87
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                            Years Ended December 31,
                                                                                  ---------------------------------------------
                                                                                    2003              2002               2001
                                                                                  ---------         ---------         ---------
<S>                                                                               <C>               <C>               <C>
Cash flows from operating activities
    Net income (loss)                                                             $  48,177         $ (91,817)        $  37,546
    Adjustments to reconcile net income (loss) to net cash
       provided by (used in) operating activities:
         Depreciation and amortization                                               29,063            22,072            22,039
         Provision for doubtful accounts receivable                                   4,340            13,178             1,357
         Non-cash impairment charges                                                 12,123            19,583            14,759
         Gain on sale of assets                                                      (5,605)           (5,094)               --
         Compensation expense on amortization of restricted stock units, net          1,474               295                --
         Equity in earnings of joint ventures                                        (5,135)           (3,697)           (1,025)
         Deferred income tax provision (benefit)                                     30,031           (25,803)           (7,996)
         Income tax benefit on exercises of Andrx stock options                       3,135             5,350            18,363
         Changes in operating assets and liabilities:
              Accounts receivable                                                   (15,616)          (13,164)          (34,973)
              Inventories                                                           (72,279)           11,594           (41,045)
              Prepaid and other assets                                               (6,207)           (3,954)            6,182
              Income tax refund (payment)                                            51,695              (838)           (9,499)
              Accounts payable and accrued expenses and other liabilities            68,002            28,326            21,927
                                                                                  ---------         ---------         ---------
         Net cash provided by (used in) operating activities                        143,198           (43,969)           27,635
                                                                                  ---------         ---------         ---------

Cash flows from investing activities
    Purchases of property, plant and equipment                                      (39,455)         (112,290)          (75,089)
    Maturities (purchases) of investments available-for-sale, net                   (33,187)          121,033            38,283
    Proceeds from the sale of assets                                                  5,875             1,550                --
    Distributions from joint ventures                                                 4,646               949                --
    Acquisition of brand product rights                                             (10,100)             (100)          (16,895)
    Acquisition of CTEX Pharmaceuticals, Inc., net of cash acquired                      --                --           (14,832)
    Acquisition of certain assets of Armstrong Pharmaceuticals, Inc.                     --                --           (18,218)
    Acquisition of and advances to Mediconsult.com, Inc.                                 --                --            (3,242)
                                                                                  ---------         ---------         ---------
         Net cash provided by (used in) investing activities                        (72,221)           11,142           (89,993)
                                                                                  ---------         ---------         ---------

Cash flows from financing activities
    Proceeds from issuances of Andrx common stock in connection with
     exercises of stock options                                                       3,360             4,332             9,060
    Proceeds from issuances of Andrx common stock in connection with the
     employee stock purchase plan                                                     1,233             1,851                --
    Principal payments on capital lease obligations                                    (843)             (146)               --
                                                                                  ---------         ---------         ---------
         Net cash provided by financing activities                                    3,750             6,037             9,060
                                                                                  ---------         ---------         ---------


Net increase (decrease) in cash and cash equivalents                                 74,727           (26,790)          (53,298)
Cash and cash equivalents, beginning of year                                         35,521            62,311           115,609
                                                                                  ---------         ---------         ---------
Cash and cash equivalents, end of year                                            $ 110,248         $  35,521         $  62,311
                                                                                  =========         =========         =========


</Table>

                                   (Continued)



                                       88
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>


                                                                                              Years Ended December 31,
                                                                                  ---------------------------------------------
                                                                                     2003              2002             2001
                                                                                  ---------         ---------         ---------
<S>                                                                               <C>               <C>               <C>
Supplemental disclosure of cash paid during the year for:
    Interest                                                                      $   1,709         $     200         $      --
                                                                                  =========         =========         =========
    Income taxes (refund)                                                         $ (51,695)        $     838         $   9,499
                                                                                  =========         =========         =========

Supplemental disclosure of non-cash investing and financing activities:

Conversion of Cybear common stock into Andrx common stock                                            $  2,537
                                                                                                    =========

Assets acquired through capital leases                                            $   1,234         $   1,549         $     425
                                                                                  =========         =========         =========

Issuance of restricted stock units, net                                           $   2,710         $   6,820
                                                                                  =========         =========

Acquisition of CTEX Pharmaceuticals, Inc.
    Market value of Andrx common stock issued                                                                         $  18,166
                                                                                                                      =========
    Fair value of net liabilities assumed                                                                             $     537
                                                                                                                      =========
Acquisition adjustment                                                                              $  (1,993)
                                                                                                    =========

Acquisition of Mediconsult.com, Inc.
    Market value of Cybear common stock issued                                                                        $   4,765
                                                                                                                      =========
    Fair value of net liabilities assumed                                                                             $   5,295
                                                                                                                      =========



</TABLE>






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






                                       89
<PAGE>



                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

(1)      GENERAL

         OUR BUSINESS

         Andrx is a pharmaceutical company that:

         o        develops and commercializes generic versions of
                  controlled-release brand name pharmaceuticals, using the
                  Company's proprietary controlled-release drug delivery
                  technologies, and generic versions of niche and
                  immediate-release pharmaceutical products, including oral
                  contraceptives;

         o        distributes pharmaceuticals, primarily generics, manufactured
                  by others as well as the Company, primarily to independent
                  pharmacies, pharmacy chains, pharmacy buying groups and
                  physicians' offices; and

         o        commercializes brand pharmaceuticals, in some instances using
                  the Company's proprietary controlled-release drug delivery
                  technologies.

         Controlled-release pharmaceuticals generally provide more consistent
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. Controlled-release
pharmaceuticals allow for "patient friendly" dosage forms, which reduce the
number of times a drug must be taken, thus improving patient compliance.

         EQUITY REORGANIZATION AND CONVERSION

         On September 7, 2000, Andrx completed an equity reorganization (the
"Reorganization") whereby it acquired the outstanding equity of its Cybear Inc.
subsidiary ("Cybear") that it did not own, reincorporated in Delaware, and
created two new classes of common stock: (i) Andrx Group common stock ("Andrx
Common Stock") to track the performance of Andrx Group, and (ii) Cybear Group
common stock ("Cybear Common Stock") to track the performance of Cybear Group.

         On May 17, 2002, each share of Cybear Common Stock was converted into
0.00964 of a share of Andrx Common Stock resulting in the issuance of
approximately 65,000 shares of common stock (the "Conversion"). The Conversion
included a 25% premium on the value of Cybear Common Stock as provided by the
terms of Andrx's Certificate of Incorporation. Subsequent to the Conversion,
Andrx has only one class of common stock outstanding.

         In connection with the Reorganization, Andrx changed its method of
accounting for allocating income taxes within the consolidated group from the
pro rata method to the separate return method. Andrx and Cybear also entered
into a tax sharing agreement that resulted in Andrx Group being allocated the
income tax benefit of the tax operating losses incurred but unutilized by Cybear
Group from September 7, 2000, through May 17, 2002. Such income tax benefit
totaled approximately $2,000 for the period from January 1, 2002, through May
17, 2002, and approximately $7,600 for the year ended December 31, 2001.






                                       90
<PAGE>



                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


 (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.

         USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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.

         The most significant estimates made by management include, but are not
limited to, those related to revenue recognition, sales returns and allowances,
allowance for doubtful accounts receivable, inventories and cost of goods sold,
useful life or impairment of goodwill and other intangible assets, litigation
settlements and related accruals, income taxes, and self insurance programs. In
instances whereby Andrx has entered into collaborative agreements for the sale
of certain generic products, the net revenues reported by Andrx are subject to
numerous estimates by these other parties, such as returns and other sales
allowances and certain related expenses (see Note 3). Management periodically
evaluates estimates used in the preparation of the consolidated financial
statements for reasonableness, including estimates provided by those with whom
the Company has entered into collaborative agreements. Appropriate adjustments
to the estimates will be prospectively made, as necessary, based on such
periodic evaluations. The Company's estimates are based on currently available
information. Given the subjective nature and complexities inherent in these
areas and in the pharmaceutical industry, actual results may be significantly
different than the amounts estimated.

         CASH AND CASH EQUIVALENTS

         All highly liquid investments with original maturities of three months
or less are considered cash equivalents and are carried at cost.

         INVESTMENTS AVAILABLE-FOR-SALE

         The Company classifies its investments as available-for-sale and,
accordingly, such investments are carried at market value and any unrealized
gain or loss, net of income taxes, is reported in accumulated other
comprehensive income as a separate component of stockholders' equity. The cost
related to investments available-for-sale is determined utilizing the specific
identification method.





                                       91
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


ACCOUNTS RECEIVABLE, NET

         Trade receivables consist of amounts owed to the Company by its
customers on credit sales with terms generally ranging from 30-90 days from date
of invoice and are presented net of an allowance for doubtful accounts
receivable in the Consolidated Balance Sheets. The Company maintains an
allowance for doubtful accounts receivable for estimated losses resulting from
the Company's inability to collect from customers. In extending credit, the
Company attempts to assess its ability to collect by, among other things,
evaluating the customer's financial condition, both initially and on an ongoing
basis. Collateral is generally not required. In evaluating the adequacy of its
allowance for doubtful accounts receivable, management primarily analyzes
accounts receivable balances, the percentage of accounts receivable by aging
category, historical bad debts, and also considers, among other things, customer
concentrations, customer credit worthiness, and changes in customer payment
terms or payment patterns.

         Activity in the allowance for doubtful accounts receivable is as
follows:


<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                                  ------------------------------------------
                                                    2003             2002             2001
                                                  --------         --------         --------
<S>                                               <C>              <C>              <C>
Beginning  of year                                $ 15,495         $  7,663         $  7,077
Provision for doubtful accounts receivable           4,340           13,178            1,357
Writeoffs, net of recoveries                       (12,101)          (5,346)            (771)
                                                  --------         --------         --------

End of year                                       $  7,734         $ 15,495         $  7,663
                                                  ========         ========         ========

</TABLE>

         In August 2002, Andrx management learned that an employee had made
numerous improper entries that affected the aging of certain customer accounts
receivable and, accordingly, affected the adequacy of the Company's allowance
for doubtful accounts receivable. After extensive investigation and analysis,
including discussions with certain customers regarding past due amounts,
management determined that the Company's provision for doubtful accounts
receivable included in selling, general and administrative expenses ("SG&A") in
the Consolidated Statements of Income, was understated during 1999, 2000 and
2001 by an aggregate amount of $4,014, of which $2,655 and $1,720 related to
years ended December 31, 2001 and 2000, respectively, and a credit of $361
related to the year ended December 31, 1999. After consideration of all of the
facts and circumstances, the Company recognized the full amount of the $4,014
prior period misstatement in the second quarter of 2002, as the Company believed
it was not material to any period affected. Also included in the 2002 financial
statements is an increase to the provision for doubtful accounts receivable of
$1,417 related to this matter for the first and second quarters of 2002 (see
Notes 18 and 19).






                                       92
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         INVENTORIES

         Inventories of pharmaceutical products consist primarily of finished
goods held for distribution, and raw materials, work-in-process and finished
goods of Andrx generic and brand products. Inventories are stated at the lower
of cost (first-in, first-out) or market. Cost of inventories held for
distribution is based on purchase price, net of vendor discounts, rebates and
other allowances, but excludes shipping, warehousing and distribution costs,
which are expensed as incurred and reported as SG&A in the Consolidated
Statements of Income. In certain instances, the Company may commence the
manufacture and inventory of commercial quantities of products that have not
received final regulatory approval or satisfactory resolution of related
outstanding litigation. In evaluating whether inventories are stated at the
lower of cost or market, management considers such factors as the amount of
inventories on hand and in the distribution channel, the estimated time required
to sell such inventories, remaining shelf life and current and expected market
conditions, including levels of competition for its inventories held for
distribution and the Company's return or exchange rights with respect to such
products. As appropriate, provisions through cost of goods sold are made to
reduce inventories to their net realizable value.

         PROPERTY, PLANT AND EQUIPMENT, NET

         Property, plant and equipment are recorded at cost, less accumulated
depreciation and amortization. Depreciation and amortization are provided using
the straight-line method over the following estimated useful lives:

         Buildings                         20-40 years
         Manufacturing equipment           10 years
         Laboratory equipment              5 years
         Leasehold improvements            Lesser of asset life or term of lease
         Computer hardware and software    3-7 years
         Furniture and fixtures            5 years
         Automobiles                       Lesser of asset life or term of lease


         Major renewals and betterments are capitalized, while maintenance,
repairs and minor renewals are expensed as incurred.

         GOODWILL

         Under the purchase method of accounting for acquisitions, goodwill
represents the excess of the purchase price over the fair value of the net
assets acquired. Goodwill is capitalized and through December 31, 2001, was
amortized on a straight-line basis over the estimated useful life of the
business acquired, ranging from five to 15 years. As of December 31, 2003 and
2002, the Company had $37,599 of goodwill and accumulated amortization of
$3,618. Goodwill amortization expense was $4,967 for the year ended December 31,
2001. Effective with the adoption of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets", on January 1, 2002,
the Company's goodwill was no longer subject to amortization. Instead, goodwill
is subject to an annual assessment for impairment in value by applying a
fair-value based test.



                                       93
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         Prior to 2002, the Company measured impairment of goodwill using the
undiscounted cash flow method whenever events and circumstances warranted
revised estimates of useful lives or recognition of an impairment of goodwill.
The undiscounted cash flow method compares the net book value being tested to
the estimated aggregate undiscounted cash flows. If the net book value exceeded
the estimated aggregate undiscounted cash flows, the excess carrying amount of
goodwill was written off. Beginning in 2002, in connection with the adoption of
SFAS No. 142, goodwill is subject to at least an annual assessment for
impairment in value by applying a fair value based test. As required under SFAS
No. 142, the Company completed the impairment test of goodwill and determined
there was no impairment of goodwill as of December 31, 2003 and 2002.

         The following table shows the impact of the adoption of SFAS No. 142,
as if the provisions of this pronouncement had been retroactively applied for
the year ended December 31, 2001, as follows:


         Reported net income                                           $ 37,546
         Goodwill amortization, net of tax                                3,714
                                                                       --------
         Adjusted net income                                           $ 41,260
                                                                       ========

         ANDRX GROUP COMMON STOCK:
          Reported net income allocated to Andrx                       $ 72,862
          Goodwill amortization, net of tax, allocated to Andrx           2,053
                                                                       --------
          Adjusted net income allocated to Andrx                       $ 74,915
                                                                       ========

         Basic earnings per share:
             Reported net income allocated to Andrx                    $   1.04
             Goodwill amortization, net of tax,  allocated to Andrx        0.03
                                                                       --------
             Adjusted net income allocated to Andrx                    $   1.07
                                                                       ========

         Diluted earnings per share:
             Reported net income allocated to Andrx                    $   1.01
             Goodwill amortization, net of tax, allocated to Andrx         0.03
                                                                       --------
             Adjusted net income allocated to Andrx                    $   1.04
                                                                       ========

         CYBEAR GROUP COMMON STOCK:
          Reported net loss allocated to Cybear                        $(35,316)
          Goodwill amortization allocated to Cybear                       1,661
                                                                       --------
          Adjusted net loss allocated to Cybear                        $(33,655)
                                                                       ========

         Basic and diluted net loss per share:
             Reported net loss allocated to Cybear                     $  (6.09)
             Goodwill amortization allocated to Cybear                     0.29
                                                                       --------
             Adjusted net loss allocated to Cybear                     $  (5.80)
                                                                       ========





                                       94
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         OTHER INTANGIBLE ASSETS, NET

         Other intangible assets include brand product rights acquired from
other pharmaceutical companies by direct purchase or through the allocation of
the purchase price of such entity, which are amortized over periods ranging from
three to 10 years. Other intangible assets also include Andrx's electronic
prescription process, which is being amortized over a period of 14 years.
Amortization is provided using the straight-line method over the estimated
useful life of the assets.

         IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS

         The Company utilizes the provisions of SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," which requires that long-lived
assets be reviewed for impairment whenever events or changes in circumstance
indicate that the carrying amount of an asset may not be recoverable. The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful life of its long-lived assets
or whether the remaining balance of long-lived assets should be evaluated for
possible impairment. The Company uses an estimate of the related undiscounted
cash flows over the remaining life of the long-lived assets to determine whether
impairment has occurred. Fair value, as determined by appraisal or discounted
cash flow analysis, is compared to the carrying value in calculating any
impairment.

         ACCRUED EXPENSES AND OTHER LIABILITIES

         Accrued expenses and other liabilities as of December 31, 2003 and
2002, primarily consist of deferred revenue, estimated sales allowances,
employee benefits and related payroll taxes, litigation settlements and other
legal claims, income taxes and certain other accrued liabilities.

         REVENUE RECOGNITION

         Revenues of distributed and Andrx generic products and the related cost
of goods sold are recognized at the time a product is received by the customer.
Based on currently available information, estimated sales allowances for
chargebacks, discounts, rebates, returns, pricing adjustments, shelf stock
adjustments and other allowances or adjustments related to sales to customers
are provided in the same period the related sales are recorded.

         Revenues of Andrx brand products are recognized for products received
by customers that Andrx reasonably estimates will be pulled through the
distribution channel taking into account, among other things, historical and
projected prescription data provided by external, independent sources,
historical return data, incentives granted to customers, customers' right of
return, generic introductions and inventory levels in the distribution channel,
which the Company periodically evaluates. As a result, as of December 31, 2003
and 2002, the Company had $5,722 and $18,174, respectively, in deferred revenues
related to its brand products in its Consolidated Balance Sheets. Estimated
sales allowances for chargebacks, discounts, rebates, returns and other
allowances or adjustments related to sales to customers are provided in the same
period the related revenues are recorded.



                                       95
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         The pharmaceutical industry practice is generally to grant customers
the right to return or exchange purchased goods. In the generic pharmaceutical
industry, this practice has resulted in generic manufacturers issuing inventory
credits (also known as shelf-stock adjustments) to customers based on the
customers' existing inventories following decreases in the market price of the
related generic pharmaceutical product. Shelf-stock adjustments occur
frequently, potentially in significant amounts. Revenues from Andrx's generic
products may be affected by the level of provisions for the estimated
shelf-stock adjustments. The determination to grant an inventory credit to a
customer following a price decrease is generally at the discretion of the
Company and not pursuant to contractual arrangements with customers.
Accordingly, the Company makes significant accounting estimates, including
quantities shipped by customers and product still on customers' shelves, and
actual and expected price declines before the products pull through the
distribution channel. The Company accrues an estimate for the sales allowances
in the same period the sale is recognized and periodically reviews and adjusts
such estimates, as required.

         The Company has entered into collaborative agreements for certain
generic products, whereby Andrx will manufacture and the other party will market
those products, and the parties will share the net profits, as defined, from
product sales. Andrx recognizes revenues from these arrangements based on
information supplied by the other parties related to shipments of the product
and acceptance by their customers, less their estimates for sales returns and
allowances. The net revenues reported by Andrx are subject to several estimates
by the other parties, such as sales returns and allowances and certain related
expenses similar to those Andrx experiences with the sale of its products. The
Company periodically monitors the factors that influence sales returns and
allowances and conducts inquiries of the other parties regarding these
estimates. Such estimates are revised as changes become known. The Company
generally receives periodic reports provided by the other parties that support
the amount of revenue recognized. Recorded revenues are also compared to
subsequent cash receipts.

         Licensing and royalty fees are recognized when the obligations
associated with the earning of the licensing or royalty fee have been satisfied.
The Company's accounting policy is to review each contract and, if appropriate,
defer up-front and milestone payments, whether or not they are refundable, and
recognize them over the obligation period. Revenue recognition is deferred until
all significant contingencies have been revolved.

         Licensing fees from Kremers Urban Development Company ("KUDCo") and
Sandoz Inc. ("Sandoz") (formerly known as Geneva Pharmaceuticals, Inc.) are
recognized in accordance with the terms of the underlying agreements. Pursuant
to the agreement with KUDCo, the licensing rate earned by Andrx was 15% until
June 9, 2003, when the rate decreased to 9% and was further reduced to 6.25% in
February 2004, as a result of the entry of the December 2003 appellate court
decision affirming the lower court decision that Andrx's generic version of
Prilosec infringed patents issued to AstraZeneca plc ("AstraZeneca"). Andrx is
entitled to the 6.25% licensing rate for 24 months (see Note 3).




                                       96
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         Other revenues primarily included contract manufacturing revenues,
including the sale of certain raw materials, generated from the Company's
Massachusetts aerosol manufacturing operation, from its acquisition on March 30,
2001, to its sale on October 9, 2003, (see Note 4), and the Company's various
Internet related services. The Massachusetts aerosol contract manufacturing
revenues were recognized on a completed contract method. Internet subscription
services revenue was recognized ratably over the subscription period. The POL
web portal was sold on December 23, 2003 (see Note 4).

         ADVERTISING

         The Company's advertising expense consists primarily of product
samples, print media, online advertising and promotional material. Advertising
costs are expensed as incurred and were approximately $10,656, $11,130 and
$7,213 for the years ended December 31, 2003, 2002 and 2001, respectively. Such
costs are included in SG&A in the Consolidated Statements of Income.

         SHIPPING AND HANDLING COSTS

         Shipping and handling costs consisting of freight-out are included in
SG&A. For the years ended December 31, 2003, 2002 and 2001, the Company recorded
$18,787, $15,634 and $12,269, respectively, of freight-out costs in SG&A.

         RESEARCH AND DEVELOPMENT ("R&D") EXPENSES

         R&D costs for both the Company's generic and brand programs are
expensed as incurred and consist of costs related to products being developed
internally as well as costs related to products subject to collaborative
agreements (see Note 3).

         STOCK-BASED COMPENSATION

         At December 31, 2003, the Company maintained stock-based compensation
plans, which are described more fully in Note 14. The Company accounts for those
plans under the recognition and measurement principles of Accounting Principles
Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and
related interpretations. Stock options are granted under those plans with an
exercise price equal to the market value of the underlying common stock on the
date of grant. Accordingly, no stock-based employee compensation expense is
reflected in the Consolidated Statements of Income for stock options. For
restricted stock unit grants, the fair value on the date of the grant is fixed
and is amortized on a straight-line basis over the related period of service and
such amortization expense is included in SG&A.



                                       97
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         The following table summarizes the pro forma consolidated results of
operations of Andrx as though the provisions of the fair value-based method of
accounting for employee stock-based compensation of SFAS No. 123 had been used:

<TABLE>
<CAPTION>


                                                                                     Years Ended December 31,
                                                                           -----------------------------------------------
ANDRX GROUP                                                                   2003             2002               2001
                                                                           ----------        ----------         ----------
<S>                                                                        <C>               <C>                <C>
Net income (loss) allocated to Andrx Group (including Cybear Group
    commencing May 18, 2002)
        As reported                                                        $   48,177        $  (86,399)        $   72,862
     Add: stock-based employee compensation expense included in
       reported net income (loss), net of related tax effect                      914               183                 --
     Deduct: total stock-based employee compensation expense
       determined under the fair value-based method for all awards,
       net of related tax effect                                              (22,538)          (21,142)           (30,176)
                                                                           ----------        ----------         ----------
        Pro forma net income (loss)                                        $   26,553        $ (107,358)        $   42,686
                                                                           ==========        ==========         ==========

Basic net income (loss) per Andrx Group common share
        As reported                                                        $     0.67        $    (1.22)        $     1.04
                                                                           ==========        ==========         ==========
        Pro forma                                                          $     0.37        $    (1.51)        $     0.61
                                                                           ==========        ==========         ==========

Diluted net income (loss) per Andrx Group common share
        As reported                                                        $     0.66        $    (1.22)        $     1.01
                                                                           ==========        ==========         ==========
        Pro forma                                                          $     0.37        $    (1.51)        $     0.61
                                                                           ==========        ==========         ==========

</TABLE>


         The fair value of Andrx options was estimated using the Black-Scholes
option pricing model and the following assumptions:


<TABLE>
<CAPTION>

                                                                    Years Ended December 31,
                                                                ------------------------------------
                                                                2003            2002           2001
                                                                ----            ----           ----
<S>                                                             <C>             <C>            <C>
        Risk-free interest rate                                 3.0%            3.0%           4.5%
        Average life of options (years)                          5.6             6.5            6.8
        Average volatility                                       86%             91%            59%
        Dividend yield                                             -               -             -

</TABLE>



                                       98
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         The range of fair values per share of Andrx options, as of the
respective dates of grant, was $3.81 to $23.49, $14.56 to $36.68 and $17.10 to
$49.51 for stock options granted during the years ended December 31, 2003, 2002
and 2001, respectively.

<TABLE>
<CAPTION>


                                                             January 1, 2002           Year Ended December
                                                            Through May 17, 2002             31, 2001
                                                            --------------------       -------------------
<S>                                                             <C>               <C>
CYBEAR GROUP

Total Net loss allocated to Cybear Group
As reported                                                     $     (5,418)               $   (35,316)
  Deduct: total stock-based employee
      compensation expense determined under
      the fair value-based method for all
      awards                                                          (1,230)                    (3,547)
                                                                ------------                -----------
Pro forma                                                       $     (6,648)               $   (38,863)
                                                                ============                ===========
Basic and diluted net loss per Cybear Group
   common share

As reported                                                     $      (0.80)              $     (6.09)
                                                                ============               ===========
Pro forma                                                       $      (0.99)              $     (6.70)
                                                                ============               ===========

</TABLE>


         The fair market value of a Cybear option was estimated using the
Black-Scholes option pricing model for the year ended December 31, 2001, with
the following assumptions:

Risk-free interest rate                                        4.7%
Average life of options (years)                                7.5
Average volatility                                             291%
Dividend yield                                                  --




                                       99
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         The fair value of Cybear options, as of the grant date, was $1.62 and
$3.00 for stock options granted for the year ended December 31, 2001. As no
Cybear options were awarded during 2002, no related Black-Scholes option pricing
model assumptions are provided herein.

         The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, the Black-Scholes model, like all
option valuation models, requires highly subjective assumptions including
expected stock price volatility. As the Company's employee stock options have
characteristics significantly different than those of traded options, and
changes in the assumptions can materially affect the fair value estimate, in
management's opinion, the option pricing models do not necessarily provide a
reliable measure of the fair value of its employee stock options.

         LEGAL EXPENSES

         Legal expenses are included in SG&A and currently are expensed as
incurred.

         LITIGATION ACCRUALS

         The Company accounts for the exposure of its various litigation matters
under the provisions of SFAS No. 5 "Accounting for Contingencies", which
requires, among other things, an exposure to be accrued with a charge to the
Company's Consolidated Statements of Income when it becomes probable and
estimatable. No accrual or disclosure of legal exposures judged to be remote is
required. The exposure to legal matters is evaluated and estimated, if possible,
following consultation with legal counsel. Such estimates are based on currently
available information and their ultimate outcome may be significantly different
than the amounts estimated given the subjective nature and complexities inherent
in these areas. The Company's disclosures related to the possible significant
exposure for legal matters are included herein in Note 16 to the Consolidated
Financial Statements.

         INCOME TAXES

         The provisions of SFAS No. 109, "Accounting for Income Taxes", require,
among other things, recognition of future tax benefits measured at enacted rates
attributable to the deductible temporary differences between the financial
statement and income tax bases of assets and liabilities and to benefit net
operating loss carryforwards to the extent that the realization of such benefits
is "more likely than not" (see Note 10). Under the provisions of SFAS No. 109,
deferred income tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.




                                      100
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         The Company's future effective tax rate is based on estimates of
expected income, statutory tax rates and tax planning opportunities. Significant
judgment is required in determining the Company's effective tax rate and the
ultimate resolution of its tax return positions. Despite management's belief
that the Company's tax return positions are supportable, the Company's policy is
to establish reserves for taxes that may become payable in future years as a
result of examination by tax authorities. Management believes that the Company's
tax reserves provide an adequate allowance for such contingencies. The tax
reserves are analyzed periodically and adjustments are made to the tax reserves,
as events occur to warrant such adjustments.

         EARNINGS (LOSS) PER SHARE

         As a result of the Conversion, Andrx only has one class of common stock
outstanding, Andrx Common Stock, which includes all of the businesses of Andrx
and its majority owned subsidiaries. From the Reorganization on September 7,
2000, through the Conversion on May 17, 2002, Andrx allocated its operating
results to each class of common stock. Subsequent to the Conversion, operating
results and basic and diluted net income (loss) per share of Andrx Common Stock
include the operating results by Cybear.

         ANDRX

         The shares used in computing basic net income (loss) per share of Andrx
Common Stock for all periods presented is based on the weighted average shares
of Andrx Common Stock outstanding. Diluted per share calculations consider the
weighted average shares of common stock outstanding for Andrx Common Stock,
including common stock equivalents for years ended December 31, 2003 and 2001.
Dilutive common stock equivalents included stock options for the 2003 and 2001
years and also included, for the 2003 year, the unvested portion of restricted
stock units as computed using the treasury stock method. For the 2003 and 2001
years, anti-dilutive common stock equivalents included stock options in which
the exercise price exceeded the average market price for such shares during the
respective years. For the 2003 year, anti-dilutive common stock equivalents also
included the unvested portion of restricted stock units in which the issuance
price exceeded the average market price for the year ended December 31, 2003.
For the year ended December 31, 2002, all common stock equivalents, as well as
unamortized restricted stock units were excluded from the diluted share
computation as the Company reported a net loss and, accordingly, such potential
common stock equivalents were anti-dilutive.



                                      101
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         A reconciliation of the denominators of basic and diluted earnings
(loss) per share of Andrx common stock for the years ended December 31, 2003,
2002 and 2001, is as follows:

<TABLE>
<CAPTION>

                                                                          Years Ended December 31,
                                                                ----------------------------------------------
                                                                  2003               2002              2001
                                                                ----------        ----------        ----------
<S>                                                             <C>               <C>               <C>
Basic weighted average shares of common stock
     outstanding                                                71,892,000        70,876,000        69,998,000

     Effect of dilutive items:
         Stock  options and  unvested  restricted  stock
           units, net                                              763,000                --         2,245,000
                                                                ----------        ----------        ----------

Diluted weighted average shares of common stock
     outstanding                                                72,655,000        70,876,000        72,243,000
                                                                ==========        ==========        ==========

Anti-dilutive weighted average common stock equivalents          4,269,000         7,087,000           290,000
                                                                ==========        ==========        ==========

</TABLE>

         CYBEAR

         Cybear generated a net loss for all periods presented. Accordingly, all
Cybear common stock equivalents, which totaled 317,000 for the period from
January 1, 2002 through May 17, 2002, and 318,000 for the year ended December
31, 2001, were excluded from the Cybear calculation of diluted shares since the
effects were anti-dilutive and, accordingly, the basic and diluted weighted
average shares of Cybear Common Stock are the same for all periods presented.

         On July 31, 2001, the Company implemented a one-for-four reverse stock
split of Cybear Common Stock. All share and per share amounts of Cybear Common
Stock included herein give effect to the one-for-four reverse stock split.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         As of December 31, 2003 and 2002, the carrying amount of cash and cash
equivalents, accounts receivable, net, accounts payable and accrued and other
liabilities approximate fair value due to the short maturity of these
instruments. Investments available-for-sale are carried at market value.

         CONCENTRATION OF CREDIT RISK

         The Company invests in U.S. government agency securities, debt
instruments of corporations and taxable, tax-advantaged and tax-free auction
rate securities with investment grade credit ratings. The Company has
established guidelines relative to diversification and maturities that are
designed to help ensure safety and liquidity.



                                      102
<PAGE>



                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         Accounts receivable are principally due from independent pharmacies,
pharmacy chains, pharmacy buying groups, physicians' offices and pharmaceutical
wholesalers and distributors. Credit is extended based on an evaluation of the
customer's financial condition and collateral is generally not required. The
Company performs ongoing credit evaluations of its customers, considering, among
other things, the aging of the account, the type of customer, payment patterns
and other relevant information and maintains allowances for potential
uncollectable balances. As of December 31, 2003, the Company has two customers
that each accounted for approximately 11% of accounts receivable, net. No one
customer accounted for more than 10% of the Company's accounts receivable, net
as of December 31, 2002, other than amounts due from KUDCo, which represented
13% of accounts receivable, net as of December 31, 2002.

         The Company makes a significant amount of its generic and brand product
sales to a limited number of large pharmaceutical wholesalers and warehousing
pharmacy chains. The loss of any of these customers would have an adverse effect
on Andrx's business and results of operations. No one customer accounted for
more than 10% of the Company's total revenues for the years ended December 31,
2003, 2002 and 2001.

         COMPREHENSIVE INCOME (LOSS)

         SFAS No. 130, "Reporting Comprehensive Income" establishes standards
for reporting and presentation of comprehensive income or loss and its
components in financial statements. The Company has included the disclosure
required by this pronouncement in the accompanying Consolidated Statements of
Stockholders' Equity for the years ended December 31, 2003, 2002 and 2001, as
required.

         BUSINESS SEGMENTS

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", establishes standards for defining the Company's segments and
disclosing information about them. The provisions of SFAS No. 131 require that
the segments be based on the internal structure and reporting of the Company's
operations (see Note 19). As a result of the Conversion, Cybear's Internet
business operations were integrated into other operating segments of Andrx
Corporation and are no longer classified as a separate segment. The Internet
business became a part of the distributed products segment or brand products
segment for financial reporting purposes. Accordingly, for segment reporting
purposes, the Company has reclassified its former Internet segment operations
for the prior year presented herein to conform with the current period
presentation.



                                      103
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


RECENT ACCOUNTING PRONOUNCEMENTS

         COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

         In June 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS No. 146"). The provisions of this pronouncement require that a liability
for a cost associated with an exit or disposal activity be recognized when the
liability is incurred and nullifies the guidance of Emerging Issues Tasks Force
("EITF") 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in
Restructuring)", which recognized a liability for an exit cost at the date of an
entity's commitment to an exit plan. The provisions of SFAS No. 146 require that
the initial measurement of a liability be at fair value. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. Adoption of the provisions of SFAS No. 146 did not have a significant
effect on the Company's consolidated financial statements.

         ACCOUNTING FOR STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE

         In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" ("SFAS No. 148"). SFAS No.
148 amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition to the fair value method of accounting for
stock-based employee compensation and to require disclosure in the summary of
significant accounting policies of the effects of an entity's accounting policy
with respect to stock-based employee compensation on reported net income and
earnings per share in annual and interim financial statements. SFAS No. 148 does
not amend SFAS No. 123 to require companies to account for their employee
stock-based awards using the fair value method. However, the disclosure
provisions are required for all companies with stock-based employee
compensation, regardless of whether they utilize the fair value method of
accounting described in SFAS No. 123 or the intrinsic value method described in
APB No. 25, "Accounting for Stock Issued to Employees." The disclosure
requirements of SFAS No. 148 are included herein.

         The Company currently intends to continue to account for its
stock-based compensation plans under the recognition and measurement principles
of APB No. 25 and related interpretations. Options granted under those plans are
to employees or members of the Board of Directors with an exercise price equal
to the market value of the underlying common stock on the date of grant.
Accordingly, no stock-based employee compensation expense is reflected for stock
options in the Consolidated Statements of Income. For restricted stock unit
grants, the fair value on the date of the grant is fixed and is amortized on a
straight-line basis over the related period of service and such amortization
expense is included in SG&A.



                                      104
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)



         VARIABLE INTEREST ENTITIES

         In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN No. 46"), which is intended to clarify the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support. In December 2003, the FASB issued a revision to
FIN No. 46, which partially delayed its effective date for public companies
until the period ending after March 15, 2004, but permitted earlier adoption for
some or all of their investments. FIN No. 46 requires a company to consolidate
variable interest entities ("VIEs"), if that company has a variable interest (or
combination of variable interest) that will absorb a majority of the entity's
expected losses, receive a majority of the entity's expected returns or both.
The company that is required to consolidate the VIE is the primary beneficiary.
The adoption of FIN No. 46 for provisions effective during 2003 did not have an
impact on the Company's consolidated financial statements, since the Company
does not have any VIEs. The Company expects that the adoption of the provisions
effective for the period ending after March 15, 2004, will also not have an
impact on the Company's consolidated financial statements.

         AMENDMENT OF SFAS NO. 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
         ACTIVITIES

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). The
provisions of SFAS No. 149 amend and clarify financial accounting and reporting
for derivative instruments embedded in other contracts, collectively referred to
as derivatives, and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The provisions of SFAS No. 149
are effective for contracts entered into or modified after June 30, 2003, except
under certain circumstances as contained in SFAS No. 149. Adoption of the
provisions of SFAS No. 149 had no effect on the Company's consolidated financial
statements, since the Company does not have any derivative financial instruments
and does not engage in hedging activities.

         ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF
         BOTH LIABILITIES AND EQUITY

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS No. 150"). The provisions of SFAS No. 150 establish standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability or an
asset in some circumstances. The provisions of SFAS No. 150 are effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
are effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of non-public
entities and certain other specific deferrals. Adoption of the provisions of
SFAS No. 150 had no effect on the Company's consolidated financial statements,
since the Company does not have any financial instruments with characteristics
of both liabilities and equity.



                                      105
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES

         In May 2003, the EITF finalized EITF 00-21, "Revenue Arrangements with
Multiple Deliverables" ("EITF 00-21"). This pronouncement addresses certain
aspects of the accounting by a vendor for arrangements under which it will
perform multiple revenue-generating activities. Specifically, this issue
addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting. This pronouncement is
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. Adoption of the provisions of EITF 00-21 did not have a
significant effect on the Company's consolidated financial statements.

         REVENUE RECOGNITION

         In December 2003, the SEC published Staff Accounting Bulletin ("SAB")
No. 104, "Revenue Recognition." This SAB updates portions of the SEC staff's
interpretive guidance provided in SAB 101 and included in Topic 13 of the
Codification of Staff Accounting Bulletins. SAB 104 deletes interpretative
material no longer necessary, and conforms the interpretive material retained,
because of pronouncements issued by the FASB's EITF on various revenue
recognition topics, including EITF 00-21. SAB 104 also incorporates into the SAB
Codification certain sections of the SEC staff's "Revenue Recognition in
Financial Statements - Frequently Asked Questions and Answers" ("FAQ"). To the
extent not incorporated into the SAB codification, the SEC staff's FAQ on SAB
101 (Topic 13) has been rescinded. Adoption of the provisions of SAB No. 104 did
not have a significant effect on the Company's consolidated financial
statements.

         RECLASSIFICATIONS

         Certain prior years' amounts have been reclassified to conform to the
2003 presentation.

(3)      COLLABORATIVE AGREEMENTS

GENERIC PRILOSEC

         In October 2002, Andrx entered into an agreement with Genpharm and
KUDCo, pursuant to which Andrx and Genpharm relinquished their marketing
exclusivity rights to the 10mg and 20mg strengths of omeprazole (generic
Prilosec), thereby accelerating the ability of KUDCo to receive final U.S. Food
and Drug Administration ("FDA") approval for its version of that product, which
KUDCo received on November 1, 2002. On December 9, 2002, KUDCo commenced
marketing its generic version of Prilosec.

         Pursuant to the agreement with KUDCo, the licensing rate earned by
Andrx was 15% until June 9, 2003, when the rate decreased to 9%. The licensing
rate was further reduced from 9% to 6.25% in February 2004, as a result of the
December 2003 appellate court decision affirming the district court's decision
that Andrx's generic version of Prilosec infringed patents issued to
AstraZeneca. Andrx is entitled to the 6.25% licensing rate for 24 months.
Additional competition has resulted in reduced sales for KUDCo's generic version
of Prilosec, thereby reducing licensing revenues for Andrx.




                                      106
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         Licensing revenues from KUDCo for the years ended December 31, 2003 and
2002, were $76,658 and $16,637, respectively. The net revenues reported by Andrx
are subject to numerous estimates by KUDCo, such as returns and other sales
allowances and certain related expenses.

GENERIC OTC CLARITIN PRODUCTS

         The Company has entered into an arrangement with Perrigo under which
Andrx and Perrigo will share in the risks and rewards associated with Perrigo's
sale of Andrx's generic versions of Claritin-D 12, Claritin-D 24 and Claritin
RediTabs as over-the-counter ("OTC") products. Andrx will manufacture and
Perrigo will package and market all of these OTC products. Under the terms of
the arrangement, Andrx and Perrigo share the net profits, as defined, from
product sales. In June 2003, Perrigo launched Andrx's OTC generic version of
Claritin-D 24. The net revenues reported by Andrx are subject to numerous
estimates by Perrigo, such as returns and other sales allowances and certain
related expenses.

GENERIC GLUCOTROL XL

         In September 2003, Andrx entered into agreements with Pfizer Inc.
("Pfizer") and Alza Corporation ("Alza") to resolve patent infringement
litigation involving Andrx's ANDAs for the 2.5mg, 5mg and 10mg strengths of
Glucotrol XL (extended-release glipizide). Pursuant to this settlement, Pfizer
and Alza dismissed their lawsuits against Andrx, the parties exchanged mutual
releases, and Andrx received the right to either market the Glucotrol XL product
supplied by Pfizer as an authorized generic and/or to manufacture and market its
ANDA product(s) in exchange for a royalty, pursuant to a sublicense for relevant
Alza patents. Andrx launched all three strengths of Glucotrol XL, supplied by
Pfizer, during the fourth quarter of 2003.

CARDURA XL

         In November 2003, Andrx and Pfizer entered into a five-year supply and
distribution agreement in the U.S. regarding Pfizer's NDA for Cardura XL, a
sustained-release formulation of doxazosin mesylate used to treat benign
prostatic hyperplasia (BPH). Under the terms of the agreement, Andrx paid Pfizer
$10,000 upon execution of the exclusive distribution agreement. The $10,000 is
included in other assets in the Consolidated Balance Sheet as of December 31,
2003. The $10,000 upfront fee may be refunded at the Company's option if Pfizer
does not obtain FDA approval for Cardura XL by December 31, 2004, or if the NDA
approval does not meet certain minimum labeling requirements. Andrx will pay an
additional $25,000 to Pfizer upon FDA approval of Cardura XL in 2004, with
certain minimum labeling requirements. Upon Andrx's launch of the product, Andrx
will be committed to purchase certain annual minimum quantities of Cardura XL
from Pfizer for the first three years following FDA approval, totaling
approximately $150,000 and to provide a minimum number of annual physician
details during the term of the agreement (see Note 11).



                                      107
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

GENERIC WELLBUTRIN SR/ZYBAN

         In July 2003, the Company entered into an Exclusivity Transfer
Agreement ("Exclusivity Agreement") with Impax Corporation ("Impax") and a
subsidiary of Teva Pharmaceutical Industries Ltd ("Teva") through which Andrx is
trying to commercialize the value of its ANDAs for generic versions of
Wellbutrin SR/Zyban whether through the sale of its own products or through the
sale of Impax's product, which will be sold by Teva. Impax and Teva will share
certain profits with Andrx from the sale of certain Impax products for a 180-day
period and Andrx agreed to share certain profits with them if Andrx's products
were marketed. Though the Exclusivity Agreement originally extended to both
100mg and 150mg strengths of Wellbutrin SR/Zyban, the Company has now learned
that it does not enjoy a market exclusivity period for the 100mg strength, as it
was not the first to file an ANDA for such strength. Consequently, the Company
will not share in any of the profits from the sale of Impax's 100mg product,
which was approved for sale in January 2004. Under the terms of the Exclusivity
Agreement, Andrx will continue to seek to launch its own generic version of the
150mg product; if it is unable to do so within a defined period of time, and
Impax is able to market its 150mg product, Andrx will enable Impax to market its
product through Teva.

         In connection with the Exclusivity Agreement, the Company has made and
will continue to make certain advances in connection with Impax's preparation
for the launch of its product. Upon launch of its product by Teva, Impax will
reimburse Andrx for these advances within a reasonable period. As of December
31, 2003, amounts due from Impax for the 100mg and 150mg strengths of the
product totaled $9,703 and are included in prepaid and other current assets in
the Consolidated Balance Sheet. These advances involve certain risks. Andrx will
not be reimbursed for the amounts due from Impax in the event that Impax is
unable to market its 150mg product as a result of Andrx's decision to
manufacture and market its own 150mg product. In addition, Andrx will be
required to reimburse Impax and Teva for certain launch preparation and other
related costs. This risk notwithstanding, Andrx will continue to make advances
for the scale-up and manufacture of commercial quantities of the 150mg strength
of the product under the Exclusivity Agreement.

GENERIC ORAL CONTRACEPTIVE PRODUCTS

         In December 2003, Andrx and Teva entered into a collaboration to
develop and market generic oral contraceptive pharmaceutical products. Under the
terms of the agreement, Teva will receive certain exclusive marketing rights in
the U.S. and Canada to Andrx's line of generic oral contraceptive products
pending regulatory approval. Andrx will be responsible for all formulations,
U.S. regulatory submissions and manufacturing the products. In January 2004, FDA
issued final approval for Andrx's generic version of Ortho-Cyclen 28 and
tentative approval on Andrx's generic version of Ortho Tri-Cyclen. Under the
terms of the arrangement, the parties will share the net profits, as defined
from product sales. Andrx will recognize revenues from such sales after Teva has
shipped and the customer has accepted the product, less estimates for product
returns and other customary allowances. The net profits reported by Andrx will
be subject to numerous estimates by Teva, such as returns and other sales
allowances and certain related expenses.



                                      108
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

ACTOS AND EXTENDED-RELEASE METFORMIN COMBINATION PRODUCT

         In December 2003, Andrx entered into an agreement with Takeda Chemical
Industries, Ltd. ("Takeda") to develop and market a combination product
consisting of Takeda's Actos (pioglitazone) and Andrx's extended-release
metformin, each of which is administered once-a-day for the treatment of Type 2
diabetes. Once approved, this combination product will be manufactured by Andrx,
and Takeda will hold exclusive worldwide marketing rights and be responsible for
regulatory approvals. Andrx will receive significant milestone payments from
Takeda upon the occurrence of certain specified events, as well as a transfer
price for product manufactured by Andrx and a royalty and certain additional
performance payments related to Takeda's sale of the combination product. At
December 31, 2003, Andrx recorded a milestone receivable and deferred the
recognition of the related revenue totaling $10,000 because the amount to be
retained by the Company is contingent upon the occurrence of certain future
events. In January 2004, Andrx received the milestone payment.

 (4)     ACQUISITIONS AND DISPOSITIONS

         ACQUISITIONS

         CTEX

         On January 23, 2001, Andrx completed its acquisition of CTEX
Pharmaceuticals, Inc. ("CTEX"), a privately owned pharmaceutical company based
in Madison, Mississippi. The acquisition was accounted for using the purchase
method of accounting. The total purchase price, including transaction costs, was
approximately $29,356, consisting of $11,190 in cash and 291,400 shares of Andrx
common stock valued at $18,166. The purchase price, after the allocation of
$2,638 to product rights, was in excess of the fair value of net liabilities
acquired and resulted in goodwill of $28,891. As part of the acquisition of
CTEX, Andrx acquired CTEX's sales force and related infrastructure. Such
goodwill was being amortized on a straight-line basis over its estimated life of
10 years through December 31, 2001. Goodwill amortization ceased in 2002 with
the adoption of SFAS No. 142. The operating results of CTEX are included in the
consolidated financial statements subsequent to the January 23, 2001,
acquisition.




                                      109
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         MEDICONSULT

         On April 2, 2001, the Company acquired Mediconsult.com, Inc.
("Mediconsult") in a stock-for-stock merger whereby each share of Mediconsult
common stock was exchanged for .0358 shares of Cybear Common Stock. Accordingly,
2,942,000 shares of Cybear Common Stock (which converted into 28,400 shares of
Andrx Common Stock) were issued to the Mediconsult stockholders. The market
value of the total shares issued was $4,765. The acquisition was accounted for
using the purchase method of accounting. In connection with this transaction,
the Company incurred $3,242 in transaction costs and advances to Mediconsult.
The purchase price, including transaction costs, was in excess of the fair value
of the net liabilities assumed, resulting in an allocation to other intangible
assets for physicians' network and trademarks of $11,571 and goodwill of $381.
Such other intangible assets and goodwill was being amortized on a straight-line
basis over its estimated life of five years. Goodwill amortization ceased in
2002 with the adoption of SFAS No. 142. In December 2003, Andrx sold its
Physicians' Online ("POL") web portal, which was part of the Mediconsult
acquisition, to WebMD Corporation for $2,000 in cash.

         MASSACHUSETTS AEROSOL MANUFACTURING OPERATION

         On March 30, 2001, Andrx completed its acquisition of substantially all
of the assets of Armstrong Pharmaceuticals, ("Armstrong") a division of Celltech
Manufacturing, Inc., formerly known as Medeva Pharmaceuticals, Inc., based in
West Roxbury, Massachusetts. The acquisition was accounted for using the
purchase method of accounting. This facility manufactures pharmaceutical
aerosols, principally metered dose inhalers ("MDIs") on a contract manufacturing
basis for other pharmaceutical companies. The acquisition included an approved
ANDA for a bioequivalent version of Ventolin (albuterol MDI). The total purchase
price of $18,218, including transaction costs, was allocated among the acquired
net assets, resulting in no goodwill. In October 2003 Andrx sold its
Massachusetts aerosol manufacturing operation.

         ENTEX

         On June 30, 2001, Andrx purchased the Entex line of cough and cold
products and related inventories from an affiliate of Elan Corporation, plc
("Elan") for approximately $14,795 in cash, transaction costs and royalties on
net sales. The purchase price for the product rights of $14,698 is being
amortized through cost of goods sold over its estimated useful life of 10 years.




                                      110
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         ANEXSIA

         On July 1, 2001, Andrx entered into an eight-year agreement with the
pharmaceutical division of Mallinckrodt ("Mallinckrodt"), a Tyco healthcare
company, for the marketing rights and supply of three hydrocodone pain products.
As part of the agreement, Andrx is required to pay Mallinckrodt $1,000 upon
receipt of the first three commercial batches of each of the products and
royalties on a percentage of the net sales of this product line. Andrx also
agreed to pay an annual licensing fee of $100 to Mallinckrodt for use of the
trade name Anexsia. Andrx will also receive royalties on a percentage of the net
margin, as defined, from the sales of generic versions of the Anexsia products
marketed by Mallinckrodt. Two dosage strengths were launched by Andrx in
November 2001, and generic versions of those strengths were introduced by
Mallinckrodt in February 2003. The third dosage strength was approved by the FDA
in October 2002, but Andrx has not received the first three commercial batches
of the product. Accordingly, through December 31, 2003, Andrx paid $2,000 to
Mallinckrodt for product marketing rights and $300 for the use of the trade name
Anexsia. The purchase price for the product marketing rights is being amortized
through cost of goods sold over its estimated useful life of eight years.

         Pro forma results of operations are not presented for the above
acquisitions as the information, either individually or in the aggregate, is not
material to the consolidated financial statements of the Company.

         DISPOSITIONS

         SALE OF MASSACHUSETTS AEROSOL MANUFACTURING OPERATION

         During the second half of 2002, Andrx began evaluating and, in December
2002, determined that it would not commit additional resources to its
Massachusetts aerosol manufacturing operation. As a result, during 2002, the
Company recorded a $19,626 charge, which is included in cost of goods sold,
related to excess capacities at its Massachusetts aerosol manufacturing
operation, including excess facility leases, related leasehold improvements,
aerosol product inventories, equipment and severance.

         On October 9, 2003, Andrx entered into an agreement with Amphastar
Pharmaceuticals, Inc. ("Amphastar"), a California-based generic and specialty
pharmaceutical company to sell its Massachusetts aerosol manufacturing
operation, recognizing a gain of $3,730 in 2003, which is included in gain on
sale of assets in the Consolidated Statement of Income. Andrx also agreed, under
certain circumstances, to continue to purchase certain minimum quantities of
albuterol MDI for at least one year. The agreement with Amphastar contains
customary terms and conditions and includes Andrx's indemnification of Amphastar
against certain potential liabilities of the Massachusetts aerosol manufacturing
operation, including any liability arising in connection with the claim (now a
lawsuit) by Alpharma USPD, Inc. ("Alpharma") for the alleged breach of a
manufacturing agreement between Alpharma and the Massachusetts aerosol
manufacturing operation (see Note 16).



                                      111
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         SALES OF INTERNET ASSETS

         On July 31, 2002, Andrx sold its Dr. Chart and @Rx applications and
licensed its patents for Internet transmission of prescriptions to MyDocOnline,
a business unit of Aventis S.A. ("Aventis") and entered into a two-year
marketing agreement with Aventis related to Andrx's POL web portal. In
connection with these agreements, Andrx was entitled to receive approximately
$6,000 through April 2004. Though the $6,000 was generally non-refundable and
was partially paid in advance, revenue was recognized in the Consolidated
Financial Statements of Income as services were rendered or otherwise earned.
Due to the related nature of the transactions, $1,348 of gain on sale of assets
was deferred and was recognized as other income ratably in the same period as
the revenue was earned under the marketing agreement. For the years ended
December 31, 2003 and 2002, $2,454 and $96 was recorded as other revenues and
$656 and $26, respectively, was recognized as a gain on sale of assets. Through
December 31, 2003, the Company has received $3,750 in cash from this
arrangement.

         In December 2003, Andrx entered into an agreement with WebMD to sell
its POL web portal for $2,000. As part of the transaction, Andrx agreed to
provide certain transition related services to WebMD for a period not to exceed
90 days from the closing of the transaction. The agreement contained certain
customary terms and conditions. In conjunction with the sale, the Company and
Aventis terminated the marketing agreement and entered into a mutual release of
any further obligations under that agreement. The Company recorded a gain from
the sale of POL of $344, which is included in gain on sale of assets in the
Consolidated Statement of Income.

         BRAND PRODUCT LINES

         In June 2002, the Company sold the Histex cough and cold line of
products. In connection with the sale, the buyer assumed liabilities related to
the Histex products and the Company received $1,800 in cash and is entitled to
receive, among other things, royalty payments on net sales of Histex products
for five years. This transaction resulted in a pre-tax gain of $125 for the year
ended December 31, 2003, and $5,094 for the year ended December 31, 2002,
primarily from the extinguishment of liabilities. These amounts are included in
gain on sale of assets in the Consolidated Statements of Income.

        In December 2003, the Company sold its marketing rights for a butalbital
with acetaminophen and caffeine product for $750, all of which was recognized as
a gain and included in gain on sale of assets in the Consolidated Statement of
Income. In addition, the Company is entitled to receive 25% of all payments
received by the buyer from its sales or sublicense for the use, lease or sales
of certain strengths of butalbital with acetaminophen and caffeine to a third
party.




                                      112
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


(5)     INVESTMENTS AVAILABLE-FOR-SALE


Investments available-for-sale consists of the following:

<TABLE>
<CAPTION>

                                                                     December 31, 2003
                                                 -------------------------------------------------------
                                                                    Gross         Gross
                                                  Amortized       Unrealized    Unrealized       Market
                                                     Cost           Gains         Losses          Value
                                                  ---------       ----------    ----------       -------
<S>                                                 <C>            <C>            <C>            <C>
U.S. Government agency securities                   $81,872        $     9        $    --        $81,881
Investment grade corporate debt                       1,978             16             --          1,994
Taxable, tax-advantaged and tax-free auction
     rate securities                                 11,022             --             22         11,000
                                                    -------        -------        -------        -------
                                                    $94,872        $    25        $    22        $94,875
                                                    =======        =======        =======        =======

</TABLE>


<TABLE>
<CAPTION>

                                                                     December 31, 2002
                                                 -------------------------------------------------------
                                                                    Gross         Gross
                                                  Amortized       Unrealized    Unrealized       Market
                                                     Cost           Gains         Losses          Value
                                                  ---------       ----------    ----------       -------
<S>                                                 <C>            <C>            <C>            <C>
U.S. Government agency securities                   $20,651        $    93        $    --        $20,744
Investment grade corporate debt                      17,325            204             --         17,529
Taxable, tax-advantaged and tax-free auction
    rate securities                                  23,600             --             --         23,600
                                                    -------        -------        -------        -------
                                                    $61,576        $   297        $    --        $61,873
                                                    =======        =======        =======        =======

</Table>

(6)     INVENTORIES AND COST OF GOODS SOLD

Inventories consist of the following:

                                                         December 31,
                                                    -----------------------
                                                      2003           2002
                                                    --------       --------

Raw materials                                       $ 40,387       $ 26,350
Work in process                                       20,913          7,505
Finished goods                                       148,610        106,770
                                                    --------       --------
                                                    $209,910       $140,625
                                                    ========       ========




                                      113
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         For the year ended December 31, 2003, cost of goods sold includes
charges totaling $18,412 for the writeoff of inventory for the Company's
products and product candidates, including $5,723 for Wellbutrin SR/Zyban placed
into production after December 31, 2002. Cost of goods sold also includes
charges of $12,115 relating to the writedown of certain assets, inventory and
under-utilization and inefficiencies from the Massachusetts aerosol
manufacturing operation that was sold in October 2003. In 2003, the Company also
incurred charges of $3,946 for the write-off of certain manufacturing related
machinery and equipment and $4,650 from under-utilization and inefficiencies at
the Company's Florida and North Carolina manufacturing facilities. For the year
ended December 31, 2002, cost of goods sold included charges totaling $104,489,
which consisted primarily of: (i) a $41,000 charge for unusable pre-launch
inventories of the Company's generic versions of Prilosec (see Note 16); (ii) a
$38,025 charge related to production of the Company's other products and product
candidates, including the Company's generic versions of Wellbutrin SR/Zyban,
including $27,600 in the 2002 fourth quarter; (iii) a $19,626 charge related to
excess capacity at its Massachusetts aerosol manufacturing facilities and; (iv)
a $5,838 charge related to utilization issues at its Florida manufacturing
facilities. As of December 31, 2003, the Company had approximately $12,163 of
raw materials, work in process and finished goods inventories pending final FDA
approval and/or satisfactory resolution of litigation, of which $5,005
represents inventory for products that have been approved by the FDA subsequent
to December 31, 2003.

(7)      PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net are summarized as follows:


<TABLE>
<CAPTION>
                                                                   December 31,
                                                          -----------------------------
                                                             2003               2002
                                                          ---------           ---------
<S>                                                       <C>                 <C>
Land                                                      $  10,786           $   7,245
Buildings                                                    41,000              33,459
Manufacturing equipment                                     103,278              58,772
Laboratory equipment                                         14,805              15,676
Leasehold improvements                                       29,958              15,868
Computer hardware and software                               42,903              31,315
Furniture and fixtures                                       10,418              10,173
Automobiles                                                   2,616               1,337
                                                          ---------           ---------
                                                            255,764             173,845
Less:  accumulated depreciation and amortization            (63,732)            (42,488)
                                                          ---------           ---------
                                                            192,032             131,357
Construction in progress                                     47,141              96,507
                                                          ---------           ---------
                                                          $ 239,173           $ 227,864
                                                          =========           =========

</TABLE>



                                      114
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         Depreciation and amortization expense of property, plant and equipment
was $26,022, $17,812 and $13,521 for the years ended December 31, 2003, 2002 and
2001, respectively.

 (8)    OTHER INTANGIBLE ASSETS, NET

        Other intangible assets and the related accumulated amortization and
amortization periods are set forth below:

<TABLE>
<CAPTION>
                                                           December 31,                  Amortization Periods (Years)
                                                  ------------------------------         ----------------------------
                                                                                                            Weighted
                                                     2003                2002            Range              Average
                                                  -----------         ----------         -----              --------
<S>                                               <C>                 <C>                 <C>                 <C>
Brand product rights                              $    17,045         $   16,945          3-10                9.7
  Accumulated amortization                             (4,508)            (2,673)
Patents                                                 1,569              1,569            14                 14
  Accumulated amortization                               (385)              (237)
                                                  -----------         ----------

Total other intangible assets, net                $    13,721         $   15,604
                                                  ===========         ==========

</TABLE>

         Estimated amortization expense for intangible assets for each of the
five succeeding fiscal years, utilizing the straight-line method, is $1,932 per
annum. Amortization expense for other intangible assets was $3,041, $4,261 and
$3,543 for the years ended December 31, 2003, 2002 and 2001, respectively.

         On October 17, 2003, the FDA issued a draft compliance policy guide
with respect to pharmaceutical products that are presently permitted to be on
the market and sold by prescription without an approved ANDA or NDA, such as the
Entex line of products. This draft guidance states that it is intended to
provide notice that once it approves a version of such product, any unapproved
drug product will be subject to FDA enforcement action at any time, and that the
FDA will evaluate each product on a case-by-case basis. In determining whether
to permit a grace period, and how long such grace period will be, the FDA
indicated that it will consider factors such as: (1) the effects on the public
health of immediate removal, (2) the difficulty of conducting any required
studies, and preparing and obtaining approval of an application, (3) the burden
on affected parties, (4) FDA's available enforcement resources, and (5) any
special circumstances. Andrx is continuing to assess this matter, including
whether to seek FDA approval to market some or all of the Entex line of products
as prescription or OTC products, as well as, the FDA requirements for such
submission. Andrx will also continue to periodically assess the unamortized
portion of its Entex product rights and Entex inventories ($11,000 and $396,
respectively, as of December 31, 2003).



                                      115
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


(9)      UNCONSOLIDATED JOINT VENTURES


         Andrx and Watson Pharmaceuticals, Inc. ("Watson") are 50/50 joint
venture partners in ANCIRC, which was originally established to develop,
manufacture and market up to eight generic products. ANCIRC currently markets
generic versions of Trental and Oruvail for which profits are shared equally
with Watson. In November 2000, the joint venture was restructured and Andrx
became solely responsible for all of the additional costs to manufacture and
sell the remaining six products, for which ANCIRC had not yet submitted ANDAs.
Watson is entitled to a royalty on net sales, based on certain conditions, which
Andrx derives from the commercialization of the remaining ANCIRC products Andrx
markets, including Andrx's generic versions of Glucotrol XL and Procardia XL
(see Note 11). Andrx has the right to discontinue the development and marketing
of the remaining six products at any time.

         In August 2000, Andrx entered into CARAN, a 50/50 joint venture with
Carlsbad Technologies, Inc. ("Carlsbad") whereby Carlsbad develops and
manufactures and Andrx markets generic versions of Pepcid, Prozac and Mevacor.

         As of December 31, 2003 and 2002, the Company's investment in
unconsolidated joint ventures was $5,147 and $4,658, respectively, and is
included in Other assets in the Consolidated Balance Sheets.

         Condensed financial information of the unconsolidated joint ventures is
not presented, as they are not material to the consolidated financial statements
of the Company.

(10)     INCOME TAXES

         The components of the provision (benefit) for income taxes are
summarized as follows:

<TABLE>
<CAPTION>

                                                    Years Ended December 31,
                                       ----------------------------------------------
                                         2003               2002               2001
                                       --------           --------           --------
<S>                                    <C>                <C>                <C>
Current provision (benefit)
      Federal                          $     --           $(27,774)          $ 36,123
      State                                  --                 --              3,258
                                       --------           --------           --------
                                             --            (27,774)            39,381
                                       --------           --------           --------
Deferred provision (benefit)
      Federal                            28,408            (22,907)            (7,564)
      State                               1,623             (2,896)              (432)
                                       --------           --------           --------
                                         30,031            (25,803)            (7,996)
                                       --------           --------           --------

Change in valuation allowance                --             (7,249)                --
                                       --------           --------           --------
Total                                  $ 30,031           $(60,826)          $ 31,385
                                       ========           ========           ========

</TABLE>




                                      116
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         The following table indicates the significant elements contributing to
the difference between the federal statutory rate and the Company's effective
tax rate:


<TABLE>
<CAPTION>

                                                              Years Ended December 31,
                                                         ------------------------------------
                                                         2003           2002            2001
                                                         -----         ------           -----
<S>                                                      <C>           <C>              <C>
Federal statutory rate                                   35.0%         (35.0)%          35.0%
State income taxes, net of federal effect                 2.0           (1.9)            2.0
Change in valuation allowance on net deferred
  income tax assets                                        --           (4.8)             --
Non-deductible goodwill amortization and write
  offs and Reorganization costs                            --            1.0             7.9
Other, net                                                1.4            0.9             0.6
                                                         ----           ----            ----
Effective tax rate                                       38.4%         (39.8)%          45.5%
                                                         ====           ====            ====

</TABLE>

         Deferred income taxes represent the tax effect of the difference
between financial reporting and income tax bases of assets and liabilities. The
major components of deferred tax assets and liabilities are as follows:


                                                            December 31,
                                                    ------------------------
                                                      2003            2002
                                                    -------          -------
DEFERRED INCOME TAX ASSETS
Net operating loss carryforwards, net               $13,549          $ 9,531
Allowance for doubtful accounts receivable            2,837            6,760
Other operating reserves                             47,253           50,045
Cybear product development                            1,514            1,812
                                                    -------          -------
Total deferred income tax assets                    $65,153          $68,148
                                                    =======          =======

DEFERRED INCOME TAX LIABILITIES
Tax over book depreciation                          $28,933          $12,590
                                                    =======          =======


         The following table details the activity in the valuation allowance in
2002 and 2001 (none in 2003):


                            Years Ended December 31,
                           -------------------------
                            2002              2001
                           -------           -------
Beginning of year          $ 7,249           $ 7,249


Utilized                    (7,249)               --
                           -------           -------

End of year                $    --           $ 7,249
                           =======           =======





                                      117
<PAGE>
                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         Andrx records a valuation allowance to reduce its deferred income tax
assets to the amount that is more likely than not to be realized. As of December
31, 2003, Andrx had deferred income tax assets totaling $65,153. The Company has
considered its ability to carry back certain net operating losses, future
taxable income and ongoing prudent and feasible tax planning strategies and has
determined that no valuation allowance is necessary on its deferred income tax
assets. In the event that Andrx was to determine that it would not be able to
realize all or part of its deferred income tax assets in the future, an
adjustment to the valuation allowance would be charged to the Consolidated
Statement of Income in the period such determination was made.

         At December 31, 2003, the Company had available federal net operating
loss carryforwards for financial reporting purposes of approximately $28,064
that begin to expire in 2019. In assessing the realizability of deferred income
tax assets, pursuant to SFAS No. 109, management considers whether it is more
likely than not that some portion or all of the deferred income tax assets will
be realized through future taxable income. The Company adjusts the valuation
allowance in the period management determines it is more likely than not that
the deferred income tax assets will or will not be realized. Andrx previously
recorded a valuation allowance of $7,249 on certain Cybear net operating loss
carryforwards. Due to a later change in circumstances during 2002, Andrx
determined that it is more likely than not that the net operating loss
carryforwards would be utilized, and the Company reversed this $7,249 valuation
allowance.

         During 2003, the Company incurred, and will report on its 2003 income
tax return a significant tax loss as the result of certain ordinary business
developments. The Company believes the loss is appropriate and deductible;
however, the complexity of the tax rules and the likelihood of a review and
subsequent challenge by the taxing authorities resulted in the Company recording
an accrual, which is included in accrued and other liabilities, to fully offset
the resulting current year income tax benefit of approximately $17,181.
Additionally, the remaining loss, approximately $46,478 tax effected, will be
carried forward and may be available to reduce certain future taxable income,
which at that time will be similarly offset by an accrual for financial
reporting purposes. Accordingly, as of December 31, 2003, such loss carryforward
is reflected net of a full reserve in the components of deferred tax assets and
liabilities, the income tax provision (benefit) and income tax rate
reconciliation tables. This reserve will be reassessed upon any changes in
status of any contingencies related to this deduction, until such contingencies
are fully resolved. The Company's effective tax rate and cash flows could be
materially impacted by the ultimate resolution of this matter.



                                      118
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


(11)     COMMITMENTS

         SECURED LINE OF CREDIT

         On December 30, 2002, Andrx entered into a four-year secured revolving
line of credit facility for up to an aggregate amount of $185,000, none of which
was outstanding at December 31, 2003. Borrowings available under the credit
facility are limited to defined values of eligible accounts receivable,
inventories, property, plant and equipment and reasonable reserves established
by the lenders. The credit facility includes an interest charge on the average
outstanding principal balance and on the unused portion of the credit facility,
which accrues at Andrx's option, at either the lender's prime lending rate (4.0%
as of December 31, 2003) or 2.0% above the rate quoted by the lenders as the
Eurodollar Rate, as defined in the agreement. The credit facility also includes
an unused line fee of 0.75%. The credit facility contains certain financial
covenants. Andrx is currently in compliance with all the covenants under the
credit facility, however, the borrowing base limits Andrx's borrowing
availability to approximately $172,277 as of December 31, 2003.

         ROYALTIES ON GENERIC PRODUCTS

         Pursuant to the ANCIRC agreement, as amended, Watson may be entitled to
receive a royalty on net sales of the Company's generic versions of Glucotrol XL
and Procardia XL for which ANDAs have been filed with FDA. No royalty is due
with respect to Andrx's sale of Glucotrol XL purchased from Pfizer (see Note 3).

         Pfizer may be entitled to a license fee on the net sales of the
Company's generic version of Procardia XL, if the Company's product is
ultimately determined to infringe a related patent, based upon an agreed testing
protocol.

         Royalties are paid on sales of Andrx's generic version of Cardizem CD
(see Note 12).

         MILESTONES AND ROYALTIES ON BRAND PRODUCTS

         Pursuant to certain agreements, Andrx pays royalties on its Entex line
of cough and cold products to Elan and on its Anexsia line of pain products to
Mallinckrodt. These royalties, totaling $1,197, $1,612 and $470 for the years
ended December 31, 2003, 2002 and 2001, respectively, are included in cost of
sales in the Company's Consolidated Statements of Income.

         In connection with the Company's metformin extended-release product,
milestones of $2,000 and $3,000 may be due to Sandoz upon FDA product approval
and product launch, respectively. Additionally, in connection with future sales
of the product, the Company will pay royalties to Sandoz for five years with
certain guaranteed minimum and maximum royalties.



                                      119
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         EMPLOYMENT AGREEMENTS

         The Company has entered into employment agreements with certain of its
corporate and subsidiary executive officers. These agreements generally provide,
among other things, that if the employment of the named executive is terminated
by the Company without cause or if there is a change in control of the Company,
the Company may be required to make a lump sum payment to such executive,
ranging from 50% to 300% of the named executive's annual compensation, and the
named executive officer may vest in full on certain installments of shares under
stock option and restricted stock units agreements. In February 2004, Richard J.
Lane resigned as the Company's Chief Executive Officer and is entitled to
severance and the continuation of benefits for an 18-month period, which will be
accrued in the first quarter of 2004.

         VALMED PHARMACEUTICALS, INC. ("VALMED") PROFIT SHARING ARRANGEMENT

         In 2000, upon acquiring Valmed, the Company entered into a profit
sharing agreement, which ends in March 2004, with several former shareholders of
Valmed, who are current Andrx employees. Under the terms of the agreement, the
individuals earned profit sharing payments of $1,688, $1,611 and $1,239 in 2003,
2002 and 2001, respectively, which is included in SG&A, based upon pretax
profits generated by Valmed, as defined.

         CAPITAL LEASES

         The Company leases automobiles and computer equipment under capital
leases, which expire at various dates through 2007. The following schedule
summarizes future minimum lease payments required under non-cancelable capital
leases with terms greater than one year, as of December 31, 2003:

<TABLE>
<CAPTION>

<S>                                                                                     <C>
    2004                                                                                $     981
    2005                                                                                      863
    2006                                                                                      729
    2007                                                                                       24
                                                                                          -------
  Total minimum lease payments                                                              2,597
  Imputed interest                                                                          (166)
                                                                                          -------
  Present value of net minimum lease payments                                               2,431
  Current portion (included in accrued expenses and other liabilities)                       (901)
                                                                                          -------
  Long-term portion of capital lease obligations
       (included in obligations under capital leases and other obligations)               $ 1,530
                                                                                          =======

</TABLE>



                                      120
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         Assets recorded under capital leases are included in property, plant
and equipment, net as follows:


                                                   December 31,
                                           -------------------------
                                             2003             2002
                                           -------           -------
         Computer equipment                $   675           $   675
         Automobiles                         2,533             1,299
                                           -------           -------
                                             3,208             1,974
         Accumulated amortization           (1,026)             (197)
                                           -------           -------
                                           $ 2,182           $ 1,777
                                           =======           =======

         OPERATING LEASES

         The Company leases manufacturing, laboratory, warehouse and office
space and various equipment under operating leases which expire at various dates
through 2017. The following schedule summarizes future minimum lease payments
required under non-cancelable operating leases with terms greater than one year
as of December 31, 2003:


<TABLE>
<CAPTION>
                                                                          Minimum Lease
                                  Total Obligation       Sublease         Payments, Net
                                  ----------------       --------         -------------
               <S>                    <C>                <C>               <C>
               2004                   $ 12,003           $   (690)          $ 11,313
               2005                     11,370               (719)            10,651
               2006                     10,156               (721)             9,435
               2007                      9,560               (728)             8,832
               2008                      7,781               (791)             6,990
               Thereafter               25,258             (2,317)            22,941
                                      --------           --------           --------
                                      $ 76,128           $ (5,966)          $ 70,162
                                      ========           ========           ========

</TABLE>

         Rent expense amounted to approximately $11,800, $11,100 and $5,800 for
the years ended December 31, 2003, 2002 and 2001, respectively.

         PURCHASE COMMITMENTS

         The Company had purchase commitments at December 31, 2003, of
approximately $130,000 for raw material inventories, marketing expenses and
building and construction costs associated with the renovation of the Company's
manufacturing facilities in North Carolina.

         Pursuant to the Company's supply and distribution agreement with Pfizer
for Cardura XL, Andrx agreed to purchase certain annual minimum quantities of
this product at an established price for the first three years following FDA
approval of the product, totaling approximately $150,000, and to provide a
minimum number of annual physician details during the term of the agreement.



                                      121
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


(12)     RELATED PARTY TRANSACTIONS


         In February 1993, the Company entered into a royalty agreement with Dr.
Chen, the Company's former Co-Chairman and Chief Scientific Officer, which
provides for royalties to Dr. Chen on the sales of Andrx's generic version of
Cardizem CD, for which the Company received final FDA approval in July 1998. In
August 1998, the Company amended that royalty agreement to account for the
various contingencies presented by the stipulation (see Note 16). Royalties paid
to Dr. Chen of $3,811, $3,330 and $4,238 for the years ended December 31, 2003,
2002 and 2001, respectively, were based on 3.33% of the net sales of Cartia XT,
as defined. Such royalties are included in SG&A in the accompanying Consolidated
Statements of Income.

         In December 2001, the Company entered into an asset purchase agreement
with Athlon Pharmaceuticals, Inc. ("Athlon"). Athlon's primary shareholder is a
former employee of Andrx and the former primary shareholder of CTEX. Under the
terms of the agreement, Andrx sold to Athlon trademarks, equipment, licenses and
permits, marketing materials and packaging supplies related to certain products
originally acquired in the January 2001 CTEX acquisition. In return, Andrx
received $2,000 in cash and recorded a net pre-tax gain of approximately $117
for the year ended December 31, 2001. Additionally, the Company recorded $537
for the year ended December 31, 2003 in royalty revenues from the net sales of
certain of these products.

         Andrx entered into an Executive Suite License Agreement with Arena
Operating Company, LTD for the lease of a suite at the Office Depot Center
("ODC"), formerly known as the National Car Rental Center, where the Florida
Panthers of the National Hockey League play their home games and numerous other
events are held. Andrx's former Co-Chairman of the Board and Chief Executive
Officer, Alan P. Cohen, is directly or indirectly the principal beneficial owner
of Panthers Hockey LLLP, the entity which directly or indirectly owns the
Florida Panthers and manages the ODC. Additional limited partners of the Florida
Panthers include Dr. Elliot F. Hahn, current Chairman Emeritus and a Director,
and Steven Cohen, current Vice President of an Andrx subsidiary. The lease has a
one-year term, but automatically renews for successive one-year periods unless
either party provides written notice of its intent to cancel such renewal prior
to March 1 of the contract year. The Company paid approximately $130 to the ODC
in 2003.

         In the normal course of its distribution operations, the Company
purchases finished good inventories from various companies, including Ranbaxy
Pharmaceuticals and Able Laboratories, Inc. During 2001, Ranbaxy purchased the
assets of HMS Sales and Marketing, Inc. ("HMS"), which is wholly-owned by
Lawrence J. Dubow, a current Andrx director, and his immediate-family. Following
the asset sale, HMS has rendered consulting services to Ranbaxy. For the years
ended December 31, 2003, 2002 and 2001, the Company purchased finished goods
inventories of $41,287, $16,366 and $7,245, respectively, from Ranbaxy. Dr.
Elliot F. Hahn, the Company's Chairman Emeritus and a current Andrx director,
became a member of Able's Board of Directors on April 10, 2003. For the year
ended December 31, 2003, the Company purchased finished goods inventories of
$9,500 from Able.




                                      122
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         The Company licenses certain software for regulatory compliance and
training materials with respect to current Good Manufacturing Practices (cGMP)
from LearnWright, Inc., in which Dr. Mel Sharoky, an Andrx director, is the
majority owner and a LearnWright director and Angelo C. Malahias, the Company's
President, is a LearnWright director. Licensing fees and out-of-pocket expenses
paid to LearnWright, Inc. for 2003 and 2002 were $18 and $7, respectively.

         In June 2003, the Company's brand operations entered into an
arrangement with Riverworks Healthcare Communications, LLC ("Riverworks") to
provide advertising and promotional services. Subsequent to June 2003, the
son-in-law of Richard J. Lane, the Company's then-CEO and director, became
employed by a company affiliated with Riverworks. After Mr. Lane resigned as the
Company's CEO and as a director, the Company entered into a written agreement
with Riverworks. Either party may terminate that agreement on 60 days notice,
and the Company will only be responsible for payment related to actual fee hours
and expenses incurred by Riverworks. The Company recorded an expense of $514,
included in SG&A, for the year ended December 31, 2003.

Andrx and certain of its executive officers and directors may have investment
accounts at the same financial institutions as the Company.

(13)     STOCKHOLDERS' EQUITY

         On September 7, 2000, Andrx completed a Reorganization, whereby it
acquired the outstanding equity of its Cybear subsidiary that it did not own,
reincorporated in Delaware and created two new classes of common stock: (i)
Andrx Common Stock to track the performance of Andrx Group and (ii) Cybear
Common Stock to track the performance of Cybear Group. Upon completion of the
Reorganization, Cybear became a wholly-owned subsidiary of Andrx with 100% of
its value publicly traded in the form of Cybear Common Stock.

         On January 23, 2001, Andrx completed its acquisition of CTEX, issuing
291,400 shares of Andrx common stock.

         On April 2, 2001, the Company completed its acquisition of Mediconsult
in a stock-for-stock merger, whereby each share of Mediconsult common stock was
exchanged for .0358 shares of Cybear Common Stock. Accordingly, a total of
2,942,000 shares of Cybear Common Stock (which was converted into 28,400 shares
of Andrx Common Stock) were issued in connection with this transaction, with a
total market value of approximately $4,765.

         On May 17, 2002, each share of Cybear Common Stock was converted into
0.00964 of a share of Andrx Common Stock, resulting in the issuance of
approximately 65,000 shares of Andrx Common Stock. The Conversion included a 25%
premium on the value of Cybear Common Stock, as provided by the terms of Andrx's
Certificate of Incorporation. Subsequent to the Conversion, Andrx has only one
class of common stock outstanding.

         In 2003 and 2002, the Company issued a total of 100,200 and 89,100,
respectively, in connection with the Company's employee stock purchase plan.




                                      123
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         In 2003 and 2002, the Company granted a total of 187,500 and 260,000
restricted stock units with a net value of $2,710 and $6,820, respectively. Each
unit represents the right to acquire one share of Andrx common stock. The value
of the restricted stock units is being amortized on a straight-line basis over
the respective service periods and is included in SG&A. For the years ended
December 31, 2003 and 2002, $1,474 and $295, respectively, were included in SG&A
pertaining to the amortization of these restricted stock units.

         The Company's former CEO, Richard J. Lane, in accordance with the terms
of his employment agreement, is entitled to receive, upon the termination of his
employment and his agreement to certain non-compete, non-solicitation and other
conditions, 16,667 shares of Andrx common stock, representing the vested portion
of the 100,000 restricted stock units he was originally granted.

         The Company's Board of Directors adopted a stockholder rights plan
("the Rights Plan") in March 2003. The Rights Plan has certain anti-takeover
provisions that may cause substantial dilution to a person or group that
attempts to acquire the Company on terms not approved by the Board of Directors.
Under the Rights Plan, each stockholder is issued one right to acquire one
one-thousandth of a share of Series A Junior Participating Preferred Stock at an
exercise price of $70.00, subject to adjustment, for each outstanding share of
Andrx Common Stock they own. These rights are only exercisable if a single
person or company acquires 15% or more of Andrx Common Stock, or if an announced
tender or exchange offer would result in 15% or more of the Andrx Common Stock
being acquired. If the Company were acquired, each right, except those of the
acquirer, would entitle its holder to purchase the number of shares of Andrx
Group Common Stock in the Company having a then-current market value of twice
the exercise price of the right. In addition, if the Company becomes involved in
a merger or other business combination where (1) the Company is not the
surviving company, (2) the Company's common stock is changed or exchanged, or
(3) 50% or more of the Company's assets or earning power are sold, then each
right, except those of the acquirer, would be exercisable for common stock of
the acquiring corporation having a market value of twice the exercise price of
the right. In addition, the Board of Directors has the option of exchanging all
or part of the rights for an equal number of shares of common stock. The Company
may redeem the rights for $0.01 per right at any time prior to a triggering
acquisition and, unless redeemed earlier, the rights would expire on March 20,
2013.

 (14)    STOCK-BASED COMPENSATION

         In September 2000, shareholders approved the Company's 2000 Stock
Incentive Plan (the "2000 Plan"), which allows for the issuance of up to
12,000,000 shares of Andrx Common Stock. Under the provisions of the 2000 Plan,
the Company's Board of Directors or its compensation committee (the "Andrx
Committee") is authorized to grant stock options of Andrx Common Stock to
employees, consultants or advisors of the Company. The terms for, and exercise
price at which any stock option may be awarded, is to be determined by the Andrx
Committee. Prior to the approval of the 2000 Plan, the Company operated under
the 1993 Stock Incentive Plan, as amended, which allowed for the issuance of up
to 8,000,000 shares of Andrx common stock in the form of restricted stock units,
stock appreciation rights and other performance-based awards.

         In July 2001, Andrx stockholders approved the adoption of an employee
stock purchase plan. The number of shares available for purchase by
participating employees under the plan is 400,000. In June 2003, stockholders
approved an amendment to increase the number of shares eligible under the plan
to 650,000. As of December 31, 2003, 460,700 shares remain available for future
issuances.



                                      124
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         In June 2003, Andrx received approval from its stockholders to amend
the 2000 Plan, to among other things, (i) allow the granting of restricted stock
units, stock appreciation rights, and other performance-based awards
(collectively, "Other Awards"), in addition to stock options and (ii) prohibit
option re-pricing and the issuance of options at per share exercise prices less
than fair market value. Other Awards may not in the aggregate exceed 1,500,000
shares of Andrx Common Stock. The June 2003 amendment did not affect the
12,000,000 shares authorized for issuance under the 2000 Plan, approved by
shareholders in September 2000.

      A summary of the plan activity is as follows:


      ANDRX COMMON STOCK

<TABLE>
<CAPTION>

                                                        Outstanding                                             Exercisable
                           -----------------------------------------------------------------------     -----------------------------
                              Number of                      Exercise Price Per Share                                     Wtd. Avg.
                            Shares Under       ---------------------------------------------------                        Exercise
                               Option               Low                High           Wtd. Avg.            Shares           Price
                           ----------------    ---------------    ---------------   --------------     ---------------    ---------
<S>                         <C>                 <C>                 <C>               <C>                 <C>             <C>
December 31, 2000           5,965,385           $    1.62           $   85.00         $   22.49           2,492,535       $    6.13

Granted                     1,961,258               49.00               70.85             64.05
Exercised                    (880,736)               1.80               58.50             10.29
Forfeited                    (133,785)               8.22               85.00             40.74
                           ----------

December 31, 2001           6,912,122                1.62               85.00             35.49           2,747,798           13.88

Granted                     1,550,777               17.94               45.50             34.67
Exercised                    (863,495)               1.62               47.83              5.02
Forfeited                  (1,167,404)               6.82               85.00             56.38
                           ----------

December 31, 2002           6,432,000                1.62               85.00             35.96           2,932,891           25.37

Granted                     2,349,998                8.85               35.63             18.52
Exercised                    (730,150)              22.17                1.62              4.60
Forfeited                  (1,573,254)               3.49               85.00             33.71
                           ----------

December 31, 2003           6,478,594           $    2.74           $   85.00         $   33.71           3,024,878       $   34.37
                           ==========           =========           =========         =========           ==========      =========

</TABLE>




                                      125
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)



<TABLE>
<CAPTION>

                               Options Outstanding                                           Exercisable Options
                               At December 31, 2003                                         At December 31, 2003
   -------------------------------------------------------------------------------      ------------------------------
       Range of                  Number of        Weighted Avg.      Weighted Avg.                       Weighted Avg.
       Exercise                    Shares        Remaining Life         Exercise                           Exercise
        Prices                  Under Option        (Years)             Price            Shares             Price
   --------------               ------------     --------------      -------------     ----------        -------------
<S>                               <C>                 <C>               <C>               <C>              <C>
   $ 2.74 - $15.48                1,633,294           5.65              $10.84            803,600          $  7.75
    15.91 -  20.40                1,087,521           7.07               17.18            399,936            16.71
    20.57 -  35.63                1,245,140           6.33               26.84            620,683            28.07
    44.86 -  58.50                1,123,259           7.27               49.11            394,597            51.27
    62.19 -  70.85                1,330,280           7.57               66.57            770,782            65.49
    77.73 -  85.00                   59,100           6.76               82.66             35,280            82.55
                                  ---------                                             ---------
                                  6,478,594                             $33.71          3,024,878          $ 34.37
                                 ==========                                             =========

</TABLE>

         As of December 31, 2003, approximately 6,432,000 shares of Andrx Common
Stock remain available for future grants under the 2000 Plan.

         In connection with the Conversion, Cybear Common Stock options were
converted into Andrx stock options at an exchange rate of .00956. Given the
immateriality of the number of converted options and their exercise price, which
is significantly in excess of the current market price and the historical range
of Andrx's stock trading price, such options to acquire a total of approximately
2,900 shares of Andrx Common Stock with exercise prices ranging from $314 to
$18,500 per share are excluded from the above tables.

(15)     401(K) PLANS

         In February 1995, the Company adopted a 401(k) defined contribution
retirement plan covering substantially all of its employees. Monthly
contributions to the retirement plan are made by the Company based upon the
employees' contributions to the plan. In February 2001, the Cybear 401(k) Plan
was merged with the Andrx 401(k) Plan.

         For the years ended December 31, 2003, 2002 and 2001, the Company
contributed $1,600, $1,223 and $1,156, respectively, to the 401(k) retirement
plans.

(16)     LITIGATION AND CONTINGENCIES

         See Note 17 for charges related to certain legal claims asserted
against the Company.

         PATENT INFRINGEMENT LITIGATION

         Following its submission of Paragraph IV certifications that its ANDA
 product candidates do not infringe the valid patent rights of the referenced
 brand product, Andrx anticipates that patent infringement litigation will be
 commenced against it. Unless Andrx commences selling its ANDA product before
 such litigation has been concluded, Andrx should not incur any substantial
 damages in connection with these types of litigation cases, which currently
 include:



                                      126
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         NAPROXEN SODIUM (NAPRELAN)

         In 1998, Andrx filed an ANDA seeking approval from FDA to market
naproxen sodium, its generic version of Naprelan. Elan sued Andrx for patent
infringement in October 1998. The matter was tried in the U.S. District Court
for the Southern District of Florida and on March 14, 2002, the court issued an
order of final judgment in favor of Andrx invalidating the patent in
controversy. Elan filed a motion, asking the court to reconsider and reverse its
invalidity ruling and Andrx filed a motion asking that the court issue a ruling
on Andrx's defenses of non-infringement. On March 24, 2003, the court entered an
order denying both Elan's motion for reconsideration and Andrx's motion to amend
the judgment. Elan has appealed the district court's opinion invalidating its
patent, and Andrx has appealed the district court's order dismissing its
antitrust counterclaims and for certain other matters. As Andrx believes that
its product does not infringe any valid patent, it commenced selling its generic
version of Naprelan. If the court were to ultimately determine that the Elan
patent is valid and that the Andrx product infringes such patent, Andrx could be
subject to damages.

         PAROXETINE HYDROCHLORIDE (PAXIL)

         The Company filed an ANDA seeking FDA approval to market paroxetine
hydrochloride 40mg, the Company's generic version of Paxil 40mg, and in June
2001, SmithKline Beecham Corporation and Beecham Group plc ("SmithKline") sued
the Company, and our raw material supplier, in the U.S. District Court for the
Eastern District of Pennsylvania for patent infringement. The Company later
amended its ANDA to add the 10mg, 20mg and 30mg strengths of paroxetine
hydrochloride and in November 2003, SmithKline filed a new infringement
complaint against the Company in the United States District Court for the
Eastern District Pennsylvania in connection with those lower strengths. These
cases and several other cases related to other companies' ANDAs for generic
versions of Paxil have been consolidated for pre-trial discovery purposes only.

         VALPROATE (DEPAKOTE)

         In December 1999, Andrx filed an ANDA seeking FDA approval to market
valproate sodium, a generic version of Depakote. In April 2000, Abbott
Laboratories ("Abbott") sued Andrx for patent infringement in the U.S. District
Court for the Southern District of Florida in connection with Andrx's ANDA for
its generic version of Depakote. As a result of a dispute with the FDA as to
what constituted the active ingredient in Andrx's product, Andrx dropped its
ANDA and filed a 505(b)(2) application in March 2003. In May 2003, Abbott filed
suit against Andrx in connection with Andrx's new application. Both the ANDA and
NDA cases have been consolidated and the lawsuit pertaining to Andrx's ANDA
product was dismissed without prejudice. Consequently, the trial will only
pertain to Andrx's NDA product.



                                      127
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         BUPROPION HYDROCHLORIDE (WELLBUTRIN SR/ZYBAN)

         In June 1999, Andrx filed an ANDA seeking FDA approval to market
bupropion hydrochloride, its generic versions of Wellbutrin SR/Zyban. In
September 1999, Glaxo SmithKline ("Glaxo") filed suit against Andrx in the U.S.
District Court for the Southern District of Florida, claiming patent
infringement. In February 2002, the U.S. District Court for the Southern
District of Florida granted Andrx's motion of summary judgment of
non-infringement for Wellbutrin SR/Zyban and denied Glaxo's cross-motion for
summary judgment. Glaxo appealed the district court's decisions and in September
2003, the U.S. Court of Appeals for the Federal Circuit vacated the summary
judgment in favor of Andrx and remanded the case back to the U.S. District Court
for the Southern District of Florida for further proceedings.

         FOSINOPRIL SODIUM AND FOSINOPRIL HCTZ (MONOPRIL AND MONOPRIL HCT)

         In February 2003, Andrx filed ANDAs seeking FDA approval to market
fosinopril sodium tablets that are generic to Monopril and fosinopril sodium
hydrochlorathiazide tablets that are generic to Monopril HCT. On April 10, 2003,
Britol-Myers Squibb Company and E.R. Squibb and Sons, LLC filed identical suits
against Andrx in the U.S. District Court for the Southern District of New York
and Florida for alleged patent infringement. The New York action has been
dismissed and transferred to Florida. Trial is scheduled to commence in April
2004.

         METOPROLOL SUCCINATE (TOPROL XL)

         In 2003, Andrx filed an ANDA seeking FDA approval to market metoprolol
succinate extended-release tablets in 50mg strength, a generic version of Toprol
XL. In February 2004, AstraZeneca AB, Aktiebolaget Hassle and AstraZeneca LP
sued Andrx for patent infringement in the U.S. District Court for the District
of Delaware.



                                      128
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)



         CARDIZEM CD ANTITRUST LITIGATION

         Beginning in August 1998, several putative class action lawsuits were
filed against Andrx and Aventis, arising from a 1997 stipulation entered into
between Andrx and Aventis in connection with a patent infringement suit brought
by Aventis with regard to its product, Cardizem CD. The actions pending in
federal court have been consolidated for multi-district litigation purposes in
the U.S. District Court for the Eastern District of Michigan. The complaint in
each action alleges that Andrx and Aventis, by way of the 1997 stipulation,
engaged in alleged state antitrust and other statutory and common law violations
that allegedly gave Aventis and Andrx a near monopoly in the U.S. market for
Cardizem CD and a generic version of that product. According to the complaints,
the monopoly possessed by the defendants enabled Aventis to perpetuate its
ability to fix the price of Cardizem CD at an artificially high price, free from
generic competition, with the result that direct purchasers such as pharmacies,
as well as indirect purchasers such as medical patients who have been issued
prescriptions for Cardizem CD, are forced to overpay for the drug. Each
complaint seeks compensatory damages on behalf of each class member in an
unspecified amount and, in some cases, treble damages, as well as costs and
counsel fees, disgorgement, injunctive relief and other remedies. In June 2000,
the District Court granted summary judgment to plaintiffs, finding that the 1997
stipulation was a per se violation of antitrust laws. Aventis and Andrx appealed
the judgment to the U.S. Court of Appeals for the Sixth Circuit. In June 2003
the U.S. Court of Appeals for the Sixth Circuit affirmed the district court's
order that determined that the 1997 Stipulation and Agreement between Andrx and
Aventis was a per se violation of the federal antitrust laws. Andrx is seeking
legal review by the U.S. Supreme Court.

         On May 14, 2001, the State Attorneys General for the states of New York
and Michigan, joined by 13 additional states and the District of Columbia, filed
suit against Andrx and Aventis in the same federal court in which the above
described consolidated Cardizem CD antitrust class action litigation is being
conducted. The attorneys general's suit is brought on behalf of their government
entities and consumers resident in their jurisdictions who allegedly were
damaged as a result of the 1997 Stipulation. Subsequently, an amended complaint
was filed, adding 12 additional states and Puerto Rico to the action. The
lawsuit essentially reiterates the claims asserted against Andrx in the
aforementioned Cardizem CD antitrust class action litigation and seeks the same
relief sought in that litigation.

         On July 26, 2001, Blue Cross Blue Shield of Michigan, joined by three
other Blue Cross Blue Shield plans (one in Minnesota and two in New York), filed
suit against Andrx and Aventis in the U.S. District Court for the Eastern
District of Michigan on behalf of themselves and as claim adjustors for their
self-funded customers to recover damages allegedly caused by the 1997
Stipulation. The complaint essentially repeats the claims asserted against Andrx
that are being litigated in the above-described consolidated Cardizem CD
antitrust class action litigation and seeks substantially the same relief sought
in that litigation.




                                      129
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)



         In addition to the consolidated proceedings in the U.S. District Court
for the Eastern District of Michigan, there are two actions pending in state
courts in Florida and two actions pending in state courts in Kansas. These
actions are currently stayed.

         On November 26, 2002, the Court approved a settlement between the
direct purchasers and Andrx and Aventis. In January 2003, Andrx announced it had
reached a settlement with the indirect purchasers and state attorneys general.
On October 21, 2003, the district court granted final approval of the proposed
settlement between Andrx and Aventis and the indirect purchasers class and the
state attorney general plaintiffs for all 50 states. This order is currently on
appeal, purportedly on behalf of a class of Tennessee residents, which Andrx is
opposing.

         In addition to that appeal, the remaining claims in this litigation are
the claims of four Blue Cross Blue Shield entities that chose to opt-out from
the indirect purchaser class settlement; and the claims of the various retail
chain customers who chose to opt-out from the direct purchaser class settlement.
The Company is attempting to resolve the claims of these other two opt-out
plaintiffs on reasonable terms and conditions. If not settled, Andrx anticipates
that these matters may take several years to be resolved but an adverse judgment
could have a material adverse effect on Andrx's business and consolidated
financial statements.

         TIAZAC RELATED SECURITIES CLAIMS

         Several securities fraud class action complaints were filed in March
2002, alleging that Andrx and certain of its officers and directors engaged in
securities fraud and/or made material misrepresentations regarding the
regulatory status of the Company's ANDA for a generic version of Tiazac. The
amended class action complaint sought a class period for those persons or
institutions that acquired Andrx common stock from April 30, 2001, through
February 21, 2002. In November 2002, the U.S. District Court for the Southern
District of Florida granted in part Andrx's motion to dismiss the amended
consolidated class action complaint and determined that all but one of the
statements allegedly made in violation of the federal securities laws should be
dismissed as a matter of law. The Court's decision reduced the class period to
six weeks commencing January 9, 2002, and ending February 21, 2002. The Court
also later granted Andrx's motion to strike all allegations of insider trading
from the complaint. In December 2003, defendant's motion for summary judgment
was granted and a final judgment was entered in favor of defendants. Plaintiffs
have filed a notice of appeal of the motion to dismiss and the summary judgment
orders. The Company believes that the plaintiffs are unlikely to prevail in
their appeal or ultimately on such claims.



                                      130
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         WELLBUTRIN SR/ZYBAN RELATED SECURITIES CLAIMS

         Seven complaints were filed against Andrx and certain of its officers
and directors for alleged material misrepresentations regarding the expiration
period for Andrx's bioequivalent versions of Wellbutrin SR/Zyban and that
Andrx's launch quantities might expire before FDA approval of the product. All
of these cases were consolidated and on October 20, 2003, plaintiffs filed a
consolidated amended class action complaint in the U.S. District Court for the
Southern District of Florida against Andrx and Richard Lane alleging a class
period from March 1, 2002 through March 4, 2003.

         OTHER PATENT LITIGATION

         FAMOTIDINE (PEPCID)

         As part of the CARAN joint venture between Andrx and Carlsbad, Carlsbad
developed and is manufacturing for distribution by Andrx, famotidine, a generic
version of Pepcid. In July 2001, Richter Gedeon Vegyeszeti Gyar RT sued Andrx,
Carlsbad and seven other defendants for patent infringement in the U.S. District
Court for the Eastern District of New York. Carlsbad has agreed to indemnify
Andrx from any liability arising out of this lawsuit. Andrx understands that the
parties to that litigation are working on settlement terms.

         LEMELSON PATENT LITIGATION

         On November 23, 2001, the Lemelson Medical, Education & Research
Foundation, LP filed an action in the U.S. District Court for the District of
Arizona alleging patent infringement against Andrx and others involving "machine
vision" or "computer image analysis." On March 20, 2002, the court stayed the
proceedings, pending the resolution of another suit that involves the same
patents, but does not involve Andrx. On January 23, 2004, the United States
District Court for the District of Nevada issued an order determining that
certain Lemelson patents, including the patents asserted against the Company,
were unenforceable. The Lemelson Foundation has moved to amend or alter the
judgment entered in that case. The Company is not in a position to determine the
ultimate outcome of this matter but an adverse judgment could have a material
adverse effect on Andrx's business and consolidated financial statements.

         ALTOCOR TRADEMARK OPPOSITION AND TRADEMARK INFRINGEMENT LITIGATION

         On August 13, 2003 Kos Pharmaceuticals, Inc. ("Kos") filed a complaint
in the U.S. District Court for the District of New Jersey alleging trademark
infringement and unfair competition and seeking to enjoin Andrx from using the
Altocor name. On September 18, 2003, the district court denied Kos' motion for
preliminary injunction. Kos has appealed this decision to the U.S. Court of
Appeals for the Third Circuit. This matter is set for hearing on March 9, 2004.
The foregoing proceeding is separate from the proceeding pending before the US
Patent and Trademark Office ("USPTO") with respect to Kos' trademark opposition
to Andrx's Altocor trademark. Kos has filed a motion to suspend the USPTO
proceeding in light of its lawsuit, but the USPTO has not ruled on Kos' motion.
Though the Company is not in a position to determine the ultimate outcome of
this matter, customer loyalty associated with the Altocor name could be lost if
Andrx were required to change the name of its product.




                                      131
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         PPA LITIGATION


         Beginning in October 2001, a number of product liability lawsuits were
filed against Andrx and others for personal injuries allegedly arising out of
the use of phenylpropanolamine (PPA). The actions have been consolidated and
transferred to the U.S. District Court for the Western District of Washington.
Andrx was named in the suits because of its Entex product line, which it
acquired from Elan in June 2001. While PPA was at one time contained in Elan's
Entex products, Andrx reformulated the Entex products containing PPA upon their
acquisition from Elan, and eliminated PPA as an active ingredient in the
products. Andrx believes that it will be fully indemnified by Elan for the
defense of all such cases and for any liability that may arise associated with
the products it purchased from Elan. Several of these cases have been
voluntarily dismissed by the plaintiffs.

         ALPHARMA BREACH OF CONTRACT LITIGATION

         On September 26, 2003, Alpharma USPD Inc. filed a complaint against one
of Andrx's subsidiaries (Armstrong) in the United States District Court for the
Southern District of New York. Alpharma alleges that the contractual breach by
Armstrong resulted in the recall of Epinephrine Mist, a product manufactured by
Armstrong for Alpharma. In the complaint, Alpharma seeks to recover $18,000 in
damages for breach of contract, $17,400 in damages for negligent
misrepresentations, (many of which preceded Andrx's involvement), and $50,000 in
punitive damages. Andrx believes that at least part of the cause of the recall
is attributable to Alpharma. Andrx also believes that it is entitled to
indemnification for at least part of these claims from Celltech Manufacturing,
Inc. ("Celltech") formerly known as Medeva Pharmaceuticals Manufacturing, Inc.,
from whom Andrx purchased Armstrong in March 2001. On January 22, 2004, Alpharma
filed an amended complaint, which added the Company and Celltech as additional
named defendants. The Company disputes both the basis for liability and the
amount of damages owed, but is not in a position to determine the ultimate
outcome of this matter.

         BURNETT EMPLOYMENT DISPUTE

         On October 19, 1993, Terrill Hill Burnett, a former employee of POL,
filed an action in the U.S. District Court for the Southern District of New York
against POL and some of the original shareholders thereof, alleging POL breached
her employment contract, securities and common law fraud with respect to the
sale of shares of common stock, breach of fiduciary duty, negligent
misrepresentation and gender discrimination, and seeking damages in excess of
$1,000, plus punitive damages. The District Court has dismissed all of these
claims, except those for breach of contract and damages based on quantum meruit.
POL's motion for partial summary judgment regarding the issue of damages has
been denied and trial is tentatively set for May 2004. The Company does not
believe Ms. Hill will prevail in her claims for damages in a material amount,
but the Company is not in a position to determine the ultimate outcome of this
matter.



                                      132
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         CONCLUDED LITIGATION MATTERS

         OMEPRAZOLE (PRILOSEC)

         In 1998, Andrx filed an ANDA seeking approval from the FDA to market
omeprazole, its generic version of Prilosec. In May 1998, Astra filed suit under
the provisions of the Waxman-Hatch Amendments alleging patent infringement. The
matter was tried in the U.S. District Court for the Southern District of New
York along with the consolidated claims of three other ANDA applicants. In
October 2002, the court entered an order and an opinion finding that Astra's
`505 and `230 patents are valid and that the generic versions of Prilosec
developed by Andrx, Genpharm Inc. ("Genpharm") and Cheminor Drugs Ltd
("Cheminor") infringe those patents. The court also determined that the generic
version of Prilosec developed by KUDCo does not infringe the two patents. The
court specifically deferred ruling on the `281 patent that was asserted solely
against Andrx's product, and has not issued any opinion on Astra's claims for
willful infringement of the `505 and `230 patents or on Astra's request for
attorneys' fees. Andrx appealed the district court's opinion to the Federal
Circuit Court of Appeals and on December 11, 2003, the Federal Circuit affirmed
the district court's opinion that Astra's patents are valid and infringed by the
products developed by Andrx, Genpharm and Cheminor. Following the district court
decision, but well before the appellate court decision, Astra advised the
District Court that it believes it may be entitled to damages as a result of
Andrx's decision to build an inventory of its product prior to the court's
determination. Since that statement was made, Andrx is unaware of any effort on
the part of Astra to enforce such claims.

         LORATADINE (CLARITIN-D 24/REDITABS/D 12)

         Andrx filed ANDAs with FDA seeking approval for its generic versions of
Claritin-D 24, Claritin Reditabs and Claritin-D 12 in September 1999, September
2000 and July 2001, respectively. Schering-Plough Corporation ("Schering") sued
Andrx in the U.S. District Court for New Jersey claiming that Andrx's ANDA for
Claritin-D 24 infringed two of its patents, a metabolite patent and a
formulation patent, and with respect to Claritin Reditabs and D 12, claiming
infringement only of the metabolite patent. The district court entered final
summary judgment in favor of Andrx with respect to the metabolite patent,
finding the patent invalid. Schering appealed that judgment and in August 2003,
the federal circuit affirmed the lower court's opinion. This decision is final
with respect to the formulation patent at issue for the D 24 product, in October
2003, the parties reached a settlement calling for the dismissal of the
litigation, with prejudice and the payment of a non-material amount by Andrx.

         GLIPIZIDE (GLUCOTROL XL)

         Andrx filed an ANDA for its generic version of Glucotrol XL in April
2001, and in July 2001, was sued in the U.S. District Court for the Southern
District of Florida by Pfizer and Alza for alleged infringement of several
patents. In September 2003, the parties reached a settlement and entered into a
sublicense/supply agreement. As a result of this settlement, all claims by
Pfizer and Alza against Andrx were dismissed.



                                      133
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         MIRTAZAPINE (REMERON)

         In December 2001, Andrx filed an ANDA seeking FDA approval to market
mirtazapine, its bioequivalent version of Remeron. In April 2002, Organon, Inc.
and Akzo Nobel N.V. filed suit against Andrx for patent infringement in the U.S.
District Court for the Southern District of Florida. In 2003, the claims against
Andrx were dismissed, with prejudice.

         NICEBID BREACH OF CONTRACT CLAIMS

         In October 2001, Nicebid.com, LLC served a demand for arbitration of
its claims against Cybear in connection with web design and web hosting services
arising out of an agreement between Nicebid and a company acquired by Cybear.
Nicebid asserts claims for breach of contract and warranty, negligence,
fraudulent inducement, fraud and NJ Consumer Fraud Act violations and claims
damages for lost profits exceeding $7,000, punitive damages and attorneys' fees
and costs. In August 2003, the Company settled this matter for an immaterial
amount.

         TIAZAC DERIVATIVE CLAIMS

         In October 2002, two shareholder derivative complaints related to the
Tiazac class action referred to above were filed against certain current and
former officers and directors of Andrx, as well as Andrx (as a nominal
defendant), in the Circuit Court of Broward County, Florida. These complaints
alleged that, during the period from May 2001 through November 2001, the
individual defendants were in possession of material non-public information
relating to the regulatory status of Andrx's ANDA for a generic version of
Tiazac and used such information to sell shares of Andrx common stock at prices
higher than they could have obtained had the information been made public,
thereby reaping insider trader profits. The complaints seek the imposition of a
constructive trust in favor of Andrx for the more than $204,000 in profits that
the individual defendants received from their allegedly illegal sales of Andrx
stock during such period. As a result of the summary judgment in favor of Andrx
in the Taztia securities fraud litigation, plaintiffs voluntarily dismissed this
action in 2004.



                                      134
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         SEC INVESTIGATION

         In February 2001, the Southeast Regional Office of the SEC commenced a
formal private investigation of Cybear, which focused on Cybear's revenue
reporting, disclosure and internal controls in 1999 and 2000 with respect to
Cybearclub LC, a joint venture between Andrx and Cybear intended to promote the
distribution of certain healthcare products through the Internet. The Cybear
matter involved whether approximately $1,300 in revenue, representing
approximately $27 in gross profit, should properly have been recognized by
Cybear. In an administrative Order, to which the Company consented without
admitting or denying the SEC's findings, the SEC found that, although senior
management of both Andrx and Cybear had consulted with the Company's then
auditors concerning this issue prior to Cybear's reporting of that revenue in
its Form 10-Q for the quarterly period ended June 30, 2000, that revenue should
not have been recognized by Cybear. In a separate matter addressed in the same
consent Order, the SEC found that the Company's allowance for doubtful accounts
receivable was understated due to the unauthorized actions of a single employee
who had altered certain of the Company's accounts receivable records. Without
admitting or denying the SEC's findings with respect to these two matters, in
May 2003, the Company agreed to cease and desist from future violations of the
books and records, internal controls and proxy solicitation provisions of the
securities laws and, on behalf of Cybear, to pay a $100 penalty.

         TAX MATTERS

         The Company is currently under audit by the Internal Revenue Service
for the years 1999 to 2002. Despite the Company's belief that its tax return
positions are supportable, it is the Company's policy to establish reserves for
taxes that may become payable in future years as a result of an examination by
tax authorities. While it is difficult to predict the final outcome of any
particular tax matter, Management believes that the company's tax reserves are
adequate. The tax reserves are analyzed periodically and adjustments are made to
the tax reserves, as events occur to warrant such adjustment. The Company's
effective tax rate and cash flows could be materially impacted by the ultimate
resolution of its tax positions.

(17)     LITIGATION SETTLEMENTS AND OTHER CHARGES

         Litigation settlements and other charges consist of the following:

<TABLE>
<CAPTION>

                                                                     Years Ended December 31,
                                                              -----------------------------------------
                                                                2003            2002             2001
                                                              -------          -------          -------
<S>                                                           <C>              <C>              <C>
Litigation settlement charge and legal claims                 $ 8,750          $65,000          $    --
POL goodwill and intangible impairment                             --            7,833               --
Reorganization goodwill impairment                                 --               --            9,313
Ft. Washington, PA, Boca Raton, FL and Tarrytown, NY
     leases charge                                                 --               --            1,722
Computer software license impairment                               --               --            1,742
Telegraph goodwill impairment                                      --               --            1,982
                                                              -------          -------          -------
                                                              $ 8,750          $72,833          $14,759
                                                              =======          =======          =======

</TABLE>


         In 2003 and 2002, Andrx recorded charges of $8,750 and $65,000,
respectively, related to various previously disclosed legal claims, as well as a
negotiated settlement of an obligation to one of the Company's law firms with
respect to Andrx's generic version of Tiazac in 2003.



                                      135
<PAGE>


                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         In 2002, Andrx recorded a charge of $7,833 for impairment of goodwill
and intangible assets related to POL assets. Such charge was the result of
management's decision in the fourth quarter of 2002, not to commit additional
resources to POL and an evaluation of the related goodwill and intangible
assets. As a result, management believes that the future benefits previously
associated with this transaction no longer exist under Andrx's current
operations. Andrx sold POL on December 23, 2003 (see Note 4).

         In 2001, Cybear wrote off the remaining $9,313 of goodwill established
in the September 2000 Reorganization. Such writeoff was the result of an
evaluation of the Reorganization goodwill in consideration of, among other
things, Cybear Group's business subsequent to the Reorganization. As a result,
the future benefits previously associated with the Reorganization goodwill no
longer existed.

         In 2001, Cybear recorded an allowance of $1,722 associated with an
estimated loss that Cybear expected to incur in subleasing all or portions of
its Fort Washington, PA, Tarrytown, NY and Boca Raton, FL facilities.

         In 2001, Cybear wrote off $1,742 for certain computer software licenses
that Cybear no longer intends to market or to commercialize.

         In 2001, Cybear wrote off the remaining $1,982 of goodwill established
with the acquisition of Telegraph Consulting Corporation ("Telegraph") in 1999.
Such write-off was the result of an evaluation of the Telegraph goodwill in
consideration of, among other things, the Company's Internet business strategy
and the acquisition of Mediconsult (see Note 4). As a result, the future
benefits previously associated with the Telegraph goodwill no longer existed.



                                      136
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


(18)     SELECTED QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                               2003
                                                                      --------------------------------------------------------
                                                                      March 31,       June 30,    September 30,   December 31,
                                                                      ---------      ---------    -------------   ------------
<S>                                                                   <C>            <C>            <C>            <C>
Distributed products revenue                                          $ 154,617      $ 161,506      $ 168,334      $ 172,641
Andrx products revenue                                                   48,432         76,679         74,489        102,052
Licensing and royalties                                                  31,013         33,054          9,588          6,425
Cost of goods sold                                                      159,033        171,693        170,196        199,479
Litigation settlements and other charges                                     --          7,500             --          1,250
Net income                                                                6,356         14,477         11,741         15,603
Total net income allocated to Andrx Group                                 6,356         14,477         11,741         15,603
Basic net income per share of Andrx Group common stock                     0.09           0.20           0.16           0.22
Diluted net income per share of Andrx Group common stock                   0.09           0.20           0.16           0.21

</TABLE>



<TABLE>
<CAPTION>


                                                                                               2002
                                                                      --------------------------------------------------------
                                                                      March 31,       June 30,    September 30,   December 31,
                                                                      ---------      ---------    -------------   ------------
<S>                                                                   <C>            <C>            <C>            <C>
Distributed products revenue                                          $ 127,045      $ 121,502      $ 133,020      $ 153,051
Andrx products revenue                                                   54,536         55,770         53,391         45,710
Licensing and royalties                                                     114            102            193         16,931
Cost of goods sold                                                      126,517        129,888        178,405        185,259
Litigation settlements and other charges                                     --         60,000             --         12,833
Net income (loss)                                                         4,513        (31,334)       (33,084)       (31,912)
Total net income (loss) allocated to Andrx Group                          8,395        (29,798)       (33,084)       (31,912)
Basic net income  (loss) per share of Andrx Group common stock             0.12          (0.42)         (0.47)         (0.45)
Diluted net income (loss) per share of Andrx Group common stock            0.12          (0.42)         (0.47)         (0.45)
Total net loss allocated to Cybear Group                                 (3,882)        (1,536)            --             --
Basic and diluted net loss per share of Cybear Group common stock         (0.58)         (0.23)            --             --


</TABLE>




                                      137
<PAGE>
                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         As a result of the Conversion, Cybear business operations have been
integrated into Andrx and Andrx currently only has one class of common stock
outstanding which includes all of the businesses of Andrx and its subsidiaries.
From the Reorganization on September 7, 2000, through the Conversion on May 17,
2002, Andrx allocated its operating results to each class of common stock.

         Earnings (loss) per share are computed independently for each quarter
presented.

         In August 2002, Andrx management learned that an employee had made
numerous improper entries that affected the adequacy of the Company's allowance
for doubtful accounts receivable. Management determined that the Company's
provision for doubtful accounts receivable (included in SG&A) was understated
from January 1, 1999, through December 31, 2001, by an aggregate of $4,014, of
which $2,655 and $1,720 related to the years ended December 31, 2001 and 2000,
respectively, and a credit of $361 related to the year ended December 31, 1999.
The Company recognized the full amount of the $4,014 prior period misstatement
in the second quarter of 2002, as the Company believed it was not material to
any period affected. The 2002 financial statements include a $1,417 increase in
the provision for doubtful accounts receivable related to this matter for the
first and second quarters of 2002. For each of the applicable 2002 unaudited
quarterly periods, the misstatement was $888 for the quarter ended March 31,
2002 and $529 for the quarter ended June 30, 2002, both of which were recorded
in the second quarter of 2002.

(19)     SEGMENTS

         Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. The operating segments are
managed separately because of the fundamental differences in their operations or
in the uniqueness of their products. As a result of the Conversion, the
Company's Internet business operations were integrated into other operating
segments of Andrx and are no longer classified as a separate segment and became
a part of the distributed products segment or brand products segment for
financial reporting purposes. Accordingly, for segment reporting purposes, the
Company has reclassified its former Internet segment operations for all prior
periods herein to conform with the current period presentation. It is
impracticable to report the current segment information under the old basis of
segmentation given the integration of Internet business operations into other
reportable segments.



                                      138
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

         The Company currently operates in the following business segments:

         DISTRIBUTED PRODUCTS

         The Company distributes primarily generic pharmaceuticals manufactured
largely by others, as well as the Company, from its Weston, Florida and
Columbus, Ohio distribution facilities primarily to independent pharmacies,
pharmacy chains, pharmacy buying groups and physicians' offices. Sales are
primarily generated through its in-house telemarketing staff and through Andrx's
internally developed ordering systems. The distributed products segment's
operating results exclude participation in the distribution of Andrx generic
products, which are included in the generic product segment. As a result of the
Conversion, Cybear's Cybearclub LC joint venture with Andrx, which was formerly
included in the Internet segment, is now included in the distributed products
business segment.

         GENERIC PRODUCTS

         The Company researches and develops, manufactures and sells generic
versions of selected controlled-release brand name pharmaceuticals, utilizing
its proprietary drug delivery technologies, as well as generic versions of niche
and immediate-release pharmaceutical products, including oral contraceptives.
The generic products segment also includes licensing revenues earned under the
agreement with KUDCo, and the contract manufacturing activities conducted at
Andrx's aerosol manufacturing facility in Massachusetts through October 9, 2003,
the date the Massachusetts operation was sold. The generic products segment also
includes the equity in earnings (losses) of unconsolidated joint ventures (see
Note 9).

         BRAND PRODUCTS

         The Company commercializes brand name pharmaceuticals in many cases
using its controlled-release drug delivery technologies. The brand products
segment also includes: (i) fees generated under an agreement with Sandoz for
specified brand products, which was terminated in October 2001; (ii) milestones
to Sandoz in connection with the termination of such agreement; (iii) sales of
products from CTEX, which Andrx acquired on January 23, 2001, which include
Histex through June 28, 2002; (iv) gain on sale of Histex product line in June
2002 and the sale of butalbital in 2003; (v) commencing in July 2001, sales of
the Entex brand product line; (vi) commencing in November 2001, sales of the
Anexsia pain product line; and (vii) commencing July 2002, net sales of Altocor,
Andrx's first internally developed brand product.

         CORPORATE AND OTHER

         Corporate and other consists of corporate headquarters, including
general and administrative expenses, which include legal costs associated with
antitrust matters, litigation settlements charges, interest income, interest
expense and income taxes. The Company evaluates the performance of the segments
after all intercompany transactions are eliminated. The allocation of income
taxes is not evaluated at the segment level.



                                      139
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)

The following table presents financial information by business segment:

<TABLE>
<CAPTION>


                                                              As of or for the Year Ended December 31, 2003
                                         ------------------------------------------------------------------------------
                                         Distributed       Generic           Brand         Corporate
                                           Products        Products         Products        & Other        Consolidated
                                         -----------     -----------      -----------      ---------       ------------
<S>                                      <C>             <C>              <C>              <C>              <C>
Revenues                                 $   657,098     $   336,197      $    53,043      $        --      $ 1,046,338
Income (loss) from operations                 46,183         130,386          (57,929)         (50,773)          67,867
Equity in earnings of joint ventures              --           5,135               --               --            5,135
Interest income                                   --              --               --            2,242            2,242
Interest expense                                  --              --              127            2,514            2,641
Gain on sale of assets                            --           3,730            1,875               --            5,605
Depreciation and amortization                  4,299          17,848            4,940            1,976           29,063
Purchase of property, plant and equipment      4,102          28,375              994            5,984           39,455
Total assets                                 232,366         365,113           87,956          273,011          958,446

</TABLE>


<TABLE>
<CAPTION>


                                                              As of or for the Year Ended December 31, 2002
                                         ------------------------------------------------------------------------------
                                         Distributed       Generic           Brand         Corporate
                                           Products        Products         Products        & Other        Consolidated
                                         -----------     -----------      -----------      ---------       ------------
<S>                                      <C>             <C>              <C>              <C>              <C>
Revenues                                 $   534,618     $   208,127      $    28,235      $        --      $   770,980
Income (loss) from operations                 31,887         (19,732)         (78,450)        (100,359)        (166,654)
Equity in earnings of joint ventures              --           3,697               --               --            3,697
Interest income                                   --              --               --            5,420            5,420
Interest expense                                  --              --               --              200              200
Gain on sale of assets                            --              --            5,094               --            5,094
Depreciation and amortization                  3,289          12,526            5,488              769           22,072
Purchase of property, plant and equipment     13,916          96,321              808            1,245          112,290
Total assets                                 234,008         289,468           68,136          197,867          789,479

</TABLE>

<TABLE>
<CAPTION>


                                                              As of or for the Year Ended December 31, 2001
                                         ------------------------------------------------------------------------------
                                         Distributed       Generic           Brand         Corporate
                                           Products        Products         Products        & Other        Consolidated
                                         -----------     -----------      -----------      ---------       ------------
<S>                                      <C>             <C>              <C>              <C>              <C>
Revenues                                 $   495,241     $   204,969      $    48,831      $        --      $   749,041
Income (loss) from operations                 34,581         102,504          (55,726)         (24,839)          56,520
Equity in earnings of joint ventures              --           1,025               --               --            1,025
Interest income                                   --              --               --           11,386           11,386
Depreciation and amortization                  2,924           6,954           12,083               78           22,039
Purchase of property, plant and equipment      8,336          64,908            1,149              696           75,089
Total assets                                 194,784         222,045           73,593          298,792          789,214


</TABLE>



                                      140
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2003, 2002 AND 2001
             (in thousands, except for share and per share amounts)


         For each of the applicable, unaudited quarterly periods, the
misstatement to the allowance for doubtful accounts receivable resulting from an
employee making improper entries (see Note 18) for the Distributed Products
Segment was $803 for the quarter ended March 31, 2002 and $524 for the quarter
ended June 30, 2002. The amount of the misstatement attributable to each of the
applicable unaudited quarterly periods for the Generic Products Segment was $85
for the quarter ended March 31, 2002 and $5 for the quarter ended June 30, 2002.




                                      141
<PAGE>

--------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
================================================================================

None.

--------------------------------------------------------------------------------
ITEM 9A. CONTROLS AND PROCEDURES
================================================================================

         As of the end of the period covered by this Annual Report on Form 10-K,
an evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures was carried out by us under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief
Financial Officer. Based on that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
have been designed and are being operated in a manner that provides reasonable
assurance that the information required to be disclosed by us in reports filed
under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. A system of controls, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the system of controls are
met, and no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected.


                                    PART III

--------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
================================================================================

         Information regarding directors, including information regarding the
determination of our Board of Directors concerning the Audit Committee Financial
Expert, appearing under the caption "Election of Directors" in our proxy
statement for the 2004 annual meeting of stockholders is incorporated by
reference.

         Information regarding executive officers is included in Part I on this
Form 10-K as permitted by General Instruction G(3).

         We have adopted a Code of Ethics that applies to our principal
executive officer, our principal financial officer and our vice president and
corporate controller. We will provide the Code of Ethics, without charge, upon
request made to Investor Relations at 954-217-4500 or at
INVESTOR.RELATIONS@ANDRX.COM.


--------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION
================================================================================

         Information appearing under the caption "Executive Compensation" in our
proxy statement for the 2004 annual meeting of stockholders is incorporated by
reference.

--------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
================================================================================

         Information appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management" in our proxy statement for the 2004 annual
meeting of stockholders is incorporated by reference.



                                      142
<PAGE>

--------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
================================================================================

         Information appearing under the caption "Certain Relationships and
Related Transactions" in our proxy statement for the 2004 annual meeting of
stockholders is incorporated by reference.

--------------------------------------------------------------------------------
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
================================================================================

         Information appearing under the caption "Principal Accountant Fees and
Services" in our proxy statement for the 2004 annual meeting of stockholders is
incorporated by reference.


                                     PART IV

--------------------------------------------------------------------------------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
================================================================================

    (A) Documents Filed as Part of this Report

    (1) Reference is made to the Index to Financial Statements included in Part
II, Item 8 of this Report.

    (2) Financial Statement Schedules

        Not Applicable

        All other schedules for which provision is made in applicable
regulations of the SEC are omitted because they are not applicable or the
required information is in the Consolidated Financial Statements or notes
thereto.

    (3) Exhibits

Exhibit No.    Description
-----------    -----------------------------------------------------------------

   2.2         Agreement and Plan of Merger and Reorganization dated March 23,
               2000 among Andrx Corporation, Cybear, Inc., New Andrx
               Corporation, Andrx Acquisition Corp., and Cybear Acquisition
               Corp. (3)

   2.3         Agreement and Plan of Merger dated January 9, 2001, among Andrx
               Corporation, Mediconsult Acquisition Corp. and Mediconsult.com,
               Inc. (4)

   3.1         Form of Registrant's Amended and Restated Certificate of
               Incorporation (6)

   3.2         Registrant's Amended and Restated Bylaws dated March 17, 2003
               (23)

   4.1         Specimen Certificate of Andrx Corporation - Andrx Group Common
               Stock (7)

   4.3         Rights Agreement, dated as of March 20, 2003, between Andrx
               Corporation and American Stock Transfer & Trust Company as rights
               agent (8)

   4.4         Revised Specimen Certificate of Andrx Corporation - Andrx Group
               Common Stock (20)

   10.1        Form of Stock Incentive Plan, as amended (9)*

   10.6        Royalty Agreement between the Registrant and Chih-Ming J. Chen
               (9)*

   10.7        Form of Indemnification Agreement between the Registrant and
               officers and directors (9)*

   10.14       Lease Agreement relating to the premises at 4001 SW 47th Avenue,
               Ft. Lauderdale, Florida (9)

   10.15       Lease Agreement related to the premises at 4011 SW 47th Avenue,
               Ft. Lauderdale, Florida (9)

   10.16       Lease Agreement relating to the premises at 3436 University
               Drive, Davie, Florida (9)

   10.30       First Amendment to Lease Agreement relating to the premises
               located at 3436 University Drive, Davie, Florida (10)




                                      143
<PAGE>

   10.31       Third Addendum to Lease between the Registrant and New Town
               Centre, Ltd., relating to the premises at 4011 S.W. Avenue,
               Davie, Florida (11)

   10.32       Fourth Addendum to Lease between the Registrant and New Town
               Commerce Centre, Ltd., relating to the premises at 4011 S.W. 47th
               Avenue, Davie, Florida (11)

   10.33       Lease by and between Registrant and New Town Commerce Center,
               Ltd., relating to the premises at 4111 S.W. 47th Avenue, Davie,
               Florida (11)

   10.34       Amendment to Royalty Agreement between the Registrant and
               Chih-Ming J. Chen, Ph.D. (12)*

   10.35       Lease Agreement relating to the premises at 500 Blue Lake Drive,
               Boca Raton, Florida (12)

   10.36       Lease Agreement relating to the premises at 2915 Weston Road,
               Weston, Florida (12)

   10.39       Lease Agreement relating to the premises at 180 Passaic Avenue,
               Fairfield, New Jersey (24)

   10.40       Lease Agreement relating to the premises at 5000 Blue Lake Drive,
               Suite 200, Boca Raton, Florida (13)

   10.41(a)    First Amendment to Lease Agreement relating to the premises at
               5000 Blue Lake Drive, Suite 200, Boca Raton, Florida (13)

   10.41(b)    Second Amendment to Lease Agreement relating to the premises at
               5000 Blue Lake Drive, Suite 200, Boca Raton, Florida (13)

   10.42       2000 Stock Option Plan (6)*

   10.45       Tax Sharing Agreement (6)

   10.50       Lease Agreement relating to the premises at 4491 South State Road
               7, Suite #700, Ft. Lauderdale, Florida 33314 (15)

   10.53       Lease Agreement relating to the premises at 2945 West Corporate
               Lakes Boulevard, Weston, Florida (15)

   10.54       Amendment to Tax Sharing Agreement (15)

   10.55       Lease Agreement Relating to the premises at 3040 Universal
               Boulevard, Suite #150, Weston, Florida (15)

   10.59       Termination Agreement with Geneva Pharmaceuticals, Inc. (2) (16)

   10.60       Employment Agreement between the Registrant and Scott Lodin (16)*

   10.61       Employment Agreement between the Registrant and Angelo C.
               Malahias (16)*

   10.62       Separation Agreement between the Registrant and Chih Ming Chen,
               Ph.D. (16)*

   10.63       Separation Agreement between the Registrant and Alan P. Cohen
               (16)*

   10.64       Employee Stock Purchase Plan, as amended (17)*

   10.66       Employment Agreement between Registrant and Richard J. Lane,
               former Chief Executive Officer* (18)

   10.67       Commercialization Agreement among Andrx Pharmaceuticals, Inc.,
               Genpharm, Inc. and Kremers Urban Development Co. dated as of
               October 30, 2002 (23) (2)

   10.68       Credit Agreement dated as of December 30, 2002, among Andrx
               Corporation and its subsidiaries, Bank of America, N.A., as agent
               and the lenders party thereto (23)

   10.69       First Amendment to Credit Agreement dated as of December 30,
               2002, among Andrx Corporation and its subsidiaries, Bank of
               America, N.A., as agent and the lenders party thereto. (23)

   10.70       Employment Agreement between the Registrant and Lawrence J.
               Rosenthal (23)*

   10.71       Employment Agreement between Registrant and Daniel H. Movens
               (23)*

   10.73       Form of 2003 Indemnification Agreement between Registrant and
               directors (23)*

   10.74       2000 Stock Option Plan, as amended and restated (21) (*)

   10.75       Employee Stock Purchase Plan, as amended (22) (*)

   10.76       Employment Agreement between the registrant and Ian J. Watkins
               (1) (*)

   21.1        Subsidiaries of the Registrant (1)

   23.1        Consent of Ernst & Young LLP (1)

   31.1        Certification of Chief Executive Officer pursuant to Rule
               13a-15(e) and Rule 15d-15(e), promulgated under the Securities
               Exchange Act of 1934, as amended. (1)




                                      144
<PAGE>

   31.2        Certification of Chief Financial Officer pursuant to Rule
               13a-15(e) and Rule 15d-15(e), promulgated under the Securities
               Exchange Act of 1934, as amended. (1)

   32          Certification of Chief Executive Officer and Chief Financial
               Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
               Section 906 of the Sarbanes-Oxley Act of 2002. (1)
-----------------

    *          Management Compensation Plan or arrangement.

   (1)         Filed herewith.

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

   (3)         Filed as an exhibit of the same number in Andrx Corporation's
               Annual Report on Form 10-K for the year ended December 31, 1999,
               and incorporated herein by reference.

   (4)         Filed as exhibit 2.1 to Andrx Corporation's Form 8-K filed
               January 17, 2001, and incorporated herein by reference.

   (5)         Filed as an exhibit of the same number to Andrx Corporation's
               Registration Statement on Form S-4 (File No. 333-54926).

   (6)         Filed as an exhibit of the same number to Andrx Corporation's
               Registration Statement on Form S-4 (File No. 333-38226) filed May
               31, 2000.

   (7)         Filed as an exhibit of the same number to Andrx Corporation's
               Form 8-A12G filed September 6, 2000.

   (8)         Filed as an exhibit of the same number to Andrx Corporation's
               Form 8-K filed March 21, 2003, and incorporated herein by
               reference.

   (9)         Filed as an exhibit of the same number to Andrx Corporation's
               Registration Statement on Form S-1 (File No. 333-03614) and
               incorporated herein by reference.

   (10)        Filed as an exhibit of the same number in Andrx Corporation's
               Annual Report on Form 10-K for the year ended December 31, 1996,
               and incorporated herein by reference.

   (11)        Filed as an exhibit of the same number in Andrx Corporation's
               Report on Form 10-K for the year ended December 31, 1997, and
               incorporated herein by reference.

   (12)        Filed as an exhibit of the same number in Andrx Corporation's
               Quarterly Report on Form 10-Q for the period ended September 30,
               1998, and incorporated herein by reference.

   (13)        Filed as an exhibit to Cybear Inc.'s Annual Report on Form 10-K
               for the year ended December 31, 1999 and incorporated herein by
               reference.

   (14)        Filed as Annex C to Andrx Corporation's Registration Statement on
               Form S-4 (File No. 333-54926).

   (15)        Filed as an exhibit of the same number in Andrx Corporation's
               Annual Report on Form 10-K for the year ended December 31, 2000,
               and incorporated by reference.


                                      145
<PAGE>


   (16)        Filed as an exhibit of the same number in Andrx Corporation's
               Quarterly Report on Form 10-Q for the period ended September 30,
               2001, and incorporated by reference.

   (17)        Filed as an exhibit to Andrx Corporation's Form S-8 (File No.
               333-84672) dated March 21, 2002.

   (18)        Filed as an exhibit of the same number in Andrx Corporation's
               Quarterly Report on Form 10-Q for the period ended June 30, 2002,
               and incorporated by reference.

   (19)        Filed as an exhibit of the same number to Andrx Corporation's
               Form 8-K filed June 19, 2002, and incorporated herein by
               reference.

   (20)        Filed as an exhibit of the same number in Andrx Corporation's
               Quarterly Report on Form 10-Q for the period ended March 31,
               2003, and incorporated by reference.

   (21)        Filed as Annex B to Andrx Corporation's Schedule 14A (Amendment
               No.1) filed on May 7, 2003.

   (22)        Filed as Annex C to Andrx Corporation's Schedule 14A (Amendment
               No.1) filed on May 7, 2003.

   (23)        Filed as an exhibit of the same number in Andrx Corporation's
               Annual Report on Form 10-K for the year ended December 31, 2002,
               and incorporated by reference.

   (24)        Filed as an exhibit of the same number in Andrx Corporation's
               Annual Report on Form 10-K for the year ended December 31, 1999,
               and incorporated by reference.

----------

(B)  Reports on Form 8-K

On October 31, 2003, Andrx filed a current report pursuant to Item 12 of the
Form 8-K announcing its financial results for the third quarter of 2003.

(C)  Item 601 Exhibits

The exhibits required by Item 601 of Regulation S-K are set forth in (A)(3)
above.

(D)  Financial Statement Schedules

The Financial Statement Schedules required by Regulation S-K are set forth in
(A)(2) above.



                                      146
<PAGE>

                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                       ANDRX CORPORATION

                                       By: /s/ Thomas P. Rice
                                           -------------------------------------
                                           Thomas P. Rice
                                           Chief Executive Officer


                                       By: /s/ John M. Hanson
                                           -------------------------------------
                                           John M. Hanson
                                           Senior Vice President and
                                           Chief Financial Officer

Date:  March 12, 2004

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

              Signatures                                         Title                                   Date
              ----------                                         -----                                   ----

<S>                                     <C>                                                      <C>
/s/ Thomas P. Rice                      Chief Executive Officer and Director                     March 12, 2004
----------------------------------
Thomas P. Rice                          (Principal Executive Officer)

/s/ John M. Hanson                      Senior Vice President and Chief Financial Officer        March 12, 2004
----------------------------------
John M. Hanson                          (Principal Accounting Officer)

/s/ Angelo C. Malahias                  President                                                March 12, 2004
----------------------------------
Angelo C. Malahias

/s/ Tamara A. Baum                      Director                                                 March 12, 2004
----------------------------------
Tamara A. Baum

/s/ Joseph E. Breslin                   Director                                                 March 12, 2004
----------------------------------
Joseph E. Breslin

/s/ Lawrence J. Dubow                   Director                                                 March 12, 2004
----------------------------------
Lawrence J. DuBow

/s/ Carter H. Eckert                    Director                                                 March 12, 2004
----------------------------------
Carter H. Eckert

</TABLE>


                                      147
<PAGE>




<TABLE>
<CAPTION>

<S>                                     <C>                                                      <C>
/s/ Irwin C. Gerson                     Director                                                 March 12, 2004
----------------------------------
Irwin C. Gerson

/s/ Elliot F. Hahn, Ph.D.               Chairman Emeritus and Director                           March 12, 2004
----------------------------------
Elliot F. Hahn, Ph.D.

/s/ Melvin Sharoky, M.D.                Director                                                 March 12, 2004
----------------------------------
Melvin Sharoky, M.D.


</TABLE>





                                      148