<PAGE>
 



                                 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, 1996
                         or
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

Commission file number 1-10432
------------------------------

                       ROBERTS PHARMACEUTICAL CORPORATION
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

         New Jersey                                            22-2429994
---------------------------------                       ------------------------
 (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                          Identification No.)

       Meridian Center II
     4 Industrial Way West
        Eatontown, New Jersey                                   07724
----------------------------------                      ------------------------
     (Address of principal                                      (Zip Code)
     executive offices)
                         Registrant's telephone number,
                      including area code:  (908) 389-1182

Securities registered pursuant to Section 12(b) of the Act:

                                              Name of each exchange
Title of each class                            on which registered
-------------------                         -------------------------

     None                                     Not Applicable

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $.01 par value per share
--------------------------------------------------------------------------------
                           (Title of class)


                             Rights
--------------------------------------------------------------------------------
                           (Title of class)
<PAGE>
 
     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 the 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.  [ ]

     The aggregate market value of the common stock, $.01 par value per share
(the "Common Stock"), of the Registrant held by non-affiliates of the
Registrant, as determined by reference to the last sale price of the Common
Stock as reported on the Automated Quotation System of the National Association
of Securities Dealers, Inc., National Market System ("NASDAQ National Market
System"), as of March 19, 1997, was $271,172,433.

     As of March 19, 1997, the number of outstanding shares of Common Stock was
27,218,770.

         Documents incorporated by                 Part of Form 10-K into which
         reference into this report                document is incorporated
         --------------------------                ----------------------------

     The Prospectus included as                          Part II
     part of the Form S-3 Registration
     Statement which became effective
     on November 7, 1996.

     Proxy Statement for the                             Part III
     Annual Meeting of Shareholders
     to be held in May 1997.

FORWARD LOOKING STATEMENTS

     Certain statements included in (i) Item 1(c) Description of Business with
respect to the Registrant's development of its proprietary pipeline products and
with respect to certain discontinued operations of the Registrant; (ii) Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations; and (iii) certain of the notes to the Registrant's consolidated
financial statements included on pages F-7, F-8, F-12, F-14, F-18, F-20, F-22
and F-23 herein, are intended to be, and are hereby identified as, forward
looking statements for purposes of the safe harbor provided by Section 21E of
the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. The Registrant cautions readers that forward
looking statements, including, without limitation, those relating to the
Registrant's future business prospects, revenues, cost of sales, intangible
dispositions and write-offs, continuing operations and discontinued operations,
and liquidity and capital resources, are subject to certain risks and
uncertainties, including, without limitation, the ability of the Registrant to
secure regulatory approval in the United States and in foreign jurisdictions for
the Registrant's developmental pipeline drugs, the efforts of the Registrant's
competitors and the introduction of rival pharmaceutical products which may
prove to be more effective than the Registrant's products, general market
conditions, the availability of capital, and the uncertainty over the future
direction of the healthcare industry, that could cause actual results to differ
materially from those indicated in the forward looking statements.
<PAGE>
 
PART I

ITEM 1.  BUSINESS

(a)  GENERAL DEVELOPMENT OF BUSINESS

     Roberts Pharmaceutical Corporation (the "Company") is an international
pharmaceutical company which licenses, acquires, develops and commercializes
post-discovery drugs in selected therapeutic categories.  The Company was
incorporated under the laws of the State of New Jersey in 1982 and commenced
operations in 1983.  In 1988, its name was changed to Roberts Pharmaceutical
Corporation from VRG International, Inc.  The Company's executive offices are
located at Meridian Center II, 4 Industrial Way West, Eatontown, New Jersey
07724, and its telephone number is (908) 389-1182.  As used herein, the term the
"Company" refers to Roberts Pharmaceutical Corporation and its subsidiaries
unless the context indicates otherwise.

(b)   FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     For the fiscal year ended December 31, 1994, the Company reported, in a
note to the Company's consolidated financial statements, selected financial
information for the Company's two industry segments:  Product Sales and Contract
Clinical Research.  For the fiscal year ended December 31, 1994, Product Sales
and Contract Clinical Research had revenues of $95.1 million and $15.5 million,
respectively; operating income of $2.2 million and $42,000, respectively; and
identifiable assets of $327.9 million and $8.3 million respectively.  In March
1996, the Company announced that, in connection with the ongoing efforts of the
Company to achieve a more focused utilization of the Company's resources in its
core business of licensing, acquiring, developing and selling prescription
pharmaceutical products, it intended to discontinue and divest the business
comprising the Contract Clinical Research industry segment.  For the fiscal
years ended December 31, 1994, 1995 and 1996, the Company has reclassified its
consolidated financial statements to report separately the net assets expected
to be realized and the operating results of discontinued operations.
Accordingly, for the years ended December 31, 1995 and December 31, 1996, the
Company has not included separate selected financial information by industry
segments in the Company's consolidated financial statements.  See "Contract
Clinical Research" and "Notes to Consolidated Financial Statements - Note 16."

(c)       DESCRIPTION OF BUSINESS

     The Company was founded to take advantage of the large and growing
opportunity to license, acquire, develop and commercialize post-discovery drugs
in selected therapeutic categories.  The Company has organized its drug
development, acquisition and marketing activities to focus on late-stage
development drugs in Phase II or Phase III clinical trials and currently
marketed prescription pharmaceutical products which (i) do not meet the
strategic objectives or profit thresholds of larger pharmaceutical companies or
(ii) are made available by government agencies and research institutions.  The
therapeutic categories targeted by the Company are Cardiovascular, Respiratory,
Gynecology/Endocrinology, Urology, Oncology, Hematology and Gastroenterology.

     The Company has a broad product portfolio including PROAMATINE(R), which is
the Company's first proprietary drug approved by the U.S. Food and Drug
Administration (the "FDA").  The second product to emerge from the Company's
pipeline, AGRYLIN(TM), has recently been approved by the FDA, and the Company
expects to begin actively promoting 

                                      -2-
<PAGE>
 
and marketing AGRYLIN in the second quarter of 1997. See "Approved Pipeline
Products." In addition, the Company has a number of other proprietary late-stage
development products in the Company's pipeline. See "Late-Stage Development
Products."

     During 1996, the Company continued the efforts commenced in 1995 which were
designed to concentrate the Company's business operations in its core business
of licensing, acquiring, developing and selling prescription pharmaceuticals.
While sales of nonprescription pharmaceutical products and the operations of
certain other nonpharmaceutical businesses, such as providing home and
outpatient medical care, marketing and selling medical products, and conducting
clinical research for other pharmaceutical companies, played important roles in
the initial stages of the Company's growth and development, the Company
determined that the continuation of such diverse operations was no longer
compatible with its principal objective of licensing, acquiring, developing,
marketing and selling prescription pharmaceutical products and moving the
Company's late-stage development drugs through the regulatory process.
Accordingly, in August 1995, the Company announced its decision to divest and
seek purchasers for certain non-core business activities, including certain
nonprescription pharmaceuticals, certain prescription pharmaceuticals, and its
home care and medical products divisions ("Homecare").  The Company has since
completed the sale of the core of its nonprescription pharmaceuticals and has 
essentially completed the sale of the Homecare operations. See "Nonprescription
Pharmaceutical Products," "Prescription Pharmaceutical Products" and "Homecare."
Further, in March 1996, the Company announced its decision to discontinue and
divest the Company's clinical research business operations. The Company is
actively seeking purchasers for its contract clinical research operations. See
"Contract Clinical Research."

     APPROVED PIPELINE PRODUCTS

     PROAMATINE(R).  In 1985, the Company acquired from the predecessor in
interest of Nycomed Pharma AG ("Nycomed Pharma") exclusive marketing rights in
the United States, Canada, the United Kingdom and Ireland to PROAMATINE
(midodrine), formerly AMATINE(R), a drug used for the treatment of orthostatic
hypotension and other blood pressure disorders.  Orthostatic hypotension is a
condition involving the sudden drop in blood pressure upon assuming an upright
posture, resulting in dizziness, weakness or unconsciousness.
 
     In September 1996, the FDA approved the Company's New Drug Application
("NDA") for PROAMATINE and cleared PROAMATINE for marketing in the United States
for the treatment of symptomatic orthostatic hypotension.  The Company commenced
marketing and sales activities in the U.S. with respect to PROAMATINE in the
fourth quarter of 1996.

     The FDA approved PROAMATINE pursuant to its accelerated approval process
for new drugs for serious or life threatening illnesses. There are no other FDA
approved treatments available for orthostatic hypotension. Other current
therapies used to treat the condition are associated with significant adverse
side effects such as potassium reduction, fluid retention and cardiac and
central nervous system disorders. The Company is required to conduct post-
approval and post-launch (Phase IV) studies of PROAMATINE. PROAMATINE is in
Phase II trials for stress urinary incontinence. See "Late Stage Development
Products -Therapeutic Category - Urology."

                                      -3-
<PAGE>
 
     PROAMATINE for orthostatic hypotension has been designated by the FDA as an
"Orphan Drug" under the Orphan Drug Act of 1983 (the "Orphan Drug Act"), which
provides the Company with a seven year period of market exclusivity in the
United States from the date of the FDA approval.  See "Government Regulation."

     In 1990, the Company was granted approval by the Irish National Drugs
Advisory Board to market PROAMATINE for use in the treatment of orthostatic
hypotension in Ireland, where the drug is sold under the name MIDON(R).  In
1991, the Company obtained regulatory approval for the sale in Canada of
PROAMATINE for use in the treatment of orthostatic hypotension, where the drug
is sold under the name AMATINE(R).  AMATINE is sold in Canada by the Company's
licensee, Knoll Pharma Inc. ("Knoll") (formerly Boots Pharmaceuticals Ltd.).

     AGRYLIN(TM).  In 1991, the Company obtained an exclusive worldwide license
from Bristol-Myers Squibb to develop, market and sell AGRYLIN (anagrelide),
which has been developed as an oral treatment for thrombocytosis, a blood
disorder characterized by high blood platelet counts and an abnormally high
incidence of adverse blood clotting events, including heart attack and stroke.
There is evidence that some patients with increased platelet counts have
thrombosis or hemorrhage which can be treated successfully by lowering the
platelet count.  AGRYLIN is intended to inhibit excessive platelet production
and reduce the morbidity and mortality of heart attack and stroke in
thrombocytosis patients.

     In March 1997, the Company received notification from the FDA that the
Company's NDA for AGRYLIN was approved.  The Company expects to commence active
marketing and sales activities with respect to AGRYLIN in the second quarter of
1997.  There is no other FDA approved treatment available for thrombocytosis.
Other current therapies used to reduce excessive platelet production have
distinct disadvantages, such as suspected leukemogenesis, leukopenia and anemia.
Further, AGRYLIN has been designated by the FDA as being eligible for Orphan
Drug status.

     The Company has filed a New Drug Submission ("NDS") with the Health
Protection Branch, Canada ("HPB") for the sale of AGRYLIN in the Canadian
market, and the Company was recently notified that its NDS has been given
priority review status by the HPB.

     AGRYLIN is currently in pre-registration in Europe.  AGRYLIN has been
accepted by the European Community regulatory authorities as a "List B" product,
which includes those products considered to be major therapeutic advances.  The
Company plans to file a Product License Application with the European Medicines
Evaluation Agency ("EMEA") according to the EMEA harmonization procedures for
the approval of new drugs within the European Community.  If approved by the
EMEA, AGRYLIN would receive simultaneous approval throughout the European
Community for sale in member countries.  The Company also intends to pursue
filing in other geographic locations such as Japan and Australia/Asia for the
sale of AGRYLIN.

     PRESCRIPTION PHARMACEUTICAL PRODUCTS

     In addition to developing its proprietary pipeline products, the Company's
principal objective is to concentrate its operations primarily on licensing,
acquiring, developing, marketing and selling prescription pharmaceutical
products.  To enhance the Company's presence in its targeted therapeutic
categories, the Company has acquired marketed prescription pharmaceutical
products from various pharmaceutical companies.  These product 

                                      -4-
<PAGE>
 
lines generate cash flow, which contributes partial financial support to the
Company's drug development activities, and provides enhanced product sales
opportunities for the Company's sales force. Further, the sale of prescription
pharmaceutical products has enabled the Company to establish marketing channels
in its targeted therapeutic categories which the Company expects to use to
market PROAMATINE and AGRYLIN as well as its other late-stage development
products if such products are approved for sale.

     Over the last five years, the Company has acquired the United States and/or
foreign product rights for many prescription pharmaceutical products from
various pharmaceutical manufacturers such as Procter & Gamble Pharmaceuticals,
Inc. ("Procter & Gamble"), Bristol-Myers Squibb Company ("Bristol-Myers
Squibb"), Glaxo Canada, Inc. ("Glaxo Canada"), Du Pont Merck Pharmaceutical
Company ("Du Pont Merck"), Merck and Co., Inc. ("Merck"), G.D. Searle & Co.
("G.D. Searle"), SmithKline Beecham plc ("SmithKline Beecham") and Wyeth
Laboratories, U.K. Certain of these products are: NOROXIN(R), an antibiotic used
for the treatment of urinary tract infections, TIGAN(R), a drug used to control
nausea and vomiting, EMINASE(R), a thrombolytic agent used in the treatment of
acute myocardial infarction to dissolve blood clots obstructing coronary
arteries, NORETHIN(TM), an oral contraceptive agent, ETHMOZINE(R), NORPACE(R),
TRANDATE(R), SALUTENSIN(R), SALURON(R) and NITRODISC(TM), cardiovascular
products, FLORINEF(R), for adrenocortical insufficiency, MAXOLON(R), a gastro-
intestinal agent used for treatment of nausea and vomiting associated with
cancer chemotherapy, MINTEC(R), a gastro-intestinal drug used for symptomatic
relief of irritable bowel and spastic colon syndromes in adults, ESTRACE(R), a
line of estrogen replacement therapy products used for symptomatic relief of
menopausal symptoms and for the prevention of osteoporosis, and MEPTID(R) and
LODINE(R), analgesic agents.

     As part of the Company's divestiture activities, the Company completed the
sale of its NUCOFED(R) and QUIBRON(R) lines of prescription respiratory products
to Monarch Pharmaceuticals, a division of King Pharmaceuticals, in October 1996.

     NONPRESCRIPTION PHARMACEUTICAL PRODUCTS

     In order to facilitate the growth of the Company's business, the Company
had always focused a part of its operations on the acquisition, marketing and
sale of nonprescription pharmaceutical products.  Some of the nonprescription
pharmaceutical products acquired from various pharmaceutical companies and which
are marketed by the Company are CHERACOL D(R) and CHERACOL PLUS(R), cough/cold
products; ENTROTABS(R), ENTEROSAN(R), COLACE(R), PERI-COLACE(R), SQUIBB(R)
mineral oil, SQUIBB(R) Glycerin Suppositories and SQUIBB(R) Cod Liver Oil, used
in the treatment of gastrointestinal disorders.

     In August 1995, the Company identified the sale of nonprescription
pharmaceuticals as a non-core business activity and made the decision to divest
most of the products it had acquired.  The Company divested a substantial 
portion of its nonprescription products during the fourth quarter of 1996. The
Company has retained and will continue to sell, and under the right
circumstances may acquire, only certain well known, high volume nonprescription
pharmaceutical products, such as COLACE and PERI-COLACE, that do not require
significant promotional outlays to establish and maintain consumer brand
recognition and the demand for which is not susceptible to uncontrollable
seasonal factors.

                                      -5-
<PAGE>
 
     LATE-STAGE DEVELOPMENT PRODUCTS

     The Company has a portfolio of several late-stage development products,
including PROAMATINE which, in addition to the treatment of orthostatic
hypotension for which it has received FDA approval, is being developed for the
treatment of stress urinary incontinence.  Rights to these late-stage
development products were acquired by the Company after substantial value had
been added to the products through research activities conducted by others.  The
Company's objective is to continue the development of these late-stage products
and bring them to market as has been accomplished with PROAMATINE and AGRYLIN.
There can be no assurance that regulatory approval of the late-stage
developmental products will be obtained in the United States or abroad.  Sales
of products acquired from other pharmaceutical companies, and sales of the
Company's prescription and nonprescription pharmaceutical products, have enabled
the Company to develop a marketing and sales infrastructure to facilitate sales
of these late-stage products, if approved.

     In the latter part of 1996, the Company and Eli Lilly and Company ("Lilly")
entered into a series of License Agreements pursuant to which the Company
acquired from Lilly certain rights to four developmental compounds designated
LY246736, LY353433, LY213829 (also known as "Tazofelone") and LY315535
(collectively, the "Compounds"), which could potentially address some of the
unmet medical needs with respect to certain gastrointestinal disorders such as
inflammatory bowel disease and irritable bowel syndrome.  Each of the License
Agreements grants the Company an exclusive license to develop, manufacture,
market and sell the Compounds anywhere in the world, except with respect to
LY315535, for which the Company is licensed only in the United States and its
territories, Canada and Mexico.  For a description of certain other terms of the
Lilly License Agreements, see "License Agreements."

     Tazofelone is being developed for the treatment of Inflammatory Bowel
Diseases ("IBD"), including ulcerative colitis and Crohn's disease.  A Phase II
efficacy trial has been completed for Tazofelone, and Tazofelone could offer
consumers an alternative to existing treatments for IBD which include
corticosteroids, 5ASA and azsulfidine.

     The other three Compounds are being developed to treat Functional Bowel
Disorders ("FBD"), including irritable bowel syndrome and non-ulcerative
dyspepsia.  These Compounds could provide an alternative to current FBD
therapies which include dietary changes, over-the-counter laxatives,
antidiarrheals, prescription antispasmodics, gastroprokinetics, proton pump
inhibitors, 5HT\\3\\ compounds and antacids.

     In March, 1997, the Company and Pfizer Inc. (Pfizer) entered into a License
Agreement pursuant to which the Company acquired from Pfizer certain worldwide 
rights to a compound in development called Sampatrilat. Sampatrilat, currently 
in phase II clinical trials, is intended to treat essential hypertension and 
congestive heart failure. The License Agreement grants the Company exclusive 
worldwide rights to develop, manufacture, market and sell Sampatrilat anywhere 
in the world.

     Sampatrilat incorporates, in a single substance, two different but 
complimentary modes of activity. It is a potent inhibitor of angiotensin 
converting enzyme ("ACE") and also inhibits neutral endopeptidase which, in 
turn, results in an elevation of atrial natriuretic factor ("ANF"), the body's 
own natural diuretic. This dual mode of activity may offer patients and managed 
care providers the potential advantages of a treatment regime involving fewer 
drugs, reduced risks, and lower costs in comparison to currently existing 
therapies.


                                      -6-
<PAGE>
 
     Today, treatment of uncomplicated essential hypertension follows a step 
therapy paradigm with the initial treatment often being an ACE inhibitor. 
However, normalization of blood pressure may require the addition of a second 
drug, generally a diuretic, in combination with the ACE inhibitor. This type of 
step therapy, involving two and sometimes three drugs, may produce side effects 
comprising the additive adverse reactions of the different products employed.

     Diuretics commonly employed with ACE inhibitors can produce side effects 
that include potassium depletion, gout, elevated blood lipids, and abnormalities
in sugar metabolism. Because ANF is a natural diuretic that does not possess 
these properties, the use of Sampatrilat in hypertension or congestive heart 
failure patients may confer, through the administration of a single drug, all 
the advantages of a pure ACE inhibitor with the addition of greater natruresis 
thus obviating the separate diuretics.

     THERAPEUTIC CATEGORY - RESPIRATORY

     MAXIVENT(R).  In 1984, the Company obtained an exclusive license from ABC
Laboratories of Italy ("ABC") to develop and market MAXIVENT (doxofylline) in
the United States, Canada and Japan and, in 1989, obtained a nonexclusive
license to develop and market the drug in the United Kingdom and Ireland.
MAXIVENT is an oral bronchodilator intended for use in the treatment of asthma.

     Common asthma is a condition involving the periodic constriction of the
airways resulting in labored and often painful breathing.  Treatment is
generally provided by means of bronchodilator drugs which relieve the
constriction of the airways and, in turn, the distress of an attack.  The most
commonly used oral bronchodilator is theophylline, a drug with good efficacy but
which is capable of producing certain undesirable side effects such as
disturbances in heart rhythm, central nervous system irritability, convulsions,
gastro-intestinal distress and excess urination. Phase II clinical studies and
Phase III clinical trials indicate that MAXIVENT appears to be comparable in
efficacy to theophylline; however, unlike theophylline, MAXIVENT does not appear
to produce a high incidence of adverse side effects.

     The Company has completed Phase III trials and anticipates filing an NDA
for MAXIVENT in 1997.  MAXIVENT has been approved for commercial sale in Italy
and is currently being sold in that country under the tradename "ANSIMAR" by the
Company's unaffiliated licensor, ABC.

     THERAPEUTIC CATEGORY - GYNECOLOGY/ENDOCRINOLOGY

     SOMAGARD(R).  In 1988, the Company acquired rights from the Salk Institute
to manufacture and market SOMAGARD (deslorelin) in the United States and in
certain foreign countries, including the United Kingdom and Canada.  SOMAGARD is
being developed for the treatment of central precocious puberty in children, an
endocrine disorder that results in premature release of hormones, and
endometriosis in women.  Published reports of long-term studies conducted by the
National Institutes of Health have indicated that the administration of SOMAGARD
inhibits the release of hormones which cause the abnormal maturation process and
causes a return to normal growth rates.  The Company has completed Phase III
trials for SOMAGARD for use in the treatment of central precocious puberty and
is studying various alternatives for the commercialization of this product and
may elect to complete its development through a licensing arrangement with a
third party.



                                      -7-
<PAGE>
 
     The Company currently markets the product SUPPRELIN(R) (histrelin), an
Orphan Drug, for central precocious puberty.  See "Government Regulation."  The
Company believes that SOMAGARD will complement SUPPRELIN.  A depot formulation
of SOMAGARD is being developed which will require less frequent injections.
SOMAGARD, if approved by the FDA, would be marketed to endocrinologists and
managed healthcare organizations.

     SOMAGARD also is being developed as a treatment for endometriosis.  A
number of Phase II clinical trials for this indication have been conducted.
Endometriosis is a gynecologic abnormality which may result in pain, infertility
and sexual and bowel dysfunction.  Published reports of studies conducted by the
National Institutes of Health indicate that SOMAGARD relieves pain and restores
normal sexual and bowel function in women with this condition.

     THERAPEUTIC CATEGORY - HEMATOLOGY

     STANATE(TM).  In 1994, the Company acquired the exclusive worldwide rights
from The Rockefeller University to develop, manufacture, market and sell
STANATE(TM) (SN-mesoporpyrin), which is being developed for the treatment of
hyperbilirubinemia in neonates, a condition caused by an accumulation of
excessive levels of bilirubin produced by the liver.  Unless treated,
hyperbilirubinemia can result in jaundice, brain damage and death.

     Bilirubin is excreted by the liver pursuant to a metabolic step requiring
the presence of an enzyme which, studies have shown, is not fully functional in
many early term and full term neonates.  STANATE is intended to inhibit the
accumulation of excessive levels of bilirubin in neonates and to provide neonate
enzyme systems with an opportunity to mature and take over the normal
elimination of bilirubin.

     The most common treatment for hyperbilirubinemia in neonates involves
phototherapy which requires exposure to a light source in order to stimulate the
temporary excretion of bilirubin by the kidneys. Phototherapy is often not fully
effective and requires many hours and sometimes several days of exposure to
light with resulting maternal separation, extensive nursing supervision and
related time-sensitive costs. In contrast, STANATE is administered by injection
and clinical studies have shown that one dose is generally all that is necessary
for treatment purposes. STANATE is currently in Phase II/III clinical trials.

     THERAPEUTIC CATEGORY - UROLOGY

     PROAMATINE.  In addition to its use in the treatment of blood pressure
disorders, PROAMATINE is currently sold in several countries by unaffiliated
third parties to treat stress urinary incontinence, the involuntary loss of
urine from the bladder.  There is no approved therapy for stress urinary
incontinence in the United States.  PROAMATINE is an alpha agonist which
increases the tension of the urinary sphincter, thereby preventing the
involuntary loss of urine from the bladder.  The Company is conducting a Phase
II clinical program in the United States for the use of PROAMATINE in the
treatment of stress urinary incontinence.

                                      -8-
<PAGE>
 

     THERAPEUTIC CATEGORY - ONCOLOGY

     RADINYL.  In 1985, the Company obtained from the United States government
rights to manufacture and sell the product RADINYL (etanidazole), a
radiosensitizer being developed to enhance the anticancer effects of radiation
therapy and a chemosensitizer being developed to increase the effectiveness of
other anticancer drugs.

     For use in conjunction with radiotherapy, RADINYL is currently in Phase III
clinical trials in patients with advanced head and neck cancer.  The patients
enrolled in these trials in the United States and Europe were randomized to
receive either RADINYL in conjunction with radiotherapy or radiotherapy alone.
The results of these studies are currently under analysis.

     Phase I and Phase II clinical studies are being conducted with RADINYL to
determine its potential in increasing the effectiveness of other anticancer
drugs in the treatment of brain, lung, prostate and bladder cancer and its
potential for use with brachytherapy, a technique involving the direct implant
of a radioactive source into or adjacent to large tumors.

     DIRAME(R).  In 1992, the Company obtained exclusive worldwide rights from
Bayer AG ("Bayer") to develop and market DIRAME (propiram), a potent, centrally
acting analgesic with low addiction potential intended for use in the control of
moderate to severe acute or chronic pain.  See "Government Regulation."

     DIRAME is in Phase III clinical trials which indicate that the compound
appears to be safe and effective in patients with various kinds of acute and
chronic pain.

     A joint venture from which Bayer obtained the rights to DIRAME had
initially filed an NDA for DIRAME.  Subsequent to such filing, the FDA required
additional studies regarding the drug.  The Company is now addressing the issues
raised by the FDA and, in 1993, commenced long-term carcinogenicity studies on
two species of laboratory animals and other clinical studies. The in-life phase
of these studies has been completed and the results are currently under
analysis. In order to complete its NDA filing, the Company believes it must
complete an additional Phase III clinical trial.  The Company plans to commence
such clinical trial during 1997.

     SOMAGARD.  In addition to the treatment of central precocious puberty and
endometriosis, SOMAGARD has been studied as adjunctive treatment for prostate
cancer.  Other treatments for prostate cancer such as surgery and/or
radiotherapy are often precluded because the cancer has spread to the bones. As
a result, castration, hormonal therapy or chemotherapy are often the only
available treatments. SOMAGARD is being evaluated by the Company as an
alternative to these procedures. The Company has filed a Product License
Application (NDA equivalent) for SOMAGARD for treatment of prostate cancer in
the United Kingdom and has obtained approval from the Irish regulatory
authorities to market the product for this indication. Use of SOMAGARD for the
treatment of prostate cancer in the United States is in Phase III clinical
trials.

     The Company intends to contract-out the development of several of its late
stage development products, utilizing contract clinical research organizations.



                                      -9-
<PAGE>
 
     LICENSE AGREEMENTS

     The Company has obtained rights to the late-stage drugs currently being
developed by it through license agreements with pharmaceutical companies,
government agencies and research-based institutions and has sublicensed certain
of these rights to pharmaceutical companies through license and/or marketing
agreements.  A discussion of these agreements is provided below.

     PROAMATINE Agreements.  In 1985, the Company entered into a license
     ----------------------                                             
agreement with the predecessor in interest of Nycomed Pharma pursuant to which
the Company obtained exclusive rights to develop and market the product
PROAMATINE in the United States, Canada, the United Kingdom, Ireland and certain
other countries.  The agreement was amended in January 1994 to, among other
things, provide for a reduction in the delivery price of the product to the
Company in any territory covered by the agreement for a five year period
commencing upon the Company's launch of the product in any such territory and
the addition of minimum sales requirements which must be achieved by the Company
in the territories covered by the agreement in order to maintain exclusivity.
The Company's agreement with Nycomed Pharma, as amended, obligates it to develop
PROAMATINE and obtain governmental approval to market the product in the
licensed territories.  The Company is obliged to pay a royalty to Nycomed Pharma
on sales of PROAMATINE by the Company and its distributors and must purchase its
requirements of PROAMATINE from Nycomed Pharma.

     In 1991, the Company entered into a marketing agreement with Knoll which
granted Knoll the exclusive right to market and sell PROAMATINE in Canada (under
the name AMATINE) for use in the treatment of orthostatic hypotension.

     AGRYLIN License Agreement.  In 1991, the Company entered into a license
     --------------------------                                             
agreement with Bristol-Myers Squibb pursuant to which the Company obtained
exclusive worldwide rights to develop and market AGRYLIN.  The Company is
obliged to fund the continued development and registration of AGRYLIN, make an
additional payment upon FDA approval and pay royalties on sales of the drug.

     In 1994, the Company entered into a distribution agreement with Swedish
Orphan AB ("Swedish Orphan") for the distribution and sale of AGRYLIN in the
Nordic countries of Norway, Sweden, Finland, Denmark and Iceland.  AGRYLIN is
not yet approved in the Nordic countries and, as part of the distribution
agreement, Swedish Orphan is responsible for obtaining regulatory approval.  If
regulatory approval is obtained, the Company will supply finished goods to
Swedish Orphan which will provide physical distribution along with marketing and
sales support.

     MAXIVENT Agreements.  In 1984, the Company obtained an exclusive license
     --------------------                                                    
from ABC to develop and market MAXIVENT in the United States, Canada and Japan
and, in 1989, obtained a nonexclusive license to develop and market the drug in
the United Kingdom and Ireland.  The exclusive license agreement requires the
Company to develop the product and obtain the requisite FDA and other approvals.
Each of the exclusive and nonexclusive license agreements requires the Company
to purchase its requirements of the bulk drug substance from ABC.  If the
Company does not meet certain sales levels to be agreed upon, ABC may terminate
the exclusive license agreement, appoint additional licensees in the United
States, Canada and Japan or market the product directly or through third parties
in the United Kingdom and Ireland.



                                      -10-
<PAGE>
 
     In 1993, the Company entered into an agreement with two Japanese
pharmaceutical companies, Sawai Pharmaceutical Co., Ltd. and Grelan
Pharmaceutical Co., Ltd., pursuant to which the Company granted such companies
exclusive rights to co-develop doxofylline in Japan.  The agreement was entered
into after the two Japanese pharmaceutical companies exercised an option to
acquire such rights previously granted to them by the Company.

     SOMAGARD License Agreement.  In 1988, the Company and the Salk Institute
     ---------------------------                                             
entered into a license agreement pursuant to which the Company obtained certain
rights to develop and market the product SOMAGARD in the United States and
certain foreign markets, including the United Kingdom and Canada.  Under the
terms of the license agreement, the Company is required to pay royalties on
sales of SOMAGARD in countries in which the Salk Institute has obtained patents.

     DIRAME License Agreement.  In 1992, the Company entered into a license
     -------------------------                                             
agreement with Bayer with respect to the product DIRAME.  Pursuant to this
agreement, the Company acquired exclusive worldwide rights from Bayer to
develop, manufacture and market the product DIRAME.  The Company paid an up-
front royalty to Bayer for rights to develop and market DIRAME.  The Company
must also pay Bayer licensing fees and royalties on sales.

     RADINYL Agreements.  In 1985, the United States government and the Company
     -------------------                                                       
entered into a license agreement pursuant to which the Company obtained certain
rights to develop and market the product RADINYL.  The license granted to the
Company is exclusive for seven years from the date of the first commercial sale
of the product and nonexclusive thereafter.  The agreement pursuant to which the
license has been granted requires the Company to pay certain patent maintenance
fees and royalties to the United States government.

     In 1985, the Company and the predecessor in interest of Nycomed Pharma
formed a joint venture company known as Linz-Roberts, Inc. ("Linz-Roberts") to
develop RADINYL.  The Company and Nycomed Pharma each owns 50% of the common
stock of Linz-Roberts.  The Company contributed its license to RADINYL to Linz-
Roberts and the Company has been granted an exclusive license by the joint
venture to manufacture and distribute RADINYL dosage forms in the United States,
Canada, the United Kingdom and Ireland. Nycomed Pharma has been licensed on an
exclusive basis to manufacture and distribute RADINYL dosage forms in Europe
(except the United Kingdom and Ireland), the Middle East and Africa.  Both
parties have the right to grant sublicenses.  Nycomed Pharma has been designated
the supplier of bulk RADINYL substance, and the joint venture has contracted to
purchase its entire requirements of bulk RADINYL substance from Nycomed Pharma,
provided that Nycomed Pharma can meet certain price requirements and supply all
required quantities. Linz-Roberts has retained the right to distribute RADINYL
in the territories not licensed to the Company or Nycomed Pharma.

     STANATE License Agreement.  In 1994, the Company and The Rockefeller
     --------------------------                                          
University entered into a license agreement pursuant to which the Company
acquired the exclusive worldwide rights to develop, manufacture, market and sell
STANATE.  The Company paid an up-front license fee to Rockefeller University for
the rights to develop, manufacture, market and sell STANATE.  The Company must
also pay Rockefeller University annual licensing fees and royalties on sales.


                                      -11-
<PAGE>

 
     License Agreements for Tazofelone and other Lilly Compounds.  During the
     ------------------------------------------------------------            
fourth quarter of 1996, the Company entered into four License Agreements with
Lilly pursuant to which the Company acquired the exclusive rights to develop,
manufacture, market and sell Tazofelone and the Compounds LY246736 and LY353433
anywhere in the world and the Compound LY315535 in the United Stated and its
territories, Canada and Mexico.  The term of each of the License Agreements
shall be the later of either (i) the life of the last to expire of the patents
covering a Compound or (ii) fifteen years.  Under the terms of each of the
License Agreements, the Company paid Lilly a signing fee and is obligated to
make certain milestone payments to Lilly as well as pay Lilly certain royalties
based on the sales of any products resulting from the Compounds licensed to the
Company pursuant to these License Agreements.

     Sampatrilat License Agreement. In March, 1997, the Company entered into a 
     -----------------------------
License Agreement with Pfizer pursuant to which the Company acquired the 
exclusive rights to develop, manufacture, market and sell Sampatrilat anywhere 
in the world. The term of the License Agreement shall be the earlier of the 
expiration of the last to expire of the patents covering Sampatrilat or fifteen 
years from the date of first commercial sale of a product containing 
Sampatrilat. Under the terms of the License Agreement, the Company paid Pfizer a
signing fee and is obligated to make certain milestone payments as well as pay
Pfizer certain royalties based on the sale of products containing Sampatrilat.
Pfizer has retained the right under certain circumstances should the Company's
sales of Sampatrilat dosage forms equal or exceed a certain percentage of the
worldwide sales of pharmaceuticals sold for the treatment of hypertension in
humans, to convert the Company's license to a nonexclusive license upon the
making of certain payments to the Company.

     MARKETING

     The Company markets and sells its products primarily through its own sales
force and through a network of brokers and distributors.  In 1995, the Company's
marketing and sales force increased by more than 50% in order to promote
actively the Company's products, mainly in connection with the commencement of
the sale of TIGAN, EMINASE and NOROXIN.  During 1996, the Company's sales force
continued to concentrate on selling TIGAN, EMINASE and NOROXIN, for the most
part, and establishing the groundwork for selling PROAMATINE and AGRYLIN.

     The Company has positioned its sales operation to impact selected physician
specialties and major buying and decision making entities, such as managed care
organizations and large retail and mass merchandise operations. With the growing
trend in the United States of providing health care through some form of managed
care program, the Company has stepped-up its selling efforts of prescription
products to such managed healthcare organizations.  In an effort to increase its
sales to managed healthcare organizations, the Company has employed national
account managers to focus efforts on this growing market.  Various marketing,
promotion, sales and training programs have been initiated to improve the
Company's penetration of the managed healthcare market and increase product
sales to managed healthcare organizations.

     MANUFACTURING

     From its inception, the Company's initial strategy was to outsource its
manufacturing and packaging functions in order to enable the Company to grow
without requiring large capital outlays to produce and package its products.  In
that regard, the Company has engaged contractors, primarily large pharmaceutical
companies, to convert active ingredients 



                                      -12-
<PAGE>
 
into finished drug products. In most instances where the Company has acquired
the rights to approved products from other pharmaceutical companies, the seller
or licensor has agreed to manufacture the Company's requirements of the products
for a specified period of time. The manufacturing activities conducted by third
parties for the Company have consisted of the receipt and storage of materials,
purification, production, packaging and labeling. The Company has established a
manufacturing department which is responsible for (i) monitoring the
manufacturing operations of its contractors, (ii) inventory control, and (iii)
quality control. The Company's manufacturing department has established a
quality control and quality assurance program, including a set of standard
operating procedures, designed to assure that the Company's products are
manufactured in accordance with Good Manufacturing Practices standards ("GMP")
and other applicable domestic and foreign regulations.

     The Company has determined that it will take control of a major portion of
its manufacturing activities and seek to achieve certain cost efficiencies.  In
October 1996, the Company agreed with Monsanto Canada, Inc. to acquire a 100,000
square foot pharmaceutical manufacturing facility currently operated by
Monsanto's Searle Division ("Searle") located in Oakville, Ontario.  The
facility which is currently operated by Searle is approved by both the FDA and
HPB.  In addition to manufacturing and processing capabilities, the facility
includes laboratory, warehouse and administrative space.  The Company expects
that by transferring certain product manufacturing from third parties to its own
facility, the Company should realize certain benefits, including, without
limitation, lower production costs and more flexibility in determining
appropriate inventory levels for the Company's products.  In addition, the
Company plans to utilize the available office space in Oakville by relocating
the operations of its subsidiary, Roberts Pharmaceutical Canada, Inc., to the
Oakville facility. The Company's ability to transfer the production of certain
of its products to the Oakville facility will be, in certain cases, dependent on
the duration of its current agreements with suppliers, and the ability to obtain
regulatory approvals to transfer the manufacture of these products to Oakville.

     Upon finalizing the purchase of the facility, which the Company expects to
consummate by the middle part of 1997, Searle has agreed in principle to lease
back some space in the facility for a period of time as well as to have the
Company fulfill certain of Searle's product packaging requirements currently
being satisfied at the Oakville facility.  In addition, the Company will explore
the possibility of using the facility to engage in contract manufacturing for
other pharmaceutical companies until the facility is fully utilized by the
Company.

     HOMECARE

     In August 1995, the Company announced its decision to discontinue and
divest certain non-core, nonpharmaceutical business activities, including the
operations of Homecare, which were no longer compatible with the Company's
objective of growing and developing a pharmaceutical company with a primary
focus on the sale of prescription drugs.  Through Homecare, the Company
distributed high value prescription injectable and biotechnology pharmaceutical
products for physician office use and provided medical and other health oriented
therapies in home and outpatient settings.  While Homecare's businesses had a
role in the initial stages of the Company's growth and development, those
businesses never represented a significant portion of the Company's consolidated
revenue or earnings.  The Company has completely divested the Homecare
operations located in New Jersey, North Carolina and South Carolina.  The entity
which purchased the New Jersey operations has also executed an agreement with
the Company to purchase Homecare's New York 

                                      -13-
<PAGE>
 
operations. The consummation of such agreement is pending as the parties seek
state regulatory approval for the transaction. See "Notes to Consolidated
Financial Statements - Note 16."

     PATENTS AND PROPRIETARY RIGHTS

     The Company considers the protection of discoveries in connection with its
development activities important to its business.  To date, the Company has
acquired certain patents in connection with the acquisition of certain products
and has filed applications for patents covering new processes for manufacturing
anagrelide, the active ingredient in AGRYLIN. Additionally, rights to patented
technology have been licensed to the Company. The late-stage products being
developed by the Company which are afforded patent protection are: AGRYLIN -
patents issued 1980 and 1982 and applications filed in 1996; RADINYL - patent
issued 1983; STANATE -patents issued 1987, 1988, 1992 and 1993. Also, regarding
the Compounds acquired from Lilly, certain patents have been issued in the
United States and several other countries with respect to Tazofelone and the
Compound designated LY246736. In addition, there are other domestic or foreign
patent applications pending for all of the Compounds. Certain of the Company's
products may be afforded protection under laws which provide market exclusivity
for Orphan Drugs and drugs which include a new active ingredient. See
"Government Regulation."

     CONTRACT CLINICAL RESEARCH

     Since its inception, the Company, through its subsidiary VRG 
International, Inc. ("VRG"), has derived a portion of its revenues from contract
clinical research. Under these arrangements, the Company is paid a fee to
conduct clinical research for pharmaceutical companies that wish to test the
safety and efficacy of their products. The Company has primarily conducted
studies of investigational new drugs for major multinational pharmaceutical
company clients and to a lesser degree performed safety and efficacy tests on a
variety of over-the-counter products. The Company has also provided clinical
investigation services to pharmaceutical companies to assist them in reducing
the time required to introduce new drugs to the market.

     The Company's integrated clinical research operations have been conducted
through twelve research-dedicated outpatient clinics located throughout the
U.S.; an in-house patient recruiting system; a custom designed multi-purpose
computerized study tracking system; on-site study coordinators; qualified
contract investigators; sophisticated data management and multi-level quality
control.

     Consistent with the Company's decision in 1995 to discontinue and divest
certain of its non-core, nonpharmaceutical businesses, the Company announced, in
March 1996, its intentions to discontinue and divest the business operations of
VRG.  Contract clinical research generally has proven to have lower profit
margins than the sale of prescription pharmaceuticals, and the Company believes
that, in the future, contract clinical research has lower growth prospects for
it than the sale of prescription pharmaceuticals.  Beginning with the 1994
fiscal year, revenue from contract clinical research operations began to
decline, and in 1995, VRG's operations produced a loss, net of tax benefit, of
$3.5 million.  Among other reasons, the Company attributes such decline to the
completion of the work under agreements with Yamanouchi U.S.A. Inc., a
subsidiary of a major shareholder of the Company, and the fact that such work
was not replaced by other significant contracts. The Company is actively seeking
a purchaser for VRG's operations. See "Item 7 Management's 

                                      -14-
<PAGE>
 
Discussion and Analysis of Financial Condition and Results of Operations" and
"Notes to Consolidated Financial Statements - Note 16."

     COMPETITION

     Many companies, including large pharmaceutical, chemical and biotechnology
firms with financial and marketing resources and research and development staffs
and facilities substantially greater than those of the Company, are engaged in
researching, developing, marketing and selling products intended to treat the
same conditions and diseases as the products currently sold and
under development by the Company.  Further, other products now in use or under
development by others may be intended to treat the same conditions as the
Company's products.  The pharmaceutical industry is characterized by rapid
technological advances, and competitors may develop products more rapidly than
the Company.  In addition, competitors may be able to complete the regulatory
approval process sooner than the Company, and therefore market their products
earlier than the Company can market certain of its products.

     GOVERNMENT REGULATION

     The marketing of pharmaceutical products requires the approval of the FDA
and comparable agencies in foreign countries.  The FDA has established
guidelines and safety standards which apply to the preclinical evaluation,
clinical testing, manufacture and marketing of pharmaceutical products.  The
process of obtaining FDA approval for a new drug can take many years and
involves the expenditure of substantial resources.  The steps required before
such a product can be produced and marketed for human use include preclinical
studies, the filing of an IND, human clinical trials and the approval of an NDA.

     Drug marketing exclusivity protection is granted through the Orphan Drug
Act of 1983 (the "Orphan Drug Act") and the Drug Price Competition and Patent
Term Restoration Act of 1984 (commonly referred to as the "Waxman Hatch Act").
The Orphan Drug Act entitles a company to market exclusivity in the United
States for a period of seven years from the date of FDA approval for drugs
which, among other criteria, are intended to treat a patient population of less
than 200,000.  PROAMATINE for idiopathic orthostatic hypotension has been
granted Orphan Drug status and the FDA has designated each of SOMAGARD for
central precocious puberty and AGRYLIN for thrombocythemia, as being eligible
for Orphan Drug status in the United States.  Certain provisions of the Waxman-
Hatch Act grant market exclusivity in the United States for a period of five
years from the date of FDA approval for drugs containing a new active
ingredient.  Based upon its review of industry and government data, the Company
believes that DIRAME may qualify for this protection.

     The manufacturing processes of the Company's contractors and licensors are
subject to regulation, including the need to comply with Good Manufacturing
Practices.  These same regulations will apply to the Company with respect to the
Oakville, Ontario manufacturing facility which it has agreed to purchase from
Searle. See "Manufacturing." The Company's business is also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Drug Enforcement Act, the
Resource Conservation and Recovery Act, the Pharmaceutical Marketing Act of 1988
and other current and potential future federal, state or local regulations.


                                      -15-
<PAGE>
 
     The Company markets various products containing controlled substances that
are subject to the Department of Justice, Drug Enforcement Administration
regulations.  Distribution of prescription drugs classified as controlled
substances or, in some cases, other pharmaceutical products, is subject to
licensing or regulation in certain states.  Generally, the entity engaged in the
actual distribution is subject to such regulation.  In addition, state licensing
is generally required in the state in which such entity's principal place of
business is located.

     United States Federal and state governments continue to seek means to
reduce costs of Medicare and Medicaid programs, including placement of
restrictions on reimbursement for, or access to, certain drug products.  Major
changes were made in the Medicaid program under the Omnibus Budget
Reconciliation Act of 1990 (the "Act").  As a result, the Company entered into a
Medicaid Rebate Agreement ("Rebate Agreement") with the United States
Government, under Section 4401 of the Act. Pursuant to the Rebate Agreement, in
order for federal reimbursement to be available for prescription drugs under
state Medicaid plans, the Company must pay certain statutorily prescribed
rebates on Medicaid purchases. Effective July 1, 1991, the law also denies
federal Medicaid reimbursement for drug products of the original NDA-holder if a
less expensive generic version of such drug is available from another
manufacturer, unless the prescriber indicates on the prescription that the
branded product is medically necessary.

     In most other markets, governments exert controls over pharmaceutical
prices either directly or by controlling admission to, or levels for,
reimbursement by government health programs.  The nature of such controls and
their effect on the pharmaceutical industry vary greatly from country to
country.

     EMPLOYEES

     As of March 19, 1997, the Company had 423 employees, including 5 officers,
66 persons engaged in research and development activities and 218 persons
engaged in marketing and sales activities.  In addition to its full-time staff,
the Company engages medical doctors and other professional personnel on a
consultancy basis and, from time to time, consultants and others on a per diem
or hourly basis.  The Company believes its relations with its employees are
satisfactory.

     FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS

     Financial Information about Foreign and Domestic Operations is presented in
Note 14 to the Company's financial statements.  See "Notes to Consolidated
Financial Statements - Note 14."

ITEM 2.  PROPERTIES

     The Company's worldwide headquarters are located at Meridian Center II, 4
Industrial Way West, Eatontown, New Jersey.  The building housing the Company's
worldwide headquarters, which was purchased by the Company in 1992 and occupied
in 1993, consists of an aggregate of 80,000 square feet.

     The Company owns an office and warehouse building consisting of 30,300
square feet, which is located across the street from the Company's worldwide
headquarters.  The Company uses this building for the warehousing of Company
records, archives, certain offices and facilities.


                                      -16-
<PAGE>
 
     The Company has agreed to purchase from Searle a 100,000 square foot
manufacturing facility located in Oakville, Ontario which is currently operated
by Searle. The Company anticipates that the purchase of this facility will be
completed by the middle part of 1997. See "Item 1 Business -Manufacturing."

     The Company's United Kingdom subsidiary, Monmouth Pharmaceuticals, Ltd.,
occupies 3,800 square feet of leased office space in the Surrey Research Park in
Guildford, Surrey, England, approximately 30 miles south of London.  The monthly
rental for these offices is approximately 6,500 British pounds.

     The Company's Canadian subsidiary, Roberts Pharmaceutical Canada, Inc.,
occupies 4,122 square feet of leased office space in Ontario, Canada.  The lease
provides for a monthly rental of $4,122, Canadian currency.  If the Company
completes the purchase of the Oakville manufacturing facility, the Company
intends to consolidate its Canadian operations by closing this office and
relocating all personnel to the office space available in the manufacturing
facility.

     The Company also leases office space in several other locations in the
United States and certain foreign countries.

ITEM 3.  LEGAL PROCEEDINGS

     On April 10, 1995, a shareholders' class action suit was instituted in the
United States District Court for the District of New Jersey against the Company
and certain of its officers and a former officer by Grace Cowitt ("Cowitt") on
behalf of all persons who purchased shares of the Company's Common stock between
November 7, 1994 and March 22, 1995.  The complaint asserts claims against the
Company and certain of its officers and a former officer for violations of
Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, as amended,
and Rule 10b-5 promulgated thereunder with respect to press releases and filings
with the Securities and Exchange Commission and certain public statements
allegedly made by the Company and certain of its officers and a former officer
relating to the Company's business.  The plaintiff seeks to recover damages in
an unspecified amount.  On June 26, 1995, a similar shareholders' class action
suit was instituted in the United States District Court for the District of New
Jersey against the Company and certain of its officers and a former officer by
Dieter Zander ("Zander") on behalf of all persons who purchased shares of the
Company's Common Stock between November 7, 1994 and May 31, 1995.  This suit was
voluntarily dismissed by Zander in October 1995.  In August 1995, a consolidated
complaint was filed in which the plaintiff, Cowitt, extended the proposed class
period from March 22, 1995 through May 31, 1995.  The Company believes that it
has complied with all of its obligations under the federal securities laws and
considers the plaintiff's allegations to be without merit.  The Company is
vigorously defending against the allegations in this remaining suit and
discovery proceedings have commenced.  The Company is not able to predict the
outcome of this proceeding at this time, and management is not able to determine
the amount of the potential liability, if any.

     There are no additional material legal, governmental, administrative or
other proceedings pending against the Company, any of its subsidiaries or any of
their properties, or to which the Company or any such subsidiary is a party, and
to the knowledge of management, no such material proceedings are threatened or
contemplated.

                                      -17-
<PAGE>
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company held a Special Meeting of Shareholders on November 6, 1996, at
which time the shareholders of the Company approved (i) a proposal to issue to
the holders of the Company's 5% Convertible Preferred Stock, $.10 par value per
share (the "5% Preferred Stock"), which had been issued to such holders in a
private placement completed in August 1996, the full number of shares of the
Company's Common Stock to which such holders are entitled upon conversion of the
5% Preferred Stock, and (ii) a proposal to amend the Company's Amended and
Restated Certificate of Incorporation to increase the authorized shares of the
Company's Common Stock from 50,000,000 shares to 100,000,000 shares. Each
proposal was approved by approximately 95% of the votes cast at the meeting.
With respect to the 5% Preferred Stock proposal, 12,686,283 votes were cast for
and 805,849 votes were cast against the proposal, and there were 182,774
abstentions and 5,385,968 broker non-votes. With respect to the proposal to
increase the number of authorized shares of Common Stock, 18,057,336 votes were
cast for and 863,532 votes were cast against the proposal, and there were
140,006 abstentions and no broker non-votes.

ITEM 4A.  EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company as of March 19, 1997 are listed
below, and brief summaries of their business experience and certain other
information with respect to each of them is set forth in the following table and
in the information which follows the table.

     The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
 
      NAME                   AGE            POSITION
---------------------------------------------------------------
<S>                          <C>  <C>
 
ROBERT A. VUKOVICH, Ph.D.     53  President and Chief Executive
                                  Officer
 
ROBERT W. LOY                 59  Executive Vice President
 
JOHN T. SPITZNAGEL            55  Executive Vice President
 
PETER M. ROGALIN              54  Vice President, Treasurer and
                                  Chief Financial Officer
 
ANTHONY A. RASCIO, ESQ.       54  Vice President, Secretary and
                                  General Counsel
</TABLE>


______________________

     Robert A. Vukovich, Ph.D., has served as Chairman of the Board and
President of the Company since its inception in 1983.  From 1979 to 1983, he
served as Director of the Division of Developmental Therapeutics for Revlon
Health Care Group.  From 1970 to 1974, Dr. Vukovich was employed in various
capacities by the Squibb Institute and served as Director of Clinical
Pharmacology for that organization from 1974 to 1979.  Prior to 1970, Dr.
Vukovich was a clinical research scientist for The Warner Lambert Research
Institute.  Dr. Vukovich is a graduate of Jefferson Medical College,
Philadelphia, Pennsylvania, with training in pharmacology and pathology.

                                      -18-
<PAGE>
 
     Robert W. Loy has served as Executive Vice President - Operations and New
Business Development since March 4, 1996.  Mr. Loy served as Chief Operating
Officer of the Company from August 1992 to March 1996 and as Vice President of
the Company from December 1992 to March 1996.  Mr. Loy has served as a Director
of the Company since October 1993.  From 1963 to 1990, he held various positions
at Squibb Corporation, including that of Vice President, Worldwide Operations
for the Squibb Derm Division.  From 1990 to 1992, Mr. Loy served as Vice
President, International Sales and Marketing, with Hollister, Inc.  Mr. Loy
received his undergraduate degree from Old Dominion University and attended
Villanova University Graduate School.

     John T. Spitznagel has served as Executive Vice President - Worldwide Sales
and Marketing since March 1996.  In July 1996, the Company's Board of Directors
appointed him as an officer of the Company and also as a director to fill a
vacancy which existed on the Board.  Mr. Spitznagel served as President of Reed
and Carnrick Pharmaceuticals from September 1990 through July 1995.  In 1989 and
1990, Mr. Spitznagel served as Chief Executive Officer of BioCryst
Pharmaceuticals, Inc.  From 1979 through 1989, Mr. Spitznagel held various
positions with Wyeth-Ayerst Laboratories, advancing from Marketing Director to
Senior Vice President of Marketing and Sales.  Mr. Spitznagel was employed by
Roche Laboratories from 1971 through 1979 and by Warner-Chilcott Laboratories
from 1966 through 1971 in various sales, marketing and management positions.
Mr. Spitznagel received his undergraduate degree from Rider University and an
M.B.A. from Fairleigh Dickinson University.

     Peter M. Rogalin has served as Vice President, Treasurer, Chief Financial
Officer and a Director of the Company since February 5, 1996.  From 1978 to
1992, Mr. Rogalin was employed in various executive capacities by Sterling
Winthrop, Inc. (formerly Sterling Drug, Inc.), including Assistant Treasurer
from 1987 through 1992.  From 1993 through July 1994, Mr. Rogalin was a
Principal in RK Associates, a consulting firm with specific expertise in
financial and business operations and systems for small and medium sized
companies.  From July 1994 through January 1996, Mr. Rogalin served as Vice
President - Finance and Chief Financial Officer of ImClone Systems, Inc., a
biopharmaceutical company engaged in research and development of therapeutic
products for the treatment of cancer and cancer related disorders.  Mr. Rogalin,
a Certified Public Accountant, received his undergraduate degree from St.
Lawrence University and an M.B.A. from the Graduate School of Business, New York
University.

     Anthony A. Rascio, Esq., has served as Vice President and General Counsel
and a Director of the Company since June 1987.  In addition, he served as
Assistant Secretary of the Company from 1987 to 1992, at which time he assumed
the position of Secretary of the Company.  From January 1987 to June 1987, Mr.
Rascio was Director, Legal Affairs for the Company.  During 1986, Mr. Rascio was
engaged in the private practice of law.  From 1984 through 1985, Mr. Rascio was
employed as Director, International Operations by Jeffrey Martin, Inc., a
marketer of cosmetics and proprietary medicines.  Mr. Rascio served as Legal
Director, International Pharmaceutical Products Division for Schering-Plough
Corporation from 1980 through 1984 and held various legal positions with that
company from 1971 to 1980.  Mr. Rascio received undergraduate and law degrees
from Fordham University.

                                      -19-
<PAGE>
 
                                    PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
          MATTERS

COMMON STOCK

     The Company's Common Stock is traded in the over-the-counter market on the
NASDAQ National Market System and was held by approximately 900 shareholders of
record as of March 19, 1997.

     The following table sets forth, for the periods indicated, the high and low
last sale prices for the Company's Common Stock, as reported on the NASDAQ
National Market System.
<TABLE>
<CAPTION>
 
                                 High      Low
                                -------  --------
<S>                             <C>      <C>
 
YEAR ENDED DECEMBER 31, 1995
 
  First Quarter                 $46 1/2  $24 3/4
  Second Quarter                $28      $15 1/2
  Third Quarter                 $26 1/2  $17
  Fourth Quarter                $23 3/4  $15 3/4
                                          
YEAR ENDED DECEMBER 31, 1996              
                                          
  First Quarter                 $24      $18 5/8
  Second Quarter                $21 7/8  $17 7/8
  Third Quarter                 $20 3/4  $15 5/16
  Fourth Quarter                $18 1/8  $11
</TABLE>
     The Company has not paid any cash dividends on its Common Stock in the
past, and it is unlikely that the Company will pay any dividends on its Common
Stock in the foreseeable future.

     Pursuant to the terms of the several Stock Purchase Agreements, each dated
as of July 17, 1996, the Company issued and sold in a private placement to
certain investment funds 600,000 shares of the Company's Common Stock at an
issue price of $16.65 per share resulting in gross proceeds to the Company of
$9,990,000 (the "Common Stock Private Placement").  The identities of such
investors in the Common Stock Private Placement are incorporated herein by
reference to the section entitled "Selling Shareholders," which is included in
the Prospectus for the resale of shares of Common Stock which is part of the
Form S-3 Registration Statement which became effective on November 7, 1996 (the
"Registration Statement").

     Cappello & Laffer Capital Corp. was the Placement Agent (the "Placement
Agent") for the Common Stock Private Placement.  In consideration for placing
such securities, the Placement Agent received aggregate cash consideration in an
amount which is equal to 5% of the gross proceeds received by the Company and
was reimbursed for certain expenses.  Further, the Company issued to certain
designees of the Placement Agent, Common Stock Warrants to acquire an aggregate
of 15,000 shares of Common Stock for a purchase price of $16.65 per share, which
warrants expire in July 1999.

                                      -20-
<PAGE>
 
     The shares of Common Stock sold in the Common Stock Private Placement were
not registered at the time such private placement was consummated.  The Company
relied on the exemption from registration provided by Rule 506 under Regulation
D of the Securities Act of 1933, as amended ( the "Securities Act").  However,
all such shares of Common Stock have been subsequently registered pursuant to
the Registration Statement.

5% PREFERRED STOCK

     Pursuant to the terms of the several Preferred Stock Investment Agreements,
each dated as of August 29, 1996, the Company issued and sold in a private
placement to approximately eighty accredited investors for $25 per share an
aggregate of 4,200,000 shares of 5% Preferred Stock resulting in gross proceeds
of $105 million (the "Preferred Stock Private Placement").  The identities of
the purchasers of the 5% Preferred Stock in the Preferred Stock Private
Placement are incorporated herein by reference to the section entitled "Selling
Shareholders" included in the Registration Statement.

     The Placement Agent placed the shares of 5% Preferred Stock sold in the
Preferred Stock Private Placement.  The Placement Agent received aggregate cash
consideration of 5% of the gross proceeds received by the Company and was
reimbursed for certain expenses.  Further, the Company issued to certain
assignees of the Placement Agent Convertible Preferred Stock Warrants to acquire
420,000 shares of 5% Preferred Stock for a purchase price of $25.00 per share,
which warrants expire in August, 1998.

     The shares of 5% Preferred Stock were not registered and were sold pursuant
to the exemption from registration provided by Rule 506 under Regulation D of
the Securities Act.  However, a certain number of shares of Common Stock into
which the shares of 5% Preferred Stock could be converted have been registered
pursuant to the Registration Statement.

     The Company is not aware of any established public trading market for the
shares of 5% Preferred Stock and none is expected to develop.  Dividends at the
rate of $1.25 per share per annum are payable quarterly on the 5% Preferred
Stock.  Such dividends may be paid in cash or, at the option of the Company and
subject to certain conditions, in shares of 5% Preferred Stock.  For the year
1996, the Company paid and accrued dividends on the 5% Preferred Stock in an 
aggregate amount equal to $1,285,716. The 5% Preferred Stock is also subject to
a liquidation preference of $25.00 per share (plus accrued and unpaid dividends
thereon) (the "Liquidation Preference").

     The 5% Preferred Stock is convertible into a number of shares of Common
Stock which depends, in part, upon the conversion price in effect at the time of
conversion.  The conversion price is equal to 90% of the lowest trade price of
the Common Stock as reported by the NASDAQ National Market System during a
specified period of trading days (the "Conversion Price") and, accordingly, the
number of shares of Common Stock will vary inversely with the market price of
the Common Stock.  In any event, the Conversion Price shall not be greater than
$19.1359 (the "Conversion Cap").  The number of shares of Common Stock which a
holder of shares of 5% Preferred Stock may acquire upon the conversion of such
shares shall be determined by dividing the Liquidation Preference by the
Conversion Price on the date the notice of conversion is given by the holder.

     At any time on or after August 29, 1997, the Company at its option may
cause all outstanding shares of 5% Preferred Stock to be converted into Common
Stock at the Conversion Price as of the date specified in the Company's notice;
provided, that the 

                                      -21-
<PAGE>
 
Company may not exercise such right of conversion unless (i) the closing price
of the Common Stock as reported by the NASDAQ National Market System for the 20
consecutive trading days prior to the date the conversion notice is mailed has
not on any day been less than 120% of the Conversion Cap, and (ii) the shares of
Common Stock issuable upon conversion are registered for resale by an effective
registration statement under the Securities Act and a current prospectus is
available for delivery.

     On August 20, 1998, any outstanding shares of 5% Preferred Stock shall be
automatically converted into shares of Common Stock at the Conversion Price on
such date.

     As of March 19, 1997, there were 1,004,622 shares of 5% Preferred Stock
outstanding and 27 holders of such 5% Preferred Stock.  3,195,378 shares of 5%
Preferred Stock have been converted into 7,962,619 shares of Common Stock.

ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data for the Company for each of the
five fiscal years in the period ended December 31, 1996 are derived from
financial statements that have been audited and reported upon by Coopers &
Lybrand L.L.P., independent accountants for the Company.  This data should be
read in conjunction with "Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations" and with the Company's
consolidated financial statements and related notes appearing elsewhere in this
report.

                                      -22-
<PAGE>
 
<TABLE>
<CAPTION>
OPERATING STATEMENT DATA:
                                               Years Ended December 31,
-----------------------------------------------------------------------------------------
                                    1992      1993     1994       1995       1996
                                  -------   -------  -------    -------    -------
                                                (in thousands, except
                                                    per share data)
<S>                              <C>       <C>      <C>       <C>        <C>        <C>
Total Revenue                    $18,407   $57,561  $89,020   $113,427   $ 98,111
 
Operating (Loss) Income
 from Continuing
 Operations                       (9,986)    7,850   25,802      6,873    (50,195)  (1)
 
(Loss) Income from
 Continuing Operations before
 Extraordinary Item               (8,473)    6,415   20,618      2,703    (34,275)  
 
Net (Loss) Income from
 Continuing Operations            (8,473)    6,415   20,618      2,703    (34,275)  
 
Net Income (Loss) from
 Discontinued Operations            (327)      813   (1,206)   (27,045)       556
 
Net (Loss) Income                 (8,800)    7,228   19,412    (24,342)   (33,719)  

(Loss) Earnings Per Share
 of Common Stock from
 Continuing Operations
 before Extraordinary Item          (.61)      .41     1.10        .15      (2.47)  (2)

Earnings (Loss) Per Share
 of Common Stock from
 Discontinued Operations            (.03)      .05     (.06)     (1.45)       .03

(Loss) Earnings Per Share
 of Common Stock                    (.64)      .46     1.04      (1.30)     (2.44)  

Average Number of
 Common Shares
 Outstanding                       13,770   15,590   18,708     18,623     19,133
</TABLE>

(1)  Intangible Dispositions and Write-Offs. During the fourth quarter of 1996,
     ---------------------------------------
     the Company completed the sale of the majority of its non-core
     nonprescription products along with the NUCOFED and QUIBRON brands in two
     independent sales transactions. These sales, net of proceeds, resulted in a
     one time, non-cash write off of $11.9 million, which amounted to $7.6
     million net of taxes. Also, during the fourth quarter of 1996, in
     accordance with FASB Statement No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
     recorded an impairment loss of long-lived intangible assets in the amount
     of $25.4 million, which amounted to $17.8 million net of taxes.


                                      -23-
<PAGE>

     Operating income and net loss were negatively affected by the sale and
     write down of the intangible assets in the amounts of $37.3 million for
     operating income and $25.4 million for net loss. In the event that these
     transactions had not occurred, operating income would have amounted to a
     loss of $12.9 million and net loss would have been $8.3 million.

(2)  Pursuant to a new position taken by the SEC staff (the "Staff"), effective
     March 13, 1997, on accounting for preferred stock which is convertible at a
     discount to market, the Company recorded a charge for Earnings Per Share
     purposes of $.61 per share. This charge to Earnings Per Share is consistent
     with the Staff's position that the 10% discount available to holders of 5%
     Preferred Stock should be amortized between the issuance date and the first
     date that conversion could occur.

     To clarify the adjustments indicated above, a reconciliation of Earnings
     Per Share for the twelve months ended December 31, 1996 is composed of the
     following elements:

     Net (loss) from continuing operations 
     before the consideration of write-off 
     and the sale of intangible assets, the 
     recognition of the discount upon the  
     issuance of 5% Preferred Stock or     
     preferred dividends                                             $ (.47)
     Write-off and sale of intangible assets                          (1.33)
        5% Preferred Stock dividends                           (.06)
        Issuance of 5% Preferred Stock     
        at a 10% discount to market                            (.61)   (.67)
                                                              ------  -----
     Net (loss) from continuing operations                            (2.47)
     Income from discontinued operations                                .03
                                                                     ------
     (Loss) attributable to Common Stock                             $(2.44)
                                                                     ======

<TABLE>
<CAPTION>
     BALANCE SHEET DATA:                                                                                    
                                                                     As of December 31                      
     ------------------------------------------------------------------------------------------------------ 
                                                           1992       1993       1994       1995       1996 
                                                       --------   --------   --------   --------   -------- 
                                                             (in thousands)                                 
     <S>                                               <C>        <C>        <C>        <C>        <C>      
     Total Assets                                      $185,424   $343,103   $336,192   $340,290   $372,225 
                                                                                                            
     Long-Term Debt and                                                                                     
      Redeemable Preferred                                                                                  
      Stock                                              28,999     45,668     22,411     16,183     10,639 
                                                                                                            
     Shareholders' Equity                               121,594    238,999    259,129    235,467    309,759  
</TABLE>
 


                                      -24-
<PAGE>
 
ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1995 AND 1996

     Corporate Revenues.  For the year ended December 31, 1996, total revenue
     -------------------                                                     
decreased $15.3 million from $113.4 to $98.1 million.  This decrease was the
result of a decrease in product sales.

     Product Sales.  For the year ended December 31, 1996, product sales
     --------------                                                     
decreased $15.3 million from $113.4 to $98.1 million. This decrease is the
result of the divestiture of certain products during the year, a decline in the
sale of certain products due in part to a shift in promotional activity and a
change in the timing of special discounts and special offers to the trade,
increased generic competition and certain back order situations, offset by
fourth quarter sales of PROAMATINE.

     For the year ended December 31, 1996, sales of the Company's United Kingdom
subsidiary, Monmouth Pharmaceuticals, Ltd., decreased slightly from $12.1
million to $12.0 million.  Sales of the Company's Canadian subsidiary, Roberts
Pharmaceutical Canada, Inc., increased $0.6 million from $11.1 million to $11.7
million.  This increase is primarily the result of an increase in the demand for
products acquired during 1995 along with the launch of Advantage 24, a
contraceptive product.

     Cost of Sales.  For the year ended December 31, 1996, cost of sales
     --------------                                                     
amounted to 51% of product sales as compared to 47% in 1995. This increase in
cost of sales percentage and corresponding decrease in gross profit percentage
is primarily the result of an increase in inventory obsolescence resulting from
the decrease in demand for certain products for which inventory production
schedules had been previously agreed with third party suppliers. Cost of sales
continues to be impacted by sales of NOROXIN, a lower gross profit margin
product in the Company's product mix.

     Research and Development.  Research and development expenses decreased from
     -------------------------                                                  
$6.1 million in 1995 to $4.0 million in 1996, a decrease of 34.4%.  This
decrease results from decreased expenditures in the development of the Company's
two recently approved products, AGRYLIN and PROAMATINE. The Company anticipates
increased research and development expenses in 1997 relating primarily to the
continued development of MAXIVENT, DIRAME, STANATE and the Lilly Compound,
LY315535.

     Marketing and Administrative Expenses.  Marketing and administrative
     --------------------------------------                              
expenses increased $9.6 million from $47.6 million in 1995 to $57.2 million in
1996.  Marketing expenses increased $8.6 million primarily as a result of
increased promotional activities for some of the Company's new products
including PROAMATINE which was launched during the fourth quarter of 1996 and
increased compensation for the sales forces in the United States, United
Kingdom, and Canada.  Administrative expenses increased $1.0 million during 1996
as compared to 1995 in large part due to expenses related to the shareholders'
lawsuit and increased insurance costs.

     Interest Income and Expense.  For the year ended December 31, 1996,
     ----------------------------                                       
interest income increased $.9 million to $2.9 million as the result of an
increased cash balance due to the private placements that were completed during
1996.  Interest expense decreased from 

                                      -25-
<PAGE>
 
$3.5 million in 1995 to $1.8 million in 1996 as a result of a decrease in long-
term debt related to product acquisitions.

     Income Taxes.  For the year ended December 31, 1996, income taxes from
     -------------                                                         
continuing operations decreased $17.4 million from a provision of $2.8 million
to a benefit of $14.6 million, primarily as a result of a decline in net income
including the write off and disposition of certain intangible assets.  The
Company's effective tax benefit of 30% was lower than the normal statutory rate
primarily as a result of the Company's inability to recognize the benefit of the
Canadian net operating loss carryforwards.

     The Company has recorded deferred tax assets of approximately $20.3
million.  Realization is dependent upon generating sufficient taxable income to
utilize such items.  Although realization is not assured, management believes it
is more likely than not that the deferred tax assets for which a valuation
allowance has not been provided will be realized.   The amount of the deferred
tax assets considered realizable, however, could be reduced at any time if
estimates of future taxable income are reduced.

     Intangible Dispositions and Write-Offs.  During the fourth quarter of 1996,
     ---------------------------------------                                    
the Company completed the sale of the majority of its nonprescription products
along with the NUCOFED and QUIBRON brands in two independent transactions. These
sales, net of proceeds, resulted in a one time, non-cash write off of $11.9
million, which amounted to $7.6 million net of taxes. Also, during the fourth
quarter of 1996, in accordance with FASB Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
the Company recorded an impairment loss of long-lived intangible assets in the
amount of $25.4 million, which amounted to $17.8 million net of taxes. If the
estimate of undiscounted cash flows to be generated by the remaining intangible
assets decreases in the future, an additional write-down of those assets may be
required.

     New Accounting Pronouncements.  In February 1997, the Financial Accounting
     ------------------------------                        
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share."  SFAS 128 specifies new standards
designed to improve the earnings per share ("EPS") information provided in
financial statements by simplifying the existing computational guidelines,
revising the disclosure requirements, and increasing the comparability of EPS
data on an international basis.  Some of the changes made to simplify the EPS
computations include:  (a) eliminating the presentation of primary EPS and
replacing it with basic EPS, with the principal difference being that common
stock equivalents are not considered in computing basic EPS, (b) eliminating the
modified treasury stock method and the three percent materiality provision, and
(c) revising the contingent share provisions and the supplemental EPS data
requirements. SFAS 128 also makes a number of changes to existing disclosure
requirements. SFAS 128 is effective for financial statements issued for periods
ending after December 31, 1997, including interim periods. The Company has not
yet determined the impact of the implementation of SFAS 128.

     See "Notes to Consolidated Financial Statements - Note 16" for a discussion
of discontinued operations.

                                      -26-
<PAGE>

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1994 AND 1995

     Corporate Revenues.  For the year ended December 31, 1995, total revenue
     -------------------                                                     
increased $24.4 million from $89 million to $113.4 million.  This increase was
the result of a $26 million increase in product revenue offset by a $1.50
million decrease in other revenues.  See "Product Sales" and "Other Revenues."

     Product Sales.  For the year ended December 31, 1995, product sales
     --------------                                                     
increased $26 million from $87.4 million to $113.4 million primarily as a result
of new product acquisitions in the U.S. and the United Kingdom in 1994 and 1995.
Sales in the U.S. increased from $66.2 million to $90.2 million as a result of
1995 product acquisitions and licensing activities.  TIGAN and EMINASE, acquired
from SmithKline Beecham, and NOROXIN licensed from Merck in 1995, added $48
million.  This increase was offset by a $24 million decline in the sales of all
other prescription and nonprescription products.  Sales of the Company's United
Kingdom subsidiary, Monmouth Pharmaceuticals, Ltd., increased $2.4 million from
$9.7 million to $12.1 million.  This increase is primarily the result of the
1994 product acquisition of MAXOLON from SmithKline Beecham.  Sales of the
Company's Canadian subsidiary, Roberts Pharmaceutical Canada, Inc., decreased
slightly to $11.1 million from $11.4 million primarily as a result of a decline
in demand for the Company's nonprescription pharmaceutical products.

     Other Revenues.  Other revenues resulted from licensing activities 
     ---------------                                                            
undertaken by the Company and represented revenues from separate transactions in
1994 and 1995. For the year ended December 31, 1995, other revenues decreased
$1.55 million from $1.6 million to $.05 million primarily as a result of a
decline in licensing activities.

     Cost of Sales.  For the year ended December 31, 1995, cost of sales
     --------------                                                     
amounted to 47% of product sales, a 25 percentage point increase as compared to
the prior year.  As a result, gross profit as a percentage of sales decreased
from 78% to 53%.  This increase in cost of sales as a percentage of product
sales and the related decrease in gross profit percentage was primarily the
result of the addition of NOROXIN to the Company's product mix as well as a
decline in sales of higher margin products in the U.S.  NOROXIN, which accounted
for 31% of the Company's product sales in 1995, has a significantly lower gross
profit margin than the other core pharmaceutical products sold by the Company.
In the foreseeable future, the Company expects that NOROXIN will continue to
provide a substantial part of the Company's product sales and, accordingly, the
Company expects that cost of sales and gross profit as a percentage of sales
will be similarly impacted.

     Research and Development.  Research and development expenses decreased by
     -------------------------                                                
$3.4 million to $6.1 million during the year ended December 31, 1995 as compared
to the prior year.  The decrease was due to a reduced level of expenditure
required to support the Company's development programs for AGRYLIN and
PROAMANTINE.
 
     Marketing and Administrative Expenses.  For the year ended December 31,
     --------------------------------------                                 
1995, marketing and administrative expenses increased $13.3 million from $34.3
million to $47.6 million in large part as a function of the significant
increases in sales and development programs in connection with the acquisition
and commencement of sales of TIGAN, EMINASE and NOROXIN during 1995.  Marketing
expenses increased $7.4 million as a result of increased promotional and sales
activities for new products and the expansion and training of the Company's
sales forces in the U.S., Canada and the United Kingdom.
 
                                      -27-
<PAGE>
 
Included in administrative expenses is amortization of intangibles relating to
product acquisitions. For the year ended December 31, 1995, this expense was
$6.6 million, an increase of $.9 million from $5.7 million recorded in 1994.

     Interest Income and Expense.  For the year ended December 31, 1995,
     ----------------------------                                       
interest income decreased from $2.9 million to $2.1 million as a result of a
decrease in invested marketable securities.  Interest expense decreased from
$3.9 million to $3.5 million primarily as a result of a decrease in long-term
debt from 1994.

     Income Taxes.  For the year ended December 31, 1995, income taxes on
     -------------                                                       
continuing operations decreased to $2.8 million from $4.1 million in 1994
primarily as a result of a decline in income.  The Company's 1995 effective tax
rate of 51% was higher than the normal statutory rate primarily as a result of
the Company's inability to recognize the tax benefit of Canadian net operating
loss carryforwards.

     Income from Continuing Operations.  For the year ended December 31,1995,
     ----------------------------------                                      
net income from continuing operations was $2.7 million, which represents a
decrease of $17.9 million of income from those same business operations during
1994.

     The Company believes that the decline in net income from continuing
operations from 1994 to 1995 was attributable to a number of factors, including
(i) a decline in demand for certain of the Company's existing pharmaceutical
products, particularly NORETHIN, NITRODISC, SALUTENSIN and the Company's over-
the-counter nonprescription pharmaceutical products; (ii) an unanticipated delay
in the closing of the Company's agreement with Merck to distribute NOROXIN and
the diversion of the Company's sales force from the promotion of existing
products to allow for sales training related to NOROXIN; (iii) revenues from the
sale of TIGAN and EMINASE during the first quarter of 1995 prior to their
acquisition by the Company, during which time the Company was distributing such
products subject to distribution agreements with SmithKline Beecham, were not
accounted for as revenues by the Company, but instead as a $5.4 million
reduction in the purchase price paid by the Company for these products; (iv) the
increase in cost of sales as a result of the higher costs related to the sale of
NOROXIN and the growing importance of NOROXIN in the Company's product mix; and
(v) the costs associated with increasing the Company's sales force by more than
50% in 1995 in order to promote TIGAN, EMINASE and NOROXIN and the fact that the
sale of such products did not commence until the end of the first quarter of
1995.

     Discontinued Operations.  In connection with the Company's decision to
     ------------------------                                              
divest certain non-core, nonpharmaceutical business operations, the Company
announced, in August 1995, its plan to discontinue and divest Homecare. In March
1996, the Company announced its plan to discontinue and divest VRG, a contract
research organization. The Company's reported loss on discontinued operations
represents the Company's best estimates of the amounts expected to be realized
on the sale of its discontinued operations. The amounts the Company will realize
could differ materially from those amounts assumed by the Company in estimating
the loss on disposal reported in the Company's financial statements. For the
year ended December 31, 1995, the Company reserved $9.7 million for anticipated
losses relating to the discontinuation of its Homecare business. The sale of
Homecare was essentially completed in 1996 resulting in a net charge to the
reserve of approximately $1 million. For the fiscal year ended December 31,
1995, the Comapny reserved $12.8 million for anticipated losses relating to the
discontinuation of VRG. In 1996, the Company revised its estimate of anticipated
losses relating to VRG and reduced its reserve for such losses by $3.1 million.
See "Notes to Consolidated Financial Statements--Note 16."

                                      -28-
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

     For the year ended December 31, 1996, operating cash inflows amounted to
$0.2 million as a result of the Company's net loss offset by non-cash charges,
including intangible asset dispositions and write-offs totalling $25.4 million.
As of December 31, 1996, the Company had cash, cash equivalents and marketable
securities of $94.9 million. These balances are primarily attributable to the
Common Stock Private Placement completed in July 1996 which resulted in net
proceeds of approximately $9.9 million and the Preferred Stock Private Placement
completed in August 1996 which provided approximately $98.8 million in net
proceeds. Cash inflows from operations amounted to $22.8 million in 1995 and
cash outflows from operations amounted to $0.7 million in 1994.

     The Company's funding requirements will depend on a number of factors,
including the Company's development programs, product acquisitions, the level of
resources required for the expansion of marketing capabilities, especially
relating to the Company's two recently approved products, PROAMATINE and
AGRYLIN, increased investment in accounts receivable and inventory which may
arise from increased sales levels, competitive and technological developments,
the timing and cost of obtaining required regulatory approvals for new products,
relationships with parties to collaborative agreements, the success of
acquisition activities, the revenues generated from sales of PROAMATINE and
AGRYLIN, and funding required to finalize the purchase of a fully equipped
pharmaceutical manufacturing facility from Searle, which is expected to occur in
mid 1997.

     Existing cash and securities balances and cash generated from operations
are expected to be sufficient to fund operating activities for the foreseeable
future, as well as support near and long term debt obligations, capital
expenditures for the manufacturing facility, and development of the existing
pipeline compounds.  Cash equivalents and marketable securities currently
consist of immediately available money market fund balances and investment grade
securities.

     Capital Expenditures.  Capital Expenditures in 1994 relate primarily to the
     ---------------------                                                      
relocation of the Company's operating facilities in 1993.  The Company has
agreed to purchase a fully equipped pharmaceutical manufacturing facility from
Searle for $6.3 million (Canadian) which is expected to be finalized in mid
1997.  The Company anticipates additional capital expenditures in 1997 for the
purchase of certain manufacturing and computer equipment associated with
manufacturing, distribution and marketing activities.

     Foreign Currency Fluctuations.  The Company has subsidiary operations
     ------------------------------                                       
outside the United States.  As a result, the Company is subject to fluctuations
in subsidiary revenues and costs reported in United States dollars as a
consequence of currency exchange rate fluctuations.  For the year ended December
31, 1996, the Company had a foreign exchange net gain of $0.4 million as a
result of translating Monmouth Pharmaceuticals Ltd.'s net assets.

     Concentration of Credit Risk.  Financial instruments that potentially
     -----------------------------                                        
expose the Company to concentrations of credit risk consist primarily of short
term cash investments and trade accounts receivables.  The Company places its
temporary excess cash investments in short term money market instruments.  At
times, such investments may be in excess of the FDIC insurance limit.  The
Company markets its products primarily to wholesale drug distributors, retail
pharmacies and physicians in the United Stated and abroad.  The Company performs
certain credit evaluation procedures and does not require collateral.  Reserves
are maintained for estimated credit losses.


                                      -29-
<PAGE>
 
     Inflation.  Although at reduced levels in recent years, inflation continues
     ----------                                                                 
to apply upward pressure on the cost of goods and services used by the Company.
However, the Company believes that the net effect of inflation on its operations
has been minimal during the past three years.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements and supplementary data of the Company
called for by this item are submitted as a separate section of this report.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE
        
     Not applicable.

                                      -30-
<PAGE>
 
                                 PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information relating to directors of the Company required to be
furnished pursuant to this item is incorporated herein by reference to the
sections entitled "Election of Directors" and "Compliance with Section 16(a) of
the Securities Exchange Act" from the Company's definitive Proxy Statement for
its Annual Meeting of Shareholders to be held in May 1997.  Certain information
relating to executive officers of the Company is set forth in Item 4A of Part I
of this Form 10-K under the caption "Executive Officers of the Registrant."

ITEM 11.  EXECUTIVE COMPENSATION

     Information pertaining to executive compensation is incorporated herein by
reference to the section entitled "Election of Directors - Executive
Compensation" from the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held in May 1997.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information pertaining to security ownership of certain beneficial owners
and management is incorporated herein by reference to the sections entitled
"Principal Shareholders" and "Security Ownership of Management" from the
Company's definitive Proxy Statement for its Annual Meeting of Shareholders to
be held in May 1997.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Any information relating to this item is incorporated herein by reference
from the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held in May 1997.

                                      -31-
<PAGE>
 
                                    PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1. and 2.  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

     Reference is made to the Index of Financial
     Statements and Financial Statement Schedules
     hereinafter contained................................  F-1

     3.  EXHIBITS

     Reference is made to the Index of Exhibits
     hereinafter contained................................  E-1

(b)  REPORTS ON FORM 8-K

     During the fourth quarter ended December 31, 1996, the following reports on
     Form 8-K were filed by the Company with the Securities and Exchange
     Commission:

     Form 8-K (Item 5.  Other Events), date of earliest event reported October
     3, 1996 with respect to the sale by the Company of the NUCOFED and QUIBRON
     lines of respiratory drugs to Monarch Pharmaceuticals, a division of King
     Pharmaceuticals of Bristol, Tennessee.

     Form 8-K (Item 5.  Other Events), date of earliest event reported October
     7, 1996 with respect to the appointment of Dr. Zola P. Horovitz to the
     Board of Directors to fill the vacancy created by the death of Dr. W.
     Robert Fowler.

     Form 8-K (Item 5.  Other Events), date of earliest event reported October
     15, 1996 with respect to the agreement by and between the Company and
     Searle pursuant to which the Company intends to acquire the pharmaceutical
     manufacturing facility located in Oakville, Ontario which is currently
     operated by Searle.

     Form 8-K (Item 5.  Other Events), date of earliest event reported November
     6, 1996 with respect to the Company's acquisition from Lilly of the
     exclusive worldwide rights to Tazofelone and two other developmental
     compounds designated as LY246736 and LY353433.

     Form 8-K (Item 5.  Other Events),  date of earliest event reported November
     8, 1996 with respect to the Special Meeting of Shareholders held on
     November 6, 1996 at which the Company's shareholders approved (i) a
     proposal for the issuance to the holders of the Company's 5% Preferred
     Stock, the full number of shares of the Company's Common Stock to which
     such holders are entitled upon conversion of the 5% Preferred Stock, and
     (ii) an amendment to the Company's Amended and Restated Certificate of
     Incorporation to increase the authorized shares of the Company's Common
     Stock from 50,000,000 shares to 100,000,000 shares.

     Form 8-K (Item 5.  Other Events),  date of earliest event reported December
     5, 1996 with respect to the Company's acquisition from Lilly of the
     exclusive rights in the United States and its territories, Canada and
     Mexico for a fourth developmental compound designated as LY315535.


                                      -32-
<PAGE>
 
     Form 8-K (Item 5.  Other Events), date of earliest event reported December
     16, 1996 with respect to the declaration by the Board of Directors of a
     dividend distribution of one Right for each outstanding share of the
     Company's Common Stock to shareholders of record at the close of business
     on February 6, 1997, pursuant to which each right will entitle the
     registered holder to purchase from the Company for $80.00, one one-
     hundredth of a share of Class B - Series A Junior Participating Preferred
     Stock, par value $.10 per share.


                                      -33-
<PAGE>
 
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                         ROBERTS PHARMACEUTICAL CORPORATION
                         ----------------------------------
                         (Registrant)


Date:  March 31, 1997          By:/s/ Robert A. Vukovich
                                  ----------------------------------------
                                  ROBERT A. VUKOVICH, President

     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 date indicated.
<TABLE>
<CAPTION>
 
Signature                                                     Title                 Date
--------------------------------------------------  -------------------------  ---------------
<S>                                                 <C>                        <C>
 
/s/ Robert A. Vukovich                              President & Director       March 31, 1997
--------------------------------------------------  (Principal Executive
ROBERT A. VUKOVICH                                  Officer)
 
/s/ Peter M. Rogalin                                Vice President, Treasurer  March 31, 1997
--------------------------------------------------  & Director (Principal
PETER M. ROGALIN                                    Financial and Accounting
                                                    Officer)
 
/s/ Robert W. Loy                                   Director                   March 31, 1997
--------------------------------------------------
ROBERT W. LOY
 
/s/ Anthony A. Rascio                               Director                   March 31, 1997
--------------------------------------------------
ANTHONY A. RASCIO
 
/s/ John T. Spitznagel                              Director                   March 31, 1997
--------------------------------------------------
JOHN T. SPITZNAGEL
 
/s/ Takao Miyamoto                                  Director                   March 31, 1997
--------------------------------------------------
TAKAO MIYAMOTO
 
/s/ Akihiko Matsubara                               Director                   March 31, 1997
--------------------------------------------------
AKIHIKO MATSUBARA
 
/s/ Digby W. Barrios                                Director                   March 31, 1997
--------------------------------------------------
DIGBY W. BARRIOS
 
/s/ Zola P. Horovitz                                Director                   March 31, 1997
--------------------------------------------------
ZOLA P. HOROVITZ
</TABLE>

                                     -34-
<PAGE>
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                       ROBERTS PHARMACEUTICAL CORPORATION

                                                        Page
                                                        ----

Report of Independent Accountants                        F-2

Consolidated Balance Sheets as of
 December 31, 1996, 1995 and 1994                        F-3

Consolidated Statements of Operations for 
 the years ended December 31, 1996, 1995 and 1994        F-4

Consolidated Statements of Cash Flows for 
 the years ended December 31, 1996, 1995 and 1994        F-5

Consolidated Statements of Changes in Shareholders'
 Equity for the years ended December 31, 1996, 1995
 and 1994                                                F-6

Notes to Consolidated Financial Statements               F-7

Schedules:*                                              F-26

Schedule II, Valuation and Qualifying Accounts



 __________

*    Schedule I under Article 12 of Regulation S-X has been omitted because of
     the absence of the conditions under which certain information is required
     and because certain information required is presented in the financial
     statements and the notes thereto.

                                      F-1
<PAGE>
 
COOPERS                              Coopers & Lybrand L.L.P.
&LYBRAND                             a professional services firm



                       Report of Independent Accountants
                       ---------------------------------

To the Board of Directors and Shareholders 
of Roberts Pharmaceutical Corporation:

        We have audited the accompanying consolidated balance sheets of Roberts
Pharmaceutical Corporation and Subsidiaries as of December 31, 1996, 1995 and
1994, and the related consolidated statements of operations, cash flows, changes
in shareholders' equity for each of the three years in the period ended December
31, 1996 and the financial statement schedules on pages F-26 to F-28 on this
Form 10-K.  These financial statements and financial statement schedules are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.

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

        In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Roberts
Pharmaceutical Corporation and Subsidiaries as of December 31, 1996, 1995 and
1994, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation to
the basic financial statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.



                                                       COOPERS & LYBRAND L.L.P.


Princeton, New Jersey
February 14, 1997


                                      F-2


Coopers & Lybrand L.L.P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand (International)
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                     (In thousands, except per share data)

<TABLE> 
<CAPTION> 
                                                            DECEMBER 31,    DECEMBER 31,   DECEMBER 31,

ASSETS                                                            1994           1995           1996
------                                                                                              
                                                            -----------     ----------     ----------
<S>                                                         <C>             <C>            <C>
Current assets:
     Cash and cash equivalents                              $    9,819      $    16,357    $    87,125
     Marketable securities                                      26,663           13,649          7,793
Accounts and Notes Receivable:
     Trade, net                                                 28,882           26,318         30,791
     Shareholder                                                 7,256              600          - - -
     Other                                                       - - -            - - -          2,889
Inventory                                                       19,797           20,785         16,665
Deferred tax assets                                              - - -           10,419          9,040
Net assets held for sale                                         - - -            4,300            500
Other current assets                                             3,784            1,342          2,124
                                                            ----------      -----------    -----------
     Total current assets                                       96,201           93,770        156,927
Fixed assets, net                                               16,800           15,681         14,945
Intangible assets                                              222,534          230,681        183,579
Notes receivable                                                 - - -            - - -          5,304
Deferred non-current tax asset                                   - - -            - - -         11,216
Other assets                                                       657              158            254
                                                            ----------      -----------    -----------
     Total assets                                           $  336,192      $   340,290    $   372,225
                                                            ===========     ===========    ===========
</TABLE> 

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE> 

<S>                                                         <C>           <C>            <C>
Current liabilities:
     Current installments of long-term debt                 $   34,277    $    34,809    $     6,376
     Accounts payable                                            6,735         14,737         15,848
     Other current liabilities                                  12,922         32,236         29,258
                                                             ---------     ----------     ----------
     Total current liabilities                                  53,934         81,782         51,482
Long-term debt, excluding current installments                  22,411         16,183         10,639
Deferred taxes payable                                           - - -          6,311          - - -
Other liabilities                                                  718            547            345
Committments and contingent liabilities                          - - -          - - -          - - -
Shareholders' equity:
     Class B preferred stock, $.10                        
         par value, 10,000,000 shares                     
         authorized, 2,721,030 outstanding                       - - -          - - -            272
     Common stock, $.01 par value,                        
         100,000,000 shares authorized,                   
         18,420,200, 18,536,590 and                       
         22,961,707 outstanding                                    188            189            233
Additional paid-in capital                                     255,994        256,296        365,150
Cumulative translation adjustments                                (674)          (297)          (301)
Retained earnings (deficit)                                      3,858        (20,484)       (55,358)
Treasury Stock, 387,594 shares of      
    common stock, at cost                                         (237)          (237)          (237)
                                                            -----------   ------------   ------------
     Total shareholders' equity                                259,129        235,467        309,759
                                                            -----------   ------------   ------------
     Total liabilities and                     
         shareholders' equity                               $  336,192    $   340,290    $   372,225
                                                            ===========   ============   ============
</TABLE> 


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

                                      F-3
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)

<TABLE> 
<CAPTION> 
                                                                            YEARS ENDED DECEMBER 31,
                                                              ------------------------------------------------
                                                                        1994            1995             1996
                                                              ---------------   -------------   --------------
<S>                                                           <C>               <C>             <C>
Sales and revenue:
     Sales                                                    $       87,437    $    113,380    $      98,075
     Other revenue                                                     1,583              47               36
                                                              ---------------   -------------   --------------
Total sales and revenue                                               89,020         113,427           98,111

Operating costs and expenses:
     Cost of sales                                                    19,418          52,870           49,753
     Research & development                                            9,546           6,108            4,008
     Marketing & administration                                       34,254          47,576           57,239
     Intangible write-offs and dispositions                            - - -           - - -           37,306(2)
                                                              ---------------   -------------   --------------
Total operating costs & expenses                                      63,218         106,554          148,306
                                                              ---------------   -------------   --------------
Operating income (loss)                                               25,802           6,873          (50,195)
                                                              ---------------   -------------   --------------
Other income (expense):
     Interest income                                                   2,891           2,050            2,907
     Interest expense                                                 (3,960)         (3,453)          (1,750)
     Other income (expense), net                                       - - -              49              188
                                                              ---------------   -------------   --------------
Total other income (expense)                                          (1,069)         (1,354)           1,345
                                                              ---------------   -------------   --------------
Income (loss) from continuing operations
    before income taxes                                               24,733           5,519          (48,850)
Benefit (Provision) for income taxes                                  (4,115)         (2,816)          14,575
                                                              ---------------   -------------   --------------
Income from continuing operations                                     20,618           2,703          (34,275)
                                                              ---------------   -------------   --------------

Discontinued operations:
     (Loss) from operations of
     discontinued divisions,
     net of tax benefits
     of $238, $2,474 and $0, respectively                             (1,206)         (4,547)           - - -
     Estimated (loss) income on disposal of divisions,
     net of tax benefits (provision)
     of $0, $2,555 and ($1,581), respectively                          - - -         (22,498)             556
                                                              ---------------   -------------   --------------

(Loss) income from discontinued operations                            (1,206)        (27,045)             556
                                                              ---------------   -------------   --------------

Net (loss) income                                             $       19,412    $    (24,342)   $     (33,719)
                                                              ===============   =============   ==============
Per share of common stock, 
     primary and fully diluted:
     Net (loss) income from continuing operations             $         1.10    $        .15    $       (2.47)(1)(2)
     Net income (loss) from discontinued operations                     (.06)          (1.45)             .03
                                                              ---------------   -------------   --------------
     Net (loss) income                                        $         1.04    $      (1.30)   $       (2.44)(1)(2)
                                                              ===============   =============   ==============
Weighted average number of common shares
    outstanding, primary and fully diluted:                       18,708,000      18,622,744       19,132,863
</TABLE> 
------------------------
(1)  Includes a $.61 per share charge pursuant to a new position taken by the
     SEC staff, effective March 13, 1997, on accounting for preferred stock
     which is convertible at a discount to market. See Note 1.

(2)  Includes a $1.33 per share charge for the sale and write-off of certain
     intangible assets. See Note 5.

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

                                      F-4
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE> 
<CAPTION> 
                                                                         Years Ended December 31,
-------------------------------------------------------------------------------------------------------------------
                                                                        1994            1995             1996
-------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>               <C>             <C>


Cash flows from operating activities:
     Net income (loss)                                        $       19,412    $    (24,342)   $     (33,719)
     Adjustments to reconcile net income (loss)
         to net cash flows from operating activities:
         Depreciation and amortization                                 6,174           7,164            7,531
         Provision for losses on receivables                             622             130            - - -
         Provision for product sales returns                           4,253           7,669            6,041
         Provision for inventory obsolescence                          - - -           - - -            4,611
         Write down of intangible assets                               - - -           - - -           17,764
         Loss on sale of intangible assets                             - - -           - - -            7,621
         Loss on abandonment of leasehold improvements                 - - -           - - -               71
         Loss on (income from) discontinued operations                 - - -          22,498             (556)
         Foreign currency (losses) gains                                 115             (31)             387
         Change in accounts receivable, unbilled
           revenue and advance billings                               (9,823)          1,187           (2,544)
         Change in other assets                                          309           1,144             (483)
         Change in inventory                                          (6,651)         (1,819)            (627)
         Change in accounts payable and
           other liabilities                                          (3,158)         12,460           (3,337)
     Impact of discontinued operations                               (11,906)         (3,298)          (2,582)
-------------------------------------------------------------------------------------------------------------------
           Total adjustments                                         (20,065)         47,104           33,897
-------------------------------------------------------------------------------------------------------------------
     Net cash provided by (used in)
         operating activities                                           (653)         22,762              178
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Redemption of marketable securities                              58,902          13,013            5,856
     Purchases of intangible assets                                  (14,272)         (1,552)          (8,162)
     Proceeds from sale of intangible assets                           - - -           - - -            1,600
     Purchases of fixed assets                                          (700)           (226)            (168)
     Impact of discontinued operations                                (1,406)           (243)           - - -
-------------------------------------------------------------------------------------------------------------------
     Net cash (used in) provided by
         investing activities                                         42,524          10,992             (874)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Payments on notes payable and long
       term debt                                                     (38,729)        (28,061)         (36,773)
     Net proceeds from issuance of common stock                          656             803            9,923
     Net proceeds from issuance of preferred stock                     - - -           - - -           99,247
     Cash dividends paid                                               - - -           - - -             (476)
     Impact of discontinued operations                                   (16)            (7)             (397)
-------------------------------------------------------------------------------------------------------------------
     Net cash provided by (used in) financing
         activities                                                  (38,089)        (27,265)          71,524
-------------------------------------------------------------------------------------------------------------------
     Effect of exchange rate changes on cash
       and cash equivalents                                              (34)             49              (60)
-------------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents                                    3,748           6,538           70,768
Beginning cash and cash equivalents                                    6,071           9,819           16,357
-------------------------------------------------------------------------------------------------------------------
Ending cash and cash equivalents                              $        9,819    $     16,357    $      87,125 
-------------------------------------------------------------------------------------------------------------------

Supplemental cash flow information:
  Interest paid                                               $        3,726    $      2,979    $       2,396 
  Income taxes paid                                                    1,970             268              233
Non cash activities:
  Present value of notes issued in
  connection with product acquisitions                        $        7,727    $     18,279    $       - - - 
  Notes received for sale of Pronetics
  subsidiaries and product rights                             $        - - -    $      - - -    $       8,193 
</TABLE> 


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

                                      F-5
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CHANGES
                            IN SHAREHOLDERS' EQUITY
                                (In thousands)
<TABLE> 
<CAPTION> 

                                                 
                             5% PREFERRED STOCK       COMMON STOCK       ADDITIONAL RETAINED   CUMULATIVE            TOTAL        
                             --------------------  --------------------  PAID-IN    EARNINGS   TRANSLATION TREASURY  SHAREHOLDERS' 
                               SHARES     AMOUNT      SHARES     AMOUNT   CAPITAL    (DEFICIT)  ADJUSTMENT  STOCK    EQUITY
                             -----------  -------  -----------  -------  --------   ---------  ---------   --------  ------------
<S>                           <C>          <C>      <C>          <C>      <C>        <C>        <C>         <C>       <C>
Balance,                    
  December 31, 1993                                  18,715,530  $   187  $ 254,803  $(15,554)  $   (200)   $  (237)   $  238, 999
                            
Issuance of common stock                                 92,264        1      1,191     - - -      - - -      - - -          1,192
Cumulative translation      
  adjustment                                              - - -    - - -      - - -     - - -       (474)     - - -           (474)
Year ended December 31, 1994
  net income                                              - - -    - - -      - - -    19,412      - - -      - - -         19,412
                                                    -----------  -------  ---------  --------  ---------    -------     ----------
Balance,                    
  December 31, 1994                                  18,807,794      188    255,994     3,858       (674)      (237)       259,129
                            
Issuance of common stock                                116,390        1        302     - - -      - - -      - - -            303
Cumulative translation      
  adjustment                                              - - -    - - -      - - -     - - -        377      - - -            377
Year ended December 31, 1995
  net loss                                                - - -    - - -      - - -   (24,342)     - - -      - - -        (24,342)
                                                    -----------  -------   --------  ---------  ---------  --------       --------
Balance,                    
  December 31, 1995                                  18,924,184      189    256,296   (20,484)      (297)      (237)       235,467
                            
Issuance of preferred shares   4,200,000     $  420       - - -    - - -     98,827     - - -      - - -      - - -         99,247
Issuance of common stock           - - -      - - -     651,058        7      9,916     - - -      - - -      - - -          9,923
Cumulative translation      
  adjustment                       - - -      - - -       - - -    - - -      - - -     - - -         (4)     - - -             (4)
Year ended December 31 1996 
  net loss                         - - -      - - -       - - -    - - -      - - -   (33,719)     - - -      - - -        (33,719)
5% Preferred dividends             - - -      - - -       - - -    - - -      - - -    (1,155)     - - -      - - -         (1,155)
                            
5% Preferred stock converted
  to common stock             (1,478,970)      (148)  3,774,059        37        111     - - -      - - -     - - -              0
                              ----------    ------- -----------   -------    ------- ---------   --------   --------      --------
Balance,                    
  December 31, 1996            2,721,030     $  272  23,349,301   $   233   $365,150 $ (55,358)  $   (301)  $  (237)      $309,759
                              ==========    ======= ===========   =======   ======== =========  =========   ========      ========
</TABLE> 



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

                                      F-6
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

     Basis of Presentation
     ---------------------

     Roberts Pharmaceutical Corporation is an international pharmaceutical
     company which licenses, acquires, develops and commercializes post-
     discovery drugs in selected therapeutic categories.  The Company currently
     markets approved pharmaceutical products in the United States, Canada, the
     United Kingdom and several other European countries.  The consolidated
     financial statements include the accounts of Roberts Pharmaceutical
     Corporation and its majority-owned subsidiaries.  All significant
     intercompany transactions are eliminated.  All dollar amounts are presented
     in thousands, except for earnings per share.

     Revenue Recognition
     -------------------

     Product sales, net of estimated future returns, are recorded as the
     products are shipped against customer orders.

     Licensing revenues are recorded as earned under the terms of each
     underlying agreement and are included in other revenue.

     Cash Equivalents and Marketable Securities
     ------------------------------------------

     Cash equivalents include all money market investments with original
     maturities of three months or less.

     Marketable securities consist primarily of debt instruments with maturities
     of more than three months and are stated at amortized cost plus accrued
     interest, which approximates market.

     Inventories
     -----------

     Inventories, consisting primarily of finished goods, are stated at the
     lower of first-in, first-out cost or market.

     Use of Estimates
     ----------------

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of 

                                      F-7
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     contingent assets and liabilities at the date of the financial statements
     and revenues and expenses during the period reported. Actual results could
     differ from those estimates. Estimates include accounting for allowance for
     doubtful accounts, inventory obsolescence, future product returns,
     depreciation and amortization, value of intangibles, employee benefit
     plans, taxes, discontinued operations and contingencies.

     Fixed Assets and Depreciation
     -----------------------------

     Fixed assets are stated at cost less accumulated depreciation.
     Depreciation is determined using the straight-line method over the
     estimated useful lives of the related assets ranging from five to fifty
     years.  Gains and losses on disposals are recognized in the year of the
     disposal.  Expenditures for maintenance and repairs are expensed as
     incurred; significant renewals and betterments are capitalized.

     Intangible Assets
     -----------------

     Intangible assets are stated at cost less accumulated amortization.
     Amortization is determined using the straight-line method over the
     estimated useful lives of the related assets which are estimated to range
     from ten to forty years.  It is the Company's policy to review periodically
     and evaluate whether there has been a permanent impairment in the value of
     intangibles.

     The Company adopted Statement of Financial Accounting Standards (SFAS) No.
     121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to Be Disposed Of," effective first quarter 1996. Upon adoption of
     SFAS No. 121, there was no material impact on the Company. SFAS No. 121
     requires impairment losses to be recognized for long-lived assets and
     certain identifiable intangible assets used in operations when indicators
     of impairment are present and the undiscounted future cash flows are not
     expected to be sufficient to recover the assets' carrying amount. In the
     fourth quarter of 1996, after the Company had reassessed the effect of SFAS
     No. 121, the Company recorded a charge to earnings of $25.4 million for an
     impairment of intangible assets.

     Foreign Currency Translation
     ----------------------------

     The functional currency of the Company's European subsidiary is the U.S.
     dollar.  Accordingly, its accounts are 

                                      F-8
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     remeasured in dollars and translation gains and losses are included in
     income currently.

     The functional currency of the Company's Canadian subsidiary is the
     Canadian dollar.  Translation gains and losses of the Company's Canadian
     subsidiary are accumulated as a separate component of Shareholders' Equity.

     Included in the balance sheet at December 31, 1994, 1995 and 1996 is debt
     of $4,673, $1,849 and $832, respectively, denominated in British pounds.

     Concentration of Credit Risk
     ----------------------------

     The Company markets prescription and nonprescription pharmaceuticals
     primarily to wholesale drug distributors, retail pharmacies and physicians
     in the United States and abroad.  The Company performs certain credit
     evaluation procedures and does not require collateral.  The Company
     maintains reserves for estimated credit losses; at December 31, 1994, 1995
     and 1996, the reserve for uncollectible accounts amounted to $2,195, $1,754
     and $1,440, respectively.

     At December 31, 1996, cash equivalents and marketable securities consisted
     of immediately available money market fund balances and investment grade
     debt and preferred stock securities with maturities of less than one year.

     The fair value of investment securities classified as available for sale,
     totaled $7,672 at December 31, 1996. These investment securities mature
     within one year.

     Income (loss) per share
     -----------------------
     
     Income (loss) per share was computed based on the weighted average number
     of shares of Common Stock actually outstanding plus the number of shares of
     Common Stock that lowercase would be outstanding assuming the exercise of
     dilutive stock options. In 1996, the 5% Preferred Stock dividends and the
     10% discount to market upon conversion of the 5% Preferred Stock into
     Common Stock were included in the calculation.

     Pursuant to a new position taken by the SEC staff (the "Staff"), effective
     March 13, 1997, on accounting for preferred stock which is convertible at a
     discount to market, the Company adjusted its calculation of Earnings Per
     Share by $.61 per share. This reflects the Staff's position that the 10%
     discount available to holders of the Company's 

                                      F-9
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     5% Preferred Stock should be incorporated in the calculation of Earnings
     Per Share.

     To clarify the adjustments indicated above, a reconciliation of Earnings
     Per Share for the twelve months ended December 31, 1996 is composed of the
     following elements:

     Net (Loss) from continuing operations
     before the consideration of write-off
     and the sale of intangible assets, the
     recognition of the discount upon the 
     issuance of 5% Preferred Stock or
     preferred dividends                                        $  (.47)
     Write-off and sale of intangible assets                      (1.33)
        5% Preferred Stock dividends                    (.06)
        Issuance of 5% Preferred Stock
        at a 10% discount to market                     (.61)      (.67)
                                                      ------    -------
     Net (Loss) from Continuing Operations                        (2.47)
     Income from Discontinued Operations                            .03
                                                                -------
     (Loss) attributable to Common Stock                        $ (2.44)
                                                                =======

     New Accounting Pronouncements.
     ------------------------------

     In February 1997, the Financial Accounting Standards Board ("FASB")
     issued Statement of Financial Accounting Standards ("SFAS") No. 128,
     "Earnings Per Share." SFAS 128 specifies new standards designed to improve
     the earnings per share ("EPS") information provided in financial statements
     by simplifying the existing computational guidelines, revising the
     disclosure requirements, and increasing the comparability of EPS data on an
     international basis. Some of the changes made to simplify the EPS
     computations include: (a) eliminating the presentation of primary EPS and
     replacing it with basic EPS, with the principal difference being that
     common stock equivalents are not considered in computing basic EPS, (b)
     eliminating the modified treasury stock method and the three percent
     materiality provision, and (c) revising the contingent share provisions and
     the supplemental EPS data requirements. SFAS 128 also makes a number of
     changes to existing disclosure requirements. SFAS 128 is effective for
     financial statements issued for periods ending after December 31, 1997,
     including interim periods. The Company has not yet determined the impact of
     the implementation of SFAS 128.


                                      F-10
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.   REVENUES AND EXPENSES
     ---------------------

     For the year ended December 31, 1994, license revenues amounted to $1.5
     million.

     Development expenses of the Company's products, including those funded
     under license agreements, are included in research and development.

3.   INVENTORY
     ---------
 
Inventory consists of:
                                    December 31,
                             --------------------------
                               1994     1995      1996  
                             -------  -------  -------- 
 
 Raw materials               $ 3,269  $ 3,539  $  2,393
 Finished goods               16,528   17,246    14,272
                             -------  -------   -------
                             $19,797  $20,785   $16,665
                             =======  =======   =======
 
 
4.   FIXED ASSETS, NET
     -----------------
 
 Fixed assets consist of:
                                    December 31,
                             ---------------------------                
                              1994      1995      1996               
                             ------    ------    ------ 
 
 Land and buildings          $15,140   $14,823   $14,925
 Office furniture and
  equipment                    3,786     2,588     2,616
 Leasehold improvements          139       109       ---
                             -------   -------   -------
                             $19,065   $17,520   $17,541
 Less:  Accumulated
  depreciation and
  amortization                 2,265   $ 1,839   $ 2,596
                             -------   -------   -------
                             $16,800   $15,681   $14,945
                             =======   =======   =======

                                      F-11
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.  INTANGIBLE ASSETS
    -----------------

    Intangible assets consist
    of:
                                     December 31,
                              ----------------------------  
                                 1994      1995      1996
                              --------  --------  --------
 
Product rights acquired       $216,879  $245,287  $204,611
Goodwill                        18,815     3,812       ---
                              --------  --------  --------
                               235,694   249,099   204,611
Less: Accumulated
      amortization              13,160    18,418    21,032
                              --------  --------  --------
                              $222,534  $230,681  $183,579
                              ========  ========  ========
 

    Intangible Dispositions and Write-Offs.  
    --------------------------------------
    During the fourth quarter of 1996, the Company completed the sale of the
    majority of its non-core nonprescription brands along with the NUCOFED and
    QUIBRON brands in two independent sales agreements. These sales, net of
    proceeds, resulted in a one time, non-cash write off of $11.9 million, which
    amounted to $7.6 million net of taxes. Also, during the fourth quarter of
    1996, in accordance with FASB Statement No. 121, "Accounting for the
    Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
    Of," the Company recorded an impairment loss of long-lived intangible assets
    in the amount of $25.4 million, which amounted to $17.8 million net of
    taxes. If the estimate of undiscounted cash flows to be generated by the
    remaining intangible assets decreases in the future, an additional write-
    down of those assets may be required.

    Operating income and net loss were negatively affected by the sale and write
    down of the intangible assets in the amounts of $37.3 million for operating
    income and $25.4 million for net loss. The operating loss would have
    amounted to $12.9 million and net loss would have been $8.3 million if such
    sale and write down had not occurred.

                                      F-12
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.  OTHER CURRENT LIABILITIES
    -------------------------

    Other current liabilities consist of:
 
                                         December 31,
                                  ----------------------------  
                                     1994      1995      1996
                                  --------  --------  --------
 
    Accrued estimated loss on
     discontinuation of VRG
     and Homecare                     ---    $ 8,848   $   448
    Accrued estimated future
     product returns              $ 7,672     15,444    15,570
    Accrued estimated Medicaid  
     rebates                          294      1,734     1,169
    Income taxes payable            2,967      3,707     7,019
    Other accrued liabilities       1,989      2,503     5,052
                                  -------    -------   -------
                                  $12,922    $32,236   $29,258
                                  =======    =======   =======

    Product return reserves of $1,279, $2,336 and $728 have been netted against
    accounts receivable for 1994, 1995 and 1996, respectively.

7.  LONG-TERM DEBT
    --------------
 
    Long-term debt consists of:
                                            December 31,
                                    ----------------------------  
                                       1994      1995      1996
                                    --------  --------  --------
     Notes payable on product       
      acquisitions at an imputed
      weighted average interest
      rate of 5.2%, 5.75% and
      6.0%                          $56,592    $50,846   $16,960
     Other notes payable                 96        146        55
                                    -------    -------   -------
                                     56,688     50,992    17,015
Less: Current installments           34,277     34,809     6,376
                                    -------    -------   -------
                                    $22,411    $16,183   $10,639
                                    =======    =======   =======

Principal payments in each of the next five years on long-term debt outstanding
at December 31, 1996 amount to:

     1997...........................................$ 6,376
     1998...........................................  3,562
     1999...........................................  3,775
     2000...........................................  3,302
     2001...........................................    ---
                                                    -------
                                                    $17,015
                                                    =======

Notes payable are collateralized by acquired product rights.

                                      F-13
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
8.  SHAREHOLDERS' EQUITY
    --------------------

    The Company has adopted the disclosure-only provisions of SFAS No. 123,
    "Accounting for Stock-Based Compensation," but applies Accounting Principles
    Board Opinion No. 25 and related interpretations in accounting for its
    plans.  If the Company had elected to recognize compensation cost based on
    the fair value at the grant dates for awards in 1995 and 1996, consistent
    with the provisions of SFAS No. 123, the Company's net loss and per share
    data would have been changed to the pro forma amounts indicated below:

                                            
                                           
                                           
                                                  Years Ended December 31,   
                                                  --------------------------  
                                                    1995             1996      
                                                  --------         --------  
Net Loss                      As reported         $ (24,342)    $ (33,719)  
                              Pro forma           $ (24,361)    $ (36,925)   
                              ---------                                
                                                                          
Loss per share                As reported         $  (1.30)     $   (2.44)  
                              Pro forma           $  (1.30)     $   (2.61)   
                              ---------  

    The fair value of stock options used to compute pro forma net loss and per
    share disclosures is the estimated present value at grant date using the
    Black-Scholes option-pricing model with the following weighted average
    assumptions:  dividend yield of 0%; expected volatility of 57%; a risk free
    interest rate of 6%; and a general expectation that employees will exercise
    options when they become vested.

    The weighted average fair value of stock options, calculated using the
    Black-Scholes option-pricing model, granted during the years ended December
    31, 1995 and 1996 was $5.31 and $ 7.17, respectively.

    On July 17, 1996, the Company issued and sold in a private placement to
    certain investment funds 600,000 shares of the Company's Common Stock at an
    issue price of $16.65 per share resulting in gross proceeds to the Company
    of $9,900. In addition to receiving cash consideration equal to 5% of the
    gross proceeds and the reimbursement of certain expenses the Placement Agent
    received Common Stock Warrants to acquire an aggregate of 15,000 shares of
    Common Stock for a purchase price of $16.65 per share. These warrants expire
    in July of 1999.


    On August 29, 1996, the Company issued and sold in a private placement to
    approximately eighty accredited investors for $25 per share an aggregate of
    4,200,000 shares of 5% Preferred                               

                                      F-14

<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    Stock resulting in gross proceeds of $105,000. In addition to receiving cash
    consideration equal to 5% of the gross proceeds and the reimbursement of
    certain expenses the Placement Agent received Preferred Stock Warrants to
    acquire 420,000 shares of 5% Preferred Stock for a purchase price of $25 per
    share. These warrants expire in August 1998. The 5% Preferred Stock is
    convertible into a number of shares of Common Stock which depends, in part,
    upon the conversion price in effect at the time of the conversion. The 5%
    Preferred Stock is convertible into Common Stock at a 10% discount to
    market.


    Stock Compensation Plans
    ------------------------

    During 1996, 1995 and in prior years, executives and key employees of the
    Company were granted stock option awards under the Incentive Stock Option
    Plan. In May of 1996, the Company's shareholders approved the Equity
    Incentive Plan which became effective May 22, 1996. The Company's Incentive
    Stock Option Plan was discontinued on the same date. The Equity Incentive
    Plan provides for the grant of incentive and nonqualified stock options,
    stock appreciation rights, deferred stock awards, restricted stock grants
    and other stock based awards to executives and key employees. The total
    number of shares of Common Stock authorized for grant under the Equity
    Incentive Plan is 1,500,000.

    Options to purchase Common Stock may be granted either alone or in addition
    to other awards.  The term of each option will be fixed by the Compensation
    Committee of the Company's Board of Directors, provided that no incentive
    stock options, as defined in the Internal Revenue Code, will be exercisable
    after the expiration of ten years from the date the option is granted.
    Options will be exercisable at such time or times as determined by the
    Committee at or subsequent to grant.  Stock Appreciation Rights ("SARS") may
    be granted to participants either alone or in addition to stock options and
    may, but need not be, related to a specific option.  The provisions of SARs
    need not be the same with respect to each recipient.


                                      F-15
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    Performance awards, restricted stock awards and other stock unit awards may
    also be granted.  Presented below is the total number of Roberts shares
    represented by awards granted to Roberts employees for the years ended
    December 31, 1995 and December 31, 1996.
 

                                      Weighted
                                      Average
                            1995    Market Value     1996
                           ------   ------------    ------
 
    Stock Awards              ---      $11.25       16,500
 
    Stock appreciation
    rights granted            ---      $11.50      258,000

    On December 3, 1996, out-of-the-money options were cancelled and reissued
    with a revalued exercise price of $11.375.  All other terms and conditions
    remained in effect.


                                      F-16
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The following table summarizes the status of the Company's stock options,
    outstanding and exercisable at January, 1997.
 
                                     Stock Options         Stock Options
                                      Outstanding           Exercisable
                                 ----------------------  ------------------
                                   Weighted
                                   Average     Weighted            Weighted
Range of                          Remaining    Average             Average
Exercise                         Contractual   Exercise            Exercise
Prices                 Shares        Life       Price     Shares    Price
-------------------  ----------  ------------  --------  --------  --------
 
$7.00                    1,000       2 months   $  7.00    1,000    $  7.00
 
$11.375 to $11.50    1,992,375   4 yrs, 6 mos   $11.433  573,225    $11.375
 
$18.25 to $21.75       115,040   4 yrs, 6 mos   $18.253  104,550    $18.254


    Presented below is a summary of the status of the Company's stock options
    held by employees, and the related transactions for the years ended December
    31, 1995  and December 31, 1996.

 
                                Year Ended               Year Ended
                               December 31,             December 31,
                                   1995                     1996
                               -------------------------------------
                                              Weighted                 
                                               Average                 
                                              Exercise                       
Stock Options                      Shares        Price      Shares      
-----------------------------   -----------   --------    -----------   
Options outstanding              1,031,854    $ 19.060     1,175,710    
 January 1                                                              
                                                                        
Granted                            392,000    $ 11.480     1,113,250    
                                                                        
Exercised                         (135,944)   $ 11.910       (51,058)   
                                                                        
Forfeited/Expired                 (112,200)   $ 18.553      (129,487)   
                                                                        
Options outstanding              1,175,710    $ 11.803      2,108,415   
 December 31
 
Options available for grant
 - Equity Incentive Plan               ---                    524,110  
 - Incentive Stock Option                                                   
   Plan                            732,124                        ---  


                                      F-17
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 
9.  INCOME TAXES
    ------------

    The Company utilizes the asset and liability method for taxes, which
    requires that deferred income taxes be provided for the cumulative temporary
    differences between the financial and tax bases of the Company's assets and
    liabilities.

    The (provision) benefit for income taxes consists of:
 
                                                Years Ended December 31,     
                                             ------------------------------  
                                               1994        1995       1996   
                                             ---------  -----------  ------  
Current                                                                      
  Federal                                     $(4,883)     $(3,641)  $  ---  
  State and foreign                               (82)         (57)     ---  
                                              -------      -------   ------  
  Total current                               $(4,965)     $(3,698)  $  ---  
                                              =======       ======   ======  
                                                                             
Deferred                                                                     
  Federal                                        (462)       728    $14,487  
  State and foreign                             1,312        154         88  
                                              -------       ------   ------  
  Total deferred                              $   850        882    $14,575  
                                              ========      =====  =========  


    A comparison of the provision for income taxes as reported, to a provision
    based on federal statutory rates and consolidated income before income taxes
    is as follows:
 
                                                Years Ended December 31,
                                              ----------------------------
                                                1994     1995      1996
                                              --------  -------  ---------
 
(Provision) benefit at
 federal statutory
 rates                                        $(8,390)  $(1,876)  $16,609
Non-deductible expense                           (599)     (404)     (530)
State taxes net of
 federal effect                                  (287)       (3)      ---
Research and development
 credits                                          744       ---      (266)
Foreign net operating
 losses-valuation
 allowance                                        ---      (405)     (809)
Other                                             641      (128)     (429)
Reduction in federal
 valuation allowance                            2,731       ---       ---
Reduction in state
 valuation allowance
 net of federal effect                          1,045       ---       ---
                                              -------    ------   -------
(Provision) benefit
 for income taxes                            $ (4,115)  $ (2,816) $14,575 
                                             ========   ========  =======

                                      F-18
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The tax effect of temporary differences that give rise to significant
    portions of the deferred tax assets and liabilities at December 31, 1995
    and December 31, 1996 are presented below:
 
                                       December 31, 1995   December 31, 1996
                                       ------------------  -----------------
Federal                                 Debits   Credits    Debits   Credits
-------------------------------------  --------  --------  --------  -------
 
Inventory                              $   767             $   718
Allowance for bad debts                    572                 855
Accrued liabilities                      5,269               7,139
Depreciation                                      $   424           $   409
Foreign items                            1,648               2,533
Amortizable intangibles                             6,668               314
Loss on Discontinuance                   3,112                 152
Other                                       16                 158
Net Operating Losses                       ---        ---   10,104
State taxes                              1,075        742    4,799      290
                                       -------    -------  -------  -------
 Total                                  12,459      7,834   26,458    1,013
  Valuation allowance -
  foreign                                 (517)       ---   (5,197)     ---
                                       -------    -------  -------  -------
                                       $11,942    $ 7,834  $21,261  $ 1,013
                                       =======    =======  =======  =======

    At December 31, 1996, the Company has federal net operating loss
    carryforwards of approximately $26,400 which expire in the year 2011,
    foreign net operating loss carryforwards of approximately $7,500 and net
    operating loss carryforwards for state tax purposes of approximately $62,282
    which expire at various dates through 2003.

    A full valuation allowance was provided for certain foreign net operating
    losses and certain state deferred tax assets due to the uncertainty of
    realization of these assets.

    The Company has recorded deferred tax assets of approximately $20.3 million.
    Realization is dependent upon generating sufficient taxable income to
    utilize such items.  Although realization is not assured, management
    believes it is more likely than not that the deferred tax assets for which a
    valuation allowance has not been provided, will be realized.  The amount of
    the deferred tax assets considered realizable, however, could be reduced at
    any time if estimates of future taxable income are reduced.

10. LEASES AND OTHER COMMITMENTS
    ----------------------------

    The Company leases office space and certain office equipment under operating
    leases.  Minimum rental payments in each of the next five fiscal years
    required under leases which have 

                                      F-19
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    initial or remaining lease terms in excess of one year are as follows:

                                      December 31, 1996
                                      -----------------
    1997..............................  $1,691
    1998..............................   1,183
    1999..............................     730
    2000..............................     388
    2001..............................     152

    Rent expense for the years ended December 31, 1994, 1995, and 1996 was
    $2,184, $1,321 and $177, respectively.

    In accordance with several product acquisitions and licensing agreements and
    subject to certain cancellation rights reserved by the Company, the Company
    may be required to purchase inventory or make minimum payments totalling
    $34,800 through 2001 and make royalty payments totalling $1,878 through
    1998.

    The Company has agreed to purchase a fully equipped pharmaceutical
    manufacturing facility from Searle for $6.3 million (Canadian) which is
    expected to be finalized in mid 1997.

11. EMPLOYEE BENEFITS
    -----------------

    The Company has employment agreements with certain of its employees which
    provide them with continued compensation for a period of two to five years
    in the event of their termination by the Company and provide certain of them
    with additional payments on termination by the Company equal to three to
    five times a portion of their average bonus and incentive compensation from
    July 1, 1988 to their termination date.

    The Company maintains an employee savings plan available to all employees
    who meet certain age and service requirements and may make discretionary
    contributions to the plan based on employee compensation or employee
    contributions.  In the years ended December 31, 1994, 1995 and 1996, the
    Company contributions amounted to $220, $231 and $197, respectively.

    The Company has a money purchase pension plan available to all employees who
    meet certain age and service requirements. The Company makes discretionary
    contributions to the plan based on employee compensation, and the Company
    can choose to terminate the plan at any time. In 1994, 1995 and 1996, the
    Company recorded contributions amounting to $0, $217 and $206, respectively.


                                      F-20
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
    Employee Stock Purchase Plan
    ----------------------------

    The Company's Board of Directors approved the Employee Stock Purchase Plan
    (the "Plan"), which gives employees of the Company the opportunity to
    purchase shares of the Company's common stock through payroll deductions
    beginning on April 1, 1997. Employees can elect to participate in the Plan
    by designating from 1% to 10% of eligible compensation to be deducted from
    pay. On the date of exercise, which is the Friday before the 15th of the
    month following each quarter end, the per share purchase price will be 85%
    of the average high and low per-share trading price of Roberts common stock
    on the NASDAQ Stock Market on that date. 500,000 shares of the Company's
    Common Stock have been reserved for issuance under the Employee Stock
    Purchase Plan.

12. CONTINGENCY
    -----------

    A shareholder class action suit has been instituted in the United States
    District Court for the District of New Jersey against the Company and
    certain of its officers for alleged violations of certain federal securities
    laws.  The Company is not able to predict the outcome of this proceeding at
    this time, and management is not able to determine the amount of the
    potential liability, if any.  The Company believes that it has complied with
    all of its obligations under the federal securities laws.  The Company
    intends to defend vigorously against the plaintiff's allegations and
    considers such allegations to be without merit.

13. ACQUISITIONS
    ------------

    In 1994, 1995 and 1996, the Company acquired inventory, trademarks and other
    rights to several products from various pharmaceutical companies.  The
    aggregate price of these acquisitions was $21,996, $22,254 and $8,052,
    respectively, consisting of cash and notes payable.  The intangibles related
    to acquisitions are being amortized on the straight-line basis over periods
    ranging from twenty-five to forty years.


                                      F-21
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14. SEGMENT REPORTING
    -----------------

    Selected financial information of the Company's geographic segments for the
    years ended December 31, 1994, 1995 and 1996 are as follows:
 
                                Years Ended December 31,
                              -------------------------------
Geographic segments             1994       1995       1996
                              ---------  ---------  ---------
 
Revenues - nonaffiliates
 
     Domestic                 $ 67,776   $ 90,177   $ 74,422
     Foreign                    21,244     23,250     23,689
                              --------   --------   --------
                              $ 89,020   $113,427   $ 98,111
                              ========   ========   ========
 
Revenues - affiliates
     Domestic                 $    663   $    483   $    174
                              ========   ========   ========
 
Operating income (loss)
     Domestic                 $ 27,261   $ 10,795   $(46,501)
     Foreign                     2,026     (1,424)    (1,513)
     Adjustments and
      eliminations              (3,485)    (2,498)    (2,181)
                              --------   --------   --------
                              $ 25,802   $  6,873   $(50,195)
                              ========   ========   ========
 
Identifiable assets at end
 of period
     Domestic                 $289,395   $294,247   $321,809
     Foreign                    50,282     48,541     52,597
     Adjustments and
      eliminations              (3,485)    (2,498)    (2,181)
                              --------   --------   --------
                              $336,192   $340,290   $372,225
                              ========   ========   ========

    Intercompany revenues are based on market conditions at the time of sale.
    Foreign operations primarily include the results of operations in the United
    Kingdom, Canada and the Organization for Economic Cooperation and
    Development countries which include the Republic of Ireland, certain other
    Western European countries and Japan.


                                      F-22
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15. RELATED PARTY TRANSACTIONS
    --------------------------

    In 1992 and 1993, the Company entered into contracts with Yamanouchi U.K.
    Limited, a subsidiary of Yamanouchi Pharmaceutical Co., Ltd. of Japan, for
    clinical trials research.  These contracts have subsequently been assigned
    to Yamanouchi U.S.A. Inc., a subsidiary of Yamanouchi. As of December 31,
    1994, 1995, and 1996, Yamanouchi owned 27.5, 27.2 and 22.0 percent of the
    Company's outstanding Common Stock, respectively.  At December 31, 1994 and
    1995, accounts receivable and unbilled revenues from these contracts
    totalled $7.3 million, and $.6 million, respectively.  Related revenues in
    the years 1994 and 1995 amounted to $10.2 million and $.5 million,
    respectively.  With the Company's decision to dispose of the contract
    research division, these revenues have been reclassified and reported in
    results from discontinued operations.  In March 1995, the Company resolved a
    contract interpretation issue with Yamanouchi concerning billings for costs
    incurred by the Company under the clinical research contracts.  As a result,
    1994 contract research revenue and operating income were reduced by
    approximately $2.4 million. Net income for 1994 was reduced by approximately
    $1.5 million.

16. DISCONTINUED OPERATIONS
    -----------------------

    In August 1995, the Company decided to seek a buyer for the assets of its
    Pronetics (Homecare) subsidiaries which were located in New York, New
    Jersey, North Carolina, and South Carolina.

    The sale of the Homecare division was expected to result in a loss at
    closing.  Accordingly, the Company charged 1995 operations with the
    estimated loss on discontinuing Homecare of $9.7 million, including a
    provision of $1.9 million for operating losses until disposal of which $1.3
    million was used in the third and fourth quarters of 1995.

    At December 31, 1995, net assets expected to be realized, consisting
    primarily of inventory, receivables, plant and equipment, totaled $3.8
    million.

    Sales of the Homecare subsidiaries were essentially completed in December
    1996.  The total realized from the sales was $2.7 million.  The additional
    loss on sale was offset by a decrease in the assets held for sale and lower
    than expected losses from operations in 1996. There was no income statement
    effect from the final disposition of the Homecare division.


                                      F-23
<PAGE>
 
                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    An additional loss of $2.5 million on disposal of the Hauck division was
    recognized in 1996.  This expense was due to impairment of the division's
    product intangibles.

    In March 1996, the Company announced its plan to discontinue and divest VRG,
    a contract clinical research organization. The Company expected the sale of
    VRG to result in a loss at closing.

    Accordingly, the Company charged 1995 operations with the estimated loss on
    discontinuing VRG of $12.8 million, including a provision of $5.0 million
    for operating losses until disposal.

    At December 31, 1995, net assets expected to be realized, consisting
    primarily of receivables and plant and equipment, totaled $0.5 million.

    In 1996, the Company reassessed the estimated operating loss which
    resulted in an income statement impact of a $3.1 million gain.  As of
    December 31, 1996 the Company is still seeking a buyer for the VRG division.

    Revenues from VRG and Homecare for the years ended December 31, 1994 and
    1995 were $23.2 million and $12.5 million, respectively.

17. FAIR VALUE OF FINANCIAL INSTRUMENTS
    -----------------------------------

    The carrying amount of cash and cash equivalents approximates fair value due
    to the short-term maturities of these instruments.  The fair value of
    marketable securities was estimated based on quotes obtained from brokers.
    The fair value of long-term debt is estimated based on the discounted future
    cash flows using currently available interest rates.
 
                                  December 31, 1996
                             ---------------------------
                             Carrying Amount  Fair Value
                             ---------------  ----------
Cash and cash equivalents            $87,125     $87,125
Marketable securities                  7,793       7,672
Long-term debt                        17,015      16,382

    The carrying amounts in the table are included in the consolidated balance
    sheet under the indicated captions.


                                      F-24
<PAGE>

                      ROBERTS PHARMACEUTICAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.  QUARTERLY RESULTS OF OPERATIONS
     -------------------------------

     The following table presents summarized quarterly results for
     1996 (in thousands, except per share data).
 
<TABLE> 
<CAPTION> 
                                                                       (Unaudited)
                                             First         Second     Third     Fourth
                                             ---------     ---------  -------   ---------     
<S>                                          <C>           <C>        <C>       <C>
                                      
Revenues                                     $ 17,228      $26,803   $ 21,688      $32,392
Gross profit                                    8,288(1)    13,325     11,331       15,378
Net earnings                                   (4,212)       2,215(2)  (3,133)(2)  (28,589)(3)
                                                                              
Net earnings per share                       $   (.22)     $   .12   $   (.40)(4)  $ (1.83)(4)
</TABLE> 
 
The following table presents summarized quarterly results for
 1995 (in thousands, except per share data).
 
<TABLE> 
<CAPTION> 
                                                                         (Unaudited)
                                      
                                             First         Second     Third     Fourth
                                             ---------     ---------  -------   ---------     
<S>                                          <C>           <C>        <C>       <C>
                                      
Revenues                                     $16,174       $30,364    $ 34,321  $32,568
Gross profit                                  10,444        17,132      15,911   17,023
Net earnings                                  (1,194)      (10,633)(5)     331  (12,846)(6)
                                      
Net earnings per share                       $  (.06)      $  (.57)   $    .02  $  (.69)
</TABLE>



    (1) Subsequent to the filing of the Company's quarterly report on Form 10-Q
        for the three months ended March 31, 1996, the Company reclassified as
        cost of sales, certain marketing and administration expenses in an
        aggregate amount of $180,000, thereby reducing the previously reported
        gross profit by the same amount.

    (2) Includes a $3.969 million credit for the reassessment of the reserve for
        discontinued operations, established in 1995.

    (3) Includes a $25.4 million charge for the loss on intangible assets
        resulting from the sale of certain product rights and adoption of
        Statement of Financial Accounting Standards No. 121, "Accounting for the
        Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
        Of." (See Note 5.)

    (4) Includes $.21 and $.40 per share charge for the third and fourth
        quarter, respectively, pursuant to the 10% discount to market upon
        conversion of the 5% Preferred Stock into Common Stock. Such amount was
        not included in the Company's third quarter 1996 10-Q. The amount is
        included based on the SEC position effective March 13, 1997 on such
        discounts. In addition, includes $.02 and $.04 per share charge for the
        third and fourth quarter, respectively, pursuant to dividends paid and
        accrued on 5% Preferred Stock.

    (5) Includes a $10.992 million charge for disposal of Homecare division.

    (6) Includes a $11.506 million charge for disposal of VRG division.


                                      F-25
<PAGE>


                                                                     SCHEDULE II
 
                       ROBERTS PHARMACEUTICAL CORPORATION
                       VALUATION AND QUALIFYING ACCOUNTS
                      FOR THE YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
 
 
                                                           Additions              
                                Balance         -----------------------------------             Balance
                                Beginning of    Charged to          Charged to                  End of
                                Period          Costs and Expenses  Other Accounts  Deductions  Period
                                --------------  ------------------  --------------- ----------  -------
<S>                             <C>              <C>                 <C>            <C>         <C>
 
Allowance for uncollectibles    $ 1,754               ---                   ---     $    314    $ 1,440

Allowance for return goods      $17,780           $ 6,041                   ---     $  7,523    $16,298

</TABLE> 


                                      F-26
<PAGE>



                                                                     SCHEDULE II
 
                       ROBERTS PHARMACEUTICAL CORPORATION
                       VALUATION AND QUALIFYING ACCOUNTS
                      FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
 
 
                                                           Additions              
                                Balance         -----------------------------------             Balance
                                Beginning of    Charged to          Charged to                  End of
                                Period          Costs and Expenses  Other Accounts  Deductions  Period
                                --------------  ------------------  --------------- ----------  -------
<S>                             <C>              <C>                 <C>            <C>         <C>
 
Allowance for uncollectibles    $2,195           $  130                    ---      $  (571)    $ 1,754
 
Allowance for return goods      $8,951           $7,669                 $6,154(1)   $(4,994)    $17,780
 
</TABLE>

(1)  Allowance established in connection with product acquisitions.


                                      F-27
<PAGE>
 
                                                                     SCHEDULE II
 
                       ROBERTS PHARMACEUTICAL CORPORATION
                       VALUATION AND QUALIFYING ACCOUNTS
                      FOR THE YEAR ENDED DECEMBER 31, 1994



<TABLE>
<CAPTION>
 
 
                                                           Additions              
                                Balance         -----------------------------------             Balance
                                Beginning of    Charged to          Charged to                  End of
                                Period          Costs and Expenses  Other Accounts  Deductions  Period
                                --------------  ------------------  --------------- ----------  -------
<S>                             <C>              <C>                 <C>             <C>         <C>
Allowance for uncollectibles     $2,199          $  622               $  270         $  (896)    $2,195

Allowance for return goods       $7,240          $4,253               $4,485(1)      $(7,027)   $8,951

</TABLE> 
(1)  Allowance established in connection with product acquisitions.

                                     F-28
<PAGE>
 
                                 Exhibit Index

Exhibit No.
-----------

zz 2.2.03      Agreement and Plan of Merger, dated March 1992, among the
               Company, NCRC of New Jersey, Inc., a wholly owned subsidiary of
               the Company, and National Clinical Research Center, Inc.
               ("NCRC"). Upon the request of the Securities and Exchange
               Commission, the Company agrees to furnish a copy of schedules
               3.A.1 through 3.A.30 to the Agreement and Plan of Merger
               described as follows: 3.A.1-Good Standing of NCRC; 3.A.2-List of
               NCRC Subsidiaries; 3.A.3-Authorized Capitalization of NCRC; 
               3.A.4-Financial Statements of NCRC; 3.A.5-Records and Books of
               Account of NCRC; 3.A.6-Organization Documents with respect to
               NCRC; 3.A.7-Liabilities of NCRC; 3.A.8-Tax Claims Against NCRC;
               3.A.9-Liens and Encumbrances Against NCRC Assets; 3.A.10- List of
               NCRC Assets; 3.A.11-Intellectual Property Rights of NCRC; 3.A.12-
               List of NCRC Insurance Policies; 3.A.13-Contracts and Commitments
               Involving NCRC; 3.A.14-Customers and Suppliers of NCRC; 3.A.15-
               Legal Proceedings Involving NCRC; 3.A.17-NCRC Licenses; 3.A.21-
               Actions by NCRC not in the Ordinary Course; 3.A.23-List of
               Capital Projects and Expenditures by NCRC; 3.A.24-List of
               Employees of NCRC and Past and Future Compensation; 3.A.28-ERISA
               Plans of NCRC; 3.A.29-Environmental Claims Involving NCRC; 
               3.A.30-Aging Schedule of Accounts Receivable of NCRC.

zz 2.2.04      Form of Escrow Agreement to be used in connection with the
               Agreement and Plan of Merger, dated March 1992, among the
               Company, NCRC of New Jersey, Inc., a wholly owned subsidiary of
               the Company, and NCRC.

o    3.1.1     Amended and Restated Certificate of Incorporation of Registrant
               filed with the Secretary of State of the State of New Jersey on
               February 1, 1988 and Certificates of Amendment thereto dated
               February 2, 1988 and October 31, 1989, respectively.

     3.1.2     Certificate of Amendment, dated August 26, 1996, to the Amended
               and Restated Certificate of Incorporation of Roberts
               Pharmaceutical Corporation.

ee   3.1.3     Certificate of Amendment, dated August 29, 1996, to the Amended
               and Restated Certificate of Incorporation of Roberts
               Pharmaceutical Corporation.

     3.1.4     Certificate of Amendment, dated November 25, 1996, to the Amended
               and Restated Certificate of Incorporation of Roberts
               Pharmaceutical Corporation.

y     3.2      By-laws of the Registrant, as amended.


                                      E-1
<PAGE>

+     4.1      Form of Specimen Certificate, Roberts Pharmaceutical Corporation
               Common Stock.

dd    4.2      Form of Specimen Certificate, Roberts Pharmaceutical Corporation
               5% Convertible Preferred Stock.
 
dd    4.4      Form of Stock Purchase Agreement, dated July 17, 1996, executed
               by and between Roberts and the purchasers of the Common Stock in
               the Common Stock Private Placement.

dd    4.5      Form of Preferred Stock Investment Agreement, dated August 29,
               1996, executed by and between Roberts and the purchasers of the
               5% Convertible Preferred Stock in the Preferred Stock Private
               Placement.

dd    4.6      Form of Stock Purchase Warrant used in connection with the Common
               Stock Private Placement.

dd    4.7      Form of Stock Purchase Warrant used in connection with the
               Preferred Stock Private Placement.

ff    4.8      Rights Agreement, dated as of December 16, 1996, between Roberts
               and Continental Stock Transfer & Trust Company and the Summary of
               Rights to purchase Roberts Preferred Stock.

ff    4.9      Form of Specimen Rights Certificate to be used upon the
               occurrence of a "Distribution Date" as defined in the Rights
               Agreement.

+    10.1      License Agreement (United States), dated November 6, 1989,
               between Roberts and Istituto Biologico Chemioterapico (ABC)
               S.p.A.

+    10.2      License Agreement (United Kingdom), dated November 6, 1989,
               between Roberts and Istituto Biologico Chemioterapico (ABC)
               S.p.A.

o    10.3      License Agreement, dated January 1, 1985, between the National
               Technical Information Service and Roberts.

o    10.4      Agreement, dated October 1, 1985, between Hafslund Nycomed Pharma
               AG (formerly CL Pharma AG) and Roberts Laboratories, Inc., a
               wholly owned subsidiary of Roberts.

aa   10.4.1    Amendment, dated January 19, 1994, to Agreement, dated October 1,
               1985, between Hafslund Nycomed Pharma AG and Roberts
               Laboratories, Inc., a wholly owned subsidiary of Roberts.


                                      E-2
<PAGE>
 
o    10.16     Agreements and other documents of Roberts, Hafslund Nycomed AG
               and Linz-Roberts, Inc. including the following exhibits thereto:

               (a) Subscription and Shareholders Agreement, dated December 1,
                   1985, between Roberts, Hafslund Nycomed Pharma AG and Linz-
                   Roberts, Inc., including the following exhibits thereto:

                   (i)   Certificate of Incorporation of Linz-Roberts, Inc.

                   (ii)  By-Laws of Linz-Roberts, Inc.

                   (iii) License Agreement, dated January 1, 1985, between the
                         National Technical Information Service and Roberts.
                         (See Exhibit 10.3)

                   (iv)  Agreement of Assignment, dated December 1, 1985,
                         between Roberts and Linz-Roberts, Inc.

                   (v)   Research and Development Agreement, dated as of 
                         December 1, 1985, between Vukovich Research Group, Inc.
                         and Roberts

               (b) License and Distribution Agreement, dated December 1, 1985,
                   between Roberts and Hafslund Nycomed Pharma AG.

o   10.17      License Agreement, dated October 31, 1988, between the Salk
               Institute for Biological Studies and Roberts.

(*) 10.20.1    Employment Agreement, dated as of November 19, 1996,
               between Roberts and John T. Spitznagel.

(*) 10.20.2    Employment Agreement, dated as of November 19, 1996,
               between Roberts and Peter M. Rogalin.

(*) bb 10.21   Employment Agreement, dated as of December 20, 1994, between
               Roberts and Robert A. Vukovich.

(*) bb 10.23   Employment Agreement, dated as of December 20, 1994, between
               Roberts and Robert W. Loy.

(*) bb 10.24   Employment Agreement, dated as of December 20, 1994, between
               Roberts and Anthony A. Rascio.

o   10.26      Rental Deposit Deed, dated September 28, 1988, between the
               University of Surrey and Roberts relating to the leased office
               space in Guildford, England.


                                      E-3
<PAGE>
 
o   10.27      Underlease, dated September 28, 1988, between the University of
               Surrey and Roberts relating to the leased office space in
               Guildford, England.

xx  10.42      Distribution Agreement, dated February 15, 1991, between Roberts
               and Flint Laboratories (Canada) Ltd.

++  10.43      Agreement for Products and Sale of Assets, dated March 6, 1991,
               between Norwich Eaton Pharmaceuticals, Inc. and Roberts
               Laboratories Inc., a wholly owned subsidiary of Roberts.

y   10.48      License Agreement, dated as of August 1, 1991, between Bristol-
               Myers Squibb Co. and Roberts Laboratories Inc., a wholly owned
               subsidiary of Roberts.

y   10.51      Agreements of Roberts Laboratories Inc., a wholly owned
               subsidiary of Roberts, Boehringer Ingelheim Limited, Windsor
               Healthcare Limited and Altam Pharmaceuticals Limited:

               (a) Agreement, dated December 5, 1991, by and among Roberts
                   Laboratories Inc., a wholly owned subsidiary of Roberts,
                   Boehringer Ingelheim Limited and Windsor Healthcare Limited.

               (b) Supplemental Agreement, dated December 5, 1991, by and among
                   Roberts Laboratories Inc., a wholly owned subsidiary of
                   Roberts, Boehringer Ingelheim Limited and Windsor Healthcare
                   Limited.

y   10.52      Dopar Agreement for Purchase and Sale of Assets, dated December
               6, 1991, between Norwich Eaton Pharmaceuticals, Inc. and Roberts
               Laboratories Inc., a wholly owned subsidiary of Roberts.

k   10.53      Agreements of Roberts, Roberts Laboratories Inc. and Monmouth
               Pharmaceuticals Ltd., wholly owned subsidiaries of Roberts,
               American Home Products Corporation, John Wyeth & Brother Limited
               and Ayerst, McKenna & Harrison Inc.

               (a) Agreement, dated December 20, 1991, by and among Roberts,
                   Roberts Laboratories Inc., a wholly owned subsidiary of
                   Roberts, American Home Products Corporation, John Wyeth &
                   Brother Limited and Ayerst, McKenna & Harrison, Inc.

               (b) Manufacturing Agreement, dated December 24, 1991, between
                   John Wyeth & Brother Limited and Monmouth Pharmaceuticals
                   Ltd., a wholly owned subsidiary of Roberts.


                                      E-4
<PAGE>

               (c) AHPC License Agreement, dated December 24, 1991, between
                   American Home Products Corporation and Roberts Laboratories
                   Inc., a wholly owned subsidiary of Roberts.

               (d) The Ayerst License Agreement, dated December 24, 1991,
                   between Ayerst, McKenna & Harrison Inc. and Roberts
                   Laboratories Inc., a wholly owned subsidiary of Roberts.

               (e) The Wyeth License Agreement, dated December 24, 1991, between
                   John Wyeth & Brother Limited and Roberts Laboratories Inc., a
                   wholly owned subsidiary of Roberts.

               (f) Distribution Agreement, dated December 24, 1991, between John
                   Wyeth & Brother Limited and Monmouth Pharmaceuticals Ltd., a
                   wholly owned subsidiary of Roberts.

               (g) Assignments, each dated December 24, 1991, between American
                   Home Products Corporation and Roberts Laboratories Inc., a
                   wholly owned subsidiary of Roberts.

               (h) Assignment, dated December 24, 1991, between John Wyeth &
                   Brother Limited and Roberts Laboratories Inc., a wholly owned
                   subsidiary of Roberts.

k   10.55      Stock Purchase Agreement, dated as of January 22, 1992, between
               Roberts and Yamanouchi Pharmaceutical Co., Ltd., including
               Shareholder Agreement dated as of January 22, 1992 between Dr.
               Robert A. Vukovich and Yamanouchi Pharmaceutical Co., Ltd. which
               comprises Annex A to such agreement.
 
j   10.56      Distribution Agreement, dated March 31, 1992, between Research
               Industries Corporation and Roberts Pharmaceutical of Canada Inc.,
               a wholly owned subsidiary of Roberts.

j   10.57     License Agreement, dated April 2, 1992, between Bayer AG and
              Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.

j   10.58     License Agreement, dated April 10, 1992, between Ortho
              Pharmaceutical Corporation and Roberts Laboratories Inc., a wholly
              owned subsidiary of Roberts.

j   10.59     Purchase Agreement, dated July 6, 1992, between Galen Limited and
              Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.


                                      E-5
<PAGE>
 
kk  10.60     Asset Purchase Agreement, dated September 29, 1992, between Smith-
              Kline Beecham Pharmaceuticals, an unincorporated division of 
              Smith-Kline Beecham Corporation, and Roberts Laboratories Inc, a
              wholly owned subsidiary of Roberts.

j   10.61     Agreement for Purchase and Sale of COMHIST Assets, dated November
              24, 1992, between Procter & Gamble Pharmaceuticals, Inc. and
              Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.
              Upon the request of the Securities and Exchange Commission,
              Roberts agrees to furnish a copy of Schedules 1.1(a) through 6.11
              and Exhibits A through C to the Agreement for Purchase and Sale of
              COMHIST Assets as follows: 1.1(a) - Schedule of Trademarks; 1.1(b)
              -Schedule of Know-How; 1.1(d) - Tooling Schedule; 1.4 -Allocation
              of Purchase Price Schedule; 6.6(4) - Intellectual Property Claims
              Schedule; 6.10 - Schedule of Customers; 6.11 - Financial
              Information Schedule; A - Form of Trademark Assignment; B - Form
              of Bill of Sale; C -Contract Manufacturing Agreement.

j   10.63     Purchase and Sale Agreement, dated December 21, 1992, between The
              Du Pont Merck Pharmaceutical Company and Roberts Laboratories
              Inc., a wholly owned subsidiary of Roberts.

j   10.64     Asset Purchase Agreement, dated December 28, 1992, between G.D.
              Searle & Co. and Roberts Laboratories Inc., a wholly owned
              subsidiary of Roberts. Upon the request of the Securities and
              Exchange Commission, Roberts agrees to furnish a copy of Exhibits
              A and B, Schedules 1.12 through 4.2(d), and various miscellaneous
              assignments of copyrights and trademarks to the Asset Purchase
              Agreement as follows: A - Security Agreement; B - Supply
              Agreement; 1.12 -Product Registrations, 2.3 - Purchase Price
              Allocations; 4.1(c) - Contracts Requiring Consents; 4.1(f) -
              Pending Suits and Claims; 4.1(g) - Compliance; 4.1(h) - Material
              Contracts; 4.1(i) - Exceptions to Ownership of Intellectual
              Property; 4.1(j) - Financial Information; 4.1(l) - Customer List;
              4.1(m) - Material Adverse Changes; 4.2(d) - Buyer's Financial
              Statements; assignments of copyrights; assignments of trademarks.

j   10.65     Asset Purchase Agreement, dated March 23, 1993, by and between
              Searle Canada, Inc. and Roberts Laboratories Inc., a wholly owned
              subsidiary of the Company. Upon the request of the Securities and
              Exchange Commission, Roberts agrees to furnish a copy of Exhibit A
              and Schedules 1.5(a) through 5.19 to the Asset Purchase Agreement
              as follows: A -Supply Agreement; 1.5(a) - Sales Retained by
              Seller; 1.5(b) -Pricing Prior to Closing; 1.10- Product
              Registrations; 4.1(c) -Contracts Requiring Consents; 4.1(f) -
              Pending Suits and Claims; 4.1(g) -Compliance; 4.1(h) - Material
              Contracts; 4.1(i) - Exceptions to Ownership of Intellectual
              Property; 4.1(j) - Financial 

                                      E-6
<PAGE>

              Information; 4.1(l) - Customer List;
              4.1(m) - Material Adverse Changes; 5.19 - Packaging Charges.

#   10.67     Copy of form of Option Agreement used in connection with options
              granted under the Roberts Pharmaceutical Corporation Restricted
              Stock Option Plan.

#   10.68     Copy of form of Option Agreement used in connection with options
              granted under the Roberts Pharmaceutical Corporation Incentive
              Stock Option Plan.

j   10.69     Rebate Agreement, dated November 11, 1992, between the Secretary
              of Health and Human Services and Roberts Laboratories, Inc., a
              wholly owned subsidiary of Roberts.

(**)b10.70    Roberts Pharmaceutical Corporation Incentive Stock Option Plan.

(**)b10.71    Roberts Pharmaceutical Corporation Restricted Stock Option Plan.

a   10.72     License Agreement, dated as of March 27, 1993, by and among
              Roberts Laboratories Inc., a wholly owned subsidiary of Roberts,
              Sawai Pharmaceutical Co., Ltd. and Grelan Pharmaceutical Co., Ltd.

a   10.73     Agreements, dated as of May 5, 1993, between Roberts Laboratories
              Inc., a wholly owned subsidiary of Roberts, and Glaxo Canada Inc.,
              dated as of May 5, 1993.

              (a)  First Asset Purchase Agreement.
              (b)  Promotion Agreement.
              (c)  Supply Agreement.
              (d)  Distribution Agreement.
              (e)  License Agreement.
              (f)  Registered User Agreement.
              (g)  Assignment of Trademarks.
              (h)  Second Asset Purchase Agreement.

a   10.74     Stock Purchase Agreement, dated August 30, 1993, by and among
              Roberts, Yamanouchi Pharmaceutical Co., Ltd. and Yamanouchi 
              U.S.A. Inc.

aa  10.75     Amendment to Stock Purchase Agreement, dated August 30, 1993, by
              and among Roberts, Yamanouchi Pharmaceutical Co., Ltd. and
              Yamanouchi U.S.A. Inc.

aa  10.76     Agreements, dated as of September 14, 1993, among Bristol-Myers
              Squibb Company, Bristol-Myers Squibb Company Canada Inc. and
              Roberts Laboratories Inc., a wholly owned subsidiary of Roberts.


                                      E-7
<PAGE>
 
              (a)  COLACE Et Al. Sale Agreement.
              (b)  COLACE Et Al. Supply Agreement.
              (c)  Security Agreement.
              (d)  Notice of Security Interest in Trademark.
              (e)  Assignment of Collateral.
              (f)  Guaranty.

aa  10.77     Underwriting Agreement, dated September 27, 1993, by and among
              Roberts, Morgan Stanley & Co., Incorporated, Merrill Lynch,
              Pierce, Fenner & Smith Incorporated and the several underwriters.

bb  10.78     License Agreement, dated as of July 6, 1994, between The
              Rockefeller University and Roberts Laboratories Inc., a wholly
              owned subsidiary of Roberts.

bb  10.79     Agreements between Roberts Laboratories Inc., a wholly owned
              subsidiary of Roberts, and SmithKline Beecham Pharmaceuticals, an
              unincorporated division of SmithKline Beecham Corporation:

              (a) TIGAN Asset Purchase Agreement dated as of March 27, 1995.
                  Upon the request of the Securities and Exchange Commission,
                  Roberts agrees to furnish a copy of Exhibits A through D and
                  Schedules 5.4 through 5.11 and Appendix I as follows: A - List
                  of Products; B -Assignment and Assumption Agreement; C -
                  Promissory Note; D -Transitional Services Agreement; 5-4 -
                  Financial Information; 5.5 -Litigation; 5.6 - Inventory; 5.7 -
                  Product Formulas; 5.8 - Regulatory Issues; 5.9 - FDA and Other
                  Administrative Approvals, Registrations and Permits; 5.11 -
                  Intellectual Property Rights; I - Purchase Price Adjustments.
              (b) EMINASE Asset Purchase Agreement dated as of March 27, 1995.
                  Upon the request of the Securities and Exchange Commission,
                  Roberts agrees to furnish a copy of Exhibits A through D,
                  Schedules 2.1(a)(1) through 5.11 and Appendices I and II as
                  follows: A - List of Products; B -Manufacturing Agreement; C -
                  Promissory Note; D - Transitional Services Agreement;
                  2.1(a)(1) - Transferable Product Rights; 2.1(a)(2) -Non-
                  Transferable Product Rights; 2.1(b) - Transferred Contracts;
                  5.4 -Financial Information; 5.5 - Litigation; 5.6 - Inventory;
                  5.7 - Product Formulas; 5.8 - Regulatory Issues; 5.9 - FDA and
                  Other Administrative Approvals, Registrations and Permits;
                  5.11 - Intellectual Property Rights; I - Territories; II -
                  Purchase Price Adjustments.

gg   10.80    Distribution Agreement, dated February 23, 1995, between Roberts
              Laboratories, Inc., a wholly owned subsidiary of the Company, and
              Merck and Co., Inc. with respect to NOROXIN.


                                      E-8
<PAGE>

     10.81    License Agreements between Roberts Laboratories Inc., a
              wholly owned subsidiary of Roberts, and Eli Lilly and Company:

             (a) Tazofelone License Agreement dated November 5, 1996.
             (b) Compound LY246736 License Agreement dated November 5, 1996.
             (c) Compound LY353433 License Agreement dated November 5, 1996.
             (d) Compound LY315535 License Agreement dated December 4, 1996.

     10.82   License Agreement between Roberts Laboratories Inc., a wholly owned
             subsidiary of the Company, and Pfizer Inc. with respect to 
             Sampatrilat. Upon request of the Securities and Exchange 
             Commission, Roberts agrees to furnish a copy of Exhibits 1.7(a) and
             3.1(b).

     10.83   Agreement, dated December 31, 1996, by and between Roberts and
             Monsanto Canada, Inc. with respect to Oakville manufacturing
             facility.

     10.84   Divestiture Agreement, dated December 1, 1996, by and among
             Roberts, Pronetics Health Care Group, Inc. (New Jersey), Pronetics
             Health Care Group, Inc. (New York), PHCG, Inc. and MJGC Corp.
             pertaining to the divestiture of certain Homecare operations.

     10.85   Stock Purchase Agreement, dated January 31, 1997, by and among
             Roberts, Pronetics Health Care Group, Inc. (North Carolina) and
             American Homepatient, Inc. pertaining to the divestiture of certain
             Homecare operations.

     11.     Statement re computation of per share earnings.

     21.     Subsidiaries of the Registrant.

     23.     Consent of Coopers & Lybrand L.L.P.

 cc  27.     Financial Data Schedules.

    99.01    List of Investors in Private Placements which has been incorporated
             by reference into Part II of the Form 10-K from the Prospectus
             included as part of the Form S-3 Registration Statement which
             became effective on November 7, 1996.


                                      E-9
<PAGE>
 

      (*)    Constitutes a management contract required to be filed as an
             exhibit pursuant to Item 14(c) of Form 10-K.

      (**)   Constitutes a compensatory plan required to be filed as an exhibit
             pursuant to Item 14(c) of Form 10-K.

      y      Incorporated by reference to the identically numbered exhibit to
             the Registrant's Registration Statement on Form S-4 (Registration
             No. 33-44441).

      o      Incorporated by reference to the identically numbered exhibit to
             Registrant's Registration Statement on Form S-1 (Registration No.
             33-31876).

      +      Incorporated by reference to the identically numbered exhibit to
             Amendment No. 1 to Registrant's Registration Statement on Form S-1
             (Registration No. 33-31876).

      x      Incorporated by reference to the identically numbered exhibit to
             Amendment No. 2 to Registrant's Registration Statement on Form S-1
             (Registration No. 33-31876).

      z      Incorporated by reference pursuant to the identically numbered
             exhibit to Amendment No. 1 to Registrant's Registration Statement
             on Form S-1 (Registration No. 33-40636).

      k      Incorporated by reference to the identically numbered exhibit to
             Registrant's Registration Statement on Form S-1 (Registration No.
             33-45069).

      #      Incorporated by reference to the identically numbered exhibit to
             Registrant's Registration Statement on Form S-8 (Registration No.
             33-34767).

      a      Incorporated by reference to the identically numbered exhibit to
             Registrant's Registration Statement on Form S-3 (Registration No.
             33-68080).

      b      Incorporated by reference to Registrant's Registration Statement on
             Form S-8 (Registration No. 33-51198).

      @      Incorporated by reference to Registrant's Annual Report on Form 10-
             K for the fiscal year ended June 30, 1990.

     zz      Incorporated by reference to Registrant's Annual Report on Form 10-
             K for the fiscal year ended December 31, 1991.

      j      Incorporated by reference to Registrant's Annual Report on Form 10-
             K for the fiscal year ended December 31, 1992.
 


                                     E-10
<PAGE>
 
     aa      Incorporated by reference to Registrant's Annual Report on Form 10-
             K for the fiscal year ended December 31, 1993.

     bb      Incorporated by reference to Registrant's Annual Report on Form 10-
             K for the fiscal year ended December 31, 1994.

     cc      Financial Data Schedules are submitted in electronic format only.

     dd      Incorporated by reference to the identically numbered exhibit to
             Registrant's Registration Statement on Form S-3 (Registration No.
             333-13729).

     ee      Incorporated by reference to Exhibit No. 4.3 to Registrant's
             Registration Statement on Form S-3 (Registration No. 333-13729).

     ff      Incorporated by reference to Exhibit No. 1 to Registrant's
             Registration Statement on Form 8-A.

     gg      Incorporated by reference to Registrant's Annual Report on Form 10-
             K for the fiscal year ended December 31, 1995.

     xx      Incorporated by reference to Registrant's Current Report on Form 8-
             K, dated February 15, 1991.

     ++      Incorporated by reference to Registrant's Current Report on Form 8-
             K, dated March 6, 1991.

     vv      Incorporated by reference to Registrant's Current Report on Form 8-
             K, dated November 5, 1991.

     kk      Incorporated by reference to Registrant's Current Report on Form 8-
             K, dated September 29, 1992.


                                     E-11