<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2000

                                       OR

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

             For the transition period from __________ to __________

                           Commission File No. 0-15242

                          DURAMED PHARMACEUTICALS, INC.

Incorporated Under the                                      IRS Employer I.D.
    Laws of the State                                       No. 11-2590026
        of Delaware
                              7155 East Kemper Road
                             Cincinnati, Ohio 45249
                                 (513) 731-9900

Securities Registered Pursuant to Section 12(b) of the Act:
                                      None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value;  Preferred Stock Purchase Rights

Indicate by checkmark whether the registrant (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.   Yes     X       No
                            --------         --------

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

The aggregate market value of the Common Stock of the registrant held by
non-affiliates of the registrant was approximately $136,411,412 as of March 7,
2001. As of March 7, 2001, 22,271,251 shares of Common Stock with a par value of
$.01 per share were outstanding.
Documents Incorporated by Reference - None



<PAGE>   2

                                     PART I

ITEM 1. BUSINESS.

GENERAL

Duramed Pharmaceuticals, Inc. (the "Company" or "Duramed") develops,
manufactures and markets a line of prescription drug products in tablet, capsule
and liquid forms to customers throughout the United States. Products sold by the
Company include those of its own manufacture and those it markets under
arrangements with other drug manufacturers. The Company sells its products to
drug store chains, drug wholesalers, private label distributors, health
maintenance organizations, hospitals, nursing homes, retiree organizations, mail
order distributors, other drug manufacturers, mass merchandisers and
governmental agencies.

A key aspect of the Company's strategic business plan has been to develop a
portfolio of brand and generic female hormone products focused in the estrogen
replacement therapy ("ERT"), hormone replacement therapy ("HRT") and oral
contraceptive ("OC") categories. In 1999, the Company began marketing its first
brand prescription ERT product, - Cenestin. Cenestin(R) (synthetic conjugated
estrogens, A) Tablets ("Cenestin") is a plant-derived synthetic conjugated
estrogens product for the treatment of moderate-to-severe vasomotor symptoms
associated with menopause. A recent bone marker study of Cenestin demonstrated
the product caused a favorable reduction in bone markers, which indicates a bone
preservation effect. In addition, in the cardiovascular evaluation, a positive
lipid profile was found. The Company anticipates initiating formal clinical
trials in the future to evaluate Cenestin for the prevention of osteoporosis.

In addition to the brand product, Cenestin, the Company has four generic female
hormone products including Apri(TM) (desogestrel and ethinyl estradiol) Tablets
("Apri") the first, and currently only, oral contraceptive bioequivalent to and
therapeutically interchangeable with, the brand products, Ortho-Cept(R) and
Desogen(R) tablets.

Duramed is using, in part, the resources provided by its expanding hormone
product portfolio to move ahead with its long-term product development program
designed to generate a stream of new product offerings, resulting in the Company
emerging as a leader in women's health and the female hormone product market.
Opportunities in this market area include:

         -        additional brand products that include Cenestin in combination
                  with other therapeutic drugs,

         -        other brand pharmaceuticals developed by Duramed alone or in
                  conjunction with strategic partners, and

         -        selected generic pharmaceuticals that have the potential to be
                  marketed as part of a brand identity program.






                                      -1-
<PAGE>   3

The Company's strategy has been, and will remain, to focus its product
development activities primarily on prescription drugs with attractive market
opportunities and potentially limited competition due to technological barriers
to entry, principally female hormone products. In addition to the
women's health and female hormone products markets, Duramed will continue to
seek to obtain products, either through strategic alliances or internal
development, that take advantage of the Company's core competencies and are
logical extensions of the Company's existing product line due to their marketing
or production characteristics. The Company's product development capabilities
include modified release technologies as well as controlled substances
development.

MARKET AND COMPETITION

Cenestin competes in the brand name pharmaceutical market. Cenestin, an estrogen
replacement therapy ("ERT"), competes with other ERT/HRT products in a market
exceeding $2 billion in the U.S. alone. According to leading pharmaceutical
market data providers, the HRT market is growing at a projected annual rate of
10-15%.

ERT/HRT therapies are prescribed for women entering or in menopause; the average
age for women entering menopause is 51 years. According to the American College
of Obstetrics and Gynecology, the first wave of "baby boomer" women (born
between 1945-1960) is now entering menopause and another 20 million will reach
menopause in the next decade. Currently more than 40 million women in the U.S.
are over 50 and eligible to take either ERT (estrogen only) or HRT (estrogen
with progestin).

There are several brand name products that compete in the ERT/HRT therapeutic
category, the most widely prescribed of which is Premarin(R), marketed by
Wyeth-Ayerst Laboratories, Inc. These products are supported by the resources of
larger and more experienced firms with substantially greater resources than
Duramed. Duramed believes that it will be able to compete with these companies
by leveraging the distinctive characteristics of its product. Cenestin is a
plant-derived synthetic conjugated estrogens product. Women have responded
favorably to having a choice in ERT therapies, since Cenestin uses potentially
preferable raw ingredients - plants - as well as state-of-the-art production
technology. To help communicate Cenestin's availability and favorable
characteristics, Duramed entered into an agreement in 1999 with Cardinal Market
Health Sales and Marketing Services ("Cardinal"), a wholly owned subsidiary of
Dublin, Ohio based Cardinal Health, Inc., for ongoing sales, marketing and
distribution support. To expand and enhance the promotion of Cenestin, the
Company entered into a co-promotion agreement with Solvay Pharmaceuticals, Inc.
in 1999. Effective January 1, 2000, the co-promotion agreement was expanded and
extended into a long-term arrangement when Duramed and Solvay Pharmaceuticals
entered into a 10-year marketing agreement whereby the two companies will share
in the profits of Cenestin. Solvay Pharmaceuticals assumed responsibility for
the Cenestin physicians' office promotion, including advertising, sales
promotion and sales force expenses, in exchange for a share of the Cenestin
profits. Solvay Pharmaceuticals receives 80% of the gross profit from Cenestin,
and Duramed receives 20%, until Solvay's cumulative selling and marketing
investment and Duramed's $38 million product investment in 1999 is recovered and
Cenestin becomes an income-producing product. At that point, Cenestin net profit
will be shared evenly by Solvay and Duramed.




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In addition to Cenestin and other brand products that may be developed or
acquired by the Company, for the foreseeable future generic drugs will continue
to contribute to Duramed sales. Generic drugs are the chemical and therapeutic
equivalents of brand name drugs that have gained market acceptance while under
patent protection. In general, prescription generic drug products are required
to meet the same governmental standards as brand name pharmaceutical products
and must receive U.S. Food and Drug Administration ("FDA") approval prior to
manufacture and sale. Generic drug products are marketed after expiration of
patents held by the innovator company, generally on the basis of FDA approved
Abbreviated New Drug Applications ("ANDAs") submitted by the generic
manufacturers. Generic drug products typically sell at prices substantially
below those of the equivalent brand name products. The increasing emphasis on
controlling health care costs, the growth of managed care organizations and the
significant number of drugs for which patents will expire in the next few years
are expected to offer the Company opportunities to selectively grow its generic
product portfolio.

According to UBS Warburg LLC, generic pharmaceutical market opportunities remain
strong. In addition to about $7 billion in major pharmaceutical products already
off patent, but without generic competition, over the next five years patents
will expire for brand products with more than $25 billion in total sales.

Competition in the generic industry is intense. The Company competes with other
generic drug product manufacturers, brand name pharmaceutical companies that
manufacture generic drug products and the original manufacturers of brand name
drug products that continue to produce those products after patent expirations.

As other manufacturers introduce generic products in competition with the
Company's existing products, market share and prices with respect to such
existing products typically decline. Similarly, the Company's potential for
profits is reduced if competitors introduce a product prior to the Company`s
introduction of its product. Accordingly, the level of revenue and gross profit
generated by the Company's current and prospective products depends, in part, on
the number and timing of introductions of competing products and the Company's
timely development and introduction of new products.

The Company believes that the primary competitive factors in the generic market
are the ability to develop and obtain FDA approval for new products on a timely
basis, price, product quality, customer service, breadth of product line and
reputation. Many of the Company's competitors have greater financial and other
resources than the Company and are able to expend more for product development
and marketing.











                                      -3-
<PAGE>   5


PRODUCTS

A summary, by therapeutic classification, of the products manufactured or
marketed by the Company at December 31, 2000 is given below. Chemical entities
and dosage forms discontinued by the Company in 2000 are not included.

<TABLE>
<CAPTION>
       THERAPEUTIC CATEGORY          DURAMED MANUFACTURED        MARKETED FOR OTHERS                TOTAL
                                  ----------------------------  -----------------------  -----------------------------
                                     CHEMICAL       DOSAGE       CHEMICAL    DOSAGE         CHEMICAL       DOSAGE
                                     ENTITIES       FORMS        ENTITIES     FORMS         ENTITIES        FORMS
                                  ============================  =======================  =============================
<S>                                      <C>           <C>          <C>       <C>              <C>           <C>
ADRENAL CORTICAL STEROIDS                1             1             -          -               1             1
ANALGESIC                                2             4             -          -               2             4
ANTI-EMETIC                              1             2             -          -               1             2
CALCIUM CHANNEL BLOCKER                  1             2             -          -               1             2
CARDIOVASCULAR THERAPY                   -             -             1          2               1             2
COUGH/COLD/DECONGESTANT                  5             5             9         11              14            16
DIABETES                                 1             2             -          -               1             2
DIURETIC                                 1             1             -          -               1             1
GASTROINTESTINAL STIMULANTS              -             -             3          3               3             3
FEMALE HORMONE PRODUCTS                  5            14             -          -               5            14
ONCOLOGY                                 -             -             1          2               1             2
RHEUMATOID ARTHRITIS                     1             1             -          -               1             1
VASCULAR HEADACHES                       1             1             1          1               2             2
                                  ----------------------------  -----------------------  -----------------------------
TOTALS                                   19           33             15         19              34            52
                                  ============================  =======================  =============================
</TABLE>









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The Company currently has five ANDAs on file with the FDA. Four of these ANDAs
are for hormone products. Approvals of these filings are expected to begin in
2001. (See Product Development - Internal Research and Development Efforts for
additional information).

Duramed's hormone products accounted for sales of $40.3 million (48.4%), $10.6
million (21.2%) and $3.6 million (7.3%) in 2000, 1999 and 1998, respectively.
Adrenal Cortical Steroid products accounted for 10%, 19% and 26% of net sales in
2000, 1999 and 1998, respectively. Analgesic products accounted for less than
10% in 2000 and 18% and 19% of net sales in 1999 and 1998.

The Company's generic products do not have patent protection and trademarks are
utilized only for its oral contraceptive product line and Cenestin at this time.
On June 1, 1999 the Company was granted a formulation patent for the composition
of Cenestin(R) (synthetic conjugated estrogens, A) Tablets, and solid oral dose
pharmaceutical products containing synthetic conjugated estrogens, A in
combination with a progestin. The patent, titled "Pharmaceutical Compositions of
Conjugated Estrogens and Methods for Their Use," issued on June 1, 1999 by the
U.S. Patent and Trademark Office as U.S. Patent 5,908,638, provides Duramed with
exclusivity through July 26, 2015 for its novel pharmaceutical compositions and
methods for the preparation containing synthetic conjugated estrogens, A for the
treatment of vasomotor symptoms. Additionally, under the provisions of the
Federal Food, Drug and Cosmetic Act Duramed is granted three-year non-patent
market exclusivity for Cenestin. (See Product Development - Internal Research
and Development Efforts.)

The Company has two U.S. patents for controlled release technology. One patented
technology was used in a controlled release product approved by the FDA in 1999.
Duramed has one additional patent application pertaining to drug delivery
systems pending with the U.S. Patent and Trademark Office. All of the modified
release patents relate to technologies that could be used in the development of
proprietary products.

MANUFACTURING

Duramed currently manufactures 19 chemical entities in 33 dosage forms for its
line of prescription drug products. Manufacturing occurs primarily in the
Company's Cincinnati, Ohio facility, which has highly specialized containment
facilities for the production of female hormone products and other products
requiring special handling, including Cenestin. The Company believes that
manufacturing capacity exists to meet demand for its products for the
foreseeable future.

Specialized manufacturing capabilities exist at the Company's facility in
Somerset, New Jersey. This facility has a Drug Enforcement Administration
("DEA") license and is utilized to manufacture products containing controlled
substances as well as certain other pharmaceutical products.


                                      -5-
<PAGE>   7


PFIZER INC. AGREEMENT

In September 1997 Duramed entered into a ten-year renewable manufacturing
agreement with Warner Lambert Corporation, which subsequently merged with Pfizer
Inc. ("Pfizer"). Under the terms of the agreement, Duramed manufactures a
brand name pharmaceutical product for Pfizer, at its Cincinnati manufacturing
facility. The product was approved in 1999 and was introduced into the market in
the first quarter of 2000. The provisions of the agreement include a monthly
lease payment for the term of the agreement. Duramed is compensated on a per
batch manufacturing fee basis.

DISTRIBUTION AGREEMENTS

The Company's business strategy includes enhancing its market position by
entering into strategic alliance agreements. The Company has agreements with
several manufacturers whereby the Company markets and distributes 15 generic
prescription drug products in 19 dosage forms. The terms of these agreements
vary, but typically provide for a sharing of profits between the Company and the
manufacturer.

For the years ended December 31, 2000, 1999 and 1998, respectively, the
percentages of the Company's sales comprised of products purchased from others
and resold were 15%, 31% and 46%. The gross profit generated by these sales was
approximately $3.3 million, $2.0 million and $5.4 million in 2000, 1999 and
1998, respectively. The increase in 2000 resulted from a new product. The
decline in 1999 reflects the transition of products previously purchased from
Ortho-McNeil Pharmaceutical Corporation ("Ortho-McNeil") to Duramed manufactured
products. In 1998, sales volume and profitability for outsourced products
benefited from a price increase for Acetaminophen with Codeine, instituted in
May 1998, the sales of products outsourced from Ortho-McNeil due to product
supply timing, and the launch of Hydroxyurea. These products came under
increased competition in 1999, which reduced their profitability.

ORDER BACKLOG

The dollar amount of the Company's open orders at March 1, 2001 was
approximately $3.5 million as compared with approximately $0.3 million at March
1, 2000. The Company's backlog is not indicative of net sales during the
following reporting period.

SALES AND MARKETING

Duramed sells its products to a broad range of customers located throughout the
United States. These customers include direct buying retail chains, drug
wholesalers, private label distributors, health maintenance organizations,
hospitals, nursing homes, retiree organizations, mail order distributors, other
drug manufacturers, mass merchandisers and government agencies. Despite recent
consolidations among its customers, Duramed continues to effectively penetrate
the market by selling to more than 200 different outlets.


                                      -6-
<PAGE>   8


In 2000, Walgreen Co., Cardinal Health and McKesson Drug Co. accounted for 15%,
13% and 10%, respectively, of the Company's net sales. Walgreen Co. accounted
for 13% of the Company's net sales in 1999 and 10% in 1998. The breakdown of
sales by major category reflects the growth of Duramed's direct distribution
activities and strengthening relationships with drug wholesalers.

<TABLE>
<CAPTION>
                                    2000                      1999                        1998
                                    ----                      ----                        ----
<S>                                 <C>                       <C>                        <C>
         Chains                     46.4%                     44.5%                      39.2%
         Wholesalers                40.7                      33.2                       37.0
         Distributors               12.8                      19.7                       21.6
         Other                       0.1                       2.6                        2.2
                                   -----                     -----                      -----
                  Total            100.0%                    100.0%                     100.0%
                                   =====                     =====                      =====
</TABLE>

The Company markets its products principally under the Duramed label. On all
prescription products that it manufactures, Duramed is named on the label as the
manufacturer. Marketing and sales efforts for the generic product line are
conducted principally by Duramed employees. Duramed promotes its products
through catalogs, trade shows, publications, telemarketing and direct sales.

The brand pharmaceutical market, which Duramed entered following FDA approval of
Cenestin, presents challenges that are different from those of the generic
market. Generic pharmaceuticals generally are familiar to health care
professionals, such as physicians, pharmacists and payors. Brand products must
be marketed to health care professionals in order to create interest and demand.

CENESTIN MARKETING AND DISTRIBUTION AGREEMENTS

On March 30, 1999, Duramed entered into an agreement with Cardinal for
launch-related and ongoing sales, marketing and distribution support for
Cenestin. Under the terms of the three-year agreement, Cardinal has recruited,
trained and deployed a team of dedicated, full-time sales professionals and
experienced sales managers. Additionally, Cardinal assists in the distribution
and stocking of Cenestin. In return, Duramed compensates Cardinal according to a
fixed schedule with performance incentives for achievement of certain market
share targets. At the end of the three-year period, the Company has the option
to retain the sales team as full-time Duramed employees.

Solvay Pharmaceuticals, Inc. Agreements

To expand and enhance the promotion of Cenestin, in the fourth quarter of 1999,
Duramed entered into an agreement with Solvay Pharmaceuticals to jointly promote
three of the companies' hormone products in the United States: Duramed's
Cenestin(R) (synthetic conjugated estrogens, A) Tablets and Solvay
Pharmaceuticals' Estratest(R)/Estratest(R) H.S. Tablets (esterified estrogens
and methyltestosterone) and Prometrium(R) (progesterone) Capsules.


                                      -7-
<PAGE>   9


The agreement resulted in a combined national sales force of more than 300
Cardinal and Solvay Pharmaceuticals sales representatives promoting the alliance
products to physicians across the United States. Solvay Pharmaceuticals'
resources also include teams of regional marketing managers, field trainers,
medical liaison teams and a medical advisory committee comprised of leading
women's health physicians.

Cenestin was designated as the primary product in the Duramed/Solvay
Pharmaceuticals alliance while the Solvay Pharmaceuticals products address
additional important therapeutic requirements in women's health and complement
Cenestin in the pharmaceutical sales effort.

Solvay Pharmaceuticals, based in Marietta, Ga., is a research-based
pharmaceuticals company, active in the therapeutic areas of cardiology,
gastroenterology, mental health and women's health. It is the second largest
pharmaceutical company in the U.S. hormone replacement therapy market, having
advanced from its previous standing of sixth in the industry in 1996, and is a
member of the worldwide Solvay Group of chemical and pharmaceutical companies,
headquartered in Brussels, Belgium. The Group's members employ some 33,000
people in 46 countries. Its 2000 revenue worldwide was 9.0 billion EUR ($9.0
billion) from four operating sectors: Chemicals, Plastics, Processing, and
Pharmaceuticals.

Effective January 1, 2000 the co-promotion agreement was expanded and extended
into a long-term arrangement when Duramed and Solvay Pharmaceuticals entered
into a 10-year marketing agreement whereby the two companies will share in the
profits of Cenestin. Solvay Pharmaceuticals assumed responsibility for the
advertising and sales promotion and agreed-upon expenses related to Cenestin,
including the direct selling expenses of Cardinal. In consideration of the
aforementioned services and funding, Solvay Pharmaceuticals receives 80% of the
gross profit from Cenestin, and Duramed receives 20%, until Solvay's cumulative
selling and marketing investment is recovered and Cenestin becomes an
income-producing product. The Company records the amount for reimbursement of
Solvay Pharmaceuticals' marketing expenses (80% of Cenestin gross profits) as
"brand marketing expenses" on the accompanying Consolidated Statement of
Operations.

According to the agreement, after Solvay's cumulative selling and marketing
investment is recovered and the income producing level is achieved, Duramed will
receive 80% of the gross profit dollars and Solvay Pharmaceuticals 20% until
Duramed recovers the remaining portion of $38 million the Company invested in
the product during 1999. After each company has recovered its specified
investments, the net profit dollars will be split equally for the remainder of
the ten-year term of the agreement. (See the Management's Discussion and
Analysis of Financial Condition and Results of Operations for further
information regarding the details of the Company's agreements with Solvay
Pharmaceuticals.)






                                      -8-
<PAGE>   10


PRODUCT DEVELOPMENT

During the fiscal years ended December 31, 2000, 1999 and 1998, product
development expenditures were $3.8 million, $7.3 million, and $5.3 million,
respectively. The decrease in 2000 was due to the reduction in biostudy
expenses, the termination of the Tamoxifen project and the savings realized by
consolidating the Company's product development activities into the Cincinnati,
Ohio facility.

The Company's product development strategy consists of separate but related
components:

         -        an internal research and development staff, and

         -        joint product development efforts with, or purchasing new
                  product formulations from, other parties.

INTERNAL RESEARCH AND DEVELOPMENT EFFORTS -- The Company's internal research and
development activities are headquartered at its facility in Cincinnati. The
knowledge and experience attained through the pursuit of the synthetic
conjugated estrogens product has enabled the Company to pursue the development
of additional hormone products focused in the estrogen and hormone replacement
therapy and oral contraceptive product categories. An important aspect of the
program is the development of additional brand products that include Cenestin in
combination with other therapeutic drugs and active development work for such
products is underway. Based on the favorable outcome of bone marker studies
conducted in 1999, Duramed anticipates initiating formal clinical trials in the
future to evaluate Cenestin for the prevention of osteoporosis.

The Company also has technical expertise and capabilities with respect to
advanced drug delivery systems. This technology provides the Company with
advantages with respect to the development of drug products with complex drug
delivery systems. Products of this type typically experience limited competition
due to the technical barriers to development, and therefore generate higher
margins. The Company believes that it has assembled a strong product development
team with the demonstrated ability to formulate, file and commercialize a
portfolio of new products.

The Company currently has five ANDAs on file with the FDA, four of which are for
hormone products. Of the five products awaiting approval at the FDA, two
represent ANDAs for which Duramed was first to file. In 2000, the combined brand
product sales for these two products were approximately $250 million.

The Company's filing on Mircette(TM), one of its first-to-file products, is
currently under litigation. The Mircette patent is held by Biotechnology General
Corp., which has filed suit for declaratory and injunctive relief claiming
Duramed's product infringes its patent. Duramed is vigorously defending this
lawsuit, claiming that the patent at issue is invalid and, in any event, not
infringed. The Waxman-Hatch Act provides that Duramed will be awarded a 180-day
period of generic marketing exclusivity should it prevail in the lawsuit.



                                      -9-
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In 2001, the Company expects to file five additional ANDAs for hormones,
including a progestin, an estrogen, and three oral contraceptives. Duramed also
anticipates filing three non-hormone ANDAs.

Further, Duramed has four products, in various stages of development, that the
Company intends to file as New Drug Applications ("NDA"). These products,
including the combination of Cenestin with a natural progesterone, if approved,
will expand the Cenestin brand franchise. Evaluation of the potential for
patenting the technology used to develop these extensions of the Cenestin
franchise is also in-process. Assuming successful completion of the required
clinical studies and FDA approval, we anticipate these products could be to
market in three to four years. The Company's business strategy includes pursuing
strategic partnerships on product projects where appropriate in order to fund
those projects.

Formulations for all new products are subjected to laboratory testing and
stability studies and, when required to support an ANDA filing, are tested for
bioequivalence to the reference product by qualified laboratories. Biostudies,
used to demonstrate that the rate and extent of absorption of a generic drug
statistically conform to the corresponding innovator product, currently cost in
the range of $250,000 to $700,000. Biostudies for certain product classes exceed
that range. If the accumulated data demonstrates bioequivalency, submission is
then made to the FDA for its review and approval to manufacture and market.

The cost for clinical studies of brand pharmaceutical products typically is
substantially higher than the bioequivalency studies to support an ANDA
submission. The Company anticipates multi-million dollar costs and up to three
years duration for the previously discussed clinical studies for the prevention
of osteoporosis indication for Cenestin and for the combination products.

The development of new generic products, including formulation, stability
testing and obtaining FDA approval, generally takes a minimum of 21-28 months.
Development of sustained release prescription products typically requires at
least two bioequivalence studies for most products and, therefore, total
development time, including FDA approval, may be two or three years. Liquid
product development frequently does not require bioequivalence studies and,
including formulation, stability testing and FDA approval, generally takes a
minimum of 12-18 months.

New drug applications are reviewed under the provisions of the Prescription Drug
User Fee Act, which require the payment of a user fee and provide for a standard
review period of twelve months or less.

Duramed filed the NDA for its synthetic conjugated estrogens drug product under
Section 505(b)(2) (and related regulations) of the Federal Food, Drug and
Cosmetic Act ("Act"). The NDA for Cenestin was approved under the Act, pertinent
provisions of which grant Duramed three years non-patent market exclusivity.
This delays effective approval of any subsequently approved application
submitted for the same drug substance by another company for three years from
the date of approval of Cenestin's application. Additionally, the three-year,
non-patent market exclusivity also precludes the FDA from approving any ANDA as
a generic equivalent to Cenestin during that time period. On June 1, 1999 the
Company was granted a formulation



                                      -10-
<PAGE>   12


patent for the composition of Cenestin and solid oral dose pharmaceutical
products containing synthetic conjugated estrogens, A in combination with a
progestin. The patent, titled "Pharmaceutical Compositions of Conjugated
Estrogens and Methods for Their Use," provides Duramed with exclusivity through
July 26, 2015 for its novel pharmaceutical compositions and methods for the
preparation containing synthetic conjugated estrogens, A for the treatment of
vasomotor symptoms.

Cenestin Phase IV Clinical Study Program -- In addition to the Phase III
clinical programs designed to add additional dosage forms as well as indications
for Cenestin, the Company has an ongoing Phase IV clinical program. The Phase IV
clinical program is designed to demonstrate the expected multiple benefits of
Cenestin. Programs have been established to investigate Cenestin's expected
benefits in various areas including Alzheimer's disease and the central nervous
system, osteoporosis and bone strength, the cardiovascular system, and
Fibromyalgia.

Preclinical studies of Cenestin's ability to protect neurons from toxic agents
believed to play a role in the development of Alzheimer's disease have been
completed very recently. Results of these studies in neuroprotection and
implications for memory have been positive, and Duramed is continuing work with
researchers to gain more information in this area. Studies have also recently
been completed showing Cenestin's positive impact on increasing bone strength
and resistance to fracture in an animal model. In human trials, Cenestin has
been shown to reduce bone turnover, favorably affecting markers of bone
resorption and formulation. Additionally, Cenestin has been shown to have a
beneficial improvement on lipid parameters, an important factor in the reduction
of cardiovascular risk. Other phase IV studies will continue as part of
Duramed's efforts to display all of Cenestin's expected beneficial attributes.

The Company's clinical program for Cenestin is under the direction of Dr.
Raymond Klein. Prior to joining the Company, Dr. Klein held the position of
Senior Director Global Medical Affairs - Clinical Development Women's Healthcare
for Wyeth-Ayerst Laboratories. In that role, he had management responsibility
for research on the benefits of estrogen for post-menopausal women including
extensive experience in the management of Phase IV clinical trials.

JOINT PRODUCT DEVELOPMENT ACTIVITIES -- The Company's business strategy includes
enhancing its product development activities by entering into strategic
partnerships. The Company has agreements with several firms whereby the
companies will jointly develop and seek approval for generic prescription drug
products. The terms of these agreements vary, but typically provide for a
sharing of costs and potential profits between the Company and the partner.

The most significant agreement is that entered into in 1995 with Gedeon Richter,
Ltd. ("Gedeon Richter") under which Gedeon Richter supplies certain bulk actives
(raw ingredients) and technologies that Duramed is using to develop specific
generic pharmaceuticals, some of which are on an exclusive basis. In return,
Duramed received marketing rights to the products in North America and Gedeon
Richter has marketing rights for certain Duramed products in the former


                                      -11-
<PAGE>   13


Soviet Union, now called the Commonwealth of Independent States ("CIS"), and
Eastern Europe countries on an exclusive basis. Gedeon Richter, the largest
Hungarian pharmaceutical company, focuses on the CIS and is the only Hungarian
pharmaceutical company with manufacturing and distribution joint venture local
partners in Russia and the Ukraine. Gedeon Richter is one of the market leaders
in the CIS and Eastern Europe markets, with a diversified product portfolio and
a strong distribution network.

The Company's first product marketed under this agreement, Apri, was approved by
the FDA on August 12, 1999 and is the first, and currently the only, oral
contraceptive bioequivalent to and therapeutically interchangeable with
Ortho-Cept and Desogen Tablets.

GOVERNMENT REGULATION

All pharmaceutical manufacturers are subject to extensive regulation by the
federal government, principally by the FDA, the DEA and by state governments.
The Federal Food, Drug and Cosmetic Act, the Controlled Substance Act, the
Generic Drug Enforcement Act of 1992 and other federal statutes and regulations
govern or influence the testing, manufacture, safety, labeling, storage, record
keeping, approval, pricing, advertising and promotion of the Company's products.
Noncompliance with applicable requirements can result in fines, seizure of
products, total or partial suspension of production, refusal of the government
to enter into supply contracts or to approve new drug applications, criminal
prosecution and corporate debarment. The FDA also has the authority to institute
proceedings to revoke previous approvals of drug products.

FDA approval is required before most prescription drug products can be marketed.
Each dosage form of a specific generic drug product, whether a different form of
administration or a different strength, is typically treated as a separate drug
product by the FDA and requires separate submission. There are two types of
applications currently used to obtain FDA approval of a new drug product.

1.   New Drug Application -- With respect to drug products with active
     ingredients not previously approved by the FDA or new uses or new dosage
     forms for previously approved active ingredients, a prospective
     manufacturer must conduct and submit to the FDA clinical studies to prove
     that product's safety and efficacy. An NDA also may be submitted for a drug
     product with previously approved active ingredients if the abbreviated
     procedure discussed below is not available.

2.   Abbreviated New Drug Application -- This is an abbreviated application
     procedure for obtaining FDA approval for generic drug products that are
     bioequivalent to brand name drugs. In contrast to most NDAs, this
     application procedure does not require completion of animal and clinical
     studies for safety and efficacy, and instead requires data demonstrating
     that the generic drug product is bioequivalent to the listed FDA reference
     product. Bioequivalence means that the rate of absorption and distribution
     of a generic drug in the body are equivalent to the previously approved
     listed reference drug product and, therefore, that the generic drug will
     produce a therapeutically equivalent effect.


                                      -12-
<PAGE>   14


Among the requirements for a new drug approval is that the prospective
manufacturer's methods conform to the FDA's current Good Manufacturing Practices
("cGMP Regulations"). The cGMP Regulations must be followed when the approved
drug is manufactured. To ensure compliance with the standards set forth in these
regulations, the Company must continue to expend time, money and effort in the
areas of production and quality control. Failure to comply with these
regulations risks possible FDA action such as the suspension of manufacturing or
the seizure of drug products.

The Company also is subject to environmental protection laws and regulations of
federal, state and local governmental authorities, including the Clean Air Act
and Occupational Safety and Health Administration ("OSHA") requirements. Under
the Clean Air Act, the Company is required to meet certain air emissions
standards. Under OSHA, the Company is required to meet certain safety standards,
including those relating to equipment and procedures, indoor air quality and
safety data sheets on material used at the Company's facilities. Compliance with
these laws had no material effect on the Company's capital expenditures,
operating results or competitive position during fiscal 2000, and the Company
anticipates no such material effect during fiscal 2001.

ITEM 2. PROPERTIES.

Duramed's manufacturing, laboratory, and product development activities in Ohio
are conducted primarily in a 190,000 square foot plant located on 17 acres in
Cincinnati, which includes a 38,000 square foot expansion designed to meet the
initial projected manufacturing requirements of Cenestin and other hormone
products on file with the FDA or under development. The facility is collateral
for certain of the Company's borrowings.

The Company also conducts limited manufacturing activities from a leased 38,000
square foot facility in Somerset, New Jersey. The Company has notified the owner
of the facility of its intent to purchase the facility for $2.3 million, and the
Company and the owner have been cooperating on a mutually preferred closing
date. The closing on this transaction is currently scheduled for June 1, 2001.

The Company's executive offices and certain corporate support groups occupy a
52,400 square foot facility in Cincinnati, Ohio. The lease for this facility
extends to August 3, 2004.

The Company's distribution and other support activities are conducted from a
leased 120,000 square foot facility in Mason, Ohio. The lease for this facility
extends to September 30, 2004.

The Company believes its facilities and equipment are well maintained, in good
operating condition and suitable for the Company's current level of business.






                                      -13-
<PAGE>   15


ITEM 3. LEGAL PROCEEDINGS.

On September 5, 2000, the Company filed an antitrust lawsuit against
Wyeth-Ayerst Laboratories, Inc., the makers of Premarin(R). The complaint,
(Duramed Pharmaceuticals, Inc. vs. Wyeth-Ayerst Laboratories, Inc., Case No.
C-1-00-735), filed in the Cincinnati Federal District Court, alleges that
Wyeth-Ayerst, a subsidiary of American Home Products Corporation, has illegally
perpetuated a monopoly in conjugated estrogens products by, among other things,
inducing managed care organizations (MCOs) into exclusive contracts for
Premarin, therefore eliminating the possibility of Cenestin being placed on
formulary with those same MCOs.

Duramed seeks actual and treble damages associated with profits lost due to
Wyeth-Ayerst's conduct in violation of antitrust laws and seeks to permanently
enjoin Wyeth-Ayerst from engaging in anti-competitive and exclusionary conduct.

Duramed is the sole plaintiff for the litigation. Duramed's marketing partner
for Cenestin, Solvay Pharmaceuticals, is not associated with the lawsuit.

Among other things, the suit alleges that, on or about the time of the FDA
approval of Cenestin, Wyeth-Ayerst began forming exclusive contracts with MCOs
that contained language stating that Premarin be used as "the sole and exclusive
conjugated estrogens" on the MCO's formulary. By agreeing to this contract, MCOs
would be eligible for Wyeth-Ayerst's rebates and/or administrative fees tied
directly to sales of Premarin.

Further alleged is that Wyeth-Ayerst has employed "disguised" exclusive
contracts that tie the rebates and/or administrative fees that Wyeth-Ayerst pays
to an individual MCO to that MCO's national market share of Premarin sales.
This, in effect, compels the MCO to promote Premarin and ignore Cenestin.

Duramed alleges that both types of contracts violate 15 U.S.C.ss.1 and 2, the
Sherman Act, and 15 U.S.C.ss.3, the Clayton Act.

On October 26, 2000, Wyeth-Ayerst filed a Motion to Dismiss the Complaint in its
entirety, as well as a Motion to Strike certain allegations in the Complaint. On
November 7, 2000, Duramed filed a Memorandum in Opposition to Wyeth-Ayerst's
Motion to Dismiss and Motion to Strike. Wyeth-Ayerst's Motion remains pending
before the Court.

In the meantime, discovery is proceeding, with both parties having exchanged
document requests. On March 1, 2001, Duramed filed a Motion to Compel further
production of documents from Wyeth-Ayerst. Duramed's Motion remains pending
before the Court.

The Company is involved in various additional lawsuits and claims, which arise
in the ordinary course of business. Although the outcome of such lawsuits and
claims cannot be predicted with certainty, the disposition thereof will not, in
the opinion of management, result in a material adverse effect on the Company's
financial position or results of operations.


                                     - 14 -


<PAGE>   16


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

Not applicable.


                                     PART II

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

The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "DRMD." The following table sets forth the range of high and low sale
prices for the Common Stock on the Nasdaq National Market for the periods
indicated.

                                                                  High     Low
2000:
         First Quarter     . . . . . . . . . . . . . . . . . $   13.44$   6.41
         Second Quarter    . . . . . . . . . . . . . . . . .      7.94    4.25
         Third Quarter     . . . . . . . . . . . . . . . . .      7.66    5.13
         Fourth Quarter    . . . . . . . . . . . . . . . . .      6.44    2.88

1999:
         First Quarter     . . . . . . . . . . . . . . . . . $   17.00$   3.88
         Second Quarter    . . . . . . . . . . . . . . . . .     18.00    8.00
         Third Quarter     . . . . . . . . . . . . . . . . .     15.88    7.50
         Fourth Quarter    . . . . . . . . . . . . . . . . .     10.61    6.53


As of December 31, 2000 the Company had 1,633 holders of record of the Common
Stock. The Company believes that, in addition, there are a significant number of
beneficial owners of its Common Stock whose shares are held in "street name."
The Company has not paid any cash dividends on its Common Stock since its
inception and does not intend to pay cash dividends in the foreseeable future.
Under the terms of the Company's current loan agreements with its bank, no
dividend declaration is permitted.










                                      -15-

<PAGE>   17


ITEM 6.           SELECTED FINANCIAL DATA.

The following table sets forth selected financial data, derived from the audited
financial statements of the Company, for each of the five years in the period
ended December 31, 2000. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and Notes
included elsewhere in this document.

<TABLE>
<CAPTION>
Year ended December 31,                        2000       1999         1998         1997        1996
                                            ----------------------------------------------------------
(In thousands, except per share data)

<S>                                            <C>        <C>         <C>         <C>         <C>
Net Sales                                      $ 83,465   $ 50,220    $ 49,759    $ 44,296    $ 43,855
------------------------------------------------------------------------------------------------------
Pretax income (loss)                                677    (51,023)     (8,396)    (17,441)    (20,810)
------------------------------------------------------------------------------------------------------
Income taxes                                        ---        ---         ---         ---       3,901
------------------------------------------------------------------------------------------------------
Net income (loss)                                   677    (51,023)     (8,396)    (17,441)    (24,711)
------------------------------------------------------------------------------------------------------
Preferred dividends                                 338        255         517         170         929
------------------------------------------------------------------------------------------------------
Deemed dividend
     on convertible preferred stock                 175        ---       4,873       4,835         ---
------------------------------------------------------------------------------------------------------
Net income (loss) applicable to
     common stockholders                            164    (51,278)    (13,787)    (22,446)    (25,640)
------------------------------------------------------------------------------------------------------
Net income (loss) per share of common stock:
     Basic and diluted                             0.01      (2.36)      (0.76)      (1.45)      (2.44)
------------------------------------------------------------------------------------------------------
Cash dividends
     per common share                               ---        ---         ---         ---         ---
------------------------------------------------------------------------------------------------------
Total assets                                     81,966     80,773      61,424      50,126      53,634
------------------------------------------------------------------------------------------------------
Long-term liabilities                            40,748     31,556      23,160      12,009      11,878
------------------------------------------------------------------------------------------------------
</TABLE>





                                      -16-
<PAGE>   18

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

OVERVIEW

Certain statements in this Form 10-K constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including those concerning management's expectations with respect to future
financial performance and events, particularly relating to sales of current
products as well as the introduction of new manufactured and distributed
products. Forward-looking statements involve known and unknown risks,
uncertainties and contingencies, many of which are beyond the control of the
Company, which could cause actual results and outcomes to differ materially from
those expressed. Factors that might affect the forward-looking statements set
forth in this Form 10-K include, among others, (i) increased competition from
new and existing competitors and pricing practices of those competitors, (ii)
the amount of funds continuing to be available for internal research and
development and for research and development joint ventures, (iii) research and
development project delays or delays in obtaining regulatory approvals, (iv) the
ability of the Company to retain and attract personnel in key operational areas,
(v) the status of strategic alliances, and (vi) the success of brand marketing
efforts.

Duramed develops, manufactures and distributes a line of prescription drug
products in tablet, capsule and liquid forms to customers throughout the United
States. Products sold by the Company include those of its own manufacture and
those it markets under arrangements with other drug manufacturers. The Company's
results include expenses associated with a product development program designed
to generate a stream of new product offerings. The Company's strategy has been
to focus its product development activities primarily on prescription drugs with
attractive market opportunities and potentially limited competition due to
technological barriers of entry, focusing on women's health and the hormone
replacement therapy market. The Company's product development capabilities
include modified release technologies as well as controlled substances
development.

A key aspect of the Company's strategic business plan has been to develop a
portfolio of brand and generic female hormone products. In 1999 the Company
began marketing its first brand prescription ERT product Cenestin. Cenestin(R)
(synthetic conjugated estrogens, A) Tablets ("Cenestin") is a plant-derived
synthetic conjugated estrogens product for the treatment of moderate-to-severe
vasomotor symptoms associated with menopause. A recent bone marker study of
Cenestin demonstrated the product caused a favorable reduction in bone markers,
which indicates a bone preservation effect. In addition, in the cardiovascular
evaluation, a positive lipid profile was found. The Company anticipates
initiating formal clinical trials in the future to evaluate Cenestin for the
prevention of osteoporosis.

In addition to the brand product Cenestin, the Company has four generic female
hormone products including Apri(TM) (desogestrel and ethinyl estradiol) Tablets
("Apri") the first and currently only, oral contraceptive bioequivalent to and
therapeutically interchangeable with the brand products, Ortho-Cept(R) and
Desogen(R) tablets.


                                      -17-
<PAGE>   19


Resources provided by Duramed's expanding hormone product portfolio are expected
to assist Duramed in its efforts to move ahead with its long-term product
development program designed to make the Company a leader in women's health and
the hormone replacement therapy market, in part by developing a family of
hormone products.

OUTLOOK

Business Strategy Outlook -- Based on assessments of the market opportunities
for hormone products and the related impact on Duramed's revenues and
profitability, management believes that, subject to business risks described
elsewhere in this document, the continued market penetration of Cenestin and
Apri and anticipated approvals of additional hormone products in 2001 will
continue to improve Duramed's long-term outlook and enhance the Company's
ability to become a leader in the women's health market.

To achieve its goals of leadership and improving operating performance, the
Company's business plan involves primary focus on three initiatives:

         Maximize the Market Penetration of Cenestin -- Cenestin, an estrogen
         replacement therapy (ERT), competes with other ERT/HRT (hormone
         replacement therapy) products in a market approaching $2.0 billion in
         the United States alone. According to leading pharmaceutical market
         data providers, the HRT market is growing at a projected annual rate of
         10-15%. ERT/HRT therapies are prescribed for women entering or in
         menopause. The average age for women entering menopause is 51 years.
         Currently more than 40 million women in the U.S. are over 50 and,
         therefore, candidates to take either ERT (estrogen only) or HRT
         (estrogen with progestin). According to the American College of
         Obstetrics and Gynecology, the first wave of "baby boomer" women (born
         between 1945-1960) is now entering menopause and another 20 million
         will reach menopause in the next decade.

         Duramed believes that the distinctive characteristics of its product
         will contribute to its ability to capture a significant share of the
         ERT market. To help communicate Cenestin's availability and favorable
         characteristics, on March 30, 1999 Duramed entered into a marketing and
         distribution agreement with Cardinal to perform the necessary
         direct-to-doctor sales efforts.

         To expand and enhance the promotion of Cenestin, in the fourth quarter
         of 1999, Duramed entered into an agreement with Solvay Pharmaceuticals
         to jointly promote three of the companies' hormone products in the
         United States: Duramed's Cenestin and Solvay Pharmaceuticals'
         Estratest(R)/Estratest(R) H.S. and Prometrium(R).

         The agreement resulted in a combined national sales force of more than
         300 Cardinal and Solvay Pharmaceuticals sales representatives who
         promote the alliance products to physicians across the United States.
         Solvay Pharmaceuticals' resources also include teams of regional
         marketing managers, district managers, medical liaison teams and a
         medical advisory committee comprised of leading women's health
         physicians.


                                      -18-
<PAGE>   20


         Cenestin was designated as the primary product in the Duramed/Solvay
         Pharmaceuticals alliance while the Solvay Pharmaceuticals products
         address additional important therapeutic requirements in women's health
         and complement Cenestin in the pharmaceutical sales effort.

         Effective January 1, 2000 the co-promotion agreement was expanded and
         extended into a long-term arrangement when Duramed and Solvay
         Pharmaceuticals entered into a 10-year marketing agreement whereby the
         two companies will share in the profits of Cenestin. Solvay
         Pharmaceuticals assumed responsibility for the advertising and sales
         promotion and agreed-upon expenses related to Cenestin, including the
         direct selling expenses of Cardinal. In consideration of the
         aforementioned services and funding, Solvay Pharmaceuticals receives
         80% of the gross profit from Cenestin, and Duramed receives 20%, until
         Solvay's cumulative selling and marketing investment is recovered and
         Cenestin becomes an income-producing product. The Company records the
         amount for reimbursement of Solvay Pharmaceuticals' marketing expenses
         (80% of Cenestin gross profits) as "brand marketing expenses" on the
         accompanying Consolidated Statement of Operations.

         After the income producing level is achieved, Duramed will receive 80%
         of the gross profit dollars and Solvay Pharmaceuticals 20% until
         Duramed recovers the remaining portion of $38 million the Company
         invested in the product during 1999. After each company has recovered
         its specified investments, the net profit dollars will be split equally
         for the remainder of the ten-year term of the agreement.

         Successfully Commercialize Approved and Filed Products -- The Company's
         first oral contraceptive product Apri Tablets is the first, and
         currently the only, product therapeutically interchangeable with
         Ortho-Cept(R) and Desogen(R) tablets for all new and refill
         prescriptions. This product is the first product marketed under the
         Company's agreement with Gedeon Richter, Ltd. The agreement provides
         for the profits generated by products under the agreement to be split
         between Duramed and Gedeon Richter. The market for these desogestrel
         products at brand prices is estimated to be approximately $159 million.
         Apri continues to gain market share; available data as of the week
         ending January 31, 2001, indicates that prescriptions for Apri
         accounted for 43.2% of new prescriptions for desogestrel products.

         During 1999, the FDA approved the Cenestin NDA and eight ANDAs
         submitted by the Company. In 2000, the Company received two
         supplemental approvals for additional dosage strengths of products
         already approved by the FDA. The Company currently has five ANDAs on
         file with the FDA. Four of these ANDAs are for hormone products. Of the
         five products awaiting approval at the FDA, two represent ANDAs for
         which Duramed was first to file. In 2000, the combined brand product
         sales for these two products were approximately $250 million. Approvals
         of these filings are expected to begin in 2001.


                                      -19-
<PAGE>   21


         The Company's filing on Mircette(TM), one of its first-to-file
         products, is currently under litigation. The Mircette patent is held by
         Biotechnology General Corp., which has filed suit for declaratory and
         injunctive relief claiming Duramed's product infringes its patent.

         Duramed is vigorously defending this lawsuit, claiming that the patent
         at issue is invalid and, in any event, not infringed. The Waxman-Hatch
         Act provides that Duramed will be awarded a 180-day period of generic
         marketing exclusivity should it prevail in the lawsuit.

         In 2001, the Company expects to file five additional ANDAs for
         hormones, including a progestin, an estrogen, and three oral
         contraceptives. Duramed also anticipates filing three non-hormone
         ANDAs.

         Further, Duramed has four products, in various stages of development,
         that the Company intends to file as New Drug Applications (NDAs). These
         products, including the combination of Cenestin with a natural
         progesterone, if approved, will expand the Cenestin brand franchise.
         Evaluation of the potential for patenting the technology used to
         develop these extensions of the Cenestin franchise is also in-process.
         Assuming successful completion of the required clinical studies and FDA
         approval, we anticipate these products could be to market in three to
         four years.

         Continue to Invest in Product Development Activities -- With the
         resources provided by the Company's expanding female hormone product
         portfolio, the Company intends to continue to expand its research and
         development in the women's health care area. On March 13, 2000 the
         Company received approval of the 1.25mg dosage strength of Cenestin,
         which represents a $250 million market accounting for approximately 19%
         of all conjugated estrogens prescriptions written and 23% of total
         conjugated estrogens revenues in the U.S. last year. In late 1999, the
         Company completed a bone marker study that demonstrated that Cenestin
         caused a favorable reduction in bone markers, which indicates a bone
         preservation effect. In addition, in the cardiovascular evaluation, a
         positive lipid profile was found. The Company anticipates beginning a
         full osteoporosis clinical study of Cenestin in the future to confirm
         the beneficial results indicated by the bone marker study.

         The Company intends to initiate clinical studies for solid oral dose
         pharmaceutical products containing Cenestin in combination with a
         natural progestin when and as funds generated from recently approved
         products and other resources become available. The Company's business
         strategy includes pursuing strategic partnerships on product projects
         where appropriate in order to fund projects.

As discussed previously, effective January 1, 2000 Solvay Pharmaceuticals became
responsible for the Cenestin physicians' office promotion, including assuming
advertising, sales promotion and sales force expenses, in exchange for a share
in the profits of Cenestin. Accordingly, sales, marketing, and promotion
expenses recorded by the Company are effectively limited to the 80% of the gross
profit of Cenestin paid to Solvay in the form of a profit split. The assumption
of Cenestin sales, marketing and promotion expenditures by Solvay resulted in a
material improvement in the Company's operating performance in 2000.




                                      -20-
<PAGE>   22


The Company's ability to maintain and improve operating performance is dependent
upon a number of factors including: (1) the rate at which Cenestin penetrates
the ERT market; (2) the sales performance of Apri and other products recently
approved by the FDA; (3) the successful approval and commercialization of
products on file with the FDA and the development of additional potential
sources of revenue; (4) the profit level generated from the Company's current
business base (including the level of revenue received under an agreement by
which the Company manufactures a product for Pfizer Inc.); and (5) the level of
spending on product development projects including clinical and bioequivalency
studies.

RESULTS OF OPERATIONS

The table below sets forth the components of the Company's results of operations
as a percentage of net sales.


                                    Percentage of Sales
                                   Year Ended December 31,
                                   -----------------------
                                  2000       1999         1998
                                  -----     -----        -----

Net sales                         100.0%    100.0%        100.0%
---------------------------------------------------------------
Cost of goods sold                 58.0       79.2         75.0
Gross margin                       42.0       20.8         25.0

Product development                 4.6       14.4         10.6
Brand marketing expense            12.0       41.6          ---
Selling                             4.8        5.0          6.9
General and administrative         13.4       24.4         19.6
Litigation settlement               ---       29.9          ---
Operating margin                    7.2      (94.5)       (12.1)

Interest expense                    6.4        7.0          4.7
Preferred dividends                 0.4        0.5          1.0
Deemed dividend on
     convertible preferred stock    0.2        ---          9.8
Income taxes                        ---        ---          ---
---------------------------------------------------------------

Net income (loss)                   0.2%    (102.0)%      (27.7)%
===============================================================






                                      -21-
<PAGE>   23

NET SALES

Net sales increased $33.2 million (66.2%) in 2000 compared to 1999 principally
due to sales of Cenestin and Apri. Duramed's hormone products accounted for
$40.3 million (48.4%), $10.6 million (21.2%) and $3.6 million (7.3%) in 2000,
1999 and 1998, respectively. Adrenal Cortical Steroid products accounted for
10%, 19% and 26% of net sales in 2000, 1999 and 1998, respectively. Analgesic
products accounted for less than 10% in 2000 and 18% and 19% of net sales in
1999 and 1998. No other product group has accounted for more than 10% of net
sales in 2000, 1999 and 1998. In total, products manufactured by Duramed
accounted for 85%, 69% and 54% of net sales in 2000, 1999 and 1998,
respectively. Net sales for all of the Company's other ("baseline") products
increased $3.5 million (8.9%) in 2000 compared with 1999 principally due to
increased volumes. Net sales of the baseline products decreased by $6.6 million
(14.2%) in 1999 compared with 1998. The decline was primarily attributable to
price erosion on certain of the Company's existing products.

Management believes that Cenestin has the potential to become a market leader in
the ERT market and is becoming a significant component of the Company's total
sales.

Apri is a major contributor to the Company's 2000 results. Based on prescription
data for the week ending January 31, 2001 Apri has achieved a 43.2% new
prescription market share for desogestrel products.

GROSS MARGIN

Gross margins, and the corresponding percentages of net sales, for 2000, 1999
and 1998, were $35.1 million (42.0%), $10.5 million (20.8%), and $12.4 million
(25.0%), respectively.

The increased gross margin in 2000 reflects the Company's improved sales
performance of higher margin products, principally Duramed's hormone products,
and improved operating efficiency due to increased manufacturing volumes.

The reduced gross margin in 1999 reflected the decline in selling prices on the
baseline business as well as approximately $3.3 million in start-up production
activities necessary to commercialize Cenestin and Apri.

The increased gross margin in 1998 reflected the favorable impacts of pricing
actions taken toward the end of the second quarter, contract revenues from
Pfizer, and contributions from newly approved products, partially offset by
reduced margin from the Company's methylprednisolone product due to increased
competition.








                                      -22-
<PAGE>   24


Various factors are expected to impact the Company's gross margin in 2001 and
beyond, the most significant of which will be the rate at which Cenestin
penetrates the ERT market. Additionally, the Company's gross margin could be
favorably impacted by successful introduction and marketing of other recently
approved products and additional approvals of pending applications. FDA approval
of the Company's pending applications is outside the Company's control and
management cannot predict whether or precisely when these approvals will be
obtained.

The Company's generic products are subject to price deterioration as market
conditions change, particularly when products are introduced as a result of FDA
approvals of competitors ANDAS. These impacts can be material depending on the
products affected.

PRODUCT DEVELOPMENT

Product development expenditures for the years ended December 31, 2000, 1999 and
1998 were approximately $3.8 million, $7.3 million and $5.3 million,
respectively. The decrease in 2000 was due to the reduction in biostudy
expenses, the termination of the Tamoxifen project and the savings realized by
consolidating the Company's product development activities into the Cincinnati,
Ohio facility. The increase in 1999 was due to spending for bioequivalency
studies and investment in selected projects. The decrease in product development
expense in 1998 was due principally to a reduction of spending for
bioequivalency studies in an effort to conserve resources. Additionally, product
development expenses during 1998 were impacted by reduced spending on Duramed
Europe operations. The Company decided to close the Duramed Europe operation in
2001 in order to refocus these resources to its core development projects. The
Company does not expect this to have a material adverse effect on the Company's
results of operations.

The Company's product development emphasis is on hormone therapies, modified
release technologies, and controlled substances. The Company will continue to
leverage its formulation and production capabilities to pursue opportunities for
both branded and multi-source products in the women's healthcare market, as this
field offers significant profit potentials. Duramed's top priority will be to
focus on solid oral dose hormone products developed in-house. The Company also
plans to enter into strategic partnerships, where possible, so as to expand its
product development capabilities.

Such partnering may occur in order to fund clinical studies that require large
financial commitments. Other R&D projects will be funded internally, and
Duramed's R&D spending in 2001 is projected to be approximately $10 million as
compared to $3.8 million spent in 2000. Product development expenses for 2001
and beyond are dependent on the timing of biostudies and clinical studies and
the Company's continuing efforts to balance product development spending and
available resources.





                                      -23-
<PAGE>   25


BRAND MARKETING AND SELLING

The Company's brand marketing and selling expenses decreased by $9.4 million
(40.0%) in 2000 compared with 1999. During 1999, Cenestin marketing and selling
expenses were a Duramed expense. Effective January 1, 2000 Solvay
Pharmaceuticals assumed the responsibilities for the Cenestin physicians' office
promotion and payment of all related expenses, in exchange for a share of the
Cenestin profits. Under the Company's agreement with Solvay Pharmaceuticals,
Solvay Pharmaceuticals currently receives 80% of the gross profit from Cenestin
until its cumulative selling and marketing investment is recovered and Cenestin
becomes an income-producing product. Accordingly, until then the profit split to
Solvay Pharmaceuticals is classified as brand marketing expense.

The Company's brand marketing and selling expenses for 1999 decreased $924,000
compared with 1998, excluding brand marketing expenses of $20.9 million. The
decrease principally relates to the reduction of the sales and marketing staff
positions and attendant costs assigned to the baseline business. The brand
marketing expenses relate to the Company's marketing program for Cenestin.

GENERAL AND ADMINISTRATIVE

General and administrative expenses for 2000 decreased $1.0 million (8.4%)
compared to 1999. The decline is the result of decreased legal fees, principally
fees associated with the Schein litigation, and decreased expenses relating to
the Year 2000 Compliance program as well as other information technology needs.
The reduction in 2000 was partially offset by increased personnel expenses.

General and administrative expenses increased $2.5 million in 1999 compared with
1998 principally due to consultants assisting with information technology
infrastructure and other corporate projects, compensation charges relating to
options granted to consultants and personnel expenses. The Company's information
technology infrastructure projects included its Year 2000 compliance program as
well as other information technology needs.

LITIGATION SETTLEMENT

On October 22, 1999 the Company reached a settlement agreement with Schein
Pharmaceutical, Inc. relating to a 1992 agreement regarding the pursuit of an
ANDA conjugated estrogens product. Under the terms of the settlement, Schein has
given up any claim to rights in Cenestin in exchange for payment of $15 million,
which was recorded as a charge in the third quarter of 1999. Duramed made an
initial $7.5 million payment to Schein on October 22, 1999. The second $7.5
million payment was made in the first quarter of 2000. An additional $15 million
payment is required under the terms of the settlement if Cenestin achieves total
profits (product sales less product-specific cost of goods sold, sales and
marketing and other relevant expenses) of greater than $100 million over any
five year or less period within the next 15 years.


                                      -24-
<PAGE>   26


NET INTEREST EXPENSE AND INTEREST RATE RISK

The Company's borrowings are primarily variable rate facilities. Net interest
expense increased $1.8 million (50.1%) in 2000 compared to 1999 due to increases
in the outstanding balances, principally the expanded mortgage facility with
Provident, as well as the amortization of financing costs. Additionally, the
cumulative increase of 1.0% in the prime rate from December 31, 1999 to December
31, 2000 increased interest expense on the Company's variable rate debt. Based
upon outstanding balances as of December 31, 1999, the increase in the prime
rate accounts for an annualized increase of $0.4 million in interest expense.

In 1999, net interest expense increased by $1,192,000 compared with 1998 due to
an increase in average borrowings under the Company's revolving credit facility.

Net interest expense increased by $960,000 in 1998 due to an increase in average
borrowings under the Company's revolving credit facility, the increase in the
mortgage on the Company's manufacturing facility and the amortization of
expenses incurred in connection with Series F Preferred Stock issued by the
Company in early 1998.

The Company has floating rate debt totaling $42.5 million, with interest
fluctuating based on changes in the prime rate and in commercial paper rates. As
a result, annual interest expense in 2001 will fluctuate based upon fluctuations
in those rates.

INCOME TAXES

At December 31, 2000, the Company had cumulative net operating loss
carryforwards of approximately $110.0 million for federal income tax purposes
that expire in the years 2004 to 2020. Additionally, the Company had cumulative
losses from Duramed Europe that amounted to approximately $7.1 million that are
not deductible for U.S. tax purposes. Due to net tax losses in the last three
years, the Company did not record a provision for income taxes during the
three-year period.

PREFERRED DIVIDENDS

The Series G Convertible Preferred Stock (issued in May 2000) provides a 5%
dividend on unconverted shares. Preferred stock dividends and the deemed
dividend on the convertible preferred stock aggregated $495,000 for 2000, which
represented dividends associated with the unconverted portion of the Series G
Convertible Preferred Stock.

The Company's Series E Mandatory Redeemable Preferred Stock (issued in June
1997) and Series F Mandatory Redeemable Preferred Stock (issued in February
1998) provided for a 5% dividend on unconverted shares. Preferred Stock
dividends of $17,000, $255,000, and $517,000 in 2000, 1999 and 1998,
respectively, represented dividends associated with the unconverted portion of
those series of Preferred Stock. These shares now have all been converted into
Common Stock.


                                      -25-
<PAGE>   27


BENEFICIAL CONVERSION DIVIDEND

In conjunction with the Company's issuance of the Series G Convertible Preferred
Stock, it recorded an adjustment of $1.3 million to properly reflect deemed
dividends beyond the stated 5% divided rate and a beneficial conversion feature
as required by EITF 98-5 and 00-27. This adjustment, which has reduced the
carrying amount of the Series G Convertible Preferred Stock and increased
additional paid-in-capital, will be amortized through May 12, 2004 and reflected
as additional deemed dividends during this period. For the year ended December
31, 2000, the Company has amortized $175,000 of the deemed dividend adjustment.


The effect of the application of EITF 98-5 and 00-27 was an increase in the net
loss applicable to the common stockholders of $175,000 and $4,873,000 for the
years ended December 31, 2000 and 1998, respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company financed its operations during 2000 principally through expanded
borrowings under a new mortgage facility with Provident, the issuance of
convertible preferred securities and borrowing under its revolving line of
credit.

On May 12, 2000 the Company completed a private placement of $10.0 million of
Series G Convertible Preferred Stock with an institutional investor. The
preferred shares are immediately convertible to shares of the Company's Common
Stock at a fixed price of $5.06 per share. Based on the fixed conversion price
of $5.06 per share, the number of shares of Common Stock expected to be issued
on conversion of the Series G Preferred Stock would be approximately 2 million.
The preferred stock will pay a dividend of 5% annually, payable quarterly in
arrears, on all unconverted preferred stock. Any of the Series G Preferred Stock
that remains outstanding will be automatically redeemed on May 12, 2004. The
investor also received warrants to purchase 500,000 shares of Common Stock at a
price of $5.50 per share, exercisable at any time before May 12, 2005. A portion
of the proceeds from this transaction were used to address obligations remaining
from the Cenestin launch.

While the Series G Preferred Stock remains outstanding, the Company must obtain
the written consent of the holders of at least two-thirds of the outstanding
shares of Series G Preferred Stock to authorize or issue any capital stock that
is of senior or equal rank to the Series G Preferred Stock.

On March 1, 2000, the Company entered into a $20 million financing transaction
collateralized by its Cincinnati facility and secured by a loan guaranty from
Solvay America. The proceeds from this financing were utilized to pay off the
facility's existing $7.7 million mortgage and to


                                      -26-
<PAGE>   28


pay the second $7.5 million required under the Schein settlement agreement. The
$4.8 million balance was utilized to pay down trade creditors and reduce amounts
owed under the Company's revolving line of credit.

As of March 6, 2001 the Company's borrowing capacity under its revolving credit
facility was $17.6 million of which the Company has utilized $13.5 million,
leaving a net availability of $4.1 million. (See Available Funds for a
discussion of the Company's current financial condition.)

ANALYSIS OF CASH FLOWS (amounts in millions)

<TABLE>
<CAPTION>
                                                   2000      1999      1998
                                                  ------    ------    ------
<S>                                               <C>       <C>       <C>
Net Cash Used In Operating Activities             $(16.8)   $(34.7)   $(16.1)
Net Cash Used For Investing Activities              (1.6)     (5.5)     (1.5)
Net Cash Provided by Financing Activities           18.4      40.2      17.6
                                                  ------    ------    ------
Net Change in Cash and Cash Equivalents              ---       ---       ---
Cash and Cash Equivalents at Beginning of Period     ---       ---       ---
                                                  ------    ------    ------
Cash and Cash Equivalents at End of Period        $  ---    $  ---    $  ---
                                                  ------    ------    ------
Supplemental Cash Flow Disclosures:
Interest Paid                                     $  4.8    $  3.0    $  2.0
</TABLE>

Operating Activities

For the year 2000 the Company had net income of $0.7 million and cash used in
operations totaling $16.8 million. Net income includes $6.0 million of deferred
revenue recognized in 2000 relating to cash received in 1999 from the initial
Cenestin pipeline fill. The components of cash used in operations included an
increase of $9.8 million in accounts receivable due to higher sales levels, the
remaining $7.5 million payment to Schein Pharmaceuticals in conjunction with the
previously disclosed litigation settlement, and a $5 million decrease in
accounts payable and other accrued liabilities specifically related to the
Company's Cenestin launch. A reduction in inventory due to the sale of launch
quantities of Apri and Cenestin provided $6.2 million in cash.

In 1999 the Company had a net loss of $51.0 million and cash used in operating
activities of $34.7 million. Cash used in operating activities included a $13.1
million increase in inventory resulting from the stocking of new products,
principally Cenestin and Apri. Accounts payable and accrued expenses increased
substantially due to increased spending levels related to the brand marketing
program for Cenestin, to the $15 million settlement with Schein and to $5.8
million of net deferred Cenestin revenue.

In 1998 the Company had a net loss of $8.4 million and cash used in operating
activities of $16.1 million. Cash used in operating activities included a $9.4
million increase in inventory resulting from the stocking of new products, both
Duramed produced products as well as products sourced through other
manufacturers.



                                      -27-
<PAGE>   29


Investing Activities

Cash flows related to capital expenditures were $1.6 million in 2000 and
represented primarily the acquisition of manufacturing and packaging equipment.
In 1999 capital expenditures were $5.5 million, which primarily represented
renovations to the Cincinnati, Ohio manufacturing facility to accommodate
packaging equipment acquired for Apri, computer hardware and continued
improvements to the Company's Somerset, New Jersey facility. The $1.5 million in
capital expenditures in 1998 included renovating the manufacturing portion of
the Somerset facility to incorporate updates necessary for manufacturing of
controlled substances.

Financing Activities

Financing activities funded the Company's operations for 1998-2000 including:

1)       Issuances of Convertible Preferred Stock raised $9.7 million in 2000
         and $11.4 million in 1998.
2)       Long-term borrowings including refinancing the Company's manufacturing
         facility, term notes and capital equipment leases added $20.8 million,
         $11.2 million and $6.8 million in 2000, 1999 and 1998, respectively.
         2000 long-term borrowings include the $20 million financing transaction
         collateralized by the Cincinnati manufacturing facility and secured by
         a loan guaranty by Solvay America. $7.7 million of the proceeds were
         utilized to pay off the existing mortgage debt. 1999 long-term
         borrowing facilities included a $7.0 million term note with Foothill
         Capital Corporation ("Foothill"). These funds were offset by payment of
         long-term debt in each of the three years.
3)       Solvay Pharmaceuticals purchased 3,000,000 shares of Common Stock of
         Duramed which provided net proceeds of $25.7 million in the fourth
         quarter of 1999.
4)       Increased borrowings under the Company's revolving credit facility
         provided $2.5 million, $3.9 million and $6.2 million in 2000, 1999 and
         1998, respectively.

On May 12, 2000, the Company raised $10.0 million ($9.7 million net of issuance
cost) through an offering of 100,000 shares of Series G Convertible Preferred
Stock. As of December 31, 2000 the Series G Preferred Stock remains outstanding.

In February 1998, the Company raised $12.0 million ($11.4 million net of
issuance cost) through an offering of 120,000 shares of Series F Mandatory
Redeemable 5% Cumulative Convertible Preferred Stock ("Series F Preferred
Stock"). As of December 31, 1999, $7.1 million of Series F Preferred Stock had
been converted into Common Stock. Subsequent to December 31, 1999 the remaining
$4.9 million of Series F Preferred Stock was converted into Common Stock. The
Company issued 4,088,622 shares of Common Stock in connection with the
conversion of the Series F Preferred Stock, at an average conversion price of
$3.07 per share.





                                      -28-
<PAGE>   30

On March 1, 2000 the Company refinanced its existing note payable collateralized
by its Cincinnati, Ohio manufacturing facility with a $12.0 million note and
$8.0 million note payable to The Provident Bank ("Provident"), both of which are
guaranteed by Solvay America. Provident holds a first mortgage on the Company's
Cincinnati, Ohio manufacturing facility. $7.7 million of the proceeds were
utilized to pay off the existing mortgage debt.

In August 1999, the Company entered into a second four-year term loan with
Foothill in the amount of $7.0 million. Pursuant to the terms of the agreement,
the term note is being repaid in monthly installments and bears an interest rate
of prime plus 1.25%. The term note is collateralized by the intangible assets of
the Company.

In October 1999 Solvay Pharmaceuticals was granted the option to purchase
3,000,000 shares of Duramed Common Stock at $9.00 per share. Solvay
Pharmaceuticals exercised this option by purchasing 1,666,666 shares on October
22, 1999 and the remaining 1,333,334 shares on December 30, 1999. Pursuant to
the terms of this financing, Duramed created an additional position on Duramed's
board of directors filled by a member of Solvay America's management.

The term of the Company's financing agreement with Foothill is four years,
commencing November 1998 with provisions for renewals. The financing agreement
provides for a revolving credit facility collateralized by the Company's
receivables and inventory and a term note secured by the Company's equipment.
The Company's borrowing capacity under the revolving credit facility adjusts
based on the change in receivables and inventory.

AVAILABLE FUNDS

The resources provided by the Company's expanding product portfolio are expected
to allow the Company to access sufficient funds to execute the Company's
business plan within the existing financing arrangements.

SEASONALITY

Certain of the Company's generic products have a degree of seasonality, the
effect of which the Company attempts to mitigate by adding complementary
products to its line.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

The information required by Item 7A is included in Item 7 under "Net Interest
Expense and Interest Rate Risk" of this Form 10-K.





                                      -29-
<PAGE>   31

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements are included in this report on Form 10-K:


                                                                          Page
                                                                          ----
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of
      December 31, 2000 and 1999. . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for
      the Years Ended December 31, 2000, 1999 and 1998 . . . . . . . . . .F-4
Consolidated Statements of Stockholders' Equity/(Capital Deficiency)
      for the Years Ended December 31, 2000, 1999 and 1998 . . . . . . . .F-5
Consolidated Statements of Cash Flows for
      the Years Ended December 31, 2000, 1999 and 1998 . . . . . . . . . .F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . .F-7


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.


                                    PART III

Except as set forth below, the information required by the Part is incorporated
by reference from the definitive Proxy Statement, filed or to be filed with the
Securities and Exchange Commission, for the Company's 2001 Annual Meeting of
Stockholders.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The executive officers of the Company at March 14, 2001 are as follows:

Name                      Age       Title
----                      ---       -----

E. Thomas Arington         64       Chairman and Chief Executive Officer

Jeffrey T. Arington        40       President and Chief Operating Officer

Lawrence A. Glassman       39       Senior Vice President and General Counsel

Timothy J. Holt            48       Senior Vice President, Finance and
                                    Administration and Chief Financial Officer

S. Sundararaman            64       Secretary



                                      -30-
<PAGE>   32

Information about Messrs E. Thomas Arington, Jeffrey T. Arington and S.
Sundaraman is incorporated by reference from the Company's definitive Proxy
Statement for the 2001 Annual Meeting.

Lawrence A. Glassman was appointed Senior Vice President and General Counsel
in April 2000. Prior to joining Duramed, he was employed by Aventis
Pharmaceuticals and its predecessor companies, serving as Senior Attorney from
1993 until 1995, as Corporate Counsel from 1995 until 1997, and as Vice
President and Assistant General Counsel from 1997 until 2000, and was outside
counsel at Frost & Jacobs from 1986 to 1992. Mr. Glassman is also acting
Chairman of the Pharmaceutical Committee of the Federation of Insurance and
Corporation Counsel.

Timothy J. Holt has been Senior Vice President, Finance and Administration of
the Company since 1994. He served as Vice President, Finance of the Company from
1985 to 1994. Prior to joining the Company in 1985, Mr. Holt was Vice
President-Finance and Chief Financial Officer of Vortec Corporation, a then
publicly held company operating in the fields of specialty manufacturing and
home health care equipment, and also held financial management positions with
privately held companies including Eagle Software Publishing.

The executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.

                                      -31-
<PAGE>   33




                                     PART IV


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

(a) 1. All financial statements filed as a part of this report on Form 10-K are
       listed under Item 8, above.

    2. The following financial statement schedule is filed herewith:

                                                            Page
                                                            ----
                   Valuation and Qualifying Accounts         S-1

All other schedules are omitted because of the absence of conditions under which
they are required or because the information is shown in the financial
statements or notes thereto.

(b)   Reports on Form 8-K for the quarter ended December 31, 2000: The
      Company filed a Form 8-K on December 15, 2000 announcing the date of
      the 2001 Annual Meeting of Stockholders on May 10, 2001.
(c)   Exhibits

Exhibit Number       Description
--------------       -----------

       3.1           Certificate of Incorporation (a)

       3.2           By-Laws (b)

       4.1           Certificate of Designation, Preferences and Rights of
                     Series A Preferred Stock (c)

       4.2           Certificate of Designations of 5% Cumulative Convertible
                     Preferred Stock, Series G (d)

       4.3           Rights Agreement between Duramed Pharmaceuticals, Inc. and
                     The Provident Bank as Rights Agent dated as of August 17,
                     1988 (e)

       4.4           Amendment dated as of August 12, 1998 to Rights Agreement
                     (f)

      10.1           Loan and Security Agreement dated November 6, 1998, between
                     NationsCredit Commercial Corporation through its
                     NationsCredit Commercial Funding Division and the Company
                     (g)

      10.2           First Amendment to Loan and Security Agreement dated
                     November 6, 1998 (h)

      10.3           Promissory Note dated as of February 28, 2000, by Duramed
                     Pharmaceuticals, Inc. to The Provident Bank, in the
                     principal sum of $8,000,000 (i)

      10.4           Promissory Note dated as of February 28, 2000, by Duramed
                     Pharmaceuticals, Inc. to The Provident Bank, in the
                     principal sum of $12,000,000 (i)

      10.5           Open-End Mortgage dated as of February 28, 2000, by Duramed
                     Pharmaceuticals, Inc. to The Provident Bank (i)


                                      -32-
<PAGE>   34


      10.6           Guaranty Agreement dated as of February 25, 2000, between
                     The Provident Bank and Solvay America, Inc. (i)

      10.7           Reimbursement Agreement dated as of February 25, 2000,
                     between Solvay America, Inc. and Duramed Pharmaceuticals,
                     Inc. (i)

      10.8           Form of warrant issued to shareholders of Hallmark
                     Pharmaceuticals, Inc. (j)

      10.9           Lease by and between the Company and Pfizer Inc. dated as
                     of September 24, 1997 (k)

      10.10          Marketing Agreement dated January 27, 2000 between the
                     Company and Solvay Pharmaceuticals, Inc. (i)

      10.11          Executive Compensation Plans and Arrangements
                           (i)     Amended and Restated Employment Agreement
                                   effective July 18, 2000 between the Company
                                   and E. Thomas Arington
                           (ii)    Life and disability insurance policies for
                                   the benefit of E. Thomas Arington (l)
                           (iii)   Life insurance policy for the benefit of
                                   Timothy J. Holt (l)
                           (iv)    1988 Stock Option Plan (m)
                           (v)     1991 Stock Option Plan for Nonemployee
                                   Directors (n)
                           (vi)    1997 Stock Option Plan (o)
                           (vii)   2000 Stock Option Plan (p)
                           (viii)  1999 Nonemployee Director Stock Plan (b)
                           (ix)    Change in Control Contingent Employment
                                   Agreements between the Company and each of
                                   Jeffrey T. Arington, Lawrence A. Glassmann,
                                   and Timothy J. Holt.

      23             Consent of Independent Auditors

      24             Powers of Attorney


(a) Filed as an Exhibit to Registration Statement No. 33-8215-C and incorporated
    herein by reference.

(b) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year
    ended December 31, 1998 and incorporated herein by reference.

(c) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year
    ended December 31, 1988 and incorporated herein by reference.

(d) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the
    quarter ended March 31, 2000 and incorporated herein by reference.

(e) Filed as an Exhibit to the Company's Current Report on Form 8-K, Date of
    Report August 28, 1988, and incorporated herein by reference.




                                      -33-
<PAGE>   35

(f) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q/A for
    the quarter ended June 30, 1998 and incorporated herein by reference.

(g) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1998 and incorporated herein by reference.

(h) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the
    quarter ended June 30, 1999 and incorporated herein by reference.

(i) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year
    ended December 31, 1999 and incorporated herein by reference.

(j) Filed as an Exhibit to the Company's Registration Statement on Form S-4, No.
    333-06901, and incorporated herein by reference.

(k) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the
    quarter ended September 30, 1997 and incorporated herein by reference.

(l) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the year
    ended December 31, 1992 and incorporated herein by reference.

(m) Filed as an Exhibit to the Company's Proxy Statement relating to the 1993
    Annual Meeting of Stockholders and incorporated herein by reference.

(n) Filed as an Exhibit to the Company's Proxy Statement relating to the 1998
    Annual Meeting of Stockholders and incorporated herein by reference.

(o) Filed as an Exhibit to the Company's Proxy Statement relating to the 1997
    Annual Meeting of Stockholders and incorporated herein by reference

(p) Filed as an Exhibit to the Company's Proxy Statement relating to the 2000
    Annual Meeting of Stockholders and incorporated herein by reference.

The Company will furnish to the Commission, upon request, its long-term debt
instruments not listed in this Item.





                                      -34-
<PAGE>   36


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, as of the 14th day of
March 2001.

                                        DURAMED PHARMACEUTICALS, INC.

                                        BY:  /s/ E. Thomas Arington
                                             -------------------------------
                                             E. Thomas Arington
                                             Chairman of the Board
                                             Chief Executive Officer

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 indicated as of the 14th day of March 2001.

        Signatures                                Title
        ----------                                -----

/s/ E. Thomas Arington        Chairman of the Board
-------------------------     Chief Executive Officer
E. Thomas Arington

/s/ Jeffrey T. Arington       Director, President
-------------------------
Jeffrey T. Arington           Chief Operating Officer

/s/ George W. Baughman*       Director
-------------------------
George W. Baughman

/s/ Richard R. Frankovic*     Director
-------------------------
Richard R. Frankovic

/s/ Timothy J. Holt           Senior Vice President, Finance and Administration,
-------------------------     Treasurer, Chief Financial Officer
Timothy J. Holt

/s/ Peter R. Seaver*          Director
-------------------------
Peter R. Seaver

/s/ S. Sundararaman*          Director and Secretary
-------------------------
S. Sundararaman

/s/ Philip M. Uhrhan*         Director
-------------------------
Philip M. Uhrhan

*Pursuant to Power of Attorney
/s/ Timothy J. Holt
---------------------------------
Timothy J. Holt, Attorney-in-Fact




                                      -35-
<PAGE>   37
                         [Ernst & Young LLP Letterhead]


                         Report of Independent Auditors


The Board of Directors
Duramed Pharmaceuticals, Inc.


We have audited the accompanying consolidated balance sheets of Duramed
Pharmaceuticals, Inc. as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity (capital deficiency)
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedule listed in the
index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Duramed
Pharmaceuticals, Inc. at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statements schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects, the information set forth therein.


                                                 Ernst & Young LLP



Cincinnati, Ohio
February 27, 2001

                                       F-1




<PAGE>   38

DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS


<TABLE>
<CAPTION>
December 31,                                           2000             1999
--------------------------------------------------------------------------------
<S>                                                 <C>              <C>
Current assets:
      Cash and cash equivalents                     $     4,000      $     4,000
      Trade accounts receivable,
          less allowance for doubtful
          accounts:  2000 - $1,195,000
          1999 - $951,000                            19,157,503        9,610,307
       Inventories                                   26,693,405       32,910,493
       Prepaid expenses and other assets              5,572,579        6,681,892
                                                    -----------      -----------
                 Total current assets                51,427,487       49,206,692
                                                    -----------      -----------


Property, plant and equipment - net                  28,491,485       29,939,602
                                                    -----------      -----------


Deposits and other assets                             2,046,724        1,627,123
                                                    -----------      -----------


                                                    $81,965,696      $80,773,417
                                                    ===========      ===========
</TABLE>




See accompanying notes.





                                      F-2
<PAGE>   39

DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES, MANDATORY REDEEMABLE CONVERTIBLE PREFERRED STOCK
     AND STOCKHOLDERS' EQUITY/(CAPITAL DEFICIENCY)

<TABLE>
<CAPTION>
December 31,                                                                2000               1999
---------------------------------------------------------------------------------------------------------

<S>                                                                     <C>                <C>
Current liabilities:
     Accounts payable                                                   $   7,405,020      $  11,391,954
     Accrued liabilities                                                   13,641,736         28,459,817
     Current portion of long-term debt
           and other liabilities                                            4,743,913          5,783,232
      Current portion of capital lease obligations                            870,675            992,531
                                                                        -------------      -------------

                    Total current liabilities                              26,661,344         46,627,534
                                                                        -------------      -------------

Long-term debt, less current portion                                       39,107,431         29,720,761
Long-term capital leases, less current portion                              1,640,284          1,835,023
                                                                        -------------      -------------

                    Total liabilities                                      67,409,059         78,183,318
                                                                        -------------      -------------

Mandatory redeemable convertible preferred stock - net                      8,177,000          4,900,000
                                                                        -------------      -------------

Stockholders' equity/(capital deficiency):
      Common stock - authorized 50,000,000
           shares, par value $.01; issued and outstanding
           26,355,013 and 24,808,591 shares in 2000 and 1999,
           respectively                                                       263,549            248,085
      Additional paid-in capital                                          134,880,388        126,882,751
      Accumulated deficit                                                (128,764,300)      (129,440,737)
                                                                        -------------      -------------
                    Total stockholders' equity/(capital deficiency)         6,379,637         (2,309,901)
                                                                        -------------      -------------

                                                                        $  81,965,696      $  80,773,417
                                                                        =============      =============
</TABLE>




See accompanying notes.



                                      F-3
<PAGE>   40

DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

Year ended December 31,                          2000             1999             1998
--------------------------------------------------------------------------------------------

<S>                                          <C>              <C>               <C>
Net sales                                    $ 83,465,371     $ 50,219,878      $ 49,759,285
Cost of goods sold                             48,392,534       39,759,108        37,333,632
                                             ------------     ------------      ------------
           Gross profit                        35,072,837       10,460,770        12,425,653
                                             ------------     ------------      ------------

Operating expenses:
       Product development                      3,808,264        7,258,314         5,282,167
       Brand marketing expenses                10,058,318       20,909,227               ---
       Selling                                  3,972,042        2,504,444         3,428,100
       General and administrative              11,225,486       12,259,450         9,752,471
       Litigation settlement                          ---       15,000,000               ---
                                             ------------     ------------      ------------
                                               29,064,110       57,931,435        18,462,738
                                             ------------     ------------      ------------

           Operating income (loss)              6,008,727      (47,470,665)       (6,037,085)

Net interest expense                            5,332,290        3,551,859         2,359,408
                                             ------------     ------------      ------------

Net income (loss)                                 676,437      (51,022,524)       (8,396,493)

Preferred stock dividends                         337,739          255,445           517,343
Deemed dividend on convertible
     preferred stock                              175,000              ---         4,873,000
                                             ------------     ------------      ------------

Net income (loss) applicable to
     common stockholders                     $    163,698     $(51,277,969)     $(13,786,836)
                                             ============     ============      ============


Net income (loss) per average
     common and common equivalent shares
     (basic and diluted)                     $       0.01     $      (2.36)     $      (0.76)
                                             ============     ============      ============
</TABLE>




See accompanying notes.




                                      F-4
<PAGE>   41

                          DURAMED PHARMACEUTICALS, INC.
      Consolidated Statements of Stockholders' Equity/(Capital Deficiency)

<TABLE>
<CAPTION>

                                                      Common Stock           Additional
                                            ----------------------------       Paid-In           Accumulated
                                              Shares          Amount           Capital             Deficit             Total
                                            ----------     -------------     -------------      -------------      -------------
<S>                                         <C>            <C>               <C>                <C>                <C>
BALANCE - DECEMBER 31, 1997                 17,881,287     $     178,812     $  90,728,595      $ (70,021,720)     $  20,885,687
Issuance of stock in connection
    with benefit plans                          51,121               511           236,577                ---            237,088
Issuance of stock in connection
    with stock options                          73,967               740           173,249                ---            173,989
Conversion of Series E
    Preferred Stock Net                          2,881                29               ---                ---                 29
Conversion of Series F
    Preferred Stock Net                      1,801,922            18,019         4,174,828                ---          4,192,847
Net loss for 1998                                  ---               ---               ---         (8,396,493)        (8,396,493)
Dividend on Preferred Stock                        ---               ---          (517,343)               ---           (517,343)
--------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1998                 19,811,178           198,111        94,795,906        (78,418,213)        16,575,804
Issuance of stock in connection
    with benefit plans                          47,260               472           393,709                ---            394,181
Issuance of stock in connection
    with stock options                         950,762             9,508         3,340,536                ---          3,350,044
Issuance of stock in settlement
    of certain liabilities                       6,611                66            99,925                ---             99,991
Conversion of Series F
    Preferred Stock Net                        992,780             9,928         2,792,370                ---          2,802,298
Issuance of stock in connection
    with Solvay Alliance Net                 3,000,000            30,000        25,715,750                ---         25,745,750
Net loss for 1999                                  ---               ---               ---        (51,022,524)       (51,022,524)
Dividend on Preferred Stock                        ---               ---          (255,445)               ---           (255,445)
--------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1999                 24,808,591           248,085       126,882,751       (129,440,737)        (2,309,901)
Issuance of stock in connection
    with benefit plans                          55,544               555           345,765                ---            346,320
Issuance of stock in connection
    with stock options                         196,958             1,970         1,160,647                ---          1,162,617
Conversion of Series F
    Preferred Stock                          1,293,920            12,939         4,903,964                ---          4,916,903
Issuance of warrants in connection
    with Series G Preferred Stock                  ---               ---           765,000                ---            765,000
Preferred Stock valuation adjustment               ---               ---         1,335,000                ---          1,335,000
Net income for 2000                                ---               ---               ---            676,437            676,437
Dividend on Preferred Stock                        ---               ---          (512,739)               ---           (512,739)
--------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 2000                 26,355,013     $     263,549     $ 134,880,388      $(128,764,300)     $   6,379,637
                                            ==========     =============     =============      =============      =============
</TABLE>



See accompanying notes.



                                      F-5
<PAGE>   42

DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
Year Ended December 31,                                            2000             1999                1998
---------------------------------------------------------------------------------------------------------------

<S>                                                           <C>               <C>               <C>
Cash flows from operating activities:
      Net income (loss)                                       $    676,437      $(51,022,524)     $ (8,396,493)
Adjustments to reconcile net income (loss) to net
      cash used in operating activities:
      Depreciation and amortization                              3,477,612         3,043,301         2,789,639
      Provision for doubtful accounts                              265,063           184,053           191,694
      Common stock issued in connection with
           employee benefit plans                                  346,320           394,181           237,088
      Increase in cash surrender value of life insurance          (194,561)              ---               ---

Changes in assets and liabilities:
      Trade accounts receivable                                 (9,812,259)          536,456        (2,414,048)
      Inventories                                                6,217,088       (13,123,788)       (9,350,763)
      Prepaid expenses and other assets                          1,392,888        (4,061,420)           45,128
      Accounts payable                                          (3,986,934)        7,021,773           240,469
      Accrued liabilities                                      (14,751,418)       22,944,378           927,515
      Other                                                       (470,420)         (594,454)         (418,150)
                                                              ------------      ------------      ------------
Net cash used in operating activities                          (16,840,184)      (34,678,044)      (16,147,921)
                                                              ------------      ------------      ------------

Cash flows from investing activities:
     Capital expenditures                                       (1,532,188)       (5,385,363)       (1,311,698)
     Deposits on capital equipment                                 (68,902)         (133,625)         (148,913)
                                                              ------------      ------------      ------------
Net cash used for investing activities                          (1,601,090)       (5,518,988)       (1,460,611)
                                                              ------------      ------------      ------------

Cash flows from financing activities:
     Payments of long-term debt,
          including current maturities                         (15,384,909)       (3,860,800)       (6,347,723)
     Net increase in revolving credit facility                   2,535,139         3,886,613         6,238,833
     Long-term borrowings                                       20,798,920        11,246,103         6,795,400
     Issuance of preferred stock - net                           9,700,500               ---        11,399,376
     Issuance of common stock - Solvay alliance                        ---        25,745,750               ---
     Cash redemption of preferred stock                                ---               ---          (149,971)
     Issuance of common stock                                    1,162,617         3,450,035           173,989
     Dividends paid on preferred stock                            (370,993)         (270,169)         (501,372)
                                                              ------------      ------------      ------------
Net cash provided by financing activities                       18,441,274        40,197,532        17,608,532
                                                              ------------      ------------      ------------

Net change in cash and cash equivalents                                ---               500               ---
Cash and cash equivalents at beginning of period                     4,000             3,500             3,500
                                                              ------------      ------------      ------------
Cash and cash equivalents at end of period                    $      4,000      $      4,000      $      3,500
                                                              ============      ============      ============

Supplemental cash flow disclosures:
     Interest paid                                            $  4,773,727      $  2,964,661      $  1,990,794
</TABLE>

See accompanying Notes.

                                      F-6
<PAGE>   43


DURAMED PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A. ACCOUNTING POLICIES

BUSINESS DESCRIPTION
Duramed Pharmaceuticals, Inc. (the "Company" or "Duramed") conducts business in
one segment which develops, manufactures and markets prescription pharmaceutical
products in tablet, capsule and liquid forms to customers throughout the United
States. The Company's product development program is focused on hormone
therapies and controlled release technology. On March 24, 1999, the FDA granted
Duramed approval to market Cenestin(R) (synthetic conjugated estrogens, A)
Tablets ("Cenestin") for the treatment of moderate to severe vasomotor symptoms
associated with menopause. Cenestin is Duramed's first pharmaceutical product
marketed as a brand product.

A summary of the principal accounting policies followed in preparation of the
consolidated financial statements and related information is set forth below.

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. Significant intercompany
accounts and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS
Duramed considers all investments with a maturity of three months or less as of
the date of purchase to be cash equivalents. As of December 31, 2000, the
Company had no short-term investments classified as cash equivalents. The
Company's 2000 and 1999 cash balances represent only the balances maintained in
internal cash funds.

INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Components of inventories include:

                                                       December 31,
                                            -----------------------------------
                                                2000                   1999
                                            -----------------------------------
Raw materials                               $ 15,686,281           $ 17,239,214
Work-in-process                                  347,496                249,211
Finished goods                                17,226,616             23,870,296
Obsolescence reserve                          (6,566,988)            (8,448,228)
                                            ------------           ------------
      Net inventory                         $ 26,693,405           $ 32,910,493
                                            ============           ============


As of December 31, 1999 the Company had recorded $2.0 million shipments of
Cenestin as revenue. Through December 31, 1999 the Company had shipped and
invoiced $10.0 million of Cenestin (net of returns and allowances). $2.0 million
of Cenestin shipments have been recognized as revenue with the balance of $8.0
million carried at cost in inventory.



                                       F-7


<PAGE>   44


PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation and amortization
is provided using principally the straight-line method over the estimated useful
lives of the assets. Major renewals and improvements are capitalized, while
ordinary maintenance and repairs are expensed.

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
                                                             December 31,
                                                     -------------------------------      Estimated
                                                           2000            1999          Useful Life
                                                     -------------------------------    --------------
<S>                                                  <C>                 <C>            <C>
Land                                                 $  1,000,000        $1,000,000
Buildings and improvements                             21,292,118        21,204,228     20 to 30 Years
Equipment, furniture and fixtures                      29,975,547        28,597,309      3 to 10 Years
                                                     ------------------------------
                                                       52,267,665        50,801,537
Less accumulated
      depreciation and amortization                    23,776,180        20,861,935
                                                     ------------      ------------
                                                     $ 28,491,485      $ 29,939,602
                                                     ============      ============
</TABLE>

Amortization of leasehold improvements and assets under capital leases was
$1,105,756, $809,675 and $724,938 for the years ended December 31, 2000, 1999
and 1998, respectively.

REVENUE RECOGNITION
The Company generally recognizes revenue upon shipment of its products and
provides for returns and allowances based upon historical trends. However, in
accordance with the rules governing revenue recognition, in 1999 the Company
recorded shipments associated with the Cenestin product launch as revenue when
evidence of product movement through the distribution system was obtained.
Accordingly, $2.0 million in sales of Cenestin was recognized in the fourth
quarter of 1999 with the balance of shipments recognized during 2000, based on
end-user prescription data. Management believes the Company's approach to
revenue recognition for Cenestin was appropriate due to the limited time
Cenestin had been promoted by the joint Solvay Pharmaceuticals/Duramed sales
force, the fact that Cenestin is Duramed's first introduction of a brand
product, the more than 600,000 sample packages that had been supplied to the
sales force and the large pipeline fill of Cenestin.

SHIPPING AND HANDLING COSTS
The Company includes shipping and handling costs in cost of goods sold.

PRODUCT DEVELOPMENT COSTS
Product development costs are charged to expense when incurred. The reported
costs include specifically identifiable expenses and an allocation of certain
expenses shared with the other departments within the Company.





                                       F-8


<PAGE>   45


ADVERTISING COSTS
The Company accounts for advertising costs as an expense in the period in which
they are incurred. No advertising costs were incurred in 2000. Advertising
expenses relating to Cenestin were $5.0 million in 1999. Prior to 1999,
advertising costs were not incurred.

INCOME TAXES
Income taxes have been recorded using the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes."

STOCK BASED COMPENSATION
Effective January 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123 - "Accounting for Stock-Based
Compensation". As permitted by the Statement the Company has elected to continue
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations in accounting for its
stock based compensation plans.

CONCENTRATION OF RISK
The financial instrument that potentially subjects the Company to credit risk is
accounts receivable. The Company sells its products to drug store chains, drug
wholesalers, private label distributors, health maintenance organizations,
hospitals, nursing homes, retiree organizations, mail order distributors, other
drug manufacturers, mass merchandisers and governmental agencies. In 2000, three
customers accounted for 15%, 13% and 10% of net sales and 19%, 16% and 8%,
respectively, of receivables. One customer accounted for 13% of net sales in
1999 and 9% of receivables as of December 31, 1999. In 1998, two customers
accounted for 11% and 10% of net sales and 18% and 11%, respectively, of
receivables. The credit risk associated with this financial instrument is
believed by the Company to be limited due to the relatively large number of
customers, their geographic dispersion and the performance of certain credit
evaluation procedures. The Company also maintains credit insurance for its
accounts receivable portfolio subject to certain limits and deductibles.

The drugs and other raw materials used in the Company's products are purchased
through United States distributors from foreign and domestic manufacturers of
bulk pharmaceutical chemicals and are generally available from numerous sources.
The federal drug application process requires specification and approval of raw
material suppliers. If raw materials from all specified suppliers become
unavailable, FDA approval of a new supplier is required, which can cause a delay
of six months or more in the manufacture of the drug involved. To date, the
Company has not been adversely impacted due to the unavailability of key raw
materials.

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

                                       F-9



<PAGE>   46


NOTE B. ACCRUED LIABILITIES

The Company's accrued liabilities consist of the following:

                                                           December 31,
                                                  ------------------------------
                                                      2000               1999
                                                  ------------------------------
Brand marketing expenses                          $ 6,377,408        $ 5,876,198
Profit sharing for joint product
      development activities                        2,719,487          2,256,605
Wages and other compensation                        1,592,642          1,991,129
Taxes, other than income taxes                        906,598            694,860
Biostudies                                             97,009            908,658
Litigation settlement                                     ---          7,500,000
Deferred revenue                                          ---          5,836,737
Other                                               1,948,592          3,395,630
                                                  -----------        -----------
                                                  $13,641,736        $28,459,817
                                                  ===========        ===========


Accrued brand marketing expenses at December 31, 2000 represent the amount due
Solvay Pharmaceuticals, Inc. ("Solvay Pharmaceuticals") for marketing expenses
associated with the Solvay Pharmaceuticals promotion of the Company's
Cenestin(R) (synthetic conjugated estrogens, A) Tablets ("Cenestin").

Accrued brand marketing expenses at December 31, 1999 represent marketing
expense liabilities related to the Company's promotion of Cenestin.

The litigation settlement represented the balance due for the $15.0 million
settlement of the litigation between the Company and Schein Pharmaceutical, Inc.
("Schein"). (See Note J - Litigation Settlement and Legal Proceedings).

Deferred revenues reflect amounts collected for shipments of Cenestin, net of
returns and allowances, not yet recognized. The Company recorded these shipments
as revenue as evidence of product movement through the distribution system was
obtained.














                                      F-10

<PAGE>   47


NOTE C. DEBT AND MANDATORY REDEEMABLE CONVERTIBLE PREFERRED STOCK

The Company's debt and mandatory redeemable convertible preferred stock consists
of the following:

<TABLE>
<CAPTION>
                                                             December 31,
                                                     ---------------------------
                                                        2000            1999
                                                     -----------     -----------
<S>                                                  <C>             <C>
Debt

Foothill Capital financing facilities:
      Revolving credit facility                      $17,123,241     $14,588,102
      Intangible term note                             3,666,667       6,416,667
      Equipment term note                              2,860,208       4,303,832
Provident Bank mortgage notes                         18,800,000             ---
Merrill Lynch note payable                                   ---       7,719,404
Note payable to contract sales organization              886,504       1,490,051
Note payable to strategic alliance partner                   ---         544,737
Installment notes payable                                 47,185          55,266
Other - See Note E                                       467,539         385,934
                                                     -----------     -----------
                                                      43,851,344      35,503,993
Less amount classified as current                      4,743,913       5,783,232
                                                     -----------     -----------
                                                     $39,107,431     $29,720,761
                                                     ===========     ===========

Mandatory redeemable
     convertible preferred stock - net               $ 8,177,000     $ 4,900,000
</TABLE>

DEBT
The Company's principal lender is Foothill Capital Corporation ("Foothill"). The
initial term of the agreement with Foothill is through November 2002, with
provisions for renewals. The financing agreement provides for a revolving credit
facility, collateralized by the Company's trade receivables and inventories, and
two term notes. The Company's borrowing capacity under the revolving credit
facility fluctuates based on the dollar amount of eligible trade receivables and
inventory and bears interest at the prime rate plus 0.50% (10.00% at December
31, 2000). The equipment term note, secured by specified equipment, bears
interest at the prime rate plus 0.75% (10.25% at December 31, 2000) and requires
monthly principal payments of $67,047 plus interest for the remaining term of
the note, subject to renewal of the financing agreement. The intangible term
note is a four-year term loan collateralized by the intangible assets of the
Company. The terms of the note require monthly principal payments of $145,833
plus interest for the term of the note. The intangible term note bears interest
at the prime rate plus 1.25% (10.75% at December 31, 2000).





                                      F-11

<PAGE>   48


On March 1, 2000 the Company refinanced its existing note payable collateralized
by its Cincinnati, Ohio manufacturing facility with a $12.0 million note and
$8.0 million note payable to The Provident Bank ("Provident"), both of which are
guaranteed by Solvay America. Provident holds a first mortgage on the Company's
Cincinnati, Ohio manufacturing facility.

The $12.0 million note bears interest at the prime rate (9.50% at December 31,
2000) and requires monthly payments of $100,000 plus interest for a ten-year
period commencing April 1, 2000. The $8.0 million note bears interest at the
prime rate (9.50% at December 31, 2000) and requires monthly payments of $33,333
plus interest commencing April 1, 2000. Principal payments for the $8.0 million
note are based upon a twenty-year amortization with a balloon payment due on
March 1, 2010 of $4.0 million.

The note payable to Merrill Lynch, which was guaranteed by the Warner Lambert
Company (now Pfizer Inc. ("Pfizer")), was paid in full by the Provident
financing agreement.

The note payable to a contract sales organization, initially in the principal
amount of $1,650,000, represents the initial cost to establish the brand sales
force which is representing the Company's brand products (initially Cenestin) to
the physicians community. The firm with which the Company has contracted to
establish and manage the Company's dedicated sales force agreed to finance its
startup costs over the 36-month term of the agreement in exchange for a monthly
principal and interest payment by the Company of $53,240. The loan is unsecured
and carries an interest rate of 10%.

The note payable to a strategic alliance partner was an unsecured note and was
repaid in full on April 30, 2000.





                                      F-12
<PAGE>   49


The carrying value of the Company's debt approximates fair market value.

At December 31, 2000, maturities of long-term indebtedness for the ensuing five
years were as follows:

Year ending December 31:

2001                       $ 4,743,913
2002                        21,602,633
2003                         2,582,648
2004                         2,052,544
2005                         1,602,067
Thereafter                  11,267,539
                          ------------
                            43,851,344
Less current installments    4,743,913
                          ------------
                          $ 39,107,413
                          ============


MANDATORY REDEEMABLE CONVERTIBLE PREFERRED STOCK
On May 12, 2000 the Company completed a private placement of $10.0 million of
Series G Convertible Preferred Stock with an institutional investor. The
preferred shares are immediately convertible to shares of the Company's Common
Stock at a fixed price of $5.06 per share. The preferred stock will pay a
dividend of 5% annually, payable quarterly in arrears, on all unconverted
preferred stock. Any of the Series G Preferred Stock that remains outstanding
will be automatically redeemed on May 12, 2004. The investor also received
warrants which were valued at $765,000 to purchase 500,000 shares of Common
Stock at a price of $5.50 per share, exercisable at any time before May 12,
2005. In conjunction with the Company's issuance of the Series G Convertible
Preferred Stock, it recorded an adjustment of $1.3 million to properly reflect
deemed dividends beyond the stated 5% dividend rate and a beneficial conversion
feature as required by EITF 98-5 and 00-27. This adjustment, which has reduced
the carrying amount of the Series G Convertible Preferred Stock and increased
additional paid-in capital, will be amortized through May 12, 2004 and reflected
as additional deemed dividends during this period. For the year ended December
31, 2000, the Company has amortized $175,000 of the deemed dividend adjustment.

The $4.9 million in Mandatory Redeemable Convertible Preferred Stock was the
balance outstanding of the Series F Convertible Preferred Stock as of December
31, 1999. The Series F Preferred Stock was converted into Common Stock in the
first quarter of 2000.

The Company's consolidated financial statement for the year ended December 31,
1998 reflects accounting for a beneficial conversion feature related to the
issuance of mandatory redeemable convertible preferred stock in June 1997 and
February 1998 to comply with Emerging Issues Task Force Topic No. D-60 (Topic
No. D-60). Topic No. D-60 requires that the intrinsic value of beneficial
conversion features of convertible preferred stock be treated as a return to the
preferred stockholder over the period from issuance to the first date that
conversion can occur. The Series F mandatory redeemable convertible preferred
stock provided for a maximum discount on conversion of 22%. The amount was
amortized over 300 days, the minimum period which the preferred shareholders
could have realized the maximum beneficial conversion.





                                      F-13



<PAGE>   50


NOTE D. LEASES

Aggregate rental expense for the years ended December 31, 2000, 1999 and 1998
was approximately $1,449,000, $1,476,000, and $1,118,000, respectively. The
following summarizes minimum future lease payments as of December 31, 2000:

        Year Ending December 31:

                                                       Operating       Capital
                                                         Leases        Leases
                                                       ----------     ----------
         2001                                          $1,016,994     $1,161,577
         2002                                             909,006      1,003,123
         2003                                             888,763        507,046
         2004                                             634,816        340,038
         2005                                                 ---         46,883
                                                       ----------     ----------
         Total minimum lease payments                  $3,449,579      3,058,667
                                                       ==========
         Less amount representing interest                               547,708
                                                                      ----------
         Present value of net minimum lease payments                   2,510,959
         Less current installments                                       870,675
                                                                      ----------
         Obligations under capital leases
                less current installments                             $1,640,284
                                                                      ==========

Assets under capital leases at December 31, 2000 and 1999 were $10.2 million and
$9.9 million, respectively, with related accumulated amortization of $4.8
million and $4.3 million, respectively.

Currently the Company's Somerset, New Jersey facility is leased. The Company has
notified the owner of the facility of its intent to purchase the facility, and
the Company and the owner have been cooperating on a mutually preferred closing
date. The closing on this transaction is currently scheduled for June 1, 2001.











                                      F-14
<PAGE>   51


NOTE E. EMPLOYEE RETIREMENT PLAN

The Company has a defined contribution plan, the "Duramed Pharmaceuticals, Inc.
401(k)/Profit Sharing Plan," available to eligible employees. The Plan provides
for the Company to match 50% of employee contributions to a maximum of 3% of
each employee's compensation. The Company match of $346,000, $345,000 and
$217,000 in 2000, 1999 and 1998, respectively, was made with the Company's
Common Stock, as permitted by the Plan. The Plan also has a profit sharing
provision at the discretion of the Company's Board of Directors. The Company has
not made a profit sharing contribution to the Plan. All full-time employees are
eligible to participate in the deferred compensation and Company matching
provisions of the Plan. Employees are immediately vested with respect to the
Company matching provisions of the Plan.

The Company has an unfunded pension plan covering nonemployee directors elected
prior to 1998 who have served on the Board for at least five years and
nonemployee directors elected 1998 or after who have served on the Board for at
least ten years. No director who is, or at any time during the five years prior
to the end of service as a director was, an employee of the Company may
participate in the plan. With certain exceptions for current long-serving
directors, the plan provides an annual benefit, payable monthly for a period of
ten years from the time a participating director ceases to be a member of the
Board, equal to 50% of the director's most recent annual Board fee, as adjusted
annually to reflect changes in the Consumer Price Index. As of December 31,
2000, the Company has recorded $468,000 as long-term debt representing the
present value of the estimated future benefit obligation to the eligible
directors. The right of a director to receive benefits under the plan is
forfeited if the director engages in any activity determined by the Board to be
contrary to the best interests of the Company.

NOTE F. COMMON AND PREFERRED STOCK

The Company has authorized the issuance of 100,000 shares of Series A Preferred
Stock, none of which has been issued.

On October 6, 1999 Solvay Pharmaceuticals was granted the option to purchase
3,000,000 shares of Duramed Common Stock at $9.00 per share. Solvay
Pharmaceuticals exercised this option by purchasing 1,666,666 shares on October
22, 1999 and purchased the remaining 1,333,334 shares on December 30, 1999.







                                      F-15
<PAGE>   52


NOTE G. INCOME (LOSS) PER COMMON SHARE

The following is a reconciliation of the numerators and denominators to
calculate earnings (loss) per common share:

<TABLE>
<CAPTION>
                                                        2000             1999              1998
                                                    ------------     ------------      ------------

<S>                                                 <C>              <C>               <C>
Numerator:
    Net income (loss)                               $    676,437     $(51,022,524)     $ (8,396,493)
    Dividends on preferred stock                         337,739          255,445           517,343
    Deemed dividend on convertible
       preferred stock                                   175,000              ---         4,873,000
                                                    ------------     ------------      ------------
    Numerator for basic and diluted earnings
       (loss) per share - income (loss)
       available to common stockholders             $    163,698     $(51,277,969)     $(13,786,836)
                                                    ============     ============      ============

Denominator:
    Denominator for basic earnings (loss) per
       share - weighted average shares                26,175,883       21,742,123        18,150,494
    Effect of dilutive securities:
       Stock options and warrants                        705,833              ---               ---
                                                    ------------     ------------      ------------
    Denominator for diluted earnings (loss) per
       share - adjusted weighted-average shares
       and assumed conversions                        26,881,716       21,742,123        18,150,494
                                                    ============     ============      ============

    Basic and diluted earnings (loss) per share     $       0.01     $      (2.36)     $      (0.76)
                                                    ============     ============      ============

    Not included in the calculation of diluted
      earnings (loss) per share because
      their impact is antidilutive:
          Stock options outstanding                      184,400        3,263,916         3,436,356
          Warrants                                        57,986        1,341,360         1,581,181
          Preferred shares if converted                1,976,285        1,293,920         2,286,700
</TABLE>



                                      F-16
<PAGE>   53


NOTE H. STOCK OPTIONS AND WARRANTS

STOCK OPTION PLANS
During 2000, the Company had options outstanding under the 1986 Stock Option
Plan (the "1986 Plan"), the 1988 Stock Option Plan (the "1988 Plan"), the 1997
Stock Option Plan (the "1997 Plan"), the 2000 Stock Option Plan (the "2000
Plan"), and the 1991 Stock Option Plan for Nonemployee Directors (the "Directors
Plan"). The 1986 Plan, which expired in 1996 (insofar as the grant of new
options was concerned) permitted the granting of options for up to 160,000
shares of the Company's common stock.

The1988 Plan authorizes the granting of options for up to 3,589,725 shares of
the Company's common stock and the 1997 plan authorizes the granting of options
for up to 1,500,000 shares of the Company's common stock. Options granted under
the 1997 Plan may be either incentive stock options or nonqualified stock
options. Only nonqualified options may now be granted under the 1988 Plan. All
nonqualified options must be granted with an exercise price, which is not less
than 50% of the fair market value of the Company's common stock on the date of
grant. All incentive stock options must be granted at a price not less than 100%
of the Company's common stock's fair market value on the date of grant, and
incentive stock options granted to persons owning more than 10% of the Company's
common stock must be granted at a price of at least 110% of fair market value.

After the 1997 Plan was adopted on February 11, 1997, the Company transferred to
that Plan 770,275 shares authorized for issuance under the 1988 Plan, which were
not the subject of then outstanding options. The shares remaining authorized for
issuance under the 1988 Plan have been allocated to options that have already
been exercised or options already granted but not yet exercised. Therefore, the
Company does not expect to make future routine grants from the 1988 Plan,
although it is possible that limited grants will be made, if and as shares
become available due to the termination or expiration of unexercised options.

The 2000 Plan was adopted on July 18, 2000 and the granting of options extends
until September 11, 2010. Up to 1,300,000 shares of Common Stock may be issued
to any eligible employee of the Company or to advisors of the Company. However
non-employee directors of the Company are not eligible to participate in the
Plan. Options for no more than 500,000 shares may be granted to any eligible
employee during any period of twelve consecutive months. Both incentive stock
options and nonqualified options may be granted to employee-participants in the
2000 Plan. Advisors may only receive nonqualified options. The per share
exercise price of options follow the same guidelines as options granted under
the 1988 and 1997 Plans as described above.

Options granted under the 1986, 1988, 1997, and 2000 Plans become exercisable
based upon the terms and conditions established at the time of the grant and
generally expire 10 years after the date of grant.


                                      F-17
<PAGE>   54


The Directors Plan provides for the issuance of non-qualified options for up to
300,000 shares of the Company's common stock. The Directors Plan is a "formula
plan" under which each new nonemployee director is granted, at the close of
business on the date he or she first becomes a director, options to purchase
10,000 shares of the Company's common stock. Annually, each then serving
nonemployee director, other than a new director, is also automatically granted
options to purchase 5,000 shares of the Company's common stock at a price equal
to the closing market price on the date of grant. Options granted under the
Directors Plan generally vest 100% six months from the date of grant and expire
10 years after the date of grant.




































                                      F-18
<PAGE>   55
The following summarizes the activity in the Employee and Directors Plans:

<TABLE>
<CAPTION>
                                          Employees' Plans                                 Directors Plan
                            ----------------------------------------------------------------------------------------------
                              Shares        Option Price       Weighted Avg    Shares        Option Price     Weighted Avg
                            ----------------------------------------------------------------------------------------------
<S>                         <C>          <C>           <C>         <C>         <C>        <C>          <C>         <C>
Outstanding at
   December 31, 1997.....   2,841,054    $ 0.50  to    $7.25       $3.65       69,000     $4.00  to    $16.50      $10.30
Granted             .....     658,400     $3.44  to    $6.63       $4.95       20,000     $3.63  to     $3.63       $3.63
Expired             .....      (7,000)    $3.13  to    $3.75       $3.31            -       N/A  to       N/A         N/A
Forfeited           .....     (77,871)    $3.38  to    $6.06       $4.89            -       N/A  to       N/A         N/A
Exercised           .....     (67,227)    $0.50  to    $5.00       $2.05            -       N/A  to       N/A         N/A

Outstanding at
   December 31, 1998.....   3,347,356    $ 0.50  to    $7.25       $3.91       89,000     $3.63  to    $16.50       $8.53
Granted             .....     771,264     $2.75  to   $15.38       $8.42       25,000     $7.75  to     $7.75       $7.75
Expired             .....      (7,000)    $2.75  to    $7.25       $5.84            -       N/A  to       N/A         N/A
Forfeited           .....    (108,640)    $3.38  to    $7.19       $5.00            -       N/A  to       N/A         N/A
Exercised           .....    (853,064)    $0.50  to    $7.25       $2.42            -       N/A  to       N/A         N/A

Outstanding at
   December 31, 1999.....   3,149,916    $ 0.50  to   $15.38       $5.38      114,000     $3.63  to    $16.50       $8.57
Granted             .....     787,500     $3.69  to   $13.13       $6.06       30,000     $6.94  to     $6.94       $6.94
Expired             .....     (14,200)    $3.69  to    $5.00       $4.61            -       N/A  to       N/A         N/A
Forfeited           .....    (142,220)    $3.31  to   $15.38       $7.24            -       N/A  to       N/A         N/A
Exercised           .....    (185,324)    $0.50  to    $7.16       $4.08            -       N/A  to       N/A         N/A

Outstanding at
   December 31, 2000.....   3,595,672    $ 0.50  to   $15.38       $5.52      144,000     $3.63  to    $16.50       $8.23

==========================================================================================================================
Exercisable at
   December 31, 1998.....   2,143,077     $0.50  to    $7.25       $3.36       69,000     $4.00  to    $16.50      $10.30
   December 31, 1999.....   1,807,958     $0.50  to    $6.63       $4.27       89,000     $3.63  to    $16.50       $8.53
   December 31, 2000.....   2,020,689     $0.50  to   $15.38       $4.65      114,000     $3.63        $16.50       $8.57

==========================================================================================================================
Available for future
   grants at
   December 31, 2000.....     891,987                                         105,000
==========================================================================================================================
</TABLE>











                                      F-19
<PAGE>   56

OTHER OPTIONS AND WARRANTS
On September 13, 1996, in connection with the Company's acquisition of Hallmark,
the Company issued 400,000 warrants for purchase of the Company's common stock
at an exercise price of $25.00 per share. These warrants were repriced on
September 12, 1997 to $10.00 per share. The warrants have a term of five years
and became fully vested as of March 25, 1999. During 2000, based on an
antidilutive clause in the purchase contract, the exercise price was adjusted to
$8.785 and the number of warrants to purchase shares of the Company's common
stock was adjusted to 454,759. At March 9, 2001, there were 428,941 warrants
outstanding.

On June 5, 1997, in combination with the Company's issuance of Series E
Preferred Stock, the Company granted to certain employees of Shoreline Pacific,
Institutional Finance Division of Financial West Group, warrants to purchase
20,000 shares of the Company's common stock at an exercise price of $4.3125 per
share. The warrants vested immediately and expired on June 5, 2000. The
remaining 15,800 warrants were exercised during 2000, prior to their expiration.

On February 4, 1998, along with the Company's issuance of Series F Preferred
Stock, the Company granted 550,000 warrants to purchase shares of the Company's
common stock. Of the 550,000 warrants, 500,000 warrants were issued to investors
of the Series F Preferred Stock at an exercise price of $5.74 per share. The
warrants vested on October 2, 1998 and expire four years from the date of grant.
The warrants require for-cash exercise unless the Company elects to allow a
cashless exercise. The remaining 50,000 warrants were granted to certain
employees of Shoreline Pacific, Institutional Finance Division of Financial West
Group at an exercise price of $5.22 per share. The warrants vested immediately
and expired on February 4, 2001. Of the 38,500 warrants remaining, 33,500
warrants were exercised and 5,000 warrants expired. As of March 9, 2001, the
500,000 warrants granted to investors of the Series F Preferred Stock were
outstanding.

During 1999, in conjunction with an amendment to a financing agreement, the
Company granted to its bank warrants to purchase 110,000 shares of the Company's
common stock at an exercise price of $12.79. These warrants vest immediately and
expire four years from the date of grant. In December 1999, the financing
agreement was amended to reset the exercise price of 50% of the warrants to
$9.00 per share. During 2000, based on an antidilutive clause in the agreement,
the number of warrants was adjusted to 115,092. The price of 57,986 warrants was
adjusted to $12.131 and the remaining 57,106 warrants were repriced to $8.668.
As of March 9, 2001, 115,092 warrants remain outstanding.

On May 12, 2000, in combination with the Company's issuance of Series G
Preferred Stock, the Company granted warrants to purchase 500,000 common shares
at a price of $5.50 per share. The warrants vested immediately and expire on May
12, 2005. As of March 9, 2001, 500,000 warrants remain outstanding.

At December 31, 2000, an aggregate of 5,576,890 shares of common stock were
reserved for issuance.

                                      F-20


<PAGE>   57


The following table summarizes information regarding stock options and warrants
outstanding:

<TABLE>
<CAPTION>
                 Options & Warrants Outstanding                      Options & Warrants Exercisable
-----------------------------------------------------------------   ---------------------------------
                                    Weighted
                    Number           Average        Weighted             Number         Weighted
   Range of       Outstanding       Remaining        Average          Exercisable       Average
Exercise Prices  As of 12/31/00  Contractual Life  Exercise Price      As of 12/31/00  Exercise Price
-----------------------------------------------------------------   ---------------------------------


<S>       <C>       <C>              <C>             <C>                <C>               <C>
  $0.50-  $5.00     2,191,673        4.69            $3.88              1,949,553         $3.84

  $5.06-  $6.94     2,175,730        5.81            $5.82              1,286,898         $5.60

  $6.97- $16.50     1,209,487        5.42            $9.15                735,439         $9.32

               ------------------                                   -------------------
  $0.50- $16.50     5,576,890        5.29            $5.78              3,971,890         $5.43
               ==================                                   ===================
</TABLE>



During 2000, $350,951 was recognized as compensation expense related to
non-employee grants and option modifications. The remaining options were granted
to employees or directors at an exercise price equal to or greater than the
closing market price on the date of grant and accordingly no compensation
expense was recognized on these options. During 1999, certain options were
granted to employees with exercise prices less than fair value on the date of
grant and certain options were granted to non-employees. Therefore, $530,210 was
recognized in 1999 as compensation expense related to these option grants.




















                                      F-21


<PAGE>   58


Pro forma information regarding net loss and net loss per share is required by
Statement 123, which also requires that information be determined as if the
Company has accounted for its stock options granted and/or modified subsequent
to December 31, 1994 using the fair value method of that Statement. For purposes
of pro forma disclosure, the estimated fair value of the options is amortized to
expense over the options vesting periods. The expense in connection with FASB
123 that would have been recorded in 2000, 1999, and 1998 was $2.0 million, $2.9
million, and $2.8 million, respectively and would have generated the following
pro forma results:

<TABLE>
<CAPTION>
                                 2000             1999             1998
                            -------------    --------------   ---------------
<S>                         <C>              <C>              <C>
Net loss applicable to
    common stockholders     $  (1,832,973)   $  (54,162,226)  $   (16,550,966)

Net loss per common share
   Basic and diluted               ($0.07)           ($2.49)             0.91)
</TABLE>


The fair value for these options was estimated at the date of grant using the
Black-Scholes model with the following weighted average assumptions:

Fair Value Assumptions                     2000          1999          1998
-----------------------                  ------        ------         ------
Dividend Yield                               0%            0%            0%

Expected Volatility                       69.3%         61.1%         50.6%

Risk Free Interest Rate                   5.08%         6.33%         4.55%


Expected life in years                       5             5             5






                                      F-22


<PAGE>   59


The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee and directors stock options have characteristics
significantly different from those traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, existing models do not necessarily provide a reliable
single measure of the fair value of its options.

During 2000, 1999, and 1998, the weighted average fair value of options granted
was $3.62, $4.97, and $2.19, respectively.


NOTE I. INCOME TAXES

Deferred income taxes provided under Statement of Financials Accounting
Standards No. 109 "Accounting for Income Taxes" are determined based upon the
temporary differences between the financial statements and the tax basis of
assets and liabilities. The tax effects of temporary differences that give rise
to deferred income tax assets and liabilities at December 31, 2000 and December
31, 1999 are presented below:

                                                              December 31,
                                                       ------------------------
                                                         2000            1999
                                                       ------------------------
Deferred tax assets (liabilities):                         (in thousands)
     Net operating loss carryforwards                  $ 44,499        $ 42,678
     Accrued employee benefits                              582             577
     Inventory obsolescence allowance                     2,503           3,218
     Accounts receivable allowance                          454             361
     Hallmark acquisition                                 3,162           3,459
     Litigation settlement                                  ---           2,850
     Property, plant and equipment                         (479)           (383)
     Other                                                 (797)           (815)
                                                       --------        --------
        Total deferred tax assets                        49,924          51,945
Less valuation allowance                                 49,924          51,945
                                                       --------        --------
Net deferred tax assets                                $    ---        $    ---
                                                       ========        ========


At December 31, 2000 and 1999, the Company had cumulative net operating loss
carryforwards of approximately $110.0 million and $105.9 million, respectively,
for federal income tax purposes which expire in the years 2004 to 2020.
Additionally, the Company had cumulative losses from Duramed Europe that
amounted to approximately $7.1 million and $6.4 million, respectively, in 2000
and 1999, which are not deductible for U.S. tax purposes.



                                      F-23


<PAGE>   60


The reconciliation of income tax at the U.S. federal statutory rate to income
tax (benefit) expense is:

                                                   Years Ended December 31
                                           -------------------------------------
                                              2000        1999          1998
                                           -------------------------------------
                                                      (in thousands)
Federal tax expense (benefit)
     at U.S. statutory rate                $     55      $(16,045)     $ (2,630)
State tax expense (benefit)
     net of federal benefit                       5        (1,375)         (225)
Deferred tax expense (benefit)                  ---           ---           ---
Losses for which benefit not
     previously provided                        ---        17,420         2,855
Other                                           (60)          ---           ---
                                           --------      --------      --------
Actual tax (benefit) provision             $    ---      $    ---      $    ---
                                           ========      ========      ========


NOTE J. LITIGATION SETTLEMENT AND LEGAL PROCEEDINGS

On September 5, 2000, the Company filed an antitrust lawsuit against
Wyeth-Ayerst Laboratories, Inc., the makers of Premarin(R). The complaint,
(Duramed Pharmaceuticals, Inc. vs. Wyeth-Ayerst Laboratories, Inc., Case No.
C-1-00-735), filed in the Cincinnati Federal District Court, alleges that
Wyeth-Ayerst, a subsidiary of American Home Products Corporation, has illegally
perpetuated a monopoly in conjugated estrogens products by, among other things,
inducing managed care organizations (MCOs) into exclusive contracts for
Premarin, therefore eliminating the possibility of Cenestin being placed on
formulary with those same MCOs.

Duramed seeks actual and treble damages associated with profits lost due to
Wyeth-Ayerst's conduct in violation of antitrust laws and seeks to permanently
enjoin Wyeth-Ayerst from engaging in anti-competitive and exclusionary conduct.

Duramed is the sole plaintiff for the litigation. Duramed's marketing partner
for Cenestin, Solvay Pharmaceuticals, is not associated with the lawsuit.

Among other things, the suit alleges that, on or about the time of the FDA
approval of Cenestin, Wyeth-Ayerst began forming exclusive contracts with MCOs
that contained language stating that Premarin be used as "the sole and exclusive
conjugated estrogens" on the MCO's formulary. By agreeing to this contract, MCOs
would be eligible for Wyeth-Ayerst's rebates and/or administrative fees tied
directly to sales of Premarin.

Further alleged is that Wyeth-Ayerst has employed "disguised" exclusive
contracts that tie the rebates and/or administrative fees that Wyeth-Ayerst pays
to an individual MCO to that MCO's national market share of Premarin sales.
This, in effect, compels the MCO to promote Premarin and ignore Cenestin.






                                      F-24
<PAGE>   61


Duramed alleges that both types of contracts violate 15 U.S.C.ss.1 and 2, the
Sherman Act, and 15 U.S.C.ss.3, the Clayton Act.

On October 26, 2000, Wyeth-Ayerst filed a Motion to Dismiss the Complaint in its
entirety, as well as a Motion to Strike certain allegations in the Complaint. On
November 7, 2000, Duramed filed a Memorandum in Opposition to Wyeth-Ayerst's
Motion to Dismiss and Motion to Strike. Wyeth-Ayerst's Motion remains pending
before the Court.

In the meantime, discovery is proceeding, with both parties having exchanged
document requests. On March 1, 2001, Duramed filed a Motion to Compel further
production of documents from Wyeth-Ayerst. Duramed's Motion remains pending
before the Court.

On October 22, 1999 the Company reached a settlement agreement with Schein
Pharmaceutical, Inc. relating to a 1992 agreement regarding the pursuit of an
ANDA conjugated estrogens product. Under the terms of the settlement, Schein has
given up any claim to rights in Cenestin in exchange for a payment of $15
million, which was recorded as a charge in the third quarter of 1999. Duramed
made an initial $7.5 million payment to Schein on October 22, 1999. The second
$7.5 million payment was made in the first quarter of 2000. An additional $15
million payment is required under the terms of the settlement if Cenestin
achieves total profits (product sales less product-specific cost of goods sold,
sales and marketing and other relevant expenses) of greater than $100 million
over any five year or less period within the next 15 years.

The Company is involved in various additional lawsuits and claims, which arise
in the ordinary course of business. Although the outcome of such lawsuits and
claims cannot be predicted with certainty, the disposition thereof will not, in
the opinion of management, result in a material adverse effect on the Company's
financial position or results of operations.



                                      F-25
<PAGE>   62
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                 DURAMED PHARMACEUTICALS, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
             Col. A                          Col. B                  Col. C                    Col. D           Col. E
-----------------------------------------------------------------------------------------------------------------------------
                                                                   Additions
                                                           ----------------------------
                                                                             Charged
        Description                        Balance            Charged        to Other                               Balance
                                           at Beginning       to Costs       Accounts        Deductions             at End
                                           of the Period    and Expenses    (describe)       (describe)            of Period
-----------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>              <C>                             <C>                <C>
YEAR ENDED DECEMBER 31, 2000
Allowance for doubtful trade
    accounts receivable                   $   951,239      $   265,063                     $    21,387(1)      $ 1,194,915
Allowance for inventory obsolescence      $ 8,448,228      $ 1,297,576                     $ 3,179,816(2)      $ 6,566,988

YEAR ENDED DECEMBER 31, 1999
Allowance for doubtful trade
    accounts receivable                   $   902,900      $   184,053                     $   135,714(1)      $   951,239
Allowance for inventory obsolescence      $ 9,106,571      $   595,197                     $ 1,253,540(2)      $ 8,448,228

YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful trade
    accounts receivable                   $ 1,481,868      $   191,694                     $   770,662(1)      $   902,900
Allowance for inventory obsolescence      $ 7,740,917      $ 1,397,345                     $    31,691(2)      $ 9,106,571

</TABLE>


1)   Uncollectible accounts written off, net of recoveries.
2)   Products reserved as short dated inventory then subsequently sold.








                                      S-1