<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-K
 (Mark One)
  [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

                  For the fiscal year ended December 31, 1998
                                      OR

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

Commission file number:

                     Warner Chilcott Public Limited Company

             (Exact name of Registrant as specified in its charter)

                   Ireland                                Not Applicable
       (Jurisdiction of incorporation          (IRS Employer Identification No.)
               or organization)                              

Lincoln House, Lincoln Place, Dublin 2, Ireland           353-1-662-4962
  (Address of principal executive offices)       (Registrants telephone number, 
                                                      including area code)

Securities registered or to be registered pursuant to Section 12(b) 
of the Act:   None

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



American Depository Shares, representing Ordinary Shares, par value $0.05 each
  Nasdaq National Market Ordinary Shares par value $0.05 each Nasdaq National
                                    Market*

     * Listed, not for trading, but only in connection with the listing of
  American Depositary Shares, pursuant to the requirements of the Securities
                           and Exchange Commission.

Securities for which there is a reporting obligation pursuant to Section 15(d) 
of the Act: None

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

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

As of March 26, 1999 there were 12,366,808 Ordinary Shares outstanding. The
aggregate market value of the Ordinary Shares (based upon the last sale price of
$7.00 per share as of March 26, 1999 on the Nasdaq National Market System) held
by non-affiliates of the registrant was $49,472,353.00. For the purposes of this
calculation, shares owned by officers, directors (and their affiliates) and 10%
or greater shareholders known to the registrant have been deemed to be
affiliates, which should not be construed to indicate that any such person
possesses the power, direct or indirect, to direct or cause the direction of the
management or policies of the Registrant or that such person is controlled by or
under common control with the Registrant.
<PAGE>
 
DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A (the "Proxy Statement") within 120 days after the end of the
fiscal year ended December 31, 1998. Portions of the Proxy Statement for the
Annual Meeting of Shareholders scheduled to be held on June 3, 1999 are
incorporated by reference in Part III of this report.
<PAGE>
 
                                TABLE OF CONTENTS
<TABLE> 
<S>                                                                                                             <C> 
GENERAL...........................................................................................................1

CAUTIONARY STATEMENT..............................................................................................2

PART I............................................................................................................3
         ITEM 1.  BUSINESS........................................................................................3
         ITEM 2.  PROPERTIES  ...................................................................................18
         ITEM 3.  LEGAL PROCEEDINGS..............................................................................18
         ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................20

PART II  
         ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SHAREHOLDER MATTERS...........................20
         ITEM 6.  SELECTED FINANCIAL DATA........................................................................22
         ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........23
         ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................31
         ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................31
         ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...........52
PART III.........................................................................................................53
         ITEM 14.  FINANCIAL STATEMENTS AND EXHIBITS.............................................................53
</TABLE> 
<PAGE>
 
General

As used herein, the "Company" refers to Warner Chilcott Public Limited Company
("Warner Chilcott plc") and its consolidated subsidiaries, unless the context
requires otherwise, and "WCI" refers to Warner Chilcott, Inc., a Delaware
corporation and wholly owned subsidiary of Warner Chilcott plc. Unless otherwise
indicated, the Company's financial statements and other financial data contained
in this Form 10-K are presented in United States dollars ($) and are prepared in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP").

         Reporting on Form 10-K

         While the Company is a "Foreign Registrant" within the meaning of the
         Securities Exchange Act of 1934, it elected to file as a "Domestic
         Registrant" effective June 30, 1998. This Annual Report is therefore
         the first Annual Report of the Company to be filed on Form 10-K.

         Trademarks and Service Marks

         The following are trademarks and service marks belonging to, licensed
         to, or otherwise used by the Company throughout this Form 10-K:

         CHOLEDYL(R)
         DORYX(R)
         ERYC(R)
         LOCHOLEST(R)
         MANDELAMINE(R)
         NATAFORT(R)
         PYRIDIUM(R)
         PYRIDIUM(R) PLUS
         VECTRIN(R)
         WARNER CHILCOTT(TM)
         WARNER CHILCOTT LABORATORIES(TM)
         K-DUR(R),  IMDUR(R) and NITRODUR(R) are registered trademarks of Key
                  Pharmaceuticals, a division of Schering Corporation
                  ("Schering-Plough"). The Company has permission to use these
                  marks pursuant to a Distribution Agreement with
                  Schering-Plough (the "Schering-Plough" Agreement).
         ESTRACE(R) and OVCON(R) are registered trademarks of Bristol-Myers
                  Squibb Company ("Bristol-Myers"). Warner Chilcott has
                  permission to use these marks pursuant to a Co-Promotion
                  Agreement with Apothecon, Inc. ("Apothecon"), a subsidiary of
                  Bristol-Myers (the "Bristol-Myers Agreement").
         ADALAT(R) is a registered trademark of Bayer AG.
         HYTRIN(R) is a registered trademark of Abbott Laboratories
<PAGE>
 
Cautionary Statement

This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward-looking statements are subject to significant
risks and uncertainties, including those identified in the sections of this Form
10-K entitled "Customers," "Trademarks, Patents and Proprietary Rights,"
"Competition," "Government Regulation," "Manufacturing and Supply," "Product
Liability" and "Factors That May Affect Future Operating Results" and in the
Company's 1997 Annual Report on Form 20-F and quarterly reports on Form 10-Q
filed with the Securities and Exchange Commission, which may cause actual
results to differ materially from those discussed in such forward-looking
statements. The forward-looking statements within this Form 10-K are identified
by words such as "believes," "anticipates," "expects," "intends," "may," "will,"
and other similar expressions. However these words are not the exclusive means
of identifying such statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. The Company undertakes no
obligation to release publicly the results of any revisions to these
forward-looking statements that may be made to reflect events or circumstances
occurring subsequent to the filing of this Form 10-K with the Securities and
Exchange Commission. Readers are urged to review and consider carefully the
various disclosures made by the Company in this report and in the Company's
other reports filed with the Securities and Exchange Commission that attempt to
advise interested parties of the risks and factors that may affect the Company's
business.

                                       2
<PAGE>
 
                                     Part I
Item 1.  Business.

Overview

The Company is primarily engaged in the development, marketing, sale and
distribution of prescription pharmaceutical products in the United States. The
Company's current focus is on branded products targeted for three specialty
segments: women's health care, cardiology, and dermatology. All of the Company's
branded products are promoted by the Company's specialty sales force.

The Company currently markets a portfolio of branded products including:
NataFort(R), a prescription prenatal vitamin designed to improve patient
compliance by virtue of its smaller size relative to competing products,
Pyridium(R) Plus, an orally active urinary tract analgesic antispasmodic agent
used for irritative bladder conditions, Vectrin(R), an antibiotic used most
frequently for the treatment of acne, Doryx(R), a broad spectrum antibiotic,
LoCholest(R), a lipid regulator for the reduction of LDL cholesterol levels,
Estrace(R), a hormone replacement vaginal cream, Ovcon(R) 35, an oral
contraceptive, K-Dur(R), a sustained release potassium supplement, Imdur(R), a
once-daily oral nitrate for the treatment of angina and NitroDur(R), a
nitroglycerin patch for the treatment of angina. NataFort(R), Pyridium(R) Plus,
Vectrin(R), Doryx(R) and LoCholest(R) are products owned by the Company;
Estrace(R) and Ovcon(R) are products owned by Bristol-Myers and promoted by the
Company under the Bristol-Myers Agreement; and K-Dur(R), Imdur(R) and
NitroDur(R) are products owned by Schering-Plough and promoted by the Company
under the Schering-Plough Agreement.

The Company plans to add additional products to its portfolio of branded
products through internal development, co-promotion agreements, in-licensing,
acquisition and development collaborations with other companies.

History

The Company is an Irish public limited company founded in 1992 as Nale
Laboratories Limited ("Nale"). In March 1996 Nale acquired certain assets and
assumed certain liabilities (the "Acquisition") of Warner Chilcott Laboratories,
a division of the Warner-Lambert Company (the "Division"). Following the
Acquisition, Nale changed its name to Warner Chilcott Public Limited Company.

The principal purpose of the Acquisition was to provide the Company with
channels of distribution in the United States. The Company also gained an
established reputation in the pharmaceutical industry, a portfolio of existing
products, and a functioning organization. The Company's customer base includes
all major national wholesalers and pharmacy chains. In addition, the Company
utilizes the services of an outside telemarketing organization to cover almost
5,000 independent pharmacies. The assets and liabilities of the Division
acquired in the Acquisition are now organized in the United States as Warner
Chilcott, Inc., a wholly-owned subsidiary of Warner Chilcott Public Limited
Company.

                                       3
<PAGE>
 
The Company's revenues are currently generated in the United States and the U.S.
dollar is the functional currency of the Company. Accordingly, the Company's
exposure to currency fluctuation is limited. Product sourcing from vendors and
research and development agreements are normally contracted in U.S. dollars. As
a company operating in multiple jurisdictions, the Company will be subject to
taxation on its earnings in the jurisdictions in which it operates. At present,
such jurisdictions include Ireland and the United States.

Developments during 1998 and Early 1999

The Company achieved a number of milestones during 1998 and early 1999
including:

 .        NataFort(R), the Company's internally developed prenatal vitamin,
         achieved extraordinary market penetration in its first full year of
         sales. By July 1998, NataFort(R) was the fastest growing product in its
         category. By February 1999, NataFort(R) captured the number one
         position in terms of new prescription market share.

 .        In July 1998 the Company entered into an agreement to market a number
         of Schering-Plough's branded products initially including K-Dur(R),
         Imdur(R) and Nitro-Dur(R) (See Item 1, Business - Collaborative
         Arrangements).

 .        The Company grew its pharmaceutical sales force to number approximately
         270 professionals, supported by an expanded sales management and
         product marketing team.

 .        The Company successfully eliminated all administrative reliance on
         Warner Lambert Company, putting in place its own sales support,
         personnel, legal, financial and distribution systems.

 .        In September 1998 the FDA approved Elan Corporation, plc's ("Elan")
         ANDA filing for Isosorbide-5-mononitrate extended release tablets, 60
         mg. The product was developed for the Company by Elan, the Company's
         largest shareholder. Marketing rights to the product were subsequently
         assigned to Apothecon with the Company retaining a financial interest
         in sales by Apothecon.

 .        In February 1999 the Company entered into a five year Co-Promotion
         Agreement with Apothecon to promote Ovcon(R) 35 and Estrace(R) Cream to
         the women's health care market. In addition, the Company also entered
         into a License Agreement with Bristol-Myers allowing it to develop a
         new oral contraceptive to be marketed under the Ovcon(R) trademark.

 .        In March 1999 the Company launched Pyridium(R) Plus, an orally active
         urinary tract analgesic antispasmodic agent used for irritative bladder
         conditions.

                                       4
<PAGE>
 
Strategy

The Company's goal is to be a leading marketer of branded prescription medicines
targeted for niche therapeutic applications in the United States. The main
elements of the Company's strategy are:

 .        Sales and Marketing: maintain a highly trained, dedicated, specialist
         sales force capable of executing the company's marketing plans in the
         chosen specialist markets;

 .        Branded Products: focus on growth through building a portfolio of
         proprietary branded pharmaceutical products targeted at three
         speciality therapeutic segments: women's health care, cardiology and
         dermatology;

 .        Marketing Alliances: generate high-margin revenue streams to amortize
         the cost of the Company's sales force; gain access to new product
         opportunities through establishing brand marketing and management
         relationships with top-tier pharmaceutical companies;

 .        Product Development: acquire, in-license and develop in-house new
         branded products and line extensions to existing branded products to
         provide a platform for future growth; and

 .        Multisource Products: take advantage of opportunities arising from the
         Company's existing generic product portfolio and development pipeline
         to enhance the above strategy.

Sales and Marketing

The Company pursues the commercialization of branded pharmaceutical products
that it believes will benefit from promotional activities directed toward
physician specialists. The Company has built two direct sales forces, the first
focused on general pharmaceutical sales and the other a dermatology sales force.
These sales organizations focus their efforts on high volume prescribing
physicians in each of the Company's target segments.

The Company began building its sales organization in 1997. By the end of 1998,
the Company had established a sales organization of approximately 270
professionals as well as the infrastructure to support and manage its sales
effort. The Company intends to augment its sales organization as needed to
support the promotion of the Company's existing and future branded products.

The Company's marketing strategy is to promote its branded products to high
volume prescribing physicians through these dedicated specialty sales forces.
The Company employs precision marketing techniques, which include ongoing
analyses of actual prescription data, to identify and target physicians that are
likely to be receptive to promotional efforts for the Company's products.
Generally, the physicians targeted tend to be specialists concentrated in
metropolitan areas and within larger group practices. This concentration enables
the Company to maximize the impact of its sales effort. Telemarketing and other
services are used to support its sales organization in the Company's efforts to
maintain frequent points of contact with targeted physicians.

                                       5
<PAGE>
 

The Company's general sales force began promoting LoCholest(R) to cardiologists
in the second quarter of 1997 and NataFort(R) to obstetricians and gynecologists
in January 1998. In July 1998 the general sales force began promoting cardiology
products covered by the Schering-Plough Agreement and in March 1999 began
promoting Pyridium(R) Plus and the women's health products covered by the
Bristol-Myers Agreement.

The Company's dermatology sales force began promoting Vectrin(R) in the second
quarter of 1997. The Company believes that its dermatology sales force, at its
current size, provides adequate reach and frequency to promote Vectrin(R)
effectively and has capacity to handle new products as needed.

The Company endeavors to supply its sales forces with a full complement of
support materials to assist in their efforts to promote and position the
Company's products. The Company works to produce packaging, sample kits, visual
aids and other collateral sales materials that it believes are equal in quality
and professionalism to those used by much larger pharmaceutical concerns.

         Branded Products

The Company markets a portfolio of branded products primarily in the women's
health care, cardiology and dermatology segments. The following table identifies
the Company's branded product marketing and development activities.

<TABLE> 
<CAPTION> 
Product                         Therapeutic Application         Status
<S>                             <C>                             <C> 
Women's Health Care

NataFort(R)                     Prenatal Vitamin                Developed in-house, launched in December 1997

Pyridium(R)                     Urinary Tract Analgesia         Acquired from Warner-Lambert in 1997

Pyridium(R) Plus                Urinary Tract                   Acquired rights from Warner-Lambert in 1997,
                                Analgesia/Antispasmodic         continued development in-house and launched in
                                                                March 1999

Ovcon(R) 35                     Oral Contraceptive              Bristol-Myers Agreement, began promoting in March
                                                                1999

Doryx(R)                        Antibacterial                   Acquired from Warner-Lambert in 1997, re-launched
                                                                March 1998

Mandelamine(R)                  Antibacterial                   Acquired from Warner-Lambert in 1997

Estrace(R) Cream                Hormone Replacement             Bristol-Myers Agreement, began promoting in March
                                                                1999


Cardiology

LoCholest(R)                    Lipid Regulation                Licensed from Eon; launched in 1997

K-Dur(R)                        Potassium Supplement            Schering-Plough Agreement
</TABLE> 

                                       6
<PAGE>
 
<TABLE> 
<S>                             <C>                             <C> 
Imdur(R)                          Angina                          Schering-Plough Agreement

NitroDur(R)                       Angina                          Schering-Plough Agreement


Dermatology

Vectrin(R)                        Antibacterial                   Developed in-house, launched in 1997


Other Products

Choledyl(R) SA                    Bronchodilator                  Acquired from Warner-Lambert in 1997

Eryc(R)                           Antibacterial                   Acquired from Warner-Lambert in 1997
</TABLE> 

         Women's Health Care Products

The Company is marketing and developing prescription products for the treatment
and support of women's health care.

         NataFort(R)

         In December 1997 the Company launched NataFort(R), a prescription
         strength prenatal vitamin designed to improve patient compliance by
         virtue of its smaller tablet size relative to other products in the
         category. In developing NataFort(R), the Company performed market
         research that indicated that the ingredients that physicians look for
         in a prenatal vitamin are folic acid and iron. Meanwhile, patients
         expressed a strong negative reaction to the size of the tablets.
         Prenatal vitamins tend to be large due to the inclusion of calcium in
         their formulation. Although calcium is quite important, the amount of
         calcium in other prenatal vitamins ranges from only 17% to 21% of the
         recommended daily allowance. Patients taking these prenatal vitamins
         need to obtain additional calcium from other sources. Also, the
         absorption of iron is inhibited by the presence of calcium. The
         Company's solution was to formulate NataFort(R) with a full 1 mg of
         folic acid and 60 mg of elemental iron but without calcium. As such,
         NataFort(R) tablets are significantly smaller than the competition and,
         due to the absence of calcium, potentially allow for improved iron
         absorption. NataFort(R) is a grandfathered drug and is therefore not
         subject to NDA/ANDA pre-market clearance requirements (see Item 1 -
         Government Regulation). It was developed internally by the Company. The
         entire product development cycle from initiation through market
         introduction was completed in less than nine months.

         NataFort competes in the prescription prenatal vitamin market in which
         sales in the United States were approximately $100 million in 1998.

         Pyridium(R) and Pyridium(R) Plus

         Pyridium(R)is an orally active urinary tract analgesic agent which
         helps to relieve urinary pain, burning, urgency and frequency related
         to urinary tract infections. Pyridium(R) was introduced by the Company,
         then a division of Warner-Lambert Company in 1927. In 1998


                                       7
<PAGE>
 
         there were nearly 2.5 million prescriptions written for Pyridium(R).
         However, most of those prescriptions were filled with a generic product
         substituted for the brand.

         Pyridium(R) Plus was introduced by Parke-Davis in 1980. Pyridium(R)
         Plus contains 150 mg phenazopyridine hydrochloride in combination with
         0.3 mg hyoscyamine hydrobromide and 15 mg butabarbital. Hyoscyamine
         hydrobromide, a parasympatholytic, acts to relieve detrusor muscle
         spasm. Butabarbital, a short-to-intermediate-acting sedative, helps to
         provide bladder sedation and bring a sense of calm and comfort to the
         bladder in distress. The Company reintroduced Pyridium(R) Plus in March
         1999. The product is positioned to capitalize on the brand equity
         associated with the Pyridium(R) trademark but is intended for patients
         with more chronic irritative bladder conditions. While generic
         substitution is and will remain a significant issue for the Company's
         Pyridium(R) brand, the Company does not expect Pyridium(R) Plus to have
         generic competition for some time.

         Doryx(R)

         Doryx(R) capsules contain specially coated pellets of doxycycline
         hyclate for oral administration. Doxycycline is indicated for the
         treatment of a broad range of infections. Doryx(R) was introduced in
         1986 by Warner-Lambert and was promoted to primary care physicians and
         obstetrician/gynecologists. Its point of difference versus other
         available doxycycline products is its pelletized delivery system.
         Doryx(R) pellets pass through the stomach and dissolve only after
         reaching the small intestine, facilitating absorption of the
         doxycycline in a uniform manner. The reduction in high local drug
         concentrations lessens the potential for GI upset. The Company
         relaunched Doryx(R) in the first half of 1998.

         Estrace(R) Cream

         Estrace(R) estradiol vaginal cream is a hormone replacement therapy for
         the treatment of vaginal and vulval atrophy as well as for the
         reduction of moderate to severe menopause symptoms. Estrace(R) Cream is
         promoted by the Company pursuant to the Bristol-Myers Agreement since
         March 1999. The product contains beta-estradiol as its active
         ingredient. Estrace(R) Cream is the number two product in its segment.

         Ovcon(R)35

         Ovcon(R)35 is an oral contraceptive composed of norethindrone and
         ethinyl estradiol. It was introduced by Bristol-Myers and the Company
         began promoting the product in March 1999 pursuant to the Bristol-Myers
         Agreement. Ovcon(R)35 had sales of approximately $40 million dollars in
         1998.

         Mandelamine(R)

         Mandelamine(R) is an oral tablet which is utilized in the prevention
         and treatment of urinary tract infections and cystitis. It has an
         antibacterial action of formaldehyde which is


                                       8
<PAGE>
 
         particularly suited for prevention and therapy of chronic infections as
         bacteria and fungi that do not develop resistance to formaldehyde.

         Cardiology Products

The Company is marketing and developing prescription products for the treatment
of angina pectoris and lipid disorders.

         LoCholest(R)

         LoCholest(R) powder is a resin that acts as a cholesterol-lowering
         agent and is intended for oral administration. Patients take
         LoCholest(R) by mixing it with milk, fruit juice, water or another
         beverage of their choice. The Company's primary positioning for
         LoCholest(R) is as an adjunct therapy for patients taking statins.
         Clinical studies have shown that cholestyramine can improve the
         efficacy of LDL cholesterol reduction when used concomitantly with
         statins. The Company believes that the non-systemic, non-absorbed
         mechanism of action, and the resulting safety profile, make its use in
         combination with statins an attractive alternative for patients that
         may not achieve desired reductions in LDL with statins alone. Use of
         LoCholest(R) in combination with statins may also allow physicians to
         prescribe lower dosage levels of statins while still achieving desired
         results.

         K-Dur(R)

         K-Dur(R) is an immediately dispersing extended release oral dosage form
         of potassium chloride that is used for the prevention and treatment of
         hypokalemia (abnormally low potassium concentration in the blood).
         Hypokalemia can be caused by a number of conditions including the use
         of diuretics. The Company is promoting K-Dur(R) pursuant to the
         Schering-Plough Agreement. The product was originally introduced by
         Schering-Plough and contains 1500 mg of microencapsulated potassium
         chloride USP.

         Imdur(R)

         Imdur(R) is a once-daily oral nitrate that is used for the treatment of
         angina. The Company is promoting Imdur(R) pursuant to the Schering-
         Plough Agreement.

         Nitro-Dur(R)

         Nitro-Dur(R) transdermal patch is an organic nitrate formulation used
         for the treatment of angina pectoris due to coronary artery disease.
         The product comes in five different dosage sizes and is designed to
         provide continuous controlled release of nitroglycerin through intact
         skin. The Company is promoting Nitro-Dur(R) pursuant to the Schering-
         Plough Agreement.

                                       9
<PAGE>
 
         Dermatology Products

The Company markets and develops prescription products for the treatment of acne
and other dermatological conditions. In 1996, sales of products to treat these
conditions in the United States were approximately $2.4 billion.

         Vectrin(R)

         Vectrin(R) is the Company's orally administered brand of minocycline
         HCL, a semi-synthetic derivative of tetracycline used as an anti-
         microbial agent against a wide range of organisms. More than 60% of the
         prescriptions written for minocycline have been generated by
         dermatologists for the treatment of acne.

         Other Products

         Choledyl(R)

         Choledyl(R) (oxtriphylline) is the choline salt of theophylline.
         Theophylline relaxes the smooth muscle of the bronchial airways and
         thus acts mainly as a bronchodilator. Choledyl(R) SA tablets have been
         formulated to provide therapeutic serum levels of drug when
         administered every 12 hours. Choledyl(R) SA tablets are indicated for
         relief or prevention of asthmatic symptoms and bronchospasm associated
         with chronic bronchitis and emphysema.

         Eryc(R)

         Eryc(R), the Company's brand of erythromycin, is an orally administered
         capsule containing enteric-coated pellets of erythromycin which protect
         the erythromycin base from inactivation by gastric acidity.
         Erythromycin is often prescribed by dermatologists as a lower cost
         alternative to minocycline and for patients for whom tetracycline and
         penicillin derivatives are contraindicated. Eryc(R) was introduced in
         1981 by Warner-Lambert. The Company began selling Eryc(R) in the first
         half of 1998.

Collaborative Arrangements

In July 1998 the Company entered into a collaborative sales and marketing
arrangement with Schering-Plough. Under the terms of the arrangement, the
Company is responsible for the development and execution of promotional strategy
and sales detailing of K-Dur(R), Imdur(R) and Nitro-Dur(R). The Company promotes
the products through its in-house sales force, targeting high-prescribing
physicians.

In February 1999 the Company entered into a Co-Promotion Agreement with
Apothecon, a subsidiary of Bristol-Myers, to promote Estrace(R) Cream and
Ovcon(R) 35 to the women's health market. Under the terms of the agreement, the
Company is responsible for the promotion of these two branded products to
physicians.

                                       10
<PAGE>
 
Product Development

Branded pharmaceutical products are marketed under proprietary brand names and
through programs designed to attract the loyalty of prescribing physicians. The
Company's current portfolio and development pipeline of branded products are
targeted at the women's healthcare, cardiology and dermatology segments. These
segments are large and afford attractive growth opportunities.

Through its in-house expertise in product development and regulatory affairs and
collaborations with corporate partners the Company identifies opportunities to
develop and launch additional branded pharmaceutical products. The Company's
strategy is to pursue products that represent improvements to existing
pharmaceuticals rather than creating new chemical entities. Improvements to
existing products generally involve less development and regulatory risk and
shorter time lines from concept to market. Where appropriate, the Company plans
to leverage the expertise of its collaborators in the development of new branded
products. In its evaluation of prospective product development projects, the
Company expects to maintain a strong bias towards projects that have the ability
to produce meaningful financial results in the near-term.

The Company also uses its in-house expertise, as well as the technology and
expertise of its corporate collaborators, to develop improvements and line
extensions for existing and future branded products. Enhancements may take the
form of modified formulations, novel delivery methods or alternative dosages.
Modifications of existing products are expected to enable the Company to extend
the life, and therefore the value, of its various brands.

The Company continually scans the pharmaceutical markets for opportunities to
acquire or in-license branded products in the Company's targeted specialty
areas. Candidates generally have, or can be modified to have, genuine points of
difference relative to competing products and are prescribed primarily by
physician specialists. The Company evaluates the competitive dynamics associated
with a product candidate to assess the ability of the Company to build
sustainable brand equity in the products through promotion. The Company also
weighs the financial risks and rewards of pursuing the product. The Company
believes that there will be numerous opportunities to acquire or in-license
branded products from large pharmaceutical concerns as those companies
increasingly shift their efforts away from products with annual revenue
potential of less than $100 million.

Multisource Generic Products: Pending ANDAs

As part of the Acquisition, the Company acquired a portfolio of 70 generic
products. In 1998, sales of these products were approximately $31.4 million in
the United States. Approximately 41.3% of these sales were attributable to
gemfibrozil. Other significant products of the Company include hydrocodone with
APAP with total 1998 sales of $2.1 million (representing 6.7% of total generic
sales), amoxicillin with total 1998 sales of $2.2 million (representing 7.1% of
total generic sales) and nitroglycerin patches with total 1998 sales of $1.9
million (representing 6.2% of total generic sales). However, with the launch of
its branded product initiative in 1997, the Company's primary focus shifted to
the development, acquisition and in-licensing of branded products and the
Company announced its intention to reduce or eliminate its generic
pharmaceutical business except for those 

                                       11
<PAGE>
 
products that it considered of significant value. The Company continues to
pursue the approval of certain generic products it considers of significant
value including nifedipine CC and terazosin.

         Nifedipine (Adalat(R) CC).

         Adalat(R) CC is an extended release version of the calcium channel
         blocking agent nifedipine, which is sold by Miles, a division of Bayer
         AG. Adalat(R) CC was approved by the FDA in July 1993. While the active
         ingredient nifedipine is off-patent, Adalat(R) CC is protected by
         formulation patents assigned to Bayer AG. The Company believes that if
         a product is developed with a formulation different from the one used
         in Adalat(R) CC, it should be available for generic competition. To
         date, however, no company has succeeded in gaining an ANDA approval for
         a generic version of Adalat(R) CC. Elan, who is developing the product
         for the Company, filed an ANDA for a 30 mg dosage of a generic version
         of Adalat(R) CC in June 1997 and, in accordance with the Waxman-Hatch
         Act, notified Bayer AG that the Company does not believe that it is
         infringing the formulation patents that cover Adalat(R) CC. Elan was
         subsequently sued for patent infringement by Bayer. Elan and the
         Company vigorously defended the suit, and filed a motion for summary
         judgment to dismiss it. This motion was granted on March 16, 1999 (See
         Item 3 - Legal Proceedings).

         Terazosin (Hytrin(R)).

         Terazosin hydrochloride is currently marketed as Hytrin(R) by Abbott
         Laboratories ("Abbott"). Hytrin(R) is an alpha-blocker indicated for
         use as an anti-hypertensive agent and also for the treatment of benign
         prostatic hyperplasia (BPH). In April 1998 the Company was sued by
         Abbott for an alleged patent infringement related to the Company's ANDA
         filing for terazosin. The Company is vigorously defending the suit (See
         Item 3 B Legal Proceedings).

Customers

The Company's customers include the nation's leading pharmaceutical wholesalers,
drug distributors and chain drug stores. The Company also sells certain products
in the government sector, both on the U.S. federal and state levels. The Company
has witnessed a consolidation of many customers, as chain drug stores and
wholesalers merge or consolidate. In addition, with regard to the Company's
generic pharmaceutical business, a number of the Company's customers have
instituted source programs that limit the number of the suppliers of generic
pharmaceuticals carried by that customer. As a result of these developments,
there is heightened competition among pharmaceutical companies for the business
of this smaller and more selective customer base.

During 1998, McKesson and Bergen Brunswig accounted for approximately $8.5
million and $6.0 million respectively, representing approximately 15% and 13%
respectively, of the Company's sales before rebates.

                                       12
<PAGE>
 
Trademarks, Patents and Proprietary Rights

Due to the branded product focus of the Company, it considers its trademarks
valuable assets and actively manages its trademark portfolio, maintaining
long-standing trademarks as well as obtaining trademark registrations for new
brands. The Company polices its trademark portfolio against infringement but
there can be no assurance that these efforts will be successful or that the
Company will have adequate remedies for any breach.

The Company believes that licenses from Elan and certain of the Company's other
strategic collaborators to patent rights relating to the Company's products,
particularly the Company's complex generic products, as well as the technologies
and processes used to formulate and manufacture these products, are important to
the Company's business. The success of these products may depend, in part, upon
the ability of the Company's strategic collaborators to protect these patent
rights. There can be no assurance that the Company's strategic collaborators
will succeed in protecting these patent rights, or that any patents or licenses
will (a) protect the Company against competitors with similar technologies, (b)
not be infringed upon or designed around by others, (c) not be challenged by
others and held to be invalid or unenforceable, or (d) not be terminated by a
licensor pursuant to various terms in such licenses or due to any breach.

The Company also relies on trade secrets and proprietary knowledge, which it
generally seeks to protect by confidentiality, non-disclosure and assignment of
invention agreements with its employees, consultants, licensees and other
companies. There can be no assurance, however, that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known by competitors. In
addition, there can be no assurance that the aforementioned persons will not
claim rights to intellectual property arising out of their work.

Competition

The pharmaceutical industry is highly competitive. The Company's branded
products are in competition with brands marketed by other pharmaceutical
companies including large, fully integrated concerns with financial, marketing,
legal and product development resources substantially greater than those of the
Company. In addition, several of the Company's branded products are off-patent
and therefore compete with generic pharmaceuticals that claim to offer
equivalent therapeutic benefits at a lower cost. In some cases third-party
payors encourage the use of lower cost generic products by paying or reimbursing
a user or supplier of a branded prescription product at a lower purchase price
than would be paid or reimbursed for a generic product, making branded products
less attractive, from a cost perspective, to buyers.

The Company's generic products are in competition with offerings from numerous
generic pharmaceutical companies as well as products from off-patent divisions
of major international innovator companies.

                                       13
<PAGE>
 
The aggressive pricing activities of the Company's generic competitors and the
payment and reimbursement policies of third-party payors could have a material
adverse effect on the Company's business, results of operations and financial
condition.

As the pharmaceutical industry is characterized by rapid product development and
technological change, the Company's pharmaceutical products could be rendered
obsolete or made uneconomical by the development of new pharmaceuticals to treat
the conditions addressed by the Company's products, technological advances
affecting the cost of production, or marketing or pricing actions by one or more
of the Company's competitors. The Company's business, results of operations and
financial condition could be materially adversely affected by any one or more of
such developments. Competitors may also be able to complete the regulatory
process for certain products before the Company and, therefore, may begin to
market their products in advance of the Company's products. The Company believes
that competition among prescription pharmaceutical products will be based on,
among other things, product efficacy, safety, reliability, availability and
price. From time to time, the Company may compete for the in-license or
acquisition of certain branded products with other pharmaceutical companies
pursuing a similar strategy.

The pharmaceutical industry is also characterized by frequent litigation between
generic drug companies and branded drug companies. The Company may find it
necessary to initiate or defend lawsuits to enforce its rights and to determine
the scope and validity of the proprietary rights of others. Litigation can be
costly and time-consuming, and there can be no assurance that the Company's
litigation expenses will not be significant in the future or that the outcome of
such litigation will be favorable to the Company (See Item 3, Legal
Proceedings).

Government Regulation

The research, development and commercial activities relating to branded and
generic prescription pharmaceutical products are subject to extensive regulation
by US and foreign governmental authorities. Certain pharmaceutical products are
subject to rigorous preclinical testing and clinical trials and to other
approval requirements by the FDA in the United States under the Federal Food,
Drug and Cosmetic Act ("FDCA") and the Public Health Services Act and by
comparable agencies in most foreign countries.

The FDCA, The Public Health Act, the Controlled Substances Act, and other
federal statutes and regulations govern or influence all aspects of the
Company's business. All pharmaceutical marketers are directly or indirectly
(through third parties) subject to regulations that cover the manufacture,
testing, storage, labeling, documentation/record keeping, approval, advertising,
promotion, sale, warehousing, and distribution of pharmaceutical drug products.
Non-compliance with applicable requirements can result in fines and other
judicially imposed sanctions, including product seizures, injunctive actions and
criminal prosecutions. In addition, administrative or judicial actions can
result in the recall of products, and the total or partial suspension of
manufacture and/or distribution. The government can also refuse to approve
pending applications or supplements to approved applications. The FDA also has
the authority to withdraw approvals of drugs in accordance with statutory due
process procedures.

                                       14
<PAGE>
 
FDA approval is required before any dosage form of any new unapproved drug,
including a generic equivalent of a previously approved drug, can be marketed.
Certain drugs are not considered by the FDA to be "new" drugs and fall outside
of the typical FDA pre-marketing approval process. These drugs, referred to as
"grandfathered" products, generally were in use prior to the enactment of the
FDCA. Several of the Company's products are being marketed in reliance upon
their status as grandfathered drugs. In addition, the Company has identified
grandfathered drugs as a potential source of opportunities to develop and launch
new products. The FDA has expressed the view that all prescription drugs should
ultimately be subject to pre-market clearance requirements. If the FDA adopts
this stance it could potentially affect products currently, or proposed to be,
marketed as grandfathered drugs. There can be no assurance that the FDA will not
challenge the grandfathered status of drugs including those marketed by the
Company.

         US Drug Approval Process

         In the US, marketing authority for prescription drugs is granted by
         approval of either an abbreviated new drug application (the "ANDA" or
         generic drug approval process) or by approval of a new drug application
         (the "NDA" process). All applications for FDA approval are
         comprehensive documents that must contain information relating to
         chemistry, analytical and processing controls, product formulation,
         stability, manufacturing process, packaging, labeling, and quality
         control. ANDAs contain evidence of bioequivalence compared to a
         reference-listed NDA product, whereas NDAs contain clinical safety and
         efficacy data supporting the approval of the drug product for its
         intended use.

         Regarding both ANDAs and NDAs (including any supplements thereto),
         there can be no assurance that approval will be granted by the FDA on a
         timely basis, if at all. Even after approval is granted, further
         studies may be required to provide additional data on safety. Also, the
         FDA regulations require post-marketing reporting of adverse drug events
         of the drug product. The FDA may, at any time, take action to modify
         and restrict the drug's product labeling or withdraw approval of the
         product, should new information come to light about the safety of the
         drug product.

         The FDA regulates post-marketing advertising and promotional activities
         to assure that such activities are being conducted in conformity with
         statutory and regulatory requirements. Failure to adhere to such
         requirements can result in regulatory actions that could have an
         adverse effect on the Company's business, results of operation, and
         financial condition.

         ANDAs

         The Drug Price Competition and Patent Restoration Act of 1984 (known as
         the Waxman-Hatch Act) established procedures and regulations regarding
         the ANDA process. ANDAs may be approved by the FDA for those drug
         products that are no longer protected by patents and those whose
         exclusivity period(s), if applicable, has expired. ANDAs may also be
         submitted for drugs that differ in dosage form or strength; under the
         Waxman-Hatch Act, this is accomplished by obtaining permission to file
         an ANDA for the change to the reference-

                                       15
<PAGE>
 
         listed product by first gaining approval of a Suitability Petition. A
         product is not eligible for ANDA approval if it is not bioequivalent to
         the reference listed "brand-name" drug or if its labeling differs in
         terms of indications, dosage, or safety/efficacy information. However,
         such a drug product may be approved as an NDA with supportive data from
         clinical trials.

         NDAs

         NDAs can be submitted for New Chemical Entity (NCE) drug products or
         for drug products that are not otherwise eligible for ANDA approval.
         Whether the NDA product is an NCE or a non-NCE compound, appropriate
         pre-clinical and toxicology data must be available or referenced by the
         applicant. By comparison, the NDA process for an NCE is usually much
         longer, requires significantly more resources, and has potentially more
         risk than either the ANDA process or the non-NCE NDA process. Prior to
         submission of the NDA, an investigational new drug ("IND") is submitted
         to the FDA. The IND provides details on pre-clinical studies (including
         toxicology assessments) and the protocols for any proposed testing in
         human subjects. Clinical trials in human subjects/patients are
         conducted according to strict protocols submitted as part of the IND.
         Each trial is conducted in accordance with certain standards under
         protocols that detail the objectives of the study, the parameters to be
         used to monitor safety and the efficacy criteria to be evaluated. The
         NDA process is likely to take many years and require the expenditure of
         substantial resources.

         cGMP Regulation

         Manufacturers of marketed drugs must comply with current Good
         Manufacturing Practice ("cGMP") regulations and other applicable laws
         and regulations required by the FDA, the Environmental Protection
         Agency ("EPA") and other regulatory agencies. Failure to do so could
         lead to sanctions, which may include an injunction suspending
         manufacturing, the seizure of drug products and the refusal to approve
         additional marketing applications. The Company relies upon and will in
         the future continue to rely upon third parties for the manufacture of
         its products. The Company seeks to ensure that any third party with
         whom it contracts for product manufacturing will comply with cGMP. The
         FDA conducts periodic inspections to ensure compliance with these
         rules. However, there can be no assurance that any such third parties
         will be found to be in compliance with cGMP standards. Any such
         non-compliance could result in a temporary or permanent interruption in
         the development and testing of the Company's planned products or in the
         marketing of approved products, as well as increased costs. Such
         non-compliance could have a material adverse effect on the Company's
         business, results of operations and financial condition.

         Other Regulation

         The Prescription Drug Marketing Act ("PDMA"), which amends various
         sections of the FDCA, imposes requirements and limitations upon drug
         sampling and prohibits states from licensing wholesale distributors of
         prescription drugs unless the state licensing program meets certain
         federal guidelines that include, among other things, state licensing of
         wholesale 

                                       16
<PAGE>
 
         distributors of prescription drugs under federal guidelines that
         include minimum standards for storage, handling and record keeping. In
         addition, the PDMA sets forth civil and criminal penalties for
         violations of these and other provisions. Various sections of the PDMA
         are still being implemented by the FDA and the states. Nevertheless,
         failure by the Company or its distributors to comply with the
         requirements of the PDMA could have a material adverse effect on the
         Company's business, results of operations and financial condition.

         Medicaid, Medicare and other reimbursement legislation or programs
         govern reimbursement levels, including requiring that all
         pharmaceutical companies rebate to individual states a percentage of
         their revenues arising from Medicaid-reimbursed drug sales. The Company
         believes that the federal and/or state governments may continue to
         enact measures in the future aimed at reducing the cost of drugs to the
         public. The Company cannot predict the nature of such measures or their
         impact on the Company's profitability.

         Federal, state and local laws of general applicability, such as laws
         regulating working conditions also govern the Company. In addition, the
         Company may be subject to some liability for compliance with
         environmental laws by third party manufacturers of the Company's
         products. Compliance with such general laws and environmental laws is
         not expected to have a material effect on the earnings, cash
         requirements or competitive position of the Company in the foreseeable
         future. However, no assurance can be given that changes to, or
         compliance with such laws will not have a material effect on the
         Company's earnings, cash requirements or competitive position.

         Products marketed outside of the United States that are manufactured in
         the United States are subject to certain FDA regulations, as well as
         regulation by the country in which the products are sold. While the
         Company currently does not have plans to market products in other
         countries, it may do so from time to time.

Manufacturing and Supply

The Company currently contracts with third parties for its product manufacturing
requirements. Accordingly the Company is dependent upon its contract
manufacturers to comply with regulatory requirements and to keep their
facilities in good working order. To ensure such compliance the Company conducts
quality assurance audits of the contract manufacturers sites and batch records
and other documents are examined to determine compliance with FDA requirements
and the Company's specifications. However, there can be no assurance that these
contract manufacturers will be able to manufacture the Company's products
without interruption, that these suppliers will comply with their obligations
under supply agreements with the Company, or that the Company will have adequate
remedies for any breach. In the event a supplier suffers an event that would
render it unable to manufacture the Company's product requirements for a
sustained period, the resulting delay could have a material adverse effect on
the Company.

The principal components used in the Company's products are active and inactive
pharmaceutical ingredients and certain packaging materials. Certain components
may be available only from sole-source suppliers. In addition, the FDA must
approve suppliers of certain ingredients for the 

                                       17
<PAGE>
 
Company's products. The development and regulatory approval of the Company's
products are dependent upon its ability to procure active ingredients and
packaging materials from FDA approved sources. FDA approval of a new supplier
would be required if, for example, active ingredients or such packaging
materials were no longer available from the initially approved source. The
qualification of a new supplier could potentially delay the manufacture of the
drug involved. Arrangements with foreign suppliers are subject to certain
additional risks, including the availability of governmental clearances, export
duties, political instability, currency fluctuations and restrictions on the
transfer of funds.

Although the Company considers its sources of supply to be adequate, and to
date, no significant difficulty has been encountered in obtaining product
materials, there can be no assurance that the Company will continue to be able
to obtain materials as required or at reasonable prices. An extended inability
to obtain materials or significant price increases that cannot be passed on to
customers could have a material adverse effect on the Company.

Product Liability

Product liability suits by consumers represent a continuing risk to firms in the
pharmaceutical industry. Although the Company carries product liability
insurance, it believes that no reasonable amount of insurance can fully protect
against all such risks due to the inherent risks associated with the production
of pharmaceuticals for human consumption.

Seasonality

The Company's business, taken as a whole, is not materially affected by seasonal
factors.

Personnel

As of December 31, 1998 the Company had 227 full-time employees. In addition,
the Company has approximately 85 sales representatives that it uses pursuant to
contract from two outside companies. None of the Company's employees are covered
by a collective bargaining agreement. The Company believes that its employee
relations are satisfactory.

Item 2.  Properties

The Company's principal executive offices are located in Dublin, Ireland. In
addition, WCI leases 23,600 square feet in Rockaway, New Jersey under a lease
that expires in 2001 and leased 1000 square feet of office space in New York,
New York under a lease which expires in April 1999 and which will not be
renewed.

Item 3.  Legal Proceedings.

There has been substantial litigation in the pharmaceutical and biotechnology
industries with respect to the manufacture, use and sale of new products that
are the subject of conflicting proprietary rights. Under the Waxman-Hatch Act,
when a drug developer submits an ANDA for a generic drug, and 

                                       18
<PAGE>
 
the developer believes that an unexpired patent which has been listed with the
FDA as covering that brand name product will not be infringed by the developer's
product or is invalid or unenforceable, the developer must so certify to the
FDA. That certification must also be provided to the patent holder, who may
challenge the developer's certification of non-infringement, invalidity or
unenforceability by filing a suit for patent infringement. If a suit is filed
within 45 days of the patent holder's receipt of such certification, the FDA can
review and tentatively approve the ANDA, but is precluded from granting final
marketing approval of the product until a final judgement in the action has been
rendered or 30 months from the date the certifications was received, whichever
is sooner. Should a patent holder commence a lawsuit with respect to alleged
patent infringement by the Company, the uncertainties inherent in patent
litigation make the outcome of such litigation difficult to predict. The
potential delay in obtaining FDA approval to market the Company's product
candidates as a result of litigation, as well as the expense of such litigation,
whether or not the Company is successful, could have a material adverse effect
on the Company's business, results of operations and financial condition. In
addition, even if the Company's ANDA has been approved by the FDA, an innovator
may pursue alternative legal remedies against the Company without regard to the
Waxman-Hatch Act.

In September 1997 the Company announced that following acceptance for filing of
Elan's ANDA for a generic version of Bayer AG's Adalat(R) CC, Elan had been sued
in the United States District Court for the Northern District of Georgia for
patent infringement by Bayer, seeking injunctive relief. Elan developed the
product for the Company pursuant to a development and license agreement. Bayer's
complaint alleged that the infringement was willful and sought to enjoin the FDA
from approving the ANDA and to enjoin sales of the nifedipine product which is
the subject of the ANDA until Bayer's patent expires. In June 1998 Elan filed a
motion for summary judgment seeking a ruling that the proposed product does not
infringe Bayer's patent. A hearing was held on the motion in December 1998 and
on March 16, 1999, the court dismissed the action and granted summary judgment
in favor of Elan, ruling that the proposed product does not infringe Bayer's
patent. As of the date of this report, Bayer has not filed an appeal of such
ruling. However, if such an appeal is filed, Elan and the Company intend to
continue to vigorously contest the action as they believe Bayer's action to be
without merit.

On April 6, 1998 the Company was sued by Abbott Laboratories in the United
States District Court for the Northern District of Illinois for an alleged
patent infringement related to the Company's ANDA filing for terazosin
hydrochloride. Abbott markets terazosin hydrochloride under the brand name
Hytrin(R). On August 28, 1998 the judge hearing a case Abbott had commenced
against another terazosin hydrochloride ANDA applicant, Geneva Pharmaceuticals,
Inc granted summary judgement against Abbott. Abbott has appealed this adverse
judgement and as of the date of this report, the appeal had not been argued or
decided. On September 9, 1998 WCI moved for partial summary judgement dismissing
the action based on the summary judgement of the Geneva case. The court granted
WCI's motion and entered a final judgement in favor of WCI dismissing the
action. Abbott appealed dismissal of the action to the U.S. Court of Appeals for
the Federal Circuit and Abbott and WCI have submitted an agreed motion to the
Court of Appeals to stay the appeal pending the court's determination of the
Geneva appeal.

                                       19
<PAGE>
 
Item 4.           Submission of Matters to a Vote of Security Holders

                  Not applicable.

Part II

Item 5.           Market for Registrants Common Equity and Related Shareholder
                    Matters

The Company's ADSs have been traded on the Nasdaq National Market since August
1997 (Symbol: WCRX). No securities of the Company are traded in any other
market, domestic or foreign. The following table sets forth for the periods
indicated the high and low sales prices for the Company's ADSs as reported by
Nasdaq.

<TABLE> 
<CAPTION> 
                                                           Sales Price
                                                                         High                      Low
  <S>                                                                    <C>                       <C> 
  1997:
  Third Quarter                                                          19 1/4                    17 1/2
  Fourth Quarter                                                         17 3/4                    10 5/8

  1998:
  First Quarter                                                          12 1/2                     9 1/2
  Second Quarter                                                         13                         9 1/8
  Third Quarter                                                          11 5/8                     5 1/2
  Fourth Quarter                                                         10 9/16                    5 3/8

  1999:
  First Quarter (through March 26, 1999)                                  9 3/4                     4 3/4 
</TABLE> 

  There were approximately 43 shareholders of record at December 31, 1998. The
  Company has not paid cash dividends on its Ordinary Shares and does not intend
  to pay cash dividends on its Ordinary Shares in the foreseeable future.

          Taxation and Exchange Controls

          U.S. Federal Income Tax Treatment of the Company.

          Under the income tax treaty currently in effect between the United
          States and Ireland (the "Treaty"), Warner Chilcott plc will not be
          subject to U.S. Federal income tax (other than withholding tax imposed
          on U.S. source dividends and certain interest) unless it engages in a
          trade or business in the United States through a permanent
          establishment in the United States. Warner Chilcott plc's ownership of
          its U.S. subsidiaries does not, in itself, constitute a permanent
          establishment. Warner Chilcott plc expects to be able to conduct its
          activities in a manner that will not result in it being considered to
          be engaged in a trade or business or to have a permanent establishment
          in the United States. The Company's U.S. subsidiaries, as U.S.
          corporations, are subject to U.S. taxation.

                                       20
<PAGE>
 
         U.S. Federal Income Tax Consequences to United States Shareholders.

         Holders of The Company's ADSs will be treated as the owners of the
         underlying Ordinary Shares for U.S. Federal income tax purposes.
         Dividends paid by the Company will not qualify for the dividends
         received deduction otherwise available to U.S. corporate shareholders.

         Irish Taxation

         Warner Chilcott plc is a public limited company incorporated and
         resident in Ireland. A company is regarded as resident in Ireland for
         tax purposes if it is centrally managed and controlled in Ireland.

         The standard rate of taxation in Ireland on a company's profits in 1998
         was 32%. However, the first IR,50,000 of profits in 1998 and the first
         IR,100,000 of profits in 1999 of a company or, where a company is part
         of a group of companies, of such group were, in 1998 subject to
         taxation at a lower rate of 25%. With effect from January 1, 1999, the
         standard rate of taxation has been reduced to 28%. Certain taxation
         reliefs are available to companies, which meet specific qualifying
         criteria. The Company intends to take advantage of such reliefs where
         possible. Reliefs, which may be available to the Company, are Shannon
         Relief, Patent Exemption and Manufacturing Relief.

         Irish Exchange Controls

         Irish exchange control regulations ceased to apply from and after
         December 31, 1992. Except in certain exceptional circumstances, there
         are no restrictions on non-residents of Ireland dealing in domestic
         securities, which includes shares or depositary receipts of Irish
         companies such as the Company. Dividends and redemption proceeds also
         continue to be freely transferable to non-resident holders of such
         securities.

         The Financial Transfers Act, 1992 gives power to the Minister for
         Finance of Ireland to make provision for the restriction of financial
         transfers between Ireland and other countries. The Company does not
         anticipate that Irish exchange controls or regulations under the
         Financial Transfers Act, 1992 will have a material effect on its
         business, results of operations and financial condition or will impose
         any material limitations on the acquisition or disposal of ADSs by any
         investor (including a U.S. investor).

         There are no restrictions under the Company's Articles of Association,
         or under Irish Law that limit the right of non-resident or foreign
         owners to hold or vote the Ordinary Shares.

                                       21
<PAGE>
 
Item 6.  Selected Financial Data

The following selected historical consolidated financial information of the
Company for each of the fiscal years in the five-year period ended December 31,
1998 has been derived from the Company's consolidated financial statements,
which financial statements have been audited by the Company's external auditors.
The consolidated financial statements as of December 31, 1998 and 1997, and for
each of the years in the three-year period ended December 31, 1998, and the
reports thereon, are included in Item 8 of this Form 10-K.

<TABLE> 
<CAPTION> 
                                                                     Years Ended December 31,
                                              ----------------------------------------------------------------------
                                                  1998           1997        1996 (1)        1995          1994
                                              -------------- ------------- ------------- ------------- -------------
                                                                (in thousands, except share data)
  <S>                                         <C>            <C>           <C>           <C>           <C> 
  Statement of Operations Data:                            
  Revenues.................................       $  64,894     $  75,827     $  62,734      $     48      $     --
  Costs and expenses
       Cost of goods sold..................          34,230        62,863        53,367            --            --
       Selling, general and administrative.          47,330        29,076        13,792         1,948           655
       Research and development............           3,241         6,526        10,915         7,434         5,811
       One-time charge--acquired in-process              
           research and development........              --            --        16,000            --            --  
                                              -------------- ------------- ------------- ------------- -------------
  Total costs and expenses.................          84,801        98,465        94,074         9,382         6,466
                                              -------------- ------------- ------------- ------------- -------------
  Operating loss...........................         (19,907)      (22,638)      (31,340)       (9,334)       (6,466)
  Net interest income (expense)............            (390)       (5,736)       (7,999)        1,560           317
  Net loss.................................       $ (20,297)    $ (28,374)    $ (39,339)     $ (7,774)     $ (6,149)
                                              ============== ============= ============= ============= =============
  Net loss per ordinary share(2)...........          $(1.64)    $   (3.39)       $(9.62)       $(3.17)      $(11.13)
                                              ============== ============= ============= ============= =============
  Weighted average ordinary shares               
       outstanding(2)......................      12,366,808     8,359,623     4,087,210     2,454,710       552,507
<CAPTION> 
                                                                     Years Ended December 31,
                                              ----------------------------------------------------------------------
                                                  1998          1997        1996 (1)        1995          1994
                                              -------------- ------------- ------------- ------------- -------------
                                                                          (in thousands)
  <S>                                         <C>            <C>           <C>           <C>           <C> 
  Balance Sheet Data:
  Cash and cash equivalents..................      $ 43,133      $ 52,786     $   2,663     $  21,055     $  32,213
  Working capital (deficit)..................        58,901        51,770        10,498        20,107        24,033
  Total assets...............................       157,017       171,737       123,668        21,575        32,317
  Due to Elan Corporation, plc(3)............         7,697         5,267        10,313           946         8,250
  Short-term debt............................            --        14,511        18,200            --            --
  Working capital facility...................        20,393            --            --            --            --
  Long-term debt, convertible into Ordinary           
       Shares................................         8,897         7,902        53,204            --            -- 
  Shareholders' equity (deficit).............      $104,943      $124,646     $  28,183     $  20,366     $  24,033
</TABLE> 

(1)  Includes the results of the Division from March 28, 1996, the date the
     Acquisition was consummated.
(2)  Net loss per ordinary share is based on the weighted average number of
     outstanding ordinary shares. The Company has adopted the provisions of SFAS
     128 "Earnings per Share." 
(3)  Includes $3.7 million long-term obligation payable to Elan as of December
     31, 1996.

                                       22
<PAGE>
 
Item 7.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations

Overview

The Company is a developer and marketer of branded prescription pharmaceutical
products for niche therapeutic applications. It has acquired rights to market
its products through internal development, marketing alliances, in-licensing and
acquisitions. The Company promotes these products to three segments of the U.S.
pharmaceutical market: women's health care, cardiology and dermatology. The
Company also distributes a number of generic pharmaceutical products.

Founded in 1992, the Company initially focused on the development and
commercialization of so-called "complex generic" pharmaceutical products. In
1996, the Company acquired the Warner Chilcott division of Warner-Lambert. The
name "Warner Chilcott" had been associated with ethical (branded) medicines for
over 90 years. In the years prior to the Company's acquisition of Warner
Chilcott, the division had become a distributor of non-differentiated generic
products. By late 1996, the Company's management set in motion a plan to return
Warner Chilcott to its roots as a marketer and developer of ethical (branded)
medicines.

The Company's sales of branded products began in the second quarter of 1997 with
the launch of Vectrin(R), a branded minocycline product promoted to the
dermatology segment and LoCholest(R), a lipid regulator promoted to the
cardiology segment. In June 1997 the Company acquired a number of branded
products from Warner-Lambert including Pyridium(R), an orally active urinary
tract analgesic agent, Doryx(R), a broad spectrum antibiotic, and Eryc(R), an
oral capsule containing enteric-coated pellets of erythromycin. In December
1997 the Company launched NataFort(R), a prescription prenatal vitamin.

In July 1998 Warner Chilcott entered into a promotion agreement with
Schering-Plough under which the Company began to utilize its sales and marketing
organization to promote two of Schering's cardiovascular products: Imdur(R) and
K-Dur(R). Under the terms of the agreement, Warner Chilcott's compensation is
based upon the sales of both products. Marketing alliances, such as the
agreement with Schering-Plough, represent an important source of branded product
opportunities for Warner Chilcott. In February 1999 the Company entered into a
promotion agreement with Bristol-Myers under which the Company markets two
women's health care products: Ovcon(R) 35, a low dose oral contraceptive, and
Estrace(R) Cream, an estradiol vaginal cream for the treatment of vaginal and
vulval atrophy as well as for menopause symptoms.

Revenue from sales of branded products accounted for 0.0%, 11.0% and 25.3% of
total revenue for the years 1996, 1997 and 1998 respectively. Revenue from
marketing alliances were first generated in 1998 and accounted for 26.3% of
total revenue. Revenue associated with the sale of generic products continued to
decline as expected over the three years.

The foundation for the Company's future success is its sales and marketing
organization. The Company began to build its sales force in early 1997 and
continued those efforts through 1998. It increased its sales force, including
sales management, from 175 people at year-end 1997 to 270 at the end of 1998.
The Company's target for its sales force is roughly 295 based on 250

                                       23
<PAGE>
 
representatives in the primary care sales force, 25 in the dermatology sales
force and 20 in sales force management.

Future revenue growth will be dependent on the Company increasing the sales of
its existing portfolio and adding new products through acquisition,
in-licensing, marketing alliances or self-development.

Results of Operations

The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to the Consolidated Financial
Statements, appearing in Item 8.

Years Ended December 31, 1998 and 1997

Total revenue for the year ended December 31, 1998 declined 14.4% to $64.9
million from $75.8 million for the year ended December 31, 1997. Branded sales
during the year increased 97.5% to $16.4 million from $8.3 for the prior year.
This increase was due to the launch of NataFort(R) and increased sales of both
Vectrin(R) and Doryx(R) partly offset by a decline in sales of LoCholest(R). The
Company began selling NataFort(R) in December 1997; however, meaningful sales of
the product began in the first quarter of 1998. The Company de-emphasized
LoCholest(R) in mid 1998 in anticipation of the agreement with Schering-Plough.
Sales of non-differentiated generic products during 1998 declined $36.1 million
or 53.5% to $31.4 million due to the out-licensing of the Company's generic
minocycline product to Barr Laboratories beginning in the fourth quarter of 1997
and decreased emphasis on generic products in favor of the Company's branded
offerings.

Gross profit on product sales was $13.6 million for the year ended December 31,
1998 as compared to $13.0 million for the year 1997. The gross margin for
branded and generic products sales increased by approximately 11% to 28.5%
during the year ended December 31, 1998. Improved gross profits reflect the
Company's increased focus on higher-margin branded products. As mentioned above,
1998 sales of branded products increased 97.5% and generic product sales
decreased 53.5% from 1997. Improved gross profit results would have been greater
if not for unfavorable inventory adjustments associated with the Company's
non-differentiated generic business and returns of short-dated branded goods
during the year.

Revenues from marketing alliances totaled $17.0 million for the year and
included revenues from the promotion of Imdur(R) and K-Dur(R) for Schering-
Plough, earnings from the Company's distribution arrangement for IS5MN with
Bristol-Myers and royalties on sales of generic minocycline under an agreement
with Barr Laboratories. Revenues from the marketing alliance with Schering-
Plough for Imdur(R) were negatively impacted during the fourth quarter of 1998
due to generic product competition. This generic competition also affected the
royalties the Company earned on sales of IS5MN by Bristol-Myers.

Selling, general and administrative expenses totaled $41.7 million for the year
compared to $23.6 million in 1997, an increase of 76.6%. The most significant
factor contributing to the increase was the expansion of the Company's sales
force. The sales force averaged 155 sales representatives in 1998 compared with
less than 40 in 1997. Advertising and promotion expenses increased by $0.5
million as the Company aggressively promoted three products during 1998 and only
two during 

                                       24
<PAGE>
 
1997. General and administrative expenses increased by $3.5 million compared
with the prior year, $1.7 million related to additions made to strengthen the
administrative staff and $1.7 million due to significant increases in legal
costs related to litigation of the Company's ANDA filings for two complex
generic products, nifedipine CC and terazosin.

Research and development expenses for the year were down from $6.5 million in
1997 to $3.2 million in 1998. The Company's R&D strategy shifted in mid 1997 to
focus on development projects with near-term revenue potential and relatively
low funding requirements including, for example, line extensions of the
Company's branded products.

Interest income increased from $1.5 million in 1997 to $2.6 million in 1998 due
to the interest income earned on the net proceeds from the Company's IPO and
related financings in August of 1997. Interest expense in the year decreased to
$3.0 million as compared to $7.3 million in 1997. This favorable result reflects
the exchange and conversion of $49.5 million of senior subordinated discount
notes into ordinary shares in June 1997.

The net result of the factors outlined above was that the net loss for the year
ended December 31, 1998 decreased by 28.5% to $20.3 million as compared to a net
loss of $28.4 million for the year 1997. Increased sales of branded products
combined with the revenue from marketing alliances more than offset the
increased costs of the Company's sales force and increased administrative
expense. Basic and dilutive loss per ordinary share for the year decreased to
($1.64) on 12.4 million shares from ($3.39) on 8.4 million shares. The increase
in the weighted average ordinary shares outstanding reflects the issuance of
ordinary shares in connection with the Company's initial public offering in
August 1997 and related financings, and the exchange and conversion of senior
subordinated discount notes for ordinary shares.

Years Ended December 31, 1997 and 1996

Total revenues were $75.8 million for the year ended December 31, 1997 compared
to $62.7 million in 1996. The increase is attributable to the fact that the 1996
results include revenues for the Warner Chilcott division (the "Division") only
for the period from the date of acquisition, March 28, 1996, to December 31,
1996. Including revenues for the Division on a pro forma basis for the full year
1996 net sales were $78.1 million. Measured against pro forma 1996 results, 1997
revenues decreased 2.9% reflecting a decline in sales of the Company's generic
products offset by the introduction of branded products beginning in the second
quarter of 1997. Sales of generic products declined from $78.1 million in 1996
to $67.5 million; a reduction of 13.6%.

The Company launched two branded products, Vectrin(R) and LoCholest(R), in the
second quarter of 1997, began to sell five branded products acquired from
Warner-Lambert in June and launched NataFort(R) in December. Together these
branded products accounted for $8.3 million of revenue versus zero in the prior
year. Branded products are sold at margins that are considerably higher than
those realized on the sale of generic products. Accordingly, the Company saw its
gross margin expand to 17.1% of sales for the full year 1997 from 14.9% in the
prior year. Including the results for the Division for the full year, pro forma
gross margin for 1996 was 11.3%.

                                       25
<PAGE>
 
Selling, general and administrative expenses for 1997 were $23.6 million, an
increase of 127.7% over the $10.4 million posted in 1996. A number of factors
produced the marked increase in these expenses. First and foremost, in 1997 the
Company began to assemble two professional sales forces to promote its various
branded products. Second, the 1997 results include general and administrative
costs for the Division for the full year versus approximately nine months in
1996. Finally, the Company incurred substantial advertising and promotion
expenses in 1997 in connection with the launches of Vectrin(R) and LoCholest(R)
and, to a much lesser extent, NataFort(R).

Research and development expense decreased from $10.9 million in 1996 to $6.5
million in 1997, a reduction of $4.4 million or 40.4%. Research and development
expenses include ongoing costs associated with various product development
projects including both branded and complex generic products. The decline in
research and development spending reflects both a reduction in development costs
for complex generic products as the projects moved from development stage to
filing stage and a shift in the Company's emphasis to focus on lower cost, lower
risk projects with near-term revenue potential; particularly so-called
"grandfathered" products suitable for branded strategies and extensions of, or
improvements to, the Company's existing branded offerings.

In 1996, the Company recorded a $16.0 million charge relating to the write off
of acquired in-process research and development costs associated with the
Acquisition. This charge represented the estimated fair value of acquired
products for which FDA approval had not been received as of the acquisition
date. The Company is completing the development of certain of these products and
has already filed, or intends to file, ANDAs with the FDA.

Excluding the one-time write off of acquired research and development discussed
above, the Company's operating loss for the year ended December 31, 1997
increased to $22.6 million from $15.3 million in 1996. The increase resulted
primarily from the expenses of building the two sales forces, the costs of
launching new branded products and the inclusion of a full year's expenses for
the Division.

Interest income increased from $0.4 million in 1996 to $1.5 million in 1997 due
to the interest income earned on the net proceeds from the Company's IPO and
related financings in August of 1997. Interest expense in the year decreased to
$7.3 million as compared to $8.4 million in 1996. This favorable result reflects
the exchange and conversion of $49.5 million of senior subordinated discount
notes into ordinary shares in June 1997.

The net loss for the year ended December 31, 1997 was $28.3 million compared to
a net loss of $39.3 million in the prior year. The main factors leading to this
reduced loss were the one-time write off of $16.0 million of acquired research
and development recorded in 1996 offset by the costs of building the two sales
forces and launching new branded products.

Liquidity and Capital Resources

At December 31, 1998, cash and cash equivalents on hand amounted to $43.1. This
balance is primarily the result of the infusion of capital from the Company's
initial public offering in August 1997 and related financings totalling
approximately $74.6 million. Proceeds from the IPO have been used to fund
operating losses and ongoing working capital requirements. The Company's 

                                       26
<PAGE>
 
working capital adjusted to exclude cash and short-term debt balances, increased
to $15.8 million at December 31, 1998 from $13.5 million at year-end 1997. This
increased investment in adjusted working capital and the net loss posted for the
year were funded primarily by cash and equivalents on hand and increased
borrowings under the Company's bank credit facility.

On March 30, 1998, the Company entered into a $30 million senior secured credit
agreement with a syndicate of banks led by PNC Business Credit to fund a portion
of its investment in inventories and accounts receivable. At December 31, 1998,
the Company had $20.4 million outstanding under this credit facility, an
increase of $5.9 million over the $14.5 million owed on the predecessor credit
facility at December 31, 1997. Credit availability under the PNC facility is
based on the balances of certain inventory, accounts receivable and other assets
of Warner Chilcott, Inc., the Company's wholly owned United States operating
subsidiary. The amounts outstanding under the predecessor facility at December
31, 1997 were classified as a short-term obligation. The PNC facility provides
for credit availability through March 2001. Accordingly, the amounts outstanding
under the PNC facility at December 31, 1998 were classified as long-term
obligations.

The Company posted a substantial loss for the year ended December 31, 1998 and
losses may continue in 1999 and beyond. In addition, the Company may invest in
additional working capital or make capital expenditures to support its various
business activities. Management believes the combination of the Company's cash
balances ($43.1 million at December 31, 1998) and availability under its working
capital facility provide the Company with access to sufficient capital to meet
its requirements for at least the next two years. There can be no assurance,
however, that such funds will be sufficient. Beyond such period, and in the
absence of the Company generating cash from operations, the Company would need
to raise additional funds. The Company expects that it would seek additional
funding through public or private equity or debt financings or through
collaborations. To the extent the Company raises additional capital by issuing
equity securities, ownership dilution to existing shareholders will result and
future investors may be granted rights superior to those of existing
shareholders. There can be no assurance that additional funding will be
available on acceptable terms, or at all.

Net Operating Loss Carryforwards

At December 31, 1998, the Company has available net operating loss carryforwards
for United States Federal income tax reporting purposes of $47.6 million and
state income tax reporting purposes of approximately $30.9 million. Ultimate
utilization or availability of such net operating losses and certain deferred
tax assets may be limited if a significant change in ownership occurs, as
defined by rules enacted with the United States Tax Reform Act of 1986. The
Company did not pay any Federal income taxes in 1998, 1997 or 1996.

Inflation

Inflation had no material impact on the Company's operations during the year
ended December 31, 1998.

                                       27
<PAGE>
 
Year 2000

During 1997 the Company initiated a plan to identify, assess and remediate "Year
2000" issues. This plan consists of three phases as follows: Phase I -
identification of all internal business critical systems and applications, key
vendors, and major customers. Although completed in June 1998, Phase I includes
the ongoing assessment of new vendors and customers as they become associated
with the Company's business activities. Phase II - assessment of year 2000
compliance for all systems and activities identified in Phase I. Phase II was
completed by December 31, 1998. Phase III - remediation and/or development of
contingency plans for non-compliant systems and activities. While contingency
plans have been developed for third party vendors, Phase III will continue to be
addressed through the transition of Year 2000 to ensure a smooth implementation
of contingency plans, if required.

The Company's primary information technology systems are used in the finance,
administration, billing, distribution and selling systems operated in the
Company's U.S. operating subsidiary, Warner Chilcott, Inc. Since the Acquisition
in March 1996, the Company has put into place new systems to replace those
systems previously provided by Warner-Lambert Company to the former Division. As
a result, the Company's computer systems and applications have been recently
developed. Year 2000 upgrades of network software and hardware, and financial
software were completed during this year with the exception of the Company's
general ledger system and WAN Firewall which the Company is currently working
on. All internal business critical systems and applications are Year 2000
compliant with the exception of the Company's voice mail system which the
Company is currently updating. The Company expects that the general ledger
system, WAN Firewall and voice mail system will be Year 2000 compliant by the
end of the second quarter of 1999, and expects the associated costs to be
immaterial.

The Company has sent written inquiries to its key vendors and major customers as
to their progress in identifying and addressing Year 2000 compliance issues.
Those vendors and customers who have responded have reported that they expect to
be Year 2000 compliant well before the critical date.

The Company does not expect the costs associated with Year 2000 compliance to be
material. As of December 31, 1998, the Company incurred less than $100,000 in
the above mentioned system and application upgrades. These costs were paid from
available funds. The Company does not expect to incur additional costs of
significance and has not deferred information systems projects in order to
address Year 2000 issues.

The most significant Year 2000 risk faced by the Company is compliance on the
part of third party vendors with whom the Company does business. Warner Chilcott
utilizes third party vendors to perform a variety of functions including, but
not limited to, warehousing, distribution, billing services, product
manufacture, market research and sales force recruitment. Although these vendors
have supplied the Company with written confirmation of their anticipation of
Year 2000 compliance, the Company is developing contingency plans to address
potential problems should their efforts prove unsuccessful.

                                       28
<PAGE>
 
Based on the Company's assessment efforts to date, the Company believes that
year 2000 issues will not be disruptive to its operations, nor have a material
adverse effect on its financial condition or results of operations. The
Company's beliefs and expectations, however, are based on certain assumptions
and expectations that ultimately may prove to be inaccurate. There can be no
assurance that the failure to ensure year 2000 compliance by a third party would
not have a material adverse effect on the Company.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, which becomes effective for our financial
statements beginning January 1, 2000. SFAS No. 133 requires a company to
recognize all derivative instruments as assets or liabilities in its balance
sheet and measures them at fair value. The Company does not expect the adoption
of this Statement to have a material impact on our financial statements.

The American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-1, Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use and SOP 98-5, Reporting on the Costs of Start-up
Activities, which are effective for our 1999 financial statements. The Company
does not expect adoption of these SOPs to have a material impact on our
financial statements.

Factors That May Affect Future Operating Results

Following is a discussion of some of the risks and historical facts which should
be considered when evaluating the current and future results of the Company.
This discussion is not intended to include all risks and historical facts that
could produce adverse results.

The Company has a history of operating losses. Operating losses have been posted
since the formation of the Company in 1992. As of December 31, 1998, the
Company's accumulated deficit was $103.6 million. The Company has invested in
the corporate infrastructure and sales organization needed to support the
marketing and product development activities that management believes necessary
for the success of the Company. However, there can be no assurance that these
efforts will be sufficient and, thus, future profitability is uncertain.

The future capital needs and additional funding activities of the Company are
uncertain. Warner Chilcott has experienced negative cash flows from operations
and has funded its activities to date from the issuance of equity and debt
securities. The Company has expended, and will continue to be required to
expend, substantial funds for promotional activities for products, to continue
research and development of product candidates, to in-license and acquire
additional products and to undertake sales and marketing efforts of its current
or future products. Although the Company may seek additional funding through the
public or private capital markets, there can be no assurance that any such
funding will be available to the Company.

                                       29
<PAGE>
 
Intense competition exists within the pharmaceutical industry. Many companies,
some with greater financial, marketing and development capabilities than the
Company, are engaged in developing, marketing and selling products that compete
with the products offered by Warner Chilcott. Other products now in use or under
development by others may be more effective or have fewer side effects than the
Company's current or future products. The industry is characterized by rapid
technological change, and competitors may develop their products more rapidly
than the Company. Competitors may also be able to complete the regulatory
process sooner and, therefore, may begin to market their products in advance of
the Company's products. There can be no assurance that developments by others
will not render any product or technology the Company produces to be obsolete or
otherwise noncompetitive.

The clinical development, manufacture, marketing and sale of pharmaceutical
products is subject to extensive federal, state and local regulation in the
United States and similar regulation outside the United States. FDA approval is
required before most drug products can be marketed. FDA filings can be time
consuming and expensive without assurance that the results will be adequate to
justify approval. There can be substantial delays in the process, including the
need to provide additional data. There can be no assurance that approvals for
filings already made by the Company, or to be made in the future, can be
obtained in a timely manner, if at all, or that the regulatory requirements for
any such proposed products can be met. In addition, new regulations may
adversely affect the Company's operations or competitive position in the future.

The distribution network for pharmaceutical products has in recent years been
subject to increasing consolidation. As a result, a few large wholesale
distributors control a significant share of the market. In addition, the number
of independent drug stores and small chains has decreased as retail pharmacy
consolidation has occurred. Continued consolidation of either wholesale
distributors or retail pharmacies may adversely effect the Company's operations.

The Company depends on third parties for the manufacture of its current and
future products. Currently the Company does not possess the facilities or
resources needed for these activities. The Company's strategy for development,
commercialization and manufacturing of certain of its products entails entering
into various arrangements with corporate collaborators, licensors and others. If
any of the Company's corporate collaborators were unable to satisfy their
contractual obligations to the Company, there can be no assurance that the
Company would be able to negotiate similar arrangements with other third
parties.

Many of the principal components of the Company's products are available only
from single source suppliers. There can be no assurance that the Company will
establish or, if established, maintain good relationships with such suppliers or
that such suppliers will continue to exist or be able to supply ingredients in
conformity with regulatory requirements.

The Company is engaged in the manufacture and marketing of products that may
give rise to the development of certain legal actions and proceedings. The
Company carries product liability insurance and umbrella liability insurance.
There can be no assurance that this coverage is adequate to cover potential
liability claims or that additional insurance coverage will be available in the
future if the Company manufactures and markets new products. The Company's
financial condition 

                                       30
<PAGE>
 
and results of operations could be materially adversely affected by the
unfavorable outcome of legal actions and proceedings.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The following discussion about our exposure in market risk of financial
instruments contains forward-looking statements. Actual results may differ
materially from those described.

Our holdings of financial instruments are comprised of U.S. corporate debt,
foreign corporate debt, U.S. and state government debt, foreign
government/agency guaranteed debt, bank deposits and certificates of deposit,
and commercial paper. All such instruments are classified as securities
available for sale. We do not invest in portfolio equity securities or
commodities or use financial derivatives for trading purposes. Our debt security
portfolio represents funds held temporarily pending use in our business and
operations. We manage these funds accordingly. We seek reasonable assuredness of
the safety of principal and market liquidity by investing in rated fixed income
securities while at the same time seeking to achieve a favorable rate of return.
Our market risk exposure consists principally of exposure to changes in interest
rates. Our holdings are also exposed to the risks of changes in the credit
quality of issuers. We invest in the shorter-end of the maturity spectrum, and
at December 31, 1998, 100% of such holdings matured in one year or less.

Item 8.      Financial Statements and Supplementary Data

Warner Chilcott's financial statements and schedule at December 31, 1998 and
1997 and for the years ended December 31, 1998, 1997 and 1996 and the
Independent Auditors' Reports thereon are included below.

                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders of
Warner Chilcott Public Limited Company

                                       31
<PAGE>
 
We have audited the accompanying consolidated balance sheet of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. In connection with our audit of the consolidated financial
statements, we also have audited the financial statement schedule as listed in
the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1998, and the results
of their operations and their cash flows for the year then ended in conformity
with United States generally accepted accounting principles. Also in our
opinion, the related financial statement 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.

                                                                                

                                                           KPMG LLP


Short Hills, New Jersey
February 16, 1999

                STATEMENT OF INDEPENDENT CHARTERED ACCOUNTANTS


To the Directors and Shareholders of Warner Chilcott Public Limited Company

We have audited the accompanying consolidated balance sheet of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1997 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1997 and 1996. In connection with our audits of the
consolidated financial statements, we have also audited the financial statement
schedule as listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement 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.

                                       32
<PAGE>
 
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Warner Chilcott
Public Limited Company and subsidiaries as of December 31, 1997 and the results
of their operations and their cash flows for the years ended December 31, 1997
and 1996, in conformity with accounting principles generally accepted in the
United States. Also in our opinion, based on our audits, the related financial
statement 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.


KPMG
Chartered Accountants
Dublin, Ireland

February 24, 1998

                                       33
<PAGE>
 
                    WARNER CHILCOTT PUBLIC LIMITED COMPANY
                          CONSOLIDATED BALANCE SHEETS
                        (in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                        ----------------------------
                                                                                           1998              1997
                                                                                        ----------        ----------
<S>                                                                                     <C>               <C>
 ASSETS
          Current Assets:
              Cash and cash equivalents                                                  $43,133           $52,786
              Accounts receivable                                                         18,050            14,599
              Inventories                                                                 13,099            16,175
              Prepaid expense and other assets                                             7,403             7,399
                                                                                        ----------        ----------
                       Total current assets                                               81,685            90,959
                                                                                        ----------        ----------

          Fixed Assets:
              Equipment, furniture and fixtures                                            1,076             1,148
 
          Other Assets:
              Intangible assets                                                           74,256            79,630
                                                                                        ----------        ----------
 
                       Total assets                                                     $157,017          $171,737
                                                                                        ==========        ==========
 
 LIABILITIES
          Current Liabilities:
              Accounts payable                                                            $8,833           $11,417
              Accrued liabilities                                                          6,254             7,994
              Due to Elan Corporation, plc and subsidiaries                                7,697             5,267
              Short-term debt                                                                 --            14,511
                                                                                        ----------        ----------
                       Total current liabilities                                          22,784            39,189
                                                                                        ----------        ----------
              Other Liabilities:
                  Working capital facility                                                20,393                --
                  Long-term debt                                                           8,897             7,902
                                                                                        ----------        ----------
                       Total liabilities                                                  52,074            47,091
                                                                                        ----------        ----------
 
 SHAREHOLDERS' EQUITY
          Ordinary Shares, par value $.05 per share; 50,000,000 shares                                             
              authorized, 12,366,808 shares issued and outstanding at                        
              December 31, 1998 and 1997                                                     618               618
          Deferred Shares, par value IR,1 per share; 30,000 shares                            45                45
              authorized, 30,000 shares issued and outstanding at December 31,
              1998 and 1997
          Additional paid-in capital                                                     208,939           208,962
          Accumulated deficit                                                           (103,578)          (83,281)
          Deferred compensation                                                           (1,081)           (1,698)
                                                                                        ----------        ----------
              Total shareholders' equity                                                 104,943           124,646
                                                                                        ----------        ----------
                       Total liabilities and shareholders' equity                       $157,017          $171,737
                                                                                        ==========        ==========     

 
</TABLE>
 

 
 
 See accompanying notes to consolidated financial statements.
 

                                       34
<PAGE>
 
                    WARNER CHILCOTT PUBLIC LIMITED COMPANY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
             (in thousands of U.S. dollars, except per share data)

<TABLE>
<CAPTION>
 
                                                                             Years Ended December 31,
                                                             --------------------------------------------------------
                                                                   1998                1997                  1996
                                                             --------------      --------------        --------------
<S>                                                          <C>                 <C>                   <C>
 REVENUES
          Branded product sales                                 $ 16,440             $ 8,322               $    --
          Generic product sales                                   31,405              67,505                62,705
          Marketing alliances and other revenue                   17,049                  --                    29
                                                             --------------      --------------        --------------
              Total revenues                                      64,894              75,827                62,734
                                                             --------------      --------------        --------------
 OPERATING EXPENSES
          Cost of goods sold                                      34,230              62,863                53,367
          Selling, general and administrative                     41,709              23,618                10,373
          Depreciation and amortization                            5,621               5,458                 3,419
          Research and development                                 3,241               6,526                10,915
          Onetime charge -- acquired in process                         
              research and development                                --                  --                16,000
                                                             --------------      --------------        --------------
              Total operating expenses                            84,801              98,465                94,074
                                                              --------------      --------------        --------------

 OPERATING LOSS BEFORE TAXES                                     (19,907)            (22,638)              (31,340)
                                                              --------------      --------------        --------------

 OTHER INCOME
          Interest income                                          2,622               1,524                   441
          Interest expense                                        (3,012)             (7,260)               (8,440)
                                                              --------------      --------------        --------------
              Total other income (expense)                          (390)             (5,736)               (7,999)
                                                              --------------      --------------        --------------
 
 NET LOSS BEFORE TAXES                                           (20,297)            (28,374)              (39,339)
                                                              --------------      --------------        --------------

 Income taxes                                                         --                  --                    --
                                                              --------------      --------------        --------------

 NET LOSS                                                      $ (20,297)           $(28,374)             $(39,339)
                                                              ==============      ==============        ==============

 Net loss per ordinary share
          Basic and Dilutive                                   $   (1.64)           $  (3.39)             $  (9.62)
                                                              ==============      ==============        ==============
 
 Weighted average ordinary shares outstanding                 12,366,808           8,359,623             4,087,210
                                                              ==============      ==============        ==============
</TABLE>
 

 
 
 See accompanying notes to consolidated financial statements.
 

                                       35
<PAGE>
 
                    WARNER CHILCOTT PUBLIC LIMITED COMPANY
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                        (in thousands of U.S. Dollars)


<TABLE>
<CAPTION>
                                                           Deferred  Additional
                                   Number of      Share      Share    Paid-in  Accumulated  Deferred
                                     Shares      Capital    Capital   Capital    Deficit   Compensation Total
                                 ------------    -------   --------  --------- ----------- ------------ -----
<S>                                <C>           <C>       <C>       <C>       <C>         <C>          <C>

Balance at December 31, 1995       2,349,563       $117        $45    $35,772   $(15,568)        --    $20,366

         Stock issued for          2,415,000        121         --     48,179         --         --     48,300
         cash
         Issue expenses                   --         --         --     (1,774)        --         --     (1,774)
         Issue of warrant                 --         --         --        630         --         --        630
         Net loss                         --         --         --               (39,339)        --    (39,339)
                                 ------------    -------   --------  --------- ----------- ---------- ---------
Balance at December 31, 1996       4,764,563        238         45     82,807    (54,907)        --     28,183

         Stock issued for          4,775,000        239         --     82,267         --         --     82,506
         cash
         Issue expenses                   --         --         --     (7,918)        --         --     (7,918)
         Conversion of
             senior
             subordinated          2,827,245        141         --     49,336         --         --     49,477
             notes into
             ordinary shares
         Stock compensation               --         --         --      2,470         --     (2,470)        --
         Stock compensation               --         --         --         --         --        772        772
         expense
         Net loss                         --         --         --         --    (28,374)              (28,374)
                                 ------------    -------   --------  --------- ----------- ---------- ---------
Balance at December 31, 1997      12,366,808        618         45    208,962    (83,281)    (1,698)   124,646

         Issue expenses                   --         --         --        (23)        --         --        (23)
         Stock                            --         --         --         --         --        617        617
         compensation
         expense
         Net loss                         --         --         --         --    (20,297)        --    (20,297)
                                 ------------    -------   --------  --------- ----------- ---------- ---------
Balance at December 31, 1998      12,366,808       $618        $45   $208,939  $(103,578)   $(1,081)  $104,943
                                 ============    =======   ========  ========= =========== ========== =========
</TABLE> 


See accompanying notes to consolidated financial statements.

                                       36
<PAGE>
 
                    WARNER CHILCOTT PUBLIC LIMITED COMPANY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in thousands of U.S. dollars)
<TABLE> 
<CAPTION> 

                                                                                Years Ended December 31,
                                                                        ---------------------------------------
                                                                           1998           1997          1996
                                                                        ----------     ----------    ----------
<S>                                                                     <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
         Net loss                                                       $(20,297)      $(28,374)     $(39,339)
         Adjustments to reconcile net loss to net cash (used in)
         provided by operating activities
             Depreciation and amortization                                 5,621          5,458         3,419
             Accretion of loan discount                                      995          4,174         4,904
             Deferred financing costs write-off                               --          1,069            --         
             Stock compensation expense                                      617            772            --     
             Loss on sale of fixed assets                                     --             98            --     
             One time charge - in process research and                        --             --        16,000
                development  
             Changes in assets and liabilities:
                (Increase) decrease in accounts
                     receivable, prepaid expense and other assets         (3,455)        (1,326)        3,190
                Decrease in inventories                                    3,076          7,125        12,971
                (Decrease) increase in accounts     
                     payable and accrued liabilities                      (4,324)         5,327        13,512
                                                                        ----------     ----------    ----------
                     Net cash (used in) provided by   
                        operating activities                             (17,767)        (5,677)       14,657
                                                                        ----------     ----------    ---------- 
                                                      

CASH FLOWS FROM INVESTING ACTIVITIES:
         Acquisition of business, net of cash acquired and
             deferred acquisition costs                                       --             --      (144,813)
         Purchase of tangible fixed assets                                  (175)          (495)         (546)
         Purchase of intangible assets                                        --        (12,389)           --
         Sale of tangible fixed assets                                        --          1,168            --     
                                                                        ----------     ----------    ----------
             Net cash used in investing activities                          (175)       (11,716)     (145,359)
                                                                        ----------     ----------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
         Working capital facility proceeds, net                           20,393             --            --                       
         Shortterm debt (repayment) proceeds                             (14,511)        (2,343)       16,854
         Short term advance - Elan Corporation, plc                           --             --       144,370             
         Repayment of short term advance - Elan                               --             --      (144,370)
             Corporation, plc
         Loan proceeds (repayment) - Elan Corporation, plc                 2,430         (4,729)           --
         Proceeds from longterm debt                                          --             --        48,300
         Net proceeds from issuance of share capital                         (23)        74,588        46,526
         Proceeds from sale of warrant                                        --             --           630
                                                                        ----------     ----------    ----------
             Net cash provided by financing activities                     8,289         67,516       112,310
                                                                        ----------     ----------    ----------   
         Net (decrease) increase in cash and cash                         (9,653)        50,123       (18,392)
         equivalents
             Cash and cash equivalents, beginning of year                 52,786          2,663        21,055
                                                                        ----------     ----------    ----------
             Cash and cash equivalents, end of year                      $43,133        $52,786        $2,663
                                                                        ==========     ==========    ==========
         Cash paid for interest                                           $1,542         $1,395        $1,010
                                                                        ==========     ==========    ==========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       37
<PAGE>
 
                     WARNER CHILCOTT PUBLIC LIMITED COMPANY
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.     GENERAL

Warner Chilcott Public Limited Company ("Warner Chilcott" or the "Company") is
an Irish company with operations in Dublin, Ireland and Rockaway, NJ, USA. The
Company's consolidated financial statements include the financial statements for
Warner Chilcott Public Limited Company and all of its subsidiaries and are
prepared in U.S. dollars in conformity with United States generally accepted
accounting principles.

The Company is engaged in the development, marketing, sale and distribution of
prescription pharmaceutical products in the United States. The Company's current
focus is on branded products targeted for three markets: cardiology, women's
health care and dermatology. All of the Company's branded products are promoted
by the Company's sales force. The Company operates in one business segment and
all of its revenues were generated in the United States.

2.     SIGNIFICANT ACCOUNTING POLICIES

The accounting policies followed in the preparation of the accompanying
consolidated financial statements are in conformity with generally accepted
accounting principles in the United States.

(a)    Basis of consolidation
The consolidated financial statements include the accounts of Warner Chilcott
Public Limited Company and its subsidiaries. Significant intercompany
transactions and balances have been eliminated.

(b)    Estimates and assumptions
The preparation of financial statements in accordance with United States
generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.

(c)    Financial instruments
The Company considers all liquid interest-earning investments with original
maturities of ninety days or less to be cash equivalents. Investments with
maturities between ninety days and one year are considered short-term
investments. Cash and short-term investments are stated at cost plus accrued
interest, which approximates market value. From time to time, the Company
pledges cash and equivalents as collateral for borrowings under its working
capital facility. (See Note 9)

(d)    Inventories
Inventories are valued at the lower of cost or market. Cost is determined
principally on the basis of first-in, first-out or standards, which approximate
average cost.

(e)    Equipment, furniture and fixtures
Equipment, furniture and fixtures are stated at cost, net of accumulated
depreciation. Depreciation is computed on the straight-line basis over the
estimated useful lives of the various assets (primarily five years or the life
of the lease or leasehold improvement).

(f)    Intangible assets
Purchased goodwill and other intangible assets resulting from business
acquisitions are carried at cost and are amortized over their estimated useful
lives, which range between 5 and 20 years. Where events or circumstances are
present which indicate that the carrying amount of an intangible asset may not
be 

                                       38
<PAGE>
 
recoverable, the Company estimates the future undiscounted cash flows expected
to result from use of the asset and its eventual disposition. Where future
undiscounted cash flow is less than the carrying amount of the asset, the
Company will recognize an impairment loss. Otherwise, no loss is recognized.

(g)   Revenue recognition
Revenue from sales is recognized upon shipment of product to the customer. The
Company warrants products against defects and for specific quality standards,
permitting the return of products under certain circumstances. Sales are
recorded net of deductions for cash discounts, sales returns, customer rebates
and pricing adjustments. Revenue from marketing alliances is recognized when
earned under the terms of the associated contracts.

(h)   Research and development
Research and development costs are expensed as incurred.

(i)   Foreign currency transactions
The Company's financial statements are prepared in U.S. dollars. Revenues are
generated in the United States and, in general, other business transactions are
also denominated in U.S. dollars. Accordingly, the Company's exposure to
currency fluctuations is limited. Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than
U.S. dollars are included in the results of operations as incurred.

(j)    Income Taxes
Corporation tax is provided on the results for the year. The Company applies
Statement of Financial Accounting Standard ("SFAS") No. 109 "Accounting for
Income Taxes," which requires deferred tax assets and liabilities to be
recognized for future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which these temporary
differences are expected to be recovered or settled.

(k)   Stock based compensation
The Company grants stock options for fixed numbers of shares to employees and
directors generally with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock option grants to employees
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and includes appropriate disclosures as required by
SFAS No. 123, "Accounting for Stock-Based Compensation."

(l)   Impairment of long-lived assets and long-lived assets to be disposed of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of" requires that long-lived assets and certain
identifiable intangible assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The application of this Statement did not have any impact on the
Company's consolidated financial statements.

(m)   Net loss per ordinary share
The Company calculates net loss per ordinary share in accordance with the
provisions of SFAS No. 128, "Earnings Per Share." Net loss and weighted average
shares outstanding used for computing diluted loss per share were the same as
that used for computing basic loss per share for each of the years ended
December 31, 1998, 1997 and 1996. Stock options and warrants have not been
included in the calculation since the inclusion of such shares would be
antidilutive (See Notes 10 and 11).

                                       39
<PAGE>
 
(n)  Comprehensive income
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income is defined as the
total change in shareholders' equity during the period other than from
transactions with shareholders. For the Company, comprehensive loss is comprised
solely of net loss.

3.   ACQUISITIONS

On March 28, 1996, the Company acquired certain assets, including the accounts
receivables, inventories, intellectual property, licenses, trade names and
know-how of the Warner Chilcott Division ("the Division") of Warner-Lambert
Company for approximately U.S. $145 million in cash plus certain other expenses.
The acquisition was accounted for as a purchase and, accordingly the operating
results for the Division are included in the Company's financial statements
beginning March 28, 1996. The Company had utilized Warner-Lambert since the
acquisition for certain transition services and currently utilizes
Warner-Lambert for contract manufacturing.

The total consideration paid including expenses and the allocation of such costs
are summarized by asset category below (in thousands of U.S. dollars):

     Consideration                                              $144,927
                                                                --------
     Allocation of purchase price:
         Tangible assets (receivables, inventories, etc.)         62,663
         Assumed liabilities                                      (9,360)
         Acquired in process research and development             16,000
         Trade name                                               35,000
         Abbreviated New Drug Applications                         6,200
         Supply Agreement                                          4,800
         Goodwill                                                 29,624

The supply agreement is being amortized over its estimated useful life of 5
years. The remaining intangibles, including goodwill are being amortized over
their estimated useful lives of 20 years. The acquired in process research and
development value was written off in 1996. The respective values were determined
with the assistance of an independent appraiser.

In July 1997, the Company acquired five branded products from the Warner-Lambert
Company for approximately $13.0 million. The five brands were Pyridium(R),
Mandelamine(R), Doryx(R), Eryc(R), and Choledyl SA(R). The acquisition costs are
being amortized over 15 years.

                                       40
<PAGE>
 
4.   ACCOUNTS RECEIVABLE

                                                         December 31,
                                                    1998             1997
                                               (in thousands of U.S. dollars)
                                               ------------------------------
         Trade receivables                        $10,189          $15,941
         Marketing alliance receivables             8,869               --
         Other non-trade receivables                  559              177
                                                 ---------        ---------
                                                   19,617           16,118
         Less allowance for doubtful accounts       1,567            1,519
                                                 ---------        ---------
                                                  $18,050          $14,599
                                                 ---------        ---------

5.   INVENTORIES


                                                         December 31,
                                                    1998             1997
                                               (in thousands of U.S. dollars)
                                               ------------------------------
         Raw materials                            $ 1,897          $ 3,687
         Finishing supplies                             3                7
         Work in process                              932              492
         Finished goods                            11,597           12,460
                                                 ---------        ---------
                                                   14,429           16,646
         Less reserve for obsolescence              1,330              471 
                                                 ---------        ---------
                                                  $13,099          $16,175
                                                 ---------        ---------

6.   EQUIPMENT, FURNITURE AND FIXTURES


                                                         December 31,
                                                    1998             1997
                                               (in thousands of U.S. dollars)
                                               ------------------------------
         Equipment, furniture and fixtures        $ 1,565          $ 1,390
         Less accumulated depreciation                489              242
                                                 ---------        ---------
                                                  $ 1,076          $ 1,148
                                                 ---------        ---------


Depreciation expense amounted to $247,000, $179,000, and $315,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.


                                       41
<PAGE>
 
7.  INTANGIBLE ASSETS
                                                          December 31,
                                                     1998             1997     
                                               (in thousands of U.S. dollars)
                                               ------------------------------
         Goodwill                                  $29,624          $29,624
         Tradename and other intangibles            58,389           58,389
                                                  ---------        ---------
                                                    88,013           88,013
         Less accumulated amortization              13,757            8,383
                                                  ---------        ---------
                                                   $74,256          $79,630
                                                  ---------        ---------
         

Amortization expense amounted to $5,374,000, $5,279,000, and $3,104,000 for the
years ended December 31, 1998, 1997, and 1996, respectively.

8.    FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each material class of financial instrument:

Cash, cash equivalents and accounts receivable carrying amount approximates fair
value due to the short-term maturities of these instruments.

Other creditors, short-term debt and due to Elan carrying amount approximates
fair value due to the short-term maturities of these instruments.

Long-term debt and working capital facility carrying amount approximates fair
value based on market comparables.

The Company invests its cash in U.S. government securities and debt instruments
of financial institutions and corporations with investment grade credit ratings.
The Company has established guidelines relative to diversification and
maturities that are designed to help ensure safety and liquidity.

9.    DEBT

Working Capital Facility

On March 30, 1998 Warner Chilcott, Inc., the Company's U.S. operating subsidiary
("WCI"), entered into a $30 million revolving credit facility and security
agreement with a syndicate of banks led by PNC Business Credit. The facility
expires in March 2001. The PNC facility replaced a facility provided by Bankers
Trust Commercial Corporation.

The PNC facility is collateralized by substantially all of the assets of Warner
Chilcott, Inc. including cash balances, accounts receivable, inventory, fixed
assets and other intangible assets. Availability under the credit facility is
based upon the balances of qualified collateral; primarily accounts receivable,
inventory and certain cash balances. Under the credit agreement, Warner
Chilcott, Inc. is required to maintain a minimum balance of shareholders'
equity. At December 31, 1998 the Company was in compliance with the covenants of
the PNC facility. Warner Chilcott, plc, Warner Chilcott Ireland Limited, and
Warner Chilcott Limited (Bermuda) have also pledged certain assets and financial
support for the facility.

Interest on outstanding borrowings accrues at either PNC's Base Rate or LIBOR
plus one and three-quarter percent. In addition, the Company pays a commitment
fee equal to three-eighths of one percent on the unused 

                                       42
<PAGE>
 
portion of the facility. Interest expense related to the PNC and predecessor
credit facilities in 1998, 1997 and 1996, including commitment fees, were $1.7,
$1.8 and $2.1 million respectively.

Senior Subordinated Discount Notes

In April 1996, WCI issued $69 million principal amount of Senior Subordinated
Discount Notes ("Notes") due 2001 at a 30% discount to the principal amount.
Gross proceeds to WCI amounted to $48.3 million, which were utilized to fund the
acquisition of the Division. No interest accrued on the Notes through October
25, 1998. The discount on the Notes was amortized to interest expense at a rate
of 14.8%, compounded semi-annually. At October 25, 1998 the discount on the
Notes was fully amortized and the Notes were carried at 100% of their principal
amount. Beginning October 25, 1998, interest began to accrue on the Notes at a
rate of 16.8% per annum paid semi-annually on each April 30th and October 31st.
At its sole discretion, the Company may issue additional Notes in lieu of cash
payment of any or all interest due on the Notes on each interest payment date.
The Notes are unsecured and rank subordinate in right of payment to all senior
indebtedness of WCI. The Notes are redeemable at the option of WCI, in whole or
in part, at any time prior to maturity at redemption prices equal to 105% of the
principal amount of the Notes plus accrued interest.

In June 1997, the Company offered all holders of the Notes the right to exchange
Notes for newly issued Convertible Senior Subordinated Discount Notes ("the
Convertible Notes") and detachable warrants to purchase Ordinary Shares of the
Company. The holders of 87% of the principal amount of the Notes accepted the
offer and the Company issued $49.5 million of Convertible Notes and detachable
warrants in exchange for $49.5 million of Notes. The conversion price for the
Convertible Notes, the number of shares subject to the detachable warrants and
the exercise price of the warrants were ultimately determined by the price at
which the Company sold shares in its IPO in August 1997. Following the exchange,
the Company exercised an option to convert the Convertible Notes into Ordinary
Shares. The net result of the exchange of Notes for Convertible Notes and
detachable warrants and the subsequent conversion of the Convertible Notes into
shares was that the Company issued 2,827,245 Ordinary Shares and warrants to
purchase an aggregate 141,362 Ordinary Shares exercisable at $17.50 per share.

The table below shows the components of long-term debt as of December 31, 1998
and 1997:

                                                          December 31,
                                                  1998                 1997
                                               (in thousands of U.S. dollars)
                                               -------------------------------
     Senior subordinated discount notes        $  6,228           $   6,228
     Accreted interest                            2,669               1,674
                                               -----------        ------------
          Long-term debt                       $  8,897           $   7,902
                                               -----------        ------------

The amount of original issue discount amortized to interest expense was $1.0
million in 1998 and $4.2 million in 1997.


10.   SHARE CAPITAL

Ordinary Shares

In August 1997 the Company completed its initial public offering (the "IPO")
selling 3,500,000 shares at an issue price of $17.50 per Ordinary Share.
Concurrent with the IPO, Barr Laboratories Inc. purchased 250,000 Ordinary
Shares in a private placement at an issue price of $16.275 per share which
equated to the IPO issue price net of underwriting discounts and commissions.
Also, at the time of the IPO, Elan Corporation, plc exercised a warrant to
purchase 500,000 Ordinary Shares at a price of $16.00 per share. In September
1997 the underwriters of the Company's IPO exercised an option to cover
over-allotments and purchased an 

                                       43
<PAGE>
 
additional 525,000 Ordinary Shares from the Company at a price of $17.50 per
share less underwriting discounts and commissions. The net proceeds to the
Company of the IPO and related financings totalled $74.6 million.

In 1997, the Company issued 2,827,245 Ordinary Shares and 141,362 detachable
warrants in exchange for Convertible Senior Subordinated Discount Notes (See
Note 9).

Deferred Shares

Holders of Deferred Shares will not be entitled to receive dividends or to
receive notice of or be represented at shareholder meetings of the Company or to
vote at such meetings. On liquidation or a winding up of the Company the holders
of Deferred Shares will be entitled to receive the par value of the Deferred
Shares after the holders of the Ordinary Shares have received the par value of
the Ordinary Shares but shall not be entitled to otherwise participate in the
assets which are available for distribution.

Warrants Issued In Connection With Financing Activities

The Company from time to time has issued warrants in connection with various
financing activities.

On September 30, 1997, the Company issued a five-year warrant to Elan to
purchase 150,000 Ordinary Shares at an exercise price of $22.75 per share in
conjunction with bridge financing for the purchase of five products from Warner
Lambert.

In connection with Barr's purchase of shares at the time of the IPO, the Company
issued to Barr a warrant to purchase up to 250,000 Ordinary Shares exercisable
at $16.275 per share. The warrant becomes exercisable as to 62,500 shares during
four one-year periods beginning on each of the first, second, third and fourth
anniversaries of the IPO. If Barr does not exercise, in full, its right to
purchase the 62,500 shares during any one-year period, such portion of the
warrant expires. At December 31, 1998, this warrant was exercisable as to 62,500
shares.

In connection with the acquisition of the Division, the Company issued a warrant
to Warner-Lambert for $672,000. This warrant entitles Warner-Lambert to purchase
1,130,158 Ordinary Shares of the Company for $18 million. This warrant is
exercisable through January 31, 2001.

During the years ended December 31, 1995 and 1996 the Company issued warrants to
shareholders to purchase 151,275 and 88,080 Ordinary Shares, respectively, at an
exercise price of $16.00 per share. These warrants are exercisable through
October 17, 1999.

In October 1994 the Company issued warrants to purchase 75,000 Ordinary Shares
to Montgomery Securities in connection with a private placement. These warrants
are exercisable at $19.20 per Ordinary Share at any time up to October 17, 1999.

Other Warrants

In October 1994, the Company granted to an individual who was, at the time, an
officer of the Company a warrant to purchase 10,000 Ordinary Shares at a
consideration of $0.05 per share and a warrant to purchase 33,334 Ordinary
Shares at an exercise price of $16.00 per share. These warrants are exercisable
through October 17, 1999.

During 1996, 100,000 warrants were issued to an individual who was, at the time,
an officer and director of the Company. The exercise price of $20.00 per share
was equal to the estimated fair value of the shares on the date of the grant.
The warrants are exercisable through June 28, 2001.

                                       44
<PAGE>
 
Other

In December 1998, Elan Corporation, plc, contributed 600,000 shares of the
Company's stock to an entity formed by it and selected members of senior
management of the Company. Under the terms of the transaction, Elan retained the
right to proceeds from the sale of the shares at prices up to $11.50 per share.
Thereafter, Elan would be entitled to receive 50% of any sales proceeds in
excess of $11.50 per share.

11.  EMPLOYEE AND DIRECTOR STOCK OPTIONS AND COMPENSATORY WARRANTS

Incentive Share Option Scheme

In April 1997, the Company adopted an Incentive Share Option Scheme for
officers, directors and employees which provides for both nonqualified stock
options and incentive stock options. The option exercise price is the fair
market value at the date of grant. Options for officers, employees, and
directors generally vest over four years and expire on the earlier of ten years
from the date of grant or after a specified period following the participant's
separation from the Company. At December 31, 1998 options for 799,450 shares
were outstanding under the Scheme, 700,550 shares were available for future
grants and 260,026 were exercisable.

Warrants Issued to Officers and Directors

The Company has issued warrants to certain executives and to directors that are
not governed by the Incentive Share Option Scheme. These warrants are described
below:

In June 1996, the Company issued warrants to directors to purchase up to an
aggregate 60,000 Ordinary Shares at an exercise price of $20.00 per share. The
exercise price on the date of grant was equal to the estimated fair value of the
shares on that date. The warrants are exercisable through June 28, 2001.

In March 1997, the Company issued warrants to two executives pursuant to
employment agreements approved by the Board of Directors. The warrants allow the
executives to purchase up to an aggregate 650,000 shares (520,000 at an exercise
price of $20.00 per share and 130,000 at an exercise price of $1.00 per share).
These warrants become exercisable ratably over 16 quarterly periods which began
October 1, 1996, but would be immediately exercisable in full if the Company
undergoes a change of control. The warrants expire on the earlier of October 31,
2006 or after a specified period following the termination of the executive's
employment with the Company. The difference between the estimated fair value of
the shares on the date of grant ($20.00) and the $1.00 per share exercise price
was recorded as deferred compensation expense totalling $2,470,000 on the date
of grant and is being amortized over the vesting period. Compensation expense
charged against income in respect of these warrants was $617,000 for the year
ended December 31, 1998 and $772,000 for the year ended December 31, 1997.

In February 1998, the Company issued a warrant to an executive pursuant to an
employment agreement approved by the Board of Directors. The warrant allows the
executive to purchase up to 200,000 Ordinary Shares at an exercise price of
$9.77 per share. The exercise price on the date of grant was equal to the fair
market value of the shares on that date. The warrant becomes exercisable (vests)
over 16 quarterly periods which began January 1, 1998, but would be immediately
exercisable in full if the Company undergoes a change of control. The warrants
expire on the earlier of February 3, 2008 or after a specified period following
the termination of the executive's employment with the Company.

                                       45
<PAGE>
 
Options outstanding under the Scheme and warrants issued to officers and
Directors are summarized below:

<TABLE> 
<CAPTION> 
                                                                                       Price Per Share
                                                                     -------------------------------------------------
                                                                                                     Weighted
                                                    Shares                    Range                   Average
                                            ------------------------ ------------------------ ------------------------
<S>                                         <C>                      <C>                      <C> 
Balance at December 31, 1995                                      -                        -                        -
     Granted                                                 60,000                   $20.00                   $20.00
     Exercised                                                    -                        -                        -
     Cancelled                                                    -                        -                        -
                                            ------------------------ ------------------------ ------------------------

Balance at December 31, 1996                                 60,000                   $20.00                   $20.00
     Granted                                                926,750              $1.00-20.00                   $17.33
     Exercised                                                    -                        -                        -
     Cancelled                                              (7,500)                   $20.00                   $20.00
                                            ------------------------ ------------------------ ------------------------

Balance at December 31, 1997                                979,250           $1.00 - $20.00                   $17.48
     Granted                                                748,450            $6.00 - $9.88                   $ 9.22
     Exercised                                                    -                        -                        -
     Cancelled                                             (18,250)           $9.77 - $20.00                   $14.70
                                                                                                               
----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998                              1,709,450           $1.00 - $20.00                   $13.89
----------------------------------------------------------------------------------------------------------------------
                                                                                                               
----------------------------------------------------------------------------------------------------------------------
Exercisable at December 31, 1998                            735,651           $1.00 - $20.00                   $15.96
----------------------------------------------------------------------------------------------------------------------
</TABLE> 

Following is option and warrant data at December 31, 1998 by exercise price
range:

<TABLE> 
<CAPTION> 
Exercise Price Range                                   $1.00 to        $6.00 to        $10.00 to       Total
                                                       $5.99           $10.00          $20.00
----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>             <C>             <C> 
Number of shares subject to options and warrants              130,000         738,950         840,500       1,709,450

Weighted average exercise price                                 $1.00           $9.21          $20.00          $13.89

Weighted average remaining contractual life (years)              7.75            9.23            7.53            8.28

Number of exercisable options and warrants                     73,125         147,213         515,313         735,651

Weighted average exercise price of exercisable
     options and warrants                                       $1.00           $9.23          $20.00          $15.96
</TABLE> 

The Company applies APB Opinion No. 25 in accounting for option grants under its
Incentive Share Option scheme and the issuance of warrants to officers and
directors. Accordingly, no compensation cost has been recorded in the
consolidated statement of operations for stock options or warrants granted at
exercise prices at least equal to fair market value on the date of grant. Had
the Company determined compensation cost based on the fair value of options and
warrants issued at the grant date under SFAS No.123, the Company's net loss 

                                       46
<PAGE>
 
and net loss per ordinary share would have been reduced to the pro forma amounts
indicated below (in thousands of dollars, except per share amounts).

                                                                        
                                    1998            1997           1996 
                              --------------- -------------- ---------------
                                                                        
   Net loss as reported       $(20,297)       $(28,374)      $(39,339)  
                                                                        
   Pro forma net loss         $(22,767)       $(30,817)      $(39,499)  
                                                                        
   Pro forma net loss                                                   
                                                                        
        per ordinary share    $(1.84)         $(3.69)        $(9.66)    
                                                          
The pro forma amounts shown in the table above reflect the impact of options and
warrants granted in 1996 and after. There were no options or warrants granted to
employees or directors prior to 1996. Warrants issued for acquisition-related
consideration or in connection with financing activities were not included in
the analysis.

The per share weighted-average fair value of options and warrants granted during
1998, 1997 and 1996 was $4.54, $5.53 and $5.00 using the Black-Scholes
option-pricing model. Values were estimated using a weighted average life of
3.0, 3.6 and 5.0 years in 1998, 1997 and 1996, no expected dividend yield in any
year, volatility of .728 in 1998 and .256 in 1997, and risk free interest rates
of 4.6%, 6.0% and 5.5% in 1998, 1997 and 1996.

12.   401(k) SAVINGS PLAN

In April 1996, Warner Chilcott adopted a 401(k) savings plan in which a
participant may elect to defer an amount not in excess of 15% of his or her
compensation. The Company shall make matching contributions to the plan on
behalf of all participants who make elective deferrals. The Company shall
contribute and allocate to each participant's account matching contributions
equal to 50% of up to 6% of the participant's contributions.

The Company's  contributions  recognized  for the year ended  December 31, 1998,
1997 and 1996 were $174,200, $59,500 and $42,400, respectively.

13.   TAXES

The Company operates in Ireland and the United States and is subject to various
taxes on income in both jurisdictions. Although the Company is currently
generating losses, tax relief may be available to offset future taxable
earnings. However, there can be no assurance that such relief will be available
to the Company.

                                       47
<PAGE>
 
SFAS No. 109 requires, among other things, recognition of future tax benefits
measured at enacted rates attributable to temporary differences between
financial statement and income tax basis of assets and liabilities and to tax
net operating losses if realization of such benefits were likely to occur. Under
SFAS No. 109, the Company's deferred tax assets as of December 31, 1998 and
1997, respectively, are estimated as follows:


                                                        December 31,
                                                   1998              1997
                                               (in thousands of U.S. dollars)
                                               ------------------------------
     Deferred tax assets
      Net operating loss carryforward            $18,026           $12,187
      Amortization of intangibles                  5,329             5,660
      Disqualified interest carryforward             826               826
      Other, net                                    (252)               10
                                                ---------         ---------
        Subtotal                                  23,929            18,683
      Valuation allowance                        (23,929)          (18,683)
                                                ---------         ---------
        Net deferred tax asset                   $    --           $    --
                                                ---------         ---------


For the three years ended December 31, 1998, 1997 and 1996, the temporary
differences that give rise to significant portions of deferred tax assets relate
primarily to net operating losses in the amount of $18,456,000, $22,414,000 and
$9,525,000. There are no significant deferred tax liabilities at December 31,
1998. The valuation allowance for deferred tax assets at December 31, 1998, 1997
and 1996 was $23,929,000, $18,683,000, and $10,914,000 respectively.

At December 31, 1998, the Company has available net operating loss carryforwards
for United States Federal income tax reporting purposes of $47,615,000 and state
income tax reporting purposes of approximately $30,932,000. Ultimate utilization
or availability of such net operating losses and certain deferred tax assets may
be limited if a significant change in ownership occurs, as defined by rules
enacted with the United States Tax Reform Act of 1986. The Company did not pay
any Federal income taxes in 1998, 1997 or 1996.

14.  SIGNIFICANT CONCENTRATIONS

Significant customers / revenue sources

In 1998, the Company derived 25% of its total revenue from the promotion of
several cardiovascular products under an agreement with Schering Corporation.
The Company's sales force promotes these Schering products to a targeted doctor
population and in turn receives a fee based on Schering's sales of the products
to the trade. The agreement expires in June 2001 but may be terminated sooner by
either party under certain circumstances. Amounts earned by the Company under
the promotion agreement are paid on a quarterly basis within 45 days of the end
of each calendar quarter. At December 31, 1998, $8.1 million of the balance of
accounts receivable are amounts due from Schering.


                                       48
<PAGE>
 
The Company distributes its pharmaceutical products through wholesalers,
distributors and direct to certain retailers. The following table shows
significant customer sales as a percentage of total sales:

                                   December 31,

                         1998         1997          1996
                     ------------ ------------ -------------
   Customer A             17%          12%           15%
   Customer B             12%           7%            7%
   Customer C             10%          15%           13%
                               
Credit risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of short-term investments and
accounts receivable. The Company's short-term investments consist of
interest-bearing securities issued by investment grade entities and exposure to
any one entity is limited.

Trade receivables are primarily due from wholesalers, distributors, major
retailers of pharmaceutical products, and multi-national pharmaceutical
companies located in the United States. The Company completes ongoing credit
evaluations of its customers and sales made on credit are generally not
collateralized. The following table shows significant trade receivables as a
percentage of total accounts receivable:


                             December 31,

                          1998         1997
                      ------------- ------------
   Customer A              11%          18%
   Customer B              10%          12%
   Customer C               9%          23%

15.   COMMITMENTS AND CONTINGENCIES

Leases

The Company has various operating leases for the rental of office space and
sales force vehicles and equipment. Future minimum rental commitments for
operating leases with non-cancelable terms in excess of one year are as follows:


                             Minimum Rental Payments
                          -----------------------------
                            1999            $  917
                            2000               945
                            2001               538
                            2002               544
                            2003               549
                            Thereafter          46
                                           --------
                              Total         $3,539
                                           --------

Rent expense under operating leases during the years ended 1998, 1997, and 1996
was $571,300, $206,000 and $108,000 respectively.

Employment Agreements

                                       49
<PAGE>
 
The Company has employment agreements with three of its executives, all of whom
are also directors. The agreements provide for minimum salary levels as well as
incentive bonuses that are payable if specified management goals are attained.
The agreements also contain provisions that would entitle each executive to
severance payments based upon their then current base salary in the event of
termination other than for "cause" as defined in the agreements. The maximum
contingent liability for such severance payments at December 31, 1998 totalled
$1.0 million.

16.  RELATED PARTIES

The Company has ongoing business dealings with three companies (Elan, Barr, and
Boron-LePore) that are related parties. The Company employs certain procedures
to ensure that transactions with these parties take place on terms no more
favorable than could be obtained from unrelated third parties.

Elan Corporation, plc.

At December 31, 1998, Elan Corporation, plc and its subsidiaries held 19.6% of
the ordinary share capital of the Company (excluding shares that are part of the
transaction described in Note 10). Mr. Thomas G. Lynch, Executive Vice
President, Chief Financial Officer and a member of the Board of Directors of
Elan, serves on the Company's Board of Directors. The companies have ongoing
product development activities, for which the Company owes $7.0 million as of
December 31, 1998, and Elan also provides certain administration and support
services for the Company for fee.

The Company incurred research and development costs charged by Elan of $4.1
million and $8.5 million in the years ended December 31, 1997 and 1996,
respectively. No research and development costs were charged by Elan in 1998.
General and administrative expenses of $326,200, $582,900 and $644,840 in the
years ended December 31, 1998, 1997 and 1996 and equity issue expenses of
$1,774,000 in the year ended December 31, 1996 were charged by Elan. These
charges were expensed to operations and charged to additional paid-in capital
accordingly. Amounts billed to the Company by Elan for administrative services
are due within 30 days of receipt of invoice.

Barr Laboratories, Inc.

In 1997, the Company entered into an agreement under which Barr distributes
minocycline capsules manufactured under the Company's ANDA. Royalties from this
agreement of $94,000 and $262,000 were included in the Company's financial
results for the years ended December 31, 1998 and 1997, respectively. Barr holds
250,000 of the Company's Ordinary Shares and a warrant to purchase an additional
250,000 shares. Mr. Bruce Downey, the Chairman, President and Chief Executive
Officer of Barr serves on the Company's Board of Directors.

Boron-LePore Group, Inc.

Boron-LePore provides a range of services to the Company including providing
contract sales personnel, recruitment of sales representatives and certain
sample data record keeping. Mr. Roger Boissonneault, the President and Chief
Operating Officer of Warner Chilcott, serves on the Board of Boron-LePore. For
the years ended December 31, 1998 and 1997 fees of $5.6 million and $2.2 million
were charged by Boron-LePore and expensed to operations. No fees were incurred
during the year ended December 31, 1996.

                                       50
<PAGE>
 
Schedule II
Valuation and Qualifying Accounts.

<TABLE>
<CAPTION>
                                                                         Write-
                                                                          offs
                                              Balance                   against    Additions
                                                at                      Reserves   Resulting                Balance
                                             Beginning   Additional     and other    from         Deduc-     End of
                                             of Period    Reserves      Reserves   Acquisition    tions      Period
                                             ---------   ----------     ---------  -----------    ------    --------
<S>                                          <C>         <C>            <C>        <C>            <C>       <C>
1998:
Allowance for doubtful accounts               $ 1,519     $    50        $    (2)          --         --    $ 1,567
Reserve for inventory obsolescence            $   471     $ 1,672        $  (813)          --         --    $ 1,330

1997:
Allowance for doubtful accounts               $ 2,030          --        $  (511)          --         --    $ 1,519
Reserve for inventory obsolescence            $ 1,331     $   790        $(1,650)          --         --    $   471

1996:
Allowance for doubtful accounts                    --          --             --      $ 2,047    $   (17)   $ 2,030
Reserve for iventory obsolescence                  --          --             --      $ 2,000    $  (669)   $ 1,331
</TABLE>


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


Not applicable.

                                       51
<PAGE>
 
                                   Part III

Item 14.  Financial Statements and Exhibits

     (a)      The following documents are filed with this Form 10-K

     Financial Statements:
              Index to Consolidated Financial Statements
              Reports of Independent Auditors
              Consolidated Balance Sheets as of December 31, 1998 and 1997
              Consolidated Statements of Operations for the Years Ended December
              31, 1998, 1997 and 1996
              Consolidated Statements of Shareholders' Equity for the Years
              Ended December 31, 1998, 1997 and 1996
              Consolidated Statements of Cash Flow for the Years Ended December
              31, 1998, 1997 and 1996
              Notes to the Consolidated Financial Statements

     Financial Statement Schedule:
              Schedule II - Valuation and Qualifying Accounts
              The financial statement schedule should be read in conjunction
              with the consolidated financial statements. Financial statement
              schedules not included in this Annual Report on Form 10-K have
              been omitted because they are not applicable or the required
              information is shown in the financial statements or notes thereto.

     Exhibits filed as part of this Report:

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

2.1++                                      Asset Purchase Agreement, dated as of
                                           February 13, 1996, by and between
                                           Warner Chilcott, Inc. ("WCI") and
                                           Warner-Lambert Company ("Warner-
                                           Lambert")

3.1++                                      Memorandum and Articles of
                                           Association, as amended, of Warner
                                           Chilcott Public Limited Company (the
                                           "Company")

4.1++                                      Deposit Agreement, dated as of June
                                           16, 1997, among the Company, The Bank
                                           of New York, and Owners from time to
                                           time of the Company's ADSs

4.2++                                      Form of Ordinary Share Certificate

4.3++                                      Form of ADR Certificate (included
                                           within Exhibit 4.1)

4.4++                                      Form of Senior Subordinated Discount
                                           Note

4.5++                                      Form of Convertible Senior
                                           Subordinated Discount Note


                                       52
<PAGE>
 
4.6++                                      Form of Warrant for converting
                                           holders of Rule 144 ADSs

10.1++                                     Incentive Share Option Scheme of the
                                           Company, dated as of April 3, 1997

10.2++*                                    Master Development and License
                                           Agreement, dated as of October 17,
                                           1994, by and between the Company and
                                           Elan Corporation plc ("Elan")

10.3++*                                    Development License and Supply
                                           Agreement, dated as of November 10,
                                           1994, by and between the Company and
                                           Elan

10.4++*                                    Development License and Supply
                                           Agreement, dated as of March 10,
                                           1995, by and between the Company and
                                           Elan

10.5++*                                    Development License and Supply
                                           Agreement, dated as of March 10,
                                           1995, by and between the Company and
                                           Elan

10.6++                                     Administrative Support Agreement,
                                           dated as of October 17, 1994, by and
                                           between the Company and Elan

10.7++*                                    Toll Manufacturing Agreement
                                           (Minocycline) dated as of March 28,
                                           1996 by and between WCI and Warner-
                                           Lambert

10.8++*                                    Gemfibrozil Supply Agreement, dated
                                           as of March 28, 1996, by and between
                                           WCI and Warner-Lambert

10.9++*                                    Desmopressin Agreement, dated as of
                                           March 28, 1996, by and between the
                                           Company and Warner-Lambert

10.10++*                                   Choledyl SA Supply Agreement, dated
                                           as of June 26, 1997, by and between
                                           Warner Chilcott (Bermuda) Limited and
                                           Warner-Lambert

10.11++*                                   Doryx and Eryc Packaging Agreement,
                                           dated as of June 26, 1997, by and
                                           between Warner Chilcott (Bermuda)
                                           Limited and Warner-Lambert

10.12++*                                   Transition Services Agreement, dated
                                           as of March 28, 1996, by and between
                                           WCI and Warner-Lambert

10.13++                                    Shareholders Agreement, dated as of
                                           October 17, 1994, by and between the
                                           Company and Elan

10.14+                                     Shareholders Agreement, dated as of
                                           August 13, 1997 between the Company
                                           and Barr Laboratories, Inc.

10.15++*                                   Manufacturing Agreement, dated as of
                                           December 30, 1994, by and between the
                                           Company and Mova Pharmaceutical
                                           Corporation ("Mova")


                                       53
<PAGE>
 

10.16++*                                   Development Agreement, dated as of
                                           January 19, 1995, by and between the
                                           Company and Mova

10.17++*                                   LoCholest Supply Agreement, dated as
                                           of September 13, 1996, by and between
                                           the Company and Eon Labs
                                           Manufacturing Inc.

10.18++*                                   Supply and Rebate Agreement, dated as
                                           of May 17, 1996, by and between the
                                           Company and Cardinal Distribution

10.19++*                                   Supply and Rebate Agreement, dated as
                                           of March 28, 1997, by and between the
                                           Company and McKesson Drug Company

10.20+*                                    License and Distribution Agreement,
                                           dated as of December 31, 1997, by and
                                           between the Company and FH Faulding &
                                           Co. Ltd.

10.21++                                    Private Placement Memorandum dated as
                                           of March 13, 1996

10.22++                                    Purchase Agreement, dated as of April
                                           25, 1996, by and among the Company,
                                           WCI and the purchasers named therein

10.23++                                    Registration Rights Agreement, dated
                                           as of October 17, 1994, by and among
                                           the Company and the purchasers named
                                           therein, together with all amendments
                                           thereto

10.24++                                    Registration Rights Agreement, dated
                                           as of April 25, 1996, by and among
                                           the Company and the purchasers named
                                           therein, together with all amendments
                                           thereto

10.25++                                    Indenture, dated as of April 15,
                                           1996, by and between WCI and Fleet
                                           National Bank of Connecticut, as
                                           Trustee

10.26++                                    Warrant Agreement, dated as of
                                           October 17, 1994, by and between the
                                           Company and Elan

10.27++                                    Warrant Agreement, dated as of March
                                           26, 1996, by and between the Company
                                           and Warner-Lambert

10.28++*                                   Promotion and Sales Agreement, dated
                                           as of November 25, 1996, by and
                                           between the Company and Dermatology
                                           Sales Specialists

10.29++                                    Purchase Agreement, dated as of June
                                           26, 1997, by and between Warner
                                           Chilcott (Bermuda) Limited and
                                           Warner-Lambert

10.30++                                    Stock and Warrant Purchase Agreement,
                                           dated as of July 8, 1997, by and
                                           between Barr Laboratories, Inc. and
                                           the Company


                                       54
<PAGE>
 

10.31++                                    Exchange Agreement, dated as of June
                                           15, 1997, by and among the Company
                                           and the exchanger parties thereto

10.32#                                     Employment Agreement between the
                                           Company and James G. Andress, dated
                                           March 3, 1997

10.33#                                     Employment Agreement between the
                                           Company and Roger M. Boissonneault,
                                           dated March 3, 1997

10.34#                                     Employment Agreement between the
                                           Company and Paul S. Herendeen, dated
                                           February 3, 1998

10.35+                                     Employment Agreement between the
                                           Company and Beth P. Hecht, dated
                                           December 1, 1998

10.36#                                     Warrant Certificate Agreement between
                                           the Company and James G. Andress,
                                           dated October 31, 1996

10.37#                                     Warrant Certificate Agreement between
                                           the Company and James G. Andress,
                                           dated October 31, 1996

10.38#                                     Warrant Certificate Agreement between
                                           the Company and Roger M.
                                           Boissonneault, dated October 31, 1996

10.39#                                     Warrant Certificate Agreement between
                                           the Company and Paul S. Herendeen,
                                           dated February 3, 1998

10.40#                                     Revolving Credit and Security
                                           Agreement, dated March 30, 1998,
                                           among WCI, PNC Bank National
                                           Association and the Lenders thereto

10.41#                                     Financial Support Undertaking, dated
                                           March 30, 1998, made by the Company
                                           and Warner Chilcott (Bermuda) Limited
                                           in favor of PNC Bank National
                                           Association

10.42#                                     Continuing Limited Non-Recourse and
                                           Collateralized Guaranty, dated March
                                           30, 1998, made by Warner Chilcott
                                           (Bermuda) Limited in favor of PNC
                                           Bank National Association

10.43#                                     Trademark Collateral Assignment and
                                           Security Agreement, from WCI to PNC
                                           Bank National Association dated March
                                           30, 1998

10.44#                                     Trademark Collateral Assignment and
                                           Security Agreement from Warner
                                           Chilcott (Bermuda) Limited to PNC
                                           Bank National Association dated March
                                           30, 1998

10.45##*                                   Promotion Agreement between Schering
                                           Corporation and the Company dated
                                           July 16, 1998


                                       55
<PAGE>
 

10.46##*                                   Amendment to Promotion Agreement with
                                           Schering Corporation dated September
                                           3, 1998

10.47+*                                    CoPromotion Agreement between
                                           Apothecon, Inc. and WCI dated January
                                           1, 1999

10.48+*                                    License Agreement (Ovcon) between
                                           Bristol-Myers Squibb Company and
                                           Warner Chilcott Laboratories Ireland
                                           Limited, dated February 1, 1999

27.1+                                      Financial Data Schedule

++   Previously filed by the Registrant in the Registration Statement on Form
     F-1, as amended (File no. 333-7240), and incorporated by reference.

#    Previously filed by the Registrant in the Company's Quarterly Report on
     From 10-Q for the quarterly period ended June 30, 1998 and incorporated by
     reference.

##   Previously filed by the Registrant in the Company's Quarterly Report on
     Form 10-Q for the quarterly period ended September 30, 1998 and
     incorporated by reference.

+    Filed Herewith

*    Confidential material has been omitted from this exhibit and filed
     separately with the SEC pursuant to a request for confidential treatment.


                                       56
<PAGE>
 
                                  SIGNATURES

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


                           WARNER-CHILCOTT PUBLIC LIMITED COMPANY
                           (Registrant)



                           By: /s/ James G. Andress
                               -----------------------------------  
                               Name:    James G. Andress
                               Title:   Chairman, Chief Executive Officer and
                                          Director
                                                                       
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE> 
<CAPTION> 
                 Name                                           Title                                   Date
                 ----                                           -----                                   ----
<S>                                     <C>                                                        <C> 
/s/ James G. Andress                    Chairman, Chief Executive Officer (Principal               March 30, 1999
---------------------------------       Executive Officer) and Director
James G. Andress                        


/s/ Roger M. Boissonneault              President, Chief Operating Officer and Director            March 30, 1999
---------------------------------
Roger M. Boissonneault


/s/ Paul S. Herendeen                   Executive Vice President and Chief Financial Officer       March 30, 1999
---------------------------------       (Principal Financial and Accounting Officer)
Paul S. Herendeen                       


/s/ David Pinkerton                     Director                                                   March 30, 1999
---------------------------------
David Pinkerton


/s/ Harold Chefitz                      Director                                                   March 30, 1999
---------------------------------
Harold Chefitz


/s/ Docteur Nicole Bru                  Director                                                   March 30, 1999
---------------------------------
Docteur Nicole Bru
</TABLE> 

                                       57
<PAGE>
 
<TABLE> 
<S>                                     <C>                                    <C>                          

/s/ James H. Bloem                      Director                               March 30, 1999
-------------------------------                                                
James H. Bloem                                                                 
                                                                               
/s/ Bruce Downey                        Director                               March 30, 1999
-------------------------------                                                
Bruce Downey                                                                   
                                                                               
/s/ Thomas G. Lynch                     Director                               March 30, 1999
-------------------------------                                                
Thomas G. Lynch                                                                
                                                                               
/s/ Donald E. Panoz                     Director                               March 30, 1999
-------------------------------                                                
Donald E. Panoz                                                                
</TABLE> 
                                                                               
                                       58