UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                          ----------------------------
                                    FORM 10-K

(MARK ONE)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                       OR
[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 0-28454
                            ------------------------

                               ANDRX CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                            ------------------------
                   FLORIDA                               65-0366879
        (STATE OR OTHER JURISDICTION OF               (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                IDENTIFICATION NO.)

         4001 SOUTHWEST 47TH AVENUE
         FORT LAUDERDALE, FLORIDA                          33314
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)        (ZIP CODE)

                                 (954) 584-0300
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.001
                                                            PAR VALUE

         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. 
                                 [X] Yes 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. [ ]

         THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING ON
MARCH 14, 1997 IS: 13,549,613

         THE AGGREGATE MARKET VALUE, AS OF MARCH 14, 1997, OF SHARES OF COMMON
STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT IS APPROXIMATELY $124,628,200.


                       DOCUMENTS INCORPORATED BY REFERENCE

The registrant will file a definitive Proxy Statement pursuant to Regulation 14A
within 120 days of the end of the fiscal year ended December 31, 1996. Portions
of such Proxy Statement are incorporated by reference in Part III of this
report.

<PAGE>


                           FORWARD-LOOKING STATEMENTS

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



                                     PART I

ITEM 1.  BUSINESS

(A)      GENERAL DEVELOPMENT OF BUSINESS

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

         To date, the Company has developed six distinct drug delivery
technologies that are patented or for which patent applications have been filed.
The Company believes that its technologies are relatively flexible and can be
modified to apply to a variety of pharmaceutical

                                      -2-
<PAGE>

products. The Company also believes that major pharmaceutical companies that do
not possess controlled-release drug delivery technology expertise will rely upon
third parties such as Andrx to develop such technologies for their product
candidates.

         The Company is applying its proprietary drug delivery technologies and
formulation skills initially to the development of generic versions of selected
high sales volume, controlled-release brand name pharmaceuticals, for which
marketing exclusivity or patent rights have expired or are near expiration.
Generic pharmaceuticals are therapeutic equivalents of brand name drugs for
which marketing exclusivity or patent rights have expired. In late 1995, the
Company submitted Abbreviated New Drug Applications ("ANDAs") to the U.S. Food
and Drug Administration (the "FDA") covering generic versions of Cardizem CD(R),
which is marketed by Hoechst Marion Roussel, Inc. ("HMR") and Dilacor XR(R),
which is marketed by Rhone-Poulenc Rorer, Inc. ("RPR"). The Company currently
has 15 additional generic controlled-release drugs under development. Of these
product candidates, 14 are in various phases of bioequivalence studies and one
is in formulation development. The Company is evaluating other potential product
candidates.

         To expedite product development and reduce the Company's development
costs, the Company has entered into collaborative arrangements with major
generic pharmaceutical companies. Andrx is a 50% partner in a joint venture
known as ANCIRC with Watson Pharmaceuticals, Inc. ("Watson") for the development
of up to eight controlled-release generic pharmaceuticals and has entered into
development and licensing agreements with Zenith Laboratories, Inc., a
subsidiary of IVAX Corporation ("IVAX") and Watson for three additional
controlled-release products. Watson owns approximately 16% of the Company's
presently outstanding Common Stock and has warrants to acquire additional shares
of Common Stock.

         Andrx believes that the drug delivery technologies it uses for the
development of generic controlled-release pharmaceuticals will also have
application to the development of brand name controlled-release pharmaceuticals
of existing chemical entities whose exclusivity or patent rights have expired or
are near expiration. The Company does not intend to develop new chemical
entities. To develop and commercialize this opportunity, the Company is
exploring possible applications of its technologies and will be utilizing
clinical research organizations to conduct the appropriate studies. The Company
also plans to work with brand name pharmaceutical companies in two basic ways:
(i) by developing controlled-release formulations of existing immediate-release
drugs and (ii) by applying its drug delivery technologies to the formulation of
new drugs under development by these pharmaceutical companies. In addition to
the potential for improving drug efficacy, the Company believes that its drug
delivery technologies will provide pharmaceutical companies with the opportunity
to enhance the commercial value of their new drug product candidates.

         The Company is a party to a collaborative arrangement with Sepracor,
Inc. ("Sepracor"). Pursuant to such agreement, Andrx is using one of its
controlled-release drug delivery technologies to formulate a once-a-day version
of fexofenadine (formerly known as terfenadine carboxylate), an antihistamine
being developed by Sepracor. A twice-a-day version of this drug was approved by
the FDA in 1996, and is marketed in the U.S. under the brand name Allegra(R) by
HMR. Andrx has also entered into an agreement with another pharmaceutical
company to apply one of its technologies to that company's marketed brand name
product in an attempt to

                                      -3-

<PAGE>

develop a once-a-day version of that product. If that company then wishes to
utilize Andrx's technology in connection with its product, the parties will
attempt to negotiate a licensing agreement.

         In addition to developing controlled-release pharmaceuticals, the
Company markets and distributes generic drugs manufactured by third parties.
These operations have generated substantially all of the Company's revenues to
date, including 1996 revenues of $86.7 million. The Company's customer base
consists primarily of independent pharmacies, regional pharmacy chains which do
not maintain their own central warehousing facilities and pharmacy buying
groups. The Company currently utilizes operating profit from its generic
pharmaceutical distribution operations to offset a portion of the Company's
overall administrative costs. These operations also provide Andrx with an
ability to directly observe and participate in developments and trends in the
generic pharmaceutical industry. The Company plans to use its distribution
operations to assist in the marketing of generic controlled-release products
developed by the Company and its collaborative partners.

         In June 1996, the Company completed its initial public offering (the
"IPO") of 2,530,000 shares of the Company's Common Stock at $12.00 per share.
The net proceeds of the IPO of $27.4 million are being used for research and
product development activities relating to the Company's drug delivery
technologies (including the Company's shares of the funding of the ANCIRC joint
venture) and for capital expenditures relating to product development, primarily
the establishment of a commercial-scale manufacturing facility for the
commercialization of the Company's generic versions of Cardizem CD(R) and
Dilacor XR(R). The balance of the net proceeds is being used for working capital
and other general corporate purposes.

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

(B)      FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

         Not applicable

(C)      NARRATIVE DESCRIPTION OF BUSINESS

NEED FOR CONTROLLED-RELEASE DRUG DELIVERY TECHNOLOGY

         To date, most orally administered prescription pharmaceutical products
have been available only in immediate-release formulations. These formulations,
although efficacious, may at times result in unwanted side effects due to high
initial drug concentrations in the blood and may be inconvenient to patients
requiring multiple drug administrations each day. Over the last decade, new
controlled-release drug delivery technologies have been developed to eliminate
or reduce

                                      -4-
<PAGE>


certain disadvantages of immediate-release drugs. Controlled-release drug
delivery technologies generally provide more consistent and appropriate drug
levels in the bloodstream than immediate-release dosage forms, and may improve
drug efficacy and reduce side effects by releasing drug dosages at specific
times and in specific locations in the body. These technologies also allow for
the development of "patient-friendly" dosage forms which reduce the frequency of
drug administration, thereby offering improved patient compliance.
Controlled-release pharmaceuticals can be especially beneficial for certain
patient populations, such as the elderly, who often require several medications
with differing dosing regimens.

         The Company believes the market for advanced drug delivery systems is
large and is growing rapidly.


GENERIC PHARMACEUTICAL MARKET

         Generic pharmaceuticals are therapeutic equivalents of brand name drugs
for which patents or marketing exclusivity rights have expired. The Company
believes that the market for generic drugs has grown in recent years due to a
number of factors, including the expiration of patents on a number of brand name
drugs with significant revenues, the availability of an abbreviated testing and
approval process, the ability of the pharmacist to substitute generic drugs for
brand name drugs and increased acceptance of the quality of these drugs. In
addition, reimbursement trends affecting the pharmaceutical industry, including
large volume purchasers, preferred provider organizations and health maintenance
organizations, are increasing the demand for lower cost pharmaceuticals.

ANDRX'S PROPRIETARY DRUG DELIVERY TECHNOLOGIES

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

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



                                      -5-

<PAGE>

         The following summarizes the Company's drug delivery technologies.

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

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

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

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

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

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

PORTAB SYSTEM ("PORTAB")   Portab is designed for controlled release dosage
                           forms which utilize an osmotic core typically
                           containing a water soluble drug. The core includes a
                           water soluble component and a 

                                      -6-

<PAGE>


                           continuous polymer coating. The purpose of the
                           swelling agent is to expand the core and thereby
                           create micro porous channels through which the drug
                           is released. None of the Company's current product
                           candidates employ Portab technology.

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

PRODUCT DEVELOPMENT

         GENERIC CONTROLLED-RELEASE PHARMACEUTICALS

         The Company's product development strategy has been to apply its
proprietary drug delivery technologies and formulation skills initially to the
development of generic versions of selected high sales volume,
controlled-release brand name pharmaceuticals, for which marketing exclusivity
or patent rights have expired or are near expiration. In late 1995, the Company
submitted ANDAs covering generic versions of Cardizem CD(R) and Dilacor XR(R).
The brand name versions of these drugs had combined 1996 U.S. sales of
approximately $860 million. The Company currently has 15 additional generic
versions of brand name controlled-release drugs under development, the brand
name versions of which had combined 1996 U.S. sales of approximately $4 billion.
Of these product candidates, 14 are in various phases of bioequivalence studies
and one is in various phases of formulation development. The Company is
evaluating other potential product candidates.


                                      -7-

<PAGE>
<TABLE>
<CAPTION>


         The following table sets forth certain information with respect to the
Company's product candidates.
                                          ANDRX DRUG
                                           DELIVERY
                                          TECHNOLOGY              COLLABORATIVE ARRANGEMENTS(2)
DEVELOPMENT STATUS/BRAND NAME             EMPLOYED(1)            U.S.              INTERNATIONAL
-----------------------------           ---------------         ------             -------------
<S>                                     <C>                     <C>                <C>
ANDA FILED:
   Cardizem CD(R)                              PPDS               --                 YSP
   Dilacor XR(R)                               SMHS               --               Purzer
BIOEQUIVALENCE STUDIES:
   Procardia XL(R)                             SCOT             ANCIRC             ANCIRC
   Trental(R)                           Proprietary             ANCIRC             ANCIRC
   Adalat CC(R)                                DPHS             ANCIRC             ANCIRC
   K-Dur(R)                                  Peltab              IVAX                YSP
   Seldane D(R)(3)                      Proprietary              Mylan               YSP
   Oruvail(R)                           Proprietary             ANCIRC             ANCIRC
   Verelan(R)                           Proprietary             Watson               --
   Glucotrol XL(R)                             SCOT             ANCIRC             ANCIRC
   Efidac/24(R)                                SCOT             ANCIRC             ANCIRC
   Sudafed(R)12-hour                    Proprietary             Watson               --
   Voltaren XR(R)                       Proprietary             ANCIRC             ANCIRC
   Covera HS(R)                                SCOT             ANCIRC             ANCIRC
   Naprelan(R)                          Proprietary               --                 --
   Tiazac(R)                            Proprietary               --                 --
FORMULATION:
   Prilosec(R)                          Proprietary               --                 --
<FN>
---------------
(1) Proprietary means that Andrx is applying a drug delivery technology other
    than the six drug delivery technologies previously described.
(2) For a description of these collaborative arrangements, see "--Collaborative
    Arrangements."
(3) The future of this product candidate is uncertain, see "--Product
    Descriptions."
</FN>
</TABLE>


    PRODUCT DESCRIPTIONS

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

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

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

    TRENTAL(R) is a controlled-release tablet form of pentoxifylline which is
administered three times daily and is indicated for use in patients with chronic
occlusion of arteries of the limbs. It acts to

                                      -8-
<PAGE>


improve the flow properties of blood by decreasing its viscosity. The patent on
Trental(R), which is marketed by HMR, will expire in April 1997.

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

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

    SELDANE D(R) is a twice-a-day controlled-release antihistamine and
decongestant, which combines an immediate-release formulation of terfenadine
with a controlled-release formulation of pseudoephedrine hydrochloride. Seldane
D(R) is marketed by HMR. The FDA recently recommended the removal of this
product from the marketplace. Accordingly, the Company does not anticipate any
further development with respect to this product until the regulatory status is
finalized.

    ORUVAIL(R) is a once-a-day controlled-release version of ketoprofen. The
product is indicated for the management of the signs and symptoms of rheumatoid
arthritis and osteoarthritis. Oruvail(R) is marketed by Wyeth-Ayerst
Laboratories, a division of American Home Products Corporation.

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

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

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

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

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

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

                                      -9-
<PAGE>

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

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

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


GENERIC PHARMACEUTICAL DEVELOPMENT PROCESS

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

         During formulation development, the Company attempts to develop its own
version of the brand name drug. In creating a formulation, the Company utilizes
or adapts its drug delivery technologies to the product candidate or develops a
new drug delivery technology for that product candidate. The Company's
formulation is then evaluated in IN VITRO dissolution studies to determine
whether human bioequivalence studies should be conducted.

         Once a suitable formulation has been developed, human bioequivalence
studies are conducted which compare the Company's formulation to the brand name
drug. Because bioequivalence studies can be relatively expensive to perform, the
Company often conducts a preliminary bioequivalence study in which it
manufactures a small batch of its product for testing in a limited number of
human subjects (typically six to eight). If the formulation yields a blood level
profile comparable to the brand name drug, full-scale bioequivalence studies may
be performed, which require the manufacture of at least 100,000 dosage units and
usually involves 24 or more human subjects. These studies are conducted to
determine the plasma concentrations of the drug in human subjects under fasted
and fed conditions as well as under multiple dose administration. If successful,
the studies will demonstrate that the rate and extent of absorption of the
generic version is equivalent to that of the brand name drug. If the studies
demonstrate that

                                      -10-

<PAGE>

the blood level profiles of the Company's product are not comparable to the
brand name drug, the Company will either modify its formulation or alter the
drug delivery technology employed.

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


BRAND NAME CONTROLLED-RELEASE PHARMACEUTICALS

         The Company believes that the drug delivery technologies it uses for
the development of generic controlled-release pharmaceuticals will also have
application to the development of brand name controlled-release pharmaceuticals
of existing chemical entities whose exclusivity or patent rights have expired or
are near expiration. The Company does not intend to develop new chemical
entities. To develop and commercialize this opportunity, the Company is
exploring possible applications for its technologies and will be utilizing
clinical research organizations to conduct the appropriate studies. The Company
also plans to work with brand name pharmaceutical companies in two basic ways:
(i) by developing controlled-release formulations of existing immediate-release
drugs and (ii) by applying its drug delivery technologies to the formulation of
new drugs under development by these pharmaceutical companies. The first
category provides a way for drug manufacturers to either increase or preserve
the value of their existing immediate-release drugs. By developing a
controlled-release drug formulation, the pharmaceutical manufacturer has the
potential to improve drug efficacy and reduce the cost of therapy by simplifying
drug administration regimens. Additionally, by developing a controlled-release
formulation of an immediate-release drug, the pharmaceutical manufacturer may be
able to receive several additional years of marketing exclusivity before generic
equivalents may be approved. The second category is of significant importance to
pharmaceutical manufacturers because drug candidates often require easy
administration (e.g., one or two doses per day instead of four to six) to become
commercially acceptable or to develop brand loyalty by patients and physicians.

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

                                      -11-
<PAGE>

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

COLLABORATIVE ARRANGEMENTS

         To expedite product development and reduce the Company's development
costs, the Company has entered into collaborative arrangements with major
generic pharmaceutical companies. The Company is a 50% partner in the ANCIRC
joint venture with Watson for the development of up to eight controlled-release
generic drugs and has entered into development and licensing agreements with
IVAX, Watson and Mylan for four additional controlled-release products.

         ANCIRC JOINT VENTURE

         In July 1994, the Company entered into a joint venture with Circa
Pharmaceuticals, Inc. ("Circa") for the development of up to six generic
controlled-release products. In July 1995, Circa was acquired by Watson. Since
it acquired Circa, Watson has expanded its relationship with the Company to
include up to eight generic controlled-release products (the "ANCIRC Products")
and has made equity investments in the Company (including Common Stock purchased
from certain principal shareholders) in the aggregate of approximately $21.6
million. Watson owns approximately 16% of the Company's presently outstanding
Common Stock, and has warrants to acquire additional shares of Common Stock.

         In July 1994, the Company and Watson identified six product candidates
for development by ANCIRC. Until three products have been successfully
developed, the Company and Watson will agree on a substitute product candidate
for any product candidate which is not successfully developed. Once three
products are successfully developed, the parties will not be required to agree
upon more than two additional substitute product candidates. In October 1995,
the agreement with Watson was amended to provide that the Company and Watson
will agree on two additional product candidates to be developed by ANCIRC. Those
two product candidates were subsequently identified. The Company has agreed that
Dr. Chih-Ming J. Chen, its Chief Scientist, will personally supervise the
development of all of the ANCIRC Products until at least five products have been
successfully developed. Dr. Chen is also required to supervise the development
of the products that are subject to the development and licensing agreements.

         ANCIRC is a 50/50 joint venture between the Company and Watson with
both the capital contributions and net income or losses allocated equally
between the Company and Watson. The Company and Watson have each designated
three representatives who together constitute the management committee of
ANCIRC. This management committee is responsible for reviewing each partner's
progress on the various projects on which they are working, preparing budgets
for

                                      -12-
<PAGE>

each quarter, issuing capital calls to the Company and Watson when necessary,
approving expenditures and resolving any disputes which may arise between the
partners. The Company has made investments in ANCIRC totaling $4.0 million
through December 31, 1996. The Company is responsible for contributing 50% of
any additional capital contributions required by ANCIRC, subject to a limitation
on each party's capital contribution to an additional $1.55 million from January
1, 1997 through July 1997. Capital contributions are utilized by ANCIRC to pay
for services rendered by the Company and Watson to ANCIRC.

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

         DEVELOPMENT AND LICENSING AGREEMENTS

         The Company has entered into development and licensing agreements
covering generic pharmaceuticals with three U.S. and two foreign pharmaceutical
companies. Pursuant to such agreements, the licensees typically will fund the
cost of product development and will pay the Company royalties in exchange for a
license to manufacture and market the products for a specified period in a
specified territory. Management believes that such arrangements offer a variety
of benefits, including providing an additional source of funding for product
development and affording the Company the ability to have certain of its generic
controlled-release products sold through the distribution networks of these
major pharmaceutical companies. The Company may terminate a development and
licensing agreement if the licensee fails to market the licensed product, in
which case all rights revert to the Company.

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

                                      -13-
<PAGE>

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

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

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

         In November 1993, the Company entered into a development and licensing
agreement with Mylan for a generic version of Seldane D(R) to be marketed in the
U.S., Canada and Mexico. The Company has received certain fees and milestone
payments under this agreement and will be entitled to receive royalties from the
sale of the licensed products. However, in light of the FDA's recent
recommendation to remove this product from the marketplace, the Company does not
anticipate any further development with respect to this product until the
regulatory status is finalized.

                                      -14-
<PAGE>

         In addition to the foregoing, the Company has entered into an agreement
with Sepracor to formulate a once-a-day version of a new drug being developed by
Sepracor and an agreement with another pharmaceutical company to apply one of
Andrx's drug delivery technologies to that company's marketed brand name product
in an attempt to develop a once-a-day version of that product.

         From time to time the Company also considers licensing or other
agreements to obtain rights to patents or technology which the Company believes
may have commercial value. In 1994, the Company entered into an agreement with
The UAB Research Foundation to license technology relating to the use of
dilazep, an orally administered drug to be used in the treatment of cancer. In
December 1996, that technology was sub-licensed to ASTA Medica, AG ("ASTA
Medica"), a subsidiary of Degussa, AG, which will be responsible for all
product development costs and will manufacture and market any products utilizing
the technology. The Company will receive a royalty from ASTA Medica on the sale
of any products utilizing the technology and the Company will be responsible for
certain royalty payments related thereto. The development of this and similar
technologies is a different and significantly more expensive process than the
development of products using the Company's controlled release technologies.
Therefore, in order to facilitate development of these projects, the Company
plans, in most cases, to enter into collaborative arrangements with
pharmaceutical companies and others, such as the one entered into with ASTA
Medica, to undertake these development efforts.


GENERIC PHARMACEUTICAL DISTRIBUTION OPERATIONS

         In addition to its controlled-release drug development activities, the
Company markets and distributes generic pharmaceuticals manufactured by third
parties. The Company purchases generic pharmaceuticals directly from
manufacturers and wholesalers and markets them through its in-house
telemarketing staff primarily to independent pharmacies, regional pharmacy
chains which do not maintain their own central warehousing facilities and
pharmacy buying groups. The Company offers this customer group competitive
pricing, quality products and responsive customer service, which the Company
believes are the critical elements to competing effectively in this market. The
Company currently has a telemarketing staff of approximately 80 persons,
supplemented by seven sales executives who are responsible for national
accounts.

         The Company currently utilizes operating profit from its generic
pharmaceutical distribution operations to offset a portion of the Company's
overall administrative costs. These operations also provide the Company with an
ability to directly observe and participate in developments and trends in the
generic pharmaceutical industry. The Company plans to expand its generic
pharmaceutical distribution operations by further increasing its customer base
to include larger regional and national pharmacy chains. The Company also plans
to use its distribution operations to assist in the marketing of generic
controlled-release products developed by the Company and its collaborative
partners.

         The Company concentrates on high-volume generic prescription drugs in
capsule or tablet form. These products typically provide higher gross margins,
are subject to more rapid inventory
                                      -15-

<PAGE>

turnover and require less warehouse space than liquids, creams and many
over-the-counter products. By focusing on these products, the Company believes
that it is able to control inventory investments, minimize overhead and operate
in an efficient and cost-effective manner.

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

         The Company is currently exploring the development of software designed
to enhance its distribution operations, by allowing for on-line communication
between Andrx and its customers. Such software may have additional applications,
such as allowing on-line communication with healthcare providers, including
doctors and managed care organizations. There can be no assurance that such
software can be developed and if developed that it can be successfully
commercialized.

MANUFACTURING

         Andrx is in the process of constructing an approximately 31,000 square
foot facility which will be used for manufacturing commercial quantities  of
the Company's generic versions of Cardizem CD(R) and Dilacor XR(R), for which
ANDAs have already been filed. The Company also has a laboratory and pilot
manufacturing facility currently  encompassing approximately 8,000 square
feet. The Company  has  hired manufacturing personnel. However, the
Company has not commenced commercial manufacturing of its products and there is
no assurance that the Company will be able to successfully manufacture on a
commercial scale.

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

COMPETITION

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

         The Company expects that it will be subject to competition from
numerous other entities that currently operate, or intend to operate, in the
pharmaceutical industry. These include companies that are engaged in the
development of controlled-release technologies and products, as well as other
pharmaceutical manufacturers that may decide to undertake in-house development
of these products. The Company is initially concentrating its efforts on generic
controlled-release pharmaceuticals. Typically, selling prices of
immediate-release generic drugs have declined and profit margins have narrowed
after generic equivalents of brand name products are first introduced 

                                      -16-
<PAGE>

and the number of competitive products has increased. Similarly, the maintenance
of particular levels of profitability for the Company's generic
controlled-release products will depend, in large part, on the Company's ability
to introduce new products before its competitors and on the intensity of
competition with respect to existing products.

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

PATENTS AND PROPRIETARY RIGHTS

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

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

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

         There has been substantial litigation in the pharmaceutical, biomedical
and biotechnology industries with respect to the manufacture, use and sale of
new products that are the subject of conflicting patent rights. Most of the
brand name controlled-release products of which the Company is developing
generic versions are covered by one or more patents. Under the Drug Price
Competition and Patent Restoration Act of 1984 (the "Waxman-Hatch amendments"),
when a drug developer files an ANDA for a generic drug, and the developer
believes that an unexpired patent which has been listed with the FDA as covering
that brand name product will not be

                                      -17-

<PAGE>

infringed by the developer's product or is invalid or unenforceable, the
developer must so certify to the FDA. That certification must also be provided
to the patent holder, who may challenge the developer's certification of
non-infringement, invalidity or unenforceability by filing a suit for patent
infringement. If a suit is filed within 45 days of the patent holder's receipt
of such certification, the FDA can review and approve the ANDA, but is precluded
from granting final marketing approval of the product until a final judgment in
the action has been rendered or 30 months from the date the certification was
received, whichever is sooner. Should a patent holder commence a lawsuit with
respect to alleged patent infringement by the Company, the uncertainties
inherent in patent litigation make the outcome of such litigation difficult to
predict. As described below, to date, two such actions have been commenced
against the Company (one of which has been dismissed), and it is anticipated
that additional actions will be filed as the Company files additional ANDAs. The
Company evaluates the probability of patent infringement litigation with respect
to its ANDA submissions on a case by case basis and, accordingly, for the years
ended December 31, 1996 and 1995, the Company provided for its estimated
litigation costs. The delay in obtaining FDA approval to market the Company's
product candidates as a result of litigation, as well as the expense of such
litigation, whether or not the Company is successful could have a material
adverse effect on the Company's results of operations and financial position.

         The Company has developed and filed an ANDA for a generic product which
the Company believes is bioequivalent to the once-a-day controlled-release
formulation of diltiazem hydrochloride marketed by HMR under the brand name
Cardizem CD(R). In connection therewith, the Company certified to the FDA that
this product does not infringe upon any of the patents listed as covering that
brand name product and sent the required notices to the holders of each of those
patents and the holder of the New Drug Application ("NDA"). In January 1996,
Carderm Capital, L.P., which licensed the patent to HMR, and HMR (collectively
"Hoechst"), commenced a lawsuit in the U.S. District Court, Southern District of
Florida (the "Hoechst Litigation"), alleging that the Company's product
infringes upon one of the six patents listed as covering Cardizem CD(R). While
the Company believes that this product does not infringe upon any of the patents
in question, the uncertainties inherent in patent litigation make the outcome of
such litigation difficult to predict. There can be no assurance that the Company
will prevail in the Hoechst Litigation and an adverse outcome in the Hoechst
Litigation would have a material adverse effect on the Company's business and
financial position.

         The Company has also developed and filed an ANDA for a generic product
which the Company believes is bioequivalent to the once-a-day controlled-release
version of diltiazem hydrochloride marketed under the brand name Dilacor XR(R)
by RPR. In connection therewith, the Company certified to the FDA that its
product does not infringe upon the patent listed as covering that brand name
product and sent the required notices to the holder of that patent and the
holder of the NDA. In May 1996, Jagotec AG and Jago AG, who licensed the
patent, and RPR (collectively "Rhone"), commenced a lawsuit in the U.S. District
Court, Southern District of Florida (the "RPR Litigation"), alleging that the
Company's product infringes the patent listed as covering Dilacor XR(R). In
December 1996, the parties entered into a Settlement Agreement whereby Rhone
agreed to dismiss the RPR Litigation, without prejudice. An order of dismissal
was entered by the judge in January 1997.

                                      -18-

<PAGE>

GOVERNMENT REGULATION

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

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

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

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

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

                                      -19-
<PAGE>


containing new clinical investigations essential to an approval, such as new
indications or new delivery technologies. The three-year marketing exclusivity
period would be applicable to the development of a novel drug delivery system.
The marketing exclusivity provisions apply equally to patented and non-patented
drug products.

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

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

         Manufacturers of marketed drugs must conform to the FDA's current Good
 Manufacturing Practices ("cGMP")  or  risk sanctions such as the
suspension of manufacturing or the seizure of 

                                      -20-
<PAGE>

drug products and the refusal to approve additional marketing applications. The
FDA conducts periodic inspections to implement these rules. The Company's
commercial manufacturing facility is currently under construction. In April,
1996 the Company's manufacturing facility was inspected by the FDA with regard
to both ANDA submissions and the FDA advised the Company that it could not
determine if the manufacturing site was in compliance with cGMP at that time
because the facility was not ready for scale-up production. An additional
inspection will be performed by the FDA to assure successful process validation
after ANDA approval and before initiation of commercial distribution of these
products. There can be no assurance that the Company's facility will be found to
be in compliance with cGMP or other regulatory requirements. Failure to comply
could result in significant delays in the development and testing of the
Company's planned products, as well as increased costs.

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

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

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

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

         The Company is governed by federal, state and local laws of general
applicability, such as laws regulating working conditions and environmental
protection. The Company is also licensed by, registered with, and subject to
periodic inspection and regulation by, the Drug Enforcement Administration of
the Department of Justice (the"DEA") and Florida state agencies, pursuant to
federal and state legislation relating to drugs and narcotics. Certain drugs
that the 

                                      -21-
<PAGE>


Company may develop in the future may be subject to regulations under
the Controlled Substances Act and related statutes.

PRODUCT LIABILITY INSURANCE

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

PERSONNEL

         As of March 14, 1997, the Company had 271 employees, of whom 15 were
involved in corporate administration and 189 in the Company's distribution
operations. The remaining 67 employees were involved in research and
pharmaceutical development and manufacturing, including 29 scientists, 21 of
whom hold Ph.D., masters or medical degrees.

SCIENTIFIC ADVISORY BOARD

         The Company has established a scientific advisory board ("SAB") which
is comprised of certain members of the medical, health care, pharmaceutical and
scientific communities. The Company generally consults with members of the SAB
from time to time on an individual basis to obtain their ideas, insights, input
and other assistance in helping the Company achieve its goals. Members of the
SAB have agreed to serve in such capacity for a three-year period. Certain
members of the SAB may, from time to time, render consulting services to the
Company for which they may be separately compensated.

                                      -22-

<PAGE>


EXECUTIVE OFFICERS

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


                                        PRINCIPAL OCCUPATION AND
NAME                            AGE     POSITION WITH THE COMPANY
----                            ---     -------------------------

<S>                             <C>     <C>
Alan P. Cohen                   42      Chairman of the Board and Chief
                                        Executive Officer
Elliot F. Hahn, Ph.D.           52      President
Chih-Ming J. Chen, Ph.D.        45      Vice President and Chief Scientist
Randy Glover                    54      Vice President of Manufacturing Operations
Scott Lodin                     41      Vice President, General Counsel and Secretary
Angelo C. Malahias              35      Vice  President and Chief Financial Officer
</TABLE>



         ALAN P. COHEN is Chairman of the Board, Chief Executive Officer and a
director of Andrx, which he founded in August 1992. He holds several degrees
from the University of Florida and is a registered pharmacist. In 1984, Mr.
Cohen founded Best Generics, Inc., a generic drug distribution firm ("Best"),
which was sold to IVAX in 1988. Mr. Cohen served as president of Best from April
1989 until June 1990. Alan P. Cohen and certain members of his family also
controlled Corner Drugstore, a privately-held retail drugstore chain, which
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
December 1994 and ceased operating in 1996.

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

         DR. CHIH-MING J. CHEN has served as the Company's Vice President, Chief
Scientist and a director since November 1992. In January 1992, Dr. Chen formed
his own company, ASAN Labs, Inc., which was acquired by the Company in November
1992. Dr. Chen served as the Director of Product Development at IVAX from 1988
to 1992, where he was the leader of a research team which specialized in the
development of drug formulations, including several

                                      -23-
<PAGE>

controlled-release products. After graduating with a Ph.D. degree in
pharmaceutics from Ohio State University in 1981, Dr. Chen worked at
Bristol-Myers and Berlex Labs.

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

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

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


ITEM 2.  PROPERTIES

         The Company leases approximately 69,000 square feet in a facility in
Fort Lauderdale, Florida, which houses the Company's executive offices,
warehousing and shipping facilities, a laboratory and pilot manufacturing plant
and a commercial-scale manufacturing facility under construction. The facility
is occupied pursuant to leases expiring between August 1998 and March 31, 2003
at a total annual rent of approximately $500,000. Each of the leases afford the
Company two five-year renewal options, and require the Company to pay certain
increases in rent and common area costs. The Company is completing the
construction of a 31,000 square foot facility for the manufacture of the generic
versions of Cardizem CD(R) and Dilacor XR(R). The Company has an option on
approximately 26,000 square feet of adjacent space, which option it anticipates
exercising during the next 12 months.

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

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

                                      -24-

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

         See Item 1 - Business "Patents and Proprietary Rights" with respect to
the Hoechst Litigation and the dismissal without prejudice of the RPR
Litigation.

         In May 1996, an employee of the Company resigned from his position and,
in connection therewith, claimed that he was entitled to receive, pursuant to
the terms of his employment arrangement with the Company, a royalty equal to one
percent of the gross revenues from certain products under development by the
Company. The Company has not received any communication from this employee or
his counsel since August 1996. However, if litigation is commenced, the Company
intends to contest it.

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

         No matters were submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended December 31, 1996.



                                     PART II

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

(A)      MARKET INFORMATION

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

1996                                              HIGH           LOW
----                                              ----           ---

Second Quarter (Commencing June 14, 1996)       $17.50         $12.00
Third Quarter                                    15.50          11.00
Fourth Quarter                                   17.63          12.75


(B)      HOLDERS

         At March 15, 1997, there were approximately 500 holders of record of
the Company's Common Stock. The Company believes the number of beneficial owners
of its Common Stock are in excess of 2,400.

                                      -25-
<PAGE>


(C)      DIVIDENDS

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

                                      -26-

<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data is qualified by reference to, and
should be read in conjunction with, the Consolidated Financial Statements of the
Company and related notes thereto included in Item 8 of this Report and 
"Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations."
<TABLE>
<CAPTION>

                                                                                                      AUGUST 28, 1992
                                                            YEARS ENDED DECEMBER 31,                    (INCEPTION)
                                       -----------------------------------------------------------        THROUGH
                                           1996            1995           1994            1993         DEC. 31, 1992
                                      ------------    ------------    ------------    ------------   --------------
<S>                                   <C>             <C>             <C>             <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
  Distribution revenues, net          $ 86,720,800    $ 50,467,800    $ 25,915,500    $  5,654,500    $    243,200
  Research and development services
    to joint venture                     2,205,900       2,528,700         375,300            --              --
  Licensing revenues                        50,000         165,000         155,500         225,000            --
                                      ------------    ------------    ------------    ------------    ------------
Total revenues                          88,976,700      53,161,500      26,446,300       5,879,500         243,200
                                      ------------    ------------    ------------    ------------    ------------
Cost of revenues:
  Distribution                          72,399,900      41,780,900      21,362,400       5,257,900         219,000
  Research and development services
    to joint venture                     2,205,900       2,528,700         375,300            --              --
                                      ------------    ------------    ------------    ------------    ------------
  Total cost of revenues                74,605,800      44,309,600      21,737,700       5,257,900         219,000
                                      ------------    ------------    ------------    ------------    ------------
  Gross profit                          14,370,900       8,851,900       4,708,600         621,600          24,200

Selling, general and
   administrative expenses              13,177,900       8,647,200       5,389,800       1,706,300         169,700
Research and development expenses        3,655,100       3,254,700       2,109,600         959,900            --
Equity in losses of joint venture        2,010,900       1,839,700         315,800            --              --
                                      ------------    ------------    ------------    ------------    ------------
Loss from operations                    (4,473,000)     (4,889,700)     (3,106,600)     (2,044,600)       (145,500)
Interest income (expense), net             445,300        (297,300)          2,100             300             100
                                      ------------    ------------    ------------    ------------    ------------
Net loss                              $ (4,027,700)   $ (5,187,000)   $ (3,104,500)   $ (2,044,300)   $   (145,400)
                                      ============    ============    ============    ============    ============
Net loss per share                    $      (0.33)   $      (0.55)   $      (0.35)   $      (0.26)   $      (0.03)
Weighted average shares of            ============    ============    ============    ============    ============
  common stock outstanding              12,148,000       9,446,800       8,758,400       7,745,100       4,681,400
                                      ============    ============    ============    ============    ============
</TABLE>


<TABLE>
<CAPTION>

                                                               
                                                                   DECEMBER 31,
                                       ---------------------------------------------------------------
                                           1996        1995           1994         1993         1992
                                       -----------  -----------    ----------   ----------    --------
<S>                                    <C>          <C>            <C>           <C>          <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
  investments available for sale       $30,319,500  $13,841,400   $ 3,845,800   $2,770,200     $131,300
Total assets                            66,636,300   36,148,700    16,006,000    6,837,100      695,000
Short-term borrowings                    6,563,200    6,101,000     2,635,100       68,100           --
Total shareholders' equity              42,761,600   18,324,500     8,097,100    3,926,700      373,800
</TABLE>

                                      -27-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

INTRODUCTION

         Andrx was organized in August 1992 and, in November 1992, commenced
marketing and distributing generic pharmaceuticals manufactured by third
parties. In February 1993, the Company began to engage in the development of
generic controlled-release oral pharmaceuticals utilizing its proprietary drug
delivery technologies. During 1996, the Company commenced its efforts on the
development of branded controlled-release products. To date, the distribution
operations have generated substantially all of the Company's revenues and the
Company expects that revenues from the distribution of generic pharmaceuticals
will continue to comprise substantially all of its revenues until the Company
receives FDA approvals for the marketing of its products and meaningful revenues
are achieved from a product developed by the Company. The Company expects to
generate negative cash flow and net losses at least through 1997.

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

RESULTS OF OPERATIONS

         1996 AS COMPARED TO 1995

         Total revenues in 1996 were approximately $89.0 million, an increase of
approximately $35.8 million or 67.4% as compared to total revenues of
approximately $53.2 million in 1995. Distribution revenues were approximately
$86.7 million in 1996 an increase of approximately $36.3 million or 71.8% from
approximately $50.5 million in 1995. The increase in distribution revenues
reflects the Company's increased penetration of the generic market. Revenues
generated by research and development services to ANCIRC were approximately $2.2
million in 1996 as compared to approximately $2.5 million in 1995.

         Gross profit on the distribution of generic pharmaceutical products was
16.5% as a percentage of distribution revenues in 1996, as compared to 17.2% in
1995. The decrease in gross profits as a percentage of distribution revenues is
the result of continuing competition and pricing pressures within the generic
industry. Andrx believes that such competition and pressures would continue to
decrease the Company's gross profit percentage in future periods.

         Selling, general and administrative expenses were approximately $13.2
million in 1996, an increase of approximately $4.5 million or 52.4% as compared
to approximately $8.6 million in 1995. This increase was primarily attributable
to an increase in selling activities to support the increase in distribution
revenues. Selling, general and administrative expenses were 14.8% of total
revenues in 1996 as compared to 16.3% in 1995.

         Research and development expenses were approximately $3.7 million in
1996, as compared to $3.3 million in 1995. Research and development expenses in
1996 include the expenses related to the establishment of a commercial-scale
manufacturing facility including the manufacturing scale-up to commercial size
batches. Research and development expenses in 1996 and 1995 include provisions
for anticipated litigation costs in connection with the ANDAs filed in 1995 for
the Company's generic versions of Cardizem CD(R) and Dilacor XR(R).
Litigation with respect to Dilacor XR(R) was settled in December 1996. The
filing of an ANDA for a generic version of a brand name pharmaceutical may
result in litigation alleging infringement of patents covering the brand name
pharmaceutical. Even though the Company believes that its drug delivery
technologies do not infringe on any patent rights held by others, the Company
evaluates the probability of patent infringement litigation with respect to its
ANDA submissions on a case by case basis and, accordingly, will reserve for
anticipated legal expenses as it deems appropriate. Research and development
expenses exclude the cost of revenues related to the services rendered to ANCIRC
of approximately $2.2 million in 1996 and approximately $2.5 million in 1995.

         The Company's equity in losses of the joint venture was approximately
$2.0 million in 1996 as compared to approximately $1.8 million in 1995. The
Company's share of ANCIRC's losses was decreased from 60% to 50% effective
October 30, 1995 in connection with an amendment to the ANCIRC agreement.
ANCIRC's losses increased to $4.0 million in 1996 as compared to $3.2 million in
1995 due to the increase in the research and development services rendered by
Watson to ANCIRC during 1996. 
                                     - 28 -
<PAGE>
         Interest income (expense), net primarily consists of interest expense
and interest income. Interest expense was approximately $765,000 in 1996 as
compared to $636,000 in 1995. Although the interest rate on the Company's bank
borrowings decreased effective January 1996 and October 1996, interest expense
increased in 1996 as compared to 1995, due to the higher average level of
borrowings during 1996. Such higher level of borrowings were required to finance
the higher average level of working capital supporting the growth of the
distribution operations. Interest income was approximately $1.2 million in 1996
as compared to approximately $250,000 in 1995. The increase in interest income
is the result of the net increase in cash, cash equivalents and investments
available for sale during 1996 and late 1995, primarily from the sale of shares
of the Company's Common Stock. In June 1996, the Company completed its initial
public offering generating net proceeds of approximately $27.4 million. In
August and December 1995, the Company sold shares of common stock to Watson for
net proceeds of approximately $13.6 million.

         For 1996 and 1995, the Company was not required to provide for federal
or state income taxes due to its net losses. As of December 31, 1996, the net
operating loss carryforward was approximately $13 million for financial
reporting purposes and approximately $10 million for federal income tax
purposes, which if not utilized will begin to expire in 2008.

         1995 AS COMPARED TO 1994

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

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

         Selling, general and administrative expenses were approximately $8.6
million in 1995, an increase of approximately $3.2 million, or 60.4%, compared
to approximately $5.4 million in 1994. This increase was attributable to an
increase in selling activities to support the increase in distribution revenues.
Selling, general and administrative expenses were 16.3% of total revenues in
1995, as compared to 20.4% in 1994. During 1994, the Company incurred
approximately $500,000 of expenses related to an unconsummated initial public
offering.

         Research and development expenses increased to approximately $3.3
million in 1995, an increase of approximately $1.2 million, or 54.3%, from
approximately $2.1 million in 1994. Research and development expenses in 1995
include a provision for anticipated litigation costs in connection with the
Company's ANDAs submitted in late 1995 for generic versions of Cardizem CD(R)
and Dilacor XR(R). Research and development expenses exclude cost of sales of
services rendered to ANCIRC of approximately $2.5 million in 1995 and
approximately $375,000 in 1994.

         The Company's share of losses in ANCIRC was approximately $1.8 million
in 1995 as compared to approximately $316,000 in 1994. ANCIRC losses increased
to $3.2 million in 1995 as compared to approximately $526,000 in 1994. The
increase in the ANCIRC losses in 1995 is the result of a full year of ANCIRC
activities.

         Interest income (expense), net primarily consists of interest expense
and interest income. Interest expense was approximately $636,000 in 1995 as
compared to approximately $104,000 in 1994. The increase was due to the increase
in bank borrowings to fund the working capital requirements for the Company's
generic pharmaceutical distribution operations. Interest income was
approximately $250,000 in 1995 as compared to approximately $122,000 in 1994.
The increase in interest income is the result of the net increase in cash and
cash equivalents during 1995, primarily from the sale of shares of Common Stock
to Watson in August and December 1995.

         For 1995 and 1994, the Company was not required to provide for federal
or state income taxes due to its net losses.

                                     - 29 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

         In June 1996, the Company consummated the IPO, which generated net
proceeds of $27.4 million. Prior thereto, the Company had financed its
operations primarily through private placements of equity securities which
generated proceeds of $27.9 million and, to a lesser extent, through bank
borrowings. At December 31, 1996, Andrx had $30.3 million of cash, cash
equivalents and investments available for sale and $33.0 million of working
capital.

         Net cash used in operating activities was $5.5 million and $7.4 million
in 1996 and 1995, respectively. The net cash used in operating activities in
both these periods was primarily attributed to research and development expenses
and increases in accounts receivable and inventories, which were offset by the
increases in accounts payable and accrued liabilities. In 1997, the Company
expects to incur approximately $8 million in research and development expenses
and to contribute approximately $4 million to ANCIRC. The Company is committed
to the funding of ANCIRC's future operations.

         Net cash used in investing activities was $33.8 million and $1.5
million in 1996 and 1995, respectively. In 1996, the Company invested $26.9
million in short-term investment grade interest bearing securities.
Additionally, in 1996 the Company invested $6.9 million in capital expenditures
as compared to $1.5 million in 1995. The capital expenditures in 1996 were
primarily for the procurement of manufacturing equipment and construction of the
Company's commercial-scale manufacturing facility and in 1995 were primarily for
the purchase of laboratory equipment for the Company's research and development
programs. In 1997, the Company expects to invest approximately $6 million in
manufacturing equipment and construction.

         Net cash provided by financing activities was $28.9 million and $18.9
million in 1996 and 1995, respectively. Net cash provided by financing
activities in 1996 consisted primarily of $27.4 million in net proceeds from the
Company's IPO, $1.0 million from the issuance of shares of common stock in
connection with the exercise of stock options and warrants and $383,000 from the
net cash drawn under the Company's revolving line of credit. Net cash provided
by financing activities in 1995 consisted primarily of proceeds from the
issuance of common stock of $14.6 million, the issuance of common stock in
connection with the exercise of stock options and warrants of $791,000 and net
cash drawn under the Company's revolving line of credit of $3.5 million.

         The Company had an outstanding short-term borrowing balance under its
distribution subsidiary's revolving line of credit of $6.5 million as of
December 31, 1996 as compared to $6.1 million as of December 31, 1995.
Borrowings under the line of credit are only available for financing the
Company's distribution operations, are secured by all of the assets of that
operation and are subject to a borrowing base related to the value of that
operation's accounts receivable and inventories. The line of credit agreement
requires compliance by the Company with certain covenants including the
maintenance of minimum working capital and net worth levels by the distribution
subsidiary. In January 1996, the maximum amount available under the revolving
line of credit was increased from $8.0 million to $10.0 million and the interest
rate was decreased from the prime rate (8.25% as of December 31, 1996) plus 2.0%
to the prime rate plus 1.5%. In October 1996, the Company further amended the
line of credit agreement whereby, amongst other things, the interest rate was
decreased from the prime rate plus 1.5% to the prime rate plus 1.0%, the unused
commitment fee was reduced from .5% to .25%, and under certain circumstances,
permitted the payment of dividends, repayments and advances from the Company's
distribution subsidiary to Andrx.

         The Company anticipates that its existing capital resources will be
sufficient to enable it to maintain its current and planned operations through
the end of 1997. The Company expects negative cash flows and net losses to
continue at least through 1997 because it will use substantial funds for its
product development efforts, including the formulation of and bioequivalence
studies for its generic controlled-release product candidates, for the
establishment of commercial-scale manufacturing operations and the development
of branded controlled-release products. The Company anticipates that during
1997, approximately $12 million will be used for research and product
development activities (including the Company's share of the funding of the
ANCIRC joint venture) and approximately $6 million will be used for capital
expenditures relating to product development, primarily the completion of
commercial-scale manufacturing operations for the commercialization of the
Company's generic versions of Cardizem CD(R) and Dilacor XR(R). The Company may
need additional funding in order to complete research and development for its
product candidates and to commercialize these products after receipt of FDA
approvals. Additional funding, whether obtained through public or private debt
or equity financing, or from collaborative arrangements, may not be available
when needed or may not be available on terms favorable to the Company, if at
all. If additional financing is not available, the Company may be required to
delay, scale back or eliminate some or all of its research and development
programs or to license to third parties products or technologies that the
Company might otherwise seek to develop itself.

                                     - 30 -
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       ANDRX CORPORATION AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS


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

Report of Independent Certified Public Accountants                         F-2

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

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

Consolidated Statements of Shareholders' Equity
  for the years ended December 31, 1996, 1995 and 1994                     F-5

Consolidated Statements of Cash Flows
  for the years ended December 31, 1996, 1995 and 1994                     F-6

Notes to Consolidated Financial Statements                                 F-8




                                      F-1
<PAGE>


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Shareholders of
  Andrx Corporation:

         We have audited the accompanying consolidated balance sheets of Andrx
Corporation and subsidiaries (a Florida corporation) as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Andrx Corporation
and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida, 
 February 14, 1997.
                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                       ANDRX CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                              DECEMBER 31,
                                                          1996          1995
                                                       -----------   -----------
                                     ASSETS
<S>                                                    <C>            <C>  
Current assets
   Cash and cash equivalents                           $ 3,427,500    $13,841,400
   Investments available for sale                       26,892,000           --
   Accounts receivable, net allowances of $969,800
     and $574,200 as of December 31, 1996
     and 1995, respectively                             13,501,900      8,263,400
   Due from joint venture, net                             314,100        488,500
   Inventories                                          12,240,400      9,502,000
   Prepaid and other current assets                        461,100        130,500
                                                       -----------    -----------
     Total current assets                               56,837,000     32,225,800
Property and equipment, net                              9,724,600      3,831,100
Other assets                                                74,700         91,800
                                                       -----------    -----------
     Total assets                                      $66,636,300    $36,148,700
                                                       ===========    ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                    $13,839,100    $ 9,860,000
   Accrued liabilities                                   3,374,000      1,724,200
   Bank loan                                             6,460,900      6,077,500
   Notes payable                                           102,300         23,500
   Commitment to joint venture, net                         98,400        139,000
                                                       -----------    -----------
     Total current liabilities                          23,874,700     17,824,200
                                                       -----------    -----------
Commitments and contingencies (Notes 8 and 13)

Shareholders' equity
   Convertible preferred stock; $0.001 par 
    value, 1,000,000 shares authorized; none 
    issued and outstanding as of 
    December 31, 1996 and 1995                               --              --
   Common stock; $0.001 par value, 25,000,000
    shares authorized;13,417,500 and 10,727,100
    shares issued and outstanding as of
    December 31, 1996 and 1995, respectively                13,400         10,700
   Additional paid-in capital                           57,252,700     28,795,000
   Accumulated deficit                                 (14,508,900)   (10,481,200)
   Unrealized gain on investments available
        for sale                                             4,400           --
                                                       -----------   ------------
      Total shareholders' equity                        42,761,600     18,324,500
                                                       -----------   ------------
      Total liabilities and shareholders' equity      $ 66,636,300   $ 36,148,700
                                                      ============   ============
</TABLE>
           The accompanying notes to consolidated financial statements
                 are an integral part of these balance sheets.

                                      F-3
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                             YEARS ENDED DECEMBER 31,
                                             ------------------------
                                        1996            1995            1994
                                   ------------    ------------    ------------
Revenues
   Distribution revenues, net      $ 86,720,800    $ 50,467,800    $ 25,915,500
   Research and development
      services to joint venture       2,205,900       2,528,700         375,300
   Licensing revenues                    50,000         165,000         155,500
                                   ------------    ------------    ------------
       Total revenues                88,976,700      53,161,500      26,446,300
                                   ------------    ------------    ------------

Cost of revenues
   Distribution                      72,399,900      41,780,900      21,362,400
   Research and development
      services to joint venture       2,205,900       2,528,700         375,300
                                   ------------    ------------    ------------
      Total cost of revenues         74,605,800      44,309,600      21,737,700
                                   ------------    ------------    ------------

Gross profit                         14,370,900       8,851,900       4,708,600
                                   ------------    ------------    ------------

Operating expenses
   Selling, general and
     administrative                  13,177,900       8,647,200       5,389,800
   Research and development           3,655,100       3,254,700       2,109,600
   Equity in losses of
      joint venture                   2,010,900       1,839,700         315,800
                                   ------------    ------------    ------------
      Total operating expenses       18,843,900      13,741,600       7,815,200
                                   ------------    ------------    ------------

Loss from operations                 (4,473,000)     (4,889,700)     (3,106,600)

Interest expense                       (764,900)       (636,200)       (104,300)
Interest income                       1,210,200         249,800         121,800
Other income (expense), net                --            89,100         (15,400)
                                   ------------    ------------    ------------
Net loss                           $ (4,027,700)   $ (5,187,000)   $ (3,104,500)
                                   ============    ============    ============
Net loss per share                 $      (0.33)   $      (0.55)   $      (0.35)
                                   ============    ============    ============
Weighted average shares of
     common stock outstanding        12,148,000       9,446,800       8,758,400
                                   ============    ============    ============


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

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

                                                                                                                   UNREALIZED
                                                                                                                    GAIN ON
                                         CONVERTIBLE                               ADDITIONAL                      INVESTMENTS   
                                       PREFERRED STOCK         COMMON STOCK         PAID-IN      ACCUMULATED        AVAILABLE   
                                      SHARES     AMOUNT    SHARES        AMOUNT     CAPITAL        DEFICIT           FOR SALE    
                                      ------     ------    ------        ------    ----------    -----------       ----------
<S>                                   <C>        <C>       <C>         <C>         <C>           <C>             <C>
Balance, January 1, 1994                  --      $--      8,401,400   $ 8,400    $ 6,108,000    $(2,189,700)    $      --   

Shares of common stock issued
  in connection with private
  placement                               --       --        147,200       100      1,242,300            --             --   
Shares of convertible preferred
  stock issued in connection with
  private placement                     33,700     --           --        --        6,000,000            --             --   
Shares of common stock issued as
  payment for services                    --       --          5,000      --           32,500            --             --   
Net loss                                  --                    --        --             --        (3,104,500)          --   
                                       -------    -----   ----------   -------   ------------    ------------    -----------
Balance, December 31, 1994              33,700     --      8,553,600     8,500     13,382,800      (5,294,200)          --   

Shares of common stock issued
  in connection with private
  placements                              --       --      1,338,800     1,300     14,622,600            --             --   
Shares of common stock issued in
 connection with conversion of
  shares of convertible preferred
  stock                                (33,700)    --        674,200       700           (700)           --             --   
Shares of common stock issued in
  connection with exercise of
  warrants                                --       --        154,500       200        772,300            --             --   
Shares of common stock issued in
  connection with exercise of
   stock options                          --       --          6,000      --           18,000            --             --   
Net loss                                  --       --           --        --             --        (5,187,000)          --   
                                       -------    -----   ----------   -------   ------------    ------------    -----------
Balance, December 31, 1995                --       --     10,727,100    10,700     28,795,000     (10,481,200)          --   

Shares of common stock issued in
  connection with intial public
  offering                                --       --      2,530,000     2,500     27,427,700            --             --   
Shares of common stock issued in
   connection with exercise of
   warrants                               --       --         28,100      --          203,700            --             --   
Shares of common stock issued in
   connection with exercise of stock
   options                                --       --        132,300       200        826,300            --             --   
Unrealized gain on investments
   available for sale                     --       --           --        --             --              --            4,400

Net loss                                  --       --           --        --             --        (4,027,700)          --   
                                       -------    -----   ----------   -------   ------------    ------------    -----------
Balance, December 31, 1996                --      $--     13,417,500   $13,400   $ 57,252,700    $(14,508,900)   $     4,400
                                       =======    =====   ==========   =======   ============    ============    ===========
</TABLE>
(RESTUBBED FROM PREVIOUS TABLE)
                                            TOTAL
                                        SHAREHOLDERS'
                                            EQUITY 
                                       --------------
Balance, January 1, 1994               $  3,926,700

Shares of common stock issued
  in connection with private
  placement                               1,242,400
Shares of convertible preferred
  stock issued in connection with
  private placement                       6,000,000
Shares of common stock issued as
  payment for services                       32,500
Net loss                                 (3,104,500)
                                       ------------
Balance, December 31, 1994                8,097,100

Shares of common stock issued
  in connection with private
  placements                             14,623,900

                                      F-5

<PAGE>

Shares of common stock issued in
 connection with conversion of
  shares of convertible preferred
  stock                                        --
Shares of common stock issued in
  connection with exercise of
  warrants                                  772,500
Shares of common stock issued in
  connection with exercise of
   stock options                             18,000
Net loss                                 (5,187,000)
                                       ------------
Balance, December 31, 1995               18,324,500

Shares of common stock issued in
  connection with intial public
  offering                               27,430,200
Shares of common stock issued in
   connection with exercise of
   warrants                                 203,700
Shares of common stock issued in
   connection with exercise of stock
   options                                  826,500
Unrealized gain on investments
   available for sale                         4,400

Net loss                                 (4,027,700)
                                       ------------
Balance, December 31, 1996             $ 42,761,600
                                       ============

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

                                      F-5
<PAGE>
<TABLE>
<CAPTION>

                       ANDRX CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                    YEARS ENDED DECEMBER 31,
                                                                    ------------------------
                                                              1996           1995           1994
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
 Cash flows from operating activities
    Net loss                                            $ (4,027,700)   $ (5,187,000)   $ (3,104,500)
    Adjustments to reconcile net loss to net cash
      used in operating activities
         Depreciation and amortization                     1,015,800         901,600         406,000
         Provisions for receivables, net                     395,600         271,800         428,400
         Equity in losses of joint venture                 2,010,900       1,839,700         315,800
         Contributions to joint venture                   (2,505,500)     (1,200,000)       (300,000)
         Issuance of shares of common stock for
                payment of services                             --             --             32,500
         Cancellation of note receivable--employee              --           100,000            --
         Increase in accounts receivable                  (5,634,100)     (3,939,600)     (2,977,100)
         (Increase) decrease in due from
                joint venture                                628,400        (629,700)       (375,300)
         Increase in inventories                          (2,738,400)     (5,909,000)     (2,313,000)
         Increase in prepaid and other
                current assets                              (330,600)         (1,300)       (105,000)
         (Increase) decrease in other assets                  17,100          79,300        (137,300)
         Increase in accounts payable and
                accrued liabilities                        5,628,900       6,429,600       2,520,900
         Increase (decrease) in unearned revenue                --          (115,000)         19,500
         Decrease in due to related party                       --              --           (50,000)
                                                         ------------    ------------    ------------
                Net cash used in operating activities     (5,539,600)     (7,359,600)     (5,639,100)
                                                         ------------    ------------    ------------

Cash flows from investing activities
      Purchase of property and equipment                  (6,909,300)     (1,525,100)     (2,721,000)
      Purchase of investments available for sale, net    (26,887,600)           --              --
      Disbursement of note receivable--related party            --              --          (200,000)
      Disbursement of note receivable--employee                 --              --          (100,000)
                                                        ------------    ------------    ------------
                Net cash used in investing activities    (33,796,900)     (1,525,100)     (3,021,000)
                                                        ------------    ------------    ------------

Cash flows from financing activities
      Proceeds from issuance of shares of common
                stock                                     27,430,200      14,623,900       1,242,400
      Proceeds from issuance of shares of convertible
                preferred stock                                 --              --         6,000,000
      Proceeds from exercise of stock options
                and warrants                               1,030,200         790,500            --
      Net borrowings under bank loan                         383,400       3,526,500       2,551,000
      Proceeds from notes payable                            501,900          30,100          36,100
      Payment on notes payable                              (423,100)        (90,700)        (93,800)
                                                        ------------    ------------    ------------
          Net cash provided by financing activities       28,922,600      18,880,300       9,735,700
                                                        ------------    ------------    ------------
</TABLE>


                                   (CONTINUED)

                                      F-6
<PAGE>
<TABLE>
<CAPTION>

                       ANDRX CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



                                                                   YEARS ENDED DECEMBER 31,
                                                                   ------------------------
                                                            1996            1995           1994
                                                       ------------    ------------   ------------
<S>                                                    <C>             <C>            <C> 
Net increase (decrease) in cash and cash equivalents    (10,413,900)      9,995,600      1,075,600
Cash and cash equivalents, beginning of year             13,841,400       3,845,800      2,770,200
                                                       ------------    ------------   ------------

Cash and cash equivalents, end of year                 $  3,427,500    $ 13,841,400   $  3,845,800
                                                       ============    ============   ============

Supplemental disclosure of cash paid during
    the year for:
    Interest                                           $    764,900    $    636,200   $    104,300
                                                       ============    ============   ============
</TABLE>


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

                                      F-7
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994

(1)      GENERAL

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

         In June 1996, the Company completed an initial public offering (the
"IPO") of 2,530,000 shares of the Company's common stock. The gross proceeds
from the sale of such stock totaled approximately $30.4 million. The Company
anticipates that the net proceeds of $27.4 million will be used primarily for
research and product development activities and for capital expenditures.

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

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

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

         CASH AND CASH EQUIVALENTS

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

         INVESTMENTS AVAILABLE FOR SALE

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

         INVENTORIES

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

         PROPERTY AND EQUIPMENT, NET

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

                                      F-8
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


         In March 1995, the FASB issued SFAS No. 121 "Accounting For The
Impairment Of Long-Lived Assets" which requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstance indicate that
the carrying amount of an asset may not be recoverable. To determine a loss, if
any, to be recognized, the book value of the asset would be compared to the
market value or expected future cash flow value. The Company adopted the
provisions of SFAS No. 121 for the year ended December 31, 1996, as required.
Such adoption had no impact on the Company's results of operations or financial
position.

         REVENUE RECOGNITION

         Distribution revenues and the related cost of revenues are recognized
at the time a product is shipped. Cost of distribution revenues is based on the
purchase price of the product, net of vendor discounts, rebates and allowances.
Research and development services to joint venture and the related cost are
recognized at the time the services are rendered (see Note 7). Licensing revenue
is recognized when earned in accordance with the terms of the underlying
agreements (see Note 6).

         RESEARCH AND DEVELOPMENT EXPENSES

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

         STOCK-BASED COMPENSATION

         In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". Under the provisions of SFAS No. 123, companies can
either measure the compensation cost of equity instruments issued under employee
compensation plans using a fair value based method, or can continue to recognize
compensation cost using the intrinsic value method under the provisions of
Accounting Principles Board Opinion ("APB") No. 25. However, if the provisions
of APB No. 25 are continued, pro forma disclosures of net income or loss and
earnings or loss per share must be presented in the financial statements as if
the fair value method had been applied. For the years ended December 31, 1996,
1995 and 1994, the Company recognized compensation costs under the provisions of
APB No. 25, and for the years ended December 31, 1996 and 1995 the Company has
provided the expanded disclosure required by SFAS No. 123 (see Note 11).

         INCOME TAXES

         The Company, at its inception, adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires, among other things,
recognition of future tax benefits measured at enacted rates attributable to the
deductible temporary differences between the financial statement and income tax
bases of assets and liabilities and to tax net operating loss carryforwards to
the extent that the realization of said benefits is "more likely than not".

         NET LOSS PER SHARE

         For the year ended December 31, 1996, net loss per share is based on
the weighted average number of shares of common stock outstanding. Since the
effect of common stock equivalents was antidilutive, all such equivalents were
excluded in loss per share.

         Pursuant to Securities and Exchange Commission Staff Accounting
Bulletins, common and common equivalent shares issued at prices below the public
offering price during the 12-month period prior to a public offering are
required to be included in the calculation of earnings or loss per share as if
they were outstanding for all periods presented prior to the offering (using the
treasury stock method and the initial public offering price). Accordingly, the
weighted average number of shares of common stock outstanding for the years
ended December 31, 1995 and 1994 have been adjusted to reflect the impact of
such additional common and common equivalent shares issued below the initial
public offering price.

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         As of December 31, 1996 and 1995, the carrying amount of cash and cash
equivalents, investments available for sale, accounts receivable, due from joint
venture, prepaid and other current assets, accounts payable, accrued
liabilities, bank loan, notes payable and commitment to joint venture
approximates fair value due to the short maturity of these instruments. 

                                      F-9
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


         CONCENTRATION OF CREDIT RISK

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


         USE OF ESTIMATES

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


         RECLASSIFICATIONS

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

(3)      PROPERTY AND EQUIPMENT, NET

         Property and equipment are summarized as follows:




                                                    DECEMBER 31,

                                              1996               1995
                                         ------------       ------------

Manufacturing equipment                  $  3,923,900       $  1,255,000
Laboratory equipment                        1,621,800          1,321,100
Leasehold improvements                      3,780,500            754,900
Computer hardware and software              1,754,900          1,209,700
Furniture and fixtures                        907,900            539,000
                                         ------------       ------------
                                           11,989,000          5,079,700

Less: accumulated depreciation
   and amortization                       (2,264,400)        (1,248,600)
                                         ------------       ------------

Property and equipment, net              $  9,724,600       $  3,831,100
                                         ============       ============


 (4)     INCOME TAXES

         For the years ended December 31, 1996, 1995 and 1994, the Company was
not required to provide for federal or state income taxes due to its net losses.
Under the provisions of SFAS No. 109, the Company has provided a valuation
allowance to reserve against 100% of its net operating loss carryforwards given
the Company's history of net losses. As of December 31, 1996, for financial
reporting purposes and federal income tax purposes, the Company has net
operating loss carryforwards of approximately $13 million and $10 million,
respectively, which if not utilized, will expire beginning in 2008. Net
operating loss carryforwards are subject to review and possible adjustments by
the Internal Revenue Service and may be limited in the event of certain
cumulative changes in the ownership interest of significant shareholders over a
three-year period in excess of 50%.
                                      F-10
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


(5)      BANK LOAN

         In January 1996, Anda Generics, Inc. ("Generics"), the Company's wholly
owned subsidiary engaged in the distribution of pharmaceutical products,
increased the maximum amount available under an existing line of credit from
$8,000,000 to $10,000,000 and the interest rate was decreased from the prime
rate plus 2.0% to the prime rate plus 1.5%. Borrowings under the line of credit
are only available for financing Generics' operations, are secured by all the
assets of that operation and are subject to a borrowing base related to the
value of Generics' accounts receivable and inventories. The loan is guaranteed
by Andrx Corporation and its other subsidiaries. The agreement requires
compliance with certain covenants including the maintenance of minimum working
capital and net worth levels by Generics.

         In October 1996, the Company amended its line of credit agreement
whereby, amongst other things, the interest rate was decreased from the prime
rate (8.25% as of December 31, 1996) plus 1.5% to the prime rate plus 1.0%, the
unused commitment fee was reduced from .5% to .25%, and under certain
circumstances, permitted the payment of dividends, repayments and advances from
Generics to Andrx and its other subsidiaries.

(6)      LICENSING AGREEMENTS

         In April 1996, the Company entered into a collaboration agreement for
the development of a brand name controlled-release pharmaceutical product with
Sepracor, Inc. ("Sepracor"). Pursuant to this agreement, Andrx is using one of
its controlled-release drug delivery technologies to formulate a once-a-day
version of fexofenadine (previously known as terfenadine carboxylate), an
antihistamine being developed by Sepracor. A twice-a-day version of this drug
was approved by the FDA in 1996, and is marketed in the U.S. under the brand
name Allegra(R) by Hoechst Marion Roussel, Inc. ("HMR"). Under the development
agreement with Sepracor, the Company is responsible for developing a formulation
of the product and transferring such technology to Sepracor who will be
responsible for obtaining FDA approvals for the product and the manufacturing
and marketing of the product. The Company will receive certain fees under the
development agreement and will be entitled to receive royalties from the sale or
license of the product.

         In December 20, 1996, Andrx entered into a worldwide licensing
agreement with ASTA Medica AG ("Asta Medica"), a subsidiary of Degussa AG,
for the use of dilazep, an orally administered drug to be used in the treatment
of cancer. Under the terms of the agreement, ASTA Medica will be responsible for
clinical development, the filing of a New Drug Application ("NDA") and the
commercialization of the product. Andrx will receive a royalty from ASTA Medica,
on worldwide net sales of the product and will be responsible for certain
royalty payments related thereto. Andrx originally licensing this technology,
which has now been patented, from The UAB Research Foundation.

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

         As a result of milestone payments in connection with these and previous
licensing agreements, Andrx received $125,000, $50,000 and $175,000, during the
years ended December 31, 1996, 1995 and 1994, respectively, of which $50,000,
$165,000 and $155,500, respectively, was recognized as licensing revenue.

(7)      JOINT VENTURE

         In July 1994, the Company and Circa Pharmaceuticals, Inc., now a wholly
owned subsidiary of Watson Pharmaceuticals, Inc. ("Watson") (the Company and
Watson are herein afterwards collectively referred to as the "Partners"), formed
a joint venture to develop, manufacture and market generic controlled-release
pharmaceutical products (the "joint venture" or "ANCIRC"). Watson also acquired
an equity interest in the Company in exchange for a payment of $6,000,000. In
addition, Watson may acquire a further equity interest by exercise of certain
warrants (see Note 10). Andrx Pharmaceuticals, Inc. ("Pharmaceuticals"), a
wholly owned subsidiary of the Company, will perform the research and
development formulations for the joint venture products and the Company will
also market and distribute any of ANCIRC's products upon regulatory approval.
Watson will provide the regulatory support for the joint venture products and
manufacture any of ANCIRC's products upon regulatory approval.
                                      F-11
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


         Capital contributions and ANCIRC's net income or loss are to be
allocated in proportion to the respective Partners' interest in the joint
venture. Such interests were originally 60% to Andrx and 40% to Watson. On
October 30, 1995, in connection with Watson's purchase of additional shares of
common stock of Andrx (see Note 10), the Partners amended the joint venture
agreement to modify each Partner's respective interest to 50%. Under the terms
of the amendment to the joint venture agreement, Watson was not required to
contribute additional capital to ANCIRC to equalize the partners' capital
accounts as of the amendment date. The Partners' capital accounts will be
equalized in future periods out of net cash flow or upon liquidation, to the
extent funds are available. ANCIRC is managed by and under the direction of a
management committee which is comprised of six members. Three members are
appointed by each partner. Based on the equal representation of the management
committee and the Company's inability to unilaterally control the joint venture,
the Company utilizes the equity method to account for its investment in or its
commitment to this joint venture.

         The agreements governing the ANCIRC joint venture require Dr. Chih-Ming
J. Chen, Pharmaceutical's President and the Company's chief scientist, to
supervise the development of all ANCIRC products until at least five products
have been successfully developed by ANCIRC. If Dr. Chen fails to perform
supervisory services (other than by reason of his death or disability), Watson
has the option to (i) require the Company to repurchase Watson's interests in
ANCIRC and the Company for an amount equal to Watson's investments therein, plus
interest, or (ii) assume the rights of the Company to develop and market the
products. Once ANCIRC has developed three products, Watson is limited to the
option set forth in (ii) of the preceding sentence.

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

                                                           DECEMBER 31,
                                                       1996          1995
                                                   -----------     ----------


Cash                                               $   700,900    $    84,900
Equipment, net                                          25,100             --
                                                   -----------    -----------
     Total assets                                  $   726,000    $    84,900
                                                   ===========    ===========

Current liabilities                                $ 1,047,800    $ 1,285,200
Partners' deficit                                     (321,800)    (1,200,300)
                                                   -----------    -----------
     Total liabilities and Partners' deficit       $   726,000    $    84,900
                                                   ===========    ===========

<TABLE>
<CAPTION>

                    PERIOD FROM INCEPTION              YEARS ENDED             PERIOD  FROM INCEPTION
                      (JULY 8, 1994) TO                DECEMBER 31,               (JULY 8,1994) TO
                      DECEMBER 31, 1996           1996             1995           DECEMBER 31, 1994
                    --------------------     ------------      -----------     ----------------------
<S>                 <C>                      <C>               <C>             <C> 
Research and
   development
   expenses           $   7,749,600          $  4,038,800      $ 3,183,700        $      527,100
                      =============          ============      ===========        ==============

Net loss              $ ( 7,722,100)         $( 4,021,800)     $(3,173,900)       $    ( 526,400)
                      ==============         =============     ============       ===============
</TABLE>


         For the years ended December 31, 1996 and 1995 and during the period
from ANCIRC's inception (July 8, 1994) to December 31, 1994, Pharmaceuticals
rendered research and development services to ANCIRC of $2,205,900, $2,528,700
and $375,300, respectively. These services were provided at cost which includes
research and development overhead allocations. As of December 31, 1996 and 1995,
the Company was due $376,600 and $1,005,000, respectively, from ANCIRC for
research and development services rendered. In the December 31, 1996 and 1995
consolidated balance sheets, such amounts due from the joint venture have been
offset by $62,500 and $516,500, respectively, representing the amount that Andrx
is required to fund to the joint venture in order to receive the full amount due
from the joint venture. The Company is committed to the funding of ANCIRC's
future operations. 
                                      F-12
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


(8)      COMMITMENTS

         EMPLOYMENT AGREEMENTS

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

         The following schedule summarizes the future minimum payments under the
Company's employment agreements as of December 31, 1996:


                      1997              $  700,500
                      1998                 240,425
                                        ----------
                                        $  940,925
                                        ==========


         PURCHASE COMMITMENTS

         The Company has entered into agreements to purchase certain
manufacturing equipment and to construct a manufacturing facility with future
commitments of $719,600 and $2,118,600, respectively.

         OPERATING LEASES

         The Company leases offices and office equipment under operating leases.
The following schedule summarizes future minimum lease payments required under
non-cancelable operating leases with terms greater than one year, as of December
31, 1996:

                      1997              $ 779,300
                      1998                488,300
                      1999                406,800
                      2000                370,800
                      2001                354,700
                      Thereafter          868,900
                                      -----------
                                      $ 3,268,800
                                      ===========

         Rent expense amounted to $445,600, $209,800 and $195,900 for the years
ended December 31, 1996, 1995 and 1994, respectively.

(9)      RELATED PARTY TRANSACTIONS

         In March 1994, the Company entered into an amendment to a then existing
royalty agreement (the "March 1994 Amendment") with Dr. Chih-Ming J. Chen,
Pharmaceuticals' president. The March 1994 Amendment changes the amount of the
royalties due to Dr. Chen upon the sale of certain products, including one of
the products for which an ANDA was submitted to the FDA in 1995. These products
are not currently being sold or marketed. In August 1994, Dr. Chen received a
$100,000 loan and options to purchase 200,000 shares of the Company's common
stock vesting at certain time frames based upon the ANDAs for such products. In
1996, the board of directors canceled Dr. Chen's obligation to repay the
$100,000 loan and the related accrued interest as a bonus for the submission of
one of the ANDAs in 1995. Accordingly, for the year ended December 31, 1995, the
Company recorded $107,000 of compensation expense in the accompanying
consolidated statement of operations. As of December 31, 1995, all of these
options granted to Dr. Chen had vested. These options have an exercise price of
$6.50 per share, representing the fair market value on the date of grant as
determined by the board of directors.
                                      F-13
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994

         In September 1994, the Company entered into an agreement to loan
$250,000 to Pharmacy Services Group, Inc. ("PSG"), a pharmacy benefits
management and mail order marketing company. PSG was a customer of the Company's
distribution operations and was controlled by a former principal shareholder of
the Company. In addition, the Company's chairman of the board and president each
owned less than 1% of PSG's outstanding shares of common stock. In exchange for
additional consideration in the form of options to purchase shares of PSG common
stock , the Company agreed not to declare a default under the note or to
accelerate the note as a result of PSG's failure to fulfill certain requirements
of the original note. During 1995, the management of the Company determined that
the net outstanding accounts receivable balance of $52,000 due from PSG and note
receivable of $250,000 were uncollectible, and the Company wrote off these
balances due from PSG.

         For the years ended December 31, 1996, 1995 and 1994, approximately
$119,200, $578,900 and $851,200, respectively, of distribution revenues were
generated from related parties, which were owned in part by the Company's
chairman of the board. In December 1994, one of these related parties filed for
Chapter 11 bankruptcy protection. During 1995, management provided an allowance
and wrote off the net outstanding balance of $157,000.


(10)     SHAREHOLDERS' EQUITY


         In December 1993 and January 1994, the Company sold an aggregate of
44.70 units (the "Placement Units") to various investors. Each Placement Unit
was sold at $100,000 and consisted of 11,240 shares of common stock and 11,240
warrants (the "Placement Warrants"). Each Placement Warrant entitles the holder
thereof to purchase one share of common stock through December 1998, at a price
of $7.25. The Company also granted Gruntal & Co., Incorporated, the placement
agent, the option (the "Agent's Option") to purchase 4.47 Placement Units at a
price of $100,000 per Placement Unit at any time through December 1998. In
December 1996, the Company registered, under the Securities Act of 1933, the
shares of common stock included in the Placement Units including the shares of
common stock issuable upon the exercise of the Placement Warrants and the Agents
Option.

         In July 1994, the Company issued 33,700 shares of its convertible
preferred stock and a warrant to acquire up to 337,100 shares of the Company's
common stock to Watson for an aggregate consideration of $6,000,000. The
preferred shares automatically converted into 674,200 shares of common stock on
April 30, 1995. Watson has certain registration rights related to the common
stock and warrants. The warrant is exercisable in whole or in part until July 8,
1999 at an exercise price of $8.90 per share. This issuance was associated with
a joint venture agreement between the Company and Watson. See Note 7 for further
discussion of the joint venture.

         In August 1995, the Company issued 90,900 shares of common stock in a
private placement transaction with Watson at $11.00 per share for an aggregate
consideration of $1,000,000. Additionally, in December 1995, the Company issued
1,144,900 shares of common stock in a private transaction with Watson at $11.00
per share for an aggregate consideration of $12,593,900. Watson also has certain
registration rights related to the 1,235,800 shares of common stock purchased
from the Company in 1995. In conjunction with these transactions, the Company
and Watson amended the terms of the joint venture agreement. See Note 7 for
further discussion of the amendment to the joint venture agreement.

         In June 1996, the Company completed its IPO of 2,530,000 shares of the
Company's common stock at a price of $12.00 per share. The net proceeds from the
sale of such stock totaled approximately $27.4 million.


(11)     STOCK INCENTIVE PLAN

         In February 1993, the Company adopted a stock incentive plan (the
"Plan") under which the board of directors or its compensation committee is
authorized to grant stock options, stock appreciation rights, restricted stock,
deferred stock, performance units, loans and tax offset payments or any
combination thereof, to employees, consultants or advisors of the Company. The
exercise price at which any stock option may be awarded is to be determined by
the board of directors. Options granted under the Plan must be exercised within
ten years of grant, unless a shorter period is designated at the time of grant.
No options can be awarded under the Plan after February 26, 2003. In 1996, the
board of directors and shareholders approved an increase in the number of shares
available for grant in the Plan to 1,250,000.
                                      F-14
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


          The Company accounts for options granted under this Plan in accordance
with the provisions of APB No. 25. Each stock option has an exercise price equal
to the market price on the date of grant and, accordingly, no compensation
expense has been recorded for any stock option grants.


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

                                     NUMBER OF SHARES    OPTION PRICE
                                        UNDER OPTION       PER SHARE
                                     ----------------   ---------------
Outstanding, January 1, 1994             231,375        $ 3.00   $ 7.00
Options granted                          405,000          6.50     9.00
                                         -------
Outstanding, December 31, 1994           636,375          3.00     9.00
Options granted                          210,250          7.25    11.00
Options exercised                         (6,000)         3.00       --
Options forfeited                        (74,000)         3.00     8.00
                                         -------
Outstanding, December 31, 1995           766,625          3.00    11.00
Options granted                          378,325         11.00    14.50
Options exercised                       (132,287)         3.00    11.00
Options forfeited                        (98,313)         3.00    14.44
                                        --------
Outstanding, December 31, 1996           914,350          3.00    14.50
                                        ========


         The range of fair value per share as of the grant date was $3.76 to
$10.31 for stock options granted in 1996 and $2.60 to $7.85 for stock options
granted in 1995. The determination of the fair value of all stocks options
granted in 1996 and 1995 was based on (i) risk-free interest rates of 5.5% to
6.1%, depending on the expected life of each option, (ii) expected option lives
1.5 years to 7.5 years, depending on the vesting provisions of each option,
(iii) expected volatility in the market price of the Company's common stock of
70%, and (iv) no expected dividends on the underlying stock.

         The following table summarizes the pro forma consolidated results of
operations of the Company as though the fair value based accounting method of
SFAS No. 123 had been used in accounting for stock options.


                                                           
                                               1996             1995
                                            -----------      -----------

Net Loss                 As Reported        $(4,027,700)     $(5,187,000)
                                            ===========      =========== 
                         Pro Forma          $(5,108,300)     $(5,491,800)
                                            ===========      =========== 
Net Loss Per Shares      As Reported        $     (0.33)     $     (0.55)
                                            ===========      =========== 
                         Pro Forma          $     (0.42)     $     (0.58)
                                            ===========      =========== 

(12)  401(K) PLAN

         In February 1995, the Company adopted a 401(k) retirement plan covering
substantially all employees. Monthly contributions to the retirement plan are
made by the Company based upon the employee contributions to the plan. During
the years ended December 31, 1996 and 1995, the Company contributed $86,700 and
$63,600, respectively, to the retirement plan.
                                      F-15
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1995 AND 1994


(13)     LITIGATION

         In January 1996, HMR and Carderm Capital, L.P. (collectively,
"Hoechst"), filed suit against the Company claiming patent infringement as a
result of the Company's ANDA filing with the FDA in late 1995 for a generic
version of Cardizem CD(R). The Company responded to this claim by denying
infringement, raising various other defenses and by filing certain counterclaims
against Hoechst. While the Company believes its product does not infringe upon
any of the patents held in connection with the branded product and that it has
meritorious defenses against this suit, the ultimate resolution of this matter
is not currently known and may delay or prevent the Company from obtaining an
approval to market from the FDA related to this ANDA.


         In May 1996, Rhone-Poulenc Rorer, Inc., and Jagotec AG (collectively
"RPR"), commenced a lawsuit against the Company claiming patent infringement as
a result of the Company's ANDA filing with the FDA in late 1995 for a generic
version of Dilacor XR(R). The Company denied infringement and raised various
other defenses in this claim. In December 1996, RPR agreed to dismiss the patent
infringement lawsuit and the parties signed a settlement agreement which
provided for the dismissal, without prejudice, of all claims and counterclaims
in the lawsuit. An Order of Dismissal was entered by the U.S. District Court
judge on January 7, 1997.

         Patent infringement claims of this nature may be made by other
pharmaceutical companies in connection with the Company's filing of other ANDAs
with the FDA. The Company evaluates the probability of patent infringement
litigation with respect to each of its ANDA submissions on a case by case basis.
Accordingly, for the years ended December 31, 1996 and 1995, the Company
provided for estimated litigation costs. Although the Company believes it has
adequately provided for such matters based on the current available information,
the Company may incur additional litigation costs in future years which may be
material to the Company's results of operations and financial position.

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

(14)     QUARTERLY UNAUDITED FINANCIAL RESULTS
<TABLE>
<CAPTION>

                        MARCH  31,       JUNE  30,      SEPTEMBER 30,     DECEMBER 31,
1996                  ------------     ------------     -------------    -------------
----
<S>                   <C>              <C>              <C>              <C>
Net Revenue           $ 18,917,900     $ 20,413,300     $ 23,595,000     $ 26,050,500
Gross profit          $  2,991,100     $  3,287,100     $  3,843,500     $  4,249,200
Net loss              $   (722,400)    $ (1,162,500)    $ (1,018,100)    $ (1,124,700)
Net loss per share    $      (0.07)    $      (0.10)    $      (0.08)    $      (0.08)

1995
----
Net Revenue           $ 11,425,200     $ 12,212,000     $ 13,258,500     $  16,265,800
Gross profit          $  1,820,000     $  2,070,600     $  2,360,200     $   2,601,100
Net loss              $  ( 653,700)    $ (1,134,000)    $ (1,096,500)    $  (2,302,800)
Net loss per share    $      (0.07)    $      (0.12)    $      (0.11)    $       (0.23)
</TABLE>
                                      F-16
<PAGE>


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

         There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters since January 1, 1994.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


         The information required by this Item 10 is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the end of
the fiscal year covered by this Report.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this Item 11 is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the end of
the fiscal year covered by this Report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item 12 is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the end of
the fiscal year covered by this Report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item 13 is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the end of
the fiscal year covered by this Report.

                                      -31-

<PAGE>

                                     PART IV

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

(A)  DOCUMENTS FILED AS PART OF THIS REPORT

     (1)  CONSOLIDATED FINANCIAL STATEMENTS

     Reference is made to the Index to Financial Statements included in 
       Part II, Item 8 of this Report.

     (2)  FINANCIAL STATEMENT SCHEDULES

     Report of Independent Certified Public Accountants on 
                                                                          PAGE
                                                                          ----
     Financial Statement Schedule                                          S-1

     Schedule II - Valuation and Qualifying Accounts                       S-2

     All other schedules for which provision is made in applicable regulations
of the Commission are omitted because they are not applicable or the required
information is in the Consolidated Financial Statements or notes thereto.

     (3)  EXHIBITS

EXHIBIT NO.       DESCRIPTION
-----------       -----------

 3.1              Form of Registrant's Amended and Restated Articles of
                  Incorporation(1)

 3.2              Form of Registrant's Amended and Restated Bylaws(1)

 4.1              Specimen Common Stock Certificate(1)

10.1              Form of Stock Incentive Plan, as amended(1)*

10.2              Employment Agreement between the Registrant and Alan P. Cohen,
                  as amended(1)*

10.3              Employment Agreement between the Registrant and Elliot F. 
                  Hahn, as amended(1)*

10.4              Employment Agreement between the Registrant and Chih-Ming J.
                  Chen, as amended(1)*

10.5              Severance Agreement between the Registrant and Scott Lodin(1)*

10.6              Royalty Agreement between the Registrant and Chih-Ming J.
                  Chen(1)*

10.7              Form of Indemnification Agreement between the Registrant and
                  its officers and directors(1)*

                                      -32-

<PAGE>


10.8              Development and License Agreement dated as of June 28, 1993 by
                  and between Zenith Laboratories, Inc. and the Registrant(1)(3)

10.9              Technical Transfer Agreement dated as of July 30, 1993 by and
                  between Yung Shin Pharmaceutical Ind. Co. Ltd. and the
                  Registrant (1)(3)

10.10             Development and License Agreement dated as of September 22, 
                  1993 by and between Circa Pharmaceuticals, Inc. and the
                  Registrant(1)(3)

10.11             Development and License Agreement dated as of November 10, 
                  1993 by and between Mylan Pharmaceuticals, Inc. and the
                  Registrant(1)(3)

10.12             Development and License Agreement dated as of December 7, 1993
                  by and between Circa Pharmaceuticals, Inc. and the
                  Registrant(1)(3)

10.13             Development and License Agreement dated as of January 17, 1994
                  by and between Purzer Pharmaceutical Co., Ltd. and the
                  Registrant(1)(3)

10.14             Lease Agreement relating to premises located at 4001 SW 47th 
                  Avenue, Ft. Lauderdale, Florida(1)

10.15             Lease Agreement relating to premises located at 4011 SW 47th 
                  Avenue, Ft. Lauderdale, Florida(1)

10.16             Lease Agreement relating to premises located at 3436 
                  University Drive, Davie, Florida(1)

10.17             Loan and Security Agreement by and between Congress Financial
                  Corporation (Florida) and the Registrant, as amended(1)

10.18             ANCIRC General Partnership Agreement between Circa
                  Pharmaceuticals, Inc. and the Registrant, as amended(1)

10.19             Research and Development Services Agreement dated as of 
                  July 8, 1994 by and between ANCIRC and the Registrant, as
                  amended(1)

10.20             Manufacturing and Regulatory Approval Agreement dated as of 
                  July 8, 1994 by and between Circa Pharmaceuticals, Inc. and
                  ANCIRC, as amended(1)

10.21             Distribution and Marketing Agreement dated as of July 8, 1994 
                  between ANCIRC and the Registrant, as amended(1)

10.22             Patent and Know How License Agreement dated as of July 8, 1994
                  between ANCIRC and the Registrant, as amended(1)

10.23             Patent and Know How License Agreement dated as of July 8, 1994
                  between Circa Pharmaceuticals, Inc. and ANCIRC, as amended(1)


                                      -33-
<PAGE>


10.24             Securities Purchase Agreement dated as of July 8, 1994 between
                  the Registrant and Circa Pharmaceuticals, Inc.(1)

10.25             Securities Purchase Agreement dated as of August 17, 1995 
                  between the Registrant and Circa Pharmaceuticals, Inc.(1)

10.26             Securities Purchase Agreement dated as of October 30, 1995 
                  between the Registrant and Circa Pharmaceuticals, Inc.(1)

10.27             Development Agreement between Sepracor, Inc. and the
                  Registrant(1)(3)

10.28             Sixth Amendment to the Loan and Security Agreement by and
                  between Congress Financial Corporation (Florida) and
                  Registrant(4)

10.29             Employment Agreement between the Registrant and Angelo C.
                  Malahias(2)*

10.30             First Amendment to Lease Agreement relating to the premises
                  located at 3436 University Drive, Davie, Florida(2)

11.1              Net loss per share computation(2)

21.1              Subsidiaries of the Registrant(2)

23.2              Consent of Arthur Andersen LLP(2)

27.1              Financial Data Schedule(2)

99.1              Financial Statements of ANCIRC(2)

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

*                 MANAGEMENT COMPENSATION PLAN OR ARRANGEMENT.

(1)               FILED AS AN EXHIBIT OF THE SAME NUMBER TO THE COMPANY'S
                  REGISTRATION STATEMENT ON FORM S-1 (FILE NO. 333-03614) AND
                  INCORPORATED HEREIN BY REFERENCE.

(2)               FILED HEREWITH.

(3)               A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 406 
                  UNDER THE SECURITIES ACT HAS BEEN MADE AND GRANTED FOR CERTAIN
                  PORTIONS OF THIS EXHIBIT.

(4)               FILED AS AN EXHIBIT OF THE SAME NUMBER IN QUARTERLY REPORT ON 
                  FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND
                  INCORPORATED HEREIN BY REFERENCE.


                                      -34-
<PAGE>



EXHIBIT           NO.DESCRIPTION
-------           --------------


(b)               Reports on Form 8-K

                  None.

(c)               Item 601 Exhibits

                  The exhibits required by Item 601 of Regulation S-K are set 
                  forth in (a)(3) above.

(d)               Financial Statement Schedules

                  The financial statement schedules required by Regulation S-K 
                  are set forth in (A)(2) above.


                                      -35-


<PAGE>


                                   SIGNATURES

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


                                        ANDRX CORPORATION



                                        By:  /s/ ALAN P. COHEN
                                             -----------------------------------
                                             Alan P. Cohen
                                             Chairman of the Board and
                                             Chief Executive Officer




                                        By:  /s/ ANGELO C. MALAHIAS
                                             -----------------------------------
                                             Angelo C. Malahias
                                             Vice President and 
                                             Chief Financial Officer



Date:  March 27, 1997

         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.

         SIGNATURE                       TITLE                    DATE
         ---------                       -----                    ----



/s/ ALAN P. COHEN             Chairman of the Board and Chief     March 27, 1997
----------------------------  Executive Officer
    Alan P. Cohen             (Principal Executive Officer)

     
/s/ ELLIOT F. HAHN            President                           March 27, 1997
----------------------------
    Elliot F. Hahn, Ph.D.


/s/ CHIH-MING J. CHEN         Vice President and Chief Scientist  March 27, 1997
----------------------------
    Chih-Ming J. Chen, Ph.D.


/s/ ANGELO C. MALAHIAS        Vice President and Chief            March 27, 1997
----------------------------  Financial Officer
    Angelo C. Malahias        (Principal Financial and
                              Accounting Officer)
  

                                      -36-


<PAGE>


         SIGNATURE                      TITLE                    DATE
         ---------                      -----                    ----



/s/  ELAINE BLOOM                       Director                 March 27, 1997
----------------------------
     Rep. Elaine Bloom


/s/  PAUL M. DONOFRIO                   Director                 March 27, 1997
----------------------------
     Paul M. Donofrio



/s/  IRWIN C. GERSON                    Director                 March 27, 1997
----------------------------
     Irwin C. Gerson



/s/  ELLIOT LEVINE                      Director                 March 27, 1997
----------------------------
     Elliot Levine



/s/  MICHAEL A. SCHWARTZ                Director                 March 27, 1997
----------------------------
     Michael A. Schwartz, 
     Ph.D.



/s/  MELVIN SHAROKY                     Director                 March 27, 1997
----------------------------
     Melvin Sharoky, M.D.


                                      -37-

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                        ON FINANCIAL STATEMENT SCHEDULE



To the Stockholders of
Andrx Corporation

     We have audited in accordance with generally accepted auditing standards,
the financial statements as of December 31, 1996 and 1995 and for each of the
three years in the period ended December 31, 1996 included in this Form 10-K,
and have issued our report thereon dated February 14, 1997. Our audits were made
for the purpose of forming an opinion on the basic financial statements taken as
a whole. The accompanying Schedule II is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states, in
all material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Fort Lauderdale, Florida,
    February 14, 1997.
                                      S-1
<PAGE>

                       ANDRX CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994



                                  BALANCE AT                          BALANCE AT
                                  BEGINNING                              END
                                   OF YEAR    ADDITIONS   DEDUCTIONS   OF YEAR
                                  ==========  ==-======   ==========  ==========
             
              

Year ended December 31, 1996
 allowance for doubtful accounts   $574,200   $576,800    $(181,200)   $969,800
                                   ========   ========    ==========   ========
                                                       
Year ended December 31, 1995
 allowance for doubtful accounts   $552,400   $546,600    $(524,800)   $574,200 
                                   ========   ========    ==========   ======== 
                                                         

Year ended December 31, 1994
 allowance for doubtful accounts   $124,000   $485,600    $ (57,200)   $552,400
                                   ========   ========    ==========   ========

                                      S-2

<PAGE>


                               INDEX TO EXHIBITS

                                                                   
EXHIBIT                                                            
NUMBER              DESCRIPTION                                    
-------             -----------                                    

10.29               Employment Agreement between the Registrant and Angelo C. 
                    Malahias

10.30               First Amendment to Lease Agreement relating to the premises
                    located at 3436 University Drive, Davie, Florida

21.1                Subsidiaries of the Registrant

23.2                Consent of Arthur Andersen LLP

27.1                Financial Data Schedule 

99.1                Financial Statements of ANCIRC