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United States
Securities and Exchange Commission
Washington, D.C. 20549

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

Form 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended
June 30, 2003
---------------

Commission file number 0-31475

ANDRX CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 65-1013859
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)

4955 Orange Drive
Davie, Florida 33314
(Address of principal executive offices) (Zip Code)

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


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 twelve 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

The approximate number of shares outstanding of the issuer's common stock as of
August 1, 2003 is 71,957,000.



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ANDRX CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2003





Page
Number
------

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ANDRX CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets -
as of June 30, 2003 (Unaudited) and December 31, 2002 3

Unaudited Condensed Consolidated Statements of Income -
for the three and six months ended June 30, 2003 and 2002 4

Unaudited Condensed Consolidated Statements of Cash Flows -
for the six months ended June 30, 2003 and 2002 5

Notes to Unaudited Condensed Consolidated Financial Statements 6-21

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 22-50

Item 4. Controls and Procedures 51

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 52

Item 4. Submission of Matters to a Vote of Security Holders 52

Item 6. Exhibits and Reports on Form 8-K 53

SIGNATURES 54

CERTIFICATIONS 55-57






This Form 10-Q contains trademarks held by Andrx Corporation and third parties.

Andrx Corporation's trademarks, including licensed trademarks, that may be
used in this report include: Altocor(TM), Anexsia(R), Embrex(R), Entex(R),
Metformin XT(TM), and Taztia(TM) XT.

Trademarks held by third parties that may be used in this report include:
Advicor(TM), Cardizem(R) CD, Claritin(R), Dilacor XR(R), Glucophage(R),
K-Dur(R), Naprelan(R), Oruvail(R), Pepcid(R), Prozac(R), Prilosec(R), Tiazac(R),
Trental(R), Ventolin(R), Wellbutrin SR(R), and Zyban(R).






2

ANDRX CORPORATION AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION


ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


ANDRX CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)





June 30, December 31,
2003 2002
----------- ------------
(Unaudited)

ASSETS

Current assets
Cash and cash equivalents $ 126,765 $ 35,521
Investments available-for-sale, at market value 31,375 61,873
Accounts receivable, net of allowance for doubtful accounts of $11,046 and
$15,495 at June 30, 2003 and December 31, 2002, respectively 135,741 130,044
Inventories 174,443 147,967
Income taxes receivable -- 33,710
Deferred income tax assets 50,212 68,148
Prepaid and other current assets 20,185 12,371
--------- ---------
Total current assets 538,721 489,634

Property, plant and equipment, net 241,815 233,828
Goodwill 33,981 33,981
Other intangible assets, net 18,419 19,941
Other assets 14,621 12,095
--------- ---------
Total assets $ 847,557 $ 789,479
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable $ 102,874 $ 80,850
Income taxes payable 12,047 --
Accrued expenses and other liabilities 126,781 127,208
--------- ---------
Total current liabilities 241,702 208,058

Deferred income tax liabilities 12,590 12,590
Obligations under capital leases and other liabilities 3,316 3,124
--------- ---------
Total liabilities 257,608 223,772
--------- ---------
Commitments and contingencies

Stockholders' equity
Convertible preferred stock; $0.001 par value, 1,000,000 shares authorized;
none issued and outstanding -- --
Common stocks:
Andrx Group common stock; $0.001 par value, 100,000,000 shares
authorized; issued and outstanding 71,914,000 shares and
71,501,000 shares at June 30, 2003 and December 31, 2002,
respectively 72 72
Cybear Group common stock; $0.001 par value, 12,500,000 shares
authorized; none issued and outstanding -- --
Additional paid-in capital 493,808 487,928
Restricted stock units (8,906) (6,525)
Retained earnings 104,871 84,038
Accumulated other comprehensive income, net of income taxes 104 194
--------- ---------
Total stockholders' equity 589,949 565,707
--------- ---------
Total liabilities and stockholders' equity $ 847,557 $ 789,479
========= =========





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





3


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




Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------

Revenues
Distributed products $ 161,506 $ 121,502 $ 316,123 $ 248,547
Andrx products 76,679 55,770 125,111 110,306
Licensing and royalties 33,054 102 64,192 216
Other 1,131 3,168 4,129 4,792
------------ ------------ ------------ ------------
Total revenues 272,370 180,542 509,555 363,861
------------ ------------ ------------ ------------

Operating expenses
Cost of goods sold 171,693 129,888 330,726 256,405
Selling, general and administrative 58,212 46,459 113,692 87,744
Research and development 12,484 11,420 25,824 21,342
Litigation settlements and other charges 7,500 60,000 7,500 60,000
------------ ------------ ------------ ------------
Total operating expenses 249,889 247,767 477,742 425,491
------------ ------------ ------------ ------------

Income (loss) from operations 22,481 (67,225) 31,813 (61,630)

Other income (expense)
Equity in earnings of joint ventures 1,176 943 1,624 1,588
Interest income 451 1,622 1,097 3,235
Interest expense (685) (95) (1,296) (122)
Gain on sales of assets 146 4,514 582 4,514
------------ ------------ ------------ ------------

Income (loss) before income taxes 23,569 (60,241) 33,820 (52,415)

Provision (benefit) for income taxes 9,092 (28,907) 12,987 (25,594)
------------ ------------ ------------ ------------
Net income (loss) $ 14,477 $ (31,334) $ 20,833 $ (26,821)
============ ============ ============ ============

EARNINGS (LOSS) PER SHARE

ANDRX GROUP COMMON STOCK:
Net income (loss) allocated to Andrx Group
(including Cybear Group commencing May 17, 2002) $ 14,477 $ (29,272) $ 20,833 $ (20,877)
Premium on Conversion of Cybear Group common stock -- (526) -- (526)
------------ ------------ ------------ ------------


Total net income (loss) allocated to Andrx Group $ 14,477 $ (29,798) $ 20,833 $ (21,403)
============ ============ ============ ============

Net income (loss) per share of Andrx Group common stock:

Basic $ 0.20 $ (0.42) $ 0.29 $ (0.30)
============ ============ ============ ============
Diluted $ 0.20 $ (0.42) $ 0.29 $ (0.30)
============ ============ ============ ============

Weighted average shares of Andrx Group common stock outstanding:
Basic 71,879,000 70,699,000 71,739,000 70,625,000
============ ============ ============ ============
Diluted 72,617,000 70,699,000 72,375,000 70,625,000
============ ============ ============ ============

CYBEAR GROUP COMMON STOCK:
Net loss allocated to Cybear Group (through May 17, 2002) $ (2,062) $ (5,944)
Premium on Conversion of Cybear Group common stock 526 526
------------ ------------

Total net loss allocated to Cybear Group $ (1,536) $ (5,418)
============ ============

Basic and diluted net loss per share of
Cybear Group common stock $ (0.23) $ (0.80)
============ ============

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



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



4

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





Six Months Ended
June 30,
-----------------------------
2003 2002
--------- ---------

Cash flows from operating activities:
Net income (loss) $ 20,833 $ (26,821)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 13,655 10,352
Provision for doubtful accounts 4,284 5,637
Gain on sales of assets (582) (4,514)
Asset writedowns at aerosol manufacturing facilities 8,177 --
Compensation expense on amortization of restricted stock units 663 38
Equity in earnings of joint ventures (1,624) (1,588)
Income tax benefits on exercises of Andrx Group stock options 848 2,534
Changes in operating assets and liabilities:
Accounts receivable, net (10,106) 26,127
Inventories (29,470) (27,971)
Prepaid and other assets (8,715) (3,621)
Income tax refund (payment) 51,695 (816)
Other income taxes 12,047 (28,107)
Accounts payable and accrued expenses and other
liabilities 20,326 57,663
--------- ---------
Net cash provided by operating activities 82,031 8,913
--------- ---------

Cash flows from investing activities:
Maturities of investments available-for-sale, net 30,359 59,014
Purchases of property, plant and equipment (22,981) (44,953)
Proceeds from sales of assets 250 1,425
--------- ---------
Net cash provided by investing activities 7,628 15,486
--------- ---------

Cash flows from financing activities:
Proceeds from exercises of Andrx Group stock options 1,411 1,728
Proceeds from issuances of Andrx Group shares
under the employee stock purchase plan 578 1,141
Principal payments on capital lease obligations (404) --
--------- ---------
Net cash provided by financing activities 1,585 2,869
--------- ---------

Net increase in cash and cash equivalents 91,244 27,268
Cash and cash equivalents, beginning of period 35,521 62,311
--------- ---------
Cash and cash equivalents, end of period $ 126,765 $ 89,579
========= =========

Supplemental disclosure of cash paid (received) during the period for:
Interest $ 552 $ 122
========= =========
Income taxes $ (51,695) $ 816
========= =========

Supplemental disclosure of non-cash investing and financing activities:
Assets acquired through capital leases $ 1,234 $ --
========= =========






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



5


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


1. GENERAL

The accompanying unaudited condensed consolidated financial statements
for each period include the condensed consolidated balance sheets, statements of
income and cash flows of Andrx Corporation and subsidiaries ("Andrx" or the
"Company"). All significant intercompany items and transactions have been
eliminated in consolidation. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission ("SEC"). Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted, as
permitted by SEC rules and regulations. However, in the opinion of management,
the disclosures contained herein are not misleading, and the unaudited condensed
consolidated financial statements reflect all material adjustments (which
include normal recurring adjustments) necessary to present fairly the Company's
unaudited financial position, results of operations and cash flows. The
unaudited results of operations for the three and six months ended June 30, 2003
and cash flows for the six months ended June 30, 2003, are not necessarily
indicative of the results of operations or cash flows that may be expected for
the remainder of 2003. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
related notes thereto included in Andrx's Annual Report on Form 10-K for the
year ended December 31, 2002, and its quarterly report on Form 10-Q for the
quarter ended March 31, 2003. The December 31, 2002 Consolidated Balance Sheet
included herein was extracted from the December 31, 2002 Audited Consolidated
Balance Sheet included in the Form 10-K for the year ended December 31, 2002.

EQUITY REORGANIZATION AND CONVERSION

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

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

RECLASSIFICATIONS

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



6


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)



RECENT ACCOUNTING PRONOUNCEMENTS

Accounting for Guarantor's Accounting and Disclosure Requirements for
Guarantees

In November 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others". The provisions of FIN 45 require that a liability be recorded in the
guarantor's balance sheet at fair value upon issuance of a guarantee. The
recognition provisions of FIN 45 are effective for guarantees issued or modified
after December 31, 2002. Adoption of the provisions of FIN 45 had no impact on
the Company's consolidated financial statements.

Accounting for Stock-Based Compensation - Transition and Disclosure

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

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





7

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


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





Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
ANDRX GROUP 2003 2002 2003 2002
----------- ----------- ----------- ----------

Net income (loss) allocated to Andrx Group
(including Cybear Group commencing May 17, 2002)
As reported $ 14,477 $ (29,798) $ 20,833 $ (21,403)
Add: stock-based employee compensation expense included
in reported net income (loss), net of related tax effect 177 24 411 24
Deduct: total stock-based employee compensation expense
determined under the fair value-based method for all
awards, net of related tax effect (6,637) (4,073) (11,514) (10,841)
----------- ----------- ----------- ----------
Pro forma net income (loss) $ 8,017 $ (33,847) $ 9,730 $ (32,220)
=========== =========== =========== ==========

Basic net income (loss) per Andrx Group common share
As reported $ 0.20 $ (0.42) $ 0.29 $ (0.30)
=========== =========== =========== ==========
Pro forma $ 0.11 $ (0.48) $ 0.14 $ (0.46)
=========== =========== =========== ==========

Diluted net income (loss) per Andrx Group common share
As reported $ 0.20 $ (0.42) $ 0.29 $ (0.30)
=========== =========== =========== ==========
Pro forma $ 0.11 $ (0.48) $ 0.13 $ (0.46)
=========== =========== =========== ==========



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





Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
2003 2002 2003 2002
---- ----- ---- ----

Risk-free interest rate 3.2% 2.8% 3.0% 3.2%
Average life of options (years) 5.5 5.7 5.5 5.9
Average volatility 81% 91% 90% 83%
Dividend yield -- -- -- --




The range of fair values per share of Andrx options as of the
respective dates of grant was $7.28 to $16.33, and $3.81 to $23.49, for stock
options granted during the three and six months ended June 30, 2003,
respectively, and $26.28 to $36.68 and $14.19 to $36.68 for the three and six
months ended June 30, 2002, respectively.




8


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)





2002
--------------------------
April 1, January 1,
Through Through
May 17, May 17,
CYBEAR GROUP ------- ---------

Net loss allocated to Cybear Group

As reported $(1,536) $(5,418)
Deduct: total stock-based employee compensation expense determined
under the fair value-based method for all awards (410) (1,230)
------- -------
Pro forma $(1,946) $(6,648)
======= =======

Basic and diluted net loss per Cybear Group
common share
As reported $ (0.23) $ (0.80)
======= =======

Pro forma $ (0.29) $ (0.99)
======= =======




As no Cybear options were awarded during the 2002 periods presented, no
related Black-Scholes option pricing model assumptions are provided herein.

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

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




9


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)



Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN No. 46"). The provisions of FIN No. 46
clarify the application of Accounting Research Bulletin No. 51, Consolidated
Financial Statements, to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated support from other parties. The provisions of FIN No. 46
require a variable interest entity ("VIE") to be consolidated by a company if
that company is subject to a majority of the risk of loss from the activities or
entitled to receive a majority of the entity's residual returns or both. The
provisions of FIN No. 46 also require disclosures about VIEs that the company is
not required to consolidate but in which it has a significant variable interest.
The consolidation requirements of FIN No. 46 apply immediately to VIEs created
after January 31, 2003 and to existing VIEs in the first interim or annual
period beginning after June 15, 2003. The Company believes that the adoption of
the provisions of FIN No. 46 will not have a material impact on its consolidated
financial statements.

Amendment of SFAS No. 133 on Derivative Instruments and Hedging
Activities

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

Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity

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




10


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)




2. EARNINGS (LOSS) PER SHARE

As a result of the Reorganization, Andrx's operating results for the
period from April 1, 2002 through May 17, 2002 and January 1, 2002 through May
17, 2002 have been allocated to each class of common stock. Subsequent to the
May 17, 2002 Conversion, operating results and basic and diluted net income
(loss) per share of Andrx Common Stock include the operating results of Cybear.

ANDRX

For all the periods presented, the shares used in computing basic net
income (loss) per share of Andrx Common Stock are based on the weighted average
shares of Andrx Common Stock outstanding and for the 2003 periods also include
the vested portion of restricted stock units. Diluted per share calculations for
the 2003 periods include weighted average shares of common stock outstanding, as
well as dilutive common stock equivalents, which consist of stock options and
restricted stock units as computed using the treasury stock method. For the 2003
periods, the anti-dilutive common stock equivalents include stock options and
the unvested portion of restricted stock units in which the exercise price or
the issuance price, respectively, exceeded the average market price for such
shares during the respective three and six month periods. For the 2002 periods
all potential shares were excluded from the diluted share computation as the
Company reported a net loss and, accordingly, such potential common shares were
anti-dilutive. The 2002 periods also exclude the unamortized restricted stock
units, which were also anti-dilutive.

A reconciliation of the denominators of basic and diluted earnings
(loss) per share of Andrx Common Stock is as follows:





Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------

Basic weighted average shares of common stock
outstanding 71,879,000 70,699,000 71,739,000 70,625,000
Effect of dilutive items:
Stock options and restricted stock units 738,000 -- 636,000 --
---------- ---------- ---------- ----------
Diluted weighted average shares of common stock
outstanding 72,617,000 70,699,000 72,375,000 70,625,000
========== ========== ========== ==========
Anti-dilutive common stock equivalents 4,411,000 3,623,000 6,142,000 3,460,000
========== ========== ========== ==========



CYBEAR

The shares used in computing net loss per share of Cybear Common Stock
were based on the weighted average shares of Cybear Common Stock outstanding for
the period from April 1, 2002 through May 17, 2002 and January 1, 2002 through
May 17, 2002. As Cybear incurred a net loss for such periods, all Cybear Common
Stock equivalents were excluded from the Cybear diluted share computation, since
the effects were anti-dilutive.




11


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


3. INVENTORIES

Inventories consist of the following:




June 30, December 31,
2003 2002
---------- ------------

Raw materials $ 43,371 $ 32,866
Work in process 17,575 8,176
Finished goods 113,497 106,925
---------- ------------
$ 174,443 $ 147,967
========== ============




As of June 30, 2003, the Company had approximately $9,457 in
inventories, primarily raw materials, relating to products pending launch
while the Company awaits receipt of final Food and Drug Administration ("FDA"),
marketing approval and/or satisfactory resolution of patent infringement
litigation.

For the six months ended June 30, 2003, cost of goods sold includes
$10,322 in charges related to the production of the Company's products and
product commercialization activities, including a provision of $5,723
related to pre-launch production of Andrx's bioequivalent versions of Wellbutrin
SR/Zyban placed into production after December 31, 2002. The Company is
continuing to work towards resolving the FDA and USP issues that affect its
Abbreviated New Drug Application ("ANDA") for bioequivalent versions of
Wellbutrin SR/Zyban.

For the three months ended June 30, 2003 the Company recorded charges
of $8,177 included in cost of goods sold related to the writedown of certain
assets ($2,994 for inventories and $5,183 for property, plant and equipment) of
the Company's Massachusetts aerosol facility, which the Company is seeking to
possibly divest. For the three and six months ended June 30, 2003, cost of goods
sold included $1,263 and $2,693, respectively, relating primarily to under
utilization and inefficiencies at the Company's Massachusetts aerosol
facilities. During the three and six months ended June 30, 2003, Andrx also
recorded charges directly to cost of goods sold of $1,132 and $2,731,
respectively, associated with its manufacturing facilities in Weston, Florida
(which is in the start-up phase), Morrisville, North Carolina (which the Company
plans to renovate) and Davie, Florida (related to under utilization and
inefficiencies). During the three and six months ended June 30, 2002, cost of
goods sold included $2,558 and $4,472, respectively, related to excess
capacities at its Massachusetts aerosol facility and $1,149 and $3,136 for the
three and six months of 2002, respectively, relating to under utilization and
inefficiencies at the Andrx Park manufacturing facility.




12

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)



4. LICENSING REVENUES

The licensing rate earned by Andrx from its agreement with Kremers
Urban Development Company ("KUDCo") decreased from 15% to 9% on June 9, 2003 in
conjunction with the related agreement. In August 2003, Mylan Laboratories, Inc.
("Mylan") launched its bioequivalent versions of the 10mg and 20mg strengths of
Omeprazole (generic Prilosec). This competition could lead to reduced sales for
KUDCo's version of Prilosec, which in turn would lead to reduced licensing
revenues for Andrx.

The Company has entered into an arrangement with L. Perrigo Company
("Perrigo") under which Andrx and Perrigo will share in the risks and rewards
associated with the sale of the Company's version of Loratadine-D12,
Loratadine-D24 and Loratadine Quick Dissolve Tabs that are bioequivalent to the
related Claritin family of brand products. In June 2003, Perrigo launched
Andrx's OTC version of Claritin-D24 and recognized $3,965 in revenues, which
includes initial stocking. Andrx will manufacture and Perrigo will package and
market all of these OTC products. Under the terms of the arrangement, Andrx and
Perrigo share the net profits, as defined, from product sales. The net profits
reported by Andrx are subject to numerous estimates by Perrigo such as returns
and other sales allowances and certain related expenses.

5. GAIN ON SALES OF ASSETS

Internet Assets

On July 31, 2002, Andrx sold its Dr. Chart and @Rx applications,
licensed its patents for the Internet transmission of prescriptions, and entered
into a two-year marketing agreement with a business unit of Aventis S.A.
relating to Andrx's Physicians' Online ("POL") web portal. Andrx is entitled to
receive approximately $6,000 through April 2004 in connection with these
transactions. Though the $6,000 is generally non-refundable and partially paid
in advance, the payments will be recognized as Other revenues in the
Consolidated Statements of Income as services are rendered or otherwise earned.
Due to the related nature of the transactions, $1,348 of Gain on sales of assets
was deferred, to be recognized ratably in the same period as the revenues are
earned under the marketing agreement. During the three and six months ended June
30, 2003, $546 and $1,700, respectively, was recorded as Other revenues and $146
and $457, respectively, was recognized as a Gain on sale of assets in the
Unaudited Condensed Consolidated Statements of Income related to this
transaction. Through June 30, 2003, the Company has received $3,500 in cash from
these agreements.

Histex Product Line

On June 28, 2002, the Company sold its Histex cough and cold line of
products, recognizing $4,514 as a Gain on sales of assets in the three and six
months ended June 30, 2002 in the Unaudited Condensed Consolidated Statements of
Income. For the six months ended June 30, 2003, the Company recognized $125 of
gain included in Gain on sales of assets related to this transaction, which was
previously deferred.




13


ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


6. PROVISION (BENEFIT) FOR INCOME TAXES

For the three and six months ended June 30, 2003, the Company recorded
a provision for income taxes of $9,092 and $12,987, or 39% and 38%,
respectively, of income before income taxes. For the three and six months ended
June 30, 2003, the Company provided for income taxes in excess of the expected
annual effective federal statutory rate of 35% primarily due to the effect of
state income taxes. For the three and six months ended June 30, 2002, the
Company recorded an income tax benefit of $28,907 and $25,594 or 48% and 49%,
respectively, of loss before income taxes, which included the reversal of a
$7,249 valuation allowance on deferred tax assets which related to certain net
operating loss carryforwards.

During the six months ended June 30, 2003 the Company received $51,695
from income tax refunds.


7. COMPREHENSIVE INCOME (LOSS)

The components of the Company's comprehensive income (loss) are as follows:




Three Months Six Months
Ended June 30, Ended June 30,
--------------------------- ---------------------------
2003 2002 2003 2002
-------- -------- -------- --------

Net income (loss) $ 14,477 $(31,334) $ 20,833 $(26,821)
Investments available-for-sale
Unrealized gain (loss), net (80) 213 (139) (74)
Income tax benefit (expense) 30 (79) 49 28
-------- -------- -------- --------
(50) 134 (90) (46)
-------- -------- -------- --------
Comprehensive income (loss) $ 14,427 $(31,200) $ 20,743 $(26,867)
======== ======== ======== ========



8. BUSINESS SEGMENTS

See the Company's Form 10-K for the year ended December 31, 2002 for a
discussion of its business segments.

The following table represents unaudited financial information by
business segment:




As of or for the Three Months Ended
June 30, 2003
---------------------------------------------------------------------------------
Distributed Bioequivalent Brand Corporate
Products Products Products & Other Consolidated
----------- ------------- -------- --------- ------------

Revenues $ 161,506 $ 99,142 $ 11,722 $ -- $ 272,370
Income (loss) from operations 8,055 50,213 (17,545) (18,242) 22,481
Equity in earnings of joint ventures -- 1,176 -- -- 1,176
Interest income -- -- -- 451 451
Interest expense -- -- 41 644 685
Gain on sales of assets -- -- 146 -- 146
Depreciation and amortization 1,382 3,959 1,261 130 6,732
Purchases of property, plant and
equipment 1,828 8,800 9 40 10,677
Total assets, end of period 244,774 317,883 72,691 212,209 847,557







14

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)





As of or for the Three Months Ended
June 30, 2002
-----------------------------------------------------------------------------------
Distributed Bioequivalent Brand Corporate
Products Products Products & Other Consolidated
----------- ------------- --------- ---------- ----------

Revenues $ 121,502 $ 50,661 $ 8,379 $ -- $ 180,542
Income (loss) from operations 2,527 11,228 (12,981) (67,999) (67,225)
Equity in earnings of joint ventures -- 943 -- -- 943
Interest income -- -- -- 1,622 1,622
Interest expense -- -- -- 95 95
Gain on sales of assets -- -- 4,514 -- 4,514
Depreciation and amortization 619 2,963 1,625 18 5,225
Purchases of property, plant and
equipment 5,161 23,637 281 311 29,390
Total assets, end of period 267,492 231,826 78,374 244,997 822,689






Six Months Ended
June 30, 2003
-----------------------------------------------------------------------------------
Distributed Bioequivalent Brand Corporate
Products Products Products & Other Consolidated
----------- ------------- --------- ---------- ----------

Revenues $316,123 $171,984 $ 21,448 $ -- $ 509,555
Income (loss) from operations 18,949 79,015 (36,804) (29,347) 31,813
Equity in earnings of joint ventures -- 1,624 -- -- 1,624
Interest income -- -- -- 1,097 1,097
Interest expense -- -- 68 1,228 1,296
Gain on sales of assets -- -- 582 -- 582
Depreciation and amortization 2,726 8,245 2,541 143 13,655
Purchases of property, plant and
equipment 3,106 19,440 124 311 22,981




Six Months Ended
June 30, 2002
-----------------------------------------------------------------------------------
Distributed Bioequivalent Brand Corporate
Products Products Products & Other Consolidated
----------- ------------- --------- ---------- ----------

Revenues $ 248,547 $ 100,492 $ 14,822 $ -- $ 363,861
Income (loss) from operations 13,192 31,170 (30,513) (75,479) (61,630)
Equity in earnings of joint ventures -- 1,588 -- -- 1,588
Interest income -- -- -- 3,235 3,235
Interest expense -- -- -- 122 122
Gain on sales of assets -- -- 4,514 -- 4,514
Depreciation and amortization 1,248 5,633 3,435 36 10,352
Purchases of property, plant and
equipment 6,584 37,223 632 514 44,953




In August 2002, Andrx management learned that an employee had made
numerous improper entries that affected the adequacy of the Company's allowance
for doubtful accounts receivable. Management determined that the Company's
provision for doubtful accounts receivable (included in SG&A) was understated
during 1999, 2000, 2001 and the first quarter of 2002, by the aggregate amount
of $4,902. The understatement to the allowance for doubtful accounts receivable
applicable to the three months ended March 31, 2002 unaudited period was $888,
of which $803 was attributable to the Distributed Products Segment and $85 was
attributable to the Bioequivalent Products Segment. After consideration of all
of the facts and circumstances, the Company recognized the entire $4,902 prior
period misstatement amount in the second quarter of 2002, as the Company
believed it was not material to any period affected.



15

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)



9. LITIGATION AND CONTINGENCIES

For the three and six months ended June 30, 2003, the Company recorded
a charge of $7,500 related to various previously disclosed legal claims,
including a negotiated settlement of an obligation to one of the Company's law
firms with respect to Andrx's bioequivalent version of Tiazac. The three and six
month periods ended June 30, 2002 include a litigation settlements charge of
$60,000 related to the Company's Cardizem CD antitrust litigation.

Tiazac Related Securities Claims

Several securities fraud class action complaints were filed on or about
March 2002 alleging that Andrx and certain of its officers and directors engaged
in securities fraud and/or made material misrepresentations regarding the
regulatory status of the Company's ANDA for a bioequivalent version of Tiazac.
The amended class action complaint sought a class period for those persons or
institutions that acquired Andrx Common Stock from April 30, 2001 through
February 21, 2002. In November 2002, the U.S. District Court for the Southern
District of Florida granted in part Andrx's motion to dismiss the amended
consolidated class action complaint and determined that all but one of the
statements allegedly made in violation of the federal securities laws should be
dismissed as a matter of law. The Court's decision reduced the class period to
six weeks commencing January 9, 2002 and ending February 21, 2002. The Court
later granted Andrx's motion to strike all allegations of insider trading from
the complaint. Though the Company believes that the plaintiffs are unlikely to
prevail in their claims, an adverse judgment could have a material adverse
effect on the Company's business and consolidated financial statements.

Wellbutrin SR/Zyban Related Securities Claims

Seven putative securities fraud class action complaints have been filed
against Andrx and certain of its officers and directors for alleged violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended,
and Rule 10b-5. These complaints generally allege that, during the class period,
Andrx made a series of misrepresentations and/or positive statements regarding
FDA approval of its generic Wellbutrin SR/Zyban product and failed to disclose
dating issues with respect to its product and product inventory. Six of these
complaints purport to bring the suit on behalf of all persons or institutions
who acquired Andrx Common Stock from October 31, 2002 through March 4, 2003, and
focus solely on Andrx's bioequivalent version of Wellbutrin SR. The remaining
suit alleges a class period from March 1, 2002 through March 4, 2003 and also
contains allegations regarding Andrx's bioequivalent version of Zyban. The
Company is not in a position to determine the ultimate outcome of this
litigation, but an adverse judgment could have a material adverse effect on the
Company's business and consolidated financial statements.



16

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


Cardizem CD Antitrust Litigation

Beginning in August 1998, several putative class action lawsuits were
filed against Andrx and Aventis arising from a 1997 stipulation (the "1997
Stipulation") entered into between Andrx and Aventis in connection with a patent
infringement suit brought by Aventis with regard to its product, Cardizem CD.
The actions pending in federal court have been consolidated for multi-district
litigation purposes in the U.S. District Court for the Eastern District of
Michigan. The complaint in each action alleges that Andrx and Aventis, by way of
the 1997 Stipulation, have engaged in alleged state antitrust and other
statutory and common law violations that allegedly gave Aventis and Andrx a near
monopoly in the U.S. market for Cardizem CD and a bioequivalent version of that
pharmaceutical product. According to the complaints, the monopoly possessed by
the defendants enables Aventis to perpetuate its ability to fix the price of
Cardizem CD at an artificially high price, free from generic competition, with
the result that direct purchasers such as pharmacies, as well as indirect
purchasers such as medical patients who have been issued prescriptions for
Cardizem CD are forced to overpay for the drug. Each complaint seeks
compensatory damages on behalf of each class member in an unspecified amount
and, in some cases, treble damages, as well as costs and counsel fees,
disgorgement, injunctive relief and other remedies. In June 2000, the District
Court granted summary judgment to plaintiffs finding that the 1997 Stipulation
was a per se violation of antitrust laws. Aventis and Andrx appealed the
judgment and on June 13, 2003, the U.S. Court of Appeals for the Sixth Circuit
affirmed the district court's opinion finding that the 1997 Stipulation was a
per se violation of the federal antitrust laws. Andrx is considering its legal
options which include legal review by the U.S. Supreme Court.

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

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

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




17

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)



On November 26, 2002, the Court approved a settlement between the
direct purchasers and Andrx and Aventis. In January 2003, Andrx announced it had
reached a settlement with the indirect purchasers and state attorney generals.
Discovery is still ongoing for the remaining group of litigants, including those
who timely chose to opt out of the settlements described above. If not settled,
Andrx anticipates that these matters may take several years to be resolved but
an adverse judgment could have a material adverse effect on the Company's
business and consolidated financial statements.

Alpharma Recall Claims

In March 2002, Alpharma USPD, Inc. ("Alpharma"), for whom Andrx's
aerosol manufacturing facility provided contract manufacturing of Epinephrine
Mist, notified Andrx that the product was subject to a recall. Alpharma claims
that Armstrong breached its manufacturing agreement and has requested
indemnification for the full amount of its losses arising from the recall.
Alpharma presently estimates its losses at approximately $11,250. Andrx is
investigating this matter, but has disputed both the basis for liability and the
amount of damages owed. Andrx believes that at least part of the cause of the
recall is attributable to Alpharma, and that indemnification for at least part
of these claims may be owed by Medeva Pharmaceuticals, Inc., from whom Andrx
purchased these operations in March 2001. An adverse outcome to this claim could
have a material adverse affect on the Company's business and consolidated
financial statements.



Claritin D-24 Patent Litigation

In March 2000, Schering Corporation ("Schering") filed suit against
Andrx in the United States District Court for the District of New Jersey
alleging that the Company's bioequivalent version of Claritin D-24 infringed
both a metabolite patent and a formulation patent. On August 8, 2002, the U.S.
District Court for the District of New Jersey entered an order granting Andrx's
Motion for Summary Judgment with respect to the metabolite patent (U.S. Patent
No. 4,659,716) and ruled that claims 1 and 3 of the metabolite patent were
invalid. On August 1, 2003, the U.S. Court of Appeals affirmed the district
court's order finding that the claims asserted against Andrx were invalid.
Schering's claims against Andrx with respect to the formulation patent remain
pending. In June 2003, the Company commenced marketing its bioequivalent version
of Claritin D-24 as an over the counter medication through its agreement with
Perrigo. Though the Company believes that Schering is unlikely to prevail in its
claims, an adverse judgment could have a material adverse effect on the
Company's business and consolidated financial statements.



18

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


Naprelan Patent Litigation

In October 1998, Elan Corporation, plc ("Elan") filed suit against
Andrx in the U.S. District Court for the Southern District of Florida alleging
that the Company's bioequivalent version of Naprelan infringed its patent. On
March 14, 2002, the Court issued an order of final judgment in favor of Andrx
invalidating the patent in issue. In March 2003, the U.S. District Court for the
Southern District of Florida issued an order denying Elan's motion for
reconsideration and its motion to amend and supplement the findings of fact and
also denying Andrx's motion asking the court for a ruling on its defenses of
non-infringement. On April 22, 2003, Elan filed a Notice of Appeal of the
Court's final judgment of invalidity and its order denying its motion for
reconsideration. Andrx cross-appealed for all issues that could be appealed.
Andrx has commenced selling its bioequivalent version of Naprelan. Though the
Company believes that Elan is unlikely to prevail in its claims of infringement,
a final court determination that Elan's patent is valid and that the Andrx
product infringes claims thereof could have a material adverse effect on the
Company's business and consolidated financial statements.

Lemelson Patent Litigation

On November 23, 2001, the Lemelson Medical, Education & Research
Foundation, LP filed an action in the United States District Court for the
District of Arizona alleging patent infringement against Andrx and others
involving "machine vision" or "computer image analysis." On March 20, 2002, the
Court entered an Order of Stay in the proceedings, pending the resolution of
another suit that involves the same patents, but does not involve Andrx. The
Company is not in a position to determine the ultimate outcome of this matter.

Entex Line of Products

On February 25, 2003, the FDA announced that it intends to publish a
Federal Register notice to describe its enforcement policy with respect to
products such as the Entex line of products that are presently on the market and
sold by prescription without an approved ANDA or NDA. As a result of the Federal
Register notice, Andrx may be required to seek FDA approval for marketing the
Entex line of products and may be required to market some or all of these
products as over-the-counter ("OTC") products. Upon issuance of definitive
guidance on this matter, Andrx will assess the unamortized portion of its Entex
product rights ($11,758 as of June 30, 2003) and Entex inventories ($259 as of
June 30, 2003) for any resulting impairment.

Altocor Trademark Opposition

In May 2002, Kos Pharmaceuticals ("KOS") filed a notice of opposition
to Andrx's application for a registered trademark for Altocor alleging a
likelihood of confusion between their trademark, Advicor, and Altocor. Andrx has
also recently learned that KOS has filed a lawsuit against Andrx in the United
States District Court for the District of New Jersey. If KOS were to prevail in
the litigation to enjoin the sale of Andrx's product under the Altocor name or
recover damages as a result thereof, this could have a material adverse effect
on the Company's business and consolidated financial statements. The Company is
not in a position to determine the ultimate outcome of this matter.



19

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)


Omeprazole (Prilosec)

On January 2, 2002, Andrx entered into an agreement with a law firm
(the "Law Firm") it utilizes on matters relating to, among other things, its
efforts to market its bioequivalent versions of Prilosec. Under the terms of and
as defined in the agreement, Andrx shall pay the Law Firm (i) up to 2.75% of net
sales of the product directly or indirectly resulting from the ANDA Andrx filed
for a bioequivalent version of Prilosec, with this amount declining to not less
than 1.75% following achievement of certain cumulative net sales amounts, and
(ii) up to 2.5% of the value created by any settlement or agreement with
AstraZeneca or any other party concerning bioequivalent Prilosec, in each case
if certain conditions stated in the agreement occur. The Law Firm is not
entitled to receive payment on revenues generated from the Company's agreement
with KUDCo. Upon the occurrence of any of the events entitling the Law Firm to
the aforementioned payments, Andrx will estimate the present value of the
aggregate payments the Law Firm is entitled to receive under the agreement and
recognize such amount as an expense and a liability. Such estimate will be
evaluated periodically and adjusted as necessary. Andrx is currently not able to
estimate the present value of the potential obligations under this agreement.
However, the amount of this potential obligation and the adjustments which could
result from future changes in the Company's estimate of the remaining present
value of those potential payments could be significant.

The Company negotiated a settlement of its commitment to the Law Firm
relating to revenues to be derived from Andrx's bioequivalent version of Tiazac.
The settlement amount was recorded in the three months ended June 30, 2003 and
is included in Litigation settlements and other charges in the Unaudited
Condensed Consolidated Statements of Income.


Insurance Programs

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



20

ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(in thousands, except share and per share amounts)

10. SUBSEQUENT EVENT

In July 2003, the Company entered into an Exclusivity Transfer
Agreement ("Exclusivity Agreement") with Impax Corporation ("Impax") and a
subsidiary of Teva Pharmaceutical Industries Ltd ("Teva") pertaining to pending
ANDAs for bioequivalent versions of Wellbutrin SR and Zyban 100mg and 150mg
extended-release tablets filed by Andrx and by Impax. The Exclusivity Agreement
provides, among other things, that while Andrx will continue to seek to launch
its own versions of these ANDA products, if it is unable to do so within a
defined period of time, and Impax is able to market these ANDA products, Andrx
will enable Impax to launch the Impax products through Teva. Impax and Teva will
then share certain payments with Andrx relating to the sale of the Impax
products for a 180-day period. Should Andrx launch its own products prior to the
launch of the Impax products, Andrx will share with Impax and Teva certain
payments relating to the sale of the Andrx products for a 180-day period. To
date, neither the Andrx nor the Impax ANDAs for these products have been
approved by the FDA, and the appellate court has not ruled on GlaxoSmithKline's
appeal of the favorable lower court decisions received by both Andrx and Impax
in their respective patent infringement litigations. The Exclusivity Agreement
may be subject to the approval of certain various governmental agencies.




21

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


Andrx Corporation and subsidiaries ("Andrx" or the "Company"):

o develops and commercializes bioequivalent versions of

(i) controlled-release pharmaceutical products,
using its proprietary drug delivery
technologies,

(ii) specialty, niche and immediate-release
pharmaceutical products, including oral
contraceptives,

o develops and commercializes brand name
pharmaceuticals where it believes that the
application of Andrx's drug delivery technologies may
improve the efficacy or other characteristics of
existing pharmaceutical products, and

o distributes pharmaceutical products manufactured by
third parties, primarily generics, to independent
pharmacies, pharmacy chains which do not maintain
their own central warehousing facilities, pharmacy
buying groups and, to a lesser extent, physicians'
offices.

Equity Reorganization and Conversion

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

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

Forward Looking Statements

Forward-looking statements (statements which are not historical facts)
in this release are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. For this purpose, any statements
contained herein or which are otherwise made by or on behalf of the Company that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may," "will," "to," " plan," "expect," "believe," "anticipate," "intend,"
"could," "would," "estimate," or "continue" or the negative other variations
thereof or comparable terminology are intended to identify forward-looking
statements. Investors are cautioned that all forward-looking statements involve
risk and uncertainties, including but not limited to, the Company's dependence
on a relatively small number of products; licensing revenues; the timing and
outcome of patent and antitrust litigation and future product launches; whether
the Company will be awarded any market exclusivity period and, if so, the
precise dates thereof; government regulation generally; competition;
manufacturing capacities and output; the Company's ability to develop and
successfully commercialize new products; the loss of revenues from existing
products; development and marketing expenses that may not result in commercially
successful products; Andrx's inability to obtain, or the high cost of obtaining,
licenses for third party technologies; commercial obstacles to the successful
introduction of brand products generally; exclusion of Andrx's brand products
from formularies; the consolidation or loss of customers; Andrx's relationship
to our suppliers; the success of Andrx's joint ventures; difficulties in
integrating, and potentially significant charges




22


associated with, acquisitions of technologies, products and businesses; the
inability to obtain sufficient supplies from key suppliers; the impact of
returns, allowances and chargebacks; product liability claims; rising costs and
limited availability of product liability and other insurance; the loss of key
personnel; failure to comply with environmental laws; and the absence of
certainty regarding the receipt of required regulatory approvals or the timing
or terms of such approvals. Andrx Corporation is also subject to other risks
detailed herein or detailed from time to time in its filings with the U.S.
Securities and Exchange Commission ("SEC"), including, but not limited to, the
Company's Annual Report on Form 10-K for the year ended December 31, 2002 and
Form 10-Q for the quarter ended March 31, 2003.

Critical Accounting Policies and Estimates

The preparation of its consolidated financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and the related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including but not limited to, those related to:

o allowance for doubtful accounts receivable,

o inventories,

o sales returns and allowances,

o useful life or impairment of goodwill and other intangible
assets,

o deferred income tax asset valuation allowance,

o licensing revenues and royalties,

o litigation settlements and related accruals, and

o insurance programs.

The Company bases its estimates on, among other things, historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis of making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Estimates may differ if different assumptions or
conditions are utilized, and actual results may differ from these estimates.

The Company believes that the following critical accounting policies
reflect the more significant judgments and estimates used in the preparation of
its consolidated financial statements:

Allowance for Doubtful Accounts Receivable

The Company maintains an allowance for doubtful accounts receivable for
estimated losses resulting from the Company's inability to collect from certain
customers. As of June 30, 2003, the Company's net accounts receivable totaling
$135.7 million, includes an allowance for doubtful accounts receivable of $11.0
million. Accounts receivable generated from the Company's distribution
operations are principally due from independent pharmacies, pharmacy chains
which do not maintain their own central warehousing facilities, pharmacy buying
groups and, to a lesser extent, physicians' offices. Accounts receivable
generated from the Company's bioequivalent and brand product sales are
principally due from large warehousing pharmacy chains, wholesalers and large
managed care customers. In extending credit, the Company attempts to evaluate
the customer's financial condition, both initially and on an ongoing basis.
Collateral is generally not required. In evaluating the adequacy of its
allowance for doubtful accounts receivable, management primarily analyzes
accounts receivable balances, the percentage of accounts receivable by aging
category, and historical bad debts, but also considers, among other things,
customer concentrations, customer credit-worthiness, and changes in customer
payment terms or payment patterns. If the financial condition of the Company's
customers were to deteriorate, resulting in an impairment of their ability to
make payments or the




23


Company's ability to collect, an increase to the allowance may be required.
Also, should actual collections of accounts receivable be different than the
Company's estimates included in the determination of its allowance, the
allowance would be increased or decreased through charges or credits to Selling,
general and administrative expenses ("SG&A") in the Consolidated Statements of
Income in the period in which such changes in collection become known. If
conditions change in future periods, additional allowances or reversals may be
required. Such additional allowances could be significant.

In August 2002, Andrx management learned that an employee had made
numerous improper entries that affected the adequacy of the Company's allowance
for doubtful accounts receivable. Management determined that the Company's
provision for doubtful accounts receivable was understated during 1999, 2000,
2001 and the first quarter of 2002, by an aggregate amount of $4.9 million.
After consideration of all of the facts and circumstances, the Company
recognized the full $4.9 million prior period misstatement amount in the second
quarter of 2002, as the Company believed it was not material to any period
affected. The Company notified the SEC of this matter promptly upon discovery.

Inventories

Inventories consist primarily of finished goods held for distribution,
and raw materials, work in process and finished goods of Andrx bioequivalent and
brand products. As of June 30, 2003, the Company had $174.4 million in
inventories. Inventories are stated at the lower of cost (first-in, first-out)
or market. Cost of inventories held for distribution is based on purchase price,
net of vendor discounts, rebates and other allowances, but excludes shipping,
warehousing and distribution costs, which are expensed as incurred and reported
as SG&A in the Unaudited Condensed Consolidated Statements of Income. In
evaluating whether inventories are stated at the lower of cost or market,
management considers such factors as the amount of inventory on hand and in the
distribution channel, the estimated time required to sell such inventory,
remaining shelf life and current and expected market conditions, including
levels of competition and for its inventories held for distribution, the
Company's right to return or exchange such products with the products'
manufacturer. As appropriate, provisions through cost of goods sold are made to
reduce inventories to their net realizable value. If conditions change in future
periods, additional provisions may be required. Such additional provisions could
be significant.

Andrx has made, is in the process of making and/or will scale-up and
make commercial quantities of certain of its product candidates prior to the
date Andrx anticipates that such products will receive FDA final marketing
approval and/or satisfactory resolution of the patent infringement litigation
involving them (i.e., pre-launch inventory). The scale-up and commercial
production of pre-launch inventories involves the risk that such products may
not be approved for marketing by the FDA on a timely basis, or ever, and/or that
the outcome of related litigation may not be satisfactory. This risk
notwithstanding, Andrx plans to continue to scale-up and build pre-launch
inventories of certain products that have not yet received final FDA approval
and/or satisfactory resolution of patent infringement litigation when it
believes that such action is appropriate in relation to the commercial value of
its product launch opportunity. When an exclusivity period is involved, this is
a particularly difficult determination. As of June 30, 2003, the Company had
approximately $9.5 million of inventories, primarily raw materials, pending
final approval and/or satisfactory resolution of litigation.




24

For the three months ended June 30, 2003 the Company recorded charges
of $8.2 million related to the writedown of certain assets of the Company's
Massachusetts aerosol facility, which the Company is seeking to possibly divest.
The writedown, which is included in cost of goods sold, consisted of $3.0
million for inventories and $5.2 million for property, plant and equipment. For
the three and six months ended June 30, 2003 cost of goods sold included $1.3
million and $2.7 million, respectively, relating primarily to under utilization
and inefficiencies at Andrx's Massachusetts aerosol manufacturing facilities.
During the three and six months ended June 30, 2003, Andrx also recorded charges
directly to cost of goods sold of $1.1 million and $2.7 million, respectively,
associated with its manufacturing facilities in Weston, Florida (which is in the
start-up phase), Morrisville, North Carolina (which the Company plans to
renovate) and Davie, Florida (related to under utilization and inefficiencies).
For the six months ended June 30, 2003, cost of goods sold also includes charges
totaling $10.3 million for the production of the Company's products and product
commercialization activities which include a provision of $5.7 million related
to pre-launch production of Andrx's bioequivalent versions of Wellbutrin
SR/Zyban placed into production after December 31, 2002. The Company is
continuing to work on resolving the FDA and USP issues that affect its
Abbreviated New Drug Application ("ANDA") for bioequivalent versions of
Wellbutrin SR/Zyban.

In July 2003, the Company entered into an Exclusivity Transfer
Agreement ("Exclusivity Agreement") with Impax Corporation ("Impax") and a
subsidiary of Teva Pharmaceutical Industries Ltd ("Teva") pertaining to pending
ANDAs for bioequivalent versions of Wellbutrin SR and Zyban 100mg and 150mg
extended-release tablets filed by Andrx and by Impax. The Exclusivity Agreement
provides, among other things, that while Andrx will continue to seek to launch
its own versions of these ANDA products, if it is unable to do so within a
defined period of time, and Impax is able to market these ANDA products, Andrx
will enable Impax to launch the Impax products through Teva. Impax and Teva will
then share certain payments with Andrx relating to the sale of the Impax
products for a 180-day period. Should Andrx launch its own products prior to the
launch of the Impax products, Andrx will share with Impax and Teva certain
payments relating to the sale of the Andrx products for a 180-day period. To
date, neither the Andrx nor the Impax ANDAs for these products have been
approved by the FDA, and the appellate court has not ruled on GlaxoSmithKline's
("Glaxo") appeal of the favorable lower court decisions received by both Andrx
and Impax in their respective patent infringement litigations. The Exclusivity
Agreement may be subject to the approval of certain various governmental
agencies.

Sales Returns and Allowances

Allowances against net sales for estimated returns, chargebacks, and
other sales allowances are established by the Company concurrently with the
recognition of revenue. The allowances are included in the Company's Condensed
Consolidated Balance Sheets as either accounts receivable, net or in accrued
expenses and other liabilities, as appropriate, and are based upon consideration
of a variety of factors, including but not limited to, actual return experience
by product type, the number and timing of competitive products approved for sale
both historically and as projected, the market for the product, estimated
customer inventory levels by product and current and projected economic
conditions, levels of competition and price declines. Actual product returns,
chargebacks and other sales allowances incurred are dependent upon future
events. The Company periodically monitors the factors that influence sales
allowances and makes adjustments to these provisions when management believes
that actual product returns, chargebacks and other sales returns and allowances
may differ from established allowances. If conditions in future periods change,
additional allowances may be required. Such additional allowances could be
significant. Net sales of the Company's bioequivalent and brand products may be
affected by the Company's estimated sales returns and allowances.




25

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

The Company's significant accounting estimates for sales returns and
allowances for brand products are dependent on the Company's ability to promote
to physicians, create demand for products, pull products through the
distribution channel and estimate returns, future levels of prescriptions for
its products and the inventory levels in the distribution channel. It is a
common pharmaceutical industry practice for brand manufacturers to offer
customers, among other things, buy-in allowances on initial purchases prior to
promotion activities by the manufacturer. As there are a limited number of large
customers, customer purchases are generally subject to the right of return or
exchange. Accordingly, the Company makes significant accounting estimates
related to sales allowances in connection with the recognition of revenues, and
periodically reviews such estimates. The Company's policy is to recognize net
sales to the extent it can reasonably estimate returns and the product being
pulled through the distribution channel. If conditions change in future periods,
additional allowances or reversals may be required. Such additional allowances
could be significant.

Useful Life or Impairment of Goodwill and Other Intangible Assets

Under the purchase method of accounting for acquisitions, goodwill
represents the excess of purchase price over the fair value of the net assets
acquired. As of June 30, 2003, the Company had approximately $34.0 million of
goodwill in the Condensed Consolidated Balance Sheet consisting of $26.3 million
from the acquisition of CTEX Pharmaceuticals, Inc ("CTEX") in January 2001 and
$7.7 million from the acquisition of Valmed Pharmaceuticals, Inc. ("Valmed") in
March 2000. With the adoption of Statement of Financial Accounting Standards
("SFAS") No. 142 in 2002, goodwill is no longer amortized and is subject to a
periodic assessment, based on fair value, of whether there is any impairment in
the value of the acquired goodwill. This assessment is to be performed at least
annually, and the applicable impairment loss is the amount, if any, by which the
implied fair value of goodwill is less than the carrying value. If conditions in
future periods change, impairment charges may be required. Such additional
charges could be significant.




26

As of June 30, 2003, the Company had $18.4 million of other intangible
assets, net in the Condensed Consolidated Balance Sheet, which consisted
primarily of $3.7 million related to POL and related trademarks, $1.3 million
related to patents for Andrx's electronic prescription process, and $11.8
million, $1.6 million and $9,000 for product rights related to the Entex,
Anexsia and Embrex product lines, respectively. Andrx's Physicians' Online
("POL") web portal and related trademarks, and patents relating to Andrx's
electronic prescription process are being amortized over periods ranging from
four to fourteen years. Brand product rights purchased from other pharmaceutical
companies or acquired through the allocation of purchase price upon the
acquisition of another entity are being amortized over periods ranging from
three to ten years. Management established the amortization period based on an
estimate of the period that the assets would generate positive cash flow. If
conditions in future periods change, the Company may be required to decrease the
estimated amortization period. Amortization is provided using the straight-line
method over the estimated useful life. Intangible assets are reviewed for change
in useful life or impairment whenever events or changes in circumstances have
occurred that may warrant revision of the estimated useful life or indicate that
the carrying amount of an asset may not be recoverable. If conditions in future
periods change, impairment charges may be required, which could be significant.

On February 25, 2003, the FDA announced that it intends to publish a
Federal Register notice to describe its enforcement policy with respect to
products such as the Entex line of products that are presently on the market and
sold by prescription without an approved ANDA or New Drug Application ("NDA").
As a result of the Federal Register notice, Andrx may be required to seek FDA
approval for marketing the Entex line of products and may be required to market
some or all of these products as over-the-counter ("OTC") products. Upon
issuance of definitive guidance on this matter, Andrx will assess the
unamortized portion of the Entex product rights ($11.8 million as of June 30,
2003) and Entex inventories ($259,000 as of June 30, 2003) for any resulting
impairment.

Deferred Income Tax Asset Valuation Allowance

Under the provisions of SFAS No. 109, "Accounting for Income Taxes",
the Company is required to record a valuation allowance to reduce its deferred
income tax assets to the amount that is more likely than not to be realized. As
of June 30, 2003, the Company had a $50.2 million deferred income tax asset. As
of June 30, 2003, the Company determined that no valuation allowance was
necessary on its deferred income tax asset after considering its ability to
utilize net operating losses, future taxable income projections and ongoing
prudent and feasible tax planning strategies. In the event the Company were to
determine that it would not be able to realize all or part of its deferred
income tax asset in the future, an adjustment to the deferred income tax asset
would be charged to the Consolidated Statements of Income in the period such
determination was made.




27


Licensing Revenues and Royalties

In October 2002, Andrx entered into an agreement with Genpharm Inc.
("Genpharm") and Kremers Urban Development Co. ("KUDCo"), pursuant to which
Andrx and Genpharm relinquished any marketing exclusivity rights to the 10mg and
20mg strengths of omeprazole (generic Prilosec), thereby accelerating the
ability of KUDCo to receive final FDA marketing approval for its version of that
product, which KUDCo received on November 1, 2002. Pursuant to the agreement,
Andrx is entitled to receive:

o 15.0% of KUDCo's net profits, as defined in the agreement
("Net Profits"), through June 8, 2003,

o 9.0% of KUDCo's Net Profits from June 9, 2003 for

(i) approximately the next twelve months, or

(ii) until an appellate court decision, as defined in
the agreement, occurs, and

o 6.25% of KUDCo's Net Profits during approximately the next 24
months thereafter.

Such licensing fees may also cease if either Andrx or Genpharm becomes
lawfully permitted to launch their own bioequivalent version of Prilosec. Under
the agreement, KUDCo is required to provide Andrx with an estimate of Andrx's
licensing revenues for each month within 10 days subsequent to such month.
Payments to Andrx for amounts earned in December 2002 and January 2003 were due
to Andrx 90 days after month end. Amounts earned thereafter are due to Andrx 60
days after the respective month end. Based on the estimates received from KUDCo,
Andrx recorded $32.5 million in estimated licensing revenues in the second
quarter of 2003. KUDCo has advised Andrx that it estimates that licensing
revenues to be earned by Andrx for July 2003 will be approximately $6.4 million.
Future KUDCo licensing revenues will be dependent on a number of factors,
including, the applicable licensing rate (which reduced from 15% to 9% on June
9, 2003), KUDCo's profits derived from its sales of its generic Prilosec, which
are dependent on the number of units KUDCo produces and its per unit selling
price, the outcome of the various appeals involving generic Prilosec, and other
factors outside of Andrx's control. In August 2003, Mylan Laboratories, Inc.
("Mylan") launched its bioequivalent versions of the 10mg and 20mg strengths of
Omeprazole (generic Prilosec). This competition could lead to reduced sales for
KUDCo's bioequivalent version of Prilosec, which in turn would lead to reduced
licensing revenues to Andrx.

Litigation Settlements and Related Accruals

The Company accounts for the exposure of its various litigation matters
under the provisions of SFAS No. 5 "Accounting for Contingencies", which
requires, among other things, an exposure to be accrued with a charge to Andrx's
Consolidated Statement of Income when it becomes probable and estimatable. No
accrual or disclosure of legal exposures judged to be remote is required. The
exposure to legal matters is evaluated and estimated, if possible, based on,
among other things, consultation with legal counsel. Such estimates are based on
currently available information and their ultimate outcome may be significantly
different than the amounts estimated given the subjective nature and
complexities inherent in these areas. The Company's disclosures related to
possible significant exposure for legal matters are included herein in Note 9 to
the Unaudited Condensed Consolidated Financial Statements.




28

The 2003 periods include, among other things, a $7.5 million charge
relating to various previously announced legal claims, including the negotiated
settlement of an obligation to one of the Company's law firms with respect to
Andrx's bioequivalent version of Tiazac. For the three months ended June 30,
2002, in anticipation of potentially reaching a settlement on certain
litigation, Andrx recorded an estimated litigation settlement charge of $60.0
million. This contingency became probable and estimatable in June 2002 as a
result of mediation discussions between the Company, Aventis and the various
classes of plaintiffs in the Cardizem CD antitrust litigation that was pending
for multidistrict proceedings in the United States District Court for the
Eastern District of Michigan. In connection therewith, in July 2002, Andrx and
Aventis entered into a settlement, which is now binding, with the direct
purchaser class of plaintiffs. In January 2003, Andrx and Aventis entered into a
settlement agreement with the indirect purchaser class of plaintiffs, as well as
with the attorney generals for all 50 states, the District of Columbia and
Puerto Rico, which remains subject to court approval. The respective payments
made or to be made by Andrx and Aventis under these agreements has not been
disclosed. Andrx intends to vigorously litigate any outstanding related cases
that it cannot settle on a reasonable basis. The portion of the accrued
litigation settlements charge, for this and other legal matters, that was not
paid as of June 30, 2003, is included in Accrued expenses and other liabilities
in the June 30, 2003 Condensed Consolidated Balance Sheet.

Insurance Programs

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




29


ANDRX CORPORATION AND SUBSIDIARIES

Results of Operations

Three Months Ended June 30, 2003 ("2003 Quarter") as Compared to the Three
Months Ended June 30, 2002 ("2002 Quarter")

For the 2003 Quarter, the Company generated net income of $14.5
million, as compared to a net loss of $31.3 million for the 2002 Quarter. For
the 2002 Quarter, of the $31.3 million of net loss, $29.8 million of net loss
was allocated to Andrx Common Stock and $1.5 million of net loss was allocated
to the former Cybear Common Stock.

Revenues and Cost of Goods Sold

Three Months Ended
June 30,
(in thousands)
------------------------------
2003 2002
--------- ---------

Distributed Products
Revenues $ 161,506 $ 121,502
Cost of goods sold 132,539 98,573
Gross profit 28,967 22,929
Gross margin 17.9% 18.9%

Andrx Products - Bioequivalent
Revenues $ 66,178 $ 48,341
Cost of goods sold 27,849 21,275
Gross profit 38,329 27,066
Gross margin 57.9% 56.0%

Andrx Products - Brand
Revenues $ 10,501 $ 7,429
Cost of goods sold 1,654 3,648
Gross profit 8,847 3,781
Gross margin 84.2% 50.9%

Andrx Products - Total
Revenues $ 76,679 $ 55,770
Cost of goods sold 29,503 24,923
Gross profit 47,176 30,847
Gross margin 61.5% 55.3%

TOTAL PRODUCTS
Revenues $ 238,185 $ 177,272
Cost of goods sold 162,042 123,496
Gross profit 76,143 53,776
Gross margin 32.0% 30.3%

LICENSING AND ROYALTIES
Revenues $ 33,054 $ 102
Gross margin 100.0% 100%

OTHER
Revenues $ 1,131 $ 3,168
Cost of goods sold 9,651 6,392
Gross profit (loss) (8,520) (3,224)
Gross margin (loss) (753.3)% (101.8)%

TOTAL REVENUES
Revenues $ 272,370 $ 180,542
Cost of goods sold 171,693 129,888
Gross profit 100,677 50,654
Gross margin 37.0% 28.1%



30

Distributed Products

Revenues from distributed products increased by 32.9% to $161.5 million
for the 2003 Quarter, from $121.5 million for the 2002 Quarter. The increase in
net sales from distributed products to an all time high level reflects the
participation in the distribution of generic products introduced by generic
manufacturers, and an increase in sales to existing and new customers, which was
partially offset by the overall price declines generally associated with generic
products. For the 2003 Quarter, net sales of distributed products generated
$29.0 million of gross profit with a gross margin of 17.9%, as compared to $22.9
million of gross profit with a gross margin of 18.9% for the 2002 Quarter. The
increase in net sales and the decrease in gross margin in the 2003 Quarter is
primarily the result of the Company's participation in the distribution of a
high sales volume, low gross margin cross-licensed version of Ciprofloxacin.
These levels of gross margins on sales of distributed products are within the
historical range of 14% to 21%.

Bioequivalent Products

Revenues from Andrx bioequivalent products increased by 36.9% to $66.2
million for the 2003 Quarter, as compared to $48.3 million in the 2002 Quarter.
Revenues from Andrx bioequivalent products for both periods include sales of the
Company's bioequivalent versions of Cardizem CD, Dilacor XR, Glucophage, K-Dur
and Ventolin metered dose inhalers. For the 2003 Quarter, such revenues also
include net sales of the Company's bioequivalent versions of Naprelan, Tiazac
and Claritin-D24 (which is sold by L. Perrigo Company ("Perrigo") as an OTC
product). The increase in revenues from Andrx bioequivalent products for the
2003 Quarter as compared to the 2002 Quarter results primarily from the launches
of its bioequivalent versions of Tiazac in April 2003, with $14.3 million in
revenues, and Claritin-D24 in June 2003, with $4.0 million in revenues. Both of
these launches included initial stocking. Andrx's bioequivalent version of
Cardizem CD continues to generate significant levels of net sales and gross
profit and materially contributes to Andrx's current overall operating results.

For the 2003 Quarter, Andrx's bioequivalent products generated $38.3
million of gross profit with a gross margin of 57.9%, as compared to $27.1
million of gross profit with a gross margin of 56.0% in the 2002 Quarter. The
increase in gross profit and gross margin primarily results from the launch of
Andrx's bioequivalent version of Tiazac which is currently competing with one
other generic product and Claritin-D24. Claritin-D24 is in its 180-day market
exclusivity period.

Andrx is required to make certain payments in connection with the net
sales the Company derives from its bioequivalent version of Tiazac. Andrx agreed
to pay Biovail a royalty at an undisclosed rate on net sales of Taztia XT, as
defined, in connection with, among other things, their agreement to resolve
various pending litigation matters and implement a dispute resolution mechanism
for future disputes. The Biovail royalties are recognized in conjunction with
the related net revenues and charged to cost of goods sold.

In both the 2003 and 2002 Quarters, Andrx recorded $1.1 million in
charges directly to cost of goods sold relating to its manufacturing facilities
in Weston, Florida (which is in the start-up phase), Morrisville, North Carolina
(which the Company plans to renovate) and Davie, Florida (related to under
utilization and inefficiencies). Although not eliminated, under utilization and
inefficiencies improved during the quarter.





31


The Company is continuing to work on resolving the FDA and USP issues
that affect its ANDAs for bioequivalent versions of Wellbutrin SR/Zyban. In July
2003, the Company entered into an Exclusivity Agreement with Impax and a
subsidiary of Teva pertaining to the pending ANDAs for bioequivalent versions of
Wellbutrin SR and Zyban 100mg and 150mg extended-release tablets filed by Andrx
and by Impax. The Exclusivity Agreement provides, among other things, that while
Andrx will continue to seek to launch its own versions of these ANDA products,
if it is unable to do so within a defined period of time, and Impax is able to
market these ANDA products, Andrx will enable Impax to launch the Impax products
through Teva. Impax and Teva will then share certain payments with Andrx
relating to the sale of the Impax products for a 180-day period. Should Andrx
launch its own products prior to the launch of the Impax products, Andrx will
share with Impax and Teva certain payments relating to the sale of the Andrx
products for a 180-day period. To date, neither the Andrx nor the Impax ANDAs
for these products have been approved by the FDA, and the appellate court has
not ruled on Glaxo's appeal of the favorable lower court decisions received by
both Andrx and Impax in their respective patent infringement litigations. The
Exclusivity Agreement may be subject to the approval of certain various
governmental agencies.

Brand Products

For the 2003 Quarter, revenues from Andrx brand products increased by
41.4% to $10.5 million from $7.4 million in the 2002 Quarter. Revenues from
Andrx brand products for the 2003 Quarter include sales generated from the Entex
(cough and cold), Embrex (prenatal vitamins), Anexsia (pain) and Altocor (lipid
lowering) product lines. The increase in revenues in the 2003 Quarter, as
compared to the 2002 Quarter, was primarily the result of $6.9 million in net
sales of Altocor which the Company began marketing in the third quarter of 2002,
partially offset by decreases in revenues from Andrx's brand cough and cold,
Embrex and Anexsia product lines, which were affected by various factors,
including the advent of generic competition.

For the 2003 Quarter, Andrx brand products generated $8.8 million of
gross profit with a gross margin of 84.2%, as compared to $3.8 million of gross
profit with a gross margin of 50.9% for the 2002 Quarter. The increase in gross
profit and gross margin for the 2003 Quarter from the 2002 Quarter resulted
primarily from the gross profit generated by Altocor, partially offset by lower
levels of gross profit from Andrx's cough and cold products. The 2002 Quarter
includes an inventory allowance of $1.6 million recorded through cost of goods
sold. Cost of goods sold in the 2003 Quarter and 2002 Quarter included royalties
accrued on the net sales generated from the Entex and Anexsia product lines, as
well as amortization of the marketing rights Andrx acquired for the CTEX, Entex
and Anexsia products, calculated on a straight-line basis.

Licensing and Royalties

In the 2003 Quarter, Andrx generated $33.1 million in licensing and
royalties revenue, as compared to $102,000 in the 2002 Quarter. Licensing and
royalties revenue for the 2003 Quarter include $32.5 million of estimated
revenues from the agreement with KUDCo. The licensing rate due from KUDCo
reduced from 15% to 9% on June 9, 2003 in conjunction with the related
agreement. In August 2003, Mylan launched its bioequivalent versions of the 10mg
and 20mg strengths of Omeprazole (generic Prilosec). This competition could lead
to reduced sales for KUDCo's version of Prilosec, which in turn would lead to
reduced licensing revenues for Andrx.






32

Other Revenues

The Company generated $1.1 million of other revenues in the 2003
Quarter, as compared to $3.2 million in the 2002 Quarter. Other revenues for the
2003 Quarter primarily represented revenues from the contract manufacture of
aerosols at the Company's Massachusetts facility and revenues generated from the
Company's agreement with Aventis, relating to its physician Internet operations,
including the POL web portal.

In the 2003 Quarter, cost of goods sold related to other revenues
includes $8.2 million relating to the writedown of certain assets, primarily
inventories and property, plant and equipment, at its Massachusetts aerosol
manufacturing operations that the Company is seeking to divest. Cost of goods
sold related to other revenues for the 2003 and 2002 Quarters also includes $1.3
million and $2.6 million, respectively, relating to under utilization and
inefficiencies at Andrx's Massachusetts aerosol facilities.

SG&A

SG&A expenses were $58.2 million or 21.4% of total revenues, as
compared to $46.5 million, or 25.7% of total revenues for the 2002 Quarter. SG&A
expenses include expenses relating to the administration, marketing, selling,
distributing and warehousing of products, brand sales and marketing efforts,
royalties to the Company's former Co-Chairman and Chief Scientific Officer
related to sales of the Company's bioequivalent version of Cardizem CD,
corporate overhead and legal costs (primarily patent infringement matters
relating to the Company's ANDA filings and antitrust matters). The increase in
SG&A expenses in the 2003 Quarter, as compared to the 2002 Quarter, was
primarily due to increases in brand sales and marketing costs, the continued
expansion of distribution operations, including the opening of a new Ohio
distribution facility in the third quarter of 2002, and increases in insurance
expenses and corporate overhead, which were partially offset by a decrease in
Internet operating expenses. The Company employed approximately 400 brand sales
representatives at June 30, 2003, as compared to approximately 280 at June 30,
2002. The average annualized direct cost of an Andrx brand sales representative,
including training costs, was approximately $135,000 in the 2003 Quarter, as
compared to approximately $100,000 in the 2002 Quarter. Andrx employed
approximately 220 sales representatives for its distribution businesses in its
Florida and New York locations for both the 2003 and 2002 Quarters. Operating
expenses related to Andrx's Internet operations are classified as SG&A or cost
of goods sold, as appropriate for all periods presented. The 2002 Quarter
includes a charge of $4.9 million related to an understatement of the Company's
allowance for doubtful accounts receivable, during 1999, 2000, 2001 and the
first quarter of 2002, due to the unauthorized actions of a single lower level
employee who had altered certain of the Company's accounts receivable records.

Research and Development ("R&D")

R&D expenses were $12.5 million for the 2003 Quarter, as compared to
$11.4 million for the 2002 Quarter. R&D expenses reflect the Company's continued
commercialization efforts in its bioequivalent (ANDA) and brand (NDA) product
development programs. During the 2003 Quarter, approximately 50% of R&D expenses
were in the bioequivalent program and 50% were in the brand program. During the
2003 Quarter, Andrx submitted two ANDAs to the FDA and a marketing authorization
application in the European Union for Fortamet (metformin XT).




33


In its bioequivalent R&D operations, the Company is attempting to
develop bioequivalent formulations of marketed products. The cost of related
bioequivalent biostudies are generally less than $100,000 for each small-scale
or pilot study, and approximately $250,000 for each study used in connection
with an ANDA submission. The Company estimates that the average cost of
developing a controlled-release product (excluding legal costs) is approximately
$2.0 million and the cost of developing a specialty, niche or immediate release
product is approximately $1.0 million. The principal costs incurred in
connection with these projects are personnel costs, overhead costs, costs paid
to third party contract research organizations for conducting bioequivalence
studies and costs for raw materials used in developing the products.

In its brand R&D operations, Andrx develops product formulations,
manages the clinical studies performed on those products by contract research
organizations and prepares NDAs. Brand R&D expenses include laboratory services,
clinical investigators and contract research organizations, as well as Andrx
personnel costs, overhead, raw material costs, and other professional services.
The Company estimates that the average cost of developing an Andrx brand product
(from formulation to NDA approval) could range from approximately $20 million to
$30 million, and could take up to approximately five years assuming Andrx
continues to focus on pursuing approval of its NDAs through the 505(b)(2)
regulatory process.

Litigation Settlements and Other Charges

Litigation settlements and other charges were $7.5 million for the 2003
Quarter relating to various previously announced legal claims, including the
negotiated settlement of an obligation to one of the Company's law firms with
respect to Andrx's bioequivalent version of Tiazac. The 2002 Quarter includes a
litigation settlements charge of $60.0 million related to the Company's Cardizem
CD antitrust litigation.


Equity in Earnings of Joint Ventures

The Company generated $1.2 million of equity in earnings of its
unconsolidated joint ventures in the 2003 Quarter, compared to $943,000 in the
2002 Quarter. For the 2003 Quarter and 2002 Quarter, equity in earnings of its
joint ventures were generated by ANCIRC's net sales of its bioequivalent
versions of Oruvail and to a lesser extent Trental and CARAN's net sales of its
bioequivalent versions of Pepcid and Prozac. ANCIRC is Andrx's 50/50 joint
venture with Watson Pharmaceuticals, Inc. and CARAN is Andrx's 50/50 joint
venture with Carlsbad Technologies, Inc.

Interest Income

The Company generated interest income of $451,000 in the 2003 Quarter,
as compared to $1.6 million in the 2002 Quarter. The decrease in interest income
is primarily the result of the lower average level of cash, cash equivalents and
investments available-for-sale maintained and lower interest rates on these
investments, compared to the 2002 Quarter. The Company invests in taxable,
tax-advantaged and tax-free investment grade securities.

Interest Expense

The Company incurred interest expense of $685,000 in the 2003 Quarter,
as compared to $95,000 in the 2002 Quarter. During the 2003 Quarter, interest
expense incurred was primarily related to the unused line fee and amortization
of issuance costs related to the Company's secured line of credit entered into
in December 2002, and financing charges on capital lease obligations. The 2003
Quarter and 2002 Quarter also included financing charges on certain insurance
premiums.




34


Gain on Sales of Assets

On July 31, 2002, Andrx sold its Dr. Chart and @Rx applications,
licensed its patents for the Internet transmission of prescriptions, and entered
into a two-year marketing agreement with a business unit of Aventis S.A.
relating to Andrx's POL web portal. In conjunction with this transaction, the
Company recognized $146,000 as a Gain on sales of assets in the Unaudited
Condensed Consolidated Statements of Income for the 2003 Quarter. The 2002
Quarter included a gain of $4.5 million related to the June 2002 sale of the
Histex cough and cold line of products.

Income Taxes

For the 2003 Quarter, the Company provided for income taxes of $9.1
million or 39% of income before income taxes, as compared to an income tax
benefit of $28.9 million, or 48.0% of loss before income taxes, for the 2002
Quarter. For the 2003 Quarter, the Company provided for income taxes in excess
of the expected annual effective federal statutory rate of 35%, primarily due to
the effect of state income taxes. The 2002 Quarter includes the recording of a
tax benefit of $21.7 million or 36% of loss before income taxes, which includes
the effect of state income taxes. This 2002 tax benefit was further increased by
the reversal of the $7.2 million valuation allowance on deferred tax assets,
relating to certain net operating loss carryforwards.


Weighted Average Shares Outstanding

The basic and diluted weighted average shares of Andrx Common Stock
outstanding was 71.9 million and 72.6 million, respectively, in the 2003
Quarter, as compared to 70.7 million in the 2002 Quarter. The basic weighted
average share computation for the 2003 and 2002 Quarters include the weighted
average shares of common stock outstanding during the period, as well as the
vested portion of restricted stock units. Diluted per share calculations include
weighted average shares of common stock outstanding during the three months
ended June 30, 2003 plus dilutive common stock equivalents, which include stock
options and restricted stock units as computed using the treasury stock method.
For the 2003 Quarter, the anti-dilutive common stock equivalents consist of
stock options and unvested restricted stock units in which the exercise price or
issuance price, respectively, were in excess of the average market price for the
respective three month period. For the 2002 Quarter, all potential shares were
excluded from the diluted share computation as the Company reported a net loss
and, accordingly, such potential common shares were anti-dilutive. The 2002
Quarter also excludes the unamortized restricted stock units, which were also
anti-dilutive. The increase in the basic weighted average number of shares of
Andrx Common Stock outstanding in the 2003 and 2002 Quarters, was attributable
to exercises of stock options, issuances of shares under the Company's employee
stock purchase plan, and the issuance of approximately 65,000 shares of Andrx
Common Stock in connection with the Conversion.

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




35


Six Months Ended June 30, 2003 ("2003 Period") as Compared to the Six Months
Ended June 30, 2002 ("2002 Period")

For the 2003 Period, the Company generated net income of $20.8 million,
as compared to a net loss of $26.8 million for the 2002 Period. For the 2002
Period, of the $26.8 million of net loss, $21.4 million of net loss was
allocated to Andrx Common Stock and $5.4 million of net loss was allocated to
the former Cybear Common Stock.

Revenues and Cost of Goods Sold


Six Months Ended
June 30,
(in thousands)
------------------------------
2003 2002
--------- ---------

Distributed Products
Revenues $ 316,123 $ 248,547
Cost of goods sold 257,566 202,328
Gross profit 58,557 46,219
Gross margin 18.5% 18.6%

Andrx Products - Bioequivalent
Revenues $ 106,681 $ 97,329
Cost of goods sold 56,602 38,943
Gross profit 50,079 58,386
Gross margin 46.9% 60.0%

Andrx Products - Brand
Revenues $ 18,430 $ 12,977
Cost of goods sold 4,170 6,189
Gross profit 14,260 6,788
Gross margin 77.4% 52.3%

Andrx Products - Total
Revenues $ 125,111 $ 110,306
Cost of goods sold 60,772 45,132
Gross profit 64,339 65,174
Gross margin 51.4% 59.1%

TOTAL PRODUCTS
Revenues $ 441,234 $ 358,853
Cost of goods sold 318,338 247,460
Gross profit 122,896 111,393
Gross margin 27.9% 31.0%

LICENSING AND ROYALTIES
Revenues $ 64,192 $ 216
Gross margin 100.0% 100.0%

OTHER
Revenues $ 4,129 $ 4,792
Cost of goods sold 12,388 8,945
Gross profit (loss) (8,259) (4,153)
Gross margin (loss) (200.0%) (86.7%)

TOTAL REVENUES
Revenues $ 509,555 $ 363,861
Cost of goods sold 330,726 256,405
Gross profit 178,829 107,456
Gross margin 35.1% 29.5%



36

Total Revenues and Cost of Goods Sold

Distributed Products

Revenues from distributed products increased by 27.2% to $316.1 million
for the 2003 Period, from $248.5 million for the 2002 Period. The increase in
sales from distributed products reflects the participation in the distribution
of generic products introduced by generic manufacturers, and an increase in
sales to existing and new customers, which was partially offset by the overall
price declines generally associated with generic products.

For the 2003 Period, net sales of distributed products generated $58.6
million of gross profit with a gross margin of 18.5%, as compared to $46.2
million of gross profit with a gross margin of 18.6% for the 2002 Period.

Bioequivalent Products

Revenues from Andrx bioequivalent products increased by 9.6% to $106.7
million for the 2003 Period, as compared to $97.3 million in the 2002 Period.
Revenues from Andrx bioequivalent products for both periods include sales of the
Company's bioequivalent versions of Cardizem CD, Dilacor XR, Ventolin metered
dose inhalers, Glucophage and K-Dur. For the 2003 Period, such revenues also
include net sales of the Company's bioequivalent versions of Naprelan, Tiazac
(launched in April 2003), and Claritin-D24 (launched by Perrigo as an OTC
product in June 2003). The increase in revenues from Andrx bioequivalent
products for the 2003 Period as compared to the 2002 Period results primarily
from the Tiazac and Claritin-D24 product launches, which includes initial
stockings. Andrx's bioequivalent version of Cardizem CD continues to generate
significant levels of net sales and gross profit and materially contributes to
Andrx's current overall operating results.

For the 2003 Period, Andrx's bioequivalent products generated $50.1
million of gross profit with a gross margin of 46.9%, as compared to $58.4
million of gross profit with a gross margin of 60.0% in the 2002 Period. The
decrease in gross profit and gross margin primarily results from an $11.0
million charge related to production of currently marketed bioequivalent
products and pre-launch inventories of bioequivalent products, including $5.7
million for Wellbutrin SR/Zyban placed into production after December 31, 2002.
Andrx also recorded $2.7 million and $3.1 million, respectively, in charges
directly to cost of goods sold for the 2003 and 2002 Periods relating to its
manufacturing facilities in Weston, Florida (which is in the start-up phase),
Morrisville, North Carolina (which the Company plans to renovate) and Davie,
Florida (related to under utilization and inefficiencies).

Andrx is required to make certain payments in connection with the net
sales the Company derives from its bioequivalent version of Tiazac. Andrx agreed
to pay Biovail a royalty at an undisclosed rate on net sales of Taztia XT, as
defined, in connection with, among other things, their agreement to resolve
various pending litigation matters and implement a dispute resolution mechanism
for future disputes. The Biovail royalties are recognized in conjunction with
the related net revenues and charged to cost of goods sold.




37


In July 2003, the Company entered into an Exclusivity Agreement with
Impax and a subsidiary of Teva pertaining to the pending ANDAs for bioequivalent
versions of Wellbutrin SR and Zyban 100mg and 150mg extended-release tablets
filed by Andrx and by Impax. The Exclusivity Agreement provides, among other
things, that while Andrx will continue to seek to launch its own versions of
these ANDA products, if it is unable to do so within a defined period of time,
and Impax is able to market these ANDA products, Andrx will enable Impax to
launch the Impax products through Teva. Impax and Teva will then share certain
payments with Andrx relating to the sale of the Impax products for a 180-day
period. Should Andrx launch its own products prior to the launch of the Impax
products, Andrx will share with Impax and Teva certain payments relating to the
sale of the Andrx products for a 180-day period. To date, neither the Andrx nor
the Impax ANDAs for these products have been approved by the FDA, and the
appellate court has not ruled on Glaxo's appeal of the favorable lower court
decisions received by both Andrx and Impax in their respective patent
infringement litigations. The Exclusivity Agreement may be subject to the
approval of certain various governmental agencies.

Brand Products

For the 2003 Period, revenues from Andrx brand products increased by
42.0% to $18.4 million from $13.0 million in the 2002 Period. Revenues from
Andrx brand products for the 2003 Period include sales generated from the Entex
(cough and cold), Embrex (prenatal vitamins), Anexsia (pain) and Altocor (lipid
lowering) product lines. The increase in revenues in the 2003 Period, as
compared to the 2002 Period, was primarily the result of $11.0 million in net
sales of Altocor, which the Company began marketing in the third quarter of
2002, partially offset by a lower level of net sales from the cough and cold and
Embrex product lines, which were affected by various factors, including the
advent of generic competition.


For the 2003 Period, Andrx brand products generated $14.3 million of
gross profit with a gross margin of 77.4%, as compared to $6.8 million of gross
profit with a gross margin of 52.3% for the 2002 Period. The increase in gross
profit and gross margin for the 2003 Period from the 2002 Period resulted
primarily from the gross profit generated by Altocor, partially offset by lower
levels of gross profit from Andrx's cough and cold products. Gross margins were
affected by, among other things, the Company recording an inventory allowance of
$2.4 million through cost of goods sold in the 2002 Period. Cost of goods sold
in the 2003 and 2002 Periods included royalties accrued on the net sales
generated from the Entex and Anexsia product lines, as well as amortization of
the rights for the CTEX, Entex and Anexsia products, calculated on a
straight-line basis.


Licensing and Royalties

In the 2003 Period, Andrx generated $64.2 million in licensing and
royalties revenue, as compared to $216,000 in the 2002 Period. Licensing and
royalties revenue for the 2003 Period include $62.9 million of revenues from the
agreement with KUDCo. The licensing rate due from KUDCo reduced from 15% to 9%
on June 9, 2003 in conjunction with the related agreement. In August 2003, Mylan
launched its bioequivalent versions of the 10mg and 20mg strengths of Omeprazole
(generic Prilosec). This competition could lead to reduced sales for KUDCo's
version of Prilosec, which in turn would lead to reduced licensing revenues for
Andrx.





38

Other Revenues

The Company generated $4.1 million of other revenues in the 2003
Period, as compared to $4.8 million in the 2002 Period. Other revenues for the
2003 Period primarily represented revenues from the contract manufacture of
aerosols at the Company's Massachusetts facility and revenues generated from the
Company's agreement with Aventis, relating to its physician Internet operations,
including the POL web portal.

In the 2003 Period, cost of goods sold related to other revenues
includes $8.2 million relating to the writedown of certain assets at the
Company's Massachusetts aerosol facility, primarily inventories and property,
plant and equipment. For the 2003 and 2002 Periods, cost of goods sold related
to Other revenues also includes $2.7 million and $4.5 million, respectively,
related to under utilization and inefficiencies at Andrx's Massachusetts aerosol
facilities. The Company is seeking to divest its Massachusetts aerosol
manufacturing operations and its POL web portal.

SG&A

SG&A expenses were $113.7 million or 22.3% of total revenues, as
compared to $87.7 million or 24.1% of total revenues for the 2002 Period. SG&A
expenses include expenses relating to the administration, marketing, selling,
distributing and warehousing of products, brand sales and marketing efforts,
royalties to the Company's former Co-Chairman and Chief Scientific Officer
related to sales of the Company's bioequivalent version of Cardizem CD,
corporate overhead and legal costs (primarily patent infringement matters
relating to the Company's ANDA filings and antitrust matters). The increase in
SG&A expenses in the 2003 Period, as compared to the 2002 Period, was primarily
due to increases in brand sales and marketing costs, the continued expansion of
distribution operations, including the opening of a new Ohio distribution
facility in September 2002, and increases in insurance expenses, and corporate
overhead, which were partially offset by a decrease in Internet operating
expenses. The Company employed approximately 400 brand sales representatives at
June 30, 2003, as compared to approximately 280 at June 30, 2002 and employed
approximately 220 sales representatives for its distribution businesses in its
Florida and New York locations for both the 2003 and 2002 Periods. The 2002
Period includes a charge of $4.9 million related to an understatement of the
Company's allowance for doubtful accounts receivable, during 1999, 2000, 2001
and the first quarter of 2002, due to the unauthorized actions of a single lower
level employee who had altered certain of the Company's accounts receivable
records.

R&D

R&D expenses were $25.8 million for the 2003 Period, as compared to
$21.3 million for the 2002 Period. R&D expenses reflect the Company's continued
commercialization efforts in its bioequivalent (ANDA) and brand (NDA) product
development programs. During the 2003 Period, approximately 50% of R&D expenses
were in the bioequivalent program and 50% were in the brand program. During the
2003 Period, ANDAs for five products were accepted as filed by the FDA, NDAs for
a valproate product and for metformin XT were accepted by the FDA as filed and
Andrx submitted a marketing authorization application in the European Union for
Fortamet (metformin XT).




39

Litigation Settlements and Other Charges

Litigation settlements and other charges were $7.5 million for the 2003
Period, relating to various previously announced legal claims, including the
negotiated settlement of an obligation to one of the Company's law firms with
respect to Andrx's bioequivalent version of Tiazac. The 2002 Period includes a
litigation settlements charge of $60.0 million related to the Company's Cardizem
CD antitrust litigation.

Equity in Earnings of Joint Ventures

The Company generated $1.6 million of equity in earnings of its
unconsolidated joint ventures in each of the 2003 and 2002 Periods. For the 2003
and 2002 Periods, equity in earnings of its joint ventures were generated by
ANCIRC's net sales of its bioequivalent versions of Oruvail and to a lesser
extent Trental and CARAN's net sales of its bioequivalent versions of Pepcid and
Prozac. ANCIRC is Andrx's 50/50 joint venture with Watson Pharmaceuticals, Inc.
and CARAN is Andrx's 50/50 joint venture with Carlsbad Technologies, Inc.

Interest Income

The Company generated interest income of $1.1 million in the 2003
Period, as compared to $3.2 million in the 2002 Period. The decrease in interest
income is primarily the result of the lower average level of cash, cash
equivalents and investments available-for-sale maintained and lower interest
rates on these investments, compared to the 2002 Period. The Company invests in
taxable, tax-advantaged and tax-free investment grade securities.

Interest Expense

The Company incurred interest expense of $1.3 million in the 2003
Period, as compared to $122,000 in the 2002 Period. During the 2003 Period,
interest expense incurred was primarily related to the unused line fee,
amortization of issuance costs related to the Company's secured line of credit,
and financing charges on capital lease obligations. The 2003 and 2002 Periods
also included financing charges on certain insurance premiums.

Gain on Sales of Assets

In connection with the sale of Dr. Chart and @Rx applications, the
licensing of its patents for Internet transmission of prescriptions and the
two-year marketing agreement in 2002 with a business unit of Aventis SA relating
to Andrx's POL web portal, revenue will be recognized in the Consolidated
Statements of Income as services are rendered or otherwise earned. During the
2003 Period, the Company recognized a $457,000 gain in connection with the sale
of the Dr. Chart and @Rx assets and a $125,000 gain included in Gain on sales of
assets from the sale of the Histex product line on June 28, 2002. This $125,000
gain was previously deferred. The 2002 Period included a gain of $4.5 million
related to the June 2002 sale of the Histex cough and cold line of products.




40

Income Taxes

For the 2003 Period, the Company provided for income taxes of $13.0
million or 38% of income before income taxes as compared to an income tax
benefit of $25.6 million or 49% of loss before income taxes for the 2002 Period.
For the 2003 Period, the Company provided for income taxes in excess of the
expected annual effective federal statutory rate of 35%, primarily due to the
effect of state income taxes. The 2002 Period includes the recording of an
income tax benefit of $18.4 million or 35% of loss before income taxes,
including the effect of state income taxes. This tax benefit was further
increased by the reversal of a $7.2 million valuation allowance on deferred tax
assets relating to certain net operating loss carryforwards.

Weighted Average Shares Outstanding

The basic and diluted weighted average shares of Andrx Common Stock
outstanding was 71.7 million and 72.4 million, respectively, in the 2003 Period,
as compared to 70.6 million in the 2002 Period. The basic weighted average share
computation for the 2003 and 2002 Periods, include the weighted average shares
of common stock outstanding during the period, as well as the vested portion of
restricted stock units. For the 2003 Period, the diluted per share calculations
include weighted average shares of common stock outstanding plus dilutive common
stock equivalents which include stock options and restricted stock units as
computed using the treasury stock method. For the 2003 Period, the anti-dilutive
common stock equivalents consist of stock options and unvested restricted stock
units in which the exercise price or issuance price, respectively, were in
excess of the average market price for the respective six month period. For the
2002 Period, all potential common shares were excluded from the diluted share
computation as the Company reported a net loss and accordingly, such potential
common shares and unvested restricted stock units were anti-dilutive. The
increase in the basic weighted average number of shares of Andrx Common Stock
outstanding in the 2003 Period, as compared to the 2002 Period, was attributable
to exercises of stock options, issuances of shares under the Company's employee
stock purchase plan and the issuance of approximately 65,000 shares of Andrx
Common Stock in connection with the Conversion.

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

Liquidity and Capital Resources

As of June 30, 2003, the Company had $158.1 million in cash, cash
equivalents and investments available-for-sale, $297.0 million of working
capital and $103.5 million available under the Company's $185.0 million secured
line of credit. As of June 30, 2003, no borrowings were outstanding under the
secured line of credit. The Company cannot currently access $81.5 million of the
$185.0 million line of credit based upon an insufficient fixed charge coverage
ratio and borrowing base. Andrx is currently in compliance with all the required
covenants under the credit facility.

Operating Activities

In the 2003 Period, net cash provided by operating activities was $82.0
million, compared to $8.9 million in the 2002 Period.




41


In the 2003 Period, net cash provided by operating activities of $82.0
million includes net income of $20.8 million, an income tax refund of $51.7
million, other income taxes of $12.0 million, income tax benefits on exercises
of stock options of $848,000, increases in accounts payable and accrued expenses
and other liabilities of $20.3 million, offset by increases in accounts
receivable, net of $10.1 million, inventories of $29.5 million, and prepaid and
other assets of $8.7 million. In addition, the 2003 Period also includes
depreciation and amortization of $13.7 million, a provision for doubtful
accounts receivable of $4.3 million, compensation expense on amortization of
restricted stock units of $663,000, and the writedown at the Company's
Massachusetts aerosol manufacturing facility of $8.2 million, offset by gain on
the sales of assets of $582,000 and equity in earnings of joint ventures of $1.6
million.

In the 2002 Period, net cash provided by operating activities of $8.9
million includes, income tax benefits on exercises of stock options of $2.5
million, a decrease in accounts receivable, net of $26.1 million, and an
increase in accounts payable and accrued expenses and other liabilities of $57.7
million, offset by a net loss of $26.8 million, increases in inventories of
$28.0 million, prepaid and other assets of $3.6 million, an income tax payment
of $816,000 and other income taxes of $28.1 million. In addition, the 2002
Period also includes depreciation and amortization of $10.4 million, a provision
for doubtful accounts receivable of $5.6 million, offset by equity in earnings
of joint ventures of $1.6 million and gain on sales of assets of $4.5 million.

Investing Activities

Net cash provided by investing activities was $7.6 million in the 2003
Period, as compared to $15.5 million in the 2002 Period.

In the 2003 Period, net cash provided by investing activities of $7.6
million consisted of $30.4 million in maturities of investments
available-for-sale and $250,000 in proceeds from the sales of assets, offset by
$23.0 million in purchases of property, plant and equipment.

In the 2002 Period, net cash provided by investing activities of $15.5
million consisted of $59.0 million in maturities of investments
available-for-sale and $1.4 million in proceeds from the sales of assets, offset
by $45.0 million in purchases of property, plant and equipment.

Financing Activities

Net cash provided by financing activities was $1.6 million in the 2003
Period, as compared to $2.9 million in the 2002 Period.

In the 2003 Period, net cash provided by financing activities of $1.6
million consisted of $1.4 million in proceeds from issuances of shares of Andrx
Common Stock from exercises of Andrx stock options and $578,000 in proceeds from
issuances of shares of Andrx Common Stock under the employee stock purchase
plan, offset by $404,000 in principal payments on capital lease obligations.

In the 2002 Period, net cash provided by financing activities of $2.9
million consisted of $1.7 million in proceeds from issuances of shares of Andrx
Common Stock from exercises of Andrx stock options and $1.1 million in proceeds
from issuances of shares of Andrx Common Stock under the employee stock purchase
plan.




42


Future Cash Requirements

The Company anticipates that its cash requirements will continue to
increase due to the construction of R&D, manufacturing, including related
equipment, and corporate facilities, in Florida and North Carolina. During 2003,
the Company expects to purchase approximately $60 million in capital
expenditures, which it intends to pay for with net cash provided by operating
activities. The Company will periodically review its level of capital
expenditure spending based on its level of profitability and cash flow. Absent
an acquisition, in-license or unforeseen circumstances, Andrx anticipates that
its existing capital resources will be sufficient to enable it to maintain its
operations for the foreseeable future without drawing on the four-year secured
revolving line of credit facility Andrx obtained on December 30, 2002 for up to
an aggregate amount of $185.0 million; none of which was outstanding at June 30,
2003. The Company had $103.5 million available under the secured credit
facility. The Company cannot currently access $81.5 million of the $185.0
million line of credit based upon an insufficient fixed charge coverage ratio
and borrowing base. Andrx is currently in compliance with all the required
covenants under the credit facility.

Outlook

Distributed Products

The Company's pharmaceutical distribution operations have a history of
consistent quarterly sequential growth as a result of, among other things,
introduction of generic products by other generic manufacturers and the
Company's continued penetration of the market servicing independent pharmacies,
pharmacy chains which do not maintain their own central warehousing facilities,
pharmacy buying groups and, to a lesser extent, physicians' offices. The Company
believes that it will be able to continue to expand in this market, both in
terms of per store volume and customer locations. The Company believes that the
Ohio distribution center, which Andrx opened in the third quarter of 2002,
improved the Company's ability to service various geographic regions and has
created and will continue to create additional national distribution
opportunities.

The ability of the Company to provide consistent sequential quarterly
growth is affected, in large part, by the Company's participation in the launch
of new generic products by other generic manufacturers, and the advent and
extent of competition encountered by these products and the other products
distributed by the Company. Sales prices for generic products typically decline
with the advent of competition, particularly after such products were sold
during an initial exclusivity period. Consequently, growth in revenues will
continue to primarily be a function of new generic products launched by other
generic manufacturers, offset by the overall level of net price declines on
existing distributed products. Andrx's pharmaceutical distribution operations
compete with a number of large wholesalers which market, among other things,
both brand and bioequivalent pharmaceutical products to their customers and may
therefore offer broader marketing programs. Andrx also competes with other
pharmaceutical distributors. Though distribution of pharmaceutical products is
historically a relatively low margin industry, Andrx believes that consolidation
among wholesalers (who already had far greater financial and other resources
than Andrx), the growing role of managed care organizations, the formation of
buying groups and competition between distributors could result in increased
margin reductions. Nevertheless, the Company's distribution operations are
expected to continue to grow at a rate consistent with the growth of the overall
generic industry.

The Company's distribution operations play a significant role in the
sale of Andrx's current bioequivalent products and are expected to continue to
play a significant role in the Company's new product launches. For external
reporting purposes, this segment's financial results do not include its
participation in the distribution of Andrx bioequivalent products. Such revenues
are classified as Andrx product sales in the Company's Unaudited Condensed
Consolidated Statements of Income.



43


Andrx Products

Bioequivalent

The bioequivalent pharmaceutical industry is highly competitive and
selling prices are often subject to significant and rapid declines from
competition among existing or new bioequivalent products entering the market. In
Andrx's sales efforts for its bioequivalent products, Andrx competes with
domestic and international companies and bioequivalent divisions of large brand
pharmaceutical companies. Many of these competitors offer a wider variety of
bioequivalent products to their customers. As patents and other bases for market
exclusivity expire, bioequivalent competitors enter the marketplace. Normally,
there is a unit price decline as the number of bioequivalent competitors
increases. The timing of these price decreases is difficult to predict and can
result in a significantly curtailed profitability for a bioequivalent product.
Revenues and gross profits from Andrx's bioequivalent products may also be
affected by competition involving the corresponding brand product, including the
introduction and promotion of either alternative brand or OTC versions of such
products. Andrx's bioequivalent version of Cardizem CD continues to generate
significant net revenues and gross profit for the Company.

The Company believes that its controlled-release products may face more
modest competition than other bioequivalent products due to the limited number
of competitors having the scientific expertise, legal expertise, and financial
resources necessary to develop these products and bring them to market. The
Company also believes that, for various reasons, its specialty or niche
bioequivalent products may also face less competition than most bioequivalent
products. These competitive barriers, combined with the synergistic value
derived from the Company's pharmaceutical distribution operation, are intended
to better position the Company to compete in the highly competitive
bioequivalent product marketplace.

Currently, Andrx's overall level of profitability remains dependant on
a relatively small number of products and Andrx's ability to successfully
manufacture sufficient quantities of these products on a timely basis. If these
products, and particularly Andrx's bioequivalent version of Cardizem CD, were to
experience increased competition and the resulting price reductions and/or
reduced market shares, Andrx's operating results would be significantly
adversely affected. If additional competition for the Company's bioequivalent
versions of Cardizem CD and Tiazac were to surface, which publicly available
information indicates could occur by mid-2004, this additional competition may
significantly adversely affect net sales and gross profits of these products and
their contribution to Andrx's results of operations. Sales of Andrx's current
bioequivalent products may also decrease as a result of other factors as well.
Future growth in the bioequivalent products business will be generated from the
launch of new products.

Andrx is required to make certain payments in connection with the net
sales the Company derives from its bioequivalent version of Tiazac. Andrx agreed
to pay Biovail a royalty at an undisclosed rate on net sales, as defined, of
Taztia XT, in connection with, among other things, their agreement to resolve
various pending litigation matters and implement a dispute resolution mechanism
for future disputes. The Biovail royalties are recognized in conjunction with
the related net revenues and charged to cost of goods sold.





44


The Company has entered into an arrangement with Perrigo under which
Andrx and Perrigo will share in the risks and rewards associated with the sale
of the Company's version of Loratadine-D12, Loratadine-D24 and Loratadine Quick
Dissolve Tabs that are bioequivalent to the related Claritin family of brand
products. In June 2003, Perrigo launched Andrx's OTC version of Claritin-D24.
Final approval and Perrigo's launch of the Company's OTC version of Claritin-D12
and Claritin Reditabs are awaiting, among other things, the expiration of
exclusivity rights of other generic manufacturers in the third quarter of 2003.
Andrx will manufacture and Perrigo will package and market all of these OTC
products. Under the terms of the arrangement, Andrx and Perrigo share the net
profits, as defined, from product sales. Future revenues and profits will be
dependent upon a number of factors including Andrx's manufacturing capacity,
market competition for the OTC Claritin products, the introduction of additional
bioequivalent Claritin products, as well as other factors outside of Andrx's
control. The net profits reported by Andrx are subject to numerous estimates by
Perrigo such as returns and other sales allowances and certain related expenses.

The Company is continuing to communicate with the FDA and USP on the
issues affecting ANDAs for its bioequivalent versions of Wellbutrin SR/Zyban. In
July 2003, the Company entered into an Exclusivity Agreement with Impax and a
subsidiary of Teva pertaining to the pending ANDAs for bioequivalent versions of
Wellbutrin SR and Zyban 100mg and 150mg extended-release tablets filed by Andrx
and by Impax. The Exclusivity Agreement provides, among other things, that while
Andrx will continue to seek to launch its own versions of these ANDA products,
if it is unable to do so within a defined period of time, and Impax is able to
market its ANDA products, Andrx will enable Impax to launch the Impax products
through Teva. Impax and Teva will then share certain payments with Andrx
relating to the sale of the Impax products for a 180-day period. Should Andrx
launch its own products prior to the launch of the Impax products, Andrx will
share with Impax and Teva certain payments relating to the sale of the Andrx
products for a 180-day period. To date, neither the Andrx nor the Impax ANDAs
for these products have been approved by the FDA, and the appellate court has
not ruled on Glaxo's appeal of the favorable lower court decisions received by
both Andrx and Impax in their respective patent infringement litigations. The
Exclusivity Agreement may be subject to the approval of certain various
governmental agencies.

The launch of Andrx's bioequivalent product candidates is dependent
upon a number of factors, including factors outside of the Company's control.
These factors include the receipt of FDA final marketing approval, new Orange
Book patent listings and related patent infringement litigation, the expiration
of other's exclusivity rights, and the favorable resolution of patent
litigation. The revenues and gross profits to be generated by these new products
will also be affected by the amount of bioequivalent competition they encounter,
particularly after the expiration of any 180-day exclusivity period that the
Company anticipates having, either alone or shared. Andrx has made, is in the
process of making or will make commercial quantities of certain new products
prior to the date in which Andrx anticipates that such products will receive FDA
final marketing approval and/or satisfactory resolution of the patent
infringement litigation involving them. The commercial production of these
products involves the risk that such product(s) may not be approved for
marketing by the FDA on a timely basis or ever and/or that the results of such
litigation may not be satisfactory. This risk notwithstanding, Andrx plans to
continue to scale-up and build pre-launch inventories of certain products that
have not yet received final FDA marketing approval and/or satisfactory
resolution of patent infringement litigation, when it believes that such action
is appropriate in relation to the commercial value of its product launch
opportunity. When an exclusivity period is involved, this is a particularly
difficult determination.




45

Brand

With Altocor's launch in the third quarter of 2002, the Company entered
a highly competitive market against brand pharmaceutical manufacturers having
significantly larger and more experienced sales forces and significantly greater
financial resources dedicated to advertising and promotion. Net sales for
Altocor are subject to significant accounting estimates for, among other things,
the ability of the Company's sales force to promote to physicians, generate
product demand and pull product through the distribution channel, and the
Company's ability to estimate returns. The Company's estimate of returns is
based on, among other things, terms offered to customers, inventory levels in
the distribution channel and an estimate of expected prescription levels.
Consistent with industry practice, the Company offered allowances on initial
purchases and generally provides a right of return or exchange. As prescription
levels of Altocor were low during the early stages of its launch, the Company
anticipates that, until a profitable sales level is achieved, its sales,
marketing, advertising and promotional costs will exceed its gross profit from
net sales of Altocor. With the June 2003 launch of the $AVE program for cash
paying, uninsured and under-insured patients, as well as other sales and
marketing initiatives, the Company now estimates that net sales of Altocor for
2003 could range from $30 million to $35 million. The Company continues to see
Altocor as an opportunity and is exploring options for increasing the sales
trend, including, but not limited to, pursuing the inclusion of Altocor in
managed care plans across the country.

Kos Pharmaceuticals ("KOS") alleges that there is a likelihood of
confusion between KOS' trademark, Advicor, and Altocor, and has opposed Andrx's
application for a registered trademark for Altocor. The Company has also
recently learned that KOS has filed a lawsuit against the Company in the United
States District Court for the District of New Jersey. The Company is not in a
position to determine the ultimate outcome of this matter. Andrx has requested
FDA guidance on other names, and may seek to change the name of Altocor.

Net sales of Andrx's other brand products, are recognized to the extent
Andrx estimates they are being pulled through the distribution channel. Net
sales of Andrx's other brand products can be adversely affected by generic
introductions, as they are not protected by patents, seasonality (for cough and
cold brand products) and the dedication of its sales force's efforts to Altocor
and other products.

On February 25, 2003, the FDA announced that it intends to publish a
Federal Register notice to describe its enforcement policy with respect to
products such as the Entex line of products that are presently sold by
prescription and on the market without an approved ANDA or NDA. As a result of
the Federal Register notice, Andrx may be required to seek FDA approval for
marketing the Entex products and may be required to market some or all of these
products as OTC products. Upon issuance of definitive guidance on this matter,
Andrx will assess the unamortized portion of the Entex product rights ($11.8
million as of June 30, 2003), and Entex inventories ($259,000 as of June 30,
2003) for any resulting impairment.

In the second half of 2003, the Company is planning to consolidate its
Mississippi sales administration office into its Weston, Florida offices,
thereby incurring SG&A charges estimated to be approximately $1.3 million. The
Company believes that such consolidation will result in operational efficiencies
in the long term.




46


Quality and Safety

Pharmaceutical products are required to meet certain quality, safety
and other requirements throughout their shelf life. If Andrx determines that its
product does not, or may not, meet such requirements, such product may be
recalled by Andrx, either on its own or pursuant to an FDA request. Similarly,
studies and/or the monitoring of the proper utilization of pharmaceuticals could
call into question the utilization, safety and efficacy of certain
pharmaceutical products, including those marketed by Andrx in its brand and
bioequivalent operations, and may result in the discontinuation of their
marketing or changes in the manner in which they are labeled and prescribed.
Future Andrx operating results could be adversely affected if such events were
to occur.

Licensing and Royalties

Andrx expects to continue to generate significant licensing revenues
from its agreement with KUDCo even though the licensing rate due to Andrx
decreased from 15% to 9% on June 9, 2003, in accordance with the terms of the
related agreement.

Andrx earned $32.5 million in estimated licensing revenues in the 2003
Quarter. KUDCo generates significant revenues for the Company and the Company
believes the KUDCo licensing revenues will be significantly lower in the third
quarter of 2003, compared to the second quarter of 2003. Future KUDCo licensing
revenues will be dependent on a number of factors, including, among other
things, the applicable licensing rate, KUDCo's profits derived from its sale of
its generic Prilosec, which are dependent on the number of units KUDCo produces
and its per unit selling price, the outcome of various appeals involving generic
Prilosec, and other factors outside of Andrx's control. The licensing rate due
to Andrx will further reduce from 9% to 6.25% in June 2004 or upon certain
decisions of the appellate court, whichever is earlier. KUDCo has advised Andrx
that it estimates the licensing revenues earned by Andrx for July 2003 to be
approximately $6.4 million. In August 2003, Mylan launched its bioequivalent
versions of the 10mg and 20mg strengths of Omeprazole (generic Prilosec). This
competition could lead to reduced sales for KUDCo's version of Prilosec, which
in turn would lead to reduced licensing revenues for Andrx.

Other Revenues

For the 2003 Quarter, the Company generated $1.1 million of Other
revenues primarily contract manufacturing services at Andrx's Massachusetts
aerosol manufacturing facilities and Internet related revenues primarily from an
agreement between Aventis and the Company related to the Company's POL web
portal. Since the Company is seeking to possibly divest its Massachusetts
aerosol manufacturing facilities and the POL web portal, future Other revenues
may significantly decrease or cease to exist.

Cost of Goods Sold

Andrx at times operates certain of its manufacturing facilities on a
24-hours a day, 7-days a week production cycle, in order to meet the market
demand for its current and anticipated products. Moreover, because Andrx
manufactures products that employ a variety of technology platforms, certain of
its manufacturing capabilities were over utilized, while others were under
utilized, and inefficiencies, equipment failures and rejected lots at times
interrupted Andrx's ability to fully meet the actual demand for certain of its
marketed products. Andrx has taken a number of steps to address these issues
including the acquisition of a facility in Morrisville, North Carolina.
Depending on the timing and outcome of the issues involving the marketing of the
Company's bioequivalent versions of Prilosec and/or Wellbutrin SR/Zyban, and the
manufacturing quantities of such products required in the event the Company were
to launch these products, the Company may not be able to meet the market demand
for all of the products it is currently manufacturing and that are in its
pipeline.




47


While substantial progress has been made in improving manufacturing
operations, throughout 2003 Andrx will continue to focus on further improving
its pharmaceutical manufacturing operations. Andrx's Weston, Florida
manufacturing facility is expected to become fully operational in 2004 and will
produce specialty, niche and immediate release products, including oral
contraceptives. Andrx plans to begin the renovation of its manufacturing
facility in Morrisville, North Carolina, which is expected to have some areas
operational by late 2004 or early 2005. The Company is also pursuing the
divestiture of its Massachusetts aerosol manufacturing facilities and further
renovations of, or ceasing certain manufacturing operations at, its Davie,
Florida manufacturing facilities in order to improve its manufacturing
operations and increase its manufacturing efficiencies and capacities. Andrx is
continuing to improve its manufacturing and quality processes as well as the
training and utilization of its personnel related thereto. Until all of these
efforts come to fruition, Andrx will continue to incur costs related to
inefficiencies at and under utilization of its manufacturing facilities. The
Company expects to incur approximately $5 million to $6 million per quarter of
such other unabsorbed manufacturing costs, before the possible divestiture of
its Massachusetts aerosol facilities and commencement of production of its
Weston, Florida facility. The Company will also incur additional charges
directly to cost of goods sold in the manufacture of its currently marketed
products and product commercialization activities.

SG&A Expenses

The Company's SG&A expenses are related to the level of sales and the
sales product mix, which includes distributed products, Andrx bioequivalent
products and Andrx brand products. The Company anticipates that its SG&A
expenses will continue to increase throughout 2003, as a result of the increases
in SG&A expenses related to Andrx's distribution business, which are primarily
variable in nature, and Andrx's bioequivalent and brand businesses, as well as
corporate overhead. As of June 30, 2003, the Company employed approximately 400
brand sales representatives. The Company currently intends to maintain its brand
sales representatives at that approximate level, but will periodically review
and adjust the amount of sales representatives it maintains. Altocor promotional
expenses, which are expensed as incurred, will be periodically evaluated
throughout 2003 taking into consideration, among other things, the Company's
profitability and any co-promotional arrangements for Altocor. The Company's
sales force and planned promotional spending for 2003 are likely to be
significantly less than its competitors. As of June 30, 2003, Andrx employed
approximately 220 sales representatives for its distribution businesses.

R&D Expenses

Andrx anticipates that R&D expenses for 2003 will increase to
approximately $55 million as compared to $51.5 million for 2002, as a result of
continued spending in bioequivalent drug development (ANDA) and brand product
development (NDA). R&D expenses will be periodically evaluated throughout 2003
following consideration of, among other things, the Company's level of
profitability. Andrx currently expects that its 2003 R&D expenses will be
allocated approximately 50% to bioequivalent products and 50% to brand products.
During 2003, the Company expects to file at least 10 ANDAs, of which five have
already been filed through June 30, 2003. In 2003, the Company also submitted an
NDA for its valproate product which along with Andrx's NDA for metformin XT the
FDA has accepted as filed.

Income Taxes

The Company believes its federal and state effective income tax rate
for 2003 will be approximately 38%.




48

Earnings Guidance

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

Recent Accounting Pronouncements

Accounting for Guarantor's Accounting and Disclosure Requirements for
Guarantees

In November 2002, the Financial Accounting Standards Board ("FASB")
issued Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others". The provisions of FIN 45 require that a liability be recorded in the
guarantor's balance sheet at fair value upon issuance of a guarantee. The
recognition provisions of FIN 45 are effective for guarantees issued or modified
after December 31, 2002. Adoption of the provisions of FIN 45 had no impact on
the Company's consolidated financial statements.

Accounting for Stock-Based Compensation - Transition and Disclosure

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". The provisions of SFAS
No. 148 amend SFAS No. 123, "Accounting for Stock-Based Compensation", to
provide alternative methods of transition to the fair value method of accounting
for stock-based employee compensation, and to require disclosure in the summary
of significant accounting policies of the effects of an entity's accounting
policy with respect to stock-based employee compensation on reported net income
and earnings per share in annual and interim financial statements. SFAS No. 148
does not amend SFAS No. 123 to require companies to account for their employee
stock-based awards using the fair value method. However, the disclosure
provisions are required for all companies with stock-based employee
compensation, regardless of whether they utilize the fair value method of
accounting described in SFAS No. 123 or the intrinsic value method described in
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees." The disclosure requirements of SFAS No. 148 are included herein
in Note 1 to the accompanying Unaudited Condensed Consolidated Financial
Statements. The Company currently intends to continue to account for employee
stock-based compensation in accordance with APB No. 25.




49

Variable Interest Entities

In January 2003, the FASB issued Interpretation No. 46, Consolidation
of Variable Interest Entities ("FIN No. 46"). The provisions of FIN No. 46
clarify the application of Accounting Research Bulletin No. 51, Consolidated
Financial Statements, to certain entities in which equity investors do not have
the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated support from other parties. The provisions of FIN No. 46
require a variable interest entity ("VIE") to be consolidated by a company if
that company is subject to a majority of the risk of loss from the activities or
entitled to receive a majority of the entity's residual returns or both. The
provisions of FIN No. 46 also require disclosures about VIEs that the company is
not required to consolidate but in which it has a significant variable interest.
The consolidation requirements of FIN No. 46 apply immediately to VIEs created
after January 31, 2003 and to existing VIEs in the first interim or annual
period beginning after June 15, 2003. The Company believes that the adoption of
the provisions of FIN No. 46 will not have a material impact on its consolidated
financial statements.

Amendment of SFAS No. 133 on Derivative Instruments and Hedging
Activities

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

Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity

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




50


ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form
10-Q, an evaluation of the effectiveness of the design and operation of Andrx's
disclosure controls and procedures was carried out by Andrx under the
supervision and with the participation of Andrx's management, including the
Chief Executive Officer and Chief Financial Officer. Based on that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that Andrx's
disclosure controls and procedures have been designed and are being operated in
a manner that provides reasonable assurance that the information required to be
disclosed by Andrx in reports filed under the Securities Exchange Act of 1934,
as amended, is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. A system of controls, no matter
how well designed and operated, cannot provide absolute assurance that the
objectives of the system of controls are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected. There have been no changes in Andrx's
internal control over financial reporting that occurred during the most recent
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, Andrx's internal control over financial reporting.



51

ANDRX CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS

See Note 9 to the "Notes to Unaudited Condensed Consolidated Financial
Statements of Andrx Corporation" included in Part 1 Item 1 of this report.


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

(a) On June 13, 2003, Andrx Corporation held its annual meeting of
stockholders.

(b) Not applicable.

(c) At the annual meeting, the following matters were voted upon
by Andrx Corporation stockholders:

1. Election of Directors.

The following table sets forth the name of each nominee and the voting
with respect to each nominee for director.

Nominee For Withhold Authority
------- ---------- ------------------

Joseph E. Breslin 63,673,845 1,771,663
Carter H. Eckert 64,235,623 1,209,885
Irwin C. Gerson 63,653,193 1,792,315


2. Approval of an Amendment to the 2000 Stock Option Plan.

For Against Abstain/Broker Non-Votes
- ---------- ---------- ------------------------
43,010,468 22,316,823 118,216


3. Approval of an Amendment to the Employee Stock Purchase Plan to increase the
number of shares available for purchase by eligible employees from 400,000
to 650,000 shares.

For Against Abstain/Broker Non-Votes
- ---------- ---------- ------------------------
61,354,145 4,017,455 73,907


4. Ratification of the appointment of Ernst & Young LLP as Andrx Corporation's
Independent Certified Public Accountants for the year ending December 31,
2003.

For Against Abstain/Broker Non-Votes
- ---------- ---------- ------------------------
64,525,479 869,515 50,513





52

ANDRX CORPORATION AND SUBSIDIARIES
PART II
OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.74 2000 Stock Option Plan, as amended and restated (1)(*)
10.75 Employee Stock Purchase Plan, as amended (2)(*)

* Management Compensation Plan or arrangement.

(1) Filed as Annex B to Andrx Corporation's Schedule 14A (Amendment No. 1)
filed on May 7, 2003.

(2) Filed as Annex C to Andrx Corporation's Schedule 14A (Amendment No.1)
filed on May 7, 2003.

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as
amended.

32 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K.

On April 30, 2003, Andrx filed a current report on Form 8-K with respect to Item
9 announcing its financial results for the quarter ended March 31, 2003.



53

SIGNATURES


Pursuant to the requirements 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



Date: August 14, 2003 /s/ Richard J. Lane
-----------------------------------------
Richard J. Lane
Chief Executive Officer
(Principal Executive Officer)





Date: August 14, 2003 /s/ Angelo C. Malahias
-----------------------------------------
Angelo C. Malahias
Senior Vice President and Chief Financial
Officer (Principal Financial and
Accounting Officer)





54