SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                    FORM 10-K

     Annual Report pursuant to Section 13 or 15(d)of the Securities Exchange Act
          of 1934For the fiscal year ended  March 31, 2000  Commission  File No.
          1-9114

 MYLAN LABORATORIES INC. (Exact name of registrant as specified in its charter)
                             Pennsylvania 25-1211621

(State or other  jurisdiction of incorporation  or  organization)  (IRS Employer
Identification No.)

    1030 Century Building    
      130 Seventh Street
  Pittsburgh, Pennsylvania                            15222
(Address of principal executive offices)            (Zip Code)
Registrant's telephone number, including area code: 412-232-0100

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

                                              Name of Each Exchange 
        Title of Each Class                    on Which Registered
        -------------------                   ---------------------

Common Stock, par value $.50 per share       New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:    None

         Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

         Yes...X....                                  No.......

         Indicate by checkmark if disclosure of  delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information

statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.[ ]

            The aggregate market value of voting stock held by non-affiliates of
the  registrant,  computed by reference to the closing price of such stock as of
June 20, 2000:

                                    $2,137,112,992

The number of shares of Common Stock of the registrant outstanding 
as of June 20, 2000:
                                      126,721,906

Documents incorporated by reference into this Report are:
  Annual Report to Shareholders for year ended
                                March 31, 2000...       Part I, Item 1
                                                        Part II, Items 5-8
  Proxy Statement for 2000 Annual Meeting of

                                Shareholders...         Part III, Items 10-13



                                                        PART I


     Item 1. Business

     Mylan Laboratories Inc., a Pennsylvania  corporation  incorporated in 1970,
and its  subsidiaries  (herein  referred to  collectively  as "the Company") are
engaged in  developing,  licensing,  manufacturing,  marketing and  distributing
generic and branded pharmaceutical  products.  References herein to fiscal 2000,
1999 and 1998 shall mean the fiscal years ended March 31,  2000,  1999 and 1998,
respectively.

     The   Company   conducts   business   through   its   generic  and  branded
pharmaceutical   operating  segments.  For  fiscal  2000,  the  generic  segment
represented  approximately  85% of revenues and the branded segment  represented
approximately 15% of revenues.  The financial information for operating segments
required by Item 1 is hereby incorporated by reference to Note R of the Notes to
Consolidated   Financial   Statements  in  the  accompanying  Annual  Report  to
Shareholders for the year ended March 31, 2000.

Generic Segment

     Through its subsidiaries,  Mylan  Pharmaceuticals Inc. and UDL Laboratories
Inc.,  acquired in fiscal  1996,  the Company is  recognized  as a leader in the
generic pharmaceutical industry.  Generic drugs are bioequivalent to their brand
name  counterparts  and are  generally  sold at prices  significantly  less than
branded  products.  Accordingly,  generics  provide a safe,  effective  and cost
efficient alternative to users of these branded products.

     The Company  attained  its  leadership  position  in the  generic  industry
through  its  ability  to  obtain  Abbreviated  New  Drug  Application  ("ANDA")
approvals,  uncompromising  quality control and devotion to customer service. To
build on this  position the Company has expanded  beyond its  traditional  solid
oral dose products and now offers unit dose, suspensions,  liquids,  transdermal
and extended  release  products.  The investment in research and development and
facilities to  manufacture  products in a variety of delivery  systems is one of
the many reasons the Company is a leader in the generic industry.

     The Company has entered into strategic alliances with several
pharmaceutical  companies  through  distribution and licensing  agreements which
provide the Company with  additional  products to broaden the Company's  product
line.  In  addition,  the Company  has  entered  into  product  development  and
licensing agreements, under which the Company has obtained rights to manufacture
and  distribute  other  pharmaceutical  products in exchange for funding of drug
development activities.

     Due to the non-exclusive  nature of generic products,  the generic industry
is comprised of numerous competitors  including  manufacturers that market their
products under their own names,  distributors that market products  manufactured
by others,  and brand name  companies  that market their products under both the
brand name and as a generic substitute. The non-exclusive nature thus allows for
significant price competition within the generic pharmaceutical industry.

Branded Segment

     Pharmaceutical  products  initially sold on an exclusive basis are known in
the industry as proprietary or branded  products.  These products  generally are
patent protected when introduced in the marketplace.

     The Company  operates its branded  segment  principally  through its Bertek
Pharmaceutical Inc. ("Bertek")  subsidiary.  Bertek's three therapeutic areas of
concentration  include  cardiology,  neurology and  dermatology.  The cardiology
focus is  built  upon  Maxzide(R),  Digitek(R)  and  Nitrek(R).  The  Maxzide(R)
products,  originally developed and manufactured by the Company, were reacquired
from American Home Products Corp. in fiscal 1997.

     The Company  continues to expand its branded  business  through  internally
developed  products  as well as  through  product  acquisitions.  To expand  its
presence in  dermatology,  on October 2, 1998, the Company  acquired 100% of the
outstanding  stock of  Penederm  Inc.  Bertek,  through  this  acquisition,  now
develops patented topical prescription  products at its research and development
facilities in Foster City,  California.  The current product portfolio primarily
consists of Avita(R), Mentax(R), and Acticin(R).

New Product Approvals

         The Company is required to secure and maintain  the U.S.  Food and Drug
Administration's ("FDA") approval for the products it intends to manufacture and
market.  The FDA grants such approval by approving  Company  submitted ANDAs for
generic  drug  products  and New Drug  Applications  ("NDAs")  for branded  drug
products.

         During fiscal 2000, the Company received 20 final approvals:  Verapamil
HCl ER Capsules,  Estradiol  Tablets,  Prednisolone  Syrup,  Clozapine  Tablets,
Diclofenac  Potassium  Tablets,  Estropipate  Tablets,  Dicyclomine HCl Tablets,
Dicyclomine  HCl Capsules,  Carbidopa and Levodopa ER Tablets,  Ticlopidine  HCl
Tablets, Nitroglycerin Delivery System (0.1mg/hr, 0.2mg/hr, 0.4mg/hr, 0.6mg/hr),
Nifedipine  ER  Tablets,  Ketoconazole  Tablets,  Hydrochlorothiazide  Capsules,
Terazosin HCl Anhydrous Capsules,  and Estradiol  Transdermal System (0.05mg/day
and  0.1mg/day).   Additionally,  in  fiscal  2000,  the  Company  received  two
supplements  for additional  strengths:  Atenolol 25mg Tablets and Glyburide 6mg
Tablets.

         Currently,  the  Company  has  before  the FDA 25 ANDAs  pending  final
approval and seven  Investigational New Drug ("IND") applications filed with the
FDA  for  new  innovator  compounds.  An  IND  is  the  result  of a  successful
preclinical development program and becomes part of the final NDA.

Products

     The information on the Company's product line set forth on pages8-12 of the
accompanying Annual Report to Shareholders for the year ended March 31, 2000, is
incorporated  herein by  reference.  For  fiscal  2000,  sales of the  Company's
antianxiety product group accounted for approximately 16% of net sales.

     During  fiscal  2000,  1999 and 1998,  the  Company  expensed  $49,121,000,
$61,843,000,  and  $46,278,000,  for research  and  development.  The  Company's
research and development  efforts are conducted primarily to qualify the Company
to  manufacture  ethical  pharmaceuticals  under  FDA  standards  and  approval.
Typically  research expenses related to the development of innovative  compounds
and the  filing of NDAs are  significantly  higher  than those  associated  with
ANDAs.  As the Company  continues to develop these products,  research  expenses
related to their development may increase.

Customers and Marketing

     The Company sells its products to  proprietary  and ethical  pharmaceutical
wholesalers and distributors,  drug store chains,  drug manufacturers and public
and  governmental  agencies.  Four  of the  Company's  customers  accounted  for
approximately  15%,  15%,  11%,  and 10% of net  sales  in  fiscal  2000.  Three
customers  accounted for approximately  15%, 14%, and 11% of net sales in fiscal
1999 and 13%, 12%, and 11% of net sales in fiscal 1998.

    Generic  pharmaceutical  products are marketed  directly to traditional drug
store chains, mass merchandising  chains, and food and drug chains. In addition,
product  is  distributed   through   wholesalers  and   distributors   servicing
non-warehousing chains, independent pharmacies, and institutional customers on a
contractual  basis.  Due  to  the  buying  patterns  of  certain  customers,  in
conjunction with incentive programs,  a disproportionate  amount of sales may be
recognized  in the latter part of a period.  Generic  products  involve  limited
public  promotion.  Approximately  70  employees  are  engaged  in  selling  and
servicing generic customers.

     Branded  pharmaceutical  products  are  marketed  directly  to health  care
professionals. Approximately 260 employees are engaged in marketing, selling and
servicing branded customers.

Competition

     With respect to each of the generic products it sells, the Company believes
it is usually subject to active  competition from numerous  companies.  The four
primary means of  competition  are service,  product  quality,  FDA approval and
price.  The competition  experienced by the Company varies among the markets and
classes of customers.  The Company has experienced  additional  competition from
brand-name competitors that have entered the generic pharmaceutical  industry by
creating generic  subsidiaries,  purchasing generic companies or licensing their
products prior to or as their patents expire.

     In addition to the increase in the number of competitors, the consolidation
of the Company's  customers  through  mergers and  acquisitions,  along with the
emergence of large buying groups representing  independent pharmacies and health
maintenance  organizations,  have contributed to severe price  deterioration for
many of the Company's  generic  products.  While the Company has increased  unit
volume of its generic products through specialized marketing programs,  this has
not fully offset the price declines the Company has experienced.

         In response to the price  declines  for generic  products,  the Company
raised  prices on 29 products  beginning in fiscal 1998 and  continuing  through
fiscal 1999. While these price increases had a favorable impact on net earnings,
such impact,  if any in the future,  will be affected by many factors  including
customer acceptance and the response by both existing and potential  competitors
as well as by both  existing and  potential  suppliers.  The Company  intends to
evaluate its pricing practices and make adjustments to the price of its products
when  appropriate.  The Company continues to work closely with its customers and
suppliers  to ensure that its full line of generic  products is  available  as a
cost  effective  alternative  to the innovator  products (See Part II, Item 7 of
this report for a  discussion  relating to the impact of the  Company's  pricing
policies).

     In the branded  segment,  the Company faces  competition from other branded
pharmaceutical  companies  that offer  products  which,  while having  different
properties,  are intended to provide  similar  benefits to the consumers.  These
competitors  tend to have  more  products,  a longer  history  in the  industry,
additional marketing and sales  representatives and significantly more financial
resources.  Each of these  factors or others  could  prevent  the  Company  from
achieving profitable results in the branded industry.

Product Liability

     Product  liability suits by consumers  represent a continuing risk to firms
in the  pharmaceutical  industry.  The Company strives to minimize such risks by
adherence to stringent quality control procedures.  Although the Company carries
insurance,  it believes that no reasonable amount of insurance can fully protect
it against all such risks  because of the  potential  liability  inherent in the
business of producing pharmaceuticals for human consumption.

Raw Materials

     The active  chemical  ingredients  and other materials and supplies used in
the Company's  pharmaceutical  manufacturing  operations are generally available
and purchased from many different foreign and domestic  suppliers.  However,  in
some  cases,   the  raw   materials   needed  by  the  Company  to   manufacture
pharmaceutical  products are available from a single FDA-approved supplier. Even
when more than one supplier  exists,  the Company may elect to list, and in some
cases has only  listed,  one  supplier  in its  applications  with the FDA.  New
suppliers  of the  active  ingredients  in drugs  must be  approved  by the FDA.
Accordingly,  in the event of an  interruption,  any  change in a  supplier  not
previously approved may take several months.

     In  addition,  recent  and  pending  regulatory  actions  may  make it more
difficult  for the Company and other  generic  pharmaceutical  manufacturers  to
obtain  commitments  from  foreign  suppliers  for raw  materials  prior  to the
expiration  of patents  on  branded  products.  The  unavailability  of such raw
materials could also impede the Company in its efforts to develop and obtain FDA
approval to manufacture and market new generic pharmaceutical products.

Regulation

     The Company's operations are subject to regulation under the Federal Food,
Drug and  Cosmetic  Act,  pursuant  to which  government  standards  as to "good
manufacturing practice",  product content,  purity, labeling,  effectiveness and
record  keeping (among other things) must be observed.  In this regard,  the FDA
has  extensive   regulatory   powers  over  the  activities  of   pharmaceutical
manufacturers including the power to seize and prohibit the sale of noncomplying
products and to halt operations of noncomplying manufacturers.

     In addition to the extensive regulation the Company faces under the Federal
Food,  Drug and Cosmetic Act, other  regulations  have also affected the generic
approval  process.  In June 1995, the Uruguay Round Agreements Act ("URAA") took
effect which extended patent terms pursuant to the General Agreements on Tariffs
and Trade. The extension of patent terms has delayed the introduction of generic
products by the Company.

     While URAA has already  extended  patent terms,  the brand  companies  have
further  delayed  the  approval  of  new  generic   products  by  filing  patent
infringement  suits under the Hatch-Waxman  Act. The Company upon filing an ANDA
with the FDA must make one of five  certifications  with  respect  to  innovator
patents.  If the company  certifies that its generic product is not infringing a
patent or that a patent is invalid,  the patentee can file suit. Brand companies
use this  certification  process to prevent generic  companies from  introducing
competing  generic  products by bringing suit for alleged  patent  infringement.
Once a suit is filed,  the FDA is prohibited  from approving the ANDA for thirty
months or until the suit is litigated or settled.

         Along with  delaying  the  approval  of generic  products,  the cost of
bringing a new generic product to market has risen  substantially  as the number
of these suits and the cost of defending  them  continues to increase.  All such
suits  settled to date have been on terms  favorable  to the  Company.  However,
until the laws are changed,  the Company expects this type of suit will continue
since it has proven a very  effective  way for brand  companies to delay generic
competition.

     The Company is subject to inspection and regulation under other federal and
state  legislation  relating  to  drugs,  narcotics  and  alcohol.  Many  of its
suppliers and customers, as well as the drug industry in general, are subject to
the same or similar  governmental  regulations.  The Company  also is subject to
various federal, state, and local environmental protection laws and regulations.
Compliance  with current  environmental  protection laws and regulations has not
had a material effect on the earnings,  cash flow or competitive position of the
Company.

     It is  impossible  for the  Company  to  predict  the  extent  to which its
operations  will be affected under the  regulations  discussed  above or any new
regulations which may be adopted by regulatory agencies.

Employees

     The Company employs  approximately  2,300 persons,  approximately  1,200 of
whom serve in clerical,  sales and  management  capacities.  The  remaining  are
engaged in production and maintenance activities.

     The production  and  maintenance  employees at the Company's  manufacturing
facilities in Morgantown,  West Virginia,  are represented by the Oil,  Chemical
and Atomic Workers International Union (AFL-CIO) and its Local Union 8-957 under
a contract which expires April 5, 2002.

Backlog

     At March 31, 2000,  the  uncompleted  portion of the  Company's  backlog of
orders was approximately  $28,226,000 as compared to approximately $7,388,000 at
March 31, 1999,  and  $19,899,000  at March 31, 1998.  Because of the relatively
short lead time required in filling  orders for its  products,  the Company does
not believe these backlog  amounts bear a significant  relationship  to sales or
income for any full twelve-month period.


I
tem 2. Properties

     The Company  operates  from  various  facilities  in the United  States and
Puerto Rico which have an aggregate of approximately 1,305,000 square feet.

     Mylan  Pharmaceuticals  Inc. owns  production,  warehouse,  laboratory  and
office  facilities in three  buildings in Morgantown,  West Virginia  containing
484,000 square feet. Mylan Pharmaceuticals  operates two distribution centers: a
166,000  square foot center in  Greensboro,  North  Carolina which it owns and a
38,000  square  foot  center in Reno,  Nevada  which it  operates  under a lease
expiring  in  2002.  A  new  sales  and   administration   facility   containing
approximately  65,000 square feet is currently under construction in Morgantown,
West Virginia.

     Mylan Inc.  owns a production  and office  facility in Caguas,  Puerto Rico
containing 115,000 square feet and a production  facility in Cidra,  Puerto Rico
containing 32,000 square feet.

     Bertek  Pharmaceuticals,   Inc.  owns  production,   warehouse  and  office
facilities in two buildings in Sugar Land, Texas  containing  70,000 square feet
and  research  and  development  facilities  in two  buildings  in Foster  City,
California containing 27,000 square feet under leases expiring in 2003.

     Mylan Technologies Inc. owns production,  warehouse, laboratory, and office
facilities  in three  buildings in Swanton and St.  Albans,  Vermont  containing
118,000  square  feet.  Mylan  Technologies  Inc.  also  operates a coating  and
extrusion  facility in St.  Albans  containing  71,000 square feet under a lease
expiring in 2015.

     UDL Laboratories Inc. owns production,  laboratory,  warehouse,  and office
facilities  in  three  buildings  in  Rockford,   Illinois  and  Largo,  Florida
containing 136,000 square feet. UDL also leases a warehouse facility in Rockford
containing 41,000 square feet under a lease expiring in 2005.

      The Company's  production  equipment includes that equipment  necessary to
produce and package tablet,  capsule,  aerosol,  liquid,  transdermal and powder
dosage forms. The Company  maintains seven analytical  testing  laboratories for
quality control.

     The Company's  production  facilities are operated primarily on a two-shift
basis.  Properties  and equipment are well  maintained  and adequate for present
operations.

     The  Company's  corporate  offices,  approximately  7,000 square feet,  are
located at 1030 Century Building, 130 Seventh Street, Pittsburgh,  Pennsylvania,
and are occupied under a lease expiring in 2003.


Item 3. Legal Proceedings

         In March  1999,  a  subsidiary  of the  Company  entered  into  binding
arbitration  related  to  a  dispute  with  KaiGai  Pharmaceutical,   Co.,  Ltd.
("KaiGai").  The  dispute  arose  out of a  license  and  supply  agreement  for
nitroglycerin  transdermal patches that both companies claim was breached by the
other party.  KaiGai sought damages in excess of $20,000,000.  In November 1999,
the  arbitration  panel denied  KaiGai's  request for  damages.  KaiGai filed an
appeal  and the  Company  has filed a motion to  dismiss  the  appeal due to the
appeal not being filed within the time period permitted.

         In June 1998,  the  Company  filed suit in Los Angeles  Superior  Court
against American Bioscience,  Inc. ("ABI"),  American  Pharmaceutical  Partners,
Inc.  ("APP") and certain of their  directors and officers.  The Company's  suit
seeks various  legal and  equitable  remedies.  The Los Angeles  Superior  Court
issued a preliminary  injunction order which, among other things,  prohibits the
defendants  from  transferring  or disposing  of funds,  assets,  technology  or
property  without  the  Company's  consent  or  commingling  assets,   property,
technology  or  personnel  with those of  another  company.  In June  1999,  the
defendants  filed an answer to and  cross-complaint  against  the  Company.  The
cross-complaint  alleges violations of California state laws,  interference with
contractual relations and prospective economic advantage,  fraud, slander, libel
and other allegations.  The cross-complaint  seeks unspecified  compensatory and
punitive damages.  The Company believes the cross-complaint is without merit and
intends to vigorously defend its position.

         In May 1998,  Genpharm  Inc.  filed in the general  division of Ontario
Court, Canada, a statement of claim against Novopharm Limited and Granutec, Inc.
("Novopharm"). The claim was filed to resolve contract interpretation issues and
collect  additional  funds due relating to an agreement  between the parties for
the sale of ranitidine.  In July 1998,  Novopharm  filed a counterclaim  against
Genpharm and the Company seeking  damages of up to $60,000,000.  The Company was
named in the  counterclaim due to its agreement with Genpharm in which it shared
in profits  derived  from the  product  ranitidine.  The  Company  believes  the
counterclaim is without merit and intends to vigorously to defend its position.

     On December 22, 1998,  the Federal Trade  Commission  ("FTC") filed suit in
U.S.  District  Court for the  District of Columbia  (the  "Court")  against the
Company.  The FTC's complaint alleges the Company engaged in restraint of trade,
monopolization,  attempted monopolization and conspiracy to monopolize,  arising
out of  certain  agreements  involving  the  supply  of raw  materials  used  to
manufacture two drugs.  The FTC also sued in the same case the foreign  supplier
of the raw  materials,  the  supplier's  parent  company  and its United  States
distributor.  Under the terms of the agreements  related to these raw materials,
the Company has agreed to indemnify these parties.

     The Company is a party to other suits involving the Attorneys  General from
33 states and more than 25 putative  class  actions that allege the same conduct
alleged  in the FTC  suit  as  well as  alleged  violations  of  state  consumer
protection  laws. A qui tam action was  commenced by a private party in the U.S.
District Court for the District of South  Carolina  purportedly on behalf of the
United States alleging violations of the False Claims Act and other statutes.

     The relief  sought by the FTC  includes an  injunction  barring the Company
from engaging in the  challenged  conduct,  recision of certain  agreements  and
disgorgement  in excess of  $120,000,000.  The states and private  parties  seek
similar  relief,  treble damages and attorneys'  fees. The Company's  motions to
dismiss several of the private actions were granted.

     A class action suit was filed  alleging  violations  of federal  securities
laws by the Company and certain  directors and officers of the Company.  Without
specifying a dollar amount, the suit sought compensatory  damages. The Company's
motion to dismiss the federal  securities case was granted on December 22, 1999.
An appeal is pending.

     The Company had filed motions to dismiss the FTC complaint and  significant
portions  of the State  Attorneys  General  complaint.  In July 1999,  the Court
denied the Company's  motion to dismiss the FTC  complaint.  The Company filed a
motion  requesting  the  Court  to  certify  its  ruling  with  respect  to  the
jurisdictional  issue for expedited  appeal to the U.S. Court of Appeals for the
District of  Columbia.  This motion was  denied.  The Court  granted in part and
denied in part the Company's  motion to dismiss  portions of the State Attorneys
General  complaint.  In so doing, the Court limited certain theories of recovery
asserted by the states.  Some  States  filed a motion with the Court  requesting
that it reconsider  certain claims that were  dismissed,  and, in December 1999,
the Court reinstated certain claims.

     The Company believes that it has meritorious  defenses to the claims in all
FTC and related  suits and  intends to  vigorously  defend  them.  Although  the
Company believes it has meritorious defenses to the claims, an adverse result in
these  suits could have a material  adverse  effect on the  Company's  financial
position and results of its operations.

     The  Company  is  involved  in various  other  legal  proceedings  that are
considered  normal to its  business.  While it is not  feasible  to predict  the
ultimate outcome of such  proceedings,  it is the opinion of management that the
outcome of these suits will not have a material  adverse effect on the Company's
operations, financial position, or liquidity.


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

               Not applicable.


EXECUTIVE OFFICERS OF THE REGISTRANT

The  names,  ages and  positions  of the  Company's  executive  officers  are as
follows:

    Milan Puskar                  65      Chairman and Chief Executive Officer
    Richard F. Moldin             52      President and Chief Operating Officer
    Dana G. Barnett               59      Executive Vice President
    Louis J. DeBone               54      Senior Vice President
    Roger L. Foster               53      Vice President and General Counsel
    Roderick P. Jackson           60      Senior Vice President
    Donald C. Schilling           50      Vice President-Finance and Chief
                                                         Financial Officer

    Patricia A. Sunseri           60      Vice President-Investor and
                                              Public Relations
    Robert W. Smiley              78      Secretary

     Mr.  Puskar was  employed  by the  Company  from 1961 to 1972 and served in
various positions, including Secretary-Treasurer, Executive Vice President and a
member of the Board of Directors.  From 1972 to 1975,  Mr. Puskar served as Vice
President and General Manager of the Cincinnati  division of ICN Pharmaceuticals
Inc. In addition, he has served as a partner of several  pharmaceutical firms in
foreign  countries.  Currently,  Mr.  Puskar  is a  director  of  West  Virginia
University  Foundation,  Morgantown,  West  Virginia,  and Duquesne  University,
Pittsburgh,  Pennsylvania.  Mr.  Puskar  served as President of the Company from
1976 to March 2000 and as Vice  Chairman of the Board from 1980.  He was elected
Chairman of the Board and Chief Executive Officer in November 1993.

     Mr. Moldin was employed by the Company in April 2000. Prior to assuming his
position  as  President  and Chief  Operating  Officer  of the  Company,  he was
President and Chief  Executive  Officer of Faulding Inc. from 1995 to 2000.  Mr.
Moldin served in various executive and management positions for Wellcome plc. in
England, Australia and the United States from 1979 to 1995.

     Mr. Barnett was employed by the Company in 1966. His responsibilities  have
covered production,  quality control and product development. Mr. Barnett became
Vice  President  in 1974,  Senior  Vice  President  in 1978 and  Executive  Vice
President  in 1987.  He was elected  President  and Chief  Executive  Officer of
Somerset Pharmaceuticals, Inc. in June 1991, and in August 1995, he was elevated
to Chairman and Chief Executive Officer.

     Mr. DeBone has been employed by the Company since September 1987.  Prior to
assuming   his   present   position   in   May   1999,   he   served   as   Vice
President-Operations  and  Vice  President-Quality  Control.  He was  previously
employed  with the  Company  from  March 1976  until  June 1986 as  Director  of
Manufacturing.

     Mr. Foster has been employed by the Company since May 1984.  Prior to
assuming his present position in June 1995 as Vice President and General Counsel
he served as Director of Legal Services and as Director of Governmental Affairs.

     Mr. Jackson has been employed by the Company since March 1986.  Prior to
assuming his present position in October 1992 as Senior Vice President, he
served as Vice President-Marketing and Sales.

     Mr. Schilling has been employed by the Company since October
1997.  Prior to assuming his present position as Vice President-Finance, he was
Vice President of Finance & Administration for Plastics Manufacturing Inc. in
Harrisburg, NC from 1991 to 1997.

     Mrs.  Sunseri has served as a Director of the Company  since April 1997, as
Vice  President-Investor  and Public  Relations of the Company since 1989 and as
Director of Investor Relations of the Company from 1984 to 1989.

     Mr.  Smiley has been the Secretary of the Company since 1976. He previously
served on the Company's  Board of Directors.  In October 1992, he joined the law
firm of Doepken Keevican & Weiss Professional,  which provided legal services to
the Company in fiscal 2000.  Previously,  he was a partner of Smiley,  McGinty &
Steger for more than five years.

         No  family  relationships  exist  between  any of the  above  executive
officers.  Officers  of the  Company  serve  at the  pleasure  of the  Board  of
Directors.


                                PART II


Item 5. Market for Registrant's Common Equity and
        Related Stockholder Matters

     The information  required by Item 5 is hereby  incorporated by reference to
pp. 14 and 41 of the  accompanying  Annual Report to  Shareholders  for the year
ended March 31, 2000.


Item 6. Selected Financial Data

     The information  required by Item 6 is hereby  incorporated by reference to
p. 14 of the accompanying Annual Report to Shareholders for the year ended March
31, 2000.


Item 7.  Management's Discussion and Analysis of Financial Condition and
         
Results of Operations

     The information  required by Item 7 is hereby  incorporated by reference to
pp. 15-21 of the  accompanying  Annual Report to Shareholders for the year ended
March 31, 2000.


Item  7A.  Quantitative  and  Qualitative  Disclosures  About  Market  Risk  The
information  required by Item 7A is hereby incorporated by reference to p. 20 of
the  accompanying  Annual  Report to  Shareholders  for the year ended March 31,
2000.


Item 8. Financial  Statements and Supplementary Data The information required by
Item 8 is hereby  incorporated  by reference  to pp.  22-41 of the  accompanying
Annual Report to Shareholders for the year ended March 31, 2000.


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

     Not applicable.


                              PART III


Item 10. Directors and Executive Officers of the Registrant

     The information as to directors required by Item 10 is hereby  incorporated
by reference to pp. 2 and 3 of the Company's 2000 Proxy  Statement.  Information
concerning  executive  officers is  provided in PART I of this report  under the
caption "Executive Officers of the Registrant".


Item 11. Executive Compensation

     The information required by Item 11 is hereby incorporated by reference to
pp. 8-9 of the Company's 2000 Proxy Statement.


Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management The
information  required by Item 12 is hereby  incorporated  by reference to pp. 10
and 11 of the Company's 2000 Proxy Statement.


Item 13. Certain Relationships and Related Transactions

     The information  required by Item 13 is hereby incorporated by reference to
p. 3 of the Company's 2000 Proxy Statement and Part I of this report.


                             PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

     (a) 1.  List of Financial Statements

                                                                 Annual Report
                                                                     Page

                                                                    Number

         INCLUDED IN ANNUAL REPORT TO SHAREHOLDERS:
         Consolidated Balance Sheets..............................  22-23
         Consolidated Statements of Earnings......................     24
         Consolidated Statements of Shareholders' Equity .........     25
         Consolidated Statements of Cash Flows....................  26-27
         Notes to Consolidated Financial Statements...............  28-39
         Independent Auditors' Report.............................     40

            2.  Financial Statement Schedules

                    The information required by this Item is incorporated herein
                    by  reference to Exhibit 99. All other  schedules  have been
                    omitted because they are not required or the information can
                    be  derived  from  the  Consolidated   Financial  Statements
                    included in the  accompanying  Annual Report to Shareholders
                    for the year ended March 31, 2000.

            3.  Exhibits

                   (3)(a)     Amended and Restated  Articles of Incorporation of
                              the  registrant,  filed as Exhibit 4.2 to the Form
                              S-8 on  December  23,  1997  (registration  number
                              333-43081) and incorporated herein by reference.

                      (b)     By-laws  of the  registrant,  as  amended to date,
                              filed as Exhibit  4.3 to the Form S-8 on  December
                              23,  1997  (registration   number  333-43081)  and
                              incorporated herein by reference.

                   (4)(a)     Rights Agreement,  as amended to date, between the
                              Company and American  Stock  Transfer & Trust Co.,
                              filed as Exhibit 4.1 to Form 8-K dated  August 30,
                              1996  and   incorporated   herein  by   reference.
                              Amendment is  incorporated  herein by reference to
                              Exhibit 1 to Form 8-A/A dated March 31, 2000.

                  (10)(a)     Mylan Laboratories Inc. 1986 Incentive Stock 
                              Option Plan, as amended to date, filed as
                              Exhibit 10(b) to Form 10-K for fiscal year ended 
                              March 31, 1993 and incorporated herein by 
                              reference.

                      (b)     "Salary Continuation Plan" with Milan Puskar, Dana
                              G.  Barnett and C.B.  Todd each dated  January 27,
                              1995 and filed as  Exhibit  10(b) to Form 10-K for
                              fiscal year ended March 31, 1995 and  incorporated
                              herein by reference.

                      (c)     "Salary  Continuation  Plan" with Louis J.  DeBone
                              dated  March 14,  1995 filed as  Exhibit  10(c) to
                              Form 10-K for fiscal year ended March 31, 1995 and
                              incorporated herein by reference.

                        (d)   Employment  contract with Milan Puskar dated April
                              28,  1983,  as amended  to date,  filed as Exhibit
                              10(e) to Form 10-K for fiscal year ended March 31,
                              1993 and incorporated herein by reference.

                        (e)   Split  Dollar  Life  Insurance   Arrangement  with
                              McKnight  Irrevocable Trust filed as Exhibit 10(g)
                              to Form 10-K for fiscal  year ended March 31, 1994
                              and incorporated herein by reference.

                    (f)  "Service  Benefit  Agreement"  with Laurence S. DeLynn,
                         John C. Gaisford, M.D., and Robert W. Smiley, Esq. each
                         dated  January 27,  1995 and filed as Exhibit  10(g) to
                         Form 10-K for  fiscal  year  ended  March 31,  1995 and
                         incorporated herein by reference.

                   (g) Split Dollar Life Insurance Arrangement with Milan Puskar

                          Irrevocable  Trust filed as Exhibit 10(h) to Form 10-K
                              for the  fiscal  year  ended  March  31,  1996 and
                              incorporated herein by reference.

                      (h)     Split Dollar Life Insurance  Arrangement  with the
                              Todd  Family  Irrevocable  Trust  filed as Exhibit
                              10(i) to Form 10-K for the fiscal year ended March
                              31, 1997 and incorporated herein by reference.

                      (i)     Split Dollar Life Insurance  Arrangement  with the
                              Dana G. Barnett  Irrevocable Family Trust filed as
                              Exhibit  10(j) to Form  10-K for the  fiscal  year
                              ended  March 31, 1997 and  incorporated  herein by
                              reference.

                      (j)     "Salary  Continuation  Plan" with Patricia Sunseri
                              dated  March 14,  1995 filed as  Exhibit  10(k) to
                              Form 10-K for the fiscal year ended March 31, 1997
                              and incorporated herein by reference.

                      (k)    Mylan Laboratories Inc. 1997 Incentive Stock Option
                             Plan, as amended to date, filed herewith.

                      (l)    Mylan Laboratories Inc. 1992 Nonemployee Director 
                             Stock Option Plan, as amended to date, filed as 
                             Exhibit 10(l) to Form 10-K for the fiscal year 
                             ended March 31, 1998 and incorporated herein 
                             by reference.

                      (m)     "Salary   Continuation   Plan"  with  Roderick  P.
                              Jackson  dated March 14, 1995, as amended to date,
                              filed as  Exhibit  10(m) to Form  10-K for  fiscal
                              year ended March 31, 1999 and incorporated  herein
                              by reference.

              (13)       Fiscal 2000 Annual Report to Shareholders which, except
                         for  those  portions  incorporated  by  reference,   is
                         furnished  solely for the information of the Securities
                         and  Exchange  Commission  and  is  not  deemed  to  be
                         "filed".

              (21)  Subsidiaries of the registrant, filed herewith.

              (23)  Consents of Independent Auditors, filed herewith.

              (27)  Financial Data Schedule, filed herewith.
              (99)  Consolidated financial statements of Somerset 
                    Pharmaceuticals, Inc. for years ended December 31, 1999, 
                    1998, and 1997, filed herewith.

         (b) Reports on Form 8-K

              The Company  was not  required to file a report on Form 8-K during
the quarter ended March 31, 2000.


                              SIGNATURES

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

Date:    June 22, 2000
                           by /S/ MILAN PUSKAR

                              Milan Puskar

                                    Chairman and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

/S/ MILAN PUSKAR         June 22, 2000    /S/ DANA G. BARNETT   June 22, 2000
Milan Puskar                                         Dana G. Barnett
Chairman and Chief Executive Officer      Executive Vice President and Director
(Principal executive officer)


/S/ LAURENCE S. DELYNN  June 22, 2000    /S/ DOUGLAS J. LEECH    June 22, 2000
Laurence S. DeLynn                                   Douglas J. Leech
Director                                             Director

/S/PATRICIA A. SUNSERI  June 22, 2000    /S/JOHN C. GAISFORD,M.D.June 22, 2000
Patricia A. Sunseri                                  John C. Gaisford,M.D.
Vice President and Director                                   Director

/S/ C.B. TODD           June 22, 2000    /S/ DONALD C. SCHILLING  June 22, 2000
C.B. Todd                                                    Donald C. Schilling
Director                                       Vice President-Finance and Chief 
                                               Financial Officer
                                               (Principal financial officer 
                                               and principal accounting officer)










 



                            MYLAN LABORATORIES INC.

                        1997 INCENTIVE STOCK OPTION PLAN

                         (AS AMENDED THROUGH APRIL 2000)



<PAGE>



                                      

                             MYLAN LABORATORIES INC.

                        1997 INCENTIVE STOCK OPTION PLAN

1.       PLAN NAME

This Plan shall be known as the "MYLAN  LABORATORIES  INC. 1997 Incentive  Stock
Option Plan" (the "Plan").

2.       EFFECTIVE DATE

The  effective  date of the Plan shall be January 23, 1997;  provided,  however,
that if the shareholders of MYLAN  LABORATORIES INC. (the  "Corporation") do not
approve the Plan by January 22,  1998,  no Options (as defined in  paragraph  3)
granted under the Plan shall  constitute  Incentive Stock Options (as defined in
paragraph 5(c)).

3.       PURPOSE

The  purpose of this Plan is to provide a means  whereby  the  Corporation  may,
through the grant of options to purchase  Class A Common  Stock,  par value $.50
per  share  ("Common  Stock")  of  the  Corporation   ("Options")  to  employees
(including  officers  and  directors  who are also  employees)  and  nonemployee
consultants,  agents and advisors to attract,  retain and motivate these persons
to exert their best efforts on behalf of the Corporation  and its  subsidiaries.
Collectively, these persons are called "key employees."

4.       NUMBER OF SHARES AVAILABLE UNDER PLAN

Options may be granted by the Corporation  from time to time to key employees
 of
the  Corporation  and its  subsidiaries  to purchase an aggregate of Ten Million
(10,000,000)  shares  of  Common  Stock  of  the  Corporation  and  Ten  Million
(10,000,000)  shares of Common Stock shall be reserved for Options granted under
the Plan (subject to adjustment  as provided in paragraph  6(i)).  Shares issued
upon exercise of Options  granted under the Plan may be authorized  and unissued
shares or shares held by the Corporation in its treasury.  If any Option granted
under the Plan shall  terminate,  expire or be canceled  as to any  shares,  new
Options may thereafter be granted under the Plan covering those shares,  subject
to the limitations imposed under paragraph 5(a)(2).



<PAGE>


5.       ADMINISTRATION

The Plan shall be administered under the terms of this Section 5.

(a) STOCK OPTION  COMMITTEE.  Except as further provided in this paragraph 5(a),
the  Plan  shall  be  administered  by a Stock  Option  Committee  ("Committee")
consisting of at least two members of the Board of Directors of the  Corporation
who shall be appointed by, and serve at the pleasure of, the Board of Directors.
The composition of the Committee shall be controlled by the following provisions
of this paragraph 5(a).

(1) Each member of the Committee must be a  "non-employee  director"  within the
meaning  of Rule  16b-3,  as that Rule may be amended  from time to time  ("Rule
16b-3"),  under  the  Securities  Exchange  Act of 1934,  as  amended,  when the
Committee  is  acting  to grant  Options  to those  key  employees  who are also
directors or officers.  Those actions which require a Committee of  non-employee
directors include:

     (i)  Selecting the directors or officers to whom Options may be granted;

     (ii) Deciding or determining the timing,  price,  number or other terms and
          conditions  of,  or  shares  subject  to,  each  Option  made to a key
          employee who is also a director or officer; and

     (iii)Interpreting  the Plan or Option  agreements  with  regard to  Options
          granted to a director or officer.

An officer or director  who also has an  employment  status  described in clause
(i),  (ii) or (iii) of  paragraph  5(a)(2),  shall  also be limited to a maximum
number of Options under the Plan as provided under paragraph 5(a)(3).

         (2) Each member of the Committee must be an "outside  director"  within
the meaning of Regulation  ss.1.162-27 (e)(3), as that Regulation may be amended
from time to time (the  "Regulation"),  under the Internal Revenue Code of 1986,
as amended (the "Code"),  when the Committee is acting to grant Options to those
key employees who have the following employment status with the Corporation:

     (i)  The chief  executive  officer  of the  corporation  or the  individual
          acting in that capacity;

     (ii) One of the four  highest  compensated  officers  (other than the chief
          executive officer) of the Corporation; or

     (iii)In the  judgment  of the  Board of  Directors,  is  deemed  reasonably
          likely to become an employee  described  in clause (i) or (ii) of this
          paragraph  5(a)(2)  within  the  exercise  period of any  contemplated
          option.

         Those actions which  require a Committee of outside  directors  include
the same actions as is described in the immediately  preceding  paragraph except
that the  employment  relationships  described in clauses (i), (ii) and (iii) of
this paragraph  5(a)(2) shall be  substituted  for the references to director or
officer. In addition, the provisions of paragraph 5(a)(3) shall apply.

         If an individual  who is being  considered for a grant of Options is an
officer or director and also has an employment  status  described in clause (i),
(ii) or (iii) of this  paragraph  5(a)(2),  the members of the  Committee  shall
consist  of  whichever  of  the  following  director   categories  is  the  more
restrictive, non-employee directors as defined in Section 5(a)(1), or of outside
directors as defined in this Section 5(a)(2).

         (3) In addition to any other limitation,  the Committee shall not award
to any  employee  described in clause (i),  (ii) or (iii) of  paragraph  5(a)(2)
Options  in any  calendar  year to  purchase  more than three  hundred  thousand
(300,000) shares of Common Stock,  plus any amount of shares that were available
within this limit in any prior year for which Options were not granted. Further,
any Options  awarded to such an employee  which are  thereafter  canceled  shall
continue to count against the maximum  number of Options which may be awarded to
that employee,  and any Option of such an employee which is later repriced shall
be deemed to be the  cancellation  of the original Option and the grant of a new
Option for purposes determining the number of Options awarded to that employee.

         (b) COMMITTEE  ACTION. A majority of the members of the Committee shall
constitute a quorum,  and the action (1) of a majority of the members present at
a meeting  at which a quorum is  present  or (2)  authorized  in  writing by all
members,  shall be the  action of the  Committee.  A member  participating  in a
meeting by telephone or similar communications equipment shall be deemed present
for this purpose if the member or members who are present in person can hear him
and he can hear them.

         (c) AUTHORITY OF THE COMMITTEE. The Committee shall have the power: (1)
to determine  and designate in its absolute  discretion  from time to time those
employees of the Corporation, its subsidiaries,  independent agents, consultants
and  attorneys  who by reason of the nature of their  duties,  their present and
potential contributions to the success of the Corporation and other factors, who
are eligible to  participate  in the Plan and to whom Options are to be granted;
provided,  however, no Option shall be granted after January 23, 2007, the tenth
(10th)  anniversary of the original  adoption date of the Plan; (2) to authorize
the granting of (i) Options which qualify as Incentive  Stock Options within the
meaning of Code  Section 422  ("Incentive  Stock  Option");  provided  that only
employees  of the  Corporation  may be granted  Incentive  Stock  Options,  (ii)
Options  which do not  qualify  under  Code  Section  422  ("Nonqualified  Stock
Option");  provided  that only  Nonqualified  Stock  Options  may be  granted to
persons  who are not  employees,  but who are  otherwise  eligible  for grant of
options;  (3) to determine the number of shares subject to each Option,  subject
to paragraph  5(a);  (4) to determine the time or times and the manner when each
Option shall be exercisable and the duration of the exercise period.

         The Committee may interpret the Plan, prescribe,  amend and rescind any
rules and  regulations  necessary or appropriate for the  administration  of the
Plan and make other  determinations  and take other action as it deems necessary
or advisable.  Without  limiting the  generality  of the foregoing  sentence the
Committee may, in its discretion,  treat all or any portion of any period during
which an  Optionee  is on  military  or an  approved  leave of absence  from the
Corporation as a period of employment of the Optionee by the Corporation, as the
case  may be,  for the  purpose  of  accrual  of  rights  under  an  Option.  An
interpretation,  determination  or other  action made or taken by the  Committee
shall be final, binding and conclusive.

         (d) INDEMNIFICATION OF COMMITTEE. In addition to other rights that they
may have as  Directors  or as  members  of the  Committee,  the  members  of the
Committee  shall  be  indemnified  by the  Corporation  against  the  reasonable
expenses,   including  attorney's  fees  actually  and  reasonably  incurred  in
connection with the defense of any action, suit or proceeding,  or in connection
with any appeal  therein,  to which they or any of them may be a party by reason
of any action  taken or failure to act under or in  connection  with the Plan or
any  Option  granted  thereunder,  and  against  all  amounts  paid  by  them in
settlement  thereof or paid by them in  satisfaction  of a judgment  in any such
action,  suit or proceeding,  except in relation to matters as to which it shall
be adjudged in the action, suit or proceeding that the Committee member's action
or failure to act constituted self-dealing,  willful misconduct or recklessness;
provided that within sixty (60) days after  institution  of any action,  suit or
proceeding  a  Committee  member  shall in  writing  offer the  Corporation  the
opportunity, at its own expense, to handle and defend the same.

6.       TERMS AND CONDITIONS

Each Option granted under the Plan shall be evidenced by an agreement, in a form
approved by the  Committee,  which shall be subject to the  following  expressed
terms and conditions and to other terms and conditions as the Committee may deem
appropriate,  including  those  imposed by Section 8 following  amendment of the
Plan requiring shareholder approval.

         (a) OPTION PERIOD.  Each Option  agreement shall specify the period for
which the Option  hereunder is granted  (which in no event shall exceed ten (10)
years  from the date of the  grant of the  Option)  and shall  provide  that the
Option shall expire at the end of that period.

         (b) OPTION PRICE. The Option price per share shall be determined by the
Committee at the time any Option is granted, and shall not be less than the fair
market  value  (but in no event  less than the par  value if any) of the  Common
Stock of the Corporation on the date the Option is granted, as determined by the
Committee.

         (c) AGGREGATE  OWNERSHIP AND EXERCISE  LIMITATIONS.  The aggregate fair
market  value  (determined  at the time the Option is granted) of the stock with
respect to which  Incentive  Stock Options are exercisable for the first time by
an Optionee during any calendar year (under all plans of the Corporation and its
subsidiaries and parents) shall not exceed $100,000.

         (d)  EXERCISE  OF  OPTION.  Subject in each case to the  provisions  of
paragraphs  (a),  (b),  (c),  (e) and (f) of this  Section  6, any Option may be
exercised,  to the extent  exercisable by its terms, at the time or times as may
be determined by the Committee at the time of grant;  subject,  however,  to the
following  limitations.  No portion of an Option  granted to an  employee of the
Corporation or its  subsidiaries  shall be  exercisable  unless the Optionee has
been  employed  by  the  Corporation  or  its  subsidiaries   until  the  second
anniversary  of the  date  of  the  grant  of the  Option.  Between  the  second
anniversary and the third anniversary of the date of the grant of the Option, if
the  Optionee is still  employed by the  Corporation  or its  subsidiaries,  the
Optionee may exercise up to twenty-five percent (25%) of the Option. Between the
third  anniversary  and the fourth  anniversary  of the date of the grant of the
Option,   if  the  Optionee  is  still  employed  by  the   Corporation  or  its
subsidiaries,  the Optionee may exercise  cumulatively up to fifty percent (50%)
of the Option.  On and after the fourth  anniversary of the date of the grant of
the Option (but in no event longer than the period provided in paragraph  6(a)),
if the Optionee is still employed by the  Corporation or its  subsidiaries,  the
Optionee  may  exercise  cumulatively  up to one hundred  percent  (100%) of the
Option. The Committee, in its sole discretion,  however, may reduce or eliminate
the limitations provided in the preceding four sentences ("Vesting Limitations")
for  Options  granted to any  employee  having at least two years of  continuous
service with the Corporation or its  subsidiaries.  Notwithstanding  the Vesting
Limitations,  if an Optionee's employment is terminated due to death,  Permanent
Disability  (as defined in paragraph  6(f)),  or retirement as determined in the
sole and  absolute  discretion  of the  Committee  ("Retirement"),  one  hundred
percent (100%) of the Optionee's  Option may be exercised in accordance with the
provisions of paragraph 6(f).  Vesting provisions  substantially  similar to the
Vesting  Limitations  may be imposed  upon any Option  granted to a  nonemployee
Optionee at the sole and absolute discretion of the Committee.

         (e) PAYMENT OF PURCHASE  PRICE AND TAXES UPON  EXERCISE.  The  purchase
price  of  Common  Stock  as to  which an  Option  shall  be  exercised  and any
employment taxes arising  therefrom shall be paid to the Corporation at the time
of  exercise in cash or, at the  discretion  of the  Committee,  in stock of the
Corporation;  payment in stock of the Corporation  shall include the right of an
Optionee to elect to receive the shares of Common Stock  issuable  upon exercise
of an Option  reduced  by that  number of shares of Common  Stock  necessary  to
satisfy the purchase price and/or the minimum statutory withholding requirements
for employment taxes (hereinafter "Net Exercise").



<PAGE>


         (f) EXERCISE IN THE EVENT OF DEATH OR TERMINATION OF EMPLOYMENT. (1) If
any Optionee who is an employee of the Corporation or its subsidiaries shall die
(i) while an  employee of the  Corporation  or its  subsidiaries  or (ii) within
three  (3)  months  after  termination  of the  Optionee's  employment  with the
Corporation or its subsidiaries  because the Optionee is permanently and totally
disabled (within the meaning of Code Section 22(e)(3)) ("Permanent  Disability")
or because of  Retirement,  any Option of the  Optionee  may be exercised by the
person or persons to whom the Optionee's rights under the Option pass by will or
applicable law or if no person has that right,  by the  Optionee's  executors or
administrators, at any time, or from time to time, within one (1) year after the
date of the death,  but in no event later than the expiration  date specified in
paragraph  (a) of  this  Section  6.  (2)  If an  Optionee's  employment  by the
Corporation or its subsidiaries shall terminate because of Permanent Disability,
the Optionee  may exercise any Option of the Optionee at any time,  or from time
to time,  within one (1) year of the date of the termination of employment,  but
in no event later than the  expiration  date  specified in paragraph (a) of this
Section  6.  (3)  If  an  Optionee's   employment  by  the  Corporation  or  its
subsidiaries  shall terminate  because of indefinite  lay-off,  the Optionee may
exercise  any Option of the  Optionee  to the extent  that the  Optionee  may be
entitled to do so at the date of the  indefinite  lay-off,  at any time, or from
time to  time,  within  three  (3)  months  of the  date of the  termination  of
employment,  but in no  event  later  than  the  expiration  date  specified  in
paragraph  (a) of  this  Section  6.  (4)  If an  Optionee's  employment  by the
Corporation or its  subsidiaries  shall  terminate  because of  Retirement,  any
Option of the Optionee  may be  exercised  by the Optionee at any time,  or from
time to  time,  within  three  (3)  months  of the  date of the  termination  of
employment,  but in no  event  later  than  the  expiration  date  specified  in
paragraph  (a) of this  Section 6. (5) Except as  provided by (1) through (4) of
this  paragraph  (f) of Section 6, if an  Optionee's  employment  shall cease by
reason of a voluntary or involuntary termination,  either with or without cause,
any Option of the Optionee shall  terminate  immediately.  (6) If an Optionee is
not an employee of the  Corporation  or its  subsidiaries  when the  Optionee is
granted an Option,  that Option shall  terminate  one (1) year after the date of
the Optionee's  death,  but in no event later than the expiration date specified
in paragraph (a) of this Section 6. If such an Optionee  dies, any Option of the
Optionee may be exercised by the person to whom the Optionee's  rights under the
Option pass by will or  applicable  law or if no person has that  right,  by the
Optionee's executors or administrators, at any time, or from time to time within
one (1)  year  after  the date of the  death,  but in no  event  later  than the
expiration  date  specified in paragraph (a) of this Section 6.  Notwithstanding
the foregoing, for Options granted on or after January 26, 2000, the Options, to
the extent that the Options  have vested on the date of any  termination  of the
employment of the Optionee by the Corporation, shall be exercisable at any time,
or from time to time, but in no event later than the  expiration  date specified
in paragraph (a) of Section 4, so long as the  employment of the Optionee by the
Corporation has not been  voluntarily  terminated by the Optionee and so long as
that employment was not terminated by the Corporation for cause. Options held by
Optionees who voluntarily terminate employment or whose employment is terminated
for cause shall in any event expire on the Optionee's last day of employment.



<PAGE>


         (g)  PERMITTED  TRANSFERS.  Options  granted  under  the Plan  shall be
transferrable by will or by the laws of descent and  distribution.  In addition,
Nonqualified  Stock Options granted under the Plan can be transferred during the
lifetime of the Optionee only if all of the following  conditions are satisfied:
(1) the Stock Option  Committee  has approved the proposed  transfer in writing;
(2) the proposed transfer is to be made without consideration;  (3) the proposed
transferee is a member or members of the  Optionee's  immediate  family (i.e., a
child, or children,  a grandchild or  grandchildren,  or the Optionee's  spouse)
and/or to a trust  established for the benefit of an immediate  family member or
members,  or a family limited  partnership  which  includes the Optionee  and/or
members of the  Optionee's  immediate  family,  or a trust  established  for the
benefit of the  Optionee,  and/or an  immediate  family  member or members and a
charity  exempt from taxation  under Internal  Revenue Code  501(c)(3);  and (4)
after transfer,  each option transferred by the Optionee shall remain subject to
the provisions of the Plan under which it was granted.

         (h) INVESTMENT REPRESENTATION. Each Option agreement shall provide that
upon demand by the Committee, the Optionee (or any person acting under paragraph
6(f)) shall deliver a written representation to the Committee at the time of any
exercise of an Option that the shares to be acquired upon the exercise are to be
acquired for  investment  and not for resale or with a view to the  distribution
thereof.  Upon demand,  delivery of the representation  prior to the delivery of
any shares to be issued upon  exercise of an Option and prior to the  expiration
of the Option period shall be a condition precedent to the right of the Optionee
or other person to purchase any shares.

         (i) ADJUSTMENTS.  In the event of any change in the Common Stock of the
Corporation by reason of any stock dividend,  recapitalization,  reorganization,
merger, consolidation,  split-up,  combination, or exchange of shares, or rights
offering to purchase  Common  Stock at a price  substantially  below fair market
value, or any similar change  affecting the Common Stock, the number and kind of
shares which  thereafter  may be optioned and sold under the Plan and the number
and kind of shares  subject to option in outstanding  Option  agreements and the
purchase price per share thereof shall be appropriately adjusted consistent with
the  change  in a  manner  as  the  Committee  may  deem  equitable  to  prevent
substantial  dilution or enlargement of the rights granted to, or available for,
participants in the Plan.

         (j) INCENTIVE STOCK OPTIONS.  Each Option  agreement which provides for
the grant of an Incentive  Stock Option to an employee  shall  contain terms and
provisions  as the Committee may determine to be necessary or desirable in order
to qualify the Option as an Incentive  Stock  Option  within the meaning of Code
Section 422, or successor thereto and to meet the requirement of Rule 16b-3.

         (k) NO RIGHTS AS  SHAREHOLDERS.  No  Optionee  shall  have any  rights 
as a shareholder with respect to any shares subject to an Option prior to the 
date of issuance to the Optionee of a certificate or certificates for the 
shares.

         (l) NO RIGHTS TO CONTINUED EMPLOYMENT.  The Plan and any Option granted
under the Plan  shall not confer  upon any  Optionee  any right with  respect to
continuance  of  employment  by  the   Corporation  or  any  subsidiary  of  the
Corporation,  nor  shall  they  interfere  in any  way  with  the  right  of the
Corporation to terminate the Optionee's employment at any time.

7.       COMPLIANCE WITH OTHER LAWS AND REGULATIONS

The Plan,  the grant and exercise of Options  thereunder,  and the obligation of
the  Corporation to sell and deliver  shares under Options,  shall be subject to
all applicable  Federal and state laws,  rules and  regulations  and to required
approvals of any government or regulatory  agency.  The Corporation shall not be
required to issue or deliver any  certificates  for shares of Common Stock prior
to the completion of any  registration or  qualification of the shares under any
Federal or state law, or any ruling or regulation of any  government  body which
the  Corporation  shall,  in its sole  discretion,  determine to be necessary or
advisable.

8.       AMENDMENT AND DISCONTINUANCE

The Board of Directors of the Corporation  may from time to time amend,  suspend
or discontinue the Plan;  provided,  however,  that subject to the provisions of
paragraph 6(i) or the approval of the  Corporation's  shareholders  no action of
the Board of Directors  or of the  Committee  may: (a) extend the period  during
which  Options may be granted as provided in  paragraph  4(c);  (b) increase the
number of shares  reserved  for  Options  pursuant  to Section 4; (c) permit the
granting  of any  Option  at an  Option  price  less  than  that  determined  in
accordance  with paragraph 6(b); (d) permit the granting of Options which expire
beyond the period  provided for in paragraph  6(a); (e) materially  increase the
benefits  accruing  to  participants  in the Plan;  (f)  materially  modify  the
requirements  for  eligibility for  participation  in the Plan; or (g) otherwise
cause Rule  16b-3 or the  requirements  for  Incentive  Stock  Options to become
inapplicable.  Without the  written  consent of an  Optionee,  no  amendment  or
suspension of the Plan shall diminish or impair any Option previously granted to
the Optionee under the Plan. Notwithstanding any other provision of the Plan, if
an   amendment  to  the  Plan   requires  the  approval  of  the   Corporation's
shareholders,  every Option granted after that amendment and before  approval of
the  shareholders  (and the Optionee's or other  person's  rights in every share
issued  upon an  exercise  of an  Option  granted  during  that  time)  shall be
conditional and contingent upon the approval of the Corporation's  shareholders.
Further,  those  Options (and shares  issued under those  options)  shall not be
subject to sale or transfer unless and until  shareholder  approval is obtained.
The Committee shall implement  procedures for compliance with these restrictions
when applicable.




Mylan Laboratories Inc. 2000 Annual Report

Building a Stronger Mylan


Description of Business

------------------------
Mylan  Laboratories  Inc.  is a  diversied  pharmaceutical  company  with a core
generic   business,   a  growing  branded  presence  and  varied  drug  delivery
capabilities.  Our product portfolio consists of numerous  prescription  generic
and proprietary nished pharmaceutical,  wound care and dermatological  products.
These products include solid oral dosage forms, as well as suspensions, liquids,
injectables,   transdermals  and  topicals,   many  of  which  are  packaged  in
specialized systems.

Milan Puskar

Chairman and Chief Executive Officer

Letter To Shareholders

-----------------------
Mylan Laboratories Inc.

It's about having the right tools and the right blueprint.

Dear Shareholder,

     In 1998, I set an aggressive  financial  target for net sales of $1 billion
by March 2001 with a 35% contribution  from our brand product  division,  Bertek
Pharmaceuticals.  At that time, the brand business  represented 11% of net sales
and 14% gross margin  contribution.  I am pleased to report that as of the close
of fiscal 2000, Mylan reported net sales of $790 million and record net earnings
of $154 million with 15% net sales and 19% gross  margin  contribution  from our
brand
 products.

     Total brand sales increased 47% to $122 million in fiscal 2000, compared to
$83 million the previous  year.  This  increase is largely  attributable  to our
acquisition of Penederm,  in fiscal 1999. In fiscal 2000,  Bertek's portfolio of
dermatology products grew to $46 million in net sales.

     Penederm has now been integrated in the Mylan family of companies and as of
August  1999,  it has become the Bertek  Pharmaceuticals  Inc.  Dermatology  R&D
division.

     Research  is the  foundation  upon which  every  pharmaceutical  company is
built.   Through  the  dedicated   professional  efforts  of  our  research  and
development  team,  Mylan  has laid the  groundwork  to  remain a leader  in the
generic  pharmaceutical  marketplace  and it is this same foundation of strength
and  expertise  upon which we intend to  aggressively  build our presence in the
brand  pharmaceutical  business to balance our portfolio and reduce our earnings
variability.

     I am confident in our ability to increase the growth in our brand division.
However,  the  development  curve  of  achieving  a 35%  brand  and 65%  generic
contribution may take longer than we had originally  anticipated.  Presently, we
are conducting a complete  strategic review whereby we can identify any weakness
and take the necessary steps to further implement our brand strategy.

     We  have  been  aggressively  exploring  opportunities  to grow  the  brand
division in three specific therapeutic categories:  dermatology,  cardiology and
neurology.

     We continue to proceed with our in-house research and development  projects
while also pursuing product  licensing  and/or product and company  acquisitions
for opportunities.

     This past year, Bertek signed an exclusive  marketing  agreement with Amide
Pharmaceuticals  Inc.  whereby  Amide will supply AB rated Digoxin to Bertek for
sales and marketing under the brand name  Digitektrademark.  Digitektrademark is
the  generic  equivalent  to  Glaxo  Wellcome's  LanoxinRegistration  Mark.  Our
office-based  sales force will be detailing  the product to the primary care and
institutional arena.

                                       3


<PAGE>
     Although  we are  committed  to our brand  strategy,  we intend to remain a
leader in the generic industry.  As we enter the twenty-first  century,  generic
pharmaceuticals  will play an  increasingly  important  role in our health  care
system by making safe and effective  drugs more  affordable  for all  Americans.
Throughout  the next five  years,  patents  on  products  representing  over $25
billion dollars will be expiring;  and where applicable,  we are well positioned
to participate in these  markets.  We are highly focused on these  opportunities
and we are uniquely  positioned to take advantage of the positive  growth trends
in the generic pharmaceutical industry.

     We intend to leverage our  traditional  strengths,  which are  development,
manufacturing  and  distribution to take advantage of these  opportunities.  The
brand  pharmaceutical  companies  use  drug  delivery  technology  as a means of
extending patent life and differentiating  their products and thereby increasing
market share.  Mylan  development has been successful in achieving various forms
of  extended-release  technology.  We have made a  commitment  to  complex  drug
formulation and technology and we have the manufacturing  capabilities for these
sophisticated  dosage forms.  Some examples that were  introduced this past year
include Extended Phenytoin Sodium Capsules, Verapamil HCl ER Capsules, Carbidopa
and Levodopa ER Tablets and the Estradiol Transdermal System.

     We are investing more than ever to accelerate the flow of new products into
our pipeline,  which was evident in our strong generic approval record in fiscal
2000.  We received  final or  tentative  approval  for 23  Abbreviated  New Drug
Applications   (ANDAs)  and  two  supplemental   ANDAs  for  additional  product
strengths.  These 25  approvals  encompass  21  different  products  or chemical
entities.

     In  addition  to our  in-house  product  development,  we also  added  five
products  to  our  generic   portfolio  via  strategic   alliances   with  other
pharmaceutical companies. Mylan's alliance with Pfizer Inc. is indicative of the
importance of planning, timing and opportunity.  This agreement enabled Mylan to
receive all three dosage strengths of Nifedipine,  generic ProcardiaRegistration
Mark XL,  from  Pfizer  for  entry  into the  market.  Mylan now sells all three
strengths  in the generic  market and the consumer  benefits  from a lower cost,
drug alternative.

                                     4


<PAGE>
     At the  close  of our  fiscal  year,  Mylan  Pharmaceuticals,  the  generic
division,  was marketing 115 products in over 410 sizes and/or dosage  strengths
to  wholesalers,  pharmacies,  HMO's and national  accounts  throughout the U.S.
Presently,  we have  approximately  24 ANDAs filed  awaiting FDA approval and we
have  targeted an additional 20 products to be filed with the agency this fiscal
year.

     Throughout  this  past  year,  we have  seen many  mergers  in the  generic
pharmaceutical  industry.  We expect there will be others.  Despite the changing
landscape in our industry,  the generic  division of Mylan continues to maintain
its leadership  position.  Our new product  introductions,  10% increase in unit
volume,  and prior pricing  increases have all  contributed to the growth of our
generic segment.

     Two products for which Mylan increased  prices,  Lorazepam and Clorazepate,
were a catalyst for an  investigation  by the Federal  Trade  Commission  (FTC).
Mylan  has  devoted  significant  resources  over  the past  year to  vigorously
defending  the  unprecedented  lawsuit  brought by the FTC in December  1998 and
related suits. Several of the related suits were dismissed during the past year.
Additional  motions are  pending.  We  continue,  along with our  attorneys,  to
concentrate our efforts in developing  further  support for our defenses.  Mylan
has  taken  testimony  from  many  industry  participants  and  state  agencies.
Thousands of documents  have been collected and  scrutinized.  We believe we are
well positioned  going into the next stages of the litigation - expert discovery
and summary judgment.

     We face  challenges  unrelated  to  developing  and  manufacturing  quality
pharmaceutical  products.  Poorly conceived statutory and regulatory policies of
federal  and state  governments  create  barriers  to market  entry for  generic
medicines and restrict  consumer  access to our more  affordable  products.  The
policies result from a comprehensive strategy by multinational drug companies to
protect their monopolies by ensuring market  exclusivity for products even after
their  patents  have  expired.  Efforts to  unfairly  extend  patents,  restrict
formularies  to  preclude  generic  medications,  challenge  generic  safety and
efficacy with bogus claims, and litigate against generic  manufacturers to delay
market entry by approved generic products are just a few of the tactics employed
by these multi-national drug giants.

     Mylan has committed to its  shareholders  and  customers  that we will also
vigorously  compete  in the  statutory  and  regulatory  arenas  to  defend  the
principles of an open and competitive  marketplace,  and to ensure that consumer
access to affordable medicine is protected.

                                       5


<PAGE>
     To keep that commitment,  we have made important investments in programs to
ensure that elected  officials  understand  the impact of policies that restrict
consumer access to generic medicines.  I am pleased to report to you that we are
making significant  progress in our battle to preserve and protect fair and open
competitive markets for generic medicines.

     In fact,  Mylan has  significantly  improved the perceptions of federal and
state policy makers of the importance of a strengthened  generic  pharmaceutical
industry.  As a result,  there is increasing  awareness that government policies
aimed at helping generic drug manufacturers ultimately benefit consumers.  There
also is growing  appreciation  for the fact that our  industry is  exceptionally
price  competitive,  in stark contrast to the market of the  multinational  drug
company  monopolies.  Mylan is also  committed to working with  consumer  groups
across  America to ensure that they are armed with facts about the  economic and
health  benefits  of generic  medicine.  Our network is  expanding,  providing a
louder voice for the generic industry before federal and state policy makers. We
will  continue  our  commitment  to make sure that  members of  Congress,  state
legislators,  regulators,  the  media,  and  consumers  join our  crusade  for a
stronger,  more robust  pharmaceutical  market  where  generic  drugs can play a
bigger role as the best solution to contain runaway prescription drug costs.

(picture)
Richard F. Moldin
President and Chief Operating Officer

(picture)
Douglas J. Leech
Director


                                       6


<PAGE>
     On March 24, 2000, I announced the  appointment of Richard F. Moldin as our
new President and Chief Operating Officer.  Richard knows the business, he knows
the issues and he knows a lot of people in our  industry.  He is  respected as a
businessman and leader and has been involved in the  pharmaceutical  field since
1971.  I feel  Richard is the right  person at the right  time,  and we are very
pleased that he has joined the Mylan team.

     During  this past  year,  Mylan also  experienced  a change to the Board of
Directors. Robert Smiley, a Director since 1972, decided to step aside effective
December 31, 1999. Bob's long years of service have been a great asset to Mylan.
He has been  conscientious and diligent in carrying out his duties as a Director
with his ultimate  concern  always being this company and its  shareholders.  We
will miss his  expertise  and his candor,  but we are very pleased that Bob will
continue to serve Mylan as Corporate Secretary.

     Douglas J. Leech comes to the board with 25 years of  experience  in public
accounting and banking to fill the void created by Bob's resignation. Currently,
Douglas is Chairman,  President and CEO of Centra Bank, Inc. of Morgantown, West
Virginia.  His  financial  expertise  makes him a perfect  candidate to serve as
Chairman of the Audit  Committee of the Board of Directors.  We are very pleased
that Douglas has agreed to become a member of the Mylan board.

I believe we have what it takes to build a stronger Mylan:

    - We have the foundation - our exceptional research and development program,
    - The right blueprints - our strategy of continued generic leadership and

      expanded  brand growth,
    - The right tools - our operational expertise and unsurpassed quality, - The
    right resources - our dedicated team of employees that now exceeds

      2,300 talented men and women.

     I am  extremely  proud of the  Mylan  team  whose  hard  work  assures  the
continued  growth and  success of Mylan and I thank  them for their  efforts.  I
would also like to thank you, our shareholders. This year was difficult. We also
believe the future will be difficult but we remain positioned for success in the
ever-changing  environment  in which we  operate.  Thank you for your  continued
support.

Milan Puskar

Chairman and Chief Executive Officer

                                       7


<PAGE>





Mylan Pharmaceuticals Inc. Generic Product Line


    Generic Name                        Trade Name

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

Ace Inhibitor

        (UDL)   Captopril                       Capoten&reg;
    Adrenal Cortical Steroid
        *       Prednisolone Syrup              Prelone&reg; Syrup
    Analgesic
                Propoxyphene Compound           Darvon&reg;
                                                Compound-65
                Propoxyphene HCl                Darvon&reg;
        (UDL)   Propoxyphene HCl
                and Acetaminophen               Wygesic&reg;

        (UDL)   Propoxyphene Napsylate

                and Acetaminophen               Darvocet-N&reg; 100
    Anti-Inflammatory
        *       Diclofenac Potassium            Cataflam&reg;
                Etodolac (Capsules)             Lodine&reg;
                Etodolac (Tablets)              Lodine&reg;
        (UDL)   Fenoprofen Calcium              Nalfon&reg;
        (UDL)   Flurbiprofen                    Ansaid&reg;
                Ibuprofen                       Motrin&reg;
                                                Rufen&reg;
        (UDL)   Indomethacin                    Indocin&reg;
                Ketoprofen                      Orudis&reg;
                Ketorolac Tromethamine          Toradol&reg;
                Meclofenamate Sodium            Meclomen&reg;
        (UDL)   Naproxen                        Naprosyn&reg;
                Naproxen Sodium                 Anaprox&reg;
        (UDL)   Piroxicam                       Feldene&reg;
        (UDL)   Sulindac                        Clinoril&reg;
                Tolmetin Sodium (Capsules)      Tolectin&reg; DS
                Tolmetin Sodium (Tablets)       Tolectin&reg; 600

    Antiangina

                Nitroglycerin Transdermal System
                (Patches)                       Transderm Nitro&reg;
        (UDL)   Verapamil HCl                   Isoptin&reg;
    Antianxiety
        (UDL)   Alprazolam                      Xanax&reg;
                Clorazepate Dipotassium         Tranxene&reg;
        (UDL)   Diazepam                        Valium&reg;
        (UDL)   Lorazepam                       Ativan&reg;
    Antibiotic

                Cefaclor (Capsules)             Ceclor&reg;
                Cefaclor (Powders)              Ceclor&reg;
                Cephalexin                      Keflex&reg;
        (UDL)   Doxycycline Hyclate (Capsules)  Vibramycin&reg;
        (UDL)   Doxycycline Hyclate (Tablets)   Vibra-Tabs&reg;
                Erythromycin Ethylsuccinate     E.E.S. 400&reg;
                Erythromycin Stearate           Erythrocin&reg; Stearate
                Tetracycline HCl                Achromycin V&reg;
                                                Sumycin&reg;
    Anticonvulsant

        (UDL)   Clonazepam                      Klonopin&reg;
        (UDL)   Extended Phenytoin Sodium       Dilantin&reg; Kapseals&reg;
    Antidepressant

        (UDL)   Amitriptyline HCl               Elavil&reg;
                Chlordiazepoxide and
                Amitriptyline HCl               Limbitrol&reg;
                Clomipramine HCl                Anafranil&reg;
        (UDL)   Doxepin HCl                     Sinequan&reg;
                Maprotiline HCl                 Ludiomil&reg;
        (UDL)   Nortriptyline HCl               Pamelor&reg;
                Perphenazine and
                Amitriptyline HCl               Triavil&reg;

    Antidiabetic

        (UDL)   Chlorpropamide                  Diabinese&reg;
        (UDL)   Glipizide                       Glucotrol&reg;
        *       Glyburide                       Glynase&reg; Pres-Tab&reg;
                Tolazamide                      Tolinase&reg;
        (UDL)   Tolbutamide                     Orinase&reg;
    Antidiarrheal
        (UDL)   Diphenoxylate HCl and

                Atropine Sulfate                Lomotil&reg;
        (UDL)   Loperamide HCl                  Imodium&reg;
    Antiemetic

        (UDL)   Prochlorperazine Maleate        Compazine&reg;
    Antifungal
        *       Ketoconazole                    Nizoral&reg;
    Antigout
        (UDL)   Allopurinol                     Zyloprim&reg;
                Probenecid                      Benemid&reg;
    Antihypertensive
        (UDL)   Amiloride HCl and

                Hydrochlorothiazide             Moduretic&reg;
                Atenolol and Chlorthalidone     Tenoretic&reg;
                Captopril and
                Hydrochlorothiazide             Capozide&reg;
        (UDL)   Clonidine HCl                   Catapres&reg;
                Guanfacine                      Tenex&reg;
        (UDL)   Methyldopa                      Aldomet&reg;
                Methyldopa and
                Hydrochlorothiazide             Aldoril&reg;
        (UDL)   Prazosin HCl                    Minipress&reg;
                Propranolol HCl and
                Hydrochlorothiazide             Inderide&reg;
        (UDL)   Spironolactone and

                Hydrochlorothiazide             Aldactazide&reg;

                                       8


<PAGE>
        (UDL)   Triamterene and
                Hydrochlorothiazide

                (Capsules)                      Dyazide&reg;
        (UDL)   Triamterene and
                Hydrochlorothiazide

                (Tablets)                       Maxzide&reg;-25MG
                                                Maxzide&reg;
        *       Terazosin HCl                   Hytrin&reg;
    Antihyperlipidemic
                Gemfibrozil                     Lopid&reg;
    Antimalarial
                Hydroxychloroquine Sulfate      Plaquenil&reg;
    Antineoplastic
        (UDL)   Methotrexate                    Methotrexate&reg;
Rheumatrex&reg;
    Antiparkinson

        (UDL)*  Carbidopa and Levodopa ER       Sinemet&reg; CR
    Antipsychotic
        (UDL)*  Clozapine                       Clozaril&reg;
                Fluphenazine HCl                Prolixin&reg;
                Haloperidol                     Haldol&reg;
        (UDL)   Thioridazine HCl                Mellaril&reg;
        (UDL)   Thiothixene                     Navane&reg;
        (UDL)   Trifluoperazine HCl             Stelazine&reg;
    Antiviral

                Acyclovir (Capsules)            Zovirax&reg;
                Acyclovir (Tablets)             Zovirax&reg;
    Beta Blocker

                Acebutolol HCl                  Sectral&reg;
        (UDL)*  Atenolol                        Tenormin&reg;
        (UDL)   Metoprolol Tartrate             Lopressor&reg;
                Pindolol                        Visken&reg;

        (UDL)   Nadolol                         Corgard&reg;
        (UDL)   Propranolol HCl                 Inderal&reg;
                Timolol Maleate                 Blocadren&reg;
    Bronchodilator
        (UDL)*  Albuterol                       Proventil&reg;
                                                Ventolin&reg;
        (UDL)   Albuterol Sulfate Syrup         Ventolin&reg; Syrup
    Calcium Channel Blocker

        (UDL)   Diltiazem HCl                   Cardizem&reg;
        (UDL)   Diltiazem HCl ER                Cardizem SR&reg;
        (UDL)   Diltiazem HCl ER                Dilacor XR&reg;
                Nicardipine                     Cardene&reg;
        *       Nifedipine ER                   Procardia&reg; XL
        (UDL)   Verapamil HCl ER (Tablets)      Isoptin&reg; SR
        (UDL)*  Verapamil HCl ER (Capsules)     Verelan&reg;
    Diuretic

                Bumetanide                      Bumex&reg;
        (UDL)   Chlorothiazide                  Diuril&reg;
        (UDL)   Chlorthalidone                  Hygroton&reg;
        *       Hydrochlorothiazide             Microzide&reg;
        (UDL)   Furosemide                      Lasix&reg;
        (UDL)   Indapamide                      Lozol&reg;
                Methyclothiazide                Enduron&reg;
        (UDL)   Spironolactone                  Aldactone&reg;
    Estrogen Replacement

        *       Estradiol                       Estrace&reg;
        *       Estradiol Transdermal System    Climara&reg;
        *       Estropipate                     Ogen&reg;
    Gastrointestinal Antispadmodic

         (UDL)* Dicyclomine HCl                 Bentyl&reg;
    Hemorrheologic Agent
        (UDL)   Pentoxifylline ER               Trental&reg;
    Histamine H2 Antagonist
        (UDL)   Cimetidine                      Tagamet&reg;
                Ranitidine                      Zantac&reg;
    Hypnotic Agent

        (UDL)   Flurazepam HCl                  Dalmane&reg;
        (UDL)   Temazepam                       Restoril&reg;
    Immunosuppresive

        *       Azathioprine                    Imuran&reg;
    Laxative
        (UDL)   Lactulose Solution              Chronulac&reg;
    Skeletal Muscle Relaxant
        (UDL)   Cyclobenzaprine HCl             Flexeril&reg;
                Orphenadrine Citrate ER         Norflex TM
                Orphenadrine Citrate,
                Aspirin and Caffeine            Norgesic TM
NorgesicTM Forte

    Urinary Anti-infective

        (UDL)   Nitrofurantoin                  Macrodantin&reg;

Unit-dose packaging is available

Select  products  are  available  in  convenient  unit-dose  packaging  from UDL
Laboratories,  Inc., a division of Mylan Laboratories Inc. UDL Laboratories is a
national manufacturer,  repackager and marketer of multisource and single-source
pharmaceutical  products in  unit-dose  form for the  institutional  health care
marketplace.

The Mylan products  available in unit-dose are identified  with a UDL logo (UDL)
adjacent to the product listing.

    *Indicates fiscal 2000 introduction

                                       9


<PAGE>


Bertek Pharmaceuticals Inc. Brand Product Line

Dermatology

Bertek  Pharmaceuticals  Inc.  provides  dermatologic  products  targeted to the
treatment of acne vulgaris and for the topical treatment of fungal infections.

Acticin&reg; is a topical scabicidal agent for the treatment of infestation with
Sarcoptes scabiei (scabies).  It offers proven permethrin safety and efficacy in
a smooth formula that makes it easy to apply. It also offers a cost savings.

Treatment with permethrin cream may lead to generally mild and transient burning
and stinging, and pruritus following application,  and may exacerbate conditions
such as pruritus, edema, and erythema associated with scabies.

Avita&reg;  Cream and Gel are members of the new generation of retinoid products
indicated for the treatment of acne vulgaris. Avita is uniquely formulated using
the patented TopiCare  delivery system,  which consists of a portfolio of liquid
polymers  ("Polyolprepolymers")  that are  designed  to hold skin care agents at
targeted  levels on and in the upper layers of the skin.  These  compounds  have
been shown to enhance  delivery  of a variety of skin care agents  resulting  in
improved  efficacy,  longer  duration of action,  reduced  irritation,  or lower
percent of cosmetic  active  required.  Avita Cream 0.025%  demonstrated  a high
level of  efficacy  in a low  concentration  cream.  Avita  Gel  0.025% is for a
rapidly growing group of patients preferring gel forms of topical retinoids.  It
has been shown to cause low irritation.

        As with all topical retinoids, the skin of certain sensitive individuals
may become excessively red, edematous, blistered, or crusted.

Mentax&reg;  is a  topical  antifungal  cream  indicated  for the  treatment  of
interdigital tinea pedis (athlete's foot), tinea corporis (ringworm),  and tinea
cruris (jock itch). Mentax contains butenafine HCl, a benzylamine,  the first of
this new class of antifungal agents.  Mentax is applied directly to the skin and
is  effective  with  once-a-day  dosing,   unlike  many  other  leading  topical
antifungal  drugs.  In clinical  studies with more than 1,300  patients,  Mentax
exhibited excellent results - high rates of cure with virtually no safety issues
or side effects. During U.S. clinical trials against tinea pedis, tinea corporis
and tinea cruris, no Mentax-treated patients discontinued therapy due to adverse
reactions.

The  incidence  of local  adverse  reactions  was  approximately  1%,  primarily
mild-to-moderate burning/stinging.

Cardiovascular

Bertek   Pharmaceuticals  Inc.  offers  cardiovascular  care  products  for  the
treatment of hypertension, angina, and atrial fibrillation.

The newest addition to our cardiovascular line is Digitek&reg; (Digoxin Tablets,
USP),   the  first  proven,   bioequivalent,   cost-effective   alternative   to
Lanoxin&reg;*  for the  treatment  of chronic  atrial  fibrillation.  Digitek is
supplied in 0.125mg and 0.25mg Tablets.

Digitalis   glycosides  are   contraindicated   in  patients  with   ventricular
fibrillation or in patients with a known hypersensitivity to digoxin.

Bertek  offers  Maxzide&reg;  (Triamterine/Hydrochlorothiazide)  and  ClorpresTM
(Clonidine HCl and Chlorthalidone)  diuretics for the treatment of hypertension.
JNC VI recommends  diuretics as primary therapy for all  hypertensive  patients,
"..diuretics  should be  considered  the agent of first choice in the absence of
conditions that prohibit their use."

Maxzide  adverse  reactions:  drowsiness,  insomnia,  muscle  cramps,  weakness,
headache, GI disturbances,  dizziness,  orthostatic  hypotension,  hyperurcemia,
impotence, renal stones, tachycardia,  dyspnea, dry mouth, depression,  anxiety,
urine discoloration and elevated liver enzymes.

The most common  associated  reactions of Clorpres  are: dry mouth,  drowsiness,
dizziness,  sedation and constipation.  Headache and fatigue have been reported.
Generally these effects tend to diminish with the continued therapy.

For   angina   patients   Bertek   Pharmaceuticals   Inc.   offers   Nitrek&reg;
(Nitroglycerin  Transdermal  System),  a small  translucent patch that is almost
imperceptible on any skin tone, providing reliable adhesion even while swimming,
exercising, or showering

Adverse reactions to nitroglycerin are generally  dose-related and almost all of
these  reactions are the result of  nitroglycerin's  activity as a  vasodilator.
Headache, which may be severe, is the most common side effect.

     * Lanoxin&reg; is a registered trademark of Glaxo Wellcome, Inc.

Antibacterial

Bertek Pharmaceuticals Inc. offers antibacterial products for the treatment
of lower respiratory infections, burn and chronic wounds.

Sulfamylon&reg;  Cream is a soft, white,  nonstaining,  water-miscible,  topical
antimicrobial  cream indicated for use as adjunctive  antimicrobial burn therapy
for patients with second and third degree burns.  Sulfamylon  Cream is effective
in combating P.  aeruginosa,  as well as other bacterial  organisms.  Sulfamylon
resistant  bacterial  strains are rare,  even after 30 years of use.  Sulfamylon
Cream has exceptional tissue and eschar penetrating characteristics.

Sulfamylon for 5% Topical Solution is indicated for use as an adjunctive topical
antimicrobial  agent to  control  bacterial  infection  when  used  under  moist
dressings over meshed autografts on excised burn wounds.

Sulfamylon Cream and 5% Topical Solution are contraindicated in patients who are
hypersensitive  to  mafenide  acetate.  Mafenide  acetate  and  its  metabolite,
p-carboxybenzenesulfonamide,  inhibit  carbonic  anhydrase,  which may result in
metabolic acidosis,  usually compensated by  hyperventilation.  Fatal hemolyctic
anemia with  disseminated  intravascular  coagulation,  presumably  related to a
glucose-6-phosphate   dehydrogenase  deficiency,  has  been  reported  following
mafenide acetate therapy.

Zagam&reg; (Sparfloxacin), the first of the aminodifluroquinilones, is indicated
for the treatment of acute  exacerbations  of chronic  bronchitis  and community
acquired pneumonia. Zagam is a unique fluroquinilone that offers advantages with
difficult to treat patients, smokers, the elderly, alcoholics, and patients with
COPD. For the difficult to treat patient, "take your best shot with the power of
Zagam."

The  most   common   adverse   events   occurring   in   clinical   trials  were
photosensitivity   reactions,   diarrhea,   nausea,  headache,   dyspepsia,  and
dizziness.   Sparfloxacin  should  not  be  used  in  patients  with  known  QTc
prolongation or in patients receiving QTc prolongation drugs.

                                       11


<PAGE>
Wound Care

Bertek Pharmaceuticals Inc. is a market leader and innovator in burn and chronic
wound care  products.  Our  Institutional  division  markets  these  products to
long-term  care  facilities,  hospitals,  and burn  centers,  in a  manner  that
emphasizes education-oriented product promotion and overall patient care. Bertek
has  a  longstanding  commitment  to  listening  to  our  customers'  needs  and
maintaining strong, loyal partnerships with the health-care providers we serve.

Biobrane&reg;  (sheet  dressings and gloves) are  biosynthetic  wound  dressings
constructed  of a silicon film with a nylon fabric  partially  imbedded into the
film.  The  fabric  presents  to  the  wound  bed a  complex  3-D  structure  of
trifilament thread to which collagen has been chemically bound.  Blood/sera clot
in the nylon  matrix,  thereby  firmly  adhering the dressing to the wound until
epithelialization occurs.

        If in the rare instance a patient shows evidence of an allergic reaction
to the product,  it should be removed and its use discontinued.  Biobrane&reg;-L
is a dressing  with a less  complex  nylon  fabric  structure  for use when less
aggressive adherence is required.  The lower weight monofilament thread utilized
in Biobrane-L presents a shallow,  less complex matrix to the wound bed, thereby
reducing the degree of clot integration and adherence. If in the rare instance a
patient  shows  evidence of an allergic  reaction to the  product,  it should be
removed and its use discontinued.

Flexzan&reg;  is  a  sterile,  ultra-thin,  highly  conformable,  semi-occlusive
polyurethane foam adhesive dressing which protects wounds from contamination and
trauma while maintaining a moist wound healing environment. It is constructed of
an open cell foam with a closed cell outer  surface.  Excess  wound  moisture is
absorbed  into the cells of the foam and allowed to evaporate  through the outer
surface,  helping prevent fluid accumulation under the dressing.  Flexzan should
not be used on  third  degree  burns  or on  wounds  showing  clinical  signs of
infection.

Flexzan&reg;  Extra is light tan in color with the patterned  adhesive optimized
to adhere to very moist skin surfaces.

Flexderm&reg;  is a sterile  hydrogel  polymer sheet  dressing  which protects a
wound against  dehydration and exogenous  contamination  while providing a moist
environment  conducive to optimal wound healing.  Flexderm  absorbs exudate from
the wound while providing cooling, pain relieving protection and does not adhere
to the wound bed upon removal.

Granulex&reg; is an aerosol topical wound spray used as an aid in the management
of pressure ulcers. Topical application stimulates the capillary beds of chronic
wounds and helps prevent the deterioration of Stage I ulcers into deeper stages.
Granulex also helps promote  tissue  granulation in deeper chronic ulcers (Stage
II, III, IV), and contains trypsin,  a mild debriding agent which helps keep the
wound site free of necrotic tissue once debrided. Granulex should not be sprayed
on fresh arterial clots or in the eyes.

Hydrocol&reg;   is  a  sterile,  occlusive  hydrocolloid  wound  dressing  which
interacts with wound exudate to absorb excess drainage yet is able to be removed
without  damaging  newly formed  tissue.  The  dressing  protects the wound from
bacteria, urine and feces, and other exogenous  contamination.  A unique design,
tapered borders,  rounded corners,  and a low-friction film backing help prevent
edge roll-up and extend dressing wear time. Hydrocol is not indicated for use on
third degree burns or on individuals  with known sensi tivity to the dressing or
its components.

Proderm&reg;  is a  non-prescription  topical wound spray which  stimulates  the
capillary beds of pressure ulcers to help prevent the  deterioration  of Stage I
ulcers to deeper stages. Proderm also helps promote tissue granulation in deeper
chronic ulcers. Avoid spraying in eyes or nostrils.

Sorbsan&reg;  is a unique calcium  alginate  dressing  which,  via ion exchange,
transforms into a highly absorbent, readily conformable, easy-to-use hydrophilic
sodium alginate gel when in contact with  sodium-rich  wound exudate.  Indicated
for use on all  infected  or  non-infected  wet  wounds,  Sorbsan  is  virtually
painless  upon  application  and  removal,  and is  easily  changed  by  medical
professionals  and  patients  alike.  Sorbsan is not  intended to be  surgically
implanted or used on third degree burns.

                                       12


<PAGE>




      Contents
14    Selected Financial Data

15    Management's Discussion and Analysis of Operations and Financial Position
22    Consolidated Balance Sheets
24    Consolidated Statements of Earnings
25    Consolidated Statements of Shareholders' Equity
26    Consolidated Statements of Cash Flows
28    Notes to Consolidated Financial Statements
40    Independent Auditors' Report
41    Market Information
42    Shareholder Information


                                       13


<PAGE>

Selected Financial Data
Mylan Laboratories Inc.


<TABLE>
<S>                                <C>         <C>         <C>         <C>        <C>         <C>          <C>        <C>
Year ended March 31, .............       2000        1999        1998        1997        1996        1995        1994        1993
Total revenues ...................  $  790,145  $  721,123  $  555,423  $  440,192  $  392,860  $  396,120  $  251,773  $  211,964

Net earnings .....................  $  154,246  $  115,409  $  100,777  $   63,127  $  102,325  $  120,869  $   73,067  $   70,621

Earnings per common share-basic ..  $     1.19  $      .92  $      .83  $      .52  $      .86  $     1.02  $      .62  $      .61
Earnings per common share-diluted   $     1.18  $      .91  $      .82  $      .51  $      .85  $     1.01  $      .61  $      .60

Shares used in computation-basic .     129,220     125,584     122,094     121,926     119,530     118,963     118,423     115,651
Shares used in computation-diluted     130,224     127,156     123,043     122,727     120,706     119,912     119,502     116,986

March 31,
Working capital ..................  $  598,976  $  475,398  $  379,726  $  323,942  $  351,536  $  296,990  $  197,164  $  159,748

Total assets .....................  $1,341,230  $1,206,661  $  847,753  $  777,580  $  692,009  $  546,201  $  403,325  $  351,105

Long-term obligations ............  $   30,630  $   26,827  $   26,218  $   32,593  $   18,002  $    7,122  $    4,609  $    5,125

Shareholders' equity .............  $1,203,722  $1,059,905  $  744,465  $  659,740  $  616,441  $  482,728  $  379,969  $  295,972

Book value per share-diluted .....  $     9.24  $     8.34  $     6.05  $     5.38  $     5.11  $     4.03  $     3.18  $     2.53

</TABLE>

Amounts in thousands except per share data.

From April 1, 1992,  through  July 1992,  the Company  had a quarterly  dividend
program  totaling $.067 per share per year.  From October 1992 to July 1993, the
Company had a quarterly  dividend program totaling $.08 per share per year. From
October 1993 to July 1994, the Company had a quarterly dividend program totaling
$.107 per share per year.  From  October  1994 to July 1995,  the  Company had a
quarterly  dividend  program  totaling  $.133 per share per year.  Since October
1995, the Company has had a quarterly  dividend  program totaling $.16 per share
per year. In addition, the Company paid a special one-time dividend of $.067 per
share on January 13, 1995.

The above financial data gives  retroactive  effect to the  three-for-two  stock
split effective August 15, 1995.

                                       14


<PAGE>




Management's Discussion and Analysis of Operations and Financial Position
Mylan Laboratories Inc.

Overview

     Mylan  Laboratories  Inc.  (the  "Company")  posted  record net earnings of
$154.2 million for the year ended March 31, 2000,  compared to $115.4 million in
fiscal 1999 and $100.8 million in fiscal 1998. Net earnings for fiscal 1999 were
reduced  by  $29.0  million  as a  result  of a  one-time  charge  for  acquired
in-process research and development.

     The favorable earnings trend realized over the past three years is a result
of  strategic  initiatives  undertaken  by the  Company.  The Company set out to
accelerate the expansion of its branded  operations.  While continuing  in-house
research  and  development  projects,  additional  expansion  would be  obtained
through  product  acquisitions,   with  the  acquisition  of  Penederm  and  its
dermatology product line in October 1998 being the most significant  acquisition
to date.  The branded  segment now  represents  15% of the  Company's  net sales
compared to 10% in fiscal 1998 and contributes 19% of the Company's gross margin
compared to 14% just two years ago.

        The Company continues to examine additional  opportunities to expand the
branded  segment.  The  existing  product line alone will not be  sufficient  to
provide  continued annual sales growth  comparable to that which was realized in
the past two years.  However,  the newly  expanded  sales force provides a solid
foundation  capable of growing current market share and launching new innovative
health care products and product line extensions.

     The generic  segment  continues to maintain its leadership  role within the
industry. The 17 new product additions and prior pricing increases, as well as a
10% unit volume increase,  were the primary causes for growth in fiscal 2000 and
were the result of strategic  initiatives  taken in previous years.  The Company
expanded its ability to bring new products to market through strategic alliances
with other  pharmaceutical  companies.  Five of the new products added in fiscal
2000 were the result of such  alliances.  The  Company  also  determined,  after
extensive  evaluation,  that  changes  were  necessary  in its  generic  pricing
practices; therefore, a series of price increases was implemented.

     Clorazepate  and  lorazepam  were among 29  products  for which the Company
raised prices  beginning in late fiscal 1998 and  continuing  throughout  fiscal
1999.  The  increases  on these two  specific  products  were a catalyst  for an
investigation by the Federal Trade Commission  ("FTC") which led to a suit filed
in December 1998 (See note S to the consolidated financial statements).

     Despite record  financial  results,  obstacles  continuing to challenge the
generic segment  include  consumer  acceptance of generic  substitutes and price
deterioration.  In fiscal 2000, the Company  estimates that price  deterioration
reduced  net  earnings  by  approximately  $56.1  million  with  more  than half
attributable to two products,  clorazepate and lorazepam.  Patent  litigation by
branded  pharmaceutical  companies  and  an  increasingly  difficult  regulatory
environment present additional challenges in the generic industry.

                                       15


<PAGE>

Results of Operations
Net Sales and Gross Margin

The  following  table  outlines net sales,  gross margin (net sales less cost of
sales),  gross margin as a percentage of net sales and the corresponding  change
from the previous year: (dollars in millions)

                                                                         Percent

Change

Year ended March 31,     2000      1999      1998     2000  1999
Generic Segment:
    Net sales ......  $   667.8 $   638.1 $   474.5     5%   34%
    Gross margin ...      345.3     329.5     207.5     5%   59%
    % of net sales .       52%       52%       44%
Branded Segment:
    Net sales ......  $   122.3 $    83.0 $    54.1    47%   53%
    Gross margin ...       83.0      54.8      32.8    51%   67%
    % of net sales .       68%       66%       61%
Company Totals:
    Net sales ......  $   790.1 $   721.1 $   528.6    10%   36%
    Gross margin ...      428.3     384.3     240.3    11%   60%
    % of net sales .       54%       53%       45%

     With regards to the Company's  generic product line, 13 products were added
in fiscal 1998 accounting for $61.5 million in net sales in fiscal 1998 and nine
products were added in fiscal 1999 with  aggregate net sales of $37.1 million in
fiscal 1999. In fiscal 2000, the Company added 17 new products which resulted in
aggregate  net  sales of $42.6  million.  Five of the 17 new  products  added in
fiscal 2000 accounted for over 90% of the aggregate net sales for new products.

     In  fiscal  2000,  five  of the  products  added  resulted  from  strategic
alliances  with other  pharmaceutical  companies.  Due to royalty  arrangements,
these  products  typically  have lower gross margin  percentages  than  products
developed  internally and manufactured by the Company.  For both fiscal 1999 and
1998, two of the new products added were the result of strategic alliances.

     During the second half of fiscal 1998,  the Company  raised prices on seven
generic  products.  Throughout  fiscal  1999,  the Company  raised  prices on 22
additional products.  These selective price increases increased net sales by $47
million and gross margin by $37 million in fiscal 1998 and  increased  net sales
by $130 million and gross margin by $109 million in fiscal 1999.

     Two of the 29 products, clorazepate and lorazepam accounted for $49 million
of net  sales in fiscal  1998 and $151  million  in net  sales in  fiscal  1999.
Despite a marginal increase in volume for these two products in fiscal 2000, net
sales dropped to $104 million as a result of price deterioration.  The remaining
27 products  resulted in increased  net sales of $39 million and gross margin of
$34 million in fiscal 2000.

     In addition to the items previously  mentioned,  the Company estimates that
price  deterioration in the generic industry resulted in reductions in net sales
and gross margin of  approximately  $32 million in fiscal  1998,  $39 million in
fiscal 1999 and $41 million in fiscal 2000. Such  reductions were  substantially
offset by increased volume,  favorable mix variances and production efficiencies
which generally result from higher volumes. Total unit volume of generic product
shipments,  excluding unit dose shipments,  was 7.3 billion in 1998, 8.0 billion
in 1999 and 8.8 billion in fiscal 2000.

                                       16


<PAGE>

     The Company  expects  significant  price  deterioration  on clorazepate and
lorazepam during fiscal 2001. The Company also expects  increases in the cost of
raw materials for these  products.  Accordingly,  net sales and gross margin for
these products in the fiscal year ending March 31, 2001, are expected to be less
than that recognized by the Company in fiscal 2000.

     Net sales for the Company's  branded  segment  increased 47% in fiscal 2000
and 53% in fiscal 1999. The primary reason for the significant increases in each
of the last two years was the  acquisition  of  Penederm  in October  1998.  The
acquisition of Penederm  expanded the Company's  branded  presence in one of its
targeted markets, dermatology.  Dermatology products accounted for approximately
38% of net sales for the branded segment in fiscal 2000.

     As the Company has made a concerted effort to expand its branded segment in
fiscal 2000 and 1999, the emphasis within the branded segment continues to shift
from wound care  products to  dermatology  and other  physician-based  products.
Wound care products represented less than 8% of branded net sales in fiscal 2000
compared to 15% in the prior year.

        The accounts  receivable  balance of the Company increased as of March 3
1, 2000, as compared to March 31, 1999, due to buying  patterns of its customers
and the associated payments.

Research and Development

Research and  development  expenditures  were $49.1  million,  $61.8 million and
$46.3 million in fiscal years 2000, 1999 and 1998.

        The following table outlines the allocation of research and
development expenditures: (dollars in millions)
Year ended March 31,                   2000            1999          1998
Generic related projects               $22.3           $25.7         $22.0
Innovative compound projects            20.5            29.2          18.4
Transdermal systems                      6.3             6.9           5.9

     During  fiscal 1999,  the Company  entered into an agreement  with Genpharm
Inc. to develop 15 branded and generic  products.  The initial milestone payment
in fiscal 1999 for this agreement was allocated evenly to generic and innovative
compound projects.  This expenditure  represents the majority of the fluctuation
in expenditures for generic related projects between fiscal years.

     In addition to the  Genpharm  agreement in fiscal  1999,  expenditures  for
innovative compound projects were affected by the arbitration award in which the
Company recorded  approximately  $10.0 million in funding obligations to VivoRx.
Charges  related to the Company's  funding of VivoRx were $6.3 million in fiscal
1998.  In addition to these  items,  the  increase in research  and  development
expenditures  in fiscal 1999 and fiscal 2000,  as compared to fiscal  1998,  are
principally due to the research and development expenses of Penederm,  which was
acquired in fiscal 1999.

        The Company is actively  pursuing  and is involved in joint  development
projects in an effort to broaden its scope of capabilities in bringing to market
both generic and innovative  products.  Some of these  arrangements  provide for
payments by the Company upon the  attainment of certain  milestones.  While such
arrangements  help to  reduce  the  Company's  financial  risk for  unsuccessful
projects,  fulfillment of milestones or other payment  obligations may result in
fluctuations in research and development  expense. 

Acquired In-Process Research and  Development 

     In connection with its acquisition of Penederm in October 1998, the Company
allocated  $29.0  million  of the  purchase  price to  in-process  research  and
development  in  fiscal  1999  (See  note  B  to  the   consolidated   financial
statements).

                                       17

<PAGE>
Selling and Administrative

Selling and  administrative  expenses were $156.2 million in fiscal 2000, $125.0
million in fiscal 1999 and $96.7 million in fiscal 1998. These amounts represent
20%, 17% and 18% of net sales in fiscal years 2000, 1999 and 1998.

        The following table identifies the major components of selling and
administrative expenses: (in millions)
Year ended March 31,                   2000            1999          1998
Sales and Marketing Expenses:
    Generic:
      Payroll and related             $ 5.0           $ 4.9          $ 4.5
      Advertising and promotions        8.8            12.7           16.3
    Branded:
      Payroll and related              19.1            12.8            9.4
      Advertising and promotions       19.4             9.2            4.7
    Other sales and marketing          12.1             9.9            8.4
Total Sales and Marketing Expenses    $64.4           $49.5          $43.3
Administrative Expenses:
    Payroll and related               $30.7           $27.5          $21.9
    Legal and professional fees        31.2            22.2           12.0
    Goodwill amortization               6.4             4.0            1.6
    Other administrative               23.5            21.8           17.9
Total Administrative Expenses         $91.8           $75.5          $53.4


Generic  advertising and promotions,  which for the most part represent the cost
of stocking fees to customers to assist in the  conversion  and promotion of new
generic  products,  decreased  from  fiscal 1998 to fiscal 1999 and again in the
current  year  as  such  costs  relate  to  the  launch  of  specific  products.
Promotional  costs  associated  with  products  launched in fiscal 2000 were not
significant.

The increase in branded  sales and  marketing  expenses from fiscal 1999 to 2000
primarily  relates to a full year of expenses for Penederm  compared to only six
months of expenses  that were  recorded in fiscal  1999.  In  addition,  branded
payroll and related  expenses  increased  in fiscal 2000 due to the  addition of
direct sales representatives and customer support personnel. Branded advertising
and  promotions  increased  significantly  due to  promotion  expenses  for  two
dermatology products.

Administrative  expenses  increased  from  fiscal 1999 to fiscal 2000 due to the
additional six months of expenses for Penederm,  amortization expense related to
the  acquisition  of Penederm and increased  legal and  professional  fees.  The
increase in legal and professional  fees primarily relates to the FTC litigation
initiated in December  1998,  and was ongoing for all of fiscal 2000. The fiscal
1999  increase was also  impacted by  litigation  associated  with the Company's
investment in VivoRx.

Equity in Earnings of Somerset

In fiscal 2000, the Company incurred a loss of $4.2 million in its investment in
Somerset.  Equity in earnings of  Somerset  was $5.5  million in fiscal 1999 and
$10.3  million in fiscal 1998.  The loss in the current year resulted from lower
sales  due  to  generic  competition  and  increased  research  and  development
expenditures. Somerset continues its research and development efforts to develop
alternative  indications for its sole commercial  product,  EldeprylRegistration
Mark.   Unless  such  new   indications   are   developed   and   approved   for
commercialization, the Company's earnings will continue to be adversely affected
by  Somerset's  expected  losses  (See  note  E to  the  consolidated  financial
statements).

                                       18

<PAGE>
Other Income

Other income was $24.0 million in fiscal 2000,  $18.3 million in fiscal 1999 and
$14.0 million in fiscal 1998. Other income was favorably  impacted by increasing
interest rates and significantly  higher cash and investment balances throughout
fiscal  2000.  The  Company  recorded  earnings on its  investment  in a limited
partnership  of $15.4  million,  $19.8  million and $6.6 million in fiscal years
2000, 1999 and 1998. In addition, the Company recorded a gain of $3.9 million on
the sale of an  investment  in fiscal  2000.  Provisions  to reduce the carrying
value of strategic alliances and non-publicly traded companies included in Other
assets  totaled  approximately  $9.4 million,  $12.5 million and $2.5 million in
fiscal years 2000, 1999 and 1998.

Income Taxes

The  effective  tax rate for fiscal  2000 was 36.5%  compared to 40.0% in fiscal
1999 and 32.1% in fiscal 1998.  Approximately  5% of the fiscal 1999 tax rate is
the result of the $29.0  million  charge for  acquired  in-process  research and
development  which is not  deductible  for tax  purposes.  Other factors for the
increased rates in fiscal 2000 and fiscal 1999 are an increase in  nondeductible
amortization expense and a reduction in tax favored dividends.  For fiscal 2001,
the  Company  anticipates  a slight  increase in its  effective  tax rate due to
Somerset's  expected  loss and  marginally  higher  state taxes.  Liquidity  and
Capital  Resources  Working capital increased from $475.4 million in fiscal 1999
to $599.0  million  in fiscal  2000 and the ratio of  current  assets to current
liabilities increased from 5.9 to 1 to 7.8 to 1 for this same time period.

        Net cash provided from operating activities was $119.2 million in fiscal
2000,  $163.4  million in fiscal 1999 and $52.7  million in fiscal 1998.  Fiscal
2000 operating activities were positively affected by net earnings, depreciation
and  amortization and the increase in allowances on accounts  receivable.  These
increases were partially offset by changes in deferred taxes and the increase in
accounts receivable.

        The Company's  expenditures for property,  plant and equipment was $28.8
million in fiscal 2000, $16.7 million in fiscal 1999 and $28.9 million in fiscal
1998.  The funds in the current year were primarily used to complete an addition
to one of its  generic  manufacturing  facilities  and to  construct a sales and
administrative  building.  Capital  expenditures  have  been  paid  for with the
operating  funds  of the  Company.  Capital  expenditures  to  complete  current
projects  along with the other  planned  capital  projects  are  expected  to be
financed through the operating funds of the Company.

        Other  investing  activities  which used cash relate to investments  for
product  acquisitions,  equity investments in privately held companies and a net
increase in the purchase of investment securities.

        Payments  on  long-term  obligations  primarily  relate  to  installment
payments made on certain product  acquisitions.  The Company paid cash dividends
of $.16 per  share in fiscal  years  2000,  1999 and 1998  which  totaled  $60.0
million.

        The Company is involved in litigation  with the FTC and various  parties
with related suits. While the Company believes that it has meritorious  defenses
to the claims in these  matters,  an adverse  result in these suits could have a
material  adverse  effect on the liquidity and capital  resources of the Company
(See note S to the consolidated financial statements).

        The Company's current cash position may not necessarily be indicative of
its position in future periods. As described in both the "Overview" and "Results
of  Operations,"  the Company has  experienced  price  deterioration  on certain
generic  products  on which it  increased  prices and  anticipates  that it will
experience  further  price  deterioration  on these  and other  products  in the
future.  In addition,  the Company continues to incur significant legal fees and
costs  defending  against  various  lawsuits  which will also impact future cash
flows (See "Forward Looking  Statements" for additional  information  concerning
future periods).

                                       19

<PAGE>
Year 2000
The Company to date has not  experienced  any major  disruptions  related to the
Year 2000 date change.  The Company will continue to monitor  critical  systems,
along  with  those of its  customers  and  suppliers,  to  ensure  uninterrupted
operations.   The  direct   incremental   cost  of  Year  2000  remediation  was
insignificant to the Company's operations.

Other Matters

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS")  No.133,  "Accounting  for Derivative
Instruments  and Hedging  Activities."  SFAS No.133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain derivatives
embedded in other contracts, and hedging activities.  It requires that an entity
recognize all  derivatives  as either assets or liabilities on the balance sheet
at fair  value.  As  amended,  this  statement  is  effective  for fiscal  years
beginning  after June 15, 2000.  The Company is currently  evaluating the impact
that  SFAS No. 13 3 will  have on its  financial  position  and its  results  of
operations.  

Market Risk 

The Company is exposed to market risk primarily from changes in market values on
its investments in marketable debt and equity securities,  including  marketable
securities owned indirectly through certain pooled asset funds. Market prices on
debt securities  generally bear an inverse relationship with changes in interest
rates. The Company also invests in overnight deposits and money market funds and
marketable   securities  with  maturities  of  less  than  three  months.  These
instruments are classified as cash equivalents for financial  reporting purposes
and have minimal or no interest  rate risk due to their short term  nature.  The
Company also  invests in nonpublic  securities,  often in  consideration  of its
strategic  interests.  The Company does not  consider  these  investments  to be
market risk sensitive.

The Company  attempts to mitigate its  exposure to market risk by assessing  the
relative  proportion of its  investments  in cash and cash  equivalents  and the
relatively  stable and risk  minimized  returns  available  on such  investments
withthe risks attendant to its investments in other debt and equity  securities.
The Company's  objective in managing its exposure to changes in the market value
of its  investments in debt and equity  securities is to balance the risk of the
impact  of  such  changes  on  earnings  and  cash  flows  with  the   Company's
expectations  for  investment  returns.  The  Company's  pooled  asset funds and
certain of its other  investments  in debt and equity  securities are managed by
professional  portfolio managers.  The Company was not a party to any forward or
derivative  option contract  related to interest rates or equity security prices
during fiscal 2000.

The fair market  value of the debt  securities  held by the Company at March 31,
2000, was $80.9 million,  of which $59.3 million had maturities of less than one
year (the market values of which are generally  less  sensitive to interest rate
fluctuations  than is the case  with  longer  term debt  instruments).  The fair
market value of equity  securities  held by the Company at March 31,  2000,  was
$71.8  million.  Such  investments  collectively  represent 11% of the Company's
total assets as of March 31, 2000,  and 42% of the  aggregate  value of debt and
equity  securities  and cash and cash  equivalents  held by the  Company at such
date.  Assuming  an  instantaneous  10%  decrease  in the  market  value  of the
Company's  debt and equity  securities,  the change in the aggregate fair market
value of these securities would be $15.3 million.

Forward Looking  Statements

Various  statements in this Report state or suggest that the Company  expects to
increase  revenues and to continue to be  profitable  in the future by employing
various  strategies  which include  continuing to seek,  among other things,  to
introduce new lines of generic equivalent products, to enter into alliances with
other  manufactures,  to strengthen the  development of branded  products and to
increase  prices on select generic  equivalent  products in its line.  These are
forward-looking statements. The Company's actual results could differ materially
from those  projected  or  suggested  in any  forward-looking  statement  due to
various important factors, including, but not limited to, the following:

                                       20

<PAGE>
        Although the Company is expanding its presence in the branded segment of
the pharmaceutical market, its results of operations have historically depended,
and continue to depend,  to a significant  extent, on its ability to develop and
bring to the market new generic equivalent  products.  Generally,  following the
expiration  of  patents  and  other  market  exclusivity   periods,   the  first
manufacturers  to  bring a  generic  equivalent  to the  market  achieve  higher
revenues and gross profits than competitors that subsequently  enter the market.
As competing products enter the market,  prices, sales volume and profit margins
of the first generic equivalents decline significantly.  Furthermore,  in recent
years,  the Company has increased  prices on selected  older generic  equivalent
products,  including  in some cases  generic  equivalents  that had been largely
abandoned by competitors. These price increases have provided incentive to other
generic  manufacturers  to reenter the market for many of these  products.  This
additional  competition has resulted in significant price  deterioration on many
of these  products,  which has  negatively  impacted the Company's  revenues and
margins. Additional price deterioration can be expected on these products in the
future (See "Results of OperationsNNet Sales and Gross Margin").

        In addition to suffering price  deterioration on its generic  equivalent
products generally, the Company's results of operation for fiscal 2000 continued
to be  impacted  by delays in its ability to  introduce  new generic  equivalent
products  due  to  litigation  initiated  by  branded  manufacturers  under  the
Hatch-Waxman  Act to extend the  exclusivity  periods on drugs on which  patents
were  expiring.  The  failure of  Congress  or the courts to address the present
abuses of the  Hatch-Waxman  Act could  diminish the  commercial  success of new
products  introduced by the Company,  resulting in both lower revenues and gross
margins.

     The Company is seeking to strengthen its  development of branded  products.
Obtaining approval from the FDA to market new (branded)  pharmaceutical products
in the United States is a lengthy, complex and expensive process.  Products that
appear to be  promising  in the  research  laboratories  may fail to survive the
testing phase due to  ineffectiveness or as a result of unforeseen side effects.
Even if the Company is  successful in obtaining  approval for new  products,  no
assurance  can be given  that such  products  will be  accepted  in the  medical
community as being as effective as alternative  forms of treatment for indicated
conditions.

     The Company's principal customers include wholesale drug distributors
and major drug store chains. A continuation of the  consolidation  that has been
experienced  in these  pharmaceutical  distribution  networks in recent years is
likely  to  result  in  an  increase  in  pricing  pressures  on  pharmaceutical
manufacturers.

     The  Company is involved in numerous  lawsuits,  including  anti-trust  and
anti-competition  litigation  brought by the Federal  Trade  Commission  and the
attorneys  general for 33 states,  as well as more than 25 putative class action
lawsuits alleging the same conduct.  An unfavorable outcome in these suits could
have a  potentially  adverse  effect on the  Company's  financial  position  and
results  of  operation  or, in  certain  circumstances,  the manner in which the
Company is permitted to conduct its future operations.


                                       21

<PAGE>


Consolidated Balance Sheets
Mylan Laboratories Inc.

<TABLE>
<S>                                                               <C>         <C>   

(dollars in thousands except per share data)
March 31,                                                             2000        1999

Assets
Current assets

Cash and cash equivalents .....................................   $ 203,493  $  189,849
Marketable securities .........................................      99,557      69,872
Accounts receivable ...........................................     197,760     148,896
Inventories ...................................................     145,869     136,493
Deferred income tax benefit ...................................      30,792      18,199
Other current assets ..........................................       9,275       8,450
Total current assets ..........................................     686,746     571,759

Property, plant and equipment - net of accumulated depreciation     168,000     154,636
Intangible assets - net of accumulated amortization ...........     332,142     339,603
Other assets ..................................................     124,881     106,549
Investment in and advances to Somerset ........................      29,461      34,114

Total assets ..................................................  $1,341,230  $1,206,661

</TABLE>


    See notes to consolidated financial statements.

                                       22

<PAGE>
(dollars in thousands except per share data)
March 31,

<TABLE>
<S>                                                           <C>          <C>

                                                                  2000        1999

Liabilities and shareholders' equity
Current liabilities


Trade accounts payable                                        $   17,981  $   12,142
Current portion of long-term obligations                           9,874      16,941
Income taxes payable                                               7,858         821
Other current liabilities                                         46,863      61,279
Cash dividend payable                                              5,194       5,178
Total current liabilities                                         87,770      96,361

Long-term obligations                                             30,630      26,827
Deferred income tax liability                                     19,108      23,568

Shareholders' equity

Preferred stock, par value $.50 per share,
authorized 5,000,000 shares,  issued
and outstanding - none-                                             -            -

Common stock, par value $.50 per share, authorized
300,000,000 shares, issued 130,277,568 at March 31, 2000 and
129,968,514 at March 31, 1999                                     65,139      64,984

Additional paid-in capital                                       316,393     311,995
Retained earnings                                                823,570     690,003
Accumulated other comprehensive earnings                           6,936       1,105
                                                               1,212,038   1,068,087
Less treasury stock at cost - 893,498 shares at
March 31, 2000 and 888,578 shares at March 31, 1999                8,316       8,182
Total shareholders' equity                                     1,203,722   1,059,905

Total liabilities and shareholders' equity                    $1,341,230  $1,206,661


</TABLE>

                                       23

<PAGE>



Consolidated Statements of Earnings
Mylan Laboratories Inc.

(amounts in thousands except per share data)
Year ended March 31,                              2000      1999       1998
Net sales                                     $ 790,145   $721,123  $528,601

Other revenues                                     --         --      26,822

Total revenues                                  790,145    721,123   555,423

Cost and expenses

Cost of sales                                   361,818    336,846   288,290
Research and development                         49,121     61,843    46,278
Acquired in-process research and development       --       29,000      --
Selling and administrative                      156,247    124,964    96,708
                                                567,186    552,653   431,276

Equity in (loss) earnings of Somerset            (4,193)     5,482    10,282
Other income                                     23,977     18,342    13,960
Earnings before income taxes                    242,743    192,294   148,389
Income taxes                                     88,497     76,885    47,612
Net earnings                                 $  154,246   $115,409   100,777

Earnings per common share
Basic                                          $   1.19   $    .92  $     .83
Diluted                                        $   1.18   $    .91  $     .82
Weighted average common shares outstanding
Basic                                           129,220    125,584    122,094

Diluted                                         130,224    127,156    123,043


    See notes to consolidated financial statements.

                                       24

<PAGE>


Consolidated Statements of Shareholders' Equity
Mylan Laboratories Inc.


<TABLE>
<S>                          <C>          <C>        <C>        <C>      <C>        <C>         <C>           <C>       <C>

                                                                                                  Accumulated
                                   Common Stock            Treasury Stock  Additional                Other       Total Comprehensive
(dollars in thousands except    --------------------     -----------------  Paid-In    Retained   Comprehensive Shareholders'
per share data)                 Shares        Amount     Shares     Amount   Capital   Earnings  (Loss)Earnings   Equity   Earnings
April 1, 1997                  122,814,956  $  61,407  (752,950) $ (3,732) $ 89,262   $513,750    $  (947)      $659,740        --

Net earnings                       --              --      --        --        --      100,777        --         100,777   $100,777
Net unrealized gain on 
marketable securities              --              --      --        --        --          --       2,517          2,517      2,517
Stock options exercised            235,216        118      (513)      (12)    3,143       (141)       --           3,108        --
Purchase of treasury stock         --              --  (144,900)    (2,459)   --           --         --          (2,459)       --
Reissuance of treasury stock       --              --    48,505       321      --          --         --             321        --
Cash dividend $.16 per share       --              --      --        --     (19,539)       --                    (19,539)       --
March 31, 1998                 123,050,172     61,525  (849,858)   (5,882)   92,405    594,847      1,570        744,465    103,294

Net earnings                       --              --      --        --        --      115,409         --         115,409   115,409
Net unrealized loss on 
marketable securities              --              --      --         --       --          --        (465)           (465)     (465)
Stock options exercised          1,013,313        507   (85,270)   (2,642)   16,916       (141)       --           14,640       --
Reissuance of treasury stock       --              --    46,550       342      --          --         --              342       --
Cash dividend $.16 per share       --              --      --         --       --      (20,112)       --          (20,112)      -- 
Penederm acquisition             5,905,029      2,952      --         --    202,674        --         --          205,626       --
March 31, 1999                 129,968,514     64,984  (888,578)   (8,182)  311,995    690,003        1,105     1,059,905   114,944

Net earnings                       --              --      --          --      --      154,246        --          154,246   154,246
Net unrealized gain on 
marketable securities              --              --      --          --      --          --         5,831         5,831     5,831
Stock options exercised            309,054        155    (4,920)     (134)    4,398        --         --            4,419       --
Cash dividend $.16 per share       --              --      --          --      --      (20,679)       --          (20,679)      --
March 31, 2000                 130,277,568  $  65,139  (893,498) $ (8,316) $316,393  $ 823,570    $   6,936    $1,203,722  $160,077


    See notes to consolidated financial statements.
</TABLE>


                                       25

<PAGE>



Consolidated Statements of Cash Flows
Mylan Laboratories Inc.

<TABLE>
<S>                                                                       <C>           <C>         <C>  

(dollars in thousands except supplemental disclosure)
Year ended March 31,                                                            2000         1999         1998
Cash flows from operating activities
Net earnings ............................................................   $ 154,246     $115,409    $ 100,777
Adjustments to reconcile net earnings to net cash provided from operating
activities:
    Depreciation and amortization .......................................      35,706       26,911       21,708
    Deferred income tax benefit .........................................     (23,267)     (10,314)      (3,207)
    Equity in loss (earnings) of Somerset ...............................       4,193       (5,482)     (10,282)
    Cash received from Somerset .........................................         460        1,089        5,674
    Allowances on accounts receivable ...................................      33,628       19,300        8,754
    Acquired in-process research and development ........................        --         29,000         --
    Other noncash items .................................................       6,226         (646)       1,574
    Changes in operating assets and liabilities:
      Accounts receivable ...............................................     (82,092)     (30,411)     (30,565)
      Inventories .......................................................      (9,534)      11,328      (45,007)
      Trade accounts payable ............................................       5,839       (4,282)      (2,082)
      Income taxes ......................................................      11,389        8,549       (8,949)
      Other operating assets and liabilities ............................     (17,578)       2,998       14,255
Net cash provided from operating activities .............................     119,216      163,449       52,650
Cash flows from investing activities
Additions to property, plant and equipment ..............................     (28,788)     (16,736)     (28,853)
Increase in intangible and other assets .................................     (23,779)      (7,915)      (7,984)
Purchase of investment securities .......................................    (200,939)     (79,816)     (16,785)
Proceeds from investment securities .....................................     180,706       50,151       17,309
Cash acquired net of acquisition costs ..................................        --          1,396         --
Net cash used in investing activities ...................................     (72,800)     (52,920)     (36,313)

</TABLE>


    See notes to consolidated financial statements.

                                       26

<PAGE>


Consolidated Statements of Cash Flows
Mylan Laboratories Inc.

<TABLE>
<S>                                                  <C>           <C>           <C>
(dollars in thousands except supplemental disclosure)
Year ended March 31,                                      2000          1999           1998
Cash flows from financing activities
Payments on long-term obligations                     $  (15,696)    $(14,740)     $ (19,198)
Cash dividends paid                                      (20,663)     (19,833)       (19,525)
Repurchase of common stock                                  --          --            (2,459)

Proceeds from exercise of stock options                    3,587       10,137          2,445
Net cash used in financing activities                    (32,772)     (24,436)       (38,737)

Net increase (decrease) in cash and cash equivalents      13,644       86,093        (22,400)
Cash and cash equivalents - beginning of year            189,849      103,756        126,156

Cash and cash equivalents - end of year               $  203,493     $189,849       $103,756
</TABLE>

Supplemental Disclosure

For purposes of  presentation  in the balance  sheets and the statements of cash
flows,  cash,   overnight  deposits  and  money  market  funds,  and  marketable
securities  with  original  maturities  of less  than  three  months  have  been
classified as cash and cash equivalents.

        Cash payments for interest were $1,418,000 in 2000,  $1,800,000 in 1999,
and  $3,426,000  in 1998.  Cash payments for income taxes were  $100,374,000  in
2000, $78,650,000 in 1999, and $59,770,000 in 1998.

        Certain stock option  transactions result in a reduction of income taxes
payable and a corresponding  increase in additional paid-in capital. The amounts
for the years ended March 31, 2000,  1999, and 1998 were  $719,000,  $4,302,000,
and $652,000, respectively.

        In consideration for the exercise of stock options, the Company received
and recorded into treasury stock 4,920 shares valued at $134,000 in fiscal 2000,
85,270  shares  valued at  $2,642,000  in fiscal 1999,  and 513 shares valued at
$12,000 in fiscal 1998.

        During scal 1999, the Company  acquired all of the outstanding  stock of
Penederm (See note B). The purchase price of approximately $207,938,000 was

        satised principally through the issuance of the Company's common
stock.
        In connection  with product  license  agreements,  the Company  recorded
intangible  assets and the related  obligations,  in excess of amounts  paid, of
$2,250,000 in fiscal 2000 and $22,300,000 in fiscal 1999.

                                       27

<PAGE>



Notes to Consolidated Financial Statements
Mylan Laboratories Inc.

note

(A)

        Summary of Significant  Accounting  Policies 

1) Nature of Operations and Principles of Consolidation 

The consolidated financial statements include the accounts of Mylan Laboratories
Inc.  ("the  Company")  and  its  wholly-owned  subsidiaries.  All  intercompany
accounts and transactions have been eliminated in consolidation.  The Company is
engaged in the  development,  manufacture  and  distribution  of  pharmaceutical
products  for resale by others.  The  principal  markets for these  products are
proprietary and ethical pharmaceutical wholesalers and distributors,  drug store
chains,  drug  manufacturers,  and public and  governmental  agencies within the
United States.

2) Marketable Securities

The  Company's  investments  are  classified  as  "available  for  sale" and are
recorded at market  value with net  unrealized  gains and losses,  net of income
taxes,  reflected in accumulated other  comprehensive  earnings in shareholders'
equity.  Net gains  and  losses on sales of  securities  available  for sale are
computed on a specific  security basis and included in other income. 

3) Accounts Receivable and Revenue Recognition

The Company  recognizes  revenue from product  sales upon shipment to customers.
Provisions for estimated  discounts,  rebates,  price  adjustments,  returns and
other  adjustments  are provided for in the same period as the related sales are
recorded.

     Accounts  receivable  are  presented net of  provisions  which  amounted to
$77,212,000  and  $43,584,000  at March 31,  2000,  and 1999,  respectively.  

4) Inventories 

Inventories are stated at the lower of cost (principally,  first-in,  first-out)
or market.

5) Property, Plant and Equipment

Property,  plant and equipment are stated at cost.  Depreciation  is provided in
amounts  sufficient to relate the cost of depreciable  assets to operations over
their  estimated  service  lives,  principally  on  a  straight-line  basis.  

6) Intangible Assets 

Intangible  assets  are  stated  at  cost.  Amortization  is  provided  for on a
straight-line  basis over  estimated  useful  lives not to exceed  forty  years.
Intangible  assets are  periodically  reviewed to  determine  recoverability  by
comparing carrying value to expected future cash flows.

7) Research  and Development  

Research and development expenses are charged to operations as incurred.

8) Advertising  Costs  

Advertising   costs  are  expensed  as  incurred  and  amounted  to  $6,063,000,
$5,683,000 and $3,526,000 in fiscal 2000, 1999, and 1998.

9) Income Taxes  

Income  taxes have been  provided for using an asset and  liability  approach in
which  deferred  income taxes  reflect the tax  consequences  on future years of
events  that have  already  been  recognized  by the  Company  in the  financial
statements  or tax returns.  Changes in enacted tax rates or laws will result in
adjustments to the recorded tax assets or liabilities in the period that the tax
law is enacted.

10) Concentrations of Credit Risk

Financial  instruments  that  potentially  subject  the  Company to credit  risk
consist principally of interest-bearing investments and accounts receivable. The
Company performs ongoing credit  evaluations of its customers and generally does
not require collateral.  Four of the Company's customers accounted for 15%, 15%,
11% and 10% of net  sales  in  fiscal  2000.  Three of the  Company's  customers
accounted  for 15%, 14% and 11% of net sales in fiscal 1999 and 13%, 12% and 11%
in fiscal 1998.  Approximately 62% and 56% of the accounts  receivable  balances
represent  amounts  due  from  four  customers  at March  31,  2000,  and  1999,
respectively.

                                       29

<PAGE>
        The Company  invests its excess  cash in deposits  primarily  with major
banks  and  other  high  quality  short-term  liquid  money  market  instruments
(commercial  paper,  government  and government  agency notes and bills,  etc.).
These investments  generally mature within twelve months.  The Company maintains
deposit balances at banks in excess of federally  insured  amounts,  including a
deposit in a newly  formed  regional  bank at March 31,  2000.  

11) Earnings per Common  Share 

Basic  earnings  per common  share is computed by dividing  net  earnings by the
weighted average common shares outstanding for the period.  Diluted earnings per
common share is computed by dividing net earnings by the weighted average common
shares  outstanding  adjusted for the dilutive  effect of stock options  granted
under the Company's stock option plans,  unless they are antidilutive  (See note
P).

        A reconciliation of diluted earnings per common share is as follows:
(in thousands except per share amounts)

Year ended  March 31,                                   2000    1999     1998  
Net  earnings                                        $154,246 $115,409 $100,777
Weighted  average common shares  outstanding          129,220  125,584  122,094
Dilutive effect of stock options                        1,004    1,572      949 
Diluted  weighted  average common shares outstanding  130,224  127,156  123,043 
Diluted  earnings per common share                     $ 1.18     $.91     $.82
 

12)  Accounting  Standards 


In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS")  No.133,  "Accounting  for Derivative
Instruments  and Hedging  Activities."  SFAS No.133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain derivatives
embedded in other contracts, and hedging activities.  It requires that an entity
recognize all  derivatives  as either assets or liabilities on the balance sheet
at fair  value.  As  amended,  this  statement  is  effective  for fiscal  years
beginning  after June 15, 2000.  The Company is currently  evaluating the impact
that  SFAS No. 13 3 will  have on its  financial  position  and its  results  of
operations.

13) Use of Estimates in the Preparation of Financial  Statements 

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

14) Reclassification

Certain  prior  year  amounts  have been  reclassified  to  conform  to the 2000
presentation.


note
(B)
        Acquisitions

On October 2, 1998, a  wholly-owned  subsidiary of the Company  acquired 100% of
the outstanding stock of Penederm Inc. ("Penederm"). Penederm primarily develops
and  markets  patented  topical   prescription   products.   Penederm  maintains
administrative   and  research  and  development   facilities  in  Foster  City,
California.

        The  business  combination  has been  accounted  for under the  purchase
method of accounting. Payment of approximately $207,938,000 was made principally
through the issuance of 5,905,029  shares of the Company's  common stock and the
assumption of 877,367 stock options granted prior to the  transaction.  Goodwill
and various  intangible assets acquired totaled  approximately  $193,000,000 and
are being  amortized  on a  straight-line  basis over  periods  not to exceed 20
years.

        The Company  allocated  a portion of the  purchase  price to  in-process
research  and  development  ("IPR&D").  IPR&D  represents  ongoing  research and
development projects acquired by the Company which have not yet been approved by
the Food and Drug  Administration  ("FDA") and would have no alternative  future
use. The Company used independent  professional  valuation consultants to assess
and allocate values to IPR&D.

                                       29

<PAGE>
        The Company  acquired five IPR&D projects of which two were  significant
to the  IPR&Dvaluation.  One project is for the treatment of inflammatory fungal
conditions  while  the  other  project  is for a  nail  antifungal  product.  In
assessing the value to be allocated to only these two projects, it was estimated
that they  were 42%  complete  and would  require  approximately  $9,100,000  of
additional  Company  funding to complete.  Estimated  future cash flows for each
project  were  discounted  to their  present  value  using a rate of 31%.  These
discounted cash flow projections were then adjusted by the estimated  completion
percentage for each project. The total value allocated to all IPR&D projects was
$29,000,000.

     At the date of acquisition,  the Company believes that the assumptions used
in the valuaton  process were  reasonable.  No assurance can be given,  however,
that the underlying  assumptions used in the valuation of these projects will be
realized.   Pharmaceutical   product  development  has  inherent  risks  in  the
formulation,  manufacture,  approval process and marketplace  environment  which
could  affect  or  prevent  each of these  projects  from  achieving  commercial
success.
        
     The results of  Penederm's  operations  have been included in the Company's
Consolidated Statements of Earnings from the date of acquisition.  Unaudited pro
forma information  assuming the acquisition had occurred on April 1, 1997, is as
follows,  excluding  the  one-time  charge of  $29,000,000  relating to acquired
IPR&D: (in thousands except per share amounts)

Year ended March 31,                                     1999     1998
Total revenues                                        $731,641  $565,378
Net earnings                                          $140,948  $ 85,532
Diluted earnings per common share                     $   1.08  $    .66
Diluted weighted average common shares outstanding     130,241   129,075

        The  pro  forma  financial  information  is  presented  for  comparative
purposes only and does not purport to be indicative of the operating  results or
financial position that would have occurred had the acquisition been consummated
at the beginning of the periods presented,  nor is such information  necessarily
indicative  of the future  operating  results of the combined  company after the
acquisition.

        The  Company  purchased  various  product and  marketing  rights with an
aggregate purchase price of $12,250,000 and $30,300,000 in fiscal 2000 and 1999.
The purchase agreements require fixed payments and royalties on product sales in
future periods (See note J).

note

(C)

        Inventories

Inventories consist of the following components: (in thousands)

March 31,                                     2000            1999
Raw materials                             $  64,020         $ 57,414
Work in process                              28,459           20,813
Finished goods                               53,390           58,266
                                          $ 145,869         $136,493
note

(D)

        Property, Plant and Equipment

Property, plant and equipment consists of the following components:
(in thousands)

March 31,                                     Useful Lives     2000     1999
Land and land improvements                         --          7,560   $6,583
Buildings and improvements                      20 - 40       88,001   86,898
Machinery and equipment                          5 - 10      151,308  137,716
Construction in progress                           --         26,712   13,596
                                                             273,581  244,793
Less accumulated depreciation                                105,581   90,157
                                                           $ 168,000 $154,636


                                       30

<PAGE>
note

(E)

        Investment  in and  Advances  to Somerset  The  Company  owns 50% of the
outstanding common stock of Somerset Pharmaceuticals, Inc. ("Somerset") and uses
the equity method of accounting for its investment.

        Equity in loss/earnings of Somerset includes the Company's 50%
portion

        of  Somerset's   financial  results  and  expense  for  amortization  of
intangible  assets  resulting from the acquisition of Somerset.  Such intangible
assets are amortized  over a 15 year period.  Amortization  expense  amounted to
$924,000 in fiscal 2000, 1999, and 1998. Additionally,  the Company's charges to
Somerset for management services and product development activities are included
in Somerset's financial results.

        Condensed audited balance sheet information of Somerset is as follows:

        (in thousands)

December 31,                         1999            1998         1997
Current assets                     $65,511        $70,929       $53,973
Non-current assets                   1,509          2,040         3,466
Current liabilities                 14,459         16,584        15,660
Payable to owners                      527            595         1,433

        Condensed  audited  income  statement  information  of  Somerset  is  as
follows:

        (in thousands)

Year ended December 31,                 1999            1998       1997
Net sales                         $   18,403         $  43,557    $66,956
Cost and expenses                     23,622            19,316     30,055
Income taxes                          (1,395)            9,635     12,924
Net (loss) earnings               $   (3,824)        $  14,606    $23,977

The above  information  represents  100% of  Somerset's  operations of which the
Company has a 50% interest.

     Somerset's  marketing  exclusivity for Eldepryl&reg;  under the Orphan Drug
Act expired on June 6, 1996.  Somerset  has  experienced  increased  competition
since  August  1996 due to the  approval  of  several  generic  tablet  forms of
EldeprylRegistration  Mark by the FDA.  This has resulted in a decrease in sales
and net earnings.

     In 1997, Somerset was notified by the Internal Revenue Service ("IRS") that
it had  initiated  a  challenge  related to issues  concerning  Somerset's  Code
Section 936 credit for tax years 1993 through 1995. As of December 31, 1999, the
proposed  adjustments  by the  IRS  amounted  to  approximately  $34,000,000  of
additional income tax and interest charges over amounts accrued. The $20,000,000
increase over the prior year is primarily due to losses  incurred by Somerset in
1999 and the  anticipation  of losses in the near  future  which would not allow
Somerset to utilize Puerto Rican tax credits. Management of Somerset believes it
has appropriately  claimed the Code Section 936 credit and intends to vigorously
defend its position on this matter. 

note 

(F)

        Marketable Securities

The amortized cost and estimated market values of marketable securities at
March 31, 2000 and 1999 are as follows: (in thousands)

                                       Gross          Gross
                       Amortized    Unrealized      UnrealizedMarket
March 31, 2000          Cost           Gains          Losses         Value
Debt securities      $81,133         $   168          $  405         $80,896
Equity securities      7,753          11,508             600          18,661
                      88,886          11,676           1,005          99,557

March 31, 1999
Debt securities       60,071             303             187          60,187
Equity securities      8,101           2,144             560           9,685
                     $68,172         $ 2,447          $  747         $69,872

                                       31

<PAGE>

Maturities  of debt  securities  at market  value as of March 31,  2000,  are as
follows:

(in thousands)

Mature in one year or less                           $59,253
Mature after one year through five years               7,207
Mature after five years                               14,436
                                                   $  80,896

Proceeds from sales of marketable securities were $183,633,000, $50,151,000, and
$17,233,000  during  fiscal  2000,  1999 and 1998.  Gross  gains of  $4,504,000,
$942,000, and $767,000 and gross losses of $1,414,000, $205,000 and $82,000 were
realized  during fiscal 2000,  1999 and 1998.  The cost of  investments  sold is
determined by the specific identification method.

note

(G)

        Intangible Assets

Intangible assets consist of the following components: (in thousands)

March 31,                            Useful Lives        2000          1999
Patents and technologies               10 - 20      $  123,052    $  122,985
License fees and agreements             2 - 12          49,911        36,686
MaxzideRegistration Mark intangibles       256           9,666        69,666
Goodwill                               20 - 40         128,008       128,480
Other                                   5 - 20          28,462        28,462
                                                       399,099       386,279
Less accumulated amortization                           66,957        46,676
                                                  $    332,142    $  339,603

The  Maxzide&reg;  intangibles  relate to  trademark,  tradedress  and marketing
rights.  The balance in Other consists  principally  of an assembled  workforce,
non- compete  agreements,  customer lists and contracts.  Goodwill,  patents and
technologies and various other intangible  assets of approximately  $193,000,000
were acquired in the Penederm transaction in fiscal 1999 (See note B).

note

(H)

        Other Assets

Other assets consist of the following components: (in thousands)

March 31,                                          2000      1999
Pooled asset funds                             $  60,839  $ 46,611
Cash surrender value                              33,773    29,742
Other investments                                 30,269    30,196
                                               $ 124,881  $106,549

        Pooled  asset  funds  primarily  include the  Company's  interest in one
limited  partnership fund which consists of common and preferred stocks,  bonds,
and money market funds.  Earnings on these investments  included in Other income
amounted to $15,378,000 in 2000, $19,530,000 in 1999, and $6,572,000 in 1998. At
March 31, 2000, and 1999, the carrying amounts of these investments approximated
fair value.

        Cash  surrender  value is  related  to  insurance  policies  on  certain
officers  and key  employees  and the  value  of  split  dollar  life  insurance
agreements with certain current and former executive officers of the Company.

        Other   investments   are  comprised   principally   of  investments  in
non-publicly  traded  equity  securities  and are  accounted  for under the cost
method.  Management periodically reviews the carrying value of these investments
for impairment.  Adjustments of $9,450,000 and  $12,525,000  were made in fiscal
2000 and 1999 to  reduce  the  carrying  value  of  these  investments  to their
estimated fair value and are recorded as reductions to Other income.

                                       32

<PAGE>
note

I

        Other Current Liabilities

Other current liabilities consist of the following components: (in thousands)

March 31,                                               2000          1999
Payroll and employee benefit plan accruals            $14,286      $  20,672
VivoRx funding                                          1,545         10,302
Medicaid                                                8,151          8,305
Legal and professional                                  4,786          3,811
Royalties                                               8,763          4,958
Product license fees                                    4,165          8,802
Other                                                   5,167          4,429
                                                      $46,863      $  61,279

        In fiscal 1999, the Company recorded an arbitration award for
research and development funding which is identified here as VivoRx funding.


note
(J)

        Long-Term Obligations

Long-term obligations include accruals for postretirement  compensation pursuant
to  agreements  with  certain  key  employees  and  directors  of  approximately
$15,400,000,   and  $13,463,000  at  March  31,  2000,  and  1999.  Under  these
agreements, benefits are to be paid over periods of 10 to 15 years commencing at
retirement.

     The Company's obligation on 10.5% senior promissory notes is $3,000,000 and
$4,000,000 at March 31, 2000, and 1999. Future principal payments on these notes
are  $1,000,000 in fiscal 2001 and $2,000,000 in fiscal 2002. At March 31, 2000,
and 1999, the Company was in compliance with all of its debt covenants.

     The present value of the Company's obligations for product acquisitions was
$11,121,000  at March  31,  2000,  and  $24,605,000  at March 31,  1999.  Future
payments,  including  minimum  royalty  payments for these  agreements,  will be
approximately   $2,000,000  in  fiscal  2001,  $3,750,000  in  fiscal  2002  and
$2,000,000 in fiscal 2003.

        During fiscal 2000, the Company recorded  $9,238,000 in deferred revenue
relating to a license and supply agreement.  Revenue will be recognized  ratably
over the next five years.

note

(K)

        Income Taxes

Income taxes consist of the following components: (in thousands)

Year ended March 31,                    2000            1999      1998
Federal:
    Current                         $   97,957         $77,546  $45,601
    Deferred                           (21,596)         (9,617)  (2,993)
                                        76,361          67,929   42,608
State:
    Current                             13,807           9,653    5,218
    Deferred                            (1,671)           (697)    (214)
                                        12,136           8,956    5,004
Income taxes                            88,497          76,885   47,612
Pre-tax earnings                    $  242,743        $192,294 $148,389
Effective tax rate                        36.5%           40.0%    32.1%


                                       33

<PAGE>

Temporary differences and carryforwards which give rise to the deferred tax
assets and liabilities are as follows: (in thousands)

March 31,                                                2000          1999
Deferred tax assets:
    Employee benefits                               $    6,651         $5,090
    Contractual agreements                               7,964            -
    Intangible assets                                    2,043          3,627
    Asset allowances                                    31,241         17,841
    Inventory                                            1,084          1,069
    Investments                                         10,481          5,411
    Tax loss carryforwards                              12,708         18,198
    Tax credit carryforwards                             5,596          3,683
    Other                                                -                266
Total deferred tax assets                               77,768         55,185
Deferred tax liabilities:
    Plant and equipment                                 11,017         10,373
    Intangible assets                                   41,205         43,675
    Investments                                         13,862          6,506
Total deferred tax liabilities                          66,084         60,554
Deferred tax asset (liability) - net                $   11,684       $ (5,369)
Classification in the consolidated balance sheets:
    Deferred income tax benefit - current           $   30,792       $ 18,199
    Deferred income tax liability - non-current         19,108         23,568
Deferred tax asset (liability) - net                $   11,684       $ (5,369)

        Deferred tax assets  relating to net operating  loss  carryforwards  and
research and  development tax credit  carryforwards  were acquired during fiscal
1999 upon the  acquisition  of Penederm.  Future  utilization of these assets is
subject to certain limitations set forth in the Internal Revenue Code. In fiscal
2000, the Company utilized acquired net operating loss  carryforwards and credit
carryforwards to reduce its current tax liability by  approximately  $4,800,000.
The  Company  has  approximately   $36,300,000  of  acquired  federal  tax  loss
carryforwards and $2,146,000 of acquired federal and state tax credits remaining
to offset future taxable income.  The loss  carryforwards and tax credits expire
in fiscal years 2007 through 2013.

        The Company also has $1,650,000 of federal  research and development tax
credits that are  deferred  until fiscal 2001 based upon recent tax law changes.
A$1,800,000  tax credit  against Puerto Rican local income tax is also available
for future years.

        A reconciliation  of the statutory tax rate to the effective tax rate is
as follows:

Year ended March 31,                         2000            1999          1998
Statutory tax rate                          35.0%           35.0%        35.0%
IPR&D                                         --             5.3%          --
State income taxes-net                       3.1%            3.1%          2.3%
Nondeductible amortization                   1.0%            0.8%          0.6%
Tax exempt earnings-primarily dividends       --            (1.1%)        (2.4%)
Tax credits                                 (2.7%)          (2.6%)        (3.0%)
Other items                                  0.1%           (0.5%)        (0.4%)
Effective tax rate                          36.5%           40.0%         32.1%

        Tax credits result  principally from the Company's  operations in Puerto
Rico and from qualified research and development expenditures.

        State income taxes include  provisions  for tollgate tax resulting  from
the future  repatriation of funds from the Company's operation in Puerto Rico to
the United States. Such provisions have been made to the minimum extent provided
under  Puerto  Rican tax law based on the  Company's  intent to reinvest  Puerto
Rican source earnings in qualifying investments within Puerto Rico.

        The Company's federal tax returns have been audited by the IRS
through March 31, 1996.


                                       34

<PAGE>
note
(L)
        Common Stock

On August 23,  1996,  the  Company's  Board of Directors  adopted a  Shareholder
Rights  Plan ("the  Rights  Plan").  The Rights  Plan was adopted to provide the
Company's Directors with sufficient time to assess and evaluate any takeover bid
and explore and develop a reasonable  response.  Effective November 8, 1999, the
Rights  Plan was amended to  eliminate  the  special  rights held by  continuing
directors. The Rights Plan will expire on September 5, 2006, unless a triggering
event has occurred.

note

(M)

        Commitments

The Company has entered into various product  licensing  agreements.  In some of
these  arrangements,  the Company  provides  funding for the  development of the
product,  through milestone payments, in exchange for marketing and distribution
rights to the  product.  In the event all  projects  are  successful,  milestone
payments totaling $18,800,000 would be paid over the next five years.

note

(N)

        Other Revenues

Under the terms of the Company's supply and distribution agreement with Genpharm
Inc.  ("Genpharm") relating to sales of ranitidine HCl tablets, the Company also
benefitted   from  an  agreement   between   Genpharm  and   Novopharm   Limited
("Novopharm").  The Company  recognized revenue of $26,822,000 in fiscal 1998 in
connection with the Genpharm Novopharm agreement (See note S). note O

        Fair Value of Financial Instruments

The carrying values of cash and cash  equivalents  approximate fair value due to
the short-term maturity of these instruments. Marketable securities are recorded
at fair  value  based on  quoted  market  prices.  The  carrying  value of other
financial  instruments  approximates their fair value based on other appropriate
valuation techniques.

note

(P)

        Stock Option Plans

On January 23, 1997, the Board of Directors adopted the "Mylan Laboratories Inc.
1997  Incentive  Stock  Option  Plan"  ("the  Plan")  which was  approved by the
shareholders  on July 24,  1997.  Under the Plan,  the  Company  may grant up to
10,000,000  shares of its common stock to officers,  employees,  and nonemployee
consultants and agents as either  incentive stock options or nonqualified  stock
options. Options, which may be granted at not less than fair market value on the
date of the  grant,  may be  exercised  within ten years from the date of grant.
Nonqualified  stock options  generally  vest on date of grant.  Incentive  stock
options granted have the following vesting schedule: 25% two years from the date
of grant,  25% at the end of year three and the remaining 50% at the end of year
four. As of March 31, 2000, 7,279,150 shares are available for future grants.

        On June 23, 1992, the Board of Directors  adopted the "1992  Nonemployee
Director  Stock Option Plan" ("the  Directors'  Plan") which was approved by the
shareholders on April 7, 1993. A total of 600,000 shares of the Company's common
stock are reserved  for issuance  upon  exercise of stock  options  which may be
granted at not less than fair market value on the date of grant.  Options may be
exercised within ten years from the date of grant. As of March 31, 2000, 382,500
shares have been granted pursuant to the Directors' Plan.


                                       35

<PAGE>
        Additional stock options are outstanding from the expired 1986 Incentive
        Stock Option Plan and other plans acquired through

acquisitions.
        A summary of the activity resulting from all plans is as follows:

                                                             Weighted average
                                           Number of shares   exercise price
                                              under option     per share
Outstanding as of April 1, 1997                 2,570,877      $12.10
    Options granted                             1,322,000       17.08
    Options exercised                            (235,216)      11.09
    Options cancelled                             (41,175)      14.17
Outstanding as of March 31, 1998                3,616,486      $13.96
    Options acquired - Penederm                   877,367       15.30
    Options granted                               186,500       19.74
    Options exercised                          (1,013,313)      12.16
    Options cancelled                            (117,886)      16.96
Outstanding as of March 31, 1999                3,549,154      $15.11
    Options granted                             1,410,100       25.50
    Options exercised                            (309,054)      12.04
    Options cancelled                             (53,419)      18.34
Outstanding as of March 31, 2000                4,596,781      $18.44



<TABLE>
<S>             <C>           <C>             <C>          <C>                  <C>    

                                   Options outstanding             Options exercisable
                               -----------------------------   --------------------------------
                                  Weighted
                                 average         Weighted                            Weighted
Range of           Number       remaining         average      Number                 average
exercise price outstanding as contractual life exercise price  exercisable as       exercise price
per share        of 3/31/2000  (years)           per share     of 3/31/2000           per share
$  0.81- $11.58     266,341      3.15             $ 7.77        266,341                $ 7.77
  12.00- $12.00     976,653      2.23              12.00        976,653                 12.00
  12.32- $16.69     949,971      7.05              16.19        577,972                 16.11
  16.73- $21.14     728,091      7.03              17.95        672,591                 17.96
  22.88- $25.00     474,671      8.59              23.18         65,571                 24.88
  26.06- $30.15   1,201,054      9.91              26.25         64,054                 29.64
$  0.81- $30.15   4,596,781      6.70             $18.44      2,623,182                $14.76

</TABLE>


        At March 31, 2000,  options were  exercisable for 2,623,182  shares at a
weighted average exercise price of $14.76 per share. The  corresponding  amounts
were  2,665,904  shares at $14.12  per share at March 31,  1999,  and  2,557,856
shares at $13.20 per share at March 31, 1998.

        In  accordance  with the  provisions  of SFAS No.  123  "Accounting  for
Stock-Based  Compensation," the Company will continue to apply the provisions of
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  and,  accordingly,  does not  recognize  compensation  costs for its
existing   stock  option  plans.   If  the  Company  had  elected  to  recognize
compensation costs based on the alternative fair value method prescribed by SFAS
No. 123, net earnings and earnings per share (on both a basic and diluted basis)
would have been reduced by $1,430,000,  or $.01 per share,  $1,613,000,  or $.01
per share and $6,489,000,  or $.04 per share for the years ended March 31, 2000,
1999 and 1998.  These  calculations  only take into account options issued since
April 1, 1995.


                                       36

<PAGE>
        The  weighted  average  fair value of options  granted  during the years
ended March 31, 2000, 1999 and 1998 was $9.93,  $9.37 and $6.47.  The fair value
was  estimated  using  the  Black-Scholes  option  pricing  model  based  on the
following assumptions:

March 31,                                2000            1999          1998
Volatility                                34%             42%           35%
Risk-free interest rate                  6.2%            5.0%          6.1%
Dividend yield                           0.6%            1.0%          1.0%
Expected term of options (in years)      5.2             5.2           5.4


note
(Q)

        Employee Benefits

The Company  maintains  profit  sharing  and 401(k)  retirement  plans  covering
essentially all of its employees.

        Contributions  to the profit sharing plans are made at the discretion of
the Board of  Directors.  Contributions  to the  401(k)  plans  are  based  upon
employee  contributions or service hours.  Total  contributions to all plans for
the years

        ended March 31,  2000,  1999 and 1998 were  $6,342,000,  $4,776,000  and
$3,889,000 respectively.

        In fiscal 1999, the Company adopted a plan covering substantially all of
its   employees   to  provide  for   limited   reimbursement   of   supplemental
postretirement  medical  coverage.  The  plan  provides  benefits  to  employees
retiring after April 5, 1998, who meet minimum age and service requirements. The
Company has provided for the costs of these  benefits,  which are not  material.
The future obligation related to these benefits is insignificant.

        The Company  provides  supplemental  life insurance  benefits to certain
management level employees. Such benefits require annual funding and may require
accelerated funding in the event of a change in control of the Company.

note

(R)

        Segment Reporting

The  Company  has  two  reportable  operating  segments,   Generic  and  Branded
Pharmaceuticals,  based on  differences  in products,  marketing and  regulatory
approval.

        Generic    pharmaceutical    products   are    off-patented    products,
therapeutically equivalent to a branded name product, marketed to pharmaceutical
wholesalers  and  distributors,  drug store  chains and public and  governmental
agencies by multiple  suppliers.  These  products  have been approved by the FDA
through an Abbreviated New Drug Application process.

        Branded  pharmaceutical   products  are  generally,   when  new,  patent
protected  products marketed  directly to health care  professionals by a single
provider.  These products have been approved by the FDA primarily  through a New
Drug Application process.

        The accounting  policies of the operating segments are the same as those
described in note A. In the following table, segment revenues represent sales to
unrelated third parties with corresponding  corporate wide cost of sales used to
determine segment profits.  Segment profits  represent  earnings from continuing
operations before a provision for income taxes.

                                       37

<PAGE>


<TABLE>
<S>                       <C>      <C>             <C>         <C>           <C> 
                                                                 Corporate/
March 31, (dollars in thousands)       Generic       Branded        Other     Consolidated
Total revenues              2000    $ 667,808        $ 122,337       --         $ 790,145
                            1999      638,122         83,001         --           721,123
                            1998      501,320         54,103         --           555,423
Segment profit (1)          2000      261,238         15,630     $ (34,125)       242,743
                            1999      226,153         14,941       (48,800)       192,294
                            1998      143,309          6,728        (1,648)       148,389
Segment assets (2)          2000      464,277        259,196       617,757      1,341,230
                            1999      396,293        257,860       552,508      1,206,661
                            1998      398,189        126,878       322,686        847,753
Property, plant and

equipment additions         2000       23,376          5,157           255         28,788
                            1999       11,646          3,991         1,099         16,736
                            1998       24,843          3,925            85         28,853
Deprecation and

amortization (1)&(2)        2000       12,919         15,540         7,247         35,706
                            1999       11,452         10,246         5,213         26,911
                            1998       10,950          8,084         2,674         21,708

</TABLE>


(1)Segment  profit  represents  segment  gross  profit less direct  research and
     development,  sales and marketing, and administrative  expenses.  Corporate
     and Other Segment profit represents consolidated  non-operating income less
     corporate  expenses,  including  legal  expenditures,  IPR&D  and  goodwill
     amortization.

(2)Generic and Branded  Segment  assets include  property,  plant and equipment,
     trade  accounts  receivable,  inventory  and  intangible  assets other than
     goodwill. Corporate and Other Segment assets includes consolidated cash and
     cash  equivalents,   marketable   securities,the  Company's  investment  in
     Somerset and other assets, goodwill and all income tax related assets.

note

(S)

        Contingencies

The Company is involved in various legal  proceedings that are considered normal
to its  business.  While it is not feasible to predict the  ultimate  outcome of
such proceedings, it is the opinion of management that the ultimate outcome will
not have a material adverse effect on the Company's  operations or its financial
position.

        The Company had an agreement with Genpharm where it benefitted  from the
sale of ranitidine HCl tablets by Novopharm under a separate  agreement  between
Genpharm and Novopharm  (See note N). Based on an  independent  audit,  Genpharm
initiated a lawsuit against Novopharm to resolve contract  interpretation issues
and collect  additional  funds due. In response to  Genpharm's  suit,  Novopharm
filed counterclaims against both Genpharm and the Company claiming damages of up
to $60,000,000. The Company believes the counte rclaims against Genpharm and the
Company are without merit and will vigorously defend its position.

        In June 1998,  the Company filed suit in the Los Angeles  Superior Court
against American Bioscience,  Inc. ("ABI"),  American  Pharmaceutical  Partners,
Inc.  ("APP") and certain of their  directors and officers.  The Company's  suit
seeks various  legal and  equitable  remedies.  The Los Angeles  Superior  Court
issued a preliminary  injunction order which, among other things,  prohibits the
defendants  from  transferring  or disposing  of funds,  assets,  technology  or
property  without  the  Company's  consent  or  commingling  as sets,  property,
technology  or  personnel  with those of  another  company.  In June  1999,  the
defendants  filed an answer to and  cross-complaint  against  the  Company.  The
cross-complaint  alleges violations of California state laws,  interference with
contractual relations and prospective economic advantage,  fraud, slander, libel
and other allegations.  The cross-complainants seek unspecified compensatory and
punitive damages.  The Company believes the  cross-complaints  are without merit
and intends to vigorously defend its position.

                                       38

<PAGE>
     A  subsidiary  of  the  Company  was  involved  in a  dispute  with  KaiGai
Pharmaceuticals,  Co., Ltd. ("KaiGai") relating to a license and supply contract
for nitroglycerin  transdermal  patches which both parties claim was breached by
the other.  KaiGai  sought  damages in excess of  $20,000,000.  The  dispute was
subject to binding  arbitration,  and, in November 1999, the  arbitration  panel
denied KaiGai's request for damages.  KaiGai filed an appeal and the Company has
filed a moton to dismiss the appeal due to the appeal not being filed within the
permitted time period.

        In  November  1999,  the  Company  and a  state  agency  entered  into a
settlement  concerning  certain  contract  pricing  matters.  The settlement was
satisfied without a significant  effect on the Company's  financial  position or
results of operations.

        On December 22, 1998, the Federal Trade Commission ("FTC") filed suit in
U.S.  District  Court for the  District of Columbia  (the  "Court")  against the
Company.  The FTC's complaint alleges the Company engaged in restraint of trade,
monopolization,  attempted monopolization and conspiracy to monopolize,  arising
out of  certain  agreements  involving  the  supply  of raw  materials  used  to
manufacture two drugs.  The FTC also sued in the same case the foreign  supplier
of the raw  materials,  the  supplier's  parent  company  and its United  States
distributor.  Under the terms of the agreements  related to these raw materials,
the Company has agreed to indemnify these parties.

        The Company is a party to other suits  involving the  Attorneys  General
from 33 states and more than 25  putative  class  actions  that  allege the same
conduct alleged in the FTC suit as well as alleged  violations of state consumer
protection  laws. A qui tam action was  commenced by a private party in the U.S.
District Court for the District of South Carolina,  purportedly on behalf of the
United States, alleging violations of the False Claims Act and other statutes.

        The relief sought by the FTC includes an injunction  barring the Company
from engaging in the  challenged  conduct,  recision of certain  agreements  and
disgorgement  in excess of  $120,000,000.  The states and private  parties  seek
similar  relief,  treble damages and attorneys'  fees. The Company's  motions to
dismiss several of the private actions have been granted.

        A class action suit was filed alleging  violations of federal securities
laws by the Company and certain  directors and officers of the Company.  Without
specifying a dollar amount, the suit sought compensatory  damages. The Company's
motion to dismiss the federal  securities case was granted on December 22, 1999.
The case is on appeal.

        The  Company  had  filed  motions  to  dismiss  the  FTC  complaint  and
significant  portions of the State Attorneys General  complaints.  In July 1999,
the Court denied the Company's motion to dismiss the FTC complaint.  The Company
filed a motion  requesting  the Court to certify its ruling with  respect to the
jurisdictional  issue for expedited  appeal to the U.S. Court of Appeals for the
District of  Columbia.  This motion was  denied.  The Court  granted in part and
denied in part the Company's  motion to dismiss  portions of the State Attorneys
General complaints.  In so doing, the Court limited certain theories of recovery
asserted by the states.  Some  states  filed a motion with the Court  requesting
that it reconsider  certain claims that were  dismissed,  and, in December 1999,
the Court reinstated certain claims.

        In February 2000, the Company  received notice of threatened  litigation
by another  generic  manufacturer.  The potential  complaint is based on similar
factors  alleged  in  the  FTC  litigation   relating  to  the  generic  product
clorazepate.

        The Company  believes that it has meritorious  defenses to the claims in
these FTC matters and intends to  vigorously  defend them.  Although the Company
believes it has meritorious  defenses to the claims,  an adverse result in these
suits could have a material adverse effect on the Company's  financial  position
and results of its operations.


                                       39

<PAGE>

Board of Directors and Shareholders
Mylan Laboratories Inc.
Pittsburgh, Pennsylvania


Independent Auditors' Report
Mylan Laboratories Inc.
We  have  audited  the  accompanying   consolidated   balance  sheets  of  Mylan
Laboratories  Inc.  and  subsidiaries  as of March 31,  2000 and  1999,  and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three years in the period  ended March 31,  2000,  appearing  on
pages 22 through 39. These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

     In our opinion,  such consolidated  financial statements present fairly, in
all material  respects,  the financial  position of Mylan  Laboratories Inc. and
subsidiaries as of March 31, 2000 and 1999, and the results of their  operations
and their cash flows for each of the three  years in the period  ended March 31,
2000, in conformity with generally accepted accounting  principles in the United
States of America.





Deloitte & Touche LLP
Pittsburgh, Pennsylvania

May 10, 2000


                                       40

<PAGE>



Market Information
Mylan Laboratories Inc.

<TABLE>
<S>                           <C>        <C>          <C>       <C>             <C>

Quarterly Financial Data
(Amounts in thousands              1st      2nd            3rd      4th
except per share amounts)        Quarter  Quarter        Quarter  Quarter           Year
Fiscal 2000
Total revenues                  $ 177,095  $ 194,489   $203,877   $  214,684       $790,145 
Gross profit                       96,247    110,812    111,152      110,116        428,327
Net earnings                       31,953     37,066     40,434       44,793        154,246
Earnings per share-basic              .25        .29        .31          .35           1.19
Earnings per share-diluted            .25        .28        .31          .34           1.18

Fiscal 1999
Total revenues                  $ 166,718  $ 177,592   $186,195   $  190,618      $ 721,123
Gross profit                       85,154     92,044     99,716      107,363        384,277
Net earnings                       34,182     37,215      8,154       35,858        115,409
Earnings per share-basic              .28        .30        .06          .28            .92
Earnings per share-diluted            .28        .30        .06          .27            .91

</TABLE>



Market Prices
                        1st             2nd            3rd           4th
                    Quarter         Quarter        Quarter        Quarter
Fiscal 2000
High                  28 3\8          30 5\16        25 5\8          30
Low                   21 5\8          17 1\16        17 3\16         22 1\2

Fiscal 1999
High                  32 3\4          35 1\8         35 15\16        32
Low                   22 1\16         22 1\8         24 5\16         26 1\4

New York Stock Exchange Symbol: MYL
On May 1, 2000, the Company had approximately 99,112 shareholders.


Split Date
                               Amount   Split Price      Presplit Price
July 20, 1979                     5/4    10 3\4           13 1\2
November 13, 1981                 2/1    13 1\2           27 1\8
June 30, 1983                     2/1    16 1\4           32 1\2
March 1, 1984                     3/2    14               21
July 31, 1984                     3/2    19 7\8           29 3\4
February 15, 1985                 2/1    17 7\8           35 3\4
August 1, 1986                    3/2    14               21
August 1, 1992                    2/1    21 3\4           43 1\2
August 15, 1995                   3/2    21              31  1\2


                                       41

<PAGE>


Shareholder Information
Mylan Laboratories Inc.

Notice of Annual Meeting

The annual meeting of the Company's shareholders will be held on Thursday,  July
27, 2000 at 10:00 a.m. at the David L. Lawrence  Convention Center,  South Hall,
1001 Penn Avenue,  Pittsburgh,  Pennsylvania.  A formal notice,  together with a
proxy statement and form of proxy,  will be mailed to  shareholders  entitled to
vote in advance of the meeting.

Stockholder Information

Questions  concerning  stock ownership may be directed to Investor  Relations at
Corporate headquarters.

Press Release Information

Press  releases and other  information  are available on the internet at Mylan's
homepage at www.mylan.com.

Form 10-K Annual Report

A copy of the  Mylan  Laboratories  Inc.  Annual  Report to the  Securities  and
Exchange  Commission on Form 10-K is available by contacting  Investor Relations
at the Company's headquarters.

Dividend Payments

Quarterly dividends on Mylan common stock are paid in January,  April, July, and
October.  The record date is  established  by the Company prior to each dividend
payment.  The Company also offers an Automatic  Dividend  Reinvestment and Stock
Purchase  Plan.  For further  information,  contact  Investor  Relations  at the
Company's headquarters.

Corporate Headquarters

Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street
Pittsburgh, Pennsylvania 15222
(412) 232-0100
http://www.mylan.com


Registrar and Transfer Agent

American Stock Transfer & 
Trust Company
40 Wall Street
New York, New York 10005
Certied Public Accountants

Deloitte &Touche LLP
Pittsburgh, Pennsylvania

Financial Consultants
PDA Associates, Inc.
Ironia, New Jersey

Securities Traded
New York Stock Exchange
Mylan Laboratories Inc.

Common Stock Symbol: MYL


                                       42

<PAGE>



Board of Directors and Corporate Officers

-----------------------------------------
Board of Directors

----------------------
Milan Puskar Chairman of the Board and C.E.O.

Dana G. Barnett

Executive Vice President of the Company

Laurence S. DeLynn
Retail Consultant

Morgantown, West Virginia

John C. Gaisford, M.D.
Director of Burn Research
West Penn Hospital
Pittsburgh, Pennsylvania

Douglas J. Leech
Chairman, President and C.E.O.
Centra Bank, Inc. and
Centra Financial Holdings, Inc.
Morgantown, West Virginia

Patricia A. Sunseri
Vice President-Investor and
Public Relations of the Company

C.B. Todd

Retired Pharmaceutical Executive

Executive Officers

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

Milan Puskar
Chairman and C.E.O.

Richard F. Moldin
President and C.O.O.

Dana G. Barnett
Executive Vice President

Louis J. DeBone
Senior Vice President

Roger L. Foster, Esq.
Vice President and General Counsel

Roderick P. Jackson
Senior Vice President

Donald C. Schilling
Vice President-Finance and C.F.O.

Robert W. Smiley, Esq.
Secretary

Patricia A. Sunseri
Vice President-Investor and
Public Relations

Design:John Brady Design Consultants Inc., Pittsburgh, Pennsylvania

For more information

I would like more information on:

Dividend Reinvestment Stock Purchase Program
Pharmaceutical Product Identification Guide
Generic Development and Approval Brochure

&reg;

Name
Address

City/State/Zip
Phone

Mylan Laboratories Inc.
1030 Century Building
130 Seventh Street

Pittsburgh, Pennsylvania 15222
www.mylan.com






  



                                                   EXHIBIT 21



                                                   Subsidiaries


Name                                                 State of Incorporation
----                                                 ----------------------
Milan Holding, Inc.                                     Delaware
Mylan Inc.                                              Delaware
Mylan Pharmaceuticals Inc.                              West Virginia
Mylan Caribe Inc.                                       Vermont
Bertek Pharmaceuticals, Inc.                            Texas
Mylan Technologies, Inc.                                West Virginia
American Triumvirate Insurance Company                  Vermont
Roderick Corporation                                    Delaware
UDL Laboratories, Inc.                                  Illinois
Bertek Pharmaceuticals Inc. Research                    Delaware
     and Development Division








INDEPENDENT AUDITORS' CONSENT

We consent to the  incorporation  by reference in  Registration  Statement  Nos.
333-65329,   333-65327,   333-35887,  333-43081,  33-65916,  33-65918  of  Mylan
Laboratories Inc. on Form S-8 of our report dated May 10, 2000,  incorporated by
reference in this Annual Report on Form 10-K of Mylan  Laboratories Inc. for the
year ended March 31, 2000.

/s/  Deloitte & Touche LLP

Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 22, 2000


<PAGE>
INDEPENDENT AUDITOR' CONSENT

We consent to the  incorporation  by reference in  Registration  Statement  Nos.
333-65329,   333-65327,   333-35887,  333-43081,  33-65916,  33-65918  of  Mylan
Laboratories Inc. on Form S-8 of our report dated February 4, 2000,  relating to
the  consolidated  financial  statements of Somerset  Pharmaceuticals,  Inc. and
subsidiaries  for each of the three years in the period ended December 31, 1999,
appearing in this Annual Report on Form 10-K of Mylan  Laboratories Inc. for the
year ended March 31, 2000.

/s/  Deloitte & Touche LLP

Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 22, 2000






<TABLE> <S> <C>


<ARTICLE>             5

<LEGEND>
Exhibit 27
                             Financial Data Schedule
                    Mylan Laboratories Inc. and Subsidiaries
                           Article 5 of Regulation S-X

The  schedule  contains  summary  financial   information   extracted  from  the
Consolidated Balance Sheets at March 31, 2000 and the Consolidated  Statement of
Earnings  for the twelve  months  ended March 31, 2000 and is  qualified  in its
entirety by reference to such financial statements.

</LEGEND>
<CIK>                         0000069499
<NAME>                        Exhibit 27
<MULTIPLIER>                  1,000
       
<S>                                 <C>
<PERIOD-TYPE>                          12-MOS
<FISCAL-YEAR-END>                     MAR-31-2000

<PERIOD-END>                          MAR-31-2000   

<CASH>                                203,493         
<SECURITIES>                           99,557        
<RECEIVABLES>                         274,973        
<ALLOWANCES>                           77,212        
<INVENTORY>                           145,869        
<CURRENT-ASSETS>                      686,746        
<PP&E>                                273,581        
<DEPRECIATION>                        105,581        
<TOTAL-ASSETS>                      1,341,230        
<CURRENT-LIABILITIES>                  87,770        
<BONDS>                                25,104        
<PREFERRED-MANDATORY>                       0         
<PREFERRED>                                 0         
<COMMON>                               65,139              
<OTHER-SE>                          1,138,583              
<TOTAL-LIABILITY-AND-EQUITY>        1,341,230              
<SALES>                               790,145              
<TOTAL-REVENUES>                      790,145           
<CGS>                                 361,818              
<TOTAL-COSTS>                         361,818                                   
<OTHER-EXPENSES>                      205,368                
<LOSS-PROVISION>                        2,035                
<INTEREST-EXPENSE>                        390                
<INCOME-PRETAX>                       242,743              
<INCOME-TAX>                           88,497          
<INCOME-CONTINUING>                   154,246                
<DISCONTINUED>                              0             
<EXTRAORDINARY>                             0             
<CHANGES>                                   0                   
<NET-INCOME>                          154,246      
<EPS-BASIC>                            1.19              
<EPS-DILUTED>                            1.18              
                                                     
                                                         
                                                                            



</TABLE>





SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES

Consolidated Financial Statements for the
Years Ended December 31, 1999, 1998 and 1997, and
Independent Auditors' Report


<PAGE>




INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
   Somerset Pharmaceuticals, Inc.:

We have  audited  the  accompanying  consolidated  balance  sheets  of  Somerset
Pharmaceuticals, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the three years in the period ended  December 31, 1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of Somerset Pharmaceuticals,  Inc. and
subsidiaries  as of  December  31,  1999  and  1998,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.

February 4, 2000



-2-


<PAGE>

SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
------------------------------------------------------------------------------

ASSETS                                               1999          1998

CURRENT ASSETS:
  Cash and cash equivalents                       $ 18,914,000  $ 18,672,000
  Investment securities                             40,230,000    41,412,000
  Accounts receivable (net of allowance for doubtful
   accounts of $206,000 and $250,000, respectively)  2,846,000     6,085,000
  Inventories                                        1,972,000     2,350,000
  Prepaid expenses and other current assets          1,549,000     2,410,000

     Total current assets                           65,511,000    70,929,000



PROPERTY AND EQUIPMENT - Net                           436,000       514,000



INTANGIBLE ASSETS - Net                                675,000       868,000



OTHER ASSETS                                           398,000       658,000
                                                  ------------  ------------
                                                  $ 67,020,000  $ 72,969,000
                                                   ============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY              1999          1998

CURRENT LIABILITIES:
  Accounts payable                                 $ 49,000   $ 1,281,000
  Royalty payable                                   385,000       799,000
  Medicaid payable                                  225,000       578,000
  Other accrued expenses                            464,000       587,000 
  Accrued research and development                5,369,000     2,924,000
  Income taxes payable                            6,602,000     8,280,000
  Accrued sales returns                             733,000       800,000
  Accrued compensation                              105,000       740,000 
  Amounts due to related parties                    527,000       595,000

     Total current liabilities                   14,459,000    16,584,000


STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value; 13,719
    shares authorized, 11,297 shares issued          -             -
  Retained earnings                              53,013,000    56,837,000
  Less treasury stock, 644 shares at cost          (452,000)     (452,000)

     Total stockholders' equity                  52,561,000    56,385,000
                                                 ----------    ----------
                                              $  67,020,000  $ 72,969,000
                                                 ==========    ==========

  See notes to consolidated financial statements.

 
<PAGE>

SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<S>                                                            <C>                <C>                 <C>

                                                                    1999                1998                1997

NET SALES                                                          $ 18,403,000         $ 43,557,000       $ 66,956,000
                                                                   -------------       -------------      ------------

COSTS AND EXPENSES:
  Cost of sales                                                        2,177,000           4,623,000          6,622,000
  Marketing                                                            2,180,000           4,587,000          5,757,000
  Research and development                                            17,588,000           7,269,000         13,073,000
  Administrative                                                       5,203,000           6,449,000          7,338,000
                                                                      ----------          ----------         ---------

                                                                      27,148,000          22,928,000         32,790,000
                                                                     -----------         -----------        ----------

                                                                      (8,745,000)         20,629,000         34,166,000

OTHER INCOME - Net                                                     3,526,000           3,612,000          2,735,000
                                                                      ----------          ----------         ---------

(LOSS) INCOME BEFORE INCOME TAXES                                     (5,219,000)         24,241,000         36,901,000

PROVISION FOR INCOME TAXES                                            (1,395,000)          9,635,000         12,924,000
                                                                      ------------        ----------        ----------

NET (LOSS) INCOME                                                   $ (3,824,000)       $ 14,606,000       $ 23,977,000
                                                                    ==============      =============      ============


See notes to consolidated financial statements.

</TABLE>



<PAGE>


SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<S>                          <C>          <C>              <C>           <C>             <C>             <C>


                                         Common Stock             Treasury Stock             Retained      Stockholders'
                              --------------------------   ---------------------------
                                   Shares      Amount         Shares         Amount          Earnings        Equity

BALANCE, DECEMBER 31, 1996         11,297   $       --              644   $   (452,000)   $ 34,254,000    $ 33,802,000

  Net income .............           --             --             --             --        23,977,000      23,977,000

  Dividends ..............           --             --             --             --       (16,000,000)    (16,000,000)
                             ------------   ------------   ------------   ------------    ------------    ------------

BALANCE, DECEMBER 31, 1997         11,297           --              644       (452,000)     42,231,000      41,779,000

  Net income .............           --             --             --             --        14,606,000      14,606,000
                             ------------   ------------   ------------   ------------    ------------    ------------

BALANCE, DECEMBER 31, 1998         11,297           --              644       (452,000)     56,837,000      56,385,000

  Net loss ...............           --             --             --             --        (3,824,000)     (3,824,000)
                             ------------   ------------   ------------   ------------    ------------    ------------

BALANCE, DECEMBER 31, 1999         11,297   $       --              644   $   (452,000)   $ 53,013,000    $ 52,561,000
                             ============   ============   ============   ============    ============    ============


See notes to consolidated financial statements.

</TABLE>



<PAGE>


SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997


<TABLE>
<S>                                                           <C>                 <C>                  <C>


                                                                  1999                1998                1997

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                               $ (3,824,000)       $ 14,606,000        $ 23,977,000
  Adjustments to reconcile net (loss) income to net
     cash (used in) provided by operating activities:
       Depreciation and amortization                                   335,000             429,000             952,000
       Deferred tax expense (benefit)                                  260,000             232,000              (8,000)
       (Gain) loss on sale of property and equipment                    (1,000)              5,000             422,000
       Changes in operating assets and liabilities:
         Accounts receivable                                         3,239,000          (2,559,000)          2,646,000
         Inventories                                                   378,000          (1,273,000)            627,000
         Prepaid expenses and other current assets                     861,000          (1,144,000)          2,415,000
         Accounts payable                                           (1,232,000)            765,000            (135,000)
         Royalty payable                                              (414,000)           (373,000)           (454,000)
         Medicaid payable                                             (353,000)           (109,000)                  -
         Accrued research and development                            2,445,000          (1,470,000)           (184,000)
         Other accrued expenses and related parties                   (893,000)         (1,070,000)         (1,709,000)
         Income taxes payable                                       (1,678,000)          3,181,000            (933,000)
                                                                    ------------        ----------            ---------

     Net cash (used in) provided by operating activities              (877,000)         11,220,000          27,616,000
                                                                      ----------       -----------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net decrease (increase) in investment securities                   1,182,000         (25,449,000)        (14,955,000)
  Purchases of property and equipment                                  (67,000)            (12,000)            (42,000)
  Proceeds from sale of property and equipment                           4,000              14,000           2,000,000
  Decrease in other assets                                                  -              758,000              45,000
                                                                            --            --------             ------

     Net cash provided by (used in) investing activities            1,119,000          (24,689,000)        (12,952,000)
                                                                    ----------         -------------       ------------


                                                                                                            (Continued)

</TABLE>



SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<S>                                                           <C>                  <C>                <C>


                                                                  1999                1998                1997

CASH FLOWS FROM FINANCING ACTIVITIES -
  Dividends paid on common stock                                 $     --             $    --            $ (16,000,000)
                                                                 -------------        -----------         ------------  

     Cash used in financing activities                                 --              --                  (16,000,000)
                                                                 -------------        -----------         ------------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                    242,000         (13,469,000)         (1,336,000)

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                                18,672,000          32,141,000          33,477,000
                                                                   -----------         -----------         ----------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                                                    $ 18,914,000        $ 18,672,000        $ 32,141,000
                                                                 =============       =============       ============

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION -
    Cash paid during the year for income taxes                    $ 2,152,500         $ 7,762,000        $ 12,092,000
                                                                  ============        ============       ============


See notes to consolidated financial statements.
</TABLE>


<PAGE>









SOMERSET PHARMACEUTICALS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997



1.    PRINCIPLES OF CONSOLIDATION AND OPERATIONS

The  consolidated   financial   statements  include  the  accounts  of  Somerset
Pharmaceuticals,  Inc.  (the  "Company")  and  its  wholly  owned  subsidiaries,
Somerset  Pharmaceuticals  Holding Company and Somerset Caribe, Inc. The Company
is jointly owned by Mylan Laboratories,  Inc. and Watson  Pharmaceuticals,  Inc.
("Watson"), with each owning 50% of the outstanding common stock of the Company.
All significant  intercompany  accounts and transactions have been eliminated in
consolidation.  The Company,  incorporated  in February  1986, is engaged in the
development,  testing  and  marketing  of drugs to be used in the  treatment  of
various human disorders. Currently, the Company manufactures (at its facility in
Puerto  Rico),  markets and sells  Eldepryl,  which is used as a  treatment  for
Parkinson's  Disease.  The Company  had  exclusivity  relating  to the  chemical
compound  Eldepryl  for use as a treatment  for late stage  Parkinson's  Disease
through June of 1996. In May 1996, the Company  received  approval from the Food
and Drug  Administration for Eldepryl capsules and withdrew the tablet form from
the marketplace.  Competitors  entered the marketplace with a generic version of
the tablet in August  1996.  The loss of  exclusivity  and the  introduction  of
competitive products has had and could continue to have a material impact on the
Company's future operating results.

      The Company is party to an exclusive 14-year  agreement  (through November
      22, 2003) with Chinoin  Pharmaceutical  Company  ("Chinoin")  of Budapest,
      Hungary under which Eldepryl and other new potential  drugs resulting from
      Chinoin  research are made  available  for  licensing by the Company.  The
      license  agreement  requires the Company to pay royalties equal to 3.5% of
      net sales of Eldepryl including sub-license revenues. The Company incurred
      royalty expense of approximately $794,000,  $1,730,000, and $2,716,000 for
      the years  ended  December  31,  1999,  1998 and 1997,  respectively.  The
      license  agreement  also  required  the Company to  purchase  the main raw
      material used in the  manufacture of Eldepryl from Chinoin through June of
      1999.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      a.    Cash and Cash  Equivalents - The Company  generally  considers  debt
            instruments  purchased  with a maturity of three  months or less and
            investments in money market accounts to be cash equivalents.

      b.    Investment   Securities  -  The  Company   accounts  for  investment
            securities  in  accordance  with  Statement of Financial  Accounting
            Standards ("SFAS") No. 115,  "Accounting for Certain  Investments in
            Debt and Equity  Securities."  At December  31,  1999 and 1998,  the
            investment  securities  were  available-for-sale,  and there were no
            material  unrealized  gains  or  losses.  Proceeds  from  sales  and
            maturities of investments  were  $151,619,000 and  $116,712,000,  in
            1999 and  1998,  respectively.  In 1999  there  were  $1,686,000  of
            realized gains and $-0- of realized losses. There were $1,356,000 of
            realized  gains and $23,400 of realized  losses in 1998. The gain or
            loss on sale of investments is based on the specific  identification
            method.

     c.   Inventories - Inventories are stated at the  lower-of-cost  or market,
          with cost determined on a first-in, first-out basis.




<PAGE>

      d.    Property and  Equipment - Property and equipment are stated at cost.
            Depreciation  is provided  over the  estimated  useful  lives of the
            assets by the straight-line method.  Estimated useful lives are five
            to seven years.

     e.   Intangible Assets - Intangible assets are amortized on a straight-line
          basis over 14 years.

     f.   Research and Development - Research and development costs are expensed
          as incurred.

      g.    Concentration  of  Credit  Risk  - The  Company's  product  is  sold
            throughout  the  United  States   principally  to  distributors  and
            wholesalers in the  pharmaceutical  industry.  The Company  performs
            ongoing credit evaluation of its customers'  financial condition and
            generally requires no collateral from its customers.

     h.   Use of Estimates  in the  Preparation  of  Financial  Statements - The
          preparation  of financial  statements  in  conformity  with  generally
          accepted  accounting  principles requires management to make estimates
          and  assumptions  that  affect  the  reported  amounts  of assets  and
          liabilities and the disclosure of contingent assets and liabilities at
          the date of the financial statements,  as well as the reported amounts
          of income and expenses  during the reporting  period.  Actual  results
          could differ from those estimates.

     i.   New Accounting Pronouncements - In June 1998, the Financial Accounting
          Standards  Board  issued  SFAS No.  133,  "Accounting  for  Derivative
          Instruments  and  Hedging  Activities."  This  statement   establishes
          accounting  and  reporting   standards  for  derivative   instruments,
          including certain derivative  instruments embedded in other contracts,
          and for hedging  activities.  The  provisions  of this  statement  are
          effective for all fiscal  quarters of all fiscal years beginning after
          June 15, 2000.  Management is in the process of evaluating  the impact
          of this statement on the consolidated financial statements.

3.    INVENTORIES

      Inventories consist of the following at December 31, 1999 and 1998:

                                        1999               1998

Raw materials                      $ 1,175,000         $ 1,853,000
Work in process                         35,000               -
Finished goods                         762,000             497,000
                                       --------            -------

Total                              $ 1,972,000         $ 2,350,000
                                   ============        ===========



4.    PROPERTY AND EQUIPMENT

      Property and equipment  consists of the following at December 31, 1999 and
1998:

                                            1999               1998

Machinery and equipment                $ 1,124,000         $ 1,216,000
Furniture and fixtures                      62,000              90,000
                                            -------             ------

                                         1,186,000           1,306,000
Less accumulated depreciation              750,000             792,000
                                           --------            -------

Property and equipment - net             $ 436,000           $ 514,000
                                         ==========          =========






<PAGE>

5.    SUB-LICENSE OF RIGHTS

      On February 9, 1988,  the Company  granted a sub-license  to its exclusive
      right and license to use its  technology to Draxis  Health Inc.  (formerly
      Deprenyl Research Limited) to commercialize certain drugs in Canada for 15
      years.  The Company  receives a royalty of 11% of Draxis Health Inc.'s net
      sales over the license period.

      Royalty  income,  net of  related  royalty  expense  payable  to  Chinoin,
      included in other income for the years ended  December 31, 1999,  1998 and
      1997 was approximately $51,000, $97,000 and $261,000, respectively.

6.    INTANGIBLE ASSETS

      Intangible  assets  primarily  represent the cost of a modification to the
      terms  of  the  Chinoin  Agreement,   less  accumulated   amortization  of
      $2,025,000, and $1,832,000 at December 31, 1999 and 1998, respectively.

7.    CO-PROMOTIONAL AGREEMENT

      The Company entered into an agreement with CoCensys, Inc. ("CoCensys") for
      the  promotion of Elderpryl in 1996.  The agreement had an initial term of
      two years.  Under the terms of the original  agreement,  the Company would
      have  compensated   CoCensys,   based  on  a  predetermined  formula  that
      considered both the number of new prescriptions  written and the net sales
      dollars achieved in each quarter.  During 1996 and 1997, the agreement was
      modified with respect to term, new prescriptions and detail calls.  During
      1997,  CoCensys was acquired by Watson. The Company paid Watson $2,050,000
      and  $4,700,000  for the promotion and marketing of Elderpryl  during 1999
      and 1998,  respectively.  During 1997 the Company paid $3,800,000 pursuant
      to these agreements with CoCensys. The marketing agreement with Watson was
      terminated June 30, 1999.

8.    OTHER INCOME

      In November 1994, the Company  prevailed in litigation it brought  against
      foreign  defendants  who were  selling and  marketing  chemical  compounds
      similar to Eldepryl  without FDA approval.  In late 1997, a final judgment
      was rendered by the United  States  Federal  District  Court.  In November
      1997,  the Company  received and  recorded as other  income  approximately
      $1,225,000 for settlement of the litigation and  reimbursement  of related
      costs.

      During  November  1997,  the Company  sold its  research  and  development
      facility  and  related  equipment  with a net book value of  approximately
      $3,422,000 for $3,000,000.  The resulting loss of $422,000 was recorded as
      a reduction in other income in 1997.


<PAGE>

9.    INCOME TAXES

      The income tax  provision  consists of the  following  for the years ended
December 31, 1999, 1998 and 1997:

                                       1999               1998           1997

Current (benefit) tax expense:
  Federal                          $ (1,651,000)   $  7,800,000    $ 10,283,000
  State                                  (4,000)      1,603,000       2,549,000
  Foreign                                 --              --           100,000

                                     (1,655,000)      9,403,000      12,932,000

Deferred tax expense (benefit):
  Federal                               247,000         211,000          (7,000)
  State                                  13,000          21,000          (1,000)

                                        260,000         232,000          (8,000)

Total provision for income taxes   $ (1,395,000)   $  9,635,000    $ 12,924,000

      Deferred income taxes reflect the net tax effects of temporary differences
      between  the  carrying  amounts of assets and  liabilities  for  financial
      reporting  purposes and the amounts used for income tax purposes.  The tax
      effects of  significant  items  comprising  the Company's  deferred  taxes
      (which are included in "Other Assets" in the  consolidated  balance sheet)
      at December 31, 1999 and 1998 are as follows:

<TABLE>
<S>                                                                <C>                  <C>    
                                                                           1999               1998

Deferred tax assets:
  Chargeback and rebate allowances                                    $ 391,000           $ 510,000
  Deferred compensation                                                 105,000             229,000
  Other                                                                 124,000             100,000
                                                                        --------            -------

                                                                        620,000             839,000

Deferred tax liabilities - different methods of accounting
  between financial and income tax reporting for depreciation
  and amortization                                                      284,000             243,000
                                                                        --------            -------

    Net deferred tax assets                                          $  336,000           $ 596,000
                                                                     ===========          =========

</TABLE>




<PAGE>

      The statutory  federal  income tax rate is reconciled to the effective tax
      rate as follows for the years ended December 31, 1999, 1998 and 1997:

                                                1999       1998      1997

Tax at statutory rate                          (35.0)%     35.0 %    35.0 %
State income tax (net of federal benefit)        --         3.6       3.8
Tax credit reductions (credits)                 10.6       (6.2)     (7.9)
Tollgate tax                                     --         3.1       3.4
Other                                           (2.3)       4.2       0.7

Effective tax rate                             (26.7)%     39.7 %    35.0 %



    Tax credits result principally from operations in Puerto Rico.  See Note 13.

10.   RELATED PARTY TRANSACTIONS

      The  Company had  certain  transactions  with one or both of its owners as
      detailed below for the years ended December 31, 1999, 1998 and 1997:

     
                                               1999         1998         1997

Management fees                            $  929,000   $2,167,000   $3,348,000
Marketing and advertising                   2,050,000    4,714,000      775,000
Research and development                      821,000      232,000       90,000
Inventory handling and distribution fees      283,000      524,000      465,000
Rent - equipment and facilities                54,000       14,000      640,000




11.   SIGNIFICANT CUSTOMERS

      The Company had sales to certain customers which individually exceeded 10%
      of  sales.  In  1999  sales  to  four  major  customers  were  $4,256,000,
      $2,351,000,  $2,308,500  and  $2,242,000,  respectively.  In 1998 sales to
      three  major  customers  were   $8,983,000,   $8,013,000  and  $6,953,000,
      respectively.  In 1997 sales to five  major  customers  were  $15,878,000,
      $13,498,000, $11,427,000, $8,658,000 and $7,746,000, respectively.

12.   EMPLOYEE BENEFIT PLANS

      Effective  January 1, 1998,  the  Company  created a defined  contribution
      profit sharing plan covering  substantially  all employees.  Contributions
      are  made  at the  discretion  of the  Board  of  Directors.  The  defined
      contribution profit sharing plan in effect prior to 1998 was terminated as
      of December 31, 1997.  Additionally,  during 1994, the Company initiated a
      deferred  compensation plan for certain key employees which was terminated
      during 1997.  During 1999, 1998 and 1997, the Company  recorded expense of
      $120,000, $120,000 and $-0-, respectively, under these plans.


<PAGE>

13.   CONTINGENCIES

      IRS

      In connection with an examination of the Company's Federal tax returns for
      the three years ended December 31, 1995,  representatives  of the Internal
      Revenue  Service,  in June  1997,  issued  to the  Company  a report  that
      contains  proposed  adjustments  to the Company's use of tax credits under
      the Internal Revenue Code section 936.

      Under  the  proposed   adjustments,   the  Company  could  be  subject  to
      approximately  $34 million of additional  income tax and interest  charges
      that have not been  accrued at  December  31,  1999.  The  increase of $20
      million  of  potential  additional  income  tax  over  the  prior  year is
      primarily  attributable  to losses  incurred in the  current  year and the
      anticipation  of  losses  in the near  future  which  would  not allow the
      Company to utilize Puerto Rican tax credits.

      In  September  of  1999,  the  Company's  case  was  transferred  from the
      appellate  level back to the agent  level for further  development  of the
      facts.  Management  believes that the Company has met all the requirements
      to qualify for the tax  credits  available  under  Internal  Revenue  Code
      section 936, and intends to vigorously defend its position on this matter.

      FoxMeyer

      In 1998, the Company was named as a defendant in a compliant  filed by the
      trustee to the bankruptcy estates of FoxMeyer  Corporation and its related
      entities in the U.S.  Bankruptcy  Court for the District of Delaware.  The
      compliant  alleged  that the  Company  received  preferential  payments of
      approximately   $3.4  million  from  the  bankruptcy   estates  and  seeks
      reimbursement  from the  Company of such  amounts.  The  Company  filed an
      answer to the complaint denying the allegations.

      In 1999, a settlement agreement was reached with the Trustee. There was no
      material effect to the Company as a result of this settlement.

                              * * * * * *