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Mylan Laboratories Inc · 10-K · For 3/31/99 · EX-13

Filed On 6/28/99 · SEC File 1-09114 · Accession Number 69499-99-32

This Filing was Corrected by the SEC on 8/10/99.

  As Of               Filer                 Filing     On/For/As Docs:Pgs

 6/28/99  Mylan Laboratories Inc            10-K®       3/31/99    7:70

Annual Report · Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Mylan Laboratories Inc. 1999 10-K                     11     91K 
 2: EX-10       Material Contract                                      2     10K 
 3: EX-13       Annual or Quarterly Report to Security Holders        39    215K 
 4: EX-21       Subsidiaries of the Registrant                         1      4K 
 5: EX-23       Consent of Experts or Counsel                          2      9K 
 6: EX-27       Financial Data Schedule                                2±    10K 
 7: EX-99       Miscellaneous Exhibit                                 13     57K

EX-13 · Annual or Quarterly Report to Security Holders
Exhibit Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Forward Looking Statements Overview Penederm Year 2000
1	1st Page
2	Penederm
12	Overview
17	Year 2000
18	Forward Looking Statements

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Mylan.                                                                          
A company diversified.        

     Mylan is a company on the move. Through acquisitions and alliances, we have
expanded  our product mix and moved  beyond the solid dosage form of tablets and
capsules.                                                                       

About Mylan Laboratories Inc.                                                   

     Mylan   Laboratories   Inc.  and  its   subsidiaries  are  engaged  in  the
development, licensing, manufacturing, marketing and distributing of generic and
proprietary  pharmaceutical,  wound care and dermatological  products.  We are a
diversified  pharmaceutical  company  with a core  generic  business,  a growing
branded  presence and varied drug delivery  capabilities.  Mylan  Pharmaceutical
Inc.,  the generic  division of the  company,  has a growing  product  portfolio
consisting  of more  than 105  prescription  products  covering  33  therapeutic
categories.  The  Company  sells  these  products  to  proprietary  and  ethical
pharmaceutical   wholesalers   and   distributors,   drug  store  chains,   drug
manufacturers and public and governmental  agencies. The branded division of the
Company, Bertek Pharmaceuticals Inc., markets eight proprietary products through
its detail sales force.  Bertek is responsible for the development and promotion
of all branded products including wound care,  dermatology,  branded transdermal
patches  and solid oral  medications.  Mylan is a  pharmaceutical  company  with
expanding capabilities in research and development,  marketing and distribution.
We are  exploring  a full range of  delivery  channels  for a widening  range of
products. We are building the company through strategic alliances,  acquisitions
and agreements, and we are aggressively focused on new product development.  For
the past 38 years our  reputation has been built on integrity and on the ability
to provide  quality,  service and prompt  delivery to our  customers.  Mylan has
become a leading player in the marketplace and it is our intention to be an even
stronger presence in the future.                                                

Bertek Branded Products                                                         

     Bertek Pharmaceuticals Inc., the branded drug division of Mylan, was formed
in  late  1996,   to  market   acquired   and   internally   developed   branded
pharmaceuticals.   The  three   therapeutic   areas  of  concentration   include
cardiology,  neurology and  dermatology.  The cardiology focus is built upon the
Maxzide(R)   franchise,   and  has   expanded   to  now   include   Clorpres(TM)
(anti-hypertensive),  and Nitrek(R) (Nitroglycerin Transdermal),  which are sold
by Bertek's sales force to general practitioners,  internists and cardiologists.
Mylan has several  compounds  in  development  such as  Dotarizine  for migraine
headaches,   and  Apomorphine  for  the  on/off  fluctuations   associated  with
Parkinson's disease,  that upon approval,  will be key components in the area of
neurology. The key driver to Mylan's presence in dermatol-ogy is Penederm, which
adds  three  marketed   dermatology   products,   near-term  and  long-term  R&D
opportunities  and  topical  drug  delivery  technologies.  Penederm  is a great
strategic fit for Bertek.  In addition to selling the three Penederm products to
dermatologists,  these  products  are also  detailed by the  primary  care sales
force.  Bertek also markets burn and wound care products via their institutional
sales force and has a dedicated  managed  care group to service  that arena.  As
products are added to Bertek's branded  portfolio,  the primary care sales force
must expand.  Therefore,  Bertek has implemented the hiring of 25 sales reps per
quarter for the primary care group until the sales force grows to  approximately
250-300  reps.  The  Company  believes a force of that size  should  provide the
critical mass for the products currently marketed and in development.           

Mylan Acquires Exclusive Rights to Zagam(R)                                     

     Mylan acquired the exclusive U.S. rights to manufacture and market Zagam(R)
(Sparfloxicin)  from  Rhone-Poulenc  Rorer in August 1998.  Zagam(R) is a patent
protected  oral  antibiotic  indicated for the  treatment of  community-acquired
pneumonia and chronic bronchitis.  Bertek Pharmaceuticals Inc. launched Zagam(R)
into theprimary care, institutional and managed care markets, October 23, 1998. 

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Penederm                                                                        

     Penederm  Inc.  specializes  in the  development  and  marketing  of unique
dermatology  products.  The current product portfolio  consists of three topical
prescription  products  Avita(R),  Mentax(R)  and  Acticin(R).  Avita(R)  offers
dermatologists  and  patients  a milder  formulation  of  retinoic  acid for the
treatment of acne with excellent  efficacy  utilizing  their  TopiCare  Delivery
Compounds(R).  Avita(R) cream was launched in 1997, followed by the Avita(R) gel
formulation in early 1998. Mentax(R), is a prescription topical antifungal cream
for the treatment of athlete's foot (tinea  pedis),  groin fungus (tinea cruris)
and  ringworm  (tinea  corporis).  Mentax(R)  has been  approved  by the FDA for
athlete's  foot by  treating  twice a day for only  one-we ek.  This  definitive
one-week  treatment  strengthens  the positioning of Mentax(R) in the antifungal
market,  providing  a  good  point  of  differentiation  from  those  antifungal
products,  which  require  treatment  for up to four  weeks.  In 1998,  Penederm
launched  Permethrin  5%  cream  under  the  Penederm   brand-name   Acticin(R).
Acticin(R) is a topical prescription product for the treatment of scabies.      

     In October  1998,  Mylan  acquired  Penederm  Inc.,  an emerging  specialty
pharmaceutical  company  with  emphasis  in the field of  dermatology.  Penederm
currently  has three  approved  prescription  products  and a rich  pipeline  of
promising products under active development utilizing their proprietary TopiCare
Delivery Compounds(R).                                                          

     Avita(R) is one of a new generation of topical retinoic acid treatments for
acne. Avita(R) offers dermatologists and patients a mild formulation of retinoic
acid  with  excellent  efficacy.  Acticin(R)  is a topical  application  for the
treatment of scabies  infection.  A single  application of Acticin(R) applied to
the entire body generally cures the scabies infection.                          

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Penederm Technology                                                             

     Penederm's  pipeline  represents  promising  near-term and long-term growth
opportunities.  Penederm's  technology  foundation offers many opportunities for
new drug  introduction  in the future.  These  opportunities  may include second
generation Mentax(R) products in different  formulations or for new indications.
The Company is also making  progress on two new  therapies,  a form of Mentax(R)
for nail fungus and a vitamin D analog for  psoriasis.  Penederm also has active
Phase II  programs  evaluating  a  Vitamin D  derivative  for the  treatment  of
psoriasis and advanced  retinoic acid  formulations for the treatment of actinic
keratosis  and related  indications.  Mentax(R) is currently  approved for three
types of skin fungal  infections.  The fourth  indication,  tinea  versicolor (a
fungal  infection  characterized  by  irregular  patches  of  lighter  or darker
pigmentation  surrounding  the  skin),  entered  Phase III  study in April.  The
protocol  calls for two,  130 patient  studies at ten trial sites for a 12-month
duration.  In  addition to its  approved  use  against  skin fungal  infections,
Mentax(R) also has potential as a treatment for onychomycosis  (nail fungus). It
is  estimated  that 12 million  people now suffer from this  condition  and side
effects and difficulty of  administration  limit the only  treatments  currently
available.  It is anticipated that Penederm's  current R&D efforts will not only
continue, but will be expanded to include some of Mylan's research projects that
have the potential to be improved by Penederm's drug delivery technology.       

     Mylan continues to increase its emphasis and make  significant  investments
in research and development New product  development is essential as the Company
expands into the branded arena.  Currently,  there are four proprietary products
in advanced  clinical  testing.  Dotarizine is a novel product indicated for the
prophylaxis  of  migraine  head-aches.  We  have  successfully  completed  a 429
patient,  Phase II study and are presently  preparing for two double blind,  800
patient Phase III efficacy trials. Phase III clinicals should begin in mid 1999,
and take  approximately  12 to 18 months for  completion.  The second  compound,
Sertaconazole,  is a  topical  antifungal  that  was  licensed  from  Ferrer  in
Barcelona, Spain. Sertaconazole is currently in advanced Phase III study with an
anticipated NDA filing in calendar 1999. Apomorphine is indicated for the on/off
fluctuations  in late  stage  Parkinson's  disease.  The Phase II study has been
completed  and meetings  have been held with the FDA to discuss the protocol for
Phase III  clinicals.  The final compound in development is a wound care product
for diabetic foot ulcers. This unnamed compound is a  second-generation  product
with  orphan  drug  status  and  novel  delivery.  The  Phase II study  has been
completed  and Phase III will  consist of two  parallel  studies  involving  400
patients each, with a projected completion of 12 to 18 months.                  

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Cystagon(R)                                                                     

     Five  years ago,  in August of 1994,  the FDA  awarded  Mylan  Orphan  Drug
Approval for Cystagon(R).  This novel compound is indicated for the treatment of
Nephropathic Cystinosis, a very rare genetic disorder that afflicts children and
adults.  Prior to the advent of  Cystagon(R),  Cystinosis  led to a  progressive
decline in renal  function  and often to end- stage  renal  failure.  Therefore,
Cystagon(R) is an important medical advance in the management of this condition.
Approximately  250  patients  in the United  States are being  treated  for this
disease.  Due to the small patient  population,  Mylan utilizes Chronimed as the
specialized U.S. distributor for this product.                                  

     Receiving FDA approval for Cystagon(R) was a particularly  proud moment for
everyone at Mylan.  However,  our commitment to the patients diagnosed with this
devastating  disease  reached  far beyond the U.S.  to the  hundreds of patients
throughout  the world who were in desperate  need for a  treatment.  Through the
efforts of Mylan and Orphan Europe,  Cystagon(R) was the first orphan drug to be
approved under the European Union Centralized  System in June of 1997. Today 312
patients within the EU countries are being treated. Product is also available to
patients in other  European  countries  and the Middle  East on a named  patient
basis.                                                                          

     It is estimated  that  approximately  355  patients are being  treated with
Cystagon(R)  in Europe and the Middle East with the total patient  population in
those regions estimated to be 500-600 patients.                                 

     Mylan  received  FDA  approval  for  Sulfamylon(R)  Powder  for 5%  Topical
Solution (Mafenide Acetate) June 15, 1998. Sulfamylon(R) is indicated for use as
an adjunctive topical  anti-microbial  agent to control bacterial infection when
used under moist dressing over meshed autografts on excised burn wounds.        

     Sulfamylon(R)  is the first drug  approved for this  indication  and it has
orphan drug status. The Bertek Institutional sales force launched  Sulfamylon(R)
July 15, 1998, targeting 144 burn centers throughout the U.S.                   

     Mylan,  your partner in quality,  the name you can trust.  With  American's
health and well being at stake, quality must always be the primary consideration
in dispensing the pharmaceutical  products that bear our label. For more than 38
years,  Mylan has  considered  quality  before all else in everything we do from
research and development to manufacturing and distribution. That is why our name
is synonymous with quality throughout the pharmaceutical industry.              

Sulfamylon                                                                      

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     Product  opportunities often require certain drug delivery or manufacturing
technologies.  Mylan has a network of strategic alliances that provide access to
these unique technologies.                                                      

 Mylan has had an ongoing product development collaboration with Penwest
Ltd.;  whereby  the  companies  develop  oral  controlled  release  formulations
utilizing Penwest's patented TIMERx(R) delivery  technology.  This collaboration
covers three products:  Procardia XL(R), Glucotrol XL(R) and Adalat CC(R). Mylan
filed the  first  ANDA for  30mg.  Nifedipine  ER  (Procardia  XL(R))  utilizing
TIMERx(R) in June of 1997 and received  tentative approval for the product March
15, 1999.  As the first  company to file its  application  with the FDA for this
product, Mylan will be entitled to 180 days of exclusivity upon product launch. 

     Mylan has also  signed  an  exclusive  licensing  agreement  with  Meridian
Medical  Technologies,  a worldwide  leader in the development of  auto-injector
drug delivery systems. Under the agreement,  Meridian will license,  manufacture
and  supply  a line of  generic  injectable  drugs to Mylan  for  marketing  and
distribution.  Meridian had submitted three product  applications to the FDA for
hospital use, and on March 9, 1999, the FDA approved Meridian's  application for
Acyclovir  injection,  a generic drug for the  treatment of herpes and shingles.
Bertek  Pharmaceuticals  Inc.  will be  responsible  for the  marketing  of this
product upon its launch.                                                        

     TopiCare delivery technology delivers larger polymer molecules in the upper
layers of the skin (A),  while  smaller  molecules  are  deposited in the deeper
layers (B).  This unique system can reduce skin  irritation  and can enhance the
duration of the medication.                                                     

     Penederm, based in Foster City, California, is a drug delivery company with
a  market  focus in  dermatology.  Through  its  proprietary  TopiCare  Delivery
Compounds(R),  Penederm develops and markets topically administered prescription
dermatological products. The patented TopiCare delivery technology consists of a
group of liquid polymers designed to hold skin care agents at targeted levels on
and in the upper layers of the skin. These compounds have been shown to have the
potential  to prevent  wash off by  repeated  contact  with  water,  enhance the
duration of action of active ingredients, reduce dosage requirements, and reduce
irritation common to many dermatological medications.                           

 Because of their efficacy, safety, flexibility and ease of development,
TopiCare  delivery  technology  can be  applied to a number of  compounds  Mylan
currently has in development, as well as Penederm's own pipeline of prescription
dermatological  products.  This provides Mylan with proven effective  technology
for topical pharmaceutical delivery.                                            

strategic alliances                                                             

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     Mylan  Technologies  Inc. is a leading  manufacturer  of  transdermal  drug
delivery  systems  with  unique  state-of-the-art   technologies  for  producing
finished  pharmaceutical  products.  Transdermal  drug delivery has proven to be
more  effective  than  traditional  oral  delivery  in  certain   pharmaceutical
applications.  It offers many advantages over existing  delivery such as ease of
use,  improved  compliance and market  expansion for existing drugs. The patches
developed by Mylan are smaller and more  cosmetically  elegant than  traditional
patches and since they cover less area, they can reduce common side effects such
as skin irritation.                                                             

     Mylan  Technologies  is  actively  involved  in a variety  of R&D  projects
utilizing  transdermal  drug  delivery  technology  to provide new  products for
marketing by Mylan  subsidiaries.  The first product to be approved and marketed
utilizing this unique delivery system was the Nitroglycerin  Transdermal System,
marketed by Mylan  Pharmaceuticals,  which is bioequivalent and  therapeutically
equivalent to Transderm  Nitro(R),  and also marketed by Bertek  Pharmaceuticals
Inc. as Nitrek(R).  Mylan has applied this advanced delivery technology to other
products that are currently filed with the FDA and in development.              

     Transdermal  drug  delivery,  the delivery of  medication  into the skin or
through  the skin into the  bloodstream  has proven to be more  efficacious  for
certain  applications  than  traditional  oral drug delivery.  Transdermal  Drug
Delivery Systems by Mylan  Technologies  offers a completely  integrated  source
from the initial concept through final manufacturing.                           

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     Prescription  products dispensed in unit-dose  packaging provide a distinct
marketing  advantage  in the  institutional  marketplace.  The UDL  Laboratories
division  of  Mylan  manufactures,   repackages  and  markets  multi-source  and
single-source   pharmaceutical   products   in   unit-dose   packaging   to  the
institutional  marketplace.  UDL offers a broad range of multi-source  products,
more than 450 line  items,  including  oral solid,  oral  liquid and  injectable
dosage  forms,  and  special  use  packaging  such  as   Emergi-script,   Bingo,
Control-A-Dose,  and Robot Ready.  A nine-person  detail sales force,  targeting
more than 6000 hospitals throughout the U.S., markets the full product line.    

     UDL augments Mylan's generic business by not only repackaging Mylan generic
products but also  contracting  products from other  manufactures for packaging.
UDL is  dedicated  to the  development  of generic  liquid  products.  Via their
specialized liquid manufacturing  facility in Largo,  Florida, UDL produces more
than 80 liquid  products  for the  institutional  market.  In June of 1998,  the
Company  received FDA approval for Nystatin Oral  Suspension  which  compares to
Mycostatin(R)  Mark Oral Suspension,  and in March of 1999, the Company received
approval for Albuteral  Sulfate Oral Solution,  which compares to  Proventil(R).
Presently,  there are three  applications  filed with the FDA and an  additional
seven products are in various stages of development.                            

Extended Release                                                                

     Drug  delivery  has  become  one  of  the  fastest  growing  areas  of  the
pharmaceutical  industry.   Branded  pharmaceutical  companies  are  using  drug
delivery as a means of extending  patent life,  differen-tiating  their products
and increasing market share. In today's pharmaceutical marketplace many products
whose  patents  have  expired or will  expire  have  complicated  drug  delivery
systems.                                                                        

     Mylan's  growth   strategy  has  been  to  target  these  complex   "niche"
opportunities.  Mylan has made a  commitment  to complex  drug  formulation  and
manufacturing by internally developing specialized bead technologies.  Mylan has
the ability to formulate  products with complex  extended  release drug delivery
such as Verapamil HCl ER Capsules, which compares to Verelan(R).                

     Complex extended release  formulations often require specialized  equipment
for  manufacturing.  Therefore,  the Company has  dedicated a 27,000 square foot
manufacturing facility in which it houses state-of-the-art equipment such as the
technical machinery that is essential to manufacture  Diltiazem HCl ER Capsules,
which  compares to Dilacor XR(R) and Diltiazem HCl ER Capsules which compares to
Cardizem SR(R).                                                                 

     Mylan's leadership position in the generic drug industry is strengthened by
the Company's  expertise in developing and commercially  manufacturing  extended
release and delayed release generic pharmaceuticals.                            

     To date, Mylan has introduced four compounds utilizing its extended release
bead and matrix technology.  Additionally,  there are 12-14 compounds in various
stages of development that target branded sales of approximately $7 billion.    

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     The  environment  for Mylan's core generic  business has never been better.
Patent  expirations are the catalyst driving the generic industry as a source of
new product  opportunities.  According to industry  analysts,  approximately $41
billion in branded  drug  sales  will be coming off patent  throughout  the next
decade.  Additionally,  there are  products  valued at $7  billion  that are off
patent with no generic competition.                                             

MylanPharmaceuticals consistently ranked #1 in the number of new and refilled 
prescriptions dispensed among all pharmaceutical companies,  brand or generic as
tracked by the 1998 IMS National Prescription Audit.                            

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2000                                                                            

Strategic Alliances                                                             

     Mylan has been actively seeking  strategic  alliances to expand its product
line and geographic reach in the market place. In January the company reached an
agreement with Genpharm Inc. of Canada,  whereby the companies  will  co-develop
and Mylan will  exclusively  market and distribute in the U.S.  certain products
Genpharm has in research. The agreement includes 15 branded and generic products
in a variety of dosage forms,  including immediate release tablets and capsules,
injectables,   controlled  and  sustained  release  tablets,  nasal  sprays  and
sublingual  sprays.  The first product  submission has been filed and additional
filings are anticipated to occur in the near future.  This agreement  furthers a
strategy  of Mylan's  which is to have  products  that cover  niche areas in the
marketplace.                                                                    

     Mylan's  agreement  with  Draxis   Pharmaceutial  of  Canada  provides  the
framework for an ongoing collaboration under which Draxis will introduce certain
Mylan products in Canada.  Draxis has two appli-cations filed in Canada based on
this  alliance.  Mylan's  alliance with Draxis will enable the Company to expand
the  geographic  reach of its  products  into Canada and share the profits  from
these Canadian sales without the investments that would otherwise be required to
enter the Canadian market.                                                      

     Two new  generic  products  now  carry the  Mylan  label  via an  exclusive
licensing agreement with 3M Pharmaceuticals, Orphenadrine Citrate ER Tablets and
Orphenadrine Citrate,  Aspirin and Caffeine Tablets.  Orphenadrine Citrate ER is
therapeutically  equivalent  to  Norflex(TM),  and is used as a skeletal  muscle
relaxant,  as is Orphenadrine  Citrate,  Aspirin and Caffeine Tablets,  which is
therapeutically equivalent to Norgesic(TM) and Norgesic(TM) Forte.              

     Looking to the future As we approach the 21st century,  greater emphasis is
placed on our innovator  products and drug delivery  capabilities as a source of
growth.  However,  it has  been  our  commitment  to  quality,  reliability  and
innovation  that has made us a market leader in generic  pharmaceuticals  in the
20th century.  Therefore, we are not looking to the future without regard to our
past. Mylan is a market leader and remains dedicated to being a market leader in
the generic drug industry.                                                      

The Business of Approvals                                                       

     New product  introductions  are a key  ingredient  to sustain above average
sales and earnings  growth in the generic  pharmaceutical  industry.  Therefore,
Mylan has been  aggressively  researching  and developing  compounds to ensure a
steady  stream of  approvals.  Over the past  three  years  Mylan  has  received
approval for 26 generic  products.  In fiscal 1999,  Mylan submitted 18 ANDAs to
the FDA and received  final  approval  for eleven  products,  Clomipramine  HCl,
Hydroxychloroquine Sulfate, Sulfamylon(R) for 5% Topical Solution, Nystatin Oral
Suspension,  Glyburide,  Ranitidine,  Acyclovir,  Clonazepam,  Etodolac 500 mg.,
Albuteral  Sulfate  Syrup and Extended  Phenytoin  Sodium.  Additionally,  Mylan
received   tentative   approval  for  Terazosin  HCl,   Buspirone,   Astemizole,
Fluoxetine, Verapamil HCl ER, Carbidopa & Levodopa ER and Nifedipine ER 30 mg.  

    Presently  the Company has 35 ANDAs  filed with the FDA  targeting  combined
branded sales of $9-$10  billion.  Eight of these are  tentatively  approved and
will be launched  upon the  settlement  of legal  issues with the  original  NDA
holders or upon their patent  expirations.  Twenty additional  applications have
been targeted for FDA filing in calendar  1999,  with combined  branded sales of
approximately $6 billion.                                                       

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Mylan Pharmaceuticals Inc. Generic Product Line 

Generic Name                             Trade Name                             
------------                             ----------                             
Analgesic                                                                       
---------                                                                       
Indomethacin                             Indocin (R)                            
Propoxyphene Compound                    Darvon (R)                             
Compound-65                                                                     
Propoxyphene HCl                         Darvon (R)                             
Propoxyphene HCl & Acetaminophen         Wygesic (R)                            
Propoxyphene Napsylate & Acetaminophen   Darvocet-N (R) 100                     

Anti-Inflammatory                                                               
-----------------                                                               
Etodolac (Capsules)                      Lodine (R)                             
Etodolac                                 Lodine (R)                             
Fenoprofen Calcium                       Nalfon (R)                             
Flurbiprofen                             Ansaid (R)                             
Ibuprofen                                Motrin (R)                             
           Rufen (R)
Ketoprofen                               Orudis (R)                             
Ketorolac Tromethamine                   Toradol (R)                            
Meclofenamate Sodium                     Meclomen (R)                           
Naproxen                                 Naprosyn (R)                           
Naproxen Sodium                          Anaprox (R)                            
Piroxicam                                Feldene (R)                            
Sulindac                                 Clinoril (R)                           
Tolmetin Sodium                          Tolectin (R) DS                        
Tolmetin Sodium                          Tolectin (R) 600                       

Anti-malarial                                                                   
-------------                                                                   
*Hydroxychloroquine Sulfate              Plaquenil (R)                          

Anti-obsessional                                                                
----------------                                                                
*Clomipramine HCI                        Anafranil(R)                           

Antiangina                                                                      
----------                                                                      
Atenolol                                 Tenormin (R)                           
Nadolol                                  Corgard (R)                            
Nitroglycerin Transdermal System(Patches)Transderm Nitro (R)                    
Verapamil HCl                            Isoptin (R)                            

Antianxiety                                                                     
-----------                                                                     
Alprazolam                               Xanax (R)                              
Diazepam                                 Valium (R)                             
Lorazepam                                Ativan (R)                             
Perphenazine & Amitriptyline HCl         Triavil (R)                            

Antianxiety/antipsychotic                                                       
-------------------------                                                       
Trifluoperazine HCl                      Stelazine (R)                          

Antibacterial Agent                                                             
-------------------                                                             
Nitrofurantoin                           Macrodanti (R)                         

Antibiotic                                                                      
----------                                                                      
Cefaclor                                 Ceclor (R)                             
Cefaclor (Oral Suspension)               Ceclor (R)                             
Cephalexin                               Keflex (R)                             
Doxycycline Hyclate                      Vibramycin (R)                         
Doxycycline Hyclate                      Vibra-tabs (R)                         
Erythromycin Ethylsuccinate              E.E.S. 400 (R)                         
Erythromycin Stearate                    Erythrocin (R) Stearate                
Tetracycline HCl                         Achromycin V (R)                       
             Sumycin (R)

Generic Name                             Trade Name                             
------------                             ----------                             
Anticonvulsant                                                                  
*Clonazepam                              Klonopin (R)                           
* Extended Phenytoin Sodium              Dilantin (R)                           
              Kapseals (R)
Antidepressant                                                                  

Amitriptyline HCl                        Elavil (R)                             
Chlordiazepoxide & Amitriptyline HCl     Limbitrol (R)                          
Doxepin HCl                              Sinequan (R)                           
Maprotiline HCl                          Ludiomil (R)                           
Nortriptyline HCl                        Pamelo (R)                             

Antidiabetic                                                                    
------------                                                                    
Chlorpropamide                           Diabinese (R)                          
Glipizide                                Glucotrol (R)                          
*Glyburide                               Glynase (R)                            
              Pres-Tab (R)
Tolazamide                               Tolinase (R)                           
Tolbutamide                              Orinase (R)                            

Antidiarrheal                                                                   
-------------                                                                   
Diphenoxylate HCl & Atropine Sulfate     Lomotil (R)                            
Loperamide HCl                           Imodium (R)                            

Antiemetic                                                                      
----------                                                                      
Prochlorperazine Maleate                 Compazine (R)                          

Antigout                                                                        
--------                                                                        
Allopurinol                              Zyloprim (R)                           

Antihypertensive                                                                
----------------                                                                
Amiloride HCl & Hydrochlorothiazide      Moduretic (R)                          
Captopril                                Capoten (R)                            
Captopril and Hydrochlorothiazide        Capozide (R)                           
Clonidine                                Catapres (R)                           
Guanfacine HCl                           Tenex (R)                              
Indapamide                               Lozol (R)                              
Methyldopa                               Aldomet (R)                            
Methyldopa & Hydrochlorothiazide         Aldoril (R)                            
Metoprolol Tartrate                      Lopressor (R)                          
Prazosin HCl                             Minipress (R)                          
Propranolol  HCl                         Inderal (R)                            
Propranolol HCl & Hydrochlorothiazide    Inderide (R)                           
Triamterene and Hydrochlorothiazide      Dyazide (R)                            
Triamterene and Hydrochlorothiazide      MAXZIDE (R)-25MG                       
             MAXZIDE (R)

Antilipemic                                                                     
-----------                                                                     
Gemfibrozil                              Lopid (R)                              

Antineoplastic                                                                  
--------------                                                                  
Methotrexate                             Methotrexate (R)                       
                Rheumatrex (R)
Antipsychotic                                                                   
-------------                                                                   
Fluphenazine HCl                         Prolixin (R)                           
Haloperidol                              Haldol (R)                             
Thioridazine HCl                         Mellaril (R)                           
Thiothixene                              Navane (R)                             

Antiviral                                                                       
---------                                                                       
Acyclovir   (Capsules)                   Zovirax (R)                            
*Acyclovir                               Zovirax (R)                            

Generic Name                             Trade Name                             
------------                             ----------                             
Anxiolytic                                                                      
----------                                                                      
Clorazepate Dipotassium                  Tranxene (R)                           

Beta Blocker                                                                    
------------                                                                    
Acebutolol HCl                           Sectral (R)                            
Pindolol                                 Visken (R)                             
Timolol Maleate                          Blocadren (R)                          

Beta  Blocker  with  Diuretic                                                   
-----------------------------                                                   
Atenolol and Chlorthalidone              Tenoretic (R)                          

Bronchial Dilator                                                               
-----------------                                                               
Albuterol                                Proventil (R)                          
              Ventolin (R)

Calcium  Channel Blocker                                                        
------------------------                                                        
Diltiazem HCl                            Cardizem (R)                           
Diltiazem HCl ER                         Cardizem SR (R)                        
Diltiazem HCl ER                         Dilacor XR (R)                         
Nicardipine                              Cardene (R)                            
Verapamil HCl ER                         Isoptin (R) SR                         

Diuretic                                                                        
--------                                                                        
Bumetanide                               Bumex (R)                              
Chlorothiazide                           Diuril (R)                             
Chlorthalidone                           Hygroton (R)                           
Furosemide                               Lasix (R)                              
Methyclothiazide                         Enduron (R)                            
Spironolactone                           Aldactone (R)                          
Spironolactone  &  Hydrochlorothiazide   Aldactazide (R)                        

H2 Antagonist                                                                   
-------------                                                                   
Cimetidine                               Tagamet (R)                            
Ranitidine HCl                           Zantac (R)                             

Hemorrheologic  Agent                                                           
---------------------                                                           
Pentoxifylline ER                        Trental (R)                            

Hypnotic Agent                                                                  
Flurazepam HCl                           Dalmane (R)                            
Temazepam                                Restoril (R)                           

Laxative                                                                        
--------                                                                        
Lactulose  Solution                      Chronulac (R)                          

Muscle  Relaxant                                                                
----------------                                                                
Cyclobenzaprine  HCl                     Flexeril (R)                           
*Orphenadrine  Citrate  ER               Norflex TM                             

Skeletal Muscle Relaxant                                                        
------------------------                                                        
*Orphenadrine Citrate,Aspirin and Caffeine  Norgesi TM                          
                         Norgesic TM Forte

Uricosuric                                                                      
----------                                                                      
Probenecid                               Benemid (R)                            

* Indicates fiscal 1999 introduction                                            

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Selected Financial Data   

Mylan Laboratories Inc. 

                                                        · Enlarge/Download Table
                                                                                                                  
Year ended March 31,                 1999      1998      1997      1996       1995     1994      1993       1992  
Total revenues                     $721,123  $555,423  $440,192  $392,860  $396,120  $251,773  $211,964  $ 131,936

Net earnings                       $115,409  $100,777  $ 63,127  $102,325  $120,869  $ 73,067  $ 70,621  $  40,114

Earnings per common share-basic    $    .92  $    .83  $    .52  $    .86  $   1.02  $    .62  $    .61  $     .35
Earnings per common share-diluted  $    .91  $    .82  $    .51  $    .85  $   1.01  $    .61  $    .60  $     .35

Shares used in computation-basic    125,584   122,094   121,926   119,530   118,963   118,423   115,651    114,726
Shares used in computation-diluted  127,156   123,043   122,727   120,706   119,912   119,502   116,986    115,927

At year end                                                                                                       
Working capital                    $486,598  $379,726  $323,942  $351,536  $296,990  $197,164  $159,748  $ 106,222

Total assets                     $1,206,661  $847,753  $777,580  $692,009  $546,201  $403,325  $351,105  $ 226,720

Long-term obligations              $ 26,827  $ 26,218  $ 32,593  $ 18,002  $  7,122  $  4,609  $  5,125  $   3,600

Shareholders' equity             $1,059,905  $744,465  $659,740  $616,441  $482,728  $379,969  $295,972  $ 203,452

Book value per share-diluted     $     8.34  $   6.05  $   5.38  $   5.11  $   4.03  $   3.18  $   2.53  $    1.76

Numbers in thousands except per share amounts.                                  

From June 1990  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
two-for-one  stock split effective  August 1, 1992 and the  three-for-two  stock
split effective August 15, 1995.                                                

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

Overview                                                                        
Mylan  Laboratories  Inc.  ("the  Company" or "Mylan")  recorded net earnings of
$115.4  million  for the year ended  March 31,  1999,  despite  recording  $29.0
million in charges for acquired  in-process  research and development during the
year. This represents a 14% increase over net earnings for fiscal 1998 of $100.8
million. Fiscal 1997 net earnings were $63.1 million.                           
        The favorable  results of the past two years are  indicative of both the
contin-uing  evolution of the Company  marked by the  expansion of the Company's
branded  presence  and the  Company's  historical  leading  role in the  generic
pharmaceutical industry.                                                        
        Historically,  earnings from new generic product approvals and increased
generic  volume more than offset the loss in net earnings  resulting  from price
deterioration  in the generic  market.  Beginning  in fiscal 1996,  however,  an
increasingly  difficult  regulatory  environment was compounded by a new wave of
patent  litigation  by  branded  pharmaceutical  companies  under the Drug Price
Competition and Patent Term  Restoration Act of 1984 (the  "Hatch-Waxman  Act").
These two  factors  significantly  increased  the cost of  bringing  new generic
products to market and have in many cases  diminished  the  eventual  commercial
success of new products by delaying their introduction.                         
        Against this  backdrop,  the Company  decided to accelerate  its planned
expansion  into the  branded  markets to meet  long-term  corporate  objectives.
Additionally,   despite  a  promising   pipeline  of  products  in  development,
management  determined the Company would need to further investigate  innovative
strategic  alliances  aimed at  expanding  both its branded and generic  product
lines.                                                                          
        Accordingly,   the  Company  entered  into  several  strategic  alliance
relationships in the past two years,  some of which resulted in the introduction
of new generic  products,  including  Ranitidine in fiscal 1998 and Orphenadrine
Citrate  ER in fiscal  1999,  and some of which  have  broadened  the  Company's
growing  pipeline of products pending FDA approval.  In addition,  the Company's
acquisition  of Penederm  Inc. in October of 1998,  significantly  broadened the
Company's  branded  capabilities in terms of sales force,  existing product line
and branded product pipeline.                                                   
        In  addition  to  the  uncertainty  of  new  product  approvals,   price
deterioration during fiscal 1996 and 1997 was more severe than at any other time
in the Company's history.  The Company estimates that price deterioration in the
generic  industry  reduced net earnings by  approximately  $55 million in fiscal
1996 and $75 million in fiscal 1997.  Accordingly,  the Company  recognized that
action,  in addition to the above  mentioned  efforts,  needed to be considered.
After an extensive  evaluation of its  operations,  the Company  determined that
changes in Mylan's generic pricing practices were in order.                     
        In the second half of fiscal 1998,  the Company  raised  prices on seven
generic products. During fiscal 1999, the Company raised prices on 22 additional
products.  The Company  estimates  that the price  increases  accounted  for $25
million of the increase in net earnings  from fiscal 1997 to fiscal 1998 and $71
million of the increase in net earnings from fiscal 1998 to fiscal 1999.        
        In December 1998, actions were commenced by the Federal Trade Commission
("FTC") in connection  with two products,  Clorazepate  and  Lorazepam,  each of
which were included in the Company's  fiscal 1998 price  increases.  At issue in
the FTC  litigation  are contracts  executed in 1997 between the Company and its
raw material  supplier for these  products.  The FTC claims that the exclusivity
provisions  of  these  contracts   violate  antitrust  laws.  These  exclusivity
provisions have been rescinded.                                                 
        The two products under FTC  investigation  combined for approximately 9%
of the Company's  consolidated  net sales in fiscal 1998 and 21% in fiscal 1999.
Since June 1998, the Company has seen price deterioration on both of these      

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

products  and  expects  to see  continued  price  deterioration  in the  future.
Additionally,  the Company has been  informed that  significantly  higher prices
will be  charged by the  supplier  for future  purchases  of the raw  materials.
Accordingly,  the Company  expects that net sales and resulting gross margin for
these  products in the fiscal year ending  March 31, 2000 will be less than that
recognized  in the fiscal  year  ended  March 31,  1999.  See  "Forward  Looking
Statements."                                                                    
        The Company  intends to continue to work closely with its  customers and
suppliers to ensure that Mylan's full line of generic  products  continues to be
available  to  the  American  public  as a  cost  effective  alternative  to the
innovator  products.                                                            

Results  of  Operations                                                         
Net Sales and  Gross  Margin                                                    
The following table outlines net sales,  gross margin (net sales less cost of   
sales) and the corresponding change from the previous year:(dollars in millions)

Year ended            Net Sales         Gross Margin      Gross Margin          
March 31,         Dollars   Change    Dollars   Change    as % of Sales         
1999             $721.1       36%     $384.3      60%         53%               
1998              528.6       20%      240.3      33%         45%               
1997              440.2       12%      180.5      -8%         41%               

        Generic  products  represented 88% of  consolidated  net sales in fiscal
1999, 90% in fiscal 1998 and 87% in fiscal 1997. Accordingly, the changes in net
sales,  gross  margin and gross  margin as a percent of net sales are  primarily
indicative  of the  highly  competitive  nature  of the  generic  pharmaceutical
industry,  the  Company's  history of obtaining  new product  approvals  and the
impact of price increases and strategic alliances on certain products.          
        With regard to the Company's  generic  product line,  nine products were
added in fiscal 1997  accounting  for $34.1  million in net sales in fiscal 1997
and 13  products  were added in fiscal  1998 with  aggregate  net sales of $61.5
million in fiscal  1998.  In fiscal 1999 the Company  added nine  products  with
aggregate net sales of $37.1  million.  Included in the fiscal 1999 new products
is Glyburide,  a product for which the Company had received an approval from the
FDA and begun  marketing in fiscal 1997, but was required to suspend  commercial
shipments pending the outcome of certain patent related issues.                 
        Two of the fiscal 1998 new products,  Ranitidine and Acyclovir,  and two
of the  fiscal  1999 new  products,  Orphenidrine  Citrate  ER and  Orphenadrine
Citrate,   Aspirin  and  Caffeine,  are  manufactured  by  other  companies  and
distributed by the Company under distribution  arrangements.  Under the terms of
the distribution  arrangement on Ranitidine,  the Company,  in 1998,  recognized
$26.8 million  recorded  under the caption  "Other  revenues" (See note N to the
consolidated financial statements).                                             
        The Company  estimates that price  deterioration in the generic industry
resulted in  reductions  in net sales and gross  margins of  approximately  $104
million in fiscal  1997,  $32  million in fiscal  1998 and $39 million in fiscal
1999.  Selective  price  increases  increased net sales by $47 million and gross
margins by $37 million in fiscal 1998 and  increased  net sales by $130  million
and gross margins by $109 million in fiscal 1999.                               
        As  described  under  "Overview,"  the  Company  has  experienced  price
deterioration  on certain  significant  generic  products on which it  increased
prices and anticipates  that it will experience  further price  deterioration on
these and other products in the future. Accordingly,  net sales and gross margin
percentages  realized in fiscal 1999 are not  necessarily  indicative  of future
results.                                                                        

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

        Total unit  volume of generic  product  shipments,  excluding  unit dose
shipments,  increased by 18% in fiscal 1997, 8% in fiscal 1998 and 10% in fiscal
1999. The higher levels of volume create  manufacturing  efficiencies which were
realized in each of the three past fiscal years.                                
        Net sales for the Company's branded segment declined from fiscal 1997 to
fiscal 1998 as a result of a realignment of the sales force effort away from the
institutional  wound care products which have seen continual price deterioration
and  towards  physician  based  products  including   MAXZIDERegistration  Mark,
NITREKRegistration Mark and ClorpresTM. These efforts, coupled with the addition
of ZagamRegistration Mark and SulfamylonRegistration  Mark Powder provided for a
25%  increase  in net sales and gross  profit in fiscal  1999 for the  Company's
Bertek Pharmaceuticals Inc. Division.                                           
        Continued  growth in the branded segment is a primary  objective for the
Company.  Accordingly, on October 2, 1998, the Company completed its acquisition
of Penederm  Inc. a Foster  City,  California  corporation  which  develops  and
markets  patented  topical  prescription  products.  Sales of Penederm  products
during the six months post  acquisition  were  approximately  $17  million.  The
Company has begun to combine the  marketing  efforts of the  Penederm and Bertek
sales  forces and  anticipates  continued  improvements  in the branded  segment
throughout  fiscal 2000. The Company also plans to continue to examine  external
growth  opportunities in the branded arena as internal  research and development
projects for branded products continue on their paths towards commercialization.

Research  and  Development                                                      
Research  and  development expenditures  were $61.8 million in fiscal 1999,     
$46.3 million in fiscal 1998 and $42.6 million in fiscal 1997. These amounts    
represent  approximately 9% of net sales in fiscal 1999 and 1998 and 10% in     
fiscal 1997.                                                                    
       The following table outlines the approximate allocation of research and
development expenditures: (dollars in millions)                                 

Year ended March 31,                1999           1998           1997          
Generic related projects           $25.7          $22.0          $20.5          
Innovative compound projects        29.2           18.4           16.1          
Transdermal patch related            6.9            5.9            6.0          

        During fiscal 1999, the Company  entered into an agreement with Genpharm
Inc. to  co-develop  15 branded and generic  products.  Charges  related to this
agreement  have  been  allocated  evenly  to  generic  and  innovative  compound
projects.  This  expenditure  represents  a majority of the  increase in generic
related expenditures.                                                           
        In addition to half of the charges  relating to the Genpharm  agreement,
fiscal 1999  expenditures for innovative  compound projects include $2.8 million
of expenditures  incurred by Penederm  subsequent to the date of acquisition and
approximately  $10.0 million in accrued  funding  obligations  resulting from an
arbitration  award relating to VivoRx (see note S to the consolidated  financial
statements).  Charges related to the Company's  funding of VivoRx in fiscal 1998
were $6.3 million and in fiscal 1997 were $7.8 million.                         
        Under the terms of the  arbitration  award,  the  Company has elected to
terminate the licensing arrangement with VivoRx, and will be entitled to recover
approximately $18.0 million from VivoRx through five annual installment payments
commencing in October 2000.                                                     

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

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

Selling and Administrative                                                      
Selling and  administrative  expenses were $125.0 million in fiscal 1999,  $96.7
million in fiscal 1998 and $79.9 million in fiscal 1997. These amounts represent
17% of net sales in fiscal  1999 and 18% of net sales for both  fiscal  1998 and
fiscal 1997.                                                                    
  The following table identifies the major components of selling and
adminis-trative expenses: (dollars in millions)                                 

Year ended March 31,                       1999           1998           1997   
Sales and Marketing Expenses:                                                   
Generic:                                                        
     Payroll and related                $4.9           $4.5           $4.3
     Advertising and promotions         12.7           16.3            3.2
Branded:                                                        
     Payroll and related                12.8            9.4            8.0
     Advertising and promotions          9.2            4.7            3.0
     Other sales and marketing           9.9            8.4            9.2
Total Sales and Marketing Expenses        $49.5          $43.3          $27.7   

Administrative Expenses:                                                        
     Payroll and related               $27.5          $21.9          $19.0
     Legal and professional fees        22.2           12.0            6.8
     Goodwill amortization               4.0            1.6            1.6
     Other administrative               21.8           17.9           24.8
Total Administrative Expenses             $75.5          $53.4          $52.2   

        The significant change in generic advertising and promotions from fiscal
1997 to fiscal 1998 relates primarily to costs associated with the launch of new
generic products including Ranitidine.  Such costs included payments of stocking
fees to customers to assist in the  conversion  and promotion of the new generic
products.  Similar programs of lesser magnitude were provided in fiscal 1999. In
prior years such costs were insignificant.                                      
        The majority of the  increases in branded and other sales and  marketing
expenses from fiscal 1998 to fiscal 1999 relate to Penederm, which incurred $6.9
million of expenses in the second half of fiscal 1999.                          
        Administrative  payroll and related expenses  increased from fiscal 1998
to fiscal 1999  primarily as a result of  expansion of corporate  infrastructure
and from the addition of Penederm.                                              
        Legal and professional fees relating to patent issues were approximately
$6.0  million in fiscal  1999,  $7.2  million in fiscal 1998 and $1.7 million in
fiscal 1997. The significant  increase in total legal and professional fees from
fiscal 1998 to fiscal 1999 is related  principally to antitrust  matters and the
VivoRx litigation.                                                              

Equity in Earnings of Somerset                                                  
Equity in earnings of Somerset was $5.5 million in fiscal 1999, $10.3 million in
fiscal 1998 and $18.8  million in fiscal 1997.  Somerset's  contribution  to the
Company's  net earnings  per share was $.04 in fiscal 1999,  $.07 in fiscal 1998
and $.14 in fiscal 1997.                                                        
        Somerset continues research efforts to discover alternative  indications
for  EldeprylRegistration  Mark and the development of other  compounds.  Unless
such new indications or compounds are approved for  commercialization the impact
of generic competition will continue to adversely affect Somerset's contribution
to the Company's net earnings.                                                  

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

Other Income                                                                    
Other income was $18.3 million in fiscal 1999,  $14.0 million in fiscal 1998 and
$10.4  million in fiscal  1997.  These  amounts  are  derived  principally  from
investment  earnings  and gains and  losses on the sale of fixed  assets  net of
estimated  provisions  (approximating $12.5 million and $2.5 million in 1999 and
1998  respectively)  for  adjustments  to the  carrying  value of Other  assets,
principally  related to  investments  in strategic  alliances  and  non-publicly
traded companies, including VivoRx.                                             

Income Taxes                                                                    
The  effective  tax rate for fiscal 1999 was 40%  compared to 32% in fiscal 1998
and 28% in fiscal 1997.  Approximately 5% of the fiscal 1999 rate is a result of
the $29 million charge for acquired in-process research and development which is
not  deductible  for tax purposes.  The remainder of the increase in both fiscal
1999 and fiscal  1998 is  attributable  to  increased  domestic  taxable  income
subject to full federal and state taxation.                                     
        During fiscal 1998, the Company reached a negotiated settlement with the
Internal  Revenue Service  regarding  audits of the Company's income tax returns
for the years 1992 through 1996. As part of the  settlement,  the Company agreed
to change the method employed for determining taxable income of its Puerto Rican
operations from the cost sharing method to the profit-split method for all years
after 1996.                                                                     
        Changes in the  Federal  Tax Code  enacted in 1993  reduced  tax credits
previously  available for operating in Puerto Rico by 50% in fiscal 1997, 55% in
fiscal 1998 and 60% in fiscal 1999.  Under current tax law, the amount of income
subject to the Puerto  Rican tax  credit  will be limited  for a period of seven
years before complete termination of the credits.                               

Liquidity  and  Capital Resources                                               
In fiscal 1999, the Company surpassed the billion-dollar plateau in total assets
and  shareholders'  equity.  Total assets are $1,206.7 million at March 31, 1999
compared to $847.8  million at March 31, 1998.  Working  capital  increased from
$379.7 million in 1998 to $486.6 million in 1999 and the ratio of current assets
to current liabilities decreased from 6.3 to 1 to 6.0 to 1.                     
        Net cash provided from operating  activities was $163.4 million in 1999,
$52.7  million in 1998 and $46.5  million in 1997.  The primary  reasons for the
increase in 1999 were improved operating results and inventory management. Other
contributing  factors were the timing of tax payments and collection of accounts
receivable.  The  increase in  operating  cash flows also out paced net earnings
growth in 1999 as a result of  higher  non-cash  expense  items,  including  the
increase in allowances on accounts  receivable and acquired  in-process research
and development.                                                                
        The Company  completed  several major capital projects in 1999 that were
started in prior years while  continuing to expand its facilities in Morgantown,
West Virginia. The Company's net investment in property, plant and equipment was
$16.7  million in 1999,  $28.9  million in 1998 and $26.9  million in 1997.  The
expansion at the Morgantown location includes additional  manufacturing capacity
and a sales and administrative building. All capital expenditures have been made
with the general funds of the Company and without any bank financing.           
        In  1999,  the  Company  implemented  cash  management   initiatives  by
investing more funds into marketable securities,  accounting for the increase in
cash used for  investing  activities.  Generally  these  funds are  invested  in
short-term government and corporate securities.                                 
        Payments  on  long-term   obligations  include  obligations  assumed  in
connection with the acquisition of UDL and installment  payments made on certain
product acquisitions. The Company paid cash dividends of $.16 per share in 1999,
1998 and 1997 totaling $58.8 million.                                           

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

        The Company's  current cash position will not  necessarily be indicative
of its position in future periods.  As described  under  "Overview," the Company
has experienced price  deterioration on certain  significant  generic equivalent
products on which it increased  prices and  anticipates  that it will experience
further price  deterioration  on these and other  products in the future,  which
could  impact  future  cash flows.  In  addition,  the Company  expects to incur
significant  legal fees and costs in  defending  against  the  various  lawsuits
referenced  under  "Overview" and described under Item 3 of the Company's Annual
Report on Form 10-K for the year ended March 31,  1999,  which could also impact
future cash flows. See also "Forward Looking Statements."                       

Year 2000                                                                       
The Company has completed a review of its critical information technology ("IT")
and non-IT operating  systems for Year 2000 ("Y2K")  compliance.  Y2K compliance
refers to the issue of systems and equipment  having date  sensitive  components
being  able to  recognize  the year  2000.  On the basis of this  review and the
processes described below, management believes that the costs of remediation and
potential losses related to Y2K issues are unlikely to have a material effect on
the Company's financial position, results of operations or cash flows.          
        In assessing  potential  Y2K issues,  the Company has taken or is taking
the following steps to address its IT and non-IT operating systems:             
          -Formed a project  team across  functional  departments  to complete a
review and identify nonconforming systems.              
          -Communicated   to  employees   throughout  the  Company  to  increase
    awareness of issues and activate the identification process.
          -Identified critical IT and non-IT nonconforming operating systems and
developed a plan to bring these systems into compliance.
        -Established  a testing  program  to ensure  that such  systems  are
compliant.                                              
          -Corresponded with customers, vendors, service suppliers and financial
institutions to verify their readiness.                 
       -Developed contingency plans where practical in the event of system
failures.                                               
        Because of the  continued  growth of the Company  over the last  several
years and prior to the  formation  of the project  team,  the Company  initiated
major system  conversions  to accommodate  the physical  expansion and increased
transaction  volume  associated  with this growth.  Many factors were considered
during  the  selection  process.  While Y2K  compliance  was one of the  factors
considered, other factors were equally and significantly more important. Any new
systems selected were expected to be and are believed to be Y2K compliant.      
        The Company has recently  completed the system conversions for all major
operating and  financial  systems.  All such systems have been  certified by the
vendor to be Y2K  compliant.  The Company has  substantially  completed  its own
testing on these systems and verified their Y2K compliance.                     
        Due to the recent independent  upgrades and replacements of its computer
systems to accommodate  its growth,  the Company has not been required to spend,
nor does it anticipate  spending,  significant  incremental  funds to become Y2K
compliant. The funds for system conversions have been financed through operating
revenue of the  Company.  The  Company  has  neither  delayed,  nor  anticipates
delaying, any significant information system projects prior to the year 2000.   
        The project team  continues to evaluate  and update  contingency  plans.
These plans are developed based on correspondence with customers,  vendors,  raw
material suppliers,  service suppliers and financial  institutions regarding the
status of their Y2K  readiness  and the  results  of  testing  performed  on the
Company's  internal  systems.  With the  testing of the  Company's  own  systems
substantially  complete, more emphasis will be placed on obtaining and verifying
third  party  responses.  Contingency  plans will  evolve  and change  with each
favorable  or  unfavorable  response.  As part of  this  process  and due to the
critical nature of the Company's products,  the Company has also initiated steps
to monitor  customers'  orders and buying patterns.  The Company has taken these
steps to ensure the  availability  of its  products to all its  customers as the
millennium approaches.                                                          

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

 While the project  team  continues  to develop  contingency  plans for the more
likely scenarios of possible business  interruptions,  there can be no assurance
that the project team will identify and develop successful contingency plans for
all of the business interruptions that could possibly occur.                    
        Management   believes  that  the  Company  has  acted  with  appropriate
diligence to address potential Y2K issues. The Company is, however, dependent on
third parties, such as its customers,  vendors, raw material suppliers,  service
suppliers which include energy,  water,  communication  and  transportation  and
financial  institutions,  to make  their own  systems  Y2K  compliant.  If these
entities fail to remedy their Y2K issues,  the Company could potentially  suffer
interruptions in its business operations.  These interruptions could potentially
delay  the  Company  in its  manufacturing  or  distribution  of some or all its
products for an  undeterminable  amount of time. In addition,  the Company could
experience the corruption of data in its own internal information systems.  Such
corruption could lead to temporary  interruptions  in certain isolated  business
operations.  These interruptions may or may not lead to an adverse impact on the
Company's overall business operations.                                          

Other Matters                                                                   
The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting Standards No.133,  "Accounting for Derivative Instruments and Hedging
Activities"  ("SFAS No.  133").  This  statement is  effective  for fiscal years
beginning  after June 15, 2000.  The Company is currently  evaluating the impact
that SFAS No. 133 will have on its financial position and 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 to 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 or cash  equivalents for financial  reporting
purposes and have minimal or no interest rate risk.  The Company also invests in
non-public  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 with the risks attendant to its investments in 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 1999.                                                             
        The fair  market  value of the debt  securities  held by the  Company at
March 31, 1999 was $60.2 million,  of which $42.4 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 the equity  securities held by the Company at March 31,
1999 was  $48.9  million.  Such  investments  collectively  represent  9% of the
Company's  total assets as of March 31, 1999 and 36% 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 values of the
Company's  debt and equity  securities,  the change in the aggregate fair market
value of these securities would be $10.9 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                                                                           

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Management's Discussion and Analysis of Operations and Financial Position 

 Mylan Laboratories Inc.

manufacturers, 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:        
        The Company's  results of operations  depend to a significant  extent on
its  ability to develop  and bring to market new  generic  equivalent  products.
Generally,  following  the  expiration  of  patents  and other  FDA  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,  since 1997,  the Company has  increased  prices on selected  older
generic equivalent  products,  including in some cases generic equivalents which
were largely  abandoned  by  competitors,  which has  encouraged  other  generic
manufacturers to reenter the market.  These conditions have also resulted or are
expected to result in price deterioration on these products.                    
        In addition to suffering price  deterioration on its generic  equivalent
products generally, the Company's results of operation for fiscal 1999 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 of 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 comme rcial  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 which appear 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, which has been
experienced in these  pharmaceutical  distribution  networks in recent years, is
likely  to  result  in  an  increase  in  pricing  pressures  on  pharmaceutical
manufacturers.                                                                  
        As described  under Item 3 of the  Company's  Annual Report on Form 10-K
for the year ended March 31, 1999, the Company is involved in numerous        
lawsuits,  including anti-trust and  anti-competition  litigation brought by the
Federal  Trade  Commission,  the  Attorneys  General for 33 states and  numerous
private  litigants,  as well as a class action lawsuit alleging that the Company
violated   federal   securities   laws  by  failing  to  disclose   the  alleged
monopolization   of  certain  raw  materials  used  to  manufacture   drugs.  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.                                                              
        The  statements  under  "Year  2000"  of  "Management's  Discussion  and
Analysis of Financial  Condition  and Results of  Operations"  which express the
Company's  belief that Y2K problems will not have a material  adverse  effect on
the Company may also be  forward-looking  statements.  Factors which could cause
the Company to be unable to avoid any material Y2K problems  include the failure
of its Y2K  project  team to  identify  latent or other  non-compliant  codes or
technologies, the failure of any of the customers, vendors, service suppliers or
financial  institutions  with which the Company  deals to address  their own Y2K
problems or the  ineffectiveness  of any  contingency  plans put in place by the
Company to mitigate the effects of  interruptions  in its  businesses due to Y2K
problems.                                                                       
        See  also  the  discussion  of the  Company's  business,  including  the
regulatory environment,  customers,  markets and competitive conditions included
in Item 1 of the  Company's  Annual Report on Form 10-K for the year ended March
31, 1999.                                                                       

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Consolidated Balance Sheets 

Mylan Laboratories Inc. 

(dollars in thousands except per share data)                                    
March 31                                             1999          1998         

Assets                                                                          

Current assets                                                                  
Cash and cash equivalents                       $  189,849     $  103,756       
Marketable securities                               69,872         41,941       
Accounts receivable                                148,896        136,864       
Inventories                                        136,493        146,041       
Deferred income tax benefit                         18,199          7,845       
Prepaid and refundable income taxes                     88          7,946       
Other current assets                                19,562          6,679       
                                         ----------     ----------
Total current assets                               582,959        451,072       

Property, plant and equipment - net                                             
of accumulated depreciation                   154,636        151,412  
Intangible assets - net of accumulated                                          
amortization                                  336,003        128,745  
Other assets                                        98,949         86,803       
Investment in and advances to Somerset              34,114         29,721       
                                         ----------     ----------
Total assets                                  $  1,206,661    $   847,753       

See notes to consolidated financial statements.                                 

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Consolidated Balance Sheets 

Mylan Laboratories Inc. 

(dollars in thousands except per share data)                                    

March 31,                                           1999           1998         

Liabilities and shareholders' equity                                            

Current liabilities                                                             
Trade accounts payable                           $  12,142      $  15,957       
Current portion of long-term obligations            16,941          8,477       
Income taxes payable                                   821          5,377       
Other current liabilities                           61,279         36,635       
Cash dividend payable                                5,178          4,900       
                                          ---------      ---------
Total current liabilities                           96,361         71,346       

Long-term obligations                               26,827         26,218       
Deferred income tax liability                       23,568          5,724       

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                                 
129,968,514 at March 31, 1999 and                                     
123,050,172 at March 31, 1998                  64,984         61,525  
Additional paid-in capital                         311,995         92,405       
Retained earnings                                  690,003        594,847       
Accumulated other comprehensive earnings             1,105          1,570       
                                            ---------      ---------
                                          1,068,087        750,347
Less treasury stock at cost - 888,578                                           
shares at March 31, 1999 and                                          
849,858 shares at                                                     
March 31, 1998                                  8,182          5,882  
                                          ---------      ---------
Total shareholders' equity                       1,059,905        744,465       

Total liabilities and shareholders'                                             
equity                                   $  1,206,661     $  847,753  
                                       ============     ==========

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 Consolidated Statements of Earnings

 Mylan Laboratories Inc.

(dollars in thousands except per share data)                                    
Year ended March 31,                             1999        1998         1997  
Net sales                                     $721,123   $  528,601     $440,192
Other revenues                                    -          26,822         -   
                                              --------   ----------     --------
Total revenues                                 721,123      555,423      440,192

Cost and expenses                                                               
Cost of sales                                  336,846      288,290      259,666
Research and development                        61,843       46,278       42,633
Acquired in-process research and development    29,000         -          -     
Selling and administrative                     124,964       96,708       79,948
                                              --------   ----------     --------
                                               552,653      431,276      382,247

Equity in earnings of Somerset                   5,482       10,282       18,342
Other Income                                    18,342       13,960       10,436
                                             ---------   ----------      -------
Earnings before income taxes                   192,294      148,389       87,195
Income taxes                                    76,885       47,612       24,068
                                             ---------   ----------      -------
Net earnings                                  $115,409   $  100,777      $63,127
                                             =========   ==========      =======
Earnings per common share                                                       
Basic                                        $     .92   $      .83      $   .52
Diluted                                      $     .91   $      .82      $   .51

Weighted average common shares outstanding                                      
Basic                                      125,584,000  122,094,000  121,926,000
Diluted                                    127,156,000  123,043,000  122,727,000

See notes to consolidated financial statements.                                 

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Consolidated Statements of Shareholders' Equity and Comprehensive Earnings

Mylan Laboratories Inc. 

                                                        · Enlarge/Download Table
                                                                                                                                    
                                                                                            Accumulated Other                       
(dollars in thousands except             Common Stock      Treasury Stock   Additional        Comprehensive                Total    
                                  ---------------------  ------------------ ---------- Retained Earnings Shareholders' Comprehensive
     per share data)                Shares       Amount   Shares     Amount   Paid-In  Earnings   (Loss)      Equity       Earnings 
                                                                              Capital                                               
------------------------------------------------------------------------------------------------------------------------------------
April 1, 1996                     122,524,789  $ 61,262  (694,950)  ($2,528)  $85,996  $  470,136   $1,575  $  616,441       -      

Net earnings                           -           -         -          -        -         63,127      -        63,127    $63,127   
Net unrealized loss on                                                                                                              
  marketable securities                -           -         -          -        -           -      (2,522)     (2,522)    (2,522)  
Stock options exercised               290,167       145   (75,000)   (1,266)    3,266        -         -         2,145        -     
Reissuance of treasury stock           -           -       17,000        62      -           -         -            62        -     
Cash dividend $.16 per share           -           -         -          -        -        (19,513)     -       (19,513)       -     
                                  ----------- ---------   --------  --------  -------  -----------  ------- -----------   --------  
March 31, 1997                    122,814,956    61,407   (752,950)  (3,732)   89,262     513,750     (947)    659,740     60,605   

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  
                                  =========== =========   ========  ========  =======  ===========  ======= ===========   ========  


See notes to consolidated financial statements.                                 

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Consolidated Statements of Cash Flows 

Mylan Laboratories Inc. 

(dollars in thousands except supplemental disclosure)                           
Year ended March 31,                               1999        1998       1997  
Cash flows from operating activities                                            
Net earnings                                    $115,409   $  100,777   $63,127 
Adjustments  to  reconcile  net                                                 
earnings to net cash  provided                                                  
from  operating activities:                                                     
   Depreciation and amortization                 26,911       21,708    17,347
   Deferred income tax (benefit) expense        (10,314)      (3,207)       47
    Equity in earnings of Somerset                (5,482)     (10,282)  (18,814)
   Cash received from Somerset                    1,089        5,674    20,038
   Allowances on accounts receivable             19,300        8,754     2,422
 Acquired in-process research and development  29,000          -         -
   Loss on sale of assets                           -            -       1,171
   Other noncash expenses                          (646)       1,574       290
Changes in operating assets and liabilities:                            
      Accounts receivable                        (30,411)     (30,565)  (45,198)
      Inventories                                 11,328      (45,007)   (1,495)
     Trade accounts payable                      (4,282)      (2,082)    4,000
     Income taxes                                 8,549       (8,949)      773
     Other operating assets and liabilities       2,998       14,255     2,829
                                                -------       ------    ------
Net cash provided from operating activities      163,449       52,650    46,537 

Cash flows from investing activities                                            
Additions to property, plant and equipment       (16,736)     (28,853)  (26,854)
Increase in intangible and other assets           (7,915)      (7,984)  (30,674)
Purchase of investment securities                (79,816)     (16,785)  (23,221)
Proceeds from investment securities               50,151       17,309    18,060 
Proceeds from sale of assets                         -            -       3,500 
Cash acquired net of acquisition costs             1,396          -         -   
Net cash used in investing activities            (52,920)     (36,313)  (59,189)
See notes to consolidated financial statements.                                 

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Consolidated Statements of Cash Flows 

Mylan Laboratories Inc. 

(dollars in thousands except supplemental disclosure)                           

Year ended March 31,                           1999       1998         1997     

Cash flows from financing activities                                            
Payments on long-term obligations           $(14,740)   $  (19,198)    $(19,788)
Cash dividends paid                          (19,833)      (19,525)     (19,491)
Repurchase of common stock                       -          (2,459)         -   
Proceeds from exercise of stock options       10,137         2,445        1,107 
                                           --------    ----------     --------
Net cash used in financing activities        (24,436)      (38,737)     (38,172)
                                           --------    ----------     --------
Net increase (decrease) in cash and                                             
  cash equivalents                            86,093       (22,400)     (50,824)
Cash and cash equivalents - beginning                                           
 of year                                    103,756       126,156      176,980
                                           --------    ----------     --------
Cash and cash equivalents - end of year   $  189,849      $103,756    $ 126,156 
                                           --------    ----------     --------

Supplemental Disclosure                                                         
For purposes of  presentation in the statements of cash flows,  cash,  overnight
deposits  and  money  market  funds  and  marketable  securities  with  original
matu-rities  of less than three  months  have been  classified  as cash and cash
equivalents.                                                                    
        Cash payments for interest were $1,800,000 in 1999,  $3,426,000 in 1998,
and $1,977,000 in 1997. Cash payments for income taxes were $78,650,000 in 1999,
$59,770,000 in 1998, and $23,245,000 in 1997.                                   
        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, 1999, 1998, and 1997 were $4,302,000, $652,000 and
$205,000 respectively.                                                          
        In consideration for the exercise of stock options, the Company received
and recorded  into  treasury  stock 85,270 shares valued at $2,642,000 in fiscal
1999,  513 shares valued at $12,000 in fiscal 1998,  and 75,000 shares valued at
$1,266,000 in fiscal 1997.                                                      
        During fiscal 1999 the Company acquired all of the outstanding  stock of
Penederm  (see note B). The purchase  price of  approximately  $207,938,000  was
satisfied principally through the issuance of the Company's common stock.       
        During fiscal 1999 in connection  with product  license  agreements  the
Company recorded intangible assets and the related obligations of $22,300,000 in
excess of amounts paid. In fiscal 1997 the Company  recorded  intangible  assets
and long-term  obligations  of  $49,666,000 in excess of amounts paid related to
the acquisition of MAXZIDE Registration Mark.                                   

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

  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
$43,584,000 and $23,385,000 at March 31, 1999 and 1998, 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 cost of  depreciable  assets to operations
 over the 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. 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.                                               

9. 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. Three of the Company's
     customers  accounted  for 15%, 14%, and 11% of net sales in fiscal 1999 and
     13%,  12%,  and 11% of nets  sales  in  fiscal  1998.  No  single  customer
     represented  more than 10% of net sales in fiscal 1997.  At March 31, 1999,
     approximately 48% of the accounts  receivable balance  represented  amounts
due from three customers.                                             
            The Company invests its excess cash in deposits 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.                    

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

10. Earnings per Share                                                
     During fiscal 1998 the Company  adopted  Statement of Financial  Accounting
     Standards  No.  128,  "Earnings  per  Share."  This  statement  establishes
     standards  for  computing  and  presenting  basic and diluted  earnings per
     share. Basic earnings per share is computed by dividing net earnings by the
     weighted average common shares outstanding for the period. Diluted earnings
     per share is computed  by dividing  net  earnings by the  weighted  average
     common  shares  outstanding  adjusted  for the  dilutive  effect of options
     granted  under the Company's  stock option  plans.  Prior periods have been
restated to reflect this new statement.                               
            A reconciliation  of diluted  earnings per share is as follows:  (in
thousands except per share amounts)                                   

    March 31,                                      1999       1998        1997
     Net earnings                                $115,409   $100,777   $  63,127
     Weighted average common shares               125,584    122,094     121,926
     Assumed exercise of stock options              1,572        949         801
                                                 --------   --------   ---------
     Diluted weighted average common shares       127,156    123,043     122,727
     Diluted earnings per share                  $    .91   $    .82   $     .51

11. Accounting Standards                                              
     Effective April 1, 1998, the Company adopted the provisions of Statement of
     Financial Accounting Standards No. 130, "Reporting  Comprehensive  Income,"
     which  establishes  standards for recording  and  disclosing  comprehensive
     income and its components in the financial statements. Comprehensive income
     includes all changes in  shareholders'  equity except those  resulting from
     investments  by  owners  and   distributions   to  owners.   The  Company's
     comprehensive  earnings are  comprised  of net earnings and the  unrealized
gain and loss on marketable securities, net of income taxes.          
            In June  1998,  the  Financial  Accounting  Standards  Board  issued
     Statement  of  Financial  Accounting  Standards  No.133,   "Accounting  for
     Derivative  Instruments  and Hedging  Activities"  ("SFAS No.  133").  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.  This
     statement is effective for fiscal years  beginning after June 15, 2000. The
     Company is  currently  evaluating  the impact that SFAS No.133 will have on
its financial position and its results of operations.                 

     12.  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  those  financial  statements  and
accompanying notes. Actual results could differ from those estimates. 

13. Reclassification                                                  
     Certain  prior year amounts have been  reclassified  to conform to the 1999
presentation.                                                         

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 total
     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 on going research and
     development  projects  acquired  by the  Company  which  have  not yet been
approved by the                                                       

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

     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.                                  
            The  Company   acquired  five  IPR&D  projects  of  which  two  were
     significant  to the IPR&D  valuation.  One project is for the  treatment of
     inflammatory  fungal  conditions  while  the  other  project  is for a nail
     antifungal  product.  In accessing  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 valuation 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 Statement 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  the
     $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 merger 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 merger.                                    
            During  fiscal  1999,  the  Company  purchased  various  product and
     marketing  rights with an  aggregate  purchase  price of  $30,300,000.  The
     purchase  agreements  require fixed payments and royalties on product sales
in future periods.                                                    

C.  Inventories                                                             
Inventories consist of the following components: (in thousands)       

March 31,                                        1999         1998    
Raw materials                                  $57,414      $63,308   
Work in process                                 20,813       27,858   
Finished goods                                  58,266       54,875   
                                           --------     --------
                                           $136,493     $146,041

D. Property, Plant and Equipment                                            
Property, plant and equipment consists of the following components:   
(in thousands)                                              

        March 31,                     Useful Lives      1999            1998
         Land and land improvements         -         $  6,583        $  6,909
         Buildings and improvements      20 - 40        86,898          72,893
         Machinery and equipment          5 - 10       137,716         122,572
                                         -------      --------        --------
         Construction in progress            -          13,596          23,945
                                                       244,793         226,319
         Less accumulated depreciation                  90,157          74,907
                                                      --------        --------
                                                      $154,636        $151,412

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

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 Earnings of Somerset  includes the  Company's 50% portion of
     Somerset's net earnings 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 1999,  1998,  and 1997.  Additionally,  the Company's  charges to
     Somerset for  management  services and product  development  activities are
     included  in  Equity in  Earnings  of  Somerset.  These  charges  have been
recorded by Somerset as a reduction of its net earnings.              
            Condensed  audited  balance  sheet  information  of  Somerset  is as
follows: (in thousands)                                               

December 31,                 1998            1997            1996     
Current assets             $70,929         $53,973         $45,871    
Non-current assets           2,040           3,466           7,006    
Current liabilities         16,584          15,660          19,075    
Payable to owners              595           1,433           1,621    

        Condensed audited income statement information of Somerset is as
follows: (in thousands)                                               

Year ended December 31,      1998           1997            1996      
Net sales                  $43,557        $66,956        $101,512     
Cost and expenses           19,316         30,055          46,895     
Income taxes                 9,635         12,924          18,815     
                      -------        -------        --------
Net earnings               $14,606        $23,977         $35,802     

          The above  information  represents  100% of  Somerset's  operations of
which the Company has a 50% interest.                                 
            Somerset's marketing exclusivity for EldeprylRegistration Mark 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 since 1996.          
            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,  1998,  the  proposed  adjustments  by the  IRS  amounted  to
     approximately  $14,000,000  of additional  income tax and interest  charges
     over amounts accrued, of which 50% would be the Company's share. Management
     of Somerset  believes  it has  appropriately  claimed the Code  Section 936
credit and intends to vigorously defend its position on this matter.  

F  Marketable Securities                                                    
   The amortized cost and estimated market values at March 31, 1999 and 1998
are as follows: (in thousands)                                        

                   Gross       Gross
                  Amortized  Unrealized   Unrealized    Market
March 31, 1999          Cost        Gains       Losses      Value     
Debt securities       $60,071      $  303        $187    $  60,187    
Equity securities       8,101       2,144         560        9,685    
                  $68,172      $2,447        $747    $  69,872

                    Gross      Gross
                  Amortized    Unrealized  Unrealized     Market
March 31, 1998          Cost        Gains       Losses       Value    
Debt securities       $28,942      $  380        $ 32    $  29,290    
Equity securities      10,584       3,852       1,785       12,651    
                  $39,526      $4,232      $1,817    $  41,941

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

Maturities of debt securities at market value at March 31, 1999 are as
follows: (in thousands)                                               

Mature in one year or less                   $42,413                  
Mature after one year through five years       6,152                  
Mature after five years                       11,622                  
                           -------
                           $60,187

     Proceeds from sales of marketable securities were $50,151,000,  $17,233,000
     and $11,369,000 during fiscal 1999, 1998 and 1997. Gross gains of $942,000,
     $767,000 and $565,000 and gross losses of $205,000,  $82,000, and $271,000,
     were realized  during fiscal 1999,  1998 and 1997.  The cost of investments
sold is determined by the specific identification method.             

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

   March 31,                               Useful Lives   1999          1998
    Patents and technologies                 10 - 20     $122,985     $ 27,281
    License fees and agreements               2 - 12       33,086        7,587
    MaxzideRegistration Mark intangibles          25       69,666       69,666
    Goodwill                                 20 - 40      128,480       31,732
    Other                                     5 - 20       28,462       25,719
                                             -------     --------     --------
                                                          382,679      161,985
        Less accumulated amortization                      46,676       33,240
                                                         --------     --------
                                                       $  336,003     $128,745

     The MAXZIDE  Registration Mark 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. 

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

 March 31,                                        1999            1998
  Pooled asset funds                             $46,611         $25,368
  Cash surrender value                            29,742          26,569
  Other investments                               22,596          34,866
                                                 -------         -------
                                                 $98,949         $86,803

            Pooled asset funds include the Company's interest in various limited
     partnership funds which consist of common and preferred stocks,  bonds, and
     money  market  funds.  Earnings  on these  investments  included  under the
     caption Other income amounted to $19,530,000, in 1999, $6,572,000, in 1998,
     and $1,184,000, in 1997. At March 31, 1999 and 1998 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.  The  change in other  investments  from 1998
     reflects adjustments made to reduce the carrying value of these investments
to their estimated fair value.                                        
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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

I. Other Current Liabilities                                                
Other current liabilities consist of the following components:        
(in thousands)                                                        

March 31,                                       1999            1998  
Payroll and employee benefit plan accruals     $20,672        $16,726 
VivoRx funding (See note S)                     10,302          3,000 
Medicaid                                        8,305           4,412 
Legal and professional                          3,811           2,100 
Royalties                                       4,958           6,164 
Product license fees                            8,802           1,125 
Other                                           4,429           3,108 
                                             -------         -------
                                             $61,279         $36,635

J. Long-Term Obligations                                                    
     Long-term  obligations  include  accruals for  postretirement  compensation
     pursuant  to  agreements  with  certain  key  employees  and  directors  of
     approximately  $13,463,000,  and  $11,494,000,  at March 31, 1999 and 1998.
     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
     $4,000,000,  and $5,100,000,  at March 31, 1999 and 1998.  Future principal
     payments  on  these  notes  are  in  amounts  ranging  from  $1,000,000  to
     $2,000,000,  per year through 2002. At March 31, 1999 and 1998, the Company
was in compliance with all of its debt covenants.                     
         The present value of the Company's obligations for product acquisitions
     was $24,605,000 at March 31, 1999 and $16,316,000 at March 31, 1998. Future
     payments  including  minimum royalty  payments for these agreements will be
     approximately  $18,500,000  in fiscal  2000,  $2,000,000  in  fiscal  2001,
$3,750,000 in fiscal 2002 and $2,000,000 in fiscal 2003.              

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

Year ended March 31,        1999            1998             1997     
Federal                                                               
    Current           $77,546         $45,601          $19,176
    Deferred           (9,617)         (2,993)              68
                      -------         -------          -------
                       67,929          42,608           19,244
State                                                                 
    Current             9,653           5,218            4,845
     Deferred             (697)           (214)             (21)
                      -------         -------          -------
                        8,956           5,004            4,824
Income taxes              $76,885         $47,612          $24,068    
                     --------        --------          -------
Pre-tax earnings         $192,294        $148,389          $87,195    
                     --------        --------          -------
Effective tax rate           40.0%           32.1%            27.6%   
                     --------        --------          -------

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

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

 March 31,                                             1999         1998
Deferred tax assets:                                                  
          Employee benefits                          $  5,090       $4,397
          Intangible assets                             3,627        4,080
          Asset allowances                             17,841        8,230
          Inventory                                     1,069          411
          Investments                                   5,411        4,188
        Tax loss carryforwards                       18,198          -
        Tax credit carryforwards                      3,683          -
           Other                                           266          (69)
                                                     --------      -------
  Total deferred tax assets                            55,185       21,237
Deferred tax liabilities:                                             
          Plant and equipment                          10,373        8,702
          Intangible assets                            43,675        6,829
          Investments                                   6,506        3,585
                                                     --------      -------
  Total deferred tax liabilities                       60,554       19,116
                                                     --------      -------
  Deferred tax asset (liability) - net                ($5,369)      $2,121
                                                     --------      -------
Classification in the consolidated balance sheets:                    
          Deferred income tax benefit - current       $18,199       $7,845
          Deferred income tax liability - non-current  23,568        5,724
                                                     --------      -------
   Deferred tax asset (liability) - net               ($5,369)      $2,121
                                                     --------      -------

            Deferred tax assets relating to net operating loss carryforwards and
     R&D tax credit  carryforwards  were  acquired  during  fiscal 1999 upon the
     acquisition of Penederm Inc. Future  utilization of these assets is subject
     to certain  limitations set forth in the Internal Revenue Code. The Company
     has approximately  $49,000,000 of federal and state tax loss  carryforwards
     and  $3,683,000 of tax credits to offset future  taxable  income.  The loss
 carryforwards and tax credits expire in fiscal years 2002 through 2013.
            A reconciliation of the statutory tax rate to the effective tax rate
is as follows:                                                        

        Year ended March 31,                    1999         1998       1997
         Statutory tax rate                      35.0%       35.0%       35.0%
       IPR&D                                    5.3%         -           -
         State income taxes-net                   3.1%        2.3%        4.8%
          Tax exempt earnings-primarily dividends (1.1%)      (2.4%)      (6.4%)
          Tax credits                             (2.6%)      (3.0%)      (5.9%)
         Other items                              0.3%        0.2%        0.1%
                                                 -----       -----       -----
         Effective tax rate                      40.0%       32.1%       27.6%
                                                 -----       -----       -----

            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.                                               

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

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.  The Rights
     Plan  will  expire  on  September  5, 2006  unless a  triggering  event has
occurred.                                                             

M. Commitments                                                              
     The Company has entered into various  contractual  agreements,  principally
     licensing  arrangements,  whereby the Company has obtained, in exchange for
     funding  of drug  development  activities,  rights  to  manufacture  and/or
     distribute  certain  drugs,  which  are  presently  in  various  stages  of
     development.  In the event  that all  projects  are  successful,  milestone
     payments  totaling  $23,375,000,  would be made over the next  five  years.
     Approximately  ninety-five percent of this total is due upon the filing and
     approval of an Abbreviated  New Drug  Application  or New Drug  Application
with the FDA.                                                         

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  benefits  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.  Based on
     an independent  audit,  Genpharm  initiated a lawsuit against  Novopharm to
     resolve  contract  interpretation  issues and collect any 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  counterclaims  against  Genpharm and the Company are
without merit and will vigorously defend its position.                

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.                               

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 commo n
     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, 1999,  8,625,000 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,  1999,  354,000  shares have been  granted  pursuant to the
Directors' Plan.                                                      

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

             Additional  stock options are outstanding from the recently 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
                                        under option   price per share
Outstanding as of April 1, 1996          2,720,014           $11.87   
     Options granted                    217,000            14.75
     Options exercised                 (290,167)           11.05
     Options cancelled                  (75,970)           15.70
                                     ----------           ------
Outstanding as of March 31, 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 outstanding     Options exercisable
                           -------------------     -------------------
Weighted      
                              average    Weighted                 Weighted
 Range of                   remaining    average                 average
  exercise         Number    contractual exercise     Number      exercise
 price         outstanding    life      price     exercisable    price
  per share     as of 3/31/99  (years)  per share  as of 3/31/99 per share
 -------------------------------------------------------------------------
$  .81-$11.58    391,045      3.57       $7.19     391,045      $ 7.19
$12.00-$12.00  1,023,953      3.23      $12.00   1,023,953      $12.00
$12.32-$16.36    260,228      7.25      $14.66     146,228      $14.58
$16.69-$16.69    763,000      8.32      $16.69     326,000      $16.69
$16.73-$30.15  1,110,928      8.25      $19.60     778,678      $19.23
  ------------------------------------------------------------------------
$  .81-$30.15  3,549,154      6.25      $15.11   2,665,904      $14.12

            At March 31, 1999,  options were exercisable for 2,665,904 shares at
     a weighted average  exercise price of $14.12 per share.  The  corresponding
     amounts  were  2,557,856  shares at $13.20 per share at March 31,  1998 and
1,831,061 shares at $11.06 per share at March 31, 1997.               
            In  accordance   with  the  provisions  of  Statement  of  Financial
     Accounting  Standards No. 123  "Accounting  for  Stock-Based  Compensation"
     ("SFAS No.  123"),  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  $1,613,000,  or $.01 per share,
     $6,489,000,  or $.04 per  share and  $1,174,000,  or $.01 per share for the
     years ended March 31, 1999,  1998 and 1997.  These  calculations  only take
into account options issued since April 1, 1995.                      

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

            The weighted  average fair value of options granted during the years
     ended March 31, 1999, 1998 and 1997 was $9.37,  $6.47,  and $6.15. The fair
     value was estimated using the  Black-Scholes  option pricing model based on
the following assumptions:                                            

   March 31,                              1999           1998           1997
   Volatility                              42%            35%            35%
   Risk-free interest rate                5.0%          6.07%          6.73%
   Dividend yield                         1.0%           1.0%           1.1%
  Expected term of options (in years)    5.2            5.4            6.1

Q. Employee Benefits                                                        
     The  Company  maintains  profit  sharing  and/or  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,  1999,  1998  and 1997  were  $4,776,000,
$3,889,000 and $3,620,000 respectively.                               
             In fiscal 1999, the Company  adopted a plan covering  substantially
     all 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.                                                        

R. Segment Reporting                                                        
     Effective  April 1,  1998,  the  Company  adopted  Statement  of  Financial
     Accounting  Standards No. 131 "Disclosures  about Segments of an Enterprise
     and  Related  Information,"  which  established  reporting  and  disclosure
     standards for an enterprise's  operating  segments.  Operating segments are
     defined  as  components  of an  enterprise  for  which  separate  financial
     information is available and regularly reviewed by senior  management.  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 descibed 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.       

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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

March 31, (dollars in                            Corporate/           
   thousands)                  Generic    Branded   Other   Consolidated
Total revenues         1999 $638,122     $83,001     -         721,123
                       1998  501,320      54,103     -         555,423
                       1997  381,495      58,697     -         440,192
----------------------------------------------------------------------
Segment profit (1)     1999  228,529      14,941   (51,176)    192,294
                       1998  145,618       6,728    (3,957)    148,389
                       1997   74,264      11,718     1,213      87,195
----------------------------------------------------------------------
Segment assets (2)     1999  396,293     257,860   552,508   1,206,661
                       1998  398,189     126,878   322,686     847,753
                       1997  318,367     129,796   329,417     777,580
----------------------------------------------------------------------
Property, plant and                                                   
equipment additions    1999   11,646       3,991     1,099      16,736
                       1998   24,843       3,925        85      28,853
                       1997   25,904         828       122      26,854
----------------------------------------------------------------------
Deprecation and                                                       
amortization (1)&(2)   1999   11,452      10,246     5,213      26,911
                       1998   10,950       8,084     2,674      21,708
                       1997    9,013       5,717     2,617      17,347
----------------------------------------------------------------------

          (1)  Corporate  and  Other  Segment   Profit   includes   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.

S. Contingencies                                                            
     The Company is involved in various legal  proceedings  that are  considered
     normal  to  its  business.   The  majority  of  these  proceedings  involve
     intellectual  property  rights  related to products under  development  and
     prior  to  FDA  approval.   These  proceedings  are  initiated  by  branded
     pharmaceutical  companies and often result in delaying the  introduction of
     generic  products.  As more of these suits have been initiated  against the
     Company,  the cost to defend these suits in outside legal fees and internal
     resource  commitments has risen  dramatically.  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.         
            In August 1997,  Key  Pharmaceuticals,  Inc.  filed suit against the
     Company and certain subsidiaries  claiming patent infringement  relating to
     the marketing of its Nitroglycerin  Transdermal  System.  The relief sought
     included a preliminary and permanent injunction,  treble damages along with
     interest and attorneys fees and expenses. All claims and counterclaims were
     dismissed  pursuant  to a  settlement  between the  companies.  The Company
     continues to manufacture and market its Nitroglycerin Transdermal System in
accordance with the settlement.                                       
            A subsidiary  of the Company is involved in a dispute  relating to a
     license and supply  contract for  Nitroglycerin  Transdermal  Patches which
     both parties claim has been breached by the other.  The other company seeks
     damages  in excess of $20  million.  The  dispute  is  subject  to  binding
     arbitration  before a three member panel which  commenced in March 1999 and
     is scheduled to continue in June 1999.  Although the Company  believes that
     the complaint  against it is without merit,  there can be no assurance that
the Company will prevail in this matter.                              
            In addition to the above,  on December 22, 1998,  the Federal  Trade
     Commission ("FTC") filed suit in federal district court for the District of
     Columbia  against the Company.  The FTC alleges  that the Company  violated
     Section  5(a) of the  Federal  Trade  Commission  Act (the "FTC  Act") with
respect                                                               
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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

     to two generic drugs  manufactured  and sold by the Company  (Lorazepam and
     Clorazepate). Specifically, 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  these 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 relief sought includes an injunction  barring
     the Company from engaging in conduct that violates  Section 5(a) of the FTC
     Act,  rescission of certain  agreements and  disgorgement in excess of $120
million.                                                              
            In a parallel case also filed on the same day, Attorneys General for
     ten states,  Connecticut,  Florida,  Illinois,  Minnesota,  New York, North
     Carolina, Ohio, Pennsylvania, Virginia and Wisconsin (the "States"), joined
     together  to file a single  lawsuit  against the Company in the same court.
     The complaint  filed by the States asserts claims pursuant to Section 1 and
     2 of the federal Sherman Act against the same parties as those named in the
     FTC suit and one other  distributor  not named by the FTC. These claims are
     analogous  to the claims  brought by the FTC under  Section 5(a) of the FTC
     Act, and are based on similar factual  allegations.  The States'  complaint
     also alleges violations of the respective states'  competition and consumer
     protection  laws. The States further allege a per se violation of Section 1
     of the Sherman Act with respect to the pricing of raw material  used in the
     manufacture  of  Lorazepam  (an  allegation  not made by the FTC).  Without
     specifying a dollar  amount,  the States seek relief similar to that sought
     by the FTC,  treble damages and attorneys'  fees. The complaint was amended
     in  February  1999 to  include  22  additional  states  as  plaintiffs.  In
addition, the State of Maryland has                                   
filed a similar but independent suit.                       
            The Company is aware of more than 20 class  actions filed by private
     parties in various  state and federal  courts  involving  the same  conduct
     alleged in the  complaints  brought by the FTC and the  States,  as well as
     alleged  violations of state  consumer  protection  laws. The lawsuits seek
unspecified amounts of damages.                                       
            In  addition,  on January 11, 1999, a class action suit was filed in
     federal  district court for the Western  District of Pennsylvania  alleging
     violations of federal secu-rities laws by the Company and certain directors
and officers of the Company.                                          
          The suit alleges that the Company failed to disclose monopolization of
     certain  raw  materials  used  to  manufacture  Lorazepam  and  Clorazepate
     pursuant to Sections  10(b) and 20 of the  Securities  and  Exchange Act of
     1934 and Rule 10 b-5 of the Securities and Exchange Commission. The alleged
     class  period is from  February  17,  1998 to  December  5,  1998.  Without
specifying a dollar amount, the suit seeks compensatory damages.      
            The  Company  has  filed  motions  to  dismiss  the  FTC  and  State
     Attorneys'  General cases as well as the federal  securities  case filed in
     U.S. Federal  District Court for the Western  District of Pennsylvania.  In
addition, two of these private actions have been dismissed.           
            The Company believes that it has meritorious  defenses to the claims
     in all remaining 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  currently  involved  in  negotiations  with a State
     agency concerning certain contract pricing matters. Management believes the
     resolution  of this matter will not have a material  adverse  effect on the
Company's operations or its financial position.                       
            Since 1994,  the Company had been  providing  funding to VivoRx Inc.
     ("VivoRx"),  a California  based research and development  company which is
     pursuing diabetes related  research.  The Company suspended cash funding to
     VivoRx for periods after March 31, 1998,  pending  resolution of accounting
and                                                                   
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Notes to Consolidated Financial Statements

Mylan Laboratories Inc. 

     other issues raised by the Company.  In June,  1998, the Company  commenced
     litigation  against  VivoRx,  certain  VivoRx  officers and  directors  and
     certain  companies owned or controlled by those officers and directors.  In
     March,  1999,  VivoRx  filed  counterclaims  against  the  Company  seeking
     compensatory  and punitive damages in an unspecified  amount.  Upon motions
     made by the Company,  it was ordered that certain of the disputes  relating
     to the exclusive licensing agreement between the parties were to be decided
     in a separate  arbitration  proceeding.  This  proceeding  was concluded in
     April,  1999  and on May 18,  1999,  the  Company  received  notice  of the
arbitrator's decision.                                                
            Under the terms of the  arbitration  award,  the  Company  must fund
     approximately $10 million for research and development  performed by VivoRx
     subsequent to March 31, 1998. In turn,  the Company was  permitted,  at its
     election,  either  to (1)  continue  in effect  and  continue  funding  the
     exclusive  licensing  agreement  between the parties,  or (2) terminate its
     rights under the agreement and receive payment from VivoRx of approximately
     $18 million, representing 50% of the amounts it has funded for research and
development to date                                                   
          (including the $10 million  discussed  above).  The Company elected to
     terminate the agreement and,  therefore,  VivoRx must pay to it the amounts
     due, plus interest, in five annual installments commencing October 1, 2000.
     This  obligation  will  be  secured  by a  security  interest  in  VivoRx's
diabetes-related U.S. patents.                                        
            As a result of this award,  the Company has  recorded the effects of
     the $10  million  funding  obligation  discussed  above in its fiscal  1999
     financial  statements as research and development  expense. The $18 million
   required to be paid by VivoRx will be recognized as income when realized.
            Various  disputes  between the Company and VivoRx and other  parties
     remain the  subject of  on-going  litigation.  While it is not  feasible to
     predict  the  ultimate  outcome of this  litigation,  it is the  opinion of
     management  that the  ultimate  outcome  will not have a  material  adverse
effect on the Company's operations or financial position.             

--------------------------------------------------------------------------------
Independent Auditors' Report

Mylan Laboratories Inc. 

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

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Mylan
Laboratories  Inc.  and  subsidiaries  as of March 31,  1999 and  1998,  and the
related   consolidated   statements  of  earnings,   shareholders'   equity  and
comprehensive earnings, and cash flows for each of the three years in the period
ended  March  31,  1999,  appearing  on pages 30  through  48.  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 Mylan Laboratories Inc. and
subsidiaries as of March 31, 1999 and 1998, and the results of their  operations
and their cash flows for each of the three  years in the period  ended March 31,
1999, in conformity with generally accepted accounting principles.              

/s/Deloitte & Touche LLP                                                        

Deloitte & Touche LLP                                                           
Pittsburgh, Pennsylvania                                                        
May 14, 1999 (May 18, 1999 as to note S)                                        

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Market Information

Mylan Laboratories Inc. 

Quarterly Financial Data                                            

(Amounts in thousands        1st       2nd      3rd       4th         
    except per share amounts) Quarter   Quarter  Quarter   Quarter      Year
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

Fiscal 1998                                                         
     Total revenues           $109,188  $153,955  $129,517  $162,763  $555,423
     Gross profit               47,809    55,932    54,440    82,130   240,311
     Net earnings               16,598    30,390    21,983    31,806   100,777
     Earnings per share-basic      .14       .25       .18       .26       .83
     Earnings per share-diluted    .13       .25       .18       .26       .82

    Total revenues for fiscal 1998 include $26,822,000 recognized in
   the 2nd quarter relating to the Genpharm License Agreement (see note N to
the consolidated financial statements).                               

Market Prices                                                       
               1st        2nd         3rd          4th
              Quarter      Quarter    Quarter      Quarter
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    

Fiscal 1998                                                         
High                16 7\8       24 3\4     25 1\4        24 5\16   
Low                 11 1\8       14 5\8     17 7\16       17 1\16   

New York Stock Exchange Symbol: MYL                                 
On April 30, 1999 the Company had approximately 74,842 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

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-K Filing	Date	First	Last	Other Filings

	6/23/92	33
	8/1/92	11
	4/7/93	33
	1/13/95	11
	4/1/95	34
	8/15/95	11
	3/31/96	32		10-K, DEF 14A
	6/6/96	29
	8/23/96	33
	1/23/97	33
	3/31/97	25	35	10-K
	4/1/97	28
	7/24/97	33		DEF 14A
	2/17/98	37		10-Q
	3/31/98	16	38	10-K, DEF 14A
	4/1/98	27	35
	4/5/98	35
	6/15/98	4
	7/15/98	4
	10/2/98	14	27
	10/23/98	1
	12/5/98	37
	12/22/98	36
	12/31/98	29		10-Q
	1/11/99	37
	3/9/99	5
	3/15/99	5
For The Period Ended	3/31/99	12	38	DEF 14A
	4/30/99	39
	5/14/99	38
	5/18/99	38
Filed On / Filed As Of	6/28/99
Corrected On	8/10/99
	3/31/0	13		DEF 14A, 10-K, 8-A12B/A
	6/15/0	18	27
	10/1/0	38
	9/5/6	33

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Mylan Laboratories Inc · 10-K · For 3/31/99 · EX-13

Filed On 6/28/99 · SEC File 1-09114 · Accession Number 69499-99-32

This Filing was Corrected by the SEC on 8/10/99.

Annual Report · Form 10-KFiling Table of Contents

EX-13 · Annual or Quarterly Report to Security HoldersExhibit Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Annual Report · Form 10-K
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EX-13 · Annual or Quarterly Report to Security Holders
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