26^th Consecutive Quarter of Record Sales;
16^th Consecutive Quarter of Record Net Income

Second Quarter 2002 Highlights:

• Sales Increase 36% to $49.6 Million
• Net Income Increases 68% to $10.2 Million, or $0.35 Per Diluted Share
• Purchase of Assets and Liabilities of Thames Pharmacal Company
• Two ANDA Approvals (One Tentative)

Financial Highlights ($000)

Hawthorne, New York, July 23, 2002 – Taro Pharmaceutical Industries Ltd. (Nasdaq/NMS:TARO) today reported record sales and earnings for the Company’s second quarter and six months ended June 30, 2002.

Second Quarter 2002 Results
Sales for the second quarter of 2002 increased 36% to $49.6 million, compared with $36.4 million in the second quarter of 2001. Net income for the quarter increased 68% to $10.2 million, or $0.35 per diluted share, compared with $6.1 million, or $0.24 per diluted share, for the year-ago quarter. (Per share data for the second quarter and six-month results are adjusted to reflect a two-for-one stock split in the form of a 100% stock dividend paid on July 26, 2001.)

Taro’s gross profit for the quarter increased 30% to $30.8 million, or 62% of sales, compared with $23.8 million, or 65% of sales, for the second quarter of 2001. The change in gross profit margin reflects factors that include price competition as well as the integration of the operations of Thames Pharmacal Company, Inc. ("Thames").

Selling, general and administrative expenses for the quarter were $12.6 million, or 26% of sales, compared with $11.4 million, or 31% of sales, in the year-ago quarter.

Operating income before R&D expenses increased 47% to $18.2 million, or 37% of sales, compared with $12.3 million, or 34% of sales, for the second quarter of 2001. R&D expenses were $6.2 million, or 13% of sales, compared with $4.9 million, or 13% of sales, for the year-ago quarter. Operating income increased 60% to $11.9 million, compared with $7.4 million in the second quarter of 2001.

"Our top line growth reflects gains in market share across all of our principal product lines," stated Barrie Levitt, M.D., Chairman of the Company. "At the same time, the Company’s strong increase in net income demonstrates effective operational leverage."

First Half 2002 Results
Sales for the first half of 2002 increased 45% to $94.1 million, compared with $64.7 million for the same period in 2001. Net income increased 127% to $20.1 million, or $0.68 per diluted share, compared with $8.8 million, or $0.35 per diluted share, for the year-ago period.

The Company’s gross profit in the six-month period increased 46% to $59.6 million, or 63% of sales, compared with $40.8 million, or 63% of sales, for the same period in 2001. Selling, general and administrative expenses for the period were $24.4 million, or 26% of sales, compared with $20.3 million, or 31% of sales, for the year-ago period.

Operating income before R&D expenses increased to $35.3 million, or 37% of sales, compared with $20.6 million, or 32% of sales, for the second half of 2001. R&D expenses were $11.6 million, or 12% of sales, compared with $8.9 million, or 14% of sales, for the year-ago period. Operating income increased 103% to $23.7 million, compared with $11.6 million for the same period of 2001.

Thames Acquisition
In May, the Company purchased substantially all the assets and liabilities of Thames, a privately-held pharmaceutical manufacturer located in Ronkonkoma, New York. Thames had sales of approximately $9 million in 2001, primarily consisting of topical generic products. With the purchase, Taro acquired the rights to all of Thames’ generic prescription and over-the-counter products, including its Abbreviated New Drug Applications ("ANDAs") approved by the U.S. Food and Drug Administration ("FDA"). Taro also acquired and is operating Thames’ FDA-approved manufacturing facilities under the name Thames Pharmaceuticals, Inc., a wholly owned subsidiary.

2^nd Quarter ANDA Approvals
In May, Taro received FDA approval of its ANDA for Amcinonide Cream USP, 0.1%, bioequivalent to Fujisawa Healthcare’s Cyclocort® Topical Cream. To date, Taro is the only company approved to market a generic version of Cyclocort® Topical Cream in the U.S.; the annual market for this product was estimated by industry sources at $5.4 million in 2001. The Company manufactures both the active pharmaceutical ingredient and the finished product at its facilities in Haifa, Israel.

In June, Taro received tentative approval from the FDA for its ANDA for Loratadine Syrup 10 mg/10 ml, bioequivalent to Schering-Plough’s Claritin® Syrup. A tentative approval is an FDA determination that an ANDA submission currently satisfies the substantive requirements for approval, subject to the expiration of all statutorily imposed exclusivities and restrictions. Tentative approvals do not grant marketing rights; a company may only market a product upon receiving final approval for an ANDA submission.

Taro and other pharmaceutical companies are currently involved in litigation with Schering-Plough regarding certain patents held by Schering-Plough for Loratadine. Another generic company has the right to an exclusive marketing period for the product, after which Taro, as well as other competitors, expect to receive final approval to market Loratadine Syrup. According to industry sources, the annual market for Claritinâ Syrup is estimated to be approximately $70 million.

Taro currently has 14 filings submitted to the FDA, including one tentative approval, and multiple filings with regulatory agencies around the world.

Strong Financial Position
At June 30, 2002, Taro’s total assets were $338 million, compared with $308 million at December 31, 2001. Cash and cash equivalents were $133 million, compared with $151 million at the end of 2001. Current assets at June 30, 2002 were $243 million, compared with $231 million at December 31, 2001. Total liabilities were $98 million, compared with $89 million at the end of 2001. Current liabilities were $44 million, compared with $35 million at year-end 2001. Shareholders’ equity was $240 million, compared with $218 million at the end of 2001.

Cash and cash equivalents were reduced as a result of several factors, including: the acquisition of Thames; higher accounts receivable and inventories associated with increased sales; and investments in property, plant and equipment made in anticipation of the Company’s future growth.

Outlook
"We are investing in research while seeking product acquisitions that complement our skills and resources," said Dr. Levitt. "Future growth will depend on new product approvals, as well as potential acquisitions. Taro’s strategy will continue to be driven by its long-standing commitment to good science, effective marketing and efficient, high-quality manufacturing."

Conference Call
The Company will conduct a conference call to discuss second quarter and six month results on Tuesday, July 23, 2002 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time). The call will be available live via the Internet by accessing www.taro.com. For those who cannot listen to the live broadcast, an online replay will be available through July 30, 2002 on www.taro.com. A telephone replay will also be available through July 30, 2002 by dialing 800-428-6051 (domestic U.S.) or +973-709-2089 (international) and entering the passcode 252524 when prompted.

Taro is a multinational, science-based pharmaceutical company dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products.

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements that are not describing historical facts, comments concerning: Taro’s expectations regarding growth; ANDA filings and approvals; market acceptance of Taro’s products; operational leverage and contribution of new products and acquisitions. Although Taro believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ include industry and market conditions, general economic conditions, slower than anticipated regulatory approval of new generic products, other regulatory actions, slower than anticipated penetration of new markets, changes in the Company’s financial position, and other risks detailed from time to time in the Company’s SEC reports, including its 2001 Annual Report on Form 20-F.

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