MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion and analysis in conjunction with the consolidated financial statements and the notes to those consolidated financial statements included elsewhere in this prospectus. In addition, the following discussion and analysis does not include the results from our discontinued operations, unless otherwise indicated. This discussion and analysis contains forward-looking statements. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Please note that references to “us,” “we,” “our,” and “the Company” for the periods prior to consummation of the Transactions discussed in this section refer to the Predecessor. All references in this discussion and analysis to “fiscal year” are to the twelve months ended September 30 of the year referenced, except for “fiscal year 2005,” which refers to the twelve months ending December 31, 2005.

Overview

We are a specialty pharmaceutical company that develops, manufactures, markets and sells branded prescription pharmaceutical products focused on two therapeutic categories: women’s healthcare and dermatology. Our portfolio of pharmaceutical products are promoted by our sales and marketing organization in the United States. We also distribute a product in Canada.

The Acquisition and Related Financing

We began commercial operations on January 5, 2005 when we acquired the Predecessor. The financial statements included in this prospectus and this discussion and analysis reflect the Acquisition as if the closing took place on January 1, 2005 and the operating results for the period January 1 through January 4, 2005 were those of the Successor. The period included only two business days and the impact on the results of operations during the period was not material. The consolidated financial statements presented for periods ended on or before December 31, 2004 (including the results from operations for the quarter ended March 31, 2004) include the accounts of the Predecessor and all of its wholly-owned subsidiaries.

On October 27, 2004, a company now controlled by the Sponsors reached an agreement on the terms of a recommended acquisition of Warner Chilcott PLC. The Acquisition became effective on January 5, 2005 and thereafter, following a series of transactions, we acquired 100% of the share capital of Warner Chilcott PLC.

To complete the Acquisition, the Sponsors, certain of their limited partners and certain members of our management, indirectly, funded equity contributions to Holdings, the proceeds of which were used by Holdings to purchase 100% of the Company’s share capital for $1,282.4 million. On January 18, 2005, the Company borrowed an aggregate $2,020.0 million consisting of an initial drawdown of $1,420.0 million under a $1,790.0 million senior secured credit facility and $600.0 million of 8.75% Senior Subordinated Notes due 2015.

The proceeds from the acquisition financings together with cash on hand at Warner Chilcott PLC were used: to pay selling stockholders $3,014.4 million, $70.4 million to retire all of the Predecessor’s outstanding share options, to pay $67.3 million of transaction expenses, to pay debt issuance costs of $82.7 million and to retire all of the Predecessor’s previously outstanding funded indebtedness totaling $195.0 million. The balance of the proceeds were used to fund $36.0 million of transaction costs incurred by the Company and expensed in the quarter ended March 31, 2005 and the remainder was held as cash for working capital purposes.

The Acquisition was accounted for as a purchase in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations.” The total purchase price, including direct costs of acquisition, of approximately $3,152.1 million was allocated to the acquired assets and liabilities based on their estimated fair values at the Acquisition Date. These allocations were determined by management taking into

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consideration valuation reports prepared for us by an independent third party appraisal firm. The excess of the purchase price over the underlying assets acquired and liabilities assumed was allocated to goodwill, which is not deductible for tax purposes.

Factors Affecting Our Results

Revenue

We generate two types of revenue: revenue from product sales and co-promotion revenue.

Product sales. We promote a portfolio of branded prescription pharmaceutical products primarily in the women’s health and dermatology segments of the U.S. pharmaceutical market. To generate demand for our products our sales representatives make face-to-face promotional and educational presentations to physicians who are likely to prescribe our products to their patients. By informing these physicians of the attributes of our products and the types of patients who can most benefit from them, we generate demand for our products with physicians, who in turn write prescriptions for our products for their patients, who in turn go to the pharmacy where the prescription is filled. Pharmacies buy our products either directly from us (some national retail chains) or through wholesalers/distributors. We sell our products to national retail chain stores and wholesalers/distributors and recognize revenue when title passes to our customers. Sales are recorded when title passes to our customers, generally free on board (“FOB”), destination.

When our unit sales to customers in any period exceed consumer demand (as measured by filled prescriptions in units), our sales in excess of demand must be absorbed before our customers begin to order again. We refer to the amount of inventory held by our customers, generally measured in the number of days demand on hand, as “pipeline inventory”. Pipeline inventories expand and contract in the normal course of business. When comparing reported product sales between periods, it is important to consider whether estimated pipeline increased or decreased during each period.

We generate our revenue primarily from the sale of branded pharmaceutical products in the U.S. market, including our hormonal contraceptives (Ovcon and Estrostep), our hormone therapy products (femhrt, Estrace Tablets, Estrace Cream and Femring), our treatment for premenstrual dysphoric disorder (Sarafem) and our oral antibiotic for the treatment of acne (Doryx). Our revenue from sales of these products consists primarily of sales invoiced (less returns and other deductions).

Included in net sales are amounts earned under contract manufacturing agreements. These activities are by-products of our May 2004 acquisition of the Fajardo, Puerto Rico manufacturing facility from a subsidiary of Pfizer and the March 2004 sale of rights to two Loestrin products to a unit of Barr. Under these agreements, we agreed to manufacture certain products for Pfizer and Barr for specified periods. Contract manufacturing is not an area of strategic focus for the Company and these contracts produce profit margins significantly below the margins realized on sales of distributed products. We expect to phase out the manufacturing of Pfizer products over the next two years as we transfer the manufacture of more of our own products to the Fajardo facility.

Co-promotion revenue. We generate revenue from a co-promotion agreement with Bristol-Myers for the psoriasis product Dovonex. Under this agreement, we earn revenue based on Bristol-Myers’ net sales (as defined in the agreement) of the product. We do not record Dovonex product sales or cost of goods sold and the selling and marketing expenses related to co-promotion revenue are included in our selling, general and administrative expenses. We expect our co-promotion revenue under this contract to increase in 2005 in comparison with 2004, and be replaced by Dovonex sales beginning in January 2006 when we intend to exercise our option to acquire the exclusive U.S. sales and marketing rights to that product.

Revenue Trends for Certain Product Categories

Hormonal Contraceptives. Revenues from our branded hormonal contraceptive Ovcon have grown over the periods covered in this discussion due to the increased promotion of these products by our sales force as well as overall growth of this product category. Estrostep has experienced revenue growth since our sales force began

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actively promoting it in the second quarter of fiscal year 2004. We believe that hormonal contraceptives are increasingly being prescribed to older reproductive women and are increasingly prescribed for benefits in addition to contraception. We also believe that Estrostep is well-positioned to capitalize on these attractive market trends in the future. We believe that future growth in this product category is likely to be driven by the continued promotion of Estrostep and Ovcon and planned line extensions, including Ovcon 35 Chewable which we expect to launch in early 2006.

Hormone Therapy. In our oral HT products, our revenues from femhrt have grown, while revenues from Estrace Tablets declined, over the periods covered by this discussion. We believe prescriptions for these products have been negatively affected by the announcement in July 2002 of the early termination of the E&P Arm of the WHI Study. Despite the overall decrease in the market and a decrease in femhrt prescription volume, femhrt’s share of total prescriptions in the oral estrogen-progestogen therapy segment has increased over the three years following the early termination of the E&P Arm of the WHI Study. With new prescriptions in the oral estrogen-progestogen therapy segment showing signs of stabilization, we believe that demand for these products is likely to improve in the future.

In contrast to the decline of our oral HT products, prescriptions of our local HT therapy, Estrace Cream, have experienced modest growth since July 2002. We believe that strong physician loyalty and high brand awareness has enabled Estrace Cream to achieve sales growth without active promotion other than the provision of samples by our sales force and a sample budget of approximately $0.4 million per year. We also believe that local hormone therapies generally, and Estrace Cream in particular, are well positioned in the market for HT products as doctors look for alternatives to oral HT therapy.

Acne Therapy. Our revenues from Doryx, which is the leading branded oral antibiotic prescribed by dermatologists for the treatment of acne, grew over the periods covered by this discussion. We believe that future growth in this product category is likely to be driven by Doryx as well as by the psoriasis treatment Dovonex, exclusive U.S. sales and marketing rights to which we intend to acquire from Bristol-Myers in January 2006, and Dovobet, for which we have a license from LEO Pharma and which we expect to launch in 2006, depending on the timing of FDA approval. See “Business—Dovonex and Dovobet Transactions.”

Premenstrual Dysphoric Disorder Therapy. Revenues from Sarafem, an SSRI prescribed for the treatment of premenstrual dysphoric disorder, declined over the periods covered by this discussion primarily due to therapeutic substitution and the discontinuation of promotion to primary care physicians after we acquired the product from Lilly. While we are exploring opportunities to develop a line extension for Sarafem, we do not foresee significant changes in Sarafem’s performance over the short term.

Factors Affecting Our Revenues

Changes in revenue from sales of our branded pharmaceutical products from period to period are affected by the following factors:

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Cost of Sales

We currently contract with third parties to manufacture most of our products. Our supply agreements with these third party manufacturers may include minimum purchase requirements and may provide that the price we pay for the products we sell can be increased based on inflation, increased fixed costs or other factors.

For products that we manufacture (at present, Estrostep and Femring), our direct material costs include the costs of purchasing raw materials and packaging materials. Direct labor costs for these products consist of payroll costs (including benefits) of employees engaged in production, packaging and quality control in our manufacturing plants at Fajardo, Puerto Rico and Larne, Northern Ireland. The largely fixed indirect production costs at our manufacturing plants consist of production, overhead and laboratory costs.

Due to the fact that most of our products are manufactured by third parties, the main factors that influence the cost of sales as a percentage of revenue are the terms of these supply agreements. We expect that cost of sales, as a percentage of revenues, will increase beginning in 2006 as a result of the royalties and supply prices that we will pay to LEO Pharma for Dovonex and Dovobet.

Gross Profit

Our gross profit, which excludes amortization costs, has increased in line with increases in our revenues over the periods discussed and our gross margins have remained approximately the same. Our sales from contract manufacturing generate gross margins lower than those earned on our distributed products. Contract manufacturing sales are expected to have a negative impact on our gross margin percentage in fiscal year 2005 in comparison with fiscal year 2004. We expect that our planned acquisitions of exclusive U.S. sales and marketing rights to Dovonex and Dovobet will have a negative impact on our weighted average gross margins for the reasons described above under “—Cost of Sales.”

Selling, General and Administrative

Selling, general and administrative expenses consist of all expenditures incurred in connection with the sales and marketing of our products, including distribution and warehousing costs. The major items included in sales and marketing expenses are:

Changes in sales and marketing expenses as a percentage of our revenue may be affected by a number of factors, including:

Administrative expenses consist of management salary and payroll costs, rent and miscellaneous administration and overhead costs. In addition, during fiscal year 2004 and the quarter ended December 31, 2004, we incurred exceptional administrative costs relating to fees and expenses of preparing for the Transactions and costs relating to litigation. We incurred significant administrative costs in 2005 resulting from the execution and

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completion of the Transactions and expect ongoing litigation expenses, which we expect to be offset in part by the elimination of our U.S. and U.K. securities listings and, in the United Kingdom, related reporting and compliance functions. See “The Transactions” and “Business—Legal Proceedings.”

Research and Development

Since we conduct very little early-stage exploratory research, research and development expenses comprise mainly development costs. These development costs are typically associated with:

Development costs also include payments to third party licensors when products that we have licensed from them reach milestones (such as FDA approval). These payments, which we refer to as “milestone payments,” are usually recognized as expenses, unless they meet the criteria of an intangible asset, as described below under “—Critical Accounting Policies and Estimates—Impairment of Definite Lived Intangible Assets,” in which case they are capitalized and amortized over their useful lives.

The level of development costs is related to the number of products in development and the stage of their development process. Development costs for any particular product may increase progressively in the development process, with Phase III clinical trials accounting for a significant part of the total development costs of a product.

Depreciation and Amortization

Depreciation costs relate to the depreciation of property, plant and equipment and are included in our statement of operations primarily in cost of sales. Depreciation is calculated on a straight-line basis over the expected useful life of each class of asset. No depreciation is charged on land.

Amortization costs relate to the amortization of intangible assets, which consist primarily of intellectual property rights. Amortization is calculated on either an accelerated or a straight-line basis, over the expected useful life of the asset, with each identifiable asset assessed individually. Patents and other intellectual property rights are amortized over periods not exceeding 15 years. See “ —Additional Factors Affecting Comparability of Results—The Transactions” for information regarding future increases in amortization expense as a result of the Transactions.

Interest Income and Interest Expense

Interest income consists primarily of interest income earned on our cash balances. Interest expense consists of interest on outstanding indebtedness and the amortization of financing costs. See “—Additional Factors Affecting Comparability of Results—The Transactions” for information regarding future increases in interest expense as a result of the Transactions.

Income Tax Expenses

Income tax expense consists of current corporation tax expense, deferred tax expense and any other accrued tax expense. For periods prior to December 31, 2004 our parent was a United Kingdom company and our composite tax rate reflected the rates in four tax jurisdictions: the United Kingdom, the United States, the Republic of Ireland and Puerto Rico. Our effective tax rate was 29% in fiscal year 2004. In connection with the Acquisition, the Company was reorganized and has a more tax-efficient structure with a Bermudian parent company and substantial operations in Puerto Rico and the United States. We expect to enter into a tax agreement with the Puerto Rican tax authorities, whereby our earnings in Puerto Rico, which are a large component of our overall earnings, will be subject to only a 2.0% income tax for a period of 15 years. We expect our effective tax rate in 2005 to be substantially less than the rates for the periods prior to the Acquisition.

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In 2004 the Predecessor transferred certain intangible assets between entities in different tax jurisdictions. The potential tax impacts of these transfers were recorded in the Predecessor’s income tax provisions and associated balance sheet accounts based on assumptions regarding the values of the transferred assets, including consideration of third party valuation reports. The tax year in which the transfers occurred has not yet been subject to audit by taxing authorities. Although the outcome of possible future challenges of the value at which the transfers took place cannot be predicted with certainty, we believe that any possible liability in connection with the transfers would not have a material adverse effect on our operating results or financial position but could be material to our cash flows in any one accounting period.

Additional Factors Affecting Comparability of Results

The Transactions

The Acquisition of Warner Chilcott PLC on January 5, 2005, the application of purchase accounting adjustments related thereto, and the related financing transactions has had an impact on our recent financial results and will affect our future results of operations. In particular:

For information regarding the nature and pro forma effect of these adjustments on our results for fiscal year 2004 and the quarter ended December 31, 2004, see “Unaudited Pro Forma Consolidated Financial Statements.”

Acquisitions

A consequence of the Transactions and our other recent acquisitions is that our results of operations may not be comparable to prior year periods.

Dispositions

During the periods covered by this discussion, we disposed of our Chemical Synthesis Services (“CSS”) business in December 2001, our Clinical Trial Services (“CTS”) business in May 2002, our Interactive Clinical Technologies, Inc. (“ICTI”) business in August 2002, our PDMS business in December 2003, our U.K.

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Pharmaceutical Sales and Marketing business in April 2004 and our U.K.-based sterile solutions business in May 2004. The following discussion does not include the results from these discontinued businesses unless otherwise indicated.

We sold the exclusive U.S. and Canadian sales and marketing rights to our then-marketed Loestrin products to Duramed in March 2004. Loestrin is not accounted for as a discontinued business due to our ongoing supply agreement with Duramed.

Critical Accounting Policies and Estimates

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States. Actual results could differ significantly from those estimates and assumptions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results and require management’s judgment about the effect of matters that are uncertain.

On an ongoing basis, management evaluates its estimates and assumptions, including those related to revenue recognition, recoverability of long-lived assets, continued value of goodwill and intangibles and pension and other postretirement benefits. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable at the time the estimates and assumptions are made. Actual results may differ from these estimates and assumptions under different circumstances or conditions.

Revenue Recognition

Revenue from product sales are recognized when title to the product transfers to our customers, generally FOB, destination. We warrant products against defects and for specific quality standards, permitting the return of products under certain circumstances. Product revenues are recorded net of trade discounts, sales returns, rebates, value-added tax and similar taxes, and fee for service arrangements with certain distributions. Included in net sales are amounts earned under contract manufacturing agreements. Under these agreements, we agreed to manufacture certain products for third parties for specified periods.

Revenue under co-promotion agreements from the sale of products developed or owned by other companies, such as our arrangement with Bristol-Myers to co-promote Dovonex, is recorded as “Other revenue”, which is included in “Total revenue.” Co-promotion revenue is based on a percentage of the co-promotion party’s net sales (as defined in the agreements) of the promoted product. There is no cost of goods sold associated with co-promotion revenue, and the selling and marketing expenses related to co-promotion revenue are included in selling, general and administrative expenses.

We establish accruals for rebates, trade discounts, returns and fee for service arrangements with distributors in the same period we recognize the related sales. The accruals reduce revenues and are included in accrued expenses. Accrued rebates include amounts due under Medicaid, managed care rebates and other commercial contractual rebates. We estimate accrued rebates based on a percentage of selling price determined from historical experience. These accruals reduce revenues and are included as a reduction of accounts receivable or as accrued expenses. Returns are accrued based on historical experience. In all cases, judgment is required in estimating these reserves, and actual claims for rebates and returns could be different from the estimates.

Impairment of Goodwill

We periodically evaluate acquired goodwill for potential impairment indicators. Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and operational performance of our business. We carry out an annual impairment review of goodwill unless events occur which trigger the need for an earlier impairment review. Future events could cause us to conclude that impairment indicators exist and that goodwill associated with our business is impaired. Any resulting impairment could affect our financial condition and results of operations. We will complete our next annual test during the quarter ending December 31, 2005.

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Impairment of Definite Lived Intangible Assets

We assess the impairment of definite lived intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include, but are not limited to: (i) significant negative industry or economic trends; and (ii) current, historical or projected losses with the expectation of continuing losses. When we determine that there is an indicator that the carrying value of definite lived intangible assets may not be recoverable, we measure impairment based on estimates of future cashflow. These estimates include assumptions about future conditions within the Company and the industry. If actual cashflows differ from those projected by management, additional write-offs may be required.

Acquired In-Process Research and Development

We allocated $280.7 million of the Acquisition purchase price to the estimated fair value of product development projects that, as of the Acquisition Date, were not approved by the U.S. Food and Drug Administration (“FDA”) for promotion and sale in the U.S. and had no alternative future use (in-process research and development or “IPR&D”). Accordingly, this amount was immediately expensed and is included in our condensed consolidated statement of operations for the quarter ended March 31, 2005. The estimated fair value of the acquired IPR&D was comprised of the following projects:

We determined the estimated fair value of these projects based on a discounted cash flow model using a discount rate of 13.0%. For each project, the estimated after-tax cash flows were probability weighted to take into account the stage of completion and the risks surrounding the successful development, obtaining FDA approval and commercialization.

The projects, which were in various stages of development, are expected to reach completion at various dates ranging from 2006 through 2008. The major risks and uncertainties associated with the timely and successful completion of these projects consists of the ability to confirm the safety and efficacy of the products based on data from clinical trials and obtaining necessary regulatory approvals.

Litigation and Contingencies

We are subject to litigation and contingencies in the ordinary course of business. Legal fees and other expenses related to litigation and contingencies are accrued when they are deemed probable of being incurred and the amounts are reasonably estimable. Additionally, we, in consultation with our counsel, assess the need to record a liability for litigation and contingencies on a case-by-case basis. Accruals are recorded when we determine that a loss related to a matter is both probable and reasonably estimable, based on existing information. These accruals are adjusted periodically as assessment efforts progress or as additional information becomes available. We self-insure for liability not covered by product liability insurance based on an estimate of potential product liability claims. We develop such estimates in conjunction with our insurance consultants and outside counsel.

Results of Operations

Three months ended March 31, 2005 (Successor) and March 31, 2004 (Predecessor)

The three months ended March 31, 2005 is the first reporting period for the Company following the Acquisition Date. The financial statements relating to this period treat the Acquisition as if the closing took place on January 1, 2005 and the operating results for the period January 1 through January 4, 2005 were those of the

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Successor. The period included only two business days and the impact on the results of operations during the period was not material.

During the quarter ended March 31, 2005 we recorded a number of expenses directly related to the closing of the Transactions including transaction related expenses of $36.0 million, $5.9 million of incremental operating expenses resulting from the Transactions that are included in selling, general and administrative expense, $280.7 million representing the write-off of the estimated fair value of acquired in-process research and development projects and $22.4 million representing the increased value of our opening inventory recorded through the allocation of the Transactions purchase price and reflected in cost of sales in the quarter.

Included in our results for the quarter ended March 31, 2004 were $13.5 million of revenue and $12.2 million of profit before taxes from sales of certain Loestrin brand oral contraceptive products in the U.S. and Canada. The U.S. and Canadian rights to two Loestrin products were sold to a unit of Barr on March 24, 2004. The Loestrin revenue and profits were not classified as discontinued operations as the Company supplies Barr with its requirements of Loestrin product through April 2008. Revenue from the sale of Loestrin products to Barr is included in net sales.

Revenue. The following table sets forth our unaudited revenue for the quarters ended March 31, 2005 and 2004 and the change in the 2005 period compared with the prior year:

Revenue in the quarter ended March 31, 2005 was $133.7 million, an increase of 6.1% over the same quarter last year. Excluding the $6.6 million of non-strategic and low margin contract manufacturing revenue from the 2005 quarter and the $13.5 million in sales of the divested Loestrin products in the 2004 quarter, our revenue growth was 12.8%.

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Our oral contraceptive products, Ovcon and Estrostep, have been the primary focus of our sales forces since early 2004 and that promotional effort has produced strong growth in demand for both products. Ovcon revenue growth of 30.8% versus the prior year quarter was driven primarily by growth in filled prescriptions (unit growth) combined with the impact of price increases. The 20.2% increase over the prior year quarter in Estrostep sales was driven by a combination of strong growth in filled prescriptions and the impact of price increases, offset by a modest expansion of Estrostep pipeline inventory in the quarter ending March 31, 2004.

Sales of our hormone therapy products continue to be affected by the general decline in the hormone therapy markets that began in July 2002 following the NIH’s early termination of the E&P Arm of the WHI Study. The market decline has slowed, but we have decreased our promotional emphasis on hormone therapy products in favor of products with greater market potential, especially our oral contraceptives. Our hormone therapy product sales decreased $0.4 million or 0.7% in the quarter ended March 31, 2005 compared with the prior year quarter, with sales of both femhrt and Estrace Cream declining and sales of Estrace Tablets and Femring increasing. Despite decreased promotion, unit demand for Estrace Cream (measured by filled prescriptions) was essentially flat compared with the prior year. The decrease in Estrace Cream revenue reflects a modest decrease in the level of pipeline inventory held by our customers during the March 2005 quarter relative to the prior year quarter. We do not actively promote Estrace Tablets as the product faces significant generic competition. Filled prescriptions for Estrace Tablets continue to decline at a predictable rate and we have taken price increases to offset a portion of that decline. The increase in our reported revenue from Estrace Tablets reflects a slight expansion of pipeline inventory in the current year quarter compared with a larger reduction in the prior year quarter.

In dermatology, our oral antibiotic Doryx had revenue growth of $5.3 million or 28.0% in the quarter ended March 31, 2005 over the prior year quarter. Market demand for Doryx (as measured by filled prescriptions) declined slightly versus the prior year quarter. The decrease in unit demand was offset by the impact of price increases. A modest increase in Doryx pipeline inventory during the quarter accounted for a portion of the growth in revenue versus the prior year quarter.

During the quarter ended March 31, 2005 we recorded $5.4 million of revenue relating to our co-promotion with Bristol-Myers for Dovonex compared with $0.8 million in the prior year. We were compensated at a higher rate, as a percentage of Dovonex net sales, under the agreement in the March 2005 quarter than in the prior year quarter.

Sarafem, our product used to treat pre-menstrual dysphoric disorder (PMDD), had sales of $12.2 million in the quarter ended March 31, 2005, a 13.1% decrease versus the prior year quarter. The decline in comparison with the prior year quarter would have been greater but sales in the prior year quarter were low relative to market demand as Sarafem pipeline inventories contracted during the period. Sales in the quarter ended March 31, 2005 were consistent with market demand. We believe that Sarafem, which is patent protected until May 2008, is facing significant indirect competition from generic fluoxetine, the active ingredient in Sarafem. Efforts to slow the decline of filled prescriptions have, to date, been unsuccessful. We continue to pursue means to optimize revenue from Sarafem.

In the quarter ended March 31, 2005 we recorded revenues of approximately $6.6 million from contract manufacturing activities in our facility in Fajardo, Puerto Rico. We had no such activities in the three months ended March 31, 2004 as the Fajardo facility was purchased in May 2004.

Gross profit on product net sales. Gross profit decreased $24.0 million to $86.9 million in the quarter ended March 31, 2005 from $110.9 million in the quarter ended March 31, 2004. Our reported gross profit margin in the quarter was 67.7% compared to a gross margin in the prior year quarter of 88.4%. Cost of sales in the quarter ended March 31, 2005 included $22.4 million representing the increased value of our opening inventory recorded through the allocation of the Transactions purchase price and flowing through cost of sales in the quarter. Excluding the impact of the increased value of our opening inventory, our adjusted gross profit decreased $1.6 million or 1.5% over the prior year quarter. The gross profit margin, similarly adjusted, declined from 88.4% to 85.1% mainly due to the addition of $6.6 million of lower margin contract manufacturing revenue in the current year quarter with no such revenue in the prior year.

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Selling, general and administration expenses. Selling, general and administrative expenses for the quarter ended March 31, 2005 were $46.6 million, an increase of $11.5 million, or 32.6% from $35.2 million in the quarter ended March 31, 2004. This increase is mainly due to operating expenses totaling $5.9 million that we incurred in connection with the closing of the Transactions in January 2005. These costs related to mainly employee retention compensation. Excluding the transaction related expenses, selling, general and administrative increased $5.6 million due to increases in field force costs and general and administrative costs. The increase in general and administrative costs includes $1.2 million from the initiation of a $5.0 million per year management fee payable to the Sponsors under a management agreement entered into in connection with the Transactions.

Research and Development. Research and development costs were $4.9 million for the quarter ended March 31, 2005, a decrease of $0.6 million or 10.7% compared with the quarter ended March 31, 2004. In both years our expenditures were primarily for work on our oral contraceptive line extensions and line extensions for Doryx. The decrease in research and development costs compared with the prior year quarter reflects the timing of expenses for product development projects. Our planned investment in research and development for the full year 2005 is expected to be consistent with the investment we made in 2004.

Amortization. Amortization expense in the quarter ended March 31, 2005 was $61.3 million, an increase of $48.3 million from $13.0 million in the quarter ended March 31, 2004. This increase is due to the increased carrying value of the Company’s definite-lived intangible assets due to the Transactions.

Acquired in-process research and development. We allocated $280.7 million of the purchase price paid to complete the Transactions to the fair value of product development projects that, as of the acquisition date, were not approved by the FDA for promotion and sale in the U.S. and had no alternative future use (in-process research and development or “IPR&D”). This amount was immediately expensed and is included in the Company’s condensed consolidated statement of operations for the quarter ended March 31, 2005.

Transaction costs. During the quarter ended March 31, 2005 we incurred $36.0 million of expenses representing mainly (1) fees related to bridge financing necessary to complete the Transactions and (2) the net cost of contracts purchased to hedge movements in the U.S. dollar versus the British pound sterling during the period leading up to the closing of the Transactions. These costs were directly related to the Transactions but were not considered part of the purchase price. These costs are shown in a separate line item in our statement of operations. There were no such costs in the quarter ended March 31, 2004.

Interest income and interest expense. Interest income in the quarter ended March 31, 2005 was $0.3 million, an increase of $0.1 million from $0.2 million in the quarter ended March 31, 2004. Interest expense in the quarter ended March 31, 2005 was $28.9 million, an increase of $24.5 million from $4.5 million in the quarter ended March 31, 2004. This increase is the result of increased debt service relating to the Company borrowing $1,400.0 million under bank term credit facilities, issuing $600.0 million of 8.75% senior subordinated notes and borrowing varying amounts under a revolving credit facility to fund the Transactions in January 2005.

Provision for income taxes. The Company’s effective tax rate for the quarter ended March 31, 2005 was a benefit of 1.2% versus a provision of 32% in the prior year quarter. The change in the effective rate is principally the result of non-deductible acquired in-process research and development costs recorded in connection with the Transactions. There is a valuation allowance related to U.K. deferred tax assets recorded for loss carryforwards in the current quarter since the Company currently believes it is more likely than not that these losses will not be realized in the future.

Additionally, the effective tax rate is impacted by changes to the Company’s organization and structure implemented at the closing of the Transactions. The Company is a Bermuda holding company with significant operating subsidiaries in the United States, Puerto Rico, Ireland and the United Kingdom. The Predecessor was a U.K. domiciled entity. We expect our effective tax rate in 2005 to be substantially less than the rates for periods prior to the Transactions.

Discontinued Operations. Our discontinued operations for the quarter ended March 31, 2004 represented our former U.K. pharmaceutical products business sold in April 2004 and our U.K. based sterile solutions business sold in May 2004. In March 2004 we sold the exclusive sales and marketing rights to certain Loestrin

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products to Duramed Pharmaceuticals, Inc. (“Duramed”), a subsidiary of Barr, for the U.S. and Canada. Loestrin revenue and profits were not classified as discontinued operations for periods prior to the sale date, including for the quarter ended March 31, 2004, because we have an ongoing agreement to supply Duramed with its requirements of Loestrin products through April 2008. Revenues from the sale of Loestrin products to Duramed are included in net sales. In the quarter ended March 31, 2004, the income from discontinued operations was $1.2 million net of a tax charge of $0.5 million.

Net Income. Due to the factors described above, we reported net loss of $361.6 million in the quarter ended March 31, 2005 compared with $37.9 million of net income in the same quarter in the prior year.

Three months ended December 31, 2004 (Predecessor) and December 31, 2003 (Predecessor)

During the quarter ended December 31, 2004 we recorded a number of expenses directly related to the closing of the Acquisition including transaction related expenses of $51.0 million and $3.7 million of incremental operating expenses resulting from the Acquisition that are included in selling, general and administrative expense.

Included in the Predecessor’s results for the quarter ended December 31, 2003 was $12.5 million of revenue and $11.6 million of profit before taxes from sales of certain Loestrin brand oral contraceptive products in the United States and Canada. The U.S. and Canadian rights to two Loestrin products were sold to a unit of Barr on March 24, 2004. The Loestrin revenue and profits were not classified as discontinued operations as the Company supplies Barr with its requirements of Loestrin product through April 2008. Revenue from the sale of Loestrin products to Barr is included in net sales.

Revenue. The following table sets forth our unaudited revenue for the quarters ended December 31, 2004 and 2003 and the change in the 2004 period compared with the prior year:

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Revenue in the quarter ended December 31, 2004 was $136.9 million, an increase of 9.7% over the same quarter in the prior year. Excluding $12.7 million of non-strategic and low margin contract manufacturing revenue from the 2004 quarter and $12.5 million sales of the divested Loestrin products in the 2003 quarter, our revenue growth was 11.8%.

Our oral contraceptive products, Ovcon and Estrostep, have been the primary focus of our sales forces since early 2004 and that promotional effort has produced strong growth in demand for both products. Ovcon revenue growth of 37.3% and Estrostep growth of 37.5% versus the prior year quarter were driven by growth in filled prescriptions (unit growth) combined with the impact of price increases and modest expansions in the levels of wholesaler pipeline inventories of both products during the quarter.

Sales of our hormone therapy products were affected by the general decline in the hormone therapy markets that began in July 2002 following the NIH’s early termination of the E&P Arm of the WHI Study. The market decline began to slow in the quarter ended December 31, 2004, but we decreased our promotional emphasis on hormone therapy products in favor of products with greater market potential, especially our oral contraceptives. Our hormone therapy product sales increased by $6.7 million or 20.3% in the quarter ended December 31, 2004 compared with the prior year quarter, with sales of Estrace Tablets, Estrace Cream and Femring all increasing while sales of femhrt declined. Despite decreased promotion, unit demand for Estrace Cream (measured by filled prescriptions) was essentially flat compared with the prior year. We do not actively promote Estrace Tablets as the product faces significant generic competition. Filled prescriptions for Estrace Tablets continue to decline at a predictable rate and we have taken aggressive price increases to offset a portion of that decline. Pipeline inventories of Estrace Tablet were substantially reduced during the prior year quarter, which had the effect of reducing our sales during the period. This accounts for a large part of the increase in Estrace Tablet sales in the December 2004 quarter in comparison with the December 2003 quarter.

In dermatology, our oral antibiotic Doryx had revenue growth of $3.1 million or 20.1% in the quarter ended December 31, 2004 over the prior year quarter. Market demand for Doryx (as measured by filled prescriptions) increased slightly versus the prior year quarter and the company benefited from the impact of price increases. A modest increase in pipeline inventories of Doryx during the quarter accounted for a portion of the growth in revenue versus the prior year quarter.

During the quarter ended December 31, 2004 we recorded $6.2 million of revenue relating to our co-promotion with Bristol-Myers for Dovonex compared with $0.7 million in the prior year. We were compensated at a higher rate, as a percentage of Dovonex net sales, under the agreement in the December 2004 quarter than in the prior year quarter.

Sarafem, our product used to treat pre-menstrual dysphoric disorder (PMDD), had sales of $13.0 million in the quarter ended December 31, 2004, a 47.0% decrease versus the prior year quarter. Unit demand, as measured by filled prescriptions, declined more than 30%. Net sales of Sarafem in the prior year quarter were high relative to unit demand as Sarafem pipeline inventories expanded considerably during the period. Pipeline inventories contracted modestly during the December 2004 quarter. We believe that Sarafem, which is patent protected until May 2008, is facing significant indirect competition from generic fluoxetine, the active ingredient in Sarafem. Efforts to slow the decline of filled prescriptions have, to date, been unsuccessful.

In the quarter ended December 31, 2004 we recorded revenues of $11.4 million from contract manufacturing activities in our facility in Fajardo, Puerto Rico. We had no such activities in the quarter ended December 31, 2003 as the Fajardo facility was purchased in May 2004.

Gross profit on product net sales. Gross profit on product sales decreased $16.5 million to $96.2 million in the quarter ended December 31, 2004 from $112.7 million in the prior year quarter. Our gross profit margin on product net sales was 73.6% compared to a gross margin in the prior year quarter of 90.8%. The decrease in our gross profit margin in comparison with the prior year quarter was the result of several factors. Certain Loestrin products, which were divested in March 2004, accounted for $12.5 million of high profit margin sales in the prior year quarter. Adding to the relative decline, our December 2004 quarter included $11.4 million of sales from low margin contract manufacturing activities with no such revenue in the prior year quarter.

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Selling, general and administration expenses. Selling, general and administrative expenses for the quarter ended December 31, 2004 were $41.5 million, an increase of $3.8 million, or 9.9% from $37.7 million in the quarter ended December 31, 2003. This increase is mainly due to operating expenses totaling $3.7 million that we incurred in connection with the closing of the Acquisition in January 2005. These costs related mainly to amounts accrued by the Predecessor to cover payments required to be made to an executive under change of control provisions of an employment agreement.

Research and Development. Research and development costs were $4.6 million for the quarter ended December 31, 2004; a decrease of $2.1 million or 31.1% compared with the quarter ended December 31, 2003. In both years our expenditures were primarily for work on our oral contraceptive line extensions and line extensions for Doryx. The decrease in research and development costs compared with the prior year quarter reflects the timing of expenses for product development projects.

Amortization. Amortization expense in the quarter ended December 31, 2004 was $21.6 million, an increase of $8.4 million from $13.2 million in the quarter ended December 31, 2003. This increase is due to the impact of contingent payments made to Pfizer with respect to our purchase of the Estrostep and femhrt product lines and increased amortization related to our purchase of rights to Barr Laboratories’ ANDA for which our Ovcon 35 is the reference product.

Transaction costs. During the quarter ended December 31, 2004 we incurred $51.0 million of expenses comprised mainly of fees to advisors in the period leading up to the Acquisition. These costs are shown in a separate line item in our statement of operations. There were no such costs in the quarter ended December 31, 2003.

Interest income and interest expense. Interest income in the quarter ended December 31, 2004 was $0.7 million, an increase of $0.4 million from $0.3 million in the prior year quarter. Interest expense in the quarter was $1.9 million, a decrease of $1.5 million from $3.4 million in the quarter ended December 31, 2003. We had significantly less debt outstanding in the December 2004 quarter than during the prior year quarter.

Provision for income taxes. We generated a loss before income taxes of $17.5 million in the quarter ended December 31, 2004 and a tax provision of $26.6 million. A number of expenses recorded in connection with the Acquisition are not deductible in the tax jurisdictions where they were incurred. During 2004 we transferred certain intangible assets between entities in different tax jurisdictions. Potential tax impacts of these transfers were recorded in our income tax provisions and associated balance sheet accounts during the quarter ended December 31, 2004 based on assumptions regarding the values of the transferred assets, including consideration of third party valuation reports.

Discontinued Operations. Our discontinued operations for the quarter ended December 31, 2003 represented our former U.K. pharmaceutical products business sold in April 2004. In March 2004 we sold the exclusive sales and marketing rights to certain Loestrin products to Duramed, a subsidiary of Barr, for the United States and Canada. Loestrin revenue and profits were not classified as discontinued operations for periods prior to the sale date, including for the quarter ended December 31, 2003, because we have an ongoing agreement to supply Duramed with its requirements of Loestrin products through April 2008. Revenues from the sale of Loestrin products to Duramed are included in net sales.

Net Income. Due to the factors described above, we reported net loss of $44.1 million in the quarter ended December 31, 2004 compared with $40.3 million of net income in the same quarter in the prior year.

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For fiscal year 2004, total revenue from continuing operations were $490.2 million, an increase of $125.0 million, or 34.2% from $365.2 million in fiscal year 2003. Estrostep, femhrt and Sarafem were all purchased during fiscal year 2003, and therefore 2004 represented the first full year of sales of these products under our control. We therefore do not yet have year on year growth rates for these products. Of our existing products for which we do have comparable data, Ovcon, Estrace Cream and Doryx showed year on year revenue growth of 22.0%, 29.7% and 28.5%, respectively. However, Sarafem showed a decrease of $0.4 million for fiscal year 2004, compared with the nine months ended September 30, 2003, resulting from additional competition from branded SSRIs that are increasingly targeting the PMDD market and the discontinuation of promotion to primary care physicians after we acquired the product from Lilly. In addition, revenues from Estrace Tablets showed a decrease of $7.8 million, or 34.7%, for fiscal year 2004 compared to fiscal year 2003, as a result of the continued erosion of market share resulting from generic substitution, the lack of promotional support and the impact of the controversy surrounding the E&P Arm of the WHI Study on oral HT products. See “Business—Legal Proceedings.” Revenues from femhrt, another oral HT product, were $70.5 million in fiscal year 2004. Although we do not have comparable annual data, revenues from femhrt in quarterly periods in 2004 have increased compared to corresponding periods in fiscal year 2003 following our acquisition of this product despite declining prescription volumes.

Also included in product net sales are revenues of approximately $8.3 million from contract manufacturing activities in our recently acquired facility in Fajardo, Puerto Rico. We expect this revenue to decline over the next two years as we phase out the manufacturing of Pfizer products and transfer more of our own products to the Fajardo facility.

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Our product revenues for fiscal year 2004 include revenues of $24.0 million in the United States and $2.2 million in Canada attributable to sales of Loestrin prior to the licensing of the then-marketed Loestrin products to Duramed in March 2004 and after that time, $2.7 million of revenues from our supply agreement with Duramed. Our product revenues for fiscal year 2004, excluding revenues attributable to Loestrin product sales, were $464.0 million.

During fiscal year 2004, we recorded revenues of $7.8 million in co-promotion fees relating to Dovonex, a product used to treat psoriasis. These fees are included in other revenue in the above table.

Gross profit on product net sales. Gross profit on product net sales of $428.9 million for fiscal year 2004 increased $106.3 million, or 33.0%, from $322.6 million in fiscal year 2003 primarily as a result of increased revenues, including those from newly acquired products. Our gross margin on product net sales was 89% in both fiscal years 2004 and 2003.

Selling, general and administrative expenses. Selling, general and administrative expenses for fiscal year 2004 were $146.2 million, an increase of $21.4 million, or 17.1%, from $124.8 million in fiscal year 2003. This increase reflects the continued expansion of our sales force which began in 2003, the increased costs of which are reflected for a full year in 2004. The average number of representatives on our sales force in fiscal year 2004 was 384, an increase of 17% compared to the fiscal year 2003 average of 328. As of September 30, 2004, we had 401 full-time sales representatives and approximately 295 contract sales representatives (whose promotional activities for us equal the work of approximately 55 full-time contract employees) who promoted our products on a part-time basis at a cost of $3.2 million for fiscal year 2004. The increase in selling, general and administrative expenses was partly offset by a decrease in the promotional expense in connection with the launch of Femring to $10.3 million, including incremental direct-to-consumer advertising of $5.1 million, in fiscal year 2004 from $21.4 million in fiscal year 2003. We do not intend to engage in further direct-to-consumer advertising for Femring and do not have any present intention to engage in direct-to-consumer advertising for our other products.

Research and development. Research and development expenses for fiscal year 2004 were $26.6 million, an increase of $1.7 million, or 6.8%, from $24.9 million in fiscal year 2003.

In women’s healthcare, we have ongoing projects in contraception, hormone therapy, PMDD and female sexual dysfunction. In fiscal year 2004, we received final FDA approval for our new Ovcon 35 Chewable tablet product and our estradiol acetate tablet Femtrace. A supplemental New Drug Application (an “sNDA”) for femhrt Lo (a low dose version of femhrt) was accepted for filing in May 2004. An Investigational New Drug application (“IND”) was submitted to the FDA for Loestrin 24, a 24-day regimen hormonal contraceptive, in December 2003. In addition, we initiated Phase III development for another 24-day hormonal contraceptive (Estrostep 24) in May and amended our IND for Estrostep in connection with the product in development. In dermatology, we developed a new dosage form of Doryx, for which we submitted an NDA in April 2004.

Depreciation and amortization. Depreciation expense in fiscal year 2004 was $2.1 million, an increase of $0.6 million, or 40.0%, from $1.5 million in fiscal year 2003. This increase resulted from investments in property, plant and equipment in the ordinary course. Amortization expense in fiscal year 2004 was $52.4 million, an increase of $14.3 million, or 37.5%, from $38.1 million in fiscal year 2003. This increase was primarily due to the amortization of products that we acquired during fiscal year 2003.

Interest income and interest expense. Interest income in fiscal year 2004 was $1.8 million, a decrease of $1.3 million, or 41.9%, from $3.1 million in fiscal year 2003. This decrease resulted from average cash on hand in fiscal year 2004 being significantly lower than the average cash on hand during fiscal year 2003, as a result of our new product acquisitions in fiscal year 2003 being funded in part with cash on hand. Interest expense in fiscal year 2004 was $11.0 million, a slight increase of $0.2 million from $10.8 million in fiscal year 2003. In the second quarter of fiscal year 2003, we put in place a credit facility of $450.0 million, of which we drew down approximately $350 million in fiscal year 2003 to fund product acquisitions. By the end of fiscal year 2004, $192.0 million of this balance was outstanding. In the second quarter of fiscal year 2004, we redeemed all of the remaining Warner Chilcott (US), Inc. 12.625% Senior Notes (the “12.625% Notes”) outstanding, for a total of $48.3 million. A cost of $1.2 million was associated with the early retirement of the 12.625% Notes.

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Provision for income taxes. Taxes in fiscal year 2004 were $59.4 million, an increase of $18.0 million, or 43.5%, from $41.4 million in fiscal year 2003. This increase was a result of an increase in our taxable income, and was partially offset by a decrease in the composite tax rate of the countries in which we operate. We operated in primarily four tax jurisdictions: the United Kingdom, the United States, the Republic of Ireland and Puerto Rico. In the United Kingdom, the tax rate was 30% for both fiscal years 2004 and 2003. In the United States, the tax rate was 40% for both fiscal years 2004 and 2003. In the Republic of Ireland, the tax rate was 12.5% for both fiscal years 2004 and 2003. In Puerto Rico, the tax rate for fiscal year 2004 was 2%. We did not operate in Puerto Rico in fiscal year 2003. Our effective tax rate was 29% in fiscal year 2004 and 32% in fiscal year 2003. The decrease is primarily due to changes in the revenue mix as a result of generating a higher percentage of our revenues in fiscal year 2004 in jurisdictions having lower effective tax rates.

Discontinued Operations. Our discontinued operations represented our U.K. and Ireland operations sold in fiscal year 2004. We sold our PDMS contract manufacturing business in December 2003, our U.K. Pharmaceutical products business in April 2004 and our U.K.-based sterile solutions business in May 2004. In addition, we sold the exclusive sales and marketing rights for the U.S. and Canada to the then-marketed Loestrin products to Duramed in March 2004, however, we do not account for Loestrin as a discontinued business due to our ongoing supply agreement with Duramed. In fiscal year 2003, our income from discontinued operations was $9.9 million, representing results for PDMS, U.K. Sales and Marketing and our U.K.-based sterile solutions business. In fiscal year 2004, our income from discontinued operations was $3.3 million, representing results for our U.K. and Ireland operations. We also recorded a gain on disposal of discontinued operations of $5.4 million in fiscal year 2004, net of a tax charge of $11.8 million.

Net Income. Due to the factors set forth above, we reported net income of $151.7 million in fiscal year 2004, an increase of $55.5 million, or 57.7%, from $96.2 million in fiscal year 2003. Our discontinued operations, including the gain on disposal, accounted for $8.7 million and $9.9 million of our net income, in fiscal years 2004 and 2003, respectively.

Years Ended September 30, 2003 and 2002

Revenue. The following table sets forth our revenues (in millions) for fiscal year 2003 from our continuing business:

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For fiscal year 2003, total revenue from continuing operations were $365.2 million, an increase of $193.0 million, or 112.1%, from $172.2 million in fiscal year 2002. Our continuing operations represent our pharmaceutical products business, which includes the development, promotion and sale of branded prescription products in the United States. A significant part of the increase in our revenue from continuing operations was the result of our newly acquired products.

Although revenue from our newly acquired products significantly contributed to our increased revenue in fiscal year 2003, revenues from our existing products promoted by our sales force increased as well. Revenues from Ovcon, Estrace Cream and Doryx increased by 26.8% compared to fiscal year 2002. In January 2003, we acquired the exclusive U.S. sales and marketing rights to Sarafem from Lilly. In March 2003, we acquired two hormonal contraceptives, Estrostep and Loestrin, from Pfizer. In April 2003, we acquired femhrt from Pfizer. No revenue for these newly acquired products was recorded in fiscal year 2002. In June 2003, we launched Femring, our vaginal ring for estrogen therapy.

Our product revenues for fiscal year 2003 include revenues of $34.9 million in the United States and $3.7 million in Canada attributable to sales of Loestrin which we acquired from Pfizer in March 2003. In May 2004, we licensed our then-marketed Loestrin products to Duramed. However, we do not account for Loestrin as a discontinued business due to our ongoing supply agreement with Duramed. Our product revenues for fiscal year 2003 excluding revenues attributable to Loestrin were $326.6 million.

Gross profit on product net sales. Gross profit on product net sales of $322.6 million for fiscal year 2003 increased $172.7 million, or 115.2%, from $149.9 million in fiscal year 2002. This increase was primarily the result of increased revenues, including those from newly acquired products. Our gross margin was 89% in both fiscal years 2003 and 2002.

Selling, general and administrative expenses. Selling, general and administrative expenses for fiscal year 2003 were $124.8 million, an increase of $77.6 million, or 164.4%, from $47.2 million in fiscal year 2002. This increase was primarily the result of increased selling, advertising and promotion costs incurred as we expanded our sales force and increased spending on promoting our broadened product portfolio. Included in the increase in our promotion and advertising costs is $21.4 million associated with our June 2003 U.S. launch of Femring. The average number of representatives on our sales force in fiscal year 2003 was 328, an increase of 26% compared to the fiscal year 2002 average of 261. As of September 30, 2003, we had approximately 390 full-time sales representatives and approximately 260 contract sales representatives (whose promotional activities for us equal the work of approximately 25 full-time contract employees) who promoted our products on a part-time basis at a cost of $1.3 million for fiscal year 2003.

Research and development. Research and development expenses for fiscal year 2003 were $24.9 million, an increase of $8.9 million, or 55.6%, from $16.0 million in fiscal year 2002, reflecting our ongoing investment in our pipeline of products. During fiscal year 2003, we filed an NDA for our oral estradiol acetate product, Femtrace, which received final FDA approval for the treatment of the symptoms of menopause in August 2004.

Depreciation and amortization. Depreciation expense in fiscal year 2003 was $1.5 million, an increase of $0.5 million, or 50.0%, from $1.0 million in fiscal year 2002. This increase resulted from investments in property, plant and equipment in the ordinary course. Amortization expense in fiscal year 2003 was $38.1 million, an increase of $19.8 million, or 108.2%, from $18.3 million in fiscal year 2002. This increase was primarily due to the amortization of Estrostep (acquired in March 2003), femhrt (acquired in April 2003), the U.S. sales and marketing rights to Sarafem (acquired in January 2003) and Duricef and Moisturel (acquired in March 2002).

Interest income and interest expense. Interest income in fiscal year 2003 was $3.1 million, a decrease of $7.7 million, or 71.3%, from $10.8 million in fiscal year 2002, as a result of cash on hand being significantly less during fiscal year 2003 as a result of our new product acquisitions. Interest expense in fiscal year 2003 was $10.8 million, a decrease of $18.9 million, or 63.6%, from $29.7 million in fiscal year 2002. This decrease was primarily due to the inclusion in our results for fiscal year 2002 of net costs of $13.2 million, associated with our early retirement of $111.3 million principal amount of the 12.625% Notes acquired as part of our acquisition of

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Warner Chilcott Limited as well as decreased interest paid on the 12.625% Notes in fiscal year 2003 as a result of such retirement. In fiscal year 2003, we purchased an additional $2.9 million principal amount of 12.625% Notes in privately negotiated transactions, and recorded net costs of $0.2 million. The average principal amount of the 12.625% Notes outstanding during fiscal year 2002 was $111.4 million, compared to a balance of $48.2 million during fiscal year 2003. The reduction in interest charges related to our purchase of the 12.625% Notes was partly offset by the interest expense associated with our fiscal year 2003 incurrence of approximately $350 million in debt under our March 2003 credit facility.

Provision for income taxes. Taxes in fiscal year 2003 were $41.4 million, an increase of $22.5 million, or 119.0%, from $18.9 million in fiscal year 2002, due to higher revenues resulting from our fiscal year 2003 acquisitions. In fiscal year 2003, we operated primarily in three tax jurisdictions: the United Kingdom, the United States and the Republic of Ireland. In the United Kingdom, the tax rate was 30% in both fiscal years 2003 and 2002. In the United States, the tax rate was 40% in both fiscal years 2003 and 2002. In the Republic of Ireland, the tax rate in fiscal year 2003 was 12.5% and 17% in fiscal year 2002. Our effective tax rate was 32% in fiscal year 2003, compared to 36% in fiscal year 2002. The decrease is primarily due to an increase in the percentage of our revenues that were generated in the Republic of Ireland (which has a lower effective tax rate than the other jurisdictions in which we operate) as a result of acquisitions in fiscal year 2003.

Discontinued operations. Our discontinued operations represented our pharmaceutical services businesses, which were ICTI (sold as of August 23, 2002), CTS (sold as of May 31, 2002) and CSS (sold as of December 31, 2001). In fiscal year 2002, we reported a gain of $101.1 million, net of a tax charge of $3.9 million, representing the sale of these businesses. Also included in our fiscal year 2002 results was income from discontinued operations of $10.4 million, net of taxes of $3.0 million, representing results for ICTI, CTS, CSS, PDMS, the U.K. Sales and Marketing and our U.K.-based sterile solutions business. In fiscal year 2003, our income from discontinued operations was $9.9 million, representing results for PDMS, U.K. Sales and Marketing, and our U.K.-based sterile solutions business.

Net income. Due to the factors set forth above, we reported net income of $96.2 million in fiscal year 2003, as compared to $145.2 million in fiscal year 2002. Our discontinued operations, including the gain on disposal, accounted for $111.5 million of our net income for fiscal year 2002. We paid a final dividend of 2.4 pence per ordinary share in fiscal year 2003, a 20% increase over fiscal year 2002, resulting in a total dividend of 3.6 pence per ordinary share in fiscal year 2003, compared to 3.0 pence per ordinary share in fiscal year 2002.