<PAGE>

                   SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549

                               FORM 10-Q

(Mark One)
   X      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
-------   OF THE SECURITIES EXCHANGE ACT OF 1934

          For the quarterly period ended September 30, 1999

                                  or

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
-------   OF THE SECURITIES EXCHANGE ACT OF 1934

           For the transition period from               to

                     Commission File Number 0-12950

                       ALLIANCE PHARMACEUTICAL CORP.
          (Exact name of Registrant as specified in its charter)

New York                                  14-1644018
---------------------------               ---------------------------
(State or other jurisdiction              (I.R.S. Employer
of incorporation or organization)         Identification Number)

3040 Science Park Road
San Diego, California                     92121
---------------------------               ---------------------------
(Address of principal                     Zip Code
executive offices)

Registrant's telephone number,
including area code:                      (858) 410-5200
                                          ---------------------------

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

Yes         X                             No
     ---------------                      --------------

As of November 4, 1999, Registrant had 44,649,224 shares of its Common Stock,
$.01 par value, outstanding.


<PAGE>


ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>

INDEX                                                  Page No.
-----                                                  --------
<S>                                                    <C>
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

   Condensed Consolidated Balance Sheets                    3

   Condensed Consolidated Statements of Operations          4

   Condensed Consolidated Statements of Cash Flows          5

   Notes to Condensed Consolidated Financial Statements     6

Item 2. Management's Discussion and Analysis of
   Financial Condition and Results of Operations            7

PART II - OTHER INFORMATION
Item 1. Legal Proceedings                                   12
Item 6. Exhibits and Reports on Form 8-K                    13

</TABLE>


                                       2
<PAGE>

PART I FINANCIAL INFORMATION:
ITEM 1.  FINANCIAL STATEMENTS

        ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                     SEPTEMBER 30,        JUNE 30,
                                                                                         1999               1999
                                                                                     ------------       ------------
        ASSETS                                                                        (UNAUDITED)          (NOTE)
        <S>                                                                          <C>                <C>
        CURRENT ASSETS:
                Cash and cash equivalents                                            $  9,171,000       $ 19,081,000
                Research revenue receivable                                             2,239,000          4,875,000
                Other current assets                                                      467,000            413,000
                                                                                     ------------       ------------
                                Total current assets                                   11,877,000         24,369,000

        PROPERTY, PLANT AND EQUIPMENT - NET                                            23,336,000         24,621,000
        PURCHASED TECHNOLOGY - NET                                                     10,981,000         11,361,000
        RESTRICTED CASH                                                                 5,000,000          5,000,000
        OTHER ASSETS - NET                                                                623,000            633,000
                                                                                     ------------       ------------
                                                                                     $ 51,817,000       $ 65,984,000
                                                                                     ------------       ------------
                                                                                     ------------       ------------
        LIABILITIES AND STOCKHOLDERS' EQUITY

        CURRENT LIABILITIES:
                Accounts payable                                                     $  2,171,000       $  4,910,000
                Accrued expenses                                                        4,522,000          4,280,000
                Current portion of long-term debt                                       4,336,000          4,170,000
                                                                                     ------------       ------------
                                Total current liabilities                              11,029,000         13,360,000

        LONG-TERM DEBT                                                                  9,222,000         10,499,000

        STOCKHOLDERS' EQUITY:
                Preferred stock - $.01 par value; 5,000,000 shares authorized;
                        500,000  shares of Series D issued and outstanding at
                        September 30, 1999 and June 30, 1999                                5,000              5,000
                Common stock - $.01 par value; 75,000,000 shares authorized;
                        43,511,286 and 43,510,049 shares issued and outstanding at
                        September 30, 1999 and June 30, 1999, respectively                435,000            435,000
                Additional paid-in capital                                            368,570,000        368,409,000
                Accumulated deficit                                                  (337,444,000)      (326,724,000)
                                                                                     ------------       ------------
                                Total stockholders' equity                             31,566,000         42,125,000
                                                                                     ------------       ------------
                                                                                     $ 51,817,000       $ 65,984,000
                                                                                     ------------       ------------
                                                                                     ------------       ------------

</TABLE>

        Note:   The balance sheet at June 30, 1999 has been derived from the
                audited financial statements at that date but does not include
                all of the information and footnotes required by generally
                accepted accounting principles for complete financial
                statements.

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                       3
<PAGE>


        ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                            SEPTEMBER 30,
                                                                       1999              1998
                                                                  -------------     ------------
                                                                             (Unaudited)
        <S>                                                       <C>               <C>
        REVENUES:
                License and research revenue                      $   1,568,000     $  5,100,000

        OPERATING EXPENSES:
                Research and development                             10,413,000       13,546,000
                General and administrative                            1,712,000        2,185,000
                                                                  -------------     ------------
                                                                     12,125,000       15,731,000
                                                                  -------------     ------------
        LOSS FROM OPERATIONS                                        (10,557,000)     (10,631,000)

        INVESTMENT INCOME                                               210,000          635,000
        INTEREST EXPENSE                                               (373,000)        (193,000)
                                                                  -------------     ------------
        NET LOSS                                                    (10,720,000)     (10,189,000)

        IMPUTED DIVIDEND ON SERIES E-1 PREFERRED STOCK                        -         (483,000)
                                                                  -------------     ------------
        NET LOSS APPLICABLE TO COMMON SHARES                      $ (10,720,000)    $(10,672,000)
                                                                  -------------     ------------
                                                                  -------------     ------------
        NET LOSS PER COMMON SHARE:
          Basic and diluted                                       $       (0.25)    $      (0.33)
                                                                  -------------     ------------
                                                                  -------------     ------------
        WEIGHTED AVERAGE SHARES OUTSTANDING:
          Basic and diluted                                          43,510,000       32,021,000
                                                                  -------------     ------------
                                                                  -------------     ------------

</TABLE>

SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                       4
<PAGE>


        ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                               THREE MONTHS ENDED
                                                                                                  SEPTEMBER 30,
                                                                                             1999                1998
                                                                                        -------------       -------------
                                                                                                   (UNAUDITED)
        <S>                                                                             <C>                 <C>
        OPERATING ACTIVITIES:
                Net loss                                                                $ (10,720,000)      $ (10,189,000)
                Adjustments to reconcile net loss to net cash used in operations:
                        Depreciation and amortization                                       1,811,000           1,360,000
                        Expense associated with warrant issuance                              144,000                   -
                        Changes in operating assets and liabilities:
                                Research revenue receivable                                 2,636,000             808,000
                                Other assets                                                  (44,000)             21,000
                                Accounts payable and accrued expenses and other            (2,497,000)         (1,834,000)
                                                                                        -------------       -------------
        Net cash used in operating activities                                              (8,670,000)         (9,834,000)
                                                                                        -------------       -------------
        INVESTING ACTIVITIES:
                Purchases of short-term investments                                                 -         (13,955,000)
                Sales and maturities of short-term investments                                      -          28,069,000
                Property, plant and equipment                                                 (83,000)         (2,213,000)
                                                                                        -------------       -------------
        Net cash provided by (used in) investing activities                                   (83,000)         11,901,000
                                                                                        -------------       -------------
        FINANCING ACTIVITIES:
                Issuance of common stock                                                       17,000                   -
                Issuance of convertible preferred stock                                             -           5,621,000
                Principal payments on long-term debt                                       (1,174,000)           (143,000)
                                                                                        -------------       -------------
        Net cash provided by (used in) financing activities                                (1,157,000)          5,478,000
                                                                                        -------------       -------------

        INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   (9,910,000)          7,545,000
        CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   19,081,000          11,809,000
                                                                                        -------------       -------------
        CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $   9,171,000       $  19,354,000
                                                                                        -------------       -------------
                                                                                        -------------       -------------
        SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
          AND FINANCING ACTIVITIES:
                Deferred interest expense on long-term debt                             $      63,000       $           -
                Imputed dividend on preferred stock                                                 -             483,000

</TABLE>


SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



                                       5
<PAGE>

ALLIANCE PHARMACEUTICAL CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

     Alliance Pharmaceutical Corp. and its subsidiaries (collectively, the
"Company" or "Alliance") are engaged in identifying, designing, and
developing novel medical products.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Alliance
Pharmaceutical Corp., its wholly owned subsidiary Astral, Inc., its wholly
owned subsidiary MDV Technologies, Inc. ("MDV") from the acquisition date of
November 1996, its wholly owned subsidiary Alliance Pharmaceutical GmbH, from
its inception in December 1998, and its majority-owned subsidiary, Talco
Pharmaceutical, Inc.  All significant intercompany accounts and transactions
have been eliminated.  Certain amounts in 1999 have been reclassified to
conform to the current year's presentation.

INTERIM CONDENSED FINANCIAL STATEMENTS

     The condensed consolidated balance sheet as of September 30, 1999, the
condensed consolidated statements of operations for the three months ended
September 30, 1999 and 1998, and the condensed consolidated statements of
cash flows for the three months ended September 30, 1999 and 1998 are
unaudited.  In the opinion of management, such unaudited financial statements
include all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the results for the periods presented.
Interim results are not necessarily indicative of the results to be expected
for the full year.  The financial statements should be read in conjunction
with the Company's consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
June 30, 1999.

PURCHASED TECHNOLOGY

     The purchased technology was primarily acquired as a result of the
merger of Fluoromed Pharmaceutical, Inc. into a subsidiary of the Company in
1989.  The technology acquired is the Company's core perfluorochemical
("PFC") technology and was valued based on an analysis of the present value
of future earnings anticipated from this technology at that time.  The
Company identified alternative future uses for the PFC technology, including
the OXYGENT-TM- (temporary blood substitute) and LIQUIVENT-Registered
Trademark- (intrapulmonary oxygen carrier) products.  Purchased technology
also includes $2 million for technology capitalized as a result of the
acquisition of BioPulmonics, Inc. ("BioPulmonics") in December 1991.  Since
the acquisition, an alternative future use of the acquired technology has
been pursued by the Company.  An intrapulmonary drug delivery system using
the PFC-based liquid as a carrier (or dispersing agent) is being developed by
Alliance from the liquid ventilation technology.

     The PFC technology is the basis for the Company's main drug development
programs and is being amortized over a 20-year life.  The PFC technology has
a net book value of $10.9 million and $11.2 million, and is reported net of
accumulated amortization of $12.3 million and


                                       6
<PAGE>


$12 million at September 30 and June 30, 1999, respectively.  The technology
acquired from BioPulmonics has a net book value of approximately $43,000 and
$129,000, is being amortized over five to seven years, and is reported net of
accumulated amortization of $2 million and $1.9 million at September 30 and
June 30, 1999, respectively.

     The carrying value of purchased technology is reviewed periodically
based on the projected cash flows to be received from license fees, milestone
payments, royalties, and other product revenues. If such cash flows are less
than the carrying value of the purchased technology, the difference will be
charged to expense.

COMPREHENSIVE INCOME AND LOSS

     Effective July 1, 1998, the Company adopted the Financial Accounting
Standards Board's Statement No. 130, Comprehensive Income ("SFAS No. 130").
SFAS No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS No.
130 had no impact on the Company's net loss or stockholders' equity.  SFAS
No. 130  requires unrealized gains and losses on the Company's
available-for-sale securities to be included in comprehensive income.  During
the three months ended September 30, 1999 and 1998, the total comprehensive
loss, which includes the unrealized loss on available-for-sale securities,
was $10,720,000 and $10,206,000, respectively.

NET INCOME (LOSS) PER SHARE

     The Company computes net loss per common share in accordance with
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128").
SFAS No. 128 requires the presentation of basic and diluted earnings per
share amounts.  Basic earnings per share is calculated based upon the
weighted average number of common shares outstanding during the period while
diluted earnings per share also gives effect to all potential dilutive common
shares outstanding during the period such as common shares underlying
options, warrants, and convertible securities, and contingently issuable
shares.  All potential dilutive common shares have been excluded from the
calculation of diluted earnings per share as their inclusion would be
anti-dilutive.

2.  SUBSEQUENT EVENT

     In November 1999, the Company completed the sale of certain aspects of
its PulmoSpheres-Registered Trademark-technology to Inhale Therapeutic
Systems, Inc. ("Inhale") for $15 million in cash and $5 million in common
stock of Inhale, plus additional future milestone and royalty payments.  In
consideration for retaining certain rights to use the technology, Alliance
issued $5 million in Alliance common stock to Inhale.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (References to years are to the Company's fiscal years
ended June 30.)

     Alliance has devoted substantial resources to research and development
related to its medical products.  The Company has been unprofitable since
inception and expects to incur operating losses for at least the next several
years due to substantial spending on research and development, preclinical
testing, clinical trials, regulatory activities, and commercial manufacturing
start-up. The Company has collaborative research and development agreements


                                       7
<PAGE>


for IMAGENT-Registered Trademark- and RODA-TM-.  Under the arrangement for
IMAGENT, Schering AG, Germany ("Schering") has agreed to reimburse the
Company for some of its development expenses.  Schering will also make
milestone payments to the Company upon the achievement of certain product
development events, followed by royalties on sales at commercialization.
With respect to RODA, the Company has agreed to reimburse VIA Medical
Corporation ("VIA") for substantially all of its development expenses and to
share revenues from the sale of products.  Due to the termination of the
license agreement (the "HMRI License Agreement") with Hoechst Marion Roussel,
Inc. ("HMRI") in December 1997, the restructuring of the license agreement
(the "Ortho License Agreement") with Ortho Biotech, Inc. and The R.W. Johnson
Pharmaceutical Research Institute, a division of Ortho Pharmaceutical
Corporation, both affiliates of Johnson & Johnson (collectively referred to
as "Ortho") in May 1998, and the reduction in the on-going reimbursements
from Schering, Alliance has incurred a substantial increase in development
expenses related to LIQUIVENT and OXYGENT and a substantial decrease in
related research revenue relative to prior years.  There can be no assurance
that the Company will be able to achieve profitability at all or on a
sustained basis.

LIQUIDITY AND CAPITAL RESOURCES

     Through September 1999, the Company financed its activities primarily
from public and private sales of equity and funding from collaborations with
corporate partners. To date, the Company's revenue from the sale of products
has not been significant.

     In January 1997, the Company entered into a loan and security agreement
with a bank under which the Company received $3.5 million.  In June 1998, the
Company restructured the loan to provide for up to $15 million.  Amounts
borrowed are secured by certain fixed assets and patents and are to be repaid
over four years. If certain financial covenants are not satisfied, the
outstanding balance may become due and payable. On September 30, 1999, the
balance outstanding on this loan was approximately $12.4 million.

     In September 1997, the Company entered into a license agreement (the
"Schering License Agreement") with Schering, which provides Schering with
worldwide exclusive marketing and manufacturing rights to Alliance's drug
compounds, drug compositions, and medical devices and systems related to
perfluorocarbon ultrasound imaging products, including IMAGENT. The product
is being developed jointly by Alliance and Schering. Under the Schering
License Agreement, Schering paid to Alliance in 1998 an initial license fee
of $4 million, and agreed to pay further milestone payments and royalties on
product sales. Schering is also providing funding to Alliance for some of
its development expenses related to IMAGENT. In conjunction with the
Schering License Agreement, Schering Berlin Venture Corp., an affiliate of
Schering, purchased 500,000 shares of the Company's convertible Series D
Preferred Stock for $10 million.

     From February 1996 through June 1997, HMRI was responsible for most of
the costs of development and marketing of LIQUIVENT.  In June 1997, the
Company sold $2.5 million in clinical trial supplies to HMRI and recorded it
as deferred revenue. As of July 1997, Alliance assumed responsibility for the
costs of development of LIQUIVENT worldwide.  In December 1997, the HMRI
License Agreement was terminated and HMRI has no continuing rights to the
development or marketing of LIQUIVENT.  In September 1999, HMRI and Alliance
dismissed a related arbitration proceeding that was filed in September 1998.
HMRI agreed to sell and Alliance


                                       8
<PAGE>


agreed to purchase the clinical trial supplies from HMRI for up to $3 million
over time and under certain circumstances.  No other payments will be made by
either party.

     From September 1994 until May 1998, under the Ortho License Agreement,
Ortho was responsible for substantially all the costs of developing and
marketing OXYGENT.  In May 1998, Ortho and the Company restructured the Ortho
License Agreement and Alliance assumed responsibility for worldwide
development of OXYGENT at its expense.  Under the restructured agreement,
Ortho retained certain rights to be the exclusive marketing agent for the
product, which rights have been re-acquired by the Company.  As a result of
the restructuring, Alliance incurred a substantial increase in development
expenses related to OXYGENT and a substantial decrease in related research
revenue over prior years.

     The Company had net working capital of $848,000 at September 30, 1999,
compared to $11 million at June 30, 1999. The Company's cash, cash
equivalents, and short-term investments decreased to $9.2 million at
September 30, 1999 from $19.1 million at June 30, 1999. The decrease resulted
primarily from cash used in operations of $8.7 million and principal payments
on long-term debt of $1.2 million. The Company's operations to date have
consumed substantial amounts of cash and are expected to continue to do so
for the foreseeable future.

     The Company continually reviews its product development activities in an
effort to allocate its resources to those product candidates that the Company
believes have the greatest commercial potential.  Factors considered by the
Company in determining the products to pursue include projected markets and
need, potential for regulatory approval and reimbursement under the existing
healthcare system, status of its proprietary rights, technical feasibility,
expected and known product attributes, and estimated costs to bring the
product to market. Based on these and other factors, the Company may from
time to time reallocate its resources among its product development
activities.  Additions to products under development or changes in products
being pursued can substantially and rapidly change the Company's funding
requirements.

     The Company expects to incur substantial additional expenditures
associated with product development, particularly for LIQUIVENT and OXYGENT
as they continue through pivotal clinical trials.  The Company is seeking
additional collaborative research and development relationships with suitable
corporate partners for its non-licensed products.  There can be no assurance
that such relationships, if any, will successfully reduce the Company's
funding requirements.  Additional equity or debt financing may be required,
and there can be no assurance that such financing will be available on
reasonable terms, if at all.  If adequate funds are not available, the
Company may be required to delay, scale back, or eliminate one or more of its
product development programs, or obtain funds through arrangements with
collaborative partners or others that may require the Company to relinquish
rights to certain of its technologies, product candidates, or products that
the Company would not otherwise relinquish.

     Alliance anticipates that its current capital resources, expected
revenue from the Schering License Agreement, proceeds from the recent Inhale
transaction, and investments will be adequate to satisfy its capital
requirements through March 2000.  The Company's future capital requirements
will depend on many factors, including, but not limited to, continued
scientific progress in its research and development programs, progress with
preclinical testing and clinical

                                       9
<PAGE>


trials, the time and cost involved in obtaining regulatory approvals, patent
costs, competing technological and market developments, changes in existing
collaborative relationships, the ability of the Company to establish
additional collaborative relationships, and the cost of manufacturing
scale-up.

     While the Company believes that it can produce materials for clinical
trials and the initial market launch for OXYGENT and IMAGENT at its existing
San Diego facilities and for LIQUIVENT at its Otisville, New York facility,
it may need to expand its commercial manufacturing capabilities for its
products in the future.  Any expansion for any of its products may occur in
stages, each of which would require regulatory approval, and product demand
could at times exceed supply capacity.  The Company has not selected a site
for such expanded facilities and cannot predict the amount it will expend for
the construction of such facilities. There can be no assurance as to when or
whether the U.S. Food and Drug Administration ("FDA") will determine that
such facilities comply with Good Manufacturing Practices. The projected
location and construction of such facilities will depend on regulatory
approvals, product development, and capital resources, among other factors.
The Company has not obtained any regulatory approvals for its production
facilities for these products, nor can there be any assurance that it will be
able to do so. The Schering License Agreement requires the Company to
manufacture products at its San Diego facility for a period of time after
market launch at a negotiated price. Schering will be responsible for
establishing production capacity beyond the maximum capacity of the San Diego
facility.

YEAR 2000

Many currently installed computer systems and software products are coded to
accept only two-digi t entries in the date code field.  Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish the 21st century dates from 20th century dates.  As a result,
computer systems and/or software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements.  Management has a
continuing Year 2000 program which it believes has identified most, if not
all, critical internal systems, software and embedded chips.  The Company
currently believes that at least 90% of its identified critical and
non-critical internal systems, software and embedded chips are now compliant;
however, no assurances can be given that operating problems will not occur.
The Company continues to evaluate and remedy the remaining identified
critical and non-critical internal systems.  The Company has compliance
confirmations from approximately 75% of its critical third-party suppliers,
contractors and vendors (collectively, "contractors") with respect to their
computers, s oftware and systems, and it believes that most of the remaining
contractors will be compliant by December 31, 1999.  However, no assurances
can be given that the Company's contractors will be compliant.  Many systems
have already been replaced over the past two years in the ordinary course of
Company plans for upgrading its equipment, software and systems.  The Company
has removed and exchanged several non-compliant systems and expects to
continue such replacement or other remedial programs to assure that its
computers, software and other systems will continue to operate in the Year
2000.  Additionally, the Company has contingency plans for some of its
external contractors, although there can be no assurance that such
contingency plans will work or that there are contingency plans for all
contractors whose equipment or systems may fail.  The Company's cost to date
to resolve its Year 2000 problems is not material and is expected to total
less than $400,000; however, the actual total amount it will spend to
remediate such issues


                                       10
<PAGE>


remains uncertain.  The Company believes such costs will not have a material
effect on the Company's consolidated financial position or results of
operations.  There can be no assurance, however, that the Company's computer
systems and applications of other companies on which the Company's operations
rely, will be timely converted, or that any such failure to convert by
another company will not have a material adverse effect on the Company
systems.  Moreover, a failure of (i) the Company's scientific, manufacturing
and other equipment to operate at all or operate accurately, (ii) clinical
trial site medical equipment to perform properly, (iii) necessary materials
or supplies to be available to the Company when needed, or (iv) other
equipment, software or systems to perform properly, as a result of Year 2000
problems, could have a material adverse effect on the Company's business or
financial condition.

     Except for historical information, the statements made herein and
elsewhere are forward-looking. The Company wishes to caution readers that
these statements are only predictions and that the Company's business is
subject to significant risks. The factors discussed herein and other
important factors, in some cases have affected, and in the future could
affect, the Company's actual results and could cause the Company's actual
consolidated results for 2000, and beyond, to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company.  These risks include, but are not limited to, the inability to
obtain adequate financing for the Company's development efforts; the
inability to enter into collaborative relationships to further develop and
commercialize the Company's products; changes in any such relationships, or
the inability of any collaborative partner to adequately commercialize any of
the Company's products; the uncertainties associated with the lengthy
regulatory approval process; the uncertainties associated with obtaining and
enforcing patents important to the Company's business; possible competition
from other products; and Year 2000 issues. Furthermore, even if the
Company's products appear promising at an early stage of development, they
may not reach the market for a number of important reasons. Such reasons
include, but are not limited to, the possibilities that the potential
products will be found ineffective during clinical trials; failure to receive
necessary regulatory approvals; difficulties in manufacturing on a large
scale; failure to obtain market acceptance; and the inability to
commercialize because of proprietary rights of third parties. The research,
development, and market introduction of new products will require the
application of considerable technical and financial resources, while revenues
generated from such products, assuming they are developed successfully, may
not be realized for several years.  Other material and unpredictable factors
which could affect operating results include, without limitation, the
uncertainty of the timing of product approvals and introductions and of sales
growth; the ability to obtain necessary raw materials at cost-effective
prices or at all; the effect of possible technology and/or other business
acquisitions or transactions; and the increasing emphasis on controlling
healthcare costs and potential legislation or regulation of healthcare
pricing.

RESULTS OF OPERATIONS

     THREE MONTHS ENDED SEPTEMBER 30, 1999 AS COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 1998

     The Company's license and research revenue decreased by 69% to
$1.6 million for the three months ended September 30, 1999, compared to
$5.1 million for the three months ended September 30, 1998.  The decrease was
primarily a result of the decreased research revenue from the Schering
License Agreement and decreased development expense reimbursement from the


                                       11
<PAGE>


Ortho License Agreement.  The Company expects revenue to increase in 2000
compared to 1999, due to the revenue from the Inhale transaction.

     Research and development expenses decreased by 23% to $10.4 million for
the three months ended September 30, 1999, compared to $13.5 million for the
three months ended September 30, 1998.  The decrease in expenses was
primarily due to a $1.6 million decrease in payments to outside researchers
for preclinical and clinical trials and other product development work, a
$1.2 million decrease in staffing costs for employees engaged in research and
development activities, as well as other decreases related to the Company's
research and development activities.

     General and administrative expenses decreased by approximately 23% to
$1.7 million for the three months ended September 30, 1999, compared to
$2.2 million for the three months ended September 30, 1998.  The decrease in
general and administrative expenses was primarily due to decreased salaries
and wages and professional fees.

     Investment income was $210,000 for the three months ended September 30,
1999, compared to $635,000 for the three months ended September 30, 1998.
The decrease was primarily a result of lower average cash and short-term
investment balances.

     Interest expense was $373,000 for the three months ended September 30,
1999, compared to $193,000 for the three months ended September 30, 1998.
The increase was primarily a result of higher average long-term debt
balances.

     Alliance expects to continue to incur substantial expenses associated
with its research and development programs. Operating losses may fluctuate
from quarter to quarter as a result of differences in the timing of revenues
earned and expenses incurred and such fluctuations may be substantial. The
Company's historical results are not necessarily indicative of future results.

PART II  OTHER INFORMATION:

ITEM 1.  LEGAL PROCEEDINGS

     In September 1999, HMRI dismissed arbitration proceedings filed against
the Company in September 1998 in connection with its termination of the HMRI
License Agreement, seeking up to $16.8 million, plus interest and punitive
damages.  Additionally, at any time during the next two years HMRI has agreed
to sell to Alliance raw materials (perflubron) for up to $3 million that
Alliance can use for it is products.  Alliance has committed to purchase such
materials for its use under certain circumstances.  This constitutes the only
payments to be made by either party.

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<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits

       The following exhibits are being filed herewith:

       10(a) Split Dollar Life Insurance Agreement between the Company and
             Duane J. Roth dated November 12, 1998 (1)

       10(b) Collateral Assignment of Life Insurance Policy between the
             Company and Duane J. Roth dated November 25, 1998 (1)

       10(c) Split Dollar Life Insurance Agreement between the Company and
             Theodore D. Roth dated November 12, 1998 (1)

       10(d) Collateral Assignment of Life Insurance Policy between the Company
             and Theodore D. Roth dated November 12, 1998 (1)

       10(e) Eleventh Amendment to Lease Agreement dated September 1, 1999
             between the Company and HUB Properties Trust

             (1) Management contract compensatory plan required to be filed.

(b)    There was no report on Form 8-K.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                 ALLIANCE PHARMACEUTICAL CORP.
                                                           (Registrant)
                                                         \s\ Tim T Hart
                                                      ---------------------
                                                           Tim T. Hart
                                                     Chief Financial Officer
                                                            and Treasurer

Date:  November 10, 1999





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