PENEDERM INCORPORATED
                        TABLE OF CONTENTS
                            FORM 10-Q


   
                                                               Page
                                                              Number
                                                      
PART I.   FINANCIAL INFORMATION                       
                                                      
Item 1.   Consolidated Financial Statements           
                                                      
          Condensed Consolidated Balance Sheets -       
             June 30, 1997 and December 31, 1996                 3
                                                      
          Condensed Consolidated Statements of Operations -
             Three months ended June 30, 1997 and 1996 and 
             six months ended June 30, 1997 and 1996             4
                                                     
          Condensed Consolidated Statements of Cash Flows -
             Six months ended June 30, 1997 and 1996             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 4.   Submission of Matters to a Vote of Security Holders   13
                                                      
Item 6.   Exhibits and Reports on Form 8-K                      14
                                                      
Signature Page                                                  15



                                
                                
                    PENEDERM INCORPORATED
            CONDENSED CONSOLIDATED BALANCE SHEETS
             June 30, 1997 and December 31, 1996
                        (in thousands)
                                             

            
                                    June 30,         December 31,
                                      1997               1996
                                  -----------       -------------
                                  (unaudited)
ASSETS                                                   
Current Assets:                                               
Cash and cash equivalents           $   387            $ 3,062
Short-term marketable securities      8,624              2,259
Accounts receivable                   1,679                276
Inventory                             1,779              1,539
Prepaid expenses and other              
   current assets                       724                649
                                    --------           --------
Total current assets                 13,193              7,785
                                                                               
Marketable securities                 1,000              1,099
Property and equipment, at cost,                              
   less accumulated depreciation                           
   and amortization                     257                277
Intangible and other assets           1,450              1,533
                                    --------           --------
Total assets                        $15,900            $10,694
                                    ========           ========       
LIABILITIES                                                   
Current liabilities:                                          
Accounts payable                    $   751            $ 1,196
Accrued liabilities                   1,206                879
                                    --------           --------
Total current liabilities             1,957              2,075
                                                              
Long-term obligations                    20                 28
                                    --------           --------
Total liabilities                     1,977              2,103
                                                              
SHAREHOLDERS' EQUITY                                          
Common stock, no par value           56,155             46,984
Accumulated deficit                 (42,232)           (38,393)
                                    --------           --------
Total stockholders' equity           13,923              8,591
                                    --------           --------
Total liabilities and                     
   stockholders' equity             $15,900            $10,694
                                    ========           ========

                          
See accompanying notes.                                       



                                

                       PENEDERM INCORPORATED
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands except per share data)
                            (unaudited)


                                                             
                                                             
                                 Three Months Ended       Six Months Ended
                                      June 30,                June 30,
                               --------------------    -------------------- 
                                  1997     1996          1997       1996
                               --------- ----------    --------- ----------     
Revenues:                                                           
Product sales                  $ 1,643   $ 1,100      $ 4,244    $ 1,693
Licensing revenues                 360        --          660        207
                               --------  --------     --------   --------
Total revenues                   2,003     1,100        4,904      1,900
                               --------  --------     --------   --------    
Costs and expenses:                                                 
Cost of product sales              845       687        1,608      1,115
Research and development         1,259     1,259        2,482      3,121
Sales and marketing              1,769       425        3,932        726
General and administrative         603       697          931      1,582
                               --------  --------      --------  --------
Total costs and expenses         4,476     3,068        8,953      6,544
                               --------  --------      --------  --------
                                                                    
Loss from operations            (2,473)   (1,968)       (4,049)   (4,644)
                                                                    
Interest income, net               151       154           210       330
                               --------  --------      --------  --------    
Net loss                       $(2,322)  $(1,814)      $(3,839)  $(4,314)
                               ========  ========      ========  ========      
Net loss per share             $ (0.29)  $ (0.25)      $ (0.49)  $ (0.59)
                               ========  ========      ========  ========      
Number of shares used in                                            
  computing net loss per share   8,112     7,257         7,848     7,256
                               ========  ========      ========  ========    
                                                                    


See accompanying notes.                                             
                                                                    
                                                                    
                                                                    
                                
                     PENEDERM INCORPORATED
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in thousands)
                          (unaudited)

   
                                                     Six Months Ended
                                                         June 30,
                                                     1997        1996           
                                                   --------    --------
Increase (decrease) in cash and cash  
equivalents
                                                               
Cash flows from operating activities:                          
   Net loss                                        $(3,839)     $(4,314)
   Adjustments to reconcile net loss to net                       
     cash used in operating activities:                     
       Depreciation and amortization                   159          130
       Increase in accounts receivable              (1,403)        (106)
       Increase in inventory                          (240)        (100)
       Increase in prepaid expenses and other                 
         current assets                                (75)         (77)
       Decrease in accounts payable, accrued                          
         liabilities and rent                         (118)         (10)
       Increase in other assets                         (2)          --
                                                    -------      -------
       Net cash used in operating activities        (5,518)      (4,477)
                                                    -------      -------        
Cash flows from investing activities:                          
   Purchases of available-for-sale securities       (7,032)      (6,908)
   Maturities of available-for-sale securities         266        4,051
   Sales of available-for-sale securities              500          260
   Acquisition of intangible assets                     --         (100)
   Acquisition of fixed assets                         (54)         (86)
                                                    -------      -------
       Net cash used in investing activities        (6,320)      (2,783)
                                                    -------      -------        
Cash flows from financing activities:                          
   Net proceeds from private placement stock     
     offering                                        8,975           --
   Proceeds from issuance of common stock              196          114
   Repayment of long-term debt                          (8)         (24)
                                                    -------      -------
       Net cash provided by financing activities     9,163           90
                                                    -------      -------       
Net decrease in cash and cash equivalents           (2,675)      (7,170)
Cash and cash equivalents at beginning of    
   period                                            3,062        8,695
                                                    -------      -------
Cash and cash equivalents at end of period          $  387       $1,525
                                                    =======      =======       


See accompanying notes.                                        




                      PENEDERM INCORPORATED
      NOTES TO  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           (unaudited)


     1.  Interim Unaudited Financial Information

     The    accompanying    interim   unaudited    condensed
     consolidated  financial statements of the  Company  for
     the three and six month periods ended June 30, 1997 and
     1996,   have been prepared in accordance with generally
     accepted  accounting principles for  interim  financial
     statements  and include all adjustments (consisting  of
     normal  and  recurring adjustments)  that  the  Company
     considers  necessary  for a fair  presentation  of  the
     operating results and cash flows for these periods. The
     results  of operations for the interim periods are  not
     necessarily  indicative of the results to  be  expected
     for  an entire year.  These financial statements should
     be  read  in  conjunction with  the  audited  financial
     statements and notes included as part of the  Company's
     Form 10-K for the year ended December 31, 1996.
     
     In  July  1997, the Company changed the  state  of  its
     incorporation from California to Delaware.
     
     
     2.  Net Loss Per Share

     Net  loss  per  share  is computed using  the  weighted
     average number of common shares outstanding during  the
     period.   Common  stock equivalents relating  to  stock
     options  are  excluded  from the computation  as  their
     effect is anti-dilutive.
     
     In  February  1997, the Financial Accounting  Standards
     Board   issued   Statement  of   Financial   Accounting
     Standards No. 128 "Earnings Per Share" (SFAS 128) which
     is  required  to  be  adopted in periods  ending  after
     December 15, 1997.  SFAS 128 simplifies the calculation
     of  earnings  per  share in most situations,  excluding
     common  stock equivalents in the computation  of  basic
     earnings  per share.  SFAS 128 will have no  impact  on
     the  Company's computation of  loss per  share  in  the
     periods  ended June 30, 1997 and 1996 or in  previously
     disclosed periods as common stock equivalents have  and
     had been excluded due to their anti-dilutive effect.
     
     
     
     
     
     
     
Item 2.   Management's  Discussion  and  Analysis  of   Financial
          Condition and Results of Operations


          Recent  Events

          In April 1997, Penederm announced it had entered into a
          second  agreement with SmithKline Beecham to co-develop
          an  undisclosed  OTC product using Penederm's  patented
          TopiCare  Delivery  Compounds(R)  with  a   proprietary
          SmithKline  Beecham formulation.  Both  companies  will
          contribute  scientific and technical expertise  to  the
          collaboration.   SmithKline Beecham has  the  exclusive
          option   to  market  the  finished  product  worldwide.
          Penederm  will receive milestone payments and royalties
          on   the   sale   of   products  resulting   from   the
          collaboration, as well as revenues from the  supply  of
          TopiCare Delivery Compounds.
          
          In   May  1997,  Penederm  announced  it  had  received
          regulatory  approval from the Health Protection  Branch
          of  Health  Canada of its topical antifungal  compound,
          butenafine  HCl 1% cream, as an over-the-counter  (OTC)
          tinea  pedis  (athlete's foot)  medication.   Schering-
          Plough  Healthcare  Products,  Inc.  will  market   the
          butenafine cream in Canada under its own brand names.
          
          In  June  1997,  Penederm  received  a  Phase  I  Small
          Business  Innovation  Research (SBIR)  grant  from  the
          National  Institutes  of Health National  Institute  on
          Aging to support research of Penederm's ST-630 compound
          as   a  possible  treatment  for  two  widespread  skin
          disorders: acne and premature skin aging.  ST-630 is  a
          fluorinated  derivative  of Vitamin  D3  that  Penederm
          currently  has in Phase II human clinical  studies  for
          the treatment of psoriasis.

          Overview

          Penederm  is  a pharmaceutical company that specializes
          in   developing  and  marketing  dermatology  products.
          Penederm  recently  launched  Mentax(R),  a  once-a-day
          prescription  topical treatment for three  skin  fungal
          conditions:   tinea  pedis  (athlete's   foot),   tinea
          corporis  (ringworm) and tinea cruris  (groin  fungus).
          Penederm  also recently received FDA approval to  begin
          marketing its Avita(TM) prescription cream product  for  
          the treatment of acne and contingent approval to  begin
          marketing  its Avita gel product upon expiration  of  a
          third  party  patent  in  January  1998.  Penederm  has
          several  other  pharmaceutical products for  psoriasis,
          nail  fungus and Mentax skin treatment line  extensions
          in  Phase II human clinical trials. The Company    also
          sells   its  patented   TopiCare   Delivery   Compounds
          for  use  in cosmetics  and personal care products, and 
          markets  its own over-the-counter (OTC) skin care prod-
          ucts  through corporate partners.
          
          The  Company has several partnership arrangements  with
          various pharmaceutical companies, as follows:
                                
                                
     COMPANY            PRODUCT AREA             TERRITORY
     -------            ------------             ---------
In-License and Co-                        
Development
Agreements:
------------------
Kaken               Penederm in-licensed  U.S. Canada, Mexico and
Pharmaceutical      butenafine, the       Latin America for skin
Company Ltd.        active ingredient     antifungal; U.S.,
(Kaken)             incorporated in       Canada, Europe, Mexico,
                    Mentax                Latin America,
                                          Australia & New Zealand
                                          for nail antifungal.

The Merck KGaA      Co-promote Akne-      U.S.
Group/Center        mycin(R) and
Laboratories        Cloderm(TM)

SmithKline Beecham  Undisclosed OTC       SmithKline option to
(SmithKline)        product               market worldwide

Out-License                               
Agreements:
------------------
Schering-Plough     Prescription & OTC    U.S. and Canada
HealthCare          Nail and co-promote
Products, Inc.      prescription skin
(Schering-Plough)   cream antifungal

UCB Group of        Prescription          Europe, Africa and
Belgium (UCB)       antifungal products   Middle East

Warner Wellcome     OTC Dry Skin          U.S. and Canada
Consumer Health
Products (Warner)

SmithKline Beecham  OTC Consumer          Europe & Eastern Europe
(SmithKline)        Products

Pierre Fabre Inc.   DuraScreen sunscreen  U.S.
(Pierre Fabre)
                                
     
     
     
          The  Company has been unprofitable since inception  and
          expects   to  incur  significant  additional  operating
          losses  in  the  near  future.   For  the  period  from
          inception through June 30, 1997, the Company incurred a
          cumulative net loss of  $42,232,000. Penederm's sources
          of working capital have been equity financings, product
          sales to corporate partners, sales of Mentax, Avita and
          over-the-counter products, product license fees,  sales
          of  TopiCare Delivery Compounds and interest earned  on
          investments.


          Results of Operations

          Three Months Ended June 30, 1997 and 1996

               Total revenues for the three months ended June 30,
          1997 of $2,003,000 increased 82% from $1,100,000 in the
          same period of 1996.  This increase is due primarily to
          the initial product stocking shipments of the Company's
          recently   launched  Avita  product   and   out-license
          milestone   payments  from  corporate   partners.    As
          expected,  revenues from the Company's Mentax  product,
          which  was initially launched in January of 1997,  were
          modest in the second quarter.
          
                The Company's cost of sales increased to $845,000
          in  the  three months ended June 30, 1997 from $687,000
          in  the  same period of 1996 primarily due to the  1997
          launch  of Avita.  Gross margins improved in the second
          quarter of 1997 compared to the same period of 1996 due
          to  the  1997  launch  of Avita, the  Company's  second
          pharmaceutical   product,  which   contributes   higher
          margins than the Company's nonprescription products.

          The  Company's  research and development expenses  were
          $1,259,000 in both the three months ended June 30, 1997
          and   1996.   Research  and  development  expenses  can
          fluctuate based on the size and timing of the Company's
          clinical  trial programs. The Company was conducting  a
          large  Phase  III study in the second quarter  of  1996
          whereas  several  smaller Phase II studies  were  being
          conducted  for  the  same period in  1997.   Sales  and
          marketing expenses increased 316% to $1,769,000 in  the
          three  months ended June 31, 1997 from $425,000 in  the
          same  period  of  1996 due primarily to  marketing  and
          other  expenses related to the product launch of Mentax
          in  the  first quarter of 1997 and preparation for  the
          marketing  launch  of Avita in the  third  quarter  and
          detailing support for Akne-mycin  and Cloderm.  General
          and  administrative expenses decreased 13% to  $603,000
          in  the  three months ended June 30, 1997 from $697,000
          in  the same period of 1996.  The prior year period had
          unusually  high  legal  costs  related  to  prosecuting
          violations of certain of the Company's patents.
          
          Net  interest  income was $151,000 in the three  months
          ended June 30, 1997 and $154,000 in the same period  of
          1996.


          Six Months Ended June 30, 1997 and 1996

                Total revenues for the six months ended June  30,
          1997  of  $4,904,000 increased from $1,900,000  in  the
          same period of 1996.  This increase is due primarily to
          the initial product stocking shipments of the Company's
          recently  launched  Mentax and  Avita  and  out-license
          milestone payments from corporate partners.
          
                The  Company expects its future revenues  in  the
          near  term to be derived principally from the  sale  of
          its  recently approved pharmaceutical products, and for
          the revenues derived from OTC and cosmetic products  to
          become less significant relative to total revenues.

                 The   Company's  cost  of  sales  increased   to
          $1,608,000 in the  six months ended June 30, 1997  from
          $1,115,000 in the same period of 1996 primarily due  to
          the   1997  launch  of  Mentax  sales.   Gross  margins
          improved  in  the first six months of 1997 compared  to
          the  same  period  of 1996 due to the  1997  launch  of
          Mentax  and  Avita, the Company's first  pharmaceutical
          products,  which  contribute higher  margins  than  the
          Company's nonprescription products.

          The   Company's   research  and  development   expenses
          decreased  20%  to $2,482,000 in the six  months  ended
          June  30,  1997 from $3,121,000 in the same  period  of
          1996  primarily  due to the timing and  size  of  human
          clinical  trials.  The Company was conducting  a  large
          Phase  III  study in the first quarter of 1996  whereas
          several  smaller Phase II studies were being  conducted
          for  the  same  period  in 1997.  Sales  and  marketing
          expenses increased 442% to $3,932,000 in the six months
          ended June 30, 1997 from $726,000 in the same period of
          1996  due  primarily  to marketing and  other  expenses
          related  to the product launch of Mentax in  the  first
          quarter  of  1997  and preparation  for  the  marketing
          launch  of  Avita  in the third quarter  and  detailing
          support  for  Akne-mycin  and  Cloderm.    General  and
          administrative  expenses decreased 41% to  $931,000  in
          the  six months ended June 30, 1997 from $1,582,000  in
          the  same  period of 1996.  The prior year  period  had
          unusually  high  legal  costs  related  to  prosecuting
          violations of certain of the Company's patents.    This
          patent  case  was won by the Company resulting  in  the
          recovery  of a portion of the Company's legal  fees  in
          the first quarter of 1997.
          
          Net  interest income decreased 36% to $210,000  in  the
          six  months  ended June 30, 1997 from $330,000  in  the
          same  period of 1996.  This decrease is primarily as  a
          result  of  lower average cash balances  available  for
          investment in the six months of 1997.

                The  Company  expects that annual  revenues,  and
          costs  and  expenses will continue to increase  in  the
          future,       due      principally      to      further
          commercialization  of its recently approved  pharmaceu-
          tical  products.   Sales  and  marketing  expenses  are  
          expected to increase significantly  from the prior year 
          as these products  are  promoted  in  the  marketplace.   
          The Company  also  expects some  expansion of  research 
          and  development programs, increased patent and regula-
          tory  costs,  expansion  of  regulatory,  clinical  and   
          quality  assurance capabilities,  and  increased admin-
          istrative support costs.   Therefore,  additional oper-
          ating losses are expected in the near future.
          
          In  addition,  sales of a product upon  initial  market
          introduction generally include a significant amount  of
          initial   orders  for  inventory  by  wholesalers   and
          distributors  and  are  not necessarily  indicative  of
          actual   demand  for  that  product  by  patients   and
          physicians.    There   can   be   no   assurance   that
          distributors and wholesalers will be able  to  forecast
          demand   for   product  accurately.   Fluctuations   in
          operating  results will occur to the extent  that  sell
          through  of  products  does not meet  distributors'  or
          wholesalers'  expectations.  The Company  also  expects
          that  future  operating  results  may  be  subject   to
          quarterly  variations that may impact  cash  flow  from
          operations.  Operating results for the six months ended
          June  30, 1997 are not necessarily indicative of future
          operating results.

          Liquidity and Capital Resources

               The Company's principal sources of capital to date
          have   been  the  proceeds  from  public  and   private
          offerings of its equity securities, including  a  March
          1997  private placement for which the net proceeds were
          approximately  $9,000,000.   At  June  30,  1997,   the
          Company  had  cash,  cash equivalents  and  investments
          totaling $10,011,000.

          Cash expenditures related to operating activities,  the
          acquisition of fixed assets and repayment of  long-term
          obligations totaled $5,580,000 in the six months  ended
          June  30,  1997 and $4,587,000 for the same  period  in
          1996.   Operating activities were comprised of research
          and   development,  clinical  trials,  product   sales,
          promotion  and general administration activities.   The
          Company   also  made  milestone  payments  of  $100,000
          related  to the in-licensing of drug compounds  in  the
          six  months ended June 30, 1996.  No similar  milestone
          payments were made in the first six months of 1997. The
          Company expects that amounts expended historically  are
          not  indicative of future expenditures by the  Company,
          which  the Company believes will increase. The  Company
          expects  to  continue to incur substantial expenditures
          related to the further research and development of  its
          technologies, development of its products,  acquisition
          of additional products and rights to drug compounds and
          sales and marketing.

          The  Company believes that existing capital  resources,
          including  the interest income earned on  its  invested
          cash  balances, together with the anticipated  revenues
          (consisting   of  product  sales,  license   fees   and
          royalties),  may satisfy the Company's working  capital
          and  identified  capital  expenditure  requirements  at
          least  through  June 30, 1998.  However, the  Company's
          future   capital  requirements  will  depend  on   many
          factors,   including  the  progress  of  the  Company's
          collaborative and independent research and  development
          programs,   payments   received   under   collaborative
          agreements  with other companies, if any,  the  results
          and  costs of preclinical and clinical testing for  the
          Company's products, the costs associated with  and  the
          timing of regulatory approvals, technological advances,
          the  status of competitive products, and the commercial
          success  of Penederm's licensing and marketing efforts.
          There  can  be no assurance that additional  funds,  if
          required, will be available to the Company on favorable
          terms,  if  at all, to permit the Company  to  continue
          with its current plan for operations.
     ______________________________________________

                The  statements in "Management's  Discussion  and
          Analysis   of  Financial  Condition  and   Results   of
          Operations"  that  relate to future  plans,  events  or
          performance,  including statements relating  to  future
          revenue   and   expense  levels,  are   forward-looking
          statements   which  involve  risks  and   uncertainties
          including, but not limited to, product development  and
          market  acceptance risks, product manufacturing  risks,
          risks  associated with the establishment and management
          of  a  contract sales force, the impact of  competitive
          products and pricing, the results of current and future
          licensing  and  other collaborative relationships,  the
          results  of  financing efforts, developments  regarding
          intellectual property rights and litigation,  risks  of
          product  nonapproval or delays or post-approval reviews
          by the FDA or foreign regulatory authorities, and other
          risks  identified  in  the  Company's  Securities   and
          Exchange Commission filings.  Actual results, events or
          performance   may  differ  materially.    Readers   are
          cautioned not to place undue reliance on these forward-
          looking  statements, which speak only as  of  the  date
          hereof.   The  Company  undertakes  no  obligation   to
          publicly  release the result of any revisions to  these
          forward-looking  statements  that  may  be  needed   to
          reflect  events or circumstances after the date  hereof
          or to reflect the occurrence of unanticipated events.



                      PENEDERM INCORPORATED

Part II:  OTHER INFORMATION

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

     The Company held its annual meeting of shareholders on June
     16, 1997.  At the meeting, the shareholders considered the
     items described below:

     Each of the nominees for director David E. Collins, Lloyd H.
     Malchow, Robert F. Allnutt, William I. Bergmen, Mark J.
     Gabrielson, Harvey S. Sadow, Ph.D., and Gerald D. Weinstein,
     M.D., was elected by the affirmative vote of at least
     6,227,126 shares (out of 6,460,834 shares represented at the
     meeting).

     The shareholders voted to approve an amendment to the
     Penederm Incorporated Equity Incentive Plan to increase by
     400,000 the number of shares reserved for issuance under the
     plan.  The amendment was approved by a vote of 3,458,222
     shares for, 1,566,896 shares against and 17,220 shares
     abstaining.

     The shareholders voted to approve an amendment to the
     Penederm Incorporated Employee Stock Purchase Plan to
     increase by 50,000 the number of shares reserved for
     issuance under the plan.  The amendment was approved by a
     vote of 4,417,761 shares for, 609,516 shares against and
     15,061 shares abstaining.
     
     The June 16, 1997 meeting of shareholders was adjourned
     until July 11 at which the following resolution was approved
     by shareholders:
     
     The shareholders voted to approve a change in the Company's
     state of incorporation from California to Delaware through
     the merger of the Company into a newly formed Delaware
     corporation that is a wholly-owned subsidiary of the
     Company.  This proposal was approved by a vote of  5,266,920
     shares for, 844,645 against and 90,337 abstaining (out of
     7,292,120 shares represented at the meeting).

          Item 6.  Exhibits and Reports on Form 8-K

            (a)   Exhibits

                  2.1      Agreement  and Plan of Merger  between  Penederm
                              Incorporated, a California Corporation and    
                              Penederm Incorporated, a Delaware Corporation
                  27       Financial Data Schedule
                  99.1(1)  Equity Incentive Plan
                  99.2(1)  Employee Stock Purchase Plan
_______________
(1)  Incorporated  by  reference to  the  exhibits  to  Penederm
     Registration Statement on Form S-8 (File No. 333-32689) filed on
     August 1, 1997.
  
            (b)   Reports on Form 8-K

                  On August 1, 1997, Penederm filed a current report
                  on Form 8-K in connection with the reincorporation
                  of the Company in Delaware.



                           SIGNATURES




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




                                PENEDERM INCORPORATED





     August 14, 1997            /s/Lloyd H. Malchow
     Date                       Lloyd H. Malchow, President
                                and Chief Executive Officer






     August 14, 1997            /s/Michael A. Bates
     Date                       Michael A. Bates, Director of
                                Finance and Administration




                        INDEX TO EXHIBITS


      Exhibit
        No.      Description

      2.1        Agreement  and Plan of Merger  between  Penederm
                 Incorporated, a California    Corporation    and    
                 Penederm Incorporated, a Delaware Corporation
      27         Financial Data Schedule
      99.1(1)    Equity Incentive Plan
      99.2(1)    Employee Stock Purchase Plan
_______________
(1)  Incorporated  by  reference to  the  exhibits  to  Penederm
     Registration Statement on Form S-8 (File No. 333-32689) filed on
     August 1, 1997.