UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                      Washington, DC  20549
                                
                                
                            Form 10-Q


[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 1997

Commission File Number  0-22314


                      PENEDERM INCORPORATED
     (Exact name of registrant as specified in its charter)

           DELAWARE                        77-0146116
 (State of other jurisdiction of        I.R.S. Employer
 incorporation or organization)      Identification Number

320 LAKESIDE DRIVE, FOSTER CITY,  CALIFORNIA            94404
  (Address of principal executive offices)           (Zip Code)


                         (650) 358-0100
       (Registrant's telephone number, including area code)


Indicate by 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 month (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.

               YES    X                      NO

Indicate number of shares outstanding of each of the issuer's
classes of common stock, at the latest practicable date:

        Class            Outstanding as of:  SEPTEMBER 30, 1997

     Common Stock                  8,143,051
_______________




                      PENEDERM INCORPORATED
                        TABLE OF CONTENTS
                            FORM 10-Q

                                                                 Page
                                                                Number
                                                      
PART I.   FINANCIAL INFORMATION                       
                                                      
Item 1.   Consolidated Financial Statements           
                                                      
          Condensed Consolidated Balance Sheets -       
             September 30, 1997 and December 31, 1996               3
                                                      
          Condensed Consolidated Statements of Operations -         
             Three months ended September 30, 1997 and 1996 and 
             nine months ended September 30, 1997 and 1996          4
                                                      
          Condensed Consolidated Statements of Cash Flows -         
             Nine months ended September 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                       8
                                                      
PART II.  OTHER INFORMATION                           
                                                      
Item 6.   Exhibits and Reports on Form 8-K                         14
                                                      
Signature Page                                                     15


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

                                                         
                                      September 30,     December 31,
                                         1997               1996
                                      -------------     ------------
                                      (unaudited)
ASSETS                                                   
Current assets:                                               
  Cash and cash equivalents             $   714            $ 3,062
  Short-term marketable securities        5,111              2,259
  Accounts receivable                     2,166                276
  Inventory                               1,689              1,539
  Prepaid expenses and other              
     current assets                         587                649
                                        -------            -------
     Total current assets                10,267              7,785
                                                              
  Marketable securities                   1,000              1,099
  Property and equipment, at cost,                              
     less accumulated depreciation           
     and amortization                       277                277
  Intangible and other assets             1,407              1,533
                                        -------            -------
Total assets                            $12,951            $10,694
                                        =======            =======       
LIABILITIES                                                   
Current liabilities:                                          
  Accounts payable                      $   998            $ 1,196
  Accrued liabilities                     2,093                879
                                        -------            -------
     Total current liabilities            3,091              2,075
                                                              
Long-term obligations                        14                 28
                                        -------            -------
Total liabilities                         3,105              2,103
                                                              
SHAREHOLDERS' EQUITY                                          
Common stock, $.01 par value                 81                 --
Additional paid in capital               56,130             46,984
Accumulated deficit                     (46,365)           (38,393)
                                        -------            -------
Total stockholders' equity                9,846              8,591
                                        -------            -------
Total liabilities and     
   stockholders' equity                 $12,951            $10,694
                                        =======            =======             

See accompanying notes.                                       



                       PENEDERM INCORPORATED
          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands except per share data)
                            (unaudited)
                                                             
                                                             
                                     Three Months             Nine Months
                                        Ended                    Ended
                                     September 30,           September 30,
                                 -------------------    -------------------- 
                                   1997        1996       1997        1996
                                 -------     -------    -------     -------    
Revenues:                                                           
  Product sales                  $  962      $   52     $ 5,206     $ 1,745
  Licensing revenues                925          10       1,585         217
                                 -------     -------     -------     -------
     Total revenues               1,887          62       6,791       1,962
                                 -------     -------     -------     -------  
Costs and expenses:                                                 
  Cost of product sales             527          16       2,135       1,131
  Research and development        1,947       1,019       4,429       4,140
  Sales and marketing             3,097         231       7,029         957
  General and administrative        577         514       1,508       2,096
                                 -------     -------     -------     -------
     Total costs and expenses     6,148       1,780      15,101       8,324
                                 -------     -------     -------     -------   
Loss from operations             (4,261)     (1,718)     (8,310)     (6,362)
                                                                    
Interest income, net                128         115         338         445 
                                --------    --------    --------    --------
Net loss                        $(4,133)    $(1,603)    $(7,972)    $(5,917)
                                ========    ========    ========    ========
Net loss per share              $ (0.51)    $ (0.22)    $ (1.00)    $ (0.81)
                                ========    ========    ========    ========   
Number of shares used in                                            
  computing net loss per share    8,138       7,288       7,944       7,266
                                ========    ========    ========    ========
                                                                    
                                                                    
See accompanying notes.                                             
                                                                    
                                                                    
                                                                    
                                
                     PENEDERM INCORPORATED
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (in thousands)
                          (unaudited)
                                                        Nine Months Ended
                                                          September 30,
Increase (decrease) in cash and cash                     1997        1996
  equivalents                                          -------     -------
                                                               
Cash flows from operating activities:                          
  Net loss                                             $(7,972)    $(5,917)
  Adjustments to reconcile net loss to net                       
     cash used in operating activities:                                      
  Depreciation and amortization                            243         191
  Decrease (increase) in accounts receivable            (1,890)        526
  Increase in inventory                                   (150)       (748)
  Decrease in prepaid expenses and other                         
     current assets                                         62          20
  Increase (decrease) in accounts payable,                       
     accrued liabilities and rent                        1,014      (1,220)
  Decrease (increase) in other assets                       (2)          2
                                                        -------     -------
     Net cash used in operating activities              (8,695)     (7,146)
                                                        -------     -------    
Cash flows from investing activities:                          
  Purchases of available-for-sale securities            (7,032)     (6,905)
  Maturities of available-for-sale securities            1,278       5,850
  Sales of available-for-sale securities                 3,001         761
  Acquisition of intangible assets                          --        (125)
  Acquisition of fixed assets                             (115)       (101)
                                                        -------     -------
     Net cash used in investing activities              (2,868)       (520)
                                                        -------     -------  
Cash flows from financing activities:                          
  Net proceeds from private placement stock offering     8,975          --
  Proceeds from issuance of common stock                   252         145
  Repayment of long-term debt                              (12)        (27)
                                                        -------     -------
     Net cash provided by financing activities           9,215         118
                                                        -------     -------   
Net decrease in cash and cash equivalents               (2,348)     (7,548)
Cash and cash equivalents at beginning of period         3,062       8,695
                                                        -------     -------
Cash and cash equivalents at end of period              $  714      $1,147
                                                        =======     =======    



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 nine month periods ended September  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.  Product Reserve

     The  Company  maintains  a  product  reserve  which  it
     considers sufficient to cover product returns  and  bad
     debts.
     
     3.  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  September  30,  1997  and  1996  or  in
     previously   disclosed   periods   as   common    stock
     equivalents  have and had been excluded  due  to  their
     anti-dilutive effect.
     
     4.  Comprehensive Income

     In  June 1997, the Financial Accounting Standards Board
     issued Statement of Financial Accounting Standards  No.
     130,    "Reporting   Comprehensive    Income,"    which
     establishes  standards  for  reporting  and  displaying
     comprehensive income and its components in a  full  set
     of general-purpose financial statements and is required
     to  be adopted by the Company beginning in fiscal 1998.
     Penederm's  management  is  currently  evaluating   the
     implication   of  this  statement  on   the   Company's
     statement of operations.
     
     
     5.  Segment Reporting

     In  June 1997, the Financial Accounting Standards Board
     issued Statement of Financial Accounting Standards  No.
     131,  "Disclosures about Segments of an Enterprise  and
     Related  Information," which establishes standards  for
     the   way   the  public  business  enterprises   report
     information in annual statements and interim  financial
     reports  regarding  operating  segments,  products  and
     services,  geographic areas and major customers.   SFAS
     131  will  first  be  reflected in the  Company's  1998
     Annual Report and will apply to both annual and interim
     financial   reporting   subsequent   to   this    date.
     Penederm's  management  is  currently  evaluating   the
     implication   of  this  statement  on   the   Company's
     statement of operations.
     


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

     
          Recent  Events

          Penederm  recently commenced its commercial  launch  of
          Avita  cream, a topical form of retinoic acid, for  the
          treatment  of  acne.   The U.S.  Patent  and  Trademark
          Office issued a patent to Penederm which broadly covers
          topical  formulations of Avita that include  Penederm's
          TopiCare Delivery Compounds.  The issued patent  covers
          retinoic     acid-containing     polyether-polyurethane
          formulations  which can be used for  the  treatment  of
          acne vulgaris and other skin disorders.  The polyether-
          polyurethane  compounds (TopiCare  Delivery  Compounds)
          are  liquid  polymers that deposit and hold  drugs  and
          other  skin care agents on and in the upper  layers  of
          the skin.
              
          In September 1997, in order to  facilitate the sale  of    
          the products by Merck KGaA (Merck) to a third party and
          to allow the Company  to focus on  the promotion of its
          own brands,  Penederm  terminated  its January 1997 co-
          promotion  agreement  with  a division  of Merck  under 
          which it had previously  promoted two  topical products
          in the United States.  The agreement was  terminated at
          no cost to the Company.

          In  October 1997, clinicians at a meeting of  the  Skin
          Disease  Education Foundation in Santa Fe,  New  Mexico
          reported results of a recently completed Phase II study
          demonstrating  that  a  new  combination   therapy   of
          butenafine HCl 1% and betamethasone dipropionate  0.05%
          cream  effectively treats tinea pedis (athlete's  foot)
          when applied twice daily for only seven days.  If these
          results  can be replicated in further clinical studies,
          this  new drug, which combines butenafine and a topical
          steroid   in   a  seven-day  treatment,   could   offer
          significant  safety  and  compliance  advantages   over
          current   28-day  combination  therapies  that   expose
          patients to steroids for a long dosing period.
          
          In  November  1997, Penederm announced it licensed  two
          pharmaceutical   products  to   Allergan-Lok   Produtos
          Pharmaceuticos,   Ltda.  (Allergan-Lok   Produtos),   a
          Brazilian subsidiary of Allergan, Inc. Under the  terms
          of  the  agreement, Allergan-Lok Produtos  will  pursue
          regulatory  approval of the products and pay milestones
          and  royalties to Penederm in exchange for the licenses
          to manufacture and market the products.
            
          

          Overview

          Penederm  is  a pharmaceutical company that specializes
          in  developing and marketing dermatology products.   In
          the first quarter of 1997, Penederm launched Mentax,  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 launched its Avita prescription cream
          product,  a  topical  form of  retinoic  acid  for  the
          treatment  of  acne  in  the second  quarter  of  1997.
          Penederm also received FDA 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   fungal
          inflammatory  conditions, psoriasis,  nail  fungus  and
          Mentax skin treatment line extensions in 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 products  through
          corporate pharmaceutical companies as follows:
                                
                                
                                
                                
                                
     COMPANY            PRODUCT AREA             TERRITORY

In-License and Co-Development Agreements:
-----------------------------------------
Kaken                  Penederm in-licensed     U.S., Canada, Mexico
Pharmaceutical         butenafine, the          and Latin America for
Company Ltd.           active ingredient        skin antifungal; U.S.,
(Kaken)                incorporated in          Canada, Europe, Mexico,
                       Mentax                   Latin America,
                                                Australia and New
                                                Zealand for nail
                                                antifungal.

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 and Eastern
(SmithKline)           Products                 Europe

Pierre Fabre Inc.      DuraScreen sunscreen     U.S.
(Pierre Fabre)

Allergan, Inc.         Butenafine topical       Central and South
                       antifungal and           America
                       retinoic acid cream
                                


          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  September  30,  1997,  the  Company
          incurred   a   cumulative  net  loss  of   $46,365,000.
          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 September 30, 1997 and 1996

          Total   revenues   for   the    three   months    ended
          September 30, 1997 of $1,887,000 increased from $62,000
          in  the  same  period of 1996.  This  increase  is  due
          primarily  to the sale of Penederm's Avita  and  Mentax
          products  launched  in  1997, increased  sales  of  the
          Company's  other  products  and  out-license  milestone
          and   co-promotion  payments from corporate partners.
          
          The  Company's  cost  of  sales  increased to  $527,000
          in  the  three  months ended September  30,  1997  from
          $16,000 in the same period of 1996 primarily due to the
          1997   launch  of  Avita  and  Mentax.   Gross  margins
          improved in the third quarter of 1997 compared  to  the
          same period of 1996 due to the 1997 launch of Avita and
          Mentax,  which  contribute  higher  margins  than   the
          Company's nonprescription products.

          The   Company's   research  and  development   expenses
          increased  91% to $1,947,000 in the three months  ended
          September  30, 1997 from $1,019,000 in the same  period
          of  1996  due to the timing and size of human  clinical
          trials.   The  Company commenced two  Phase  III  human
          clinical  studies of its 501 cream combination  product
          during  the  third quarter of 1997.  These studies  are
          being  conducted at over 32 clinical sites and  involve
          over  1,600  patients.   Sales and  marketing  expenses
          increased  to  $3,097,000 in  the  three  months  ended
          September 30, 1997 from $231,000 for the same period of
          1996  due  primarily  to marketing and  other  expenses
          related  to  the product launches of Mentax and  Avita.
          General  and administrative expenses increased  12%  to
          $577,000  in the three months ended September 30,  1997
          from $514,000 in the same period of 1996.
          
          Net  interest  income was $128,000 in the three  months
          ended  September  30,  1997 and $115,000  in  the  same
          period of 1996.

          


     Nine Months Ended September 30, 1997 and 1996

          Total revenues  for  the  nine  months  ended September
          30, 1997 of $6,791,000 increased from $1,962,000 in the
          same period of 1996.  This increase is due primarily to
          the initial product stocking shipments of the Company's
          Mentax  trade launch in January and Avita trade  launch
          in   June  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
          $2,135,000 in the nine months ended September 30,  1997
          from  $1,131,000  in  the  same  period  of  1996   due
          primarily  to  the  1997 launch of  Mentax  and  Avita.
          Gross margins improved in the first nine 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
          increased  7%  to $4,429,000 in the nine  months  ended
          September  30, 1997 from $4,140,000 in the same  period
          of  1996  due to the timing and size of human  clinical
          trials.  Sales and marketing expenses increased 634% to
          $7,029,000 in the nine months ended September 30,  1997
          from  $957,000 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 Avita
          in   the   third   quarter  of   1997.    General   and
          administrative expenses decreased 28% to $1,508,000  in
          the   nine   months  ended  September  30,  1997   from
          $2,096,000  in  the same period of 1996.   General  and
          administrative  expenses  in  the  prior  year   period
          included  legal costs related to prosecuting violations
          of  certain  of the Company's patents.  A  court  award
          related to this patent case resulted in the recovery of
          a  portion  of  the Company's legal fees in  the  first
          quarter of 1997 which reduced the Company's general and
          administrative expenses.
          
          Net  interest income decreased 24% to $338,000  in  the
          nine  months ended September 30, 1997 from $445,000  in
          the same period of 1996.  This decrease is primarily as
          a  result of lower average cash balances available  for
          investment in the nine 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  pharmaceutical products.  Sales and 
          marketing  expenses  are  expected to increase signifi-
          cantly  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  regulatory  costs,  expansion  of 
          regulatory, clinical and   quality  assurance  capabil-
          ities,  and  increased  administrative  support  costs.   
          Therefore,  additional operating 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  nine  months
          ended September 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 September 30,  1997,  the
          Company  had  cash,  cash equivalents  and  investments
          totaling $6,825,000.

          Cash expenditures related to operating activities,  the
          acquisition of fixed assets and repayment of  long-term
          obligations totaled $8,822,000 in the nine months ended
          September  30, 1997 and $7,274,000 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
          nine  months  ended  September 30,  1996.   No  similar
          milestone  payments were made in the first nine  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), will satisfy the Company's working  capital
          and  identified  capital  expenditure  requirements  at
          least  through  March 31, 1998.  The Company  plans  to
          raise  additional  equity capital in the  near  future.
          Management  is  currently evaluating proposals  from  a
          variety of financing sources and expects to complete  a
          transaction within the next six months.  The  Company's
          future   capital  requirements  will  depend  on   many
          factors,  including  the  commercial  success  of   the
          Company's   products,   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 strategic relationships.   There
          can  be  no  assurance that additional  funds  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.



          Item 6.  Exhibits and Reports on Form 8-K
          
          
            (a)     Exhibits

     27        Financial Data Schedule

            (b)     Reports on Form 8-K

               On August 1, 1997, Penederm filed a current report
               on Form 8-K in connection with the reincorporating
               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





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






     November 14, 1997          /s/  Michael A. Bates
     -----------------          --------------------------------
     Date                       Michael A. Bates, Vice President
                                Finance and Administration and
                                Chief Financial Officer




                        INDEX TO EXHIBITS


        Exhibit
          No.       Description
        -------     -------------------------------------------

          27        Financial Data Schedule