UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, DC 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 period ended March 31, 1997

                                   OR

[ ]     Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934

                       Commission File Number: 0-13588


                                FAULDING INC.
            (Exact name of registrant as specified in its charter)


        DELAWARE                                         04-2769995
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

                             200 Elmora Avenue
                            Elizabeth, NJ 07207
                  (Address of principal executive offices)


                       Telephone Number (908) 527-9100
            (Registrant's telephone number, including area code)


        Indicate by check mark 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 such filing requirements for the past 90 days.

                           Yes [X]        No  [ ]

        As of May 1, 1997, there were 15,094,560 shares of the Registrant's
Common Stock outstanding.


<PAGE>




                                 FAULDING INC.
                                 

                                    INDEX
                                                            

                                                                     Page No.

PART I  -  FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements:
  
         Consolidated Balance Sheets
           March 31, 1997 and June 30, 1996 . . . . . . . . . . . . . . . 3
             
         Consolidated Statements of Operations
           Three months ended March 31, 1997
           and 1996 and nine months ended
           March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . .  4
             
         Consolidated Statements of Cash Flows
           Nine months ended March 31, 1997
           and 1996  . . . . . . . . . . . . . . . . . . . .. . . . . .   5
             
         Notes to Consolidated Financial Statements . . . . . . . . . .   6
           
  
ITEM 2.  Management's Discussion and Analysis of 
         Financial Condition and Results of Operations  . . . . . . . .  10


PART II  -  OTHER INFORMATION

  ITEMS 1 thru 6  . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
    
  SIGNATURES . . . . . . . . . . . . . . . . . . .  . . . . . . . . . .  17




                                Page 2

<PAGE>



CONSOLIDATED BALANCE SHEETS 
(Dollars in thousands, except share data)

                                            
                                              March 31,          June 30,
                                                 1997              1996
                                              (Unaudited)       (Audited)
--------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------
CURRENT ASSETS:

Cash and cash equivalents                   $      3,944      $      1,897
Accounts receivable                               21,639            17,118
Inventory (Note 4)                                32,519            26,496
Other current assets                               2,551             3,315
Deferred income taxes (Note 6)                     2,256             3,225
--------------------------------------------------------------------------
TOTAL CURRENT ASSETS                              62,909            52,051
--------------------------------------------------------------------------
Property, plant and equipment, net                43,893            41,510
Other assets                                       3,499             4,279
Deferred income taxes (Note 6)                       359               838
--------------------------------------------------------------------------
TOTAL ASSETS                                $    110,660      $     98,678
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------
CURRENT LIABILITIES:

Accounts payable                            $     10,652      $      7,553
Due to affiliated companies                          949               847
Loan payable to bank                               6,250               ---
Accrued expenses                                   9,340             6,666
Accrued preferred dividends                          689               689
--------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                         27,880            15,755
--------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 1, 2 and 5)
Class A convertible preferred stock;
   par value $.01, authorized 1,834,188
   shares; issued and outstanding 834,188
   (liquidation value $24,995)                         8                 8
Class B convertible preferred stock;
   par value $.01, authorized 150,000
   shares; issued and outstanding 150,000
   (liquidation value $15,169)                         2                 2
Common stock; par value $.01, authorized
   35,000,000 shares; issued and outstanding
   15,088,060 at March 31, 1996 and 15,064,560
   at June 30, 1996                                  151               151
Capital in excess of par value                    55,399            57,138
Retained earnings                                 27,220            25,624
--------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                        82,780            82,923
--------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $    110,660      $     98,678
==========================================================================

The accompanying notes are an integral part of these consolidated financial
statements.


                                Page 3


<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except share data)


                                                            Three Months Ended               Nine Months Ended
                                                                 March 31,                       March 31,
                                                        -------------------------      -------------------------
                                                            1997           1996             1997          1996
----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>              <C>            <C>
NET SALES                                             $     25,198   $     18,513    $     66,012   $     52,212
Cost of sales                                               16,358         14,225          46,050         42,301
----------------------------------------------------------------------------------------------------------------
Gross profit                                                 8,840          4,288          19,962          9,911
----------------------------------------------------------------------------------------------------------------
Expenses:
   Selling, general and administrative                       3,742          2,735          10,162          8,239
   Research and development                                  2,692          2,647           7,094          7,741
   Acquisition expenses (Note 1)                                 0          1,018             ---          1,018
   Restructuring costs                                           0             78             ---            657
----------------------------------------------------------------------------------------------------------------
Total expenses                                               6,434          6,478          17,256         17,655
----------------------------------------------------------------------------------------------------------------
Income (loss) from operations                                2,406         (2,190)          2,706         (7,744)
Other income (expense), net                                    (74)          (190)           (187)           997 
----------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                            2,332         (2,380)          2,519         (6,747)
Income tax expense (benefit) (Note 6)                          848           (266)            923         (1,081)
----------------------------------------------------------------------------------------------------------------
Net incom(loss)                                              1,484         (2,114)          1,596         (5,666)
Preferred stock dividends                                      689            578           2,067          1,619
----------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS), APPLICABLE TO COMMON STOCK         $        795   $     (2,692)   $       (471)  $     (7,285)
================================================================================================================
Primary Earnings Per Common Share (Note 3)
   Net income (loss)                                  $        .05   $       (.18)   $       (.03)  $       (.49)
----------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding    15,071,099     14,966,754      15,066,723     14,974,255      
================================================================================================================

The accompanying notes are an integral part of these consolidated financial
statements.

</TABLE>

                                Page 4


<PAGE>


CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)



                                                      Nine Months Ended
                                                           March 31,
                                                -----------------------------
                                                     1997            1996
-----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income (Loss), Applicable to Common Stock   $        (471)   $     (7,285)
Adjustments To Reconcile Net Income (Loss)
to Net Cash
   Provided By (Used For) Operating Activities:
   Depreciation and amortization                        2,816           2,345
   Compensation expense-stock grants                      243             116
   Deferred income tax, asset                           1,448             142
   INCREASE (DECREASE) IN CASH FROM:
   Accounts receivable                                 (4,521)         (2,243)
   Inventory                                           (6,023)         (3,553)
   Other current assets                                  (144)         (1,153)
   Other assets                                           553            (659)
   Accounts payable                                     3,099           2,084 
   Accrued expenses                                     2,674             421 
   Accrued income taxes                                   851            (366)
   Accrued preferred dividends                            ---              58
   Due to/from affiliates                                 102             565
-----------------------------------------------------------------------------
   TOTAL ADJUSTMENTS                                    1,098          (2,243)
-----------------------------------------------------------------------------
Net Cash Provided By (Used For)
Operating Activites                                       627          (9,528)
-----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITES:

Purchases of property, plant and equipment             (4,972)         (2,362)
-----------------------------------------------------------------------------
Net Cash Provided By (Used For)
Investing Activities                                   (4,972)         (2,362)
-----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITES:

Borrowings from bank                                    6,250             ---
Repayments to bank                                        ---          (2,000)
Proceeds from issuance of common stock                    142             ---
Proceeds from issuance of preferred stock                 ---          15,000
Proceeds from additions to paid in capital                ---           4,264
-----------------------------------------------------------------------------
Net Cash Provided By (Used For)
Financing Activites                                     6,392          17,264
-----------------------------------------------------------------------------
Increase (Decrease) In Cash and Cash Equivalents $      2,047    $      5,374 
=============================================================================
Cash and cash equivalents,
   beginning of period                                  1,897           1,225
-----------------------------------------------------------------------------
Cash and cash equivalents,
   End of Period                                 $      3,944    $      6,599
=============================================================================
Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
   Interest                                      $        219    $        206
   Income Taxes                                  $     (1,379)   $       (857)
-----------------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated financial
statements.
          
                                Page 5


<PAGE>

                                Faulding Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                            (Dollars in Thousands)

Notes to the Financial Statements included in Faulding Inc.'s (the
"Company") Form  10-K for the year ended June 30, 1996 contain
information pertinent to the accompanying financial statements and should
be read in conjunction with reading these financial statements.  There has
been no material change in the information contained in such footnotes
except as set forth below.  The Consolidated Balance Sheet at March 31,
1997, the Consolidated Statements of Operations for the three and nine
months ended March 31, 1997 and 1996 and the Consolidated Statements of
Cash Flows for the nine months ended March 31, 1997 and 1996 are
unaudited.

In the opinion of management, all adjustments (consisting only of normal
recurring entries) necessary for a fair presentation of such financial
results have been included.

1. Acquisitions and Consolidation

   On February 29, 1996 the Company acquired all of the outstanding
   capital stock of each of Faulding Medical Device Co. ("FMD"), Faulding
   Puerto Rico, Inc. ("FPR"), and Faulding Pharmaceutical Co. ("FPC"),
   collectively the "Acquired Companies," from Faulding Holdings Inc. (the
   Company's principal stockholder) in exchange for 2,438,712 shares of
   its common stock.  As part of the acquisition, the Company created a
   Class B Preferred Stock with 150,000 authorized shares, par value at
   $.01, all of which were issued to Faulding Holdings Inc. for a cash
   purchase price of $100 per share, for a total value of $15 million.
   
   The acquisition transaction was accounted for as similar to a pooling of
   interests and, therefore, financial statements for the nine months ended
   March 31, 1996 have been restated as if the acquisition took place at
   the beginning of the earliest period presented.  The financial statements
   reflect the accounts of Faulding Inc. (including its wholly owned
   subsidiary, Purepac Pharmaceutical Co.) and the Acquired Companies. 
   All intercompany transactions and balances have been eliminated.
   
   Since the acquisition transaction was accounted for as similar to a
   pooling of interests, the acquisition expenses of $1,018,000 incurred
   were charged to results of operations in the three months ended March
   31, 1996.  The expenses include $552,000 for financial advisory
   services and $466,000 for professional fees.



                                Page 6


<PAGE>

2. A reconciliation of the change in total stockholders' equity is as
   follows:


                            Par
                            Value of
                            Common and   Capital in                 Total Stock
                            Preferred    Excess of     Retained     -holder  
                            Stock        Par Value     Earnings     Equity  
                            ----------   -----------   ----------   ----------
Balance, June 30, 1996      $     161    $    57,138   $   25,624   $   82,923
Common stock issued
   pursuant to stock
   grant plan                     ---           (---)
Exercise of stock options                        142                       142
Class A preferred
   stock dividend                             (1,560)                   (1,560)
Class B preferred
   stock dividend                               (507)                     (507)
Stock grant amortization                         243                       243
Reduction of deferred 
   income tax asset from   
   issuance of stock grants                      (57)                      (57)
Net Income                                                  1,596        1,596 
                            ----------   -----------   ----------   ----------
Balance, March 31, 1997     $      161   $    55,399   $   27,220   $   82,780
                            ==========   ===========   ==========   ==========



3. Earnings Per Common Share

   Primary earnings per common share is calculated by dividing income
   after preferred dividends by the weighted average number of common
   shares outstanding during the period.  Common stock equivalents are
   excluded as the effect is anti-dilutive.  Earnings per share assuming
   full dilution is not presented as the effect would be anti-dilutive.


4. Inventory

                                     March 31,               June 30,
                                       1997                    1996
                                    ----------             ----------
                Raw materials       $    9,975             $   11,160    
                Work-in-progress         8,895                  4,509    
                Finished goods          13,649                 10,827    
                                    ----------             ----------
                     Total          $   32,519             $   26,496     
                                    ==========             ==========


5. Capital Stock

   During the quarter ended March 31, 1997, the Company issued 3,500
   shares of common stock to employees pursuant to the Company's 1991
   Restricted Stock Incentive Plan.  The Company received no proceeds
   from this transaction.  As a result of the issuance of these shares, the
   Company will have an income tax deduction of $21 in the fiscal year
   ending June 30, 1998.  The deduction will result in a reduction of taxes
   payable of approximately $7.  In the same fiscal year, for financial
   reporting purposes, the tax benefit will be recorded as a reduction of the
   deferred tax asset to the extent previously provided, and the remainder
   of the benefit will be recorded as additional capital in excess of par
   value.  The tax effects will not be reflected in the reported earnings or
   the earnings per share calculations.



                                Page 7
<PAGE>


   During the quarter ended March 31, 1997, the Company issued 20,000
   shares of common stock upon exercise of 14,035 incentive stock
   options and 5,965 non-qualified stock options granted to a former
   employee in December 1995.  The net proceeds from this transaction
   amounted to $142.  As a result of the issuance of the 5,965 shares
   issued upon the exercise of the non-qualified stock options, the
   Company will have an income tax deduction of $8 in the fiscal year
   ended June 30, 1998.  The deduction will result in a reduction in the
   taxes payable of approximately $3.

6. Accounting for Income Taxes
   
   Deferred income tax assets, both current and non-current, reflect the net
   tax effects of (a) temporary differences between the carrying amounts of
   assets and liabilities for financial reporting purposes and the amounts
   used for income tax purposes, and (b) operating loss and tax credit
   carryforwards.  

   Income tax expense (benefit) does not include the benefit of recognizing
   available loss carryforwards to the extent they have already been
   recognized as a deferred tax asset.  Instead, there is a reduction in the
   deferred tax asset as such benefits are utilized to reduce taxes payable.

   The income tax expense (benefit) was comprised of the following:


                          Three Months Ended          Nine Months Ended
                              March 31,                   March 31,   
                        ----------------------      ----------------------
                           1997         1996           1997         1996
                        ----------   ---------      ----------   ---------
Current
  Federal               $     788    $    (218)     $     856    $    (883)
  State                        90          (25)           101          (88)
                        ----------   ---------      ----------   ---------
                              878         (243)           957         (971)
Deferred
  Federal                     (30)          (1)           (34)         (25)
  State                         0          (22)             0          (85)
                        ----------   ---------      ----------   ---------
Total expense (benefit) $     848    $    (266)     $     923    $  (1,081)
                        ==========   =========      ==========   =========
	
  
  The Company has net operating losses and tax credits available as
  carryforwards to reduce future payments of federal income taxes.  State
  tax losses are also available as carryforwards.  At March 31, 1997, for
  federal tax purposes, the net operating loss and tax credit carryforwards
  amounted to $14,870 and $707, respectively; they expire through year
  2003.  The future utilization of the net operating loss carryforwards is
  subject to limitation under provisions of the Internal Revenue Code.
  
  The benefit of net operating losses generated by the Acquired Companies
  prior to acquisition by the Company cannot be realized until the individual
  company generates sufficient taxable income to utilize such benefit.  As of
  March 31, 1997 a full valuation allowance has been provided for these net
  operating losses.



                                Page 8

<PAGE>


7.   New Accounting Pronouncements
  
  In October 1995, the Financial Accounting Standards Board issued
  Statement of Financial Accounting Standard No. 123 "Accounting For
  Stock Based Compensation" ("SFAS 123") which requires that an
  employer's financial statements include expanded disclosure regarding
  stock-based employee compensation arrangements.  The Company will
  adopt the disclosure only requirements of SFAS 123, therefore, such
  adoption will have no effect on the Company's consolidated financial
  condition or results of operations.
  
  In March 1995, the Financial Accounting Standards Board issued
  Statement of Financial Accounting Standard No. 121 "Accounting For The
  Impairment Of Long-Lived Assets" ("SFAS 121") which requires that long-lived
  assets be reviewed for impairment whenever events or changes in
  circumstance indicate that the carrying amount of an asset may not be
  recoverable. To determine a loss, if any, to be recognized, the book value
  of the asset would be compared to the market value or expected future
  cash flow value.  The Company has adopted SFAS 121 for the fiscal year
  ended June 30, 1997 with no material impact on its results of operations
  and financial position.



                                Page 9
<PAGE>



Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS
          (Dollars presented in thousands)

Results Of Operations - Three and Nine Month Periods Ended March 31,
1997 Compared with the Three and Nine Month Periods Ended March 31, 1996

Overview:  Acquisitions and Consolidation

On February 29, 1996 the Company acquired all of the outstanding capital
stock of each of Faulding Medical Device Co. ("FMD"), Faulding Puerto Rico,
Inc. ("FPR"), and Faulding Pharmaceutical Co. ("FPC"), collectively the
"Acquired Companies," from Faulding Holdings Inc. (the Company's majority
stockholder) in exchange for 2,438,712 shares of its common stock. As a
result, the acquisition transaction was accounted for as similar to a pooling of
interests and, therefore, financial statements for the three and nine month
periods ended March 31, 1996 have been restated as if the acquisition took
place at the beginning of the earliest period presented.  The financial
statements reflect the accounts of Faulding Inc. (including its wholly owned
subsidiary, Purepac Pharmaceutical Co.) and the Acquired Companies.

Results of Operations

The following segregates the results of operations before income taxes for
Faulding Inc. into the Company's business prior to the acquisition, "Purepac,"
and the Acquired Companies which became wholly owned subsidiaries of Faulding
Inc. effective March 1, 1996.

<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS (UNAUDITED) - Purepac

                                                            Three Months Ended              Nine Months Ended
                                                                 March 31,                        March 31,
                                                        -------------------------      -------------------------
                                                            1997           1996             1997          1996
                                                        -------------------------      -------------------------
<S>                                                        <C>           <C>              <C>            <C>
NET SALES                                               $   21,948   $     15,466      $   57,526   $     44,155
Cost of sales                                               12,798         11,324          36,292         34,435
                                                        -------------------------      -------------------------
Gross profit                                                 9,150          4,142          21,234          9,720
                                                        -------------------------      -------------------------
Expenses:
   Selling, general and administrative                       3,172          2,017           8,427          6,252
   Research and development                                  2,226          2,176           5,767          6,723
   Acquisition costs                                           ---          1,018             ---          1,018
   Restructuring costs                                         ---             78             ---            657
                                                        -------------------------      -------------------------
Total Expenses                                               5,398          5,289          14,194         14,650
                                                        -------------------------      -------------------------
Income (loss) from operations                                3,752         (1,147)          7,040         (4,930)
Other income (expense), net                                    (74)           (40)           (187)         1,600 
                                                        -------------------------      -------------------------
Income (loss) before income taxes                            3,678         (1,187)          6,853         (3,330)
                                                        -------------------------      -------------------------

</TABLE>


                                Page 10


<PAGE>

<TABLE>
<CAPTION>

STATEMENTS OF OPERATIONS (UNAUDITED) - Acquired Companies


                                                            Three Months Ended              Nine Months Ended
                                                               March 31,                        March 31,
                                                        -------------------------      -------------------------
                                                            1997           1996             1997          1996
                                                      ---------------------------      -------------------------
<S>                                                        <C>           <C>              <C>            <C>
NET SALES                                             $      3,250   $      3,047      $    8,486   $      8,057
Cost of sales                                                3,560          2,901           9,758          7,866
                                                      ---------------------------      -------------------------
Gross profit                                                  (310)           146          (1,272)           191
                                                      ---------------------------      -------------------------
Expenses:
   Selling, general and administrative                         570            719           1,735          1,987
   Research and development                                    466            471           1,327          1,018
                                                      ---------------------------      -------------------------
Total Expenses                                               1,036          1,190           3,062          3,005
                                                      ---------------------------      -------------------------
Income (loss) from operations                               (1,346)        (1,044)         (4,334)        (2,814)
Other income (expense), net                                    ---           (150)            ---           (603)
                                                      ---------------------------      -------------------------
Income (loss) before income taxes                           (1,346)        (1,194)         (4,334)        (3,417)
                                                      ---------------------------      -------------------------

</TABLE>


The discussion below relates to the segregated results presented above.

Purepac Results of Operations

Net sales for the three and nine month periods ended March 31, 1997 were
$21,948 and $57,526, respectively, compared with $15,466 and $44,155 for
the corresponding 1996 periods.  The increase of 42% in the third quarter's
sales over the prior year's quarter is primarily due to the commercial launch
of etodolac tablets, approved by the United States Food and Drug
Administration ("FDA") on February 28, 1997, and the launch of clonazepam
tablets which was approved by the FDA in the prior quarter.  Also
contributing to the increase was the continuing sales of diclofenac tablets
which was approved by the FDA in March 1996.  For the three months ended
March 31, 1997, etodolac, clonazepam and diclofenac accounted for 20%,
18% and 12%, respectively, of sales.  For the nine month period ended
March 31, 1997, etodolac, clonazepam and diclofenac each accounted for
8%, 7% and 20%, respectively, of sales.

Gross profit for the three and nine month periods ended March 31, 1997
were $9,150 and $21,234, respectively, compared with $4,142 and $9,720 for
the corresponding 1996 periods.  Gross profit as a percentage of net sales
for the current three and nine month periods were 42% and 37%,
respectively, compared with 27% and 22% for the corresponding periods in
the prior year.  The increase was principally attributable to the sales of
etodolac, clonazepam and diclofenac.

Selling, general and administrative expenses for the current three and nine
month periods were $3,172 and $8,427, respectively, compared with the
corresponding prior period's respective amounts of $2,017 and $6,252.
Current periods' expenses as a percentage of net sales were 14% and 15%,
respectively, compared with 13% and 14% for the corresponding prior year's
periods.   The increase in the expense level for the current three and nine
month periods were due to higher personnel and promotion expenses as well
as an increase in the bad debt provision to provide for a customer that filed
for protection under the U.S. Bankruptcy Code.



                                Page 11
<PAGE>


Research and development expenses for the current three and nine month
periods were $2,226 and $5,767, respectively, compared with $2,176 and
$6,723 for the corresponding 1996 periods.  The current periods' expenses
as a percent of net sales were both 10% compared with 14% and 15% for the
corresponding prior periods.  The relatively stable expenses for the current
three month period reflects continuing expenditures in biostudy and product
development costs.  The reduced expenses in the current nine month period
reflects mostly timing differences associated with biostudy scheduling.

In the prior three month period ended March 31, 1996, the Company incurred
$1,018 in acquisition expenses related to the purchase of the Acquired
Companies.  No such costs have been incurred in the current year.

In the three and nine month periods ended March 31, 1996, the Company
incurred  $78 and $657, respectively, in restructuring costs primarily
relating to severance arrangements.  No such costs have been incurred in the
current year.

The other income (expense) reflects interest expense and revolving credit
agreement fees partially offset by interest income.  Other income (expense)
for the current three and nine month periods were ($74) and ($187),
respectively, compared with ($40) and $1,600 in the prior year's
corresponding periods. The prior year's nine month period increase in other
income versus the current year is primarily attributable to the settlement of a
patent litigation by Purepac which was recorded in the quarter ended
December 31, 1995.

Income before income taxes for the current three and nine month periods
were $3,678 and $6,853, respectively, compared with a net loss before
income taxes of $1,187 and $3,330 for the corresponding 1996 periods.

The results for the three and nine month periods ended March 31, 1997 were
positively affected by the commercialization of new product approvals for
etodolac, clonazepam and ongoing sales of diclofenac, partly offset by
negative pricing pressures within the oral generic pharmaceutical industry.
Future financial results will continue to be highly dependent on the ability
of the Company to gain approval of and realize income from sales of new
products to counter ongoing price erosion within the industry.

Acquired Companies Results of Operations

The Acquired Companies became wholly owned subsidiaries of Faulding Inc.
effective March 1, 1996.

Net sales for the three and nine month periods ended March 31, 1997 were
$3,250 and $8,486, respectively, compared with $3,047 and $8,057 for the
corresponding 1996 periods. Products manufactured at the FPR production
facility in Aguadilla, Puerto Rico represented 70% and 65% of the net sales
for the current three and nine month periods, respectively, compared to 72%
and 78% for the corresponding periods in the prior year.  These products
were sold either to third party



                                Page 12
<PAGE>


pharmaceutical companies under contract manufacturing agreements or by FPC to
its customers in the USA.  The majority of the remainder of the net sales
comprises products licensed from F H Faulding & Co Limited, the beneficial
majority stockholder of the Company ("F H Faulding").  Net sales in the
current three and nine month periods included mitomycin, which sales
commenced in the quarter ended March 31, 1996.  The net sales increase in the
current quarter versus the prior year's quarter was principally due to sales
under the contract manufacturing agreements and sales of mitomycin.

Gross profit (loss) for the three and nine month periods ended March 31,
1997 were ($310) and ($1,272), respectively, compared with $146 and $191
for the corresponding 1996 periods.  The principal cause of the reduction in
gross profit for the current periods versus the prior year's periods was due
to price erosion on some of the product line and the unfavorable impact in
both periods by under utilization of the production facility in Puerto Rico.

Selling, general and administrative expenses for the current three and nine
month periods were $570 and $1,735, respectively, compared with the
corresponding prior period's expenses of $719 and $1,987.  The expenses
represent principally selling expenses associated with FPC.

Research and development expenses for the current three and nine month
periods were $466 and $1,327, respectively, compared with $471 and $1,018
for the corresponding 1996 periods.  The increase in expenses for the
current nine month period versus the prior year's period was due to all three
Acquired Companies increasing development expenditures.

The loss before income taxes for the current three and nine month periods
were $1,346 and $4,334, respectively, compared with a loss of $1,194 and
$3,417 for the corresponding 1996 periods.  The reduction versus last year is
mostly due to lower contract manufacturing sales, general price erosion of
the present product line and under utilization of the production facility in
Puerto Rico.

Consolidated Income Tax Benefit

The calculation of the provision (benefit) for income taxes of the Company,
which includes Purepac and the Acquired Companies, has been prepared in
accordance with accounting for the acquisitions as similar to a pooling of
interests consistently applying Statement of Financial Accounting Standard
No. 109 ("SFAS 109"). 

For the current three and nine month periods ended March 31, 1997, the
consolidated income before income taxes were $2,332 and $2,519,
respectively.

For the Acquired Companies, only the net loss before income tax since
acquisition can be consolidated into the Company's income tax returns. The
income tax benefit of the net losses prior to acquisition have been fully
reserved against as the recovery of these



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<PAGE>


losses is dependent on future taxable income of each of the respective
companies, which at present cannot be assured.

Financial Condition, Liquidity And Capital Resources

The Company had $3,944 in cash and cash equivalents at March 31, 1997,
compared with $1,897 at June 30, 1996.  The increase in the current nine
month period of $2,047 resulted primarily from $6,250 borrowed from a bank
and $627 provided by operating activities offset by $4,972 used for
investments in property, plant and equipment.

A comparison of the balance sheet accounts at March 31, 1997 to the June
30, 1996 balances shows the following to be noteworthy:

    Accounts receivable increased by $4,521 due to the higher sales level in
    the current three month period.
    
    Inventory increased by $6,023 due primarily to increased production for
    new products launched in the current quarter and products planned to be
    launched in  the near future.
    
    Net property, plant and equipment increased by $2,383 reflecting
    primarily the construction of an injectable shell glass vial filling
    facility in Aquadilla, Puerto Rico.
    
    Accounts payable increased by $3,099 reflecting the increased purchases
    of materials relating to new products in the current quarter.

    Accrued expenses increased by $2,674 primarily due to an increase in
    promotional liabilities.
    
The accrued preferred dividends payable to the Company's majority 
stockholder, Faulding Holdings Inc., of $689 for the three month period
ended March 31, 1997 were subsequently paid on April 1, 1997.

The Company believes that its current cash resources, anticipated operating
cash flows and funds available under a revolving credit and loan
arrangement with a bank will be sufficient to fund its working capital needs
for the next 24 months. In addition, it is not anticipated that the Acquired
Companies will generate adequate revenues to finance their combined
operating expenses until at least 1998.  Beyond 1998, depending upon the
timing of the Company's cash flow requirements, which is highly dependent
upon the unpredictable timing of the receipt of FDA product approvals, the
future cash flow needs of the Company could exceed the Company's current
cash resources and its available credit under its existing credit facilities.
As of March 31, 1997, the Company had $3,944 in cash and cash equivalents,
plus approximately $8,750 of available borrowings under its existing credit
facilities.

The Company is currently negotiating expanded credit facilities which it
anticipates will be successful.   In the future, should the Company require
additional cash flow to


                                Page 14


<PAGE>


support the commercialization of new products following receipt of FDA
approval, there can be no assurance that such financing will be available
when required, if at all, or will be available upon terms the Company may
deem commercially reasonable.


                        PART II  -  OTHER INFORMATION


Item 1.   LEGAL PROCEEDINGS

The Company is named as a defendant in an action in the United States
District Court for the District of Delaware entitled Purdue Pharma L.P. and
the Purdue Frederick Company v. F. H. Faulding & Company Ltd. [sic],
Faulding Inc., Purepac Pharmaceutical Co. and Zeneca Inc. 96 Civ. 427. 
The complaint alleges that the manufacture and marketing in the United
States of KADIAN(TM)  infringes a patent assigned to one of the plaintiffs and
constitutes unfair competitive practices under Federal and State law.  The
Company, through Purepac, manufactures KADIAN(TM)  pursuant to a contract
manufacturing agreement with Faulding Services Inc., a wholly-owned
subsidiary of Faulding Holdings Inc.

The complaint seeks, among other things, an order enjoining the Company
from infringing the subject patent and awarding treble and punitive damages.
The Company believes the allegations in the complaint to be entirely without
merit and intends, in cooperation with its co-defendants, to vigorously
defend this action.  The commencement of the action did not impact the launch
of KADIAN(TM).

On February 3, 1997, following the submission by Purepac of an ANDA
seeking FDA approval of Diltiazem Hydrochloride Extended-Release
Capsules, USP, the Company's proposed generic version of Cardizem-CD(R),
a lawsuit was commenced in the US District Court for the District of New
Jersey entitled Hoechst Marion Roussel, Inc. and Carderm Capital L.P. v.
Faulding Inc. and Purepac Pharmaceutical Co., Civil Action No. 97-516(JAG
Jr.), alleging that the Company's proposed generic product infringes a patent
assigned to Carderm Capital L.P. and licensed, on a non-exclusive basis, to
Hoechst Marion Roussel, Inc., and seeking to delay the commercial
introduction of the Company's proposed generic product until the expiration
of that patent.

The Company believes that its proposed generic product does not infringe
the patent at issue in the lawsuit and, additionally, that the patent is
invalid. The Company therefore intends to defend the lawsuit vigorously.
The Company also has asserted a counterclaim against Hoechst Marion Roussel,
Inc. alleging that its sales of Cardizem-CD(R) since 1993 have constituted
acts of infringement under a patent licensed to Purepac.  Hoechst Marion
Roussel, Inc. has not yet replied to such counterclaim.

The Company is involved in litigation incidental to the conduct of its
business, in addition to the above matters, and does not believe that the
ultimate adverse resolutions of any, or all, thereof would have a material
adverse effect on its financial position, results of operations or cash flows.



                                Page 15
<PAGE>


Item 2. through Item 3.

               Not Applicable.
               
Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held an Annual Meeting of Stockholders on February 12,
1997.  The following is a summary of the proposals that were voted upon at
the meeting and the voting results therefrom:


                                                Votes           Abstentions
                                                Against         and Broker
Proposal                        Votes For       or Withheld     Non-Votes
------------------------        ----------      -----------     -----------
Approval to adopt the
 Company's 1997 Stock
 Option Plan                    10,392,904      218,720         62,130

Approval of an amendment
 to the Company's 1994
 Stock Option Plan              10,414,289      194,220         66,245

Election of six directors
 of the Company for the
 ensuing year:
  Edward D. Tweddell            13,949,965      46,050
  Alan G. McGregor              13,949,965      46,050
  Richard F. Moldin             13,951,165      44,850
  Joseph C. Minio               13,950,636      45,379
  Bruce C. Tully                13,950,865      45,150
  William R. Griffith           13,950,665      45,350

Ratification of Deloitte &
 Touche LLP as the Company's
 independent auditors for the
 fiscal year ending June 30,
 1997                           13,956,050      18,245          21,720




Item 5.        OTHER EVENTS

               Not Applicable.


Item 6 (a).    EXHIBITS

               Not Applicable.


Item 6 (b).    REPORTS ON FORM 8-K

               Not Applicable.




                                Page 16
<PAGE>


                                 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.


FAULDING INC.



BY:  /s/ Richard F. Moldin
   _____________________________________                May 2, 1997
   Richard F. Moldin
   President and Chief Executive Officer
   (Principal Executive Officer)



BY:  /s/ Paul Astley
   _____________________________________                May 2, 1997
   Paul Astley
   Chief Financial Officer
   (Principal Accounting Officer)





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