UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 10-Q



Quarterly Report Pursuant To Section 13 or 15 (d) of

the Securities Exchange Act of 1934



|For quarter ended | Commission file number 1-8593
|----------------- | -----------------------------
|June 30, 2001     |                              



Alpharma Inc.

(Exact name of registrant as specified in its charter)



|Delaware                 | 22-2095212                          
|------------------------ | ------------------------------------
|(State of Incorporation) | (I.R.S. Employer Identification No.)



One Executive Drive, Fort Lee, New Jersey    07024

(Address of principal executive offices)   Zip Code



(201) 947-7774

(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 requirements for the past 90 days.



|YES X      NO
|-------------



Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of July 30, 2001:



Class A Common Stock, $.20 par value - 30,825,934 shares;

Class B Common Stock, $.20 par value -  9,500,000 shares







ALPHARMA INC.

INDEX





|                                                                                                              | Page No.
|------------------------------------------------------------------------------------------------------------- | --------
|PART I.  FINANCIAL INFORMATION                                                                                |         
|                                                                                                              |         
|                                                                                                              |         
|Item 1.  Financial Statements                                                                                 |         
|                                                                                                              |         
|Consolidated Condensed Balance Sheet as of June 30, 2001
and December 31, 2000                                | 3       
|                                                                                                              |         
|Consolidated Statement of Income for the Three and Six Months
Ended June 30, 2001 and 2000                    | 4       
|                                                                                                              |         
|Consolidated Condensed Statement of Cash Flows for the
Six Months Ended June 30, 2001 and 2000                | 5       
|                                                                                                              |         
|Notes to Consolidated Condensed Financial Statements                                                          | 6 - 13  
|                                                                                                              |         
|                                                                                                              |         
|Item 2.   Management's Discussion and Analysis of Financial
              Condition and Results of Operations | 14 - 17 
|                                                                                                              |         
|Item 3.   Quantitative and Qualitative Disclosures about
              Market Risk                            | 18      
|                                                                                                              |         
|PART II.  OTHER INFORMATION                                                                                   |         
|                                                                                                              |         
|Item 1.   Legal Proceedings                                                                                   | 19      
|                                                                                                              |         
|Item 4.   Submission of Matters to a Vote of Security Holders                                                 | 20      
|                                                                                                              |         
|Item 6.   Exhibits and Reports on Form 8-K                                                                    | 20      
|                                                                                                              |         
|Signatures                                                                                                    | 21      









ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands of dollars)
(Unaudited)



|                                                                       | June 30,2001 | December 31,2000
|---------------------------------------------------------------------- | ------------ | ----------------
|ASSETS                                                                 |              |                 
|Current assets:                                                        |              |                 
|Cash and cash equivalents                                              | $  20,660    | $  72,931       
|Accounts receivable, net                                               | 286,020      | 282,997         
|Inventories                                                            | 262,239      | 236,598         
|Prepaid expenses and other current assets                              | 18,521       | 21,937          
|Total current assets                                                   | 587,440      | 614,463         
|                                                                       |              |                 
|Property, plant and equipment, net                                     | 341,768      | 345,042         
|Intangible assets, net                                                 | 587,287      | 614,421         
|Other assets and deferred charges                                      | 61,381       | 50,554          
|Total assets                                                           | $1,577,876   | $1,624,480      
|                                                                       |              |                 
|LIABILITIES AND STOCKHOLDERS' EQUITY                                   |              |                 
|Current liabilities:                                                   |              |                 
|Current portion of long-term debt                                      | $  20,537    | $   20,676      
|Short-term debt                                                        | 6,174        | ---             
|Accounts payable and accrued expenses                                  | 148,573      | 160,484         
|Accrued and deferred income taxes                                      | 17,724       | 25,278          
|Total current liabilities                                              | 193,008      | 206,438         
|                                                                       |              |                 
|Long-term debt:                                                        |              |                 
|Senior                                                                 | 118,694      | 130,837         
|Convertible subordinated notes, including $67,850
    to related party | 377,273      | 373,608         
|Deferred income taxes                                                  | 27,993       | 29,404          
|Other non-current liabilities                                          | 20,808       | 22,261          
|                                                                       |              |                 
|Stockholders' equity:                                                  |              |                 
|Class A Common Stock                                                   | 6,217        | 6,202           
|Class B Common Stock                                                   | 1,900        | 1,900           
|Additional paid-in-capital                                             | 794,611      | 792,659         
|Retained earnings                                                      | 162,033      | 143,177         
|Accumulated other comprehensive loss                                   | (117,718)    | (75,063)        
|Treasury stock, at cost                                                | (6,943)      | (6,943)         
|Total stockholders' equity                                             | 840,100      | 861,932         
|Total liabilities and stockholders' equity                             | $1,577,876   | $1,624,480      



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





ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)

|                                              | Three Months EndedJune 30, | Six Months EndedJune 30,
|--------------------------------------------- | -------------------------- | ------------------------
|                                              | 2001                       | 2000                    
|                                              |                            |                         
|Total revenue                                 | $231,169                   | $224,039                
|                                              |                            |                         
|Cost of sales                                 | 133,644                    | 123,957                 
|                                              |                            |                         
|Gross profit                                  | 97,525                     | 100,082                 
|                                              |                            |                         
|Selling, general and administrative
 expenses | 74,180                     | 68,293                  
|                                              |                            |                         
|Operating income                              | 23,345                     | 31,789                  
|                                              |                            |                         
|Interest expense                              | (8,583)                    | (13,053)                
|                                              |                            |                         
|Other income (expense), net                   | 2,316                      | (4,857)                 
|                                              |                            |                         
|Income before provision for income taxes      | 17,078                     | 13,879                  
|                                              |                            |                         
|Provision for income taxes                    | 5,635                      | 4,835                   
|                                              |                            |                         
|Net income                                    | $11,443                    | $9,044                  
|                                              |                            |                         
|Earnings per common share:                    |                            |                         
|                                              |                            |                         
|Basic                                         | $0.28                      | $0.28                   
|Diluted                                       | $0.28                      | $0.27                   
|                                              |                            |                         
|Dividends per common share                    | $0.045                     | $0.045                  





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





ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands of dollars)
(Unaudited)

|                                                                                     | Six Months EndedJune 30,
|------------------------------------------------------------------------------------ | ------------------------
|                                                                                     | 2001                    
|Operating Activities:                                                                |                         
|Net income                                                                           | $  22,481               
|Adjustments to reconcile net income to net cash provided
    by operating activities |                         
|Depreciation and amortization                                                        | 35,164                  
|Interest accretion on convertible debt                                               | 3,665                   
|Changes in assets and liabilities:                                                   |                         
|(Increase) in accounts receivable                                                    | (10,858)                
|(Increase) in inventory                                                              | (33,563)                
|Increase(decrease) in accounts payable, accrued expenses and taxes
     payable      | (14,629)                
|Other, net                                                                           | 3,347                   
|Net cash provided by operating activities                                            | 5,607                   
|                                                                                     |                         
|Investing Activities:                                                                |                         
|Capital expenditures                                                                 | (29,215)                
|Loans to Ascent Pediatrics                                                           | (6,250)                 
|Purchase of businesses and intangible assets                                         | (15,349)                
|Net cash used in investing activities                                                | (50,814)                
|                                                                                     |                         
|Financing Activities:                                                                |                         
|Dividends paid                                                                       | (3,625)                 
|Proceeds from senior long-term debt                                                  | ---                     
|Reduction of senior long-term debt                                                   | (10,462)                
|Net advances under lines of credit                                                   | 6,172                   
|Payments for debt issuance costs                                                     | ---                     
|Proceeds from issuance of common stock                                               | 1,967                   
|Purchase of treasury stock                                                           | ---                     
|Net cash provided by (used in) financing activities                                  | (5,948)                 
|                                                                                     |                         
|Exchange Rate Changes:                                                               |                         
|Effect of exchange rate changes on cash                                              | (2,074)                 
|Income tax effect of exchange rate changes on intercompany
    advances              | 958                     
|Net cash flows from exchange rate changes                                            | (1,116)                 
|                                                                                     |                         
|Increase (decrease) in cash                                                          | (52,271)                
|Cash and cash equivalents at beginning of year                                       | 72,931                  
|Cash and cash equivalents at end of period                                           | $20,660                 

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









1.      General





2.      Inventories



|Inventories consist of the following: | June 30,2001 | December 31, 2000
|------------------------------------- | ------------ | -----------------
|                                      |              |                  
|Finished product                      | $156,895     | $143,100         
|Work-in-process                       | 36,908       | 32,936           
|Raw materials                         | 68,436       | 60,562           
|                                      | $262,239     | $236,598         



3.      Long-Term Debt



Long-term debt consists of the following:

|                                                                                                               | June 30, | December 31,
|-------------------------------------------------------------------------------------------------------------- | -------- | ------------
|                                                                                                               | 2001     | 2000        
|Senior debt:                                                                                                   |          |             
|U.S. Dollar Denominated:                                                                                       |          |             
|1999 Revolving Credit Facility                                                                                 | $96,700  | $105,000    
|Industrial Development Revenue Bonds                                                                           | 7,220    | 7,950       
|Other, U.S.                                                                                                    | ---      | 52          
|                                                                                                               |          |             
|Denominated in Other Currencies:                                                                               |          |             
|Mortgage notes payable (NOK)                                                                                   | 31,183   | 33,682      
|Bank and agency development loans (NOK) and other                                                              | 4,128    | 4,829       
|Total senior debt                                                                                              | 139,231  | 151,513     
|                                                                                                               |          |             
|Subordinated debt:                                                                                             |          |             
|3%  Convertible Senior Subordinated
       Notes due 2006 (6.875% yield), 
       including interest accretion | 184,478  | 180,813     
|5.75% Convertible Subordinated Notes  due 2005                                                                 | 124,945  | 124,945     
|5.75% Convertible Subordinated                                                                                 |          |             
|Note due 2005 - Industrier Note                                                                                | 67,850   | 67,850      
|Total subordinated debt                                                                                        | 377,273  | 373,608     
|                                                                                                               |          |             
|Total long-term debt                                                                                           | 516,504  | 525,121     
|Less, current maturities                                                                                       | 20,537   | 20,676      
|                                                                                                               | $495,967 | $504,445    

In July 2001, the Company agreed to acquire an Oral Pharmaceutical Business for $660,000. (See Note 11 - "Subsequent Event - Possible Acquisition"). The financing for the acquisition is to be provided under a $1,100,000 fully underwritten commitment by Bank of America. The financing will be comprised of a Senior Credit Facility of up to $900,000 and a subordinated financing of up to $200,000. The financing is expected to replace the 1999 Revolving Credit Facility. The final terms and conditions of the financing are currently being negotiated.



4.      Earnings Per Share

Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share reflect the dilutive effect of stock options and convertible debt when appropriate.



A reconciliation of weighted average shares outstanding for basic to diluted weighted average shares outstanding is as follows:



|(Shares in thousands)                | Three Months Ended | Six Months Ended
|------------------------------------ | ------------------ | ----------------
|                                     | June 30,2001       | June 30,2000    
|                                     |                    |                 
|Average shares outstanding - basic   | 40,255             | 32,475          
|Stock options                        | 131                | 560             
|Convertible debt                     | 6,744              | 6,744           
|Average shares outstanding - diluted | 47,130             | 39,779          





The amount of dilution attributable to the stock options, determined by the treasury stock method, depends on the average market price of the Company's common stock for each period. At June 30, 2001 stock options to purchase approximately 1,950,000 shares were not included in the computation of diluted EPS because the option price was greater than the average market price of the Class A Common shares.



Subordinated notes issued in March 1998 ("05 Notes"), convertible into 6,744,481 shares of common stock at $28.59 per share, were included in the computation of diluted EPS for all periods. In addition, subordinated senior notes issued in June 1999 ("06 Notes") convertible into 5,294,301 shares of common stock at $32.11 per share were not included in the computation of diluted EPS because the result was antidilutive for all periods presented.



The numerator for the calculation of basic EPS is net income for all periods. The numerator for the calculation of diluted EPS includes an add back for interest expense and debt cost amortization, net of income tax effects, related to the 05 Notes.



A reconciliation of net income used for basic to diluted EPS is as follows:



|                                                     | Three Months Ended | Six Months Ended
|---------------------------------------------------- | ------------------ | ----------------
|                                                     | June 30,2001       | June 30,2000    
|                                                     |                    |                 
|Net income - basic                                   | $11,443            | $9,044          
|Adjustments under if - converted
 method, net of tax | 1,811              | 1,811           
|Adjusted net income - diluted                        | $13,254            | $10,855         
|                                                     |                    |                 



5.      Supplemental Data



|                                               | Three Months Ended | Six Months Ended
|---------------------------------------------- | ------------------ | ----------------
|                                               | June 30,2001       | June 30,2000    
|Other income (expense), net:                   |                    |                 
|Fees for bridge financing - 
  MFA acquisition | $     ---          | $ (4,730)       
|Interest income                                | 428                | 688             
|Foreign exchange gains (losses), net           | 318                | (631)           
|Amortization of debt costs                     | (541)              | (502)           
|Litigation/Insurance settlement                | 2,088              | ---             
|Income from joint venture
  carried at equity  | 213                | 455             
|Other, net                                     | (190)              | (137)           
|                                               | $2,316             | $(4,857)        

|Supplemental cash flow information:                
|---------------------------------------------------
|                                                   
|                                                   
|                                                   
|Cash paid for interest (net of amount
 capitalized)
|Cash paid for income taxes (net of refunds)        
|                                                   
|Detail of businesses and intangibles
 acquired:    
|Fair value of assets                               
|Seller financed debt - Roche                       
|Liabilities assumed                                
|Cash paid                                          
|Less cash acquired                                 
|Net cash paid for businesses and
    intangibles   





6.        Reporting Comprehensive Income



SFAS 130, "Reporting Comprehensive Income" requires foreign currency translation adjustments and certain other items to be included in other comprehensive income (loss). Total comprehensive loss amounted to approximately $2,752 and $4,484 for the three months ended June 30, 2001 and 2000, respectively. Total comprehensive loss amounted to approximately $20,174 and $12,268 for the six months ended June 30, 2001 and 2000. The only components of accumulated other comprehensive loss for the Company are foreign currency translation adjustments.

7.        Contingent Liabilities and Litigation

On October 30, 2000 the Company announced the discovery of accounting irregularities in the Brazilian subsidiary included in the AHD business segment and the restatement of the Company's financial results for 1999 and the first two quarters of 2000. Six lawsuits, which have been subsequently certified as a single class action ("Class Action") have been filed in the United States District Court for the District of New Jersey. The Class Action has been brought on behalf of all persons who acquired securities of the Company between April 28, 1999 and October 30, 2000. Named as defendants are the Company and four current officers of the Company. The Class Action Complaint alleges that, among other things, the plaintiffs were damaged when they acquired securities of the Company because, the previously issued financial statements were materially false and misleading in violation of the Securities and Exchange Act of 1934. The plaintiffs seek damages on behalf of the class in an unspecified amount. The parties have not yet commenced discovery. Based on its preliminary investigation, the Company believes it has meritorious defenses which it intends to vigorously assert against the Class Action. Additionally, the Company has filed a claim on behalf of the Company and each of the named individual defendants under the directors' and officers' insurance policies and believes that insurance coverage exists to the extent of the policy limits for the costs incurred in defending the claims and any adverse judgment or settlement, subject to the terms, conditions and exclusions of the relevant insurance policy.

Based upon the facts as presently known, management does not believe that it is likely that the class actions will result in liability which will be material to the financial position of the Company.  However, because of the stage of the discovery in this matter, it is not possible for the Company to conclude that resolution of the lawsuits will not be material to the financial position of the Company or its results of operations or cash flows in the quarter in which it occurs.

The United Kingdom Department of Health, effective August 3, 2000, adopted interim maximum pricing legislation applicable to the UK generic drug industry which it has indicated will be reviewed during 2001. The Department has issued a Discussion Paper in which it analyzes, and requests comments upon, various potential changes in the generic drug market, including a continuation of present price controls. The government has indicated that it expects the discussion process to be completed on October 22, 2001. In addition, in February of 2000, the UK Office of Fair Trading ("OFT") requested information from the generic industry (including the Company) in connection with an investigation of pricing activities. The Company has not had any further contact with OFT. The Company is unable to predict the final impact these actions  will have on the UK operations of the Company and the pricing of generic pharmaceuticals in the United Kingdom.

Bacitracin zinc, one of the Company's feed additive products has been banned from sale in the European Union (the "EU") effective July 1, 1999. While initial efforts to reverse the ban in court were unsuccessful, the Company is continuing to pursue its efforts in the European Court and is engaged in certain other initiatives based on scientific evidence available for the product, to limit the effects of this ban. In addition, certain other countries, not presently material to the Company's sales of bacitracin zinc have either followed the EU's ban or are considering such action. The existing governmental actions negatively impact the Company's business but are not material to the Company's financial position or results of operations. However, if either the EU acts to prevent the importation of meat products from countries that allow the use of bacitracin based products or there is an expansion of the ban to additional countries where the Company has material sales of bacitracin based products, the resultant loss of sales could be material to the financial condition, cash flows  and results of operations of the Company.

The Company and its subsidiaries are, from time to time, involved in other litigation arising out of the ordinary course of business. It is the view of management, after consultation with counsel, that the ultimate resolution of all other pending suits should not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.



8.      Business Acquisitions - Roche MFA



On May 2, 2000, Alpharma announced the completion of the acquisition of the Medicated Feed Additive Business of Roche Ltd. ("MFA") for a cash payment of approximately $258,000 and issuance of a $30,000 promissory note to Roche. The Note was paid in full in December 2000. In addition certain international inventories were purchased from Roche during a transaction period of approximately three months. The acquisition included inventories, five manufacturing and formulation sites in the United States, global product registrations, licenses, trademarks and associated intellectual property. Approximately 200 employees primarily in manufacturing and sales and marketing were included in the acquisition.

The acquisition has been accounted for in accordance with the purchase method. The fair value of the assets acquired and liabilities assumed based on an allocation and the results of the acquired business operations are included in the Company's consolidated financial statements beginning on the acquisition date. The Company is amortizing the acquired intangibles and goodwill over 20 years using the straight-line method.

Pro forma Information:

The following unaudited pro forma information on results of operations assumes the purchase of the MFA business discussed above as if the businesses had combined at the beginning of 2000:



|            | Pro Forma                        
|----------- | ---------------------------------
|            | Three Months EndedJune 30, 2000 *
|            |                                  
|Revenue     | $231,000                         
|Net income  | $10,900                          
|Basic EPS   | $0.34                            
|Diluted EPS | $0.32                            
|            |                                  

*  2000 excludes actual non-recurring charges related to the Roche MFA acquisition of $4,026 after tax or $0.10 per share.

These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense as a result of acquired intangibles and goodwill and increased interest expense on acquisition debt. They do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of the period, or of future results of operations of the consolidated entities.



9.      Business Segment Information

The Company's reportable segments are four divisions (i.e. International Pharmaceuticals Division ("IPD"), Fine Chemicals Division ("FCD"), U.S. Pharmaceuticals Division ("USPD"), and Animal Health Division ("AHD"). In January 2001, the Aquatic Animal Health Division was combined with the AHD. Each division has a president and operates in distinct business and/or geographic area. Segment data includes immaterial intersegment revenues which are eliminated in the consolidated accounts.





|                             | Three Months Ended June 30, |         
|---------------------------- | --------------------------- | --------
|                             | 2001                        | 2000    
|                             | Revenues                    |         
|Human Pharmaceuticals:       |                             |         
|IPD                          | $ 67,651                    | $76,862 
|USPD                         | 64,142                      | 51,941  
|FCD                          | 19,259                      | 14,954  
|                             | 151,052                     | 143,757 
|Animal Pharmaceuticals:      |                             |         
|AHD                          | 81,722                      | 80,347  
|                             |                             |         
|Unallocated and eliminations | (1,605)                     | (65)    
|                             | $231,169                    | $224,039







|                             | Six Months Ended June 30, |         
|---------------------------- | ------------------------- | --------
|                             | 2001                      | 2000    
|                             | Revenues                  |         
|Human Pharmaceuticals:       |                           |         
|IPD                          | $137,406                  | $162,013
|USPD                         | 129,891                   | 95,800  
|FCD                          | 36,167                    | 30,813  
|                             | 303,464                   | 288,626 
|Animal Pharmaceuticals:      |                           |         
|AHD                          | 165,210                   | 122,703 
|                             |                           |         
|Unallocated and eliminations | (2,674)                   | (1,212) 
|                             | $466,000                  | $410,117



*  AHD 2000 operating income includes one-time charges of $1,400 related to the acquisition of Roche MFA.

10.      Recent Accounting Pronouncements

The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", and its corresponding amendments under SFAS No. 138. (referred to hereafter as "FAS 133"), on January 1, 2001. Under the provisions of FAS 133, all derivatives are recognized on the balance sheet at their fair value. Changes in fair value are recognized periodically in earnings or stockholders' equity, depending on the intended use of the derivative and whether the derivative is classified as a hedging instrument. Changes in fair value of derivative instrument not designated as hedging instruments are recognized in earnings in the current period.

The Company's derivative instruments, which are entered into on limited basis, consist principally of foreign currency forwards. These instruments are entered into in order to manage exposures to changes in foreign currency exchange rates. None of the Company's derivative instruments have been designated as hedging instruments under FAS 133. As such, the Company carries its derivative instruments  at its fair value on the balance sheet, recognizing changes in the fair value in current period earnings. The adoption of FAS 133 did not have a material impact on the Company's consolidated results of operations, financial position, or cash flows.

In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141, "Business Combinations" (SFAS 141) and SFAS 142, "Goodwill and other Intangible Assets" (SFAS 142). SFAS 141 applies to all business combinations initiated after June 30, 2001, and requires these business combinations be accounted for using the purchase method of accounting. SFAS 142 applies to all goodwill and intangibles acquired in a business combination.  Under SFAS 142, all goodwill, including goodwill acquired before initial application of the standard, will not be amortized but will be tested for impairment within six months of adoption of the statement, and at least annually thereafter. Intangible assets other than goodwill will be amortized over their useful lives and reviewed for impairment in accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS 142 is effective for fiscal years beginning after December 15, 2001, and must be adopted as of the beginning of a fiscal year.

The Company will adopt SFAS 141 for business combinations initiated after June 30, 2001, including the acquisition of the Oral Pharmaceuticals Business of FH Faulding (see Note 11), and will adopt SFAS 142 on January 1, 2002. The Company is presently evaluating the potential impact of these standards on its financial position and results of operations. However, due to the pending acquisition and the number of acquisitions completed by the Company in previous years, the adoption of these statements could have a material impact on the financial position and results of operations of the Company.

11.      Subsequent Event - Possible Acquisition

On July 11, 2001, the Company agreed to acquire the generic oral solid dose pharmaceutical businesses ("Oral Pharmaceuticals Business") of FH Faulding & Co. Limited ("Faulding") from Mayne Nickeless Limited ("Mayne"), for $660,000 (less third party and intercompany debt). The acquisition of the Oral Pharmaceuticals Business includes the operations of Purepac Pharmaceuticals  and Faulding Laboratories in the United States and Foshan Faulding Pharmaceutical in China. The oral pharmaceutical business includes research, development, manufacturing, sales and marketing of generic and proprietary oral solid dose pharmaceuticals in the United States and China. The principal market for the pharmaceutical business is the United States with approximate annual sales of $200,000.

The purchase is contingent upon completion of Mayne's proposed acquisition of Faulding by means of a takeover bid for all of the outstanding Faulding ordinary shares. Mayne's acquisition from Faulding and Alpharma's acquisition from Mayne are subject to the tendering of at least 90% of the shares of Faulding, review by regulatory agencies in Australia and the United States and certain other conditions set forth in the Put and Call Option Agreement filed by the Company on Form 8-K in July 2001.

Alpharma will finance the $660,000 cash payment under a $1,100,000 fully underwritten commitment provided by Bank of America N.A. and its affiliates which will be subject to customary terms and conditions. The acquisition will be accounted for as a purchase and, if the estimated timetable is fulfilled, will be completed in the fourth quarter of 2001. The transaction is expected to generate significant one-time charges related to in-process R&D, the write-ups and subsequent write-off of purchased inventory, interim financing, and other acquisition related costs.



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



Most comparisons of 2001 consolidated results to 2000 are affected by the Company's acquisition of the Roche MFA business ("MFA") in May 2000 and the financing required to complete the acquisition.



Total revenue increased $55.9 million (13.6%) in the six months ended June 30, 2001 compared to 2000. Operating income in 2001 was $49.6 million, a decrease of $8.1 million, compared to 2000. Net income was $22.5 million ($.55 per share diluted) compared to $19.4 million ($.60 per share diluted) in 2000. The six months ended June 30, 2000 results are reduced by one-time charges totaling $4.0 million after tax or $.10 per share related to the acquisition and interim financing of MFA in May 2000. Without the charges net income would have been $23.4 million ($.70 per share diluted).

Revenues increased in the Human Pharmaceuticals business by $14.8 million and in the Animal Pharmaceuticals business by $42.5 million. The increase in revenues was reduced by approximately $15.0 million due to changes in exchange rates used in translating sales in foreign currencies into the U.S. dollar, primarily in the IPD.

Changes in revenue and major components of change for each division in the six month period ended June 30, 2001 compared to June 30, 2000 are as follows:

USPD revenues increased by $34.1 million due to increased volume in new and existing products offset in part by lower net pricing. FCD revenues increased by $5.4 million due to increased volume. IPD revenues decreased $24.6 million. Approximately 50% of the IPD revenue decline resulted from the translation of currencies into the U.S. dollar. The remainder of the decrease was due primarily to the lower pricing in the UK markets and, secondarily to lower volume in the UK. The UK market in the first half of 2000 had historically high prices and volume due to market conditions. These favorable market conditions do not exist in 2001 due to interim market pricing legislation adopted in August of 2000. The interim pricing legislation, which is presently being reviewed, had the effect of lowering pricing. The Company cannot predict what effect, if any, this review (which is taking place within a framework created by a government Discussion Paper which enunciates several alternative changes in the UK generic drug market) will have on future UK pricing or market conditions. In addition, UK competition has increased which has also lowered prices.

AHD revenues increased by $42.5 million due to the acquisition of MFA. MFA revenues were approximately $51.0 million greater in 2001 primarily due to the fact that MFA was acquired in May 2000. Excluding MFA, revenue declined approximately $8.5 million. Unfavorable market conditions in the US Poultry, including the impact of reduced customer inventory levels, and to a lesser extent, difficult economic conditions in Asia were the primary reasons for the decline. The Company believes the unfavorable market conditions in US Poultry are temporary, but presently is unable to determine when conditions will improve. The Company believes economic conditions in Asia will remain difficult. In addition in response to current market conditions, including the negative impact of expected continuing reduction of customer inventory levels, the Company expects to reduce AHD's manufactured and purchased inventory amounts.

On a consolidated basis, gross profit increased $9.3 million and the gross margin percent decreased to 42.6% in 2001 compared to 46.1% in 2000.

The increase in gross profit dollars results primarily from the acquisition of MFA and increased sales in USPD and FCD. Offsetting increases are lower gross profits in IPD due to lower volume and pricing and lower AHD volume in poultry and other markets. The percentage decline results from the MFA acquisition as products included have a lower gross profit than existing Animal Health products and IPD and USPD where price reductions directly reduce margin percentages.

Operating expenses increased $17.4 million and represented 31.9% of revenues in 2001 compared to 32.0% in 2000. Most of the increase is attributable to the acquisition of MFA. Other increases included professional and consulting expenses related to the Company's ongoing acquisition program, increased research and development expenses, annual increases in compensation, and expenses for certain personnel actions.

Operating income decreased $8.1 million. Animal Pharmaceuticals increased $2.8 million (14%) primarily due to the MFA acquisition. Overall, Human Pharmaceuticals operating income declined $6.6 million (14%). In the USPD, operating income increased 60%. Higher volume and new products drove the U.S. performance. In the FCD operating income increased 34%. The Fine Chemicals operating income increase was primarily attributable to higher volume, improved fermentation yields and leveraging of operating expenses. In IPD operating income was lower in 2001 compared to 2000 by 57%. Lower UK pricing and lower volume account for the decline in operating income. Increases in unallocated expenses, primarily for the acquisition program, reduced operating income by $4.3 million.

Interest expense decreased in 2001 by $6.7 million due primarily to debt incurred to finance acquisitions being refinanced with equity offerings in May and August of 2000.

Other, net was $1.2 million income in 2001 compared to $3.9 million expense in 2000. 2001 includes $2.1 million income relating to the vitamin antitrust litigation settlement for vitamin purchases by the Company in prior years. Other, net was $3.9 million expense in 2000, due primarily to $4.7 million fees incurred as part of the $225.0 million MFA bridge financing and other financing fees. The bridge financing was committed, drawn, repaid and terminated in the second quarter of 2000. All fees associated with the interim financing were expensed. 2001 also includes net foreign currency transaction losses of $1.0 million due primarily to the strengthening of the U.S. dollar compared to $.4 million net foreign currency transaction losses in 2000.

The provision for taxes was $.6 million higher in 2001 due to higher pre-tax income in 2001 offset partially by a 2% reduction in the estimated effective tax rate in 2001 versus the first half of 2000.

Net income in 2001 increased $3.1 million in 2001 compared to 2000. Diluted EPS was $.55 per common share in 2001 compared to $.60 per common share in 2000 due mainly to the issuance of over 10 million common shares in 2000. The issuance of additional shares has a dilutive effect on the calculation which is offset partially by lower interest expense.

Results of Operations - Three Months Ended June 30, 2001

Total revenue increased $7.1 million (3.2%) in the three months ended June 30, 2001 compared to 2000. Operating income in 2001 was $23.3 million, a decrease of $8.4 million, compared to 2000. Net income was $11.4 million ($.28 per share diluted) compared to $9.0 million ($.27 per share diluted) in 2000. The three months ended June 30, 2000 results are reduced by one-time charges totaling $4.0 million after tax ($.10 per share diluted) related to the acquisition and interim financing of MFA in May of 2000. Without the charges net income would have been $13.0 million ($.37 per share diluted).

Revenues increased in the Human Pharmaceuticals business by $7.3 million and in the Animal Pharmaceuticals business by $1.4 million. The increase in revenues was reduced by approximately $7.8 million due to changes in exchange rates used in translating sales in foreign currencies into the U.S. dollar, primarily in the IPD.

Changes in revenue and major components of change for each division in the three month period ended June 30, 2001 compared to June 30, 2000 are as follows:

USPD revenues increased $12.2 million due to volume increases in new and existing products offset in part by lower net pricing. Revenues in FCD increased by $4.3 million due mainly to higher volume. IPD revenues decreased by $9.2 million due primarily to the translation of currencies into the U.S. Dollar (approximately $6.0 million). IPD revenues also declined due to lower pricing in the UK market and to a lesser extent lower volume in the UK and certain other markets. The UK market in the second quarter of 2000 had high prices and volume due to market conditions. These favorable market conditions do not exist in 2001 due to interim market pricing legislation adopted in August of 2000. The interim pricing legislation had the effect of lowering pricing. The Company cannot predict what effect, if any, the present government review of pricing and other aspects of the generic drug market (pursuant to the Discussion Paper referred to above) will have on future UK pricing. In addition, UK competition has increased which has also lowered prices.

AHD revenues increased by $1.4 million due to the acquisition of MFA. MFA revenues were approximately $2.0 million greater in 2001. Excluding MFA, revenue was  approximately the same as 2000. Unfavorable market conditions in the US Poultry, including the impact of reduced customer inventory levels, and to a lesser extent, difficult economic conditions in Asia were the primary reasons for lack of increase. The Company believes the unfavorable market conditions in US Poultry are temporary, but presently is unable to determine when conditions will improve. The Company believes economic conditions in Asia will remain difficult.

On a company-wide basis, gross profit declined $2.6 million and the gross margin percent declined to 42.2% in 2001 compared to 44.7% in 2000. 2000 results for AHD include a $1.0 million charge for an inventory write-up and subsequent write off upon sale of Roche manufactured MFA inventory included in the May acquisition. The decrease in dollars results from lower volume and translation effects in IPD. USPD and FCD recorded higher gross profit dollars due to higher volume offset to some degree by lower net pricing in USPD. Animal Pharmaceuticals recorded slightly higher gross profit margins and dollars due to a small increase in aggregate volume.

Operating expenses increased $5.9 million and represented 32.1% of revenues in 2001 compared to 30.5% in 2000. The dollar increase is primarily attributable to the MFA acquisition. In addition, operating expenses increased for professional and consulting related to the Company's acquisition program and increases in research and development expenses and compensation.

On an overall basis operating income decreased $8.4 million due primarily to lower operating income in IPD and AHD and higher unallocated expenses mainly for acquisition program expenses. IPD results are lower primarily related to lower volume and UK pricing. AHD results are lower due to higher operating expenses relative to 2000 primarily due to the MFA acquisition. USPD and FCD increased operating income due primarily to higher volume.

Interest expense decreased in 2001 by $4.5 million due primarily to debt incurred to finance the acquisitions being refinanced with equity offering in May and August of 2000.

Other, net in 2001 is $2.3 million income including $2.1 million income relating to the vitamin antitrust settlement for vitamin purchases by the Company in prior years. Other, net was $4.9 million expense in 2000 due to $4.7 million fees incurred as part of the Bridge Financing to acquire the MFA.

Financial Condition

Working capital at June 30, 2001 was $394.4 million compared to $408.0 million at December 31, 2000. The current ratio was 3.04 to 1 at June 30, 2001 compared to 2.98 to 1 at year end. Long-term debt to stockholders' equity was .59:1 both at June 30, 2001 and December 31, 2000.

All balance sheet captions decreased as of June 30, 2001 compared to December 2000 in U.S. Dollars as the functional currencies of the Company's principal foreign subsidiaries, the Norwegian Krone, Danish Krone, British Pound and the Euro, depreciated versus the U.S. Dollar in the six months of 2001 by approximately 5%, 9%, 6% and 9%, respectively. The decreases do impact to some degree the above mentioned ratios. The approximate decrease due to currency translation of selected captions was: accounts receivable $7.3 million, inventories $7.9 million, accounts payable and accrued expenses $3.9 million, and total stockholders' equity $42.7 million. The $42.7 million decrease in stockholder's equity represents other comprehensive loss for the six months ended June 30, 2001 resulting from the continued strengthening of the U.S. dollar.

At June 30, 2001, the Company had $20.7 million in cash, available short term lines of credit of $42.0 million and approximately $285.0 million available under its $400.0 million credit facility ("1999 Credit Facility"). The credit facility has several financial covenants, including an interest coverage ratio, total debt to EBITDA ratio, and equity to total asset ratio. Interest on borrowings under the facility is at LIBOR plus a margin of between .875% and 1.6625% depending on the ratio of total debt to EBITDA. As of June 30, 2001 the margin was 1.125%. Excluding the OPB acquisition referred to below, the Company believes that the combination of cash from operations and funds available under existing lines of credit will be sufficient to cover its currently planned operating and capital needs.

In July 2001, the Company agreed to acquire for $660 million an oral pharmaceutical business ("OPB") from an Australian Company ("Faulding") upon the completion of the acquisition of Faulding by an unrelated Australian Company ("Mayne"). The acquisition by Alpharma of the OPB is contingent upon the completion of the acquisition of Faulding by Mayne, review by regulatory agencies in the US and Australia and a number of contractual conditions. Assuming all contingencies are resolved and the present timetable is adhered to, the acquisition of OPB will be completed in the fourth quarter of 2001. The financing for the acquisition is to be provided under a fully underwritten commitment by Bank of America. It is expected when completed the financing will be comprised of a Senior Credit Facility of up to $900 million and a subordinated financing of up to $200 million. The new Senior Credit Facility will replace the 1999 Credit Facility and require the write off of fees of over $2.0 million. The financing, if fully drawn, will require fees in excess of $20 million. The acquisition, if completed, will generate significant one-time charges related to in-process R&D, write up and subsequent write off of purchased inventory, interim financing and other acquisition related costs.







Item 3. Quantitative and Qualitative Disclosures about Market Risk

Quantitative Disclosure - There has been no material changes in the Company's market risk with respect to derivative financial instruments during the three months ended June 30, 2001.

Qualitative Disclosure - This information is set forth under the caption "Derivative Financial Instruments" included in Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000.



___________



Statements made in this Form 10Q, are forward-looking statements made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Information on other significant potential risks and uncertainties not discussed herein may be found in the Company's filings with the Securities and Exchange Commission including its Form 10K for the year ended December 31, 2000.











PART II.  OTHER INFORMATION



Item 1.   Legal Proceedings

A class action lawsuit ("Class Action") has been filed in the United States District Court for the District of New Jersey.  The Class Action has been brought on behalf of all persons who acquired securities of the Company between April 28, 1999 and October 30, 2000.  Named as defendants are the Company and four current officers of the Company. The Class Action Complaint alleges that among other things, the plaintiffs were damaged when they acquired securities of the Company because, as a result of alleged irregularities in the AHD business segment and the subsequent restatement of the Company's financial results for 1999 and the first two quarters of 2000, the Company's previously issued financial statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business and operations, thereby artificially inflating the price of the Company's securities.  The Class Action alleges violations of Sections 10(b), 20(a) and Rule 10b-5 of the Securities and Exchange Act of 1934. The plaintiffs seek damages in unspecified amounts. The parties have not yet commenced discovery.  Based on its preliminary investigation, the Company believes it has meritorious defenses which it intends to vigorously assert against the Class Action.  Additionally, the Company has filed a claim on behalf of the Company and each of the named individual defendants under its directors' and officers' insurance policies and believes that insurance coverage exists to the extent of the policy limits for the costs incurred in defending the claims and any adverse judgment or settlement, subject to the terms, conditions and exclusions of the relevant insurance policy.

Based upon the facts as presently known, management does not believe that it is likely that the class actions will result in liability which will be material to the financial position of the Company.  However, because of the state of the discovery in this matter, it is not possible for the Company to conclude that resolution of the lawsuits will not be material to the financial position of the Company or its results of operations or cash flows in the quarter in which it occurs.

See Note 7 to the Company's Consolidated Condensed Financial Statement included in Part I of this Report for an updated summary of the ongoing United Kingdom generic drug industry pricing issues which were referred to in the Company's Form 10-K filing, filed in March, 2001. Due to the dismissal of the Company from the large majority of the Fen- Phen actions (as disclosed in the Company's Form 10-K filing in March, 2001) comments on the Fen-Phen litigation are being discontinued unless material events take place which would require further disclosure.







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



1. Alpharma Inc. annual meeting was held on May 30, 2001.
2. Proxies were solicited by Alpharma Inc. and there was no solicitation in opposition to the nominees listed in the proxy statement. All such nominees were elected to the classes indicated in the proxy statement pursuant to the vote of the stockholders as follows:
3. Ratifying appointment of PricewaterhouseCoopers LLP as the Company's independent accountant was approved by a vote of:





|For     | 36,544,589
|------- | ----------
|Against | 62,105    
|Abstain | 14,639    
|No Vote | 0         





Item 6.   Exhibits and Reports on Form 8-K



(a)      Exhibits



None



(b)       Reports on Form 8-K



On July 18, 2001, the Company filed a report on Form 8-K dated July 11, 2001, reporting Item 5. "Other Events." The event reported was an agreement to acquire the general oral dose pharmaceutical businesses of FH Faulding & Co. Limited from Mayne Health Logistics Pty Ltd for $660 million.







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.

|                        |                            
|----------------------- | ---------------------------
|                        | Alpharma Inc.              
|                        | (Registrant)               
|                        |                            
|                        |                            
|                        |                            
|Date:  August  14, 2001 | /s/ Jeffrey E. Smith       
|                        | Jeffrey E. Smith           
|                        | Vice President, Finance and
|                        | Chief Financial Officer