SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
Mark One
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]
                   For the fiscal year ended March 31, 1997 OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                        For the Transition period from to

                          Commission file number 1-9601

                           K-V PHARMACEUTICAL COMPANY
                             2503 SOUTH HANLEY ROAD
                            ST. LOUIS, MISSOURI 63144
                                 (314) 645-6600

Incorporated in Delaware           I.R.S. Employer Identification No. 43-0618919

           Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock par value $.01 per share         American Stock Exchange
Class B Common Stock par value $.01 per share         American Stock Exchange

          Securities registered pursuant to Section 12 (g) of the Act:
          7% Cumulative Convertible Preferred, par value $.01 per share

         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 such shorter  period that the registrant
was  required  to file such  reports)  and (2) has been  subject to such  filing
requirements for the past 90 days. Yes X No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         The  aggregate  market  value of the  5,554,663  shares  of Class A and
2,164,366 shares of Class B Common Stock held by nonaffiliates of the Registrant
as of June 6, 1997 was $90,957,607 and $36,253,131  respectively.  As of June 6,
1997, the Registrant had outstanding  7,709,147 and 4,338,950  shares of Class A
and Class B Common Stock, respectively, exclusive of treasury shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

         The following document is incorporated into this Report by reference:

         Part III:  Portions of the definitive proxy statement of the Registrant
(to be filed pursuant to Regulation 14(A) for  Registrant's  1997 Annual Meeting
of Shareholders,  which involves the election of directors), are incorporated by
reference into Items 10, 11, 12 and 13 to the extent stated in such items.

<PAGE>
         Any forward-looking statements set forth in this Report are necessarily
subject to significant  uncertainties and risks.  When used in this Report,  the
words "believes,"  "anticipates,"  "intends," "expects," and similar expressions
are intended to identify  forward-looking  statements.  Actual  results could be
materially different as a result of various possibilities. Readers are cautioned
not to place undue reliance on forward-looking  statements,  which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these  forward-looking  statements which may be made
to reflect  events or  circumstances  after the date  hereof or to  reflect  the
occurrence of unanticipated events.


Item 1. Description of Business.

         (a) General Development of Business.

         K-V  Pharmaceutical  Company ("KV") was incorporated  under the laws of
Delaware in 1971 as a successor to a business originally founded in 1942. Victor
M.  Hermelin,  KV's  Chairman and founder,  obtained  initial  patents for early
controlled release and enteric coated technologies in the early 1950's.

         KV is a pioneer  in the area of  advanced  drug  delivery  technologies
which  enhance  the   effectiveness   of  new   therapeutic   agents,   existing
pharmaceutical products and nutritional supplements. The Company has developed a
diverse portfolio of ten technologies,  including three oral controlled  release
technologies,  four  site-specific oral and topical delivery  technologies,  and
three tastemasking technologies.  These systems, which are used in the Company's
products and the products of its  marketing  licensees,  are designed to improve
and  control  the  absorption  and  utilization  by the  human  body  of  active
pharmaceutical  compounds,  allowing  the  compounds  to  be  administered  less
frequently with potentially reduced side effects,  improved drug efficacy and/or
enhanced patient compliance.  Additionally,  the Company continually applies its
scientific  expertise  and  development  experience  to refine and  enhance  its
existing drug delivery  systems and formulation  technologies  and to create new
technologies that may be used in its drug development programs.

         KV licenses the marketing rights for products developed with these drug
delivery   technologies   to  major  domestic  and   international   brand  name
pharmaceutical  marketers  in  return  for  license  fees,  milestone  payments,
research reimbursement and manufacturing and royalty revenues.

         In  February,  1990,  KV  established  a generic  marketing  capability
through a wholly-owned subsidiary,  ETHEX Corporation ("ETHEX"),  which makes KV
one of the only drug  delivery  research  and  development  companies  that also
markets "technology distinguished" generic products.

         KV's other wholly-owned  subsidiary,  Particle Dynamics,  Inc. ("PDI"),
formerly known as Desmo Chemical  Corporation,  was  incorporated in New York in
1948 and acquired by KV in 1972.  Through PDI, the Company  develops and markets
specialty   pharmaceutical   compounds,   including  directly  compressible  and
microencapsulated ingredients used in pharmaceutical processing, and tastemasked
vitamins and minerals for the pharmaceutical, nutritional and food industries.

         (Hereinafter,  KV, ETHEX and PDI are sometimes referred to collectively
as "KV" or the "Company.")

                                       2
<PAGE>
         (b) Industry Segments

         The Company operates principally in one industry segment, consisting of
pharmaceutical development,  manufacturing and marketing.  Revenues are received
from  customers for the  development,  manufacture  and sale of drug products to
pharmaceutical   marketers  and  from  directly  marketing  its  own  technology
distinguished  generic  products.  Revenues  may  be  received  in the  form  of
licensing  revenues and/or royalty payments to KV based upon a percentage of the
licensee's  sales of the product,  in addition to manufacturing  revenues,  when
marketing  rights to products using KV's advance drug delivery  technologies are
licensed.

         (c) Narrative Description of Business

         The  Company is engaged in the  formulation  and  commercialization  of
brand name  prescription,  generic  prescription  and  over-the-counter  ("OTC")
products utilizing the Company's proprietary drug delivery technologies.

         The Company develops  generic drugs using its proprietary  technologies
that it markets and  distributes  through  its  wholly-owned  subsidiary,  ETHEX
Corporation.  ETHEX currently sells 40 products,  20 of which were launched over
the past two fiscal years and many of which utilize KV's drug delivery  systems.
Approximately  10 additional  products are expected to be launched during fiscal
1998. ETHEX Corporation  distributes and markets these technology  distinguished
generic  products  directly to various  markets and classes of trade  customers,
including  wholesalers,  chains,  distributors,  mail order houses,  independent
pharmacies, large HMOs and PPOs. ETHEX has achieved a 100% penetration in the 25
largest  wholesalers  and chains.  Development  of generic  versions of existing
brand  name  products  is  typically  less  costly and time  consuming  than the
development  of new drug  products,  because  generic  drugs  typically  contain
pharmaceutical  compounds  previously  approved by the FDA and generally qualify
for the use of an abbreviated testing and approval process.

         The Company also enters into  development  and  licensing  arrangements
with companies that (i) hold patent or marketing  exclusivity rights to existing
pharmaceutical   products  that  may  benefit  from  the   application  of  KV's
proprietary  drug delivery  technologies,  (ii) are developing  new  therapeutic
agents that require delivery systems or formulation  capabilities  such as those
offered by the Company,  and/or (iii) can market and sell the products developed
by  the  Company.   To  date,  KV  has  entered  into  agreements  with  various
pharmaceutical  marketers,  including  Roche  Holding Ltd.,  Sandoz  (Novartis),
Janssen Pharmaceutical (Johnson & Johnson) and Taisho Ltd. of Japan. Under these
agreements,  KV generally  develops a product  which  utilizes its drug delivery
system in return for license fees,  milestone payments,  research  reimbursement
and  manufacturing  and royalty  revenues.  The Company's  licensee is generally
responsible for clinical trials,  regulatory approvals and marketing activities.
In certain cases, the Company may develop a product, conduct clinical trials and
seek regulatory approval before entering into a licensing arrangement.

         Particle   Dynamics,   Inc.   has   developed   and   markets   to  the
pharmaceutical, nutritional and food industries four distinct lines of specialty
raw material products. DESCOTE(R) is a family of tastemasked vitamin and mineral
products particularly applicable to chewable children's vitamins.  DESTAB(TM) is
a  family  of  direct   compression   products   which   enable   pharmaceutical
manufacturers  to  produce  tablets  and  caplets  in a more  efficient  manner.
DESTRIT(TM) is a family of low dose vitamin products for direct compression into
vitamin tablets and VITACOTE(TM) is a line of stabilized vitamins for use in the
pharmaceutical and food industries.

                                       3
<PAGE>
         During the mid-1990's,  the Company  implemented an integrated business
strategy to commercialize  its drug delivery  technologies in a variety of ways,
principally through the development and marketing of both brand name and generic
pharmaceutical  products.  During fiscal 1997, 1996 and 1995,  revenues from the
implementation  of  these  strategies  were  approximately  91%,  90%  and  84%,
respectively, of the Company's total net revenues.

         The  Company's  strategy  is to  maintain  its  position  as a  leading
developer of innovative drug delivery  systems and to apply its  technologies to
the  formulation  and  commercialization  of brand  name and  generic  drugs and
specialty raw materials. This strategy is comprised of four main components:

         The Development and Marketing of Technologically  Distinguished Generic
Drugs.  The Company applied and continues to apply its drug delivery systems and
formulation  capabilities  to develop and market  technologically  distinguished
generic drugs. The Company does so by (i) identifying and replicating brand name
drugs that are either off patent or are approaching  patent expiration and which
require or can utilize  advanced  drug  delivery  systems,  or (ii) applying the
Company's  tastemasking   formulations  to  an  off  patent  drug  in  order  to
meaningfully increase patient compliance and the drug's commercial appeal.

         The Development of Brand Name Pharmaceuticals.  The Company applies its
proprietary  drug delivery  technologies  in the  formulation and development of
brand name prescription and OTC  pharmaceutical  products.  The Company plans to
continue  to enter  into  long term  licensing  agreements  with  pharmaceutical
marketing  companies under which the Company develops products which utilize its
drug delivery systems in return for license fees,  milestone payments,  research
reimbursement and manufacturing and royalty revenues on sales of the products.

         Selective Acquisitions and In-Licensing  Opportunities.  The Company is
actively seeking  opportunities to acquire additional products,  product rights,
technologies,  and distribution  channels that complement the Company's business
and which can be integrated into the Company's existing research, manufacturing,
marketing and distribution capabilities.

         Development and Marketing of Technologically  Differentiated  Specialty
Raw  Materials.   The  Company  combines  its  advanced  technologies  with  the
utilization  of its  expertise in micro  encapsulation  and particle  coating to
strategically  develop new products that improve taste,  tableting  efficiencies
and stability while reducing manufacturing costs and increasing product quality.

DRUG DELIVERY TECHNOLOGIES

         KV's proprietary drug delivery and formulation technologies enhance the
effectiveness of new therapeutic agents,  existing  pharmaceutical  products and
nutritional  supplements,  such as vitamins and minerals.  During the 1990's, KV
has continued to develop and introduce important new generations of technologies
which represent significant  advancements in the field of drug delivery systems.
These drug delivery systems are generally  organized in the areas of "controlled
release",  "tastemasking"  and  "site  specific"  technologies.  Many  of  these
technologies have been used successfully for the  commercialization  of products
currently  being  marketed  by the  Company  and  its  pharmaceutical  marketing
licensees.  The  following  describes  the  Company's  principal  drug  delivery
technologies.

                                       4

<PAGE>
Controlled Release Technologies

         The Company has developed a number of controlled  release drug delivery
systems and  formulation  techniques  that tailor the drug  release  profiles of
certain orally administered  pharmaceuticals and nutritional supplements.  These
systems,  which  provide  for a  single  oral  dose  that  releases  the  active
ingredient  over periods  ranging  from 12 to 24 hours,  are designed to improve
patient  compliance,  improve  drug  effectiveness  and  reduce  potential  side
effects.  These technologies have been used to formulate  tablets,  capsules and
caplets that deliver single  therapeutic  compounds,  as well as multiple active
compounds,  each requiring  different  release  patterns  within a single dosage
form.

         KV/24(R) is a precisely  controlled  drug  delivery  system that can be
taken orally once every 24 hours, affording the patient a reduced dosing regimen
and dramatically  reducing  commonly  reported side effects.  KV/24(R) is also a
multi-particulate  technology that can combine several different drug compounds,
each requiring its own unique release profile, in a single dosage form. KV/24(R)
systems  have  been  developed  in  capsule  and  tablet  form for a  number  of
prescription and OTC products.

         METER RELEASE(R) is a twice a day dosing,  polymer-based  drug delivery
system which offers different release  characteristics than KV/24(R) and is used
for products  that  require a drug  release rate of between  eight and 12 hours.
METER RELEASE(R) systems have been developed in tablet,  capsule and caplet form
and have been commercialized in the cardiovascular,  gastrointestinal  and upper
respiratory  categories through products marketed by ETHEX Corporation and under
licensing agreements in various therapeutic categories.

         MICRO  RELEASE(R)  is  a  micro-particulate  formulation  that  employs
smaller  particles  than  KV/24(R)  and  METER   RELEASE(R).   MICRO  RELEASE(R)
encapsulates  therapeutic  agents which improve a drug's  absorption in the body
where precise  release  profiles are less important.  MICRO  RELEASE(R) has been
commercialized in prescription and OTC nutritional  products,  including various
prescription prenatal vitamins marketed through ETHEX Corporation.

Site Specific Technologies

         KV's site specific technologies use advanced polyphasic principles that
result in a complex  emulsion  which adheres to the desired  tissue and controls
the release of the drug.  The Company  has  developed a number of site  specific
systems and formulations that it tailors to the desired route of administration.
To date,  the  Company  has applied  its site  specific  technologies  in cream,
lotion,  lozenge and suppository form to deliver  therapeutic agents to vaginal,
rectal, oral, skin, pharyngeal and esophageal tissues.

         SITE RELEASE(R) is a patented,  controlled release bioadhesive delivery
system  which   incorporates   advanced   polyphasic   principles  to  create  a
bio-emulsion  system capable of delivering  therapeutic  agents in oral, topical
and vaginal  forms.  To the  Company's  knowledge,  SITE  RELEASE(R) is the only
bioadhesive delivery system that is clinically proven.

         SITE RELEASE(R) is the subject of licensing and development  agreements
with such companies as Roche Holding Ltd., Taisho Ltd. of Japan, J. Uriach & Cia
of Spain and  others,  to develop  products  for the  treatment  of topical  and
vaginal fungal infections.

                                       5
<PAGE>
         OraSite(R)  is  a  controlled  released  mucoadhesive  delivery  system
administered  orally  in a solid or  liquid  form.  A drug  formulated  with the
OraSite(R) technology may be formulated as a liquid or as a lozenge in which the
dosage form liquefies  upon insertion and adheres to the mucosal  surface of the
mouth, throat and esophagus.  OraSite(R) possesses characteristics  particularly
advantageous  to  therapeutic  areas  such  as oral  hygiene,  sore  throat  and
periodontal and upper gastrointestinal tract disorders.

         Trans-E(TM)  (for  transesophageal)  is a new and  novel  bio-adhesive,
controlled  release  delivery system which may permit oral delivery of compounds
that normally would be degraded if administered  orally, such as growth hormone,
calcitonin and other  protein/peptides and other complex compounds.  Trans-E(TM)
was  specifically   designed  to  provide  an  oral  delivery   alternative  for
biotechnology and other compounds that currently are injected or infused.

         BioSert(R) is a patented, bio-adhesive, controlled release system which
at room temperature is a solid rectal or vaginal suppository and after insertion
becomes a bioadhesive long acting cream.  BioSert(R) has particular applications
to   therapeutic   areas   such  as   antifungals,   narcotic   analgesics   and
anti-arthritics.

Tastemasking Technologies

         KV has  been at the  forefront  in the  development  of  pharmaceutical
formulations  capable of improving the flavor of unpleasant  tasting drugs.  The
Company has  developed  numerous  platforms for its  tastemasking  technologies,
including liquid, chewable and dry powder formulations.

         FlavorTech(R) is a liquid formulation technology designed to reduce bad
tasting   therapeutic   products.   FlavorTech(R)  has  been  commercialized  in
cough/cold  syrup products  marketed  through ETHEX  Corporation and has special
application  to other  products,  such as  antibiotic,  geriatric  and pediatric
pharmaceuticals.  FlavorTech(R) has also been commercialized through a licensing
agreement with Sandoz (Novartis) for a liquid cough cold product.

         TASTELESSE(R)  is a tastemasking  technology  which  incorporates a dry
powder,   microparticulate   approach  to  reducing   objectionable   tastes  by
sequestering   the  unpleasant   drug  agent  in  a  specialized   matrix.   The
TASTELESSE(R) technology can be formulated into chewable tablets or into packets
that can be sprinkled on food,  taken  directly into the mouth,  or stirred into
water or other liquid  before  swallowing.  This  formulation  technique has the
effect of "shielding" the drug from the taste receptors without interfering with
the dissolution and ultimate absorption of the agent within the gastrointestinal
tract.  TASTELESSE(R)  may be used in connection with such products as macrolide
antibiotics, amino acids, vitamins and other unpleasant tasting drug compounds.

         LIQUETTE(R)  is a  tastemasking  system which  incorporates  unpleasant
tasting drugs into a hydrophilic  and lipophilic  polymer matrix to suppress the
taste of a drug.  This  technology is used for mildly to moderately  distasteful
drugs. The LIQUETTE(R) technology has been successfully  commercialized in Japan
through a licensing agreement with SS Pharmaceutical.

                                        6

<PAGE>
COMPETITION

         Competition in the development and marketing of pharmaceutical products
is  intense  and   characterized   by  extensive   research  efforts  and  rapid
technological  progress.  Many  companies,  including  those with  financial and
marketing  resources and  development  capabilities  substantially  greater than
those of the Company, are engaged in developing,  marketing and selling products
that compete with those offered by the Company.  There are also a few companies,
including KV, which  specialize in drug delivery  technology and the development
of products derived from those technologies for sale/licensing to pharmaceutical
marketers.  The Company  believes that its patents,  proprietary  trade secrets,
technological expertise, and product development and manufacturing  capabilities
position  it to  continue  to develop  products  to compete  effectively  in the
marketplace  and  maintain a leadership  position in the field of advanced  drug
technologies.

         The  Company  also  markets,  sells and  distributes  generic  products
directly to various markets and classes of customers through ETHEX  Corporation.
ETHEX is  subject  to  active  competition  from  numerous  firms.  The  primary
competitive  factors in this area are customer service,  quality of products and
price.  The nature and level of competition  varies among products,  markets and
classes of customers. The Company is subject to potential additional competition
from  firms who are able to  obtain  the  necessary  governmental  approvals  to
manufacture and distribute similar products.

REGULATION

         The design,  development and marketing of pharmaceutical  compounds are
intensively  regulated by the Federal Food and Drug  Administration  ("FDA") and
comparable  agencies in foreign countries.  For example,  The Federal Food, Drug
and Cosmetic Act, the Controlled  Substances Act and other United States federal
statutes and regulations impose  requirements on the testing,  manufacturing and
approval of the Company's  products  before a drug can be marketed in the United
States. Obtaining FDA approvals is a costly, time-consuming process and there is
no guarantee  that such  approval will be obtained with respect to an individual
product.  All  companies  in the  pharmaceutical  industry  are  subject  to FDA
inspections for compliance with current Good  Manufacturing  Practice  ("cGMP"),
which  encompasses  all aspects of the production  process as interpreted by the
FDA and involves changing and evolving standards.  FDA inspections are a part of
a continuing effort by the FDA to oversee and upgrade the level of industry-wide
compliance with cGMP,  with an emphasis on increased  validation of products and
increased stringency of Standard Operating Procedures. The Company undergoes FDA
inspections at all of its facilities.

         Since 1992,  the Company has  implemented  new  programs to ensure full
compliance with all of the FDA's regulatory  requirements and their increasingly
vigorous  interpretation by the government.  In addition, KV has agreed with the
FDA in a June 1993 Consent Decree to operate in compliance with FDA requirements
and,  in the event of  violations  of FDA  requirements,  has  agreed to certain
procedures with respect to corrective actions that may be warranted.

         With respect to potential  new products,  there are two principal  ways
for the Company to satisfy the FDA's safety and efficacy  requirements for a new
drug product,  a new drug  application  (an "NDA") and an  abbreviated  new drug
application (an "ANDA").  In recent years, the Company has experienced delays in
obtaining  FDA  approvals.  In  certain  instances,  KV's  customers  have  been
responsible for obtaining such FDA approvals and have been similarly  delayed. A
number of products KV  anticipated  would be  introduced  to the  pharmaceutical

                                       7
<PAGE>
market by KV or its client pharmaceutical  companies in fiscal 1992 through 1997
were delayed. The Company follows a policy of not disclosing  information on the
specific  products  covered  by its FDA  applications  in order to  protect  the
confidentiality  and competitive  position of the Company and its customers with
respect to  products  which it has  developed  and  expects to be the subject of
future market introductions.

         As a  consequence  of the  uncertainties  inherent in the drug approval
process,  an  applicant  is not in the position to predict in advance all of the
substantive  and  procedural  requirements  for  FDA  approval  of a  particular
product. In addition, the Company believes that under the agency's invocation of
its  "Application  Integrity  Policy",  the FDA will not process  the  Company's
applications  until the  Company  has  satisfied  the FDA with  respect  to data
previously submitted and has implemented any additional  procedures necessary to
assure the accuracy of information  furnished by the Company.  However,  the FDA
has specifically advised the Company that the Application  Integrity Policy does
not adversely delay any of its clients' NDA and ANDA submissions for products KV
has  developed  and will  manufacture  for such  clients.  Currently,  it is the
applications  of KV's  clients  which have the  greatest  value to the  Company.
Therefore,  the Company  believes that any delay in processing the Company's own
applications will not have a material adverse effect on the Company.

         The  Company  also  cannot  predict   whether  future   legislative  or
regulatory  developments might have an adverse effect on the Company.  It is the
Company's belief that generic drugs and drug delivery  products can provide cost
savings  opportunities  which  the  Company  could  benefit  from  in its  ETHEX
Corporation  subsidiary's  growth  as  well  as in its  drug  delivery  research
business.

         During fiscal 1997, the Company encountered no serious shortages of any
particular raw materials and has no indications that significant  shortages will
occur.  However,  a serious  shortage  of  certain  raw  materials  could have a
material adverse effect upon the Company.

         The Company  regards its drug delivery  technologies as proprietary and
maintains  an  extensive  trade secret and patent  protection  program  based on
patent   laws,   trade  secret  laws  and   restrictions   on   disclosure   and
transferability contained in its product license agreements. Internal safeguards
incorporated in its technologies also serve to protect the proprietary nature of
its programs. In addition,  employees with access to proprietary information and
potential   customers  who  evaluate  KV's  products  are  required  to  execute
non-disclosure  agreements.  The  Company  intends to  maintain  and enforce the
proprietary  nature of its  technologies.  In  addition  to its patent and trade
secret protection,  KV believes that the collective  knowledge and experience of
its  management  and  personnel  and their  ability to develop and enhance  drug
delivery  technologies and products developed from such technologies are also of
competitive significance.

         The Company  presently  owns 38 domestic and foreign  patents  expiring
through  2013 and 24  trademarks  expiring  through  2012  (which are  renewable
assuming continuous use), none of which is considered material to the continuing
operations  and success of the Company.  The Company  considers its  proprietary
know-how and processing techniques to be of greater importance to its continuing
operations than such patents.

         In order to protect its goodwill, the Company has applied for trademark
protection  for  its  technology  names  such  as  SITE  RELEASE(R),   KV/24(R),
FlavorTech(TM) , OraSite(R), METER RELEASE(R), MICRO RELEASE(R), DESCOTE(R), and
others.  The Company intends to continue to trademark new technology and product
names as they are developed.

                                       8
<PAGE>
         The  business  of the Company is  generally  not  seasonal,  although a
number of new cough/cold  products  marketed  through ETHEX  Corporation  can be
subject to seasonal demand.

         The nature of the Company's  business does not involve  unusual working
capital requirements. Inventories are maintained at sufficient levels to support
current production and sales levels.

         Customers  of the  Company  consist  of large and small  pharmaceutical
marketing companies,  drug chains and wholesalers.  During fiscal 1997 and 1996,
one  unaffiliated  customer,  McKesson  Drug  Company,  accounted for 15% of the
Company's consolidated  revenues.  During fiscal 1996, no one customer accounted
for 10% or more of consolidated revenues.

         The majority of the  Company's  sales are related to directly  marketed
generic products through ETHEX  Corporation  where backlog  measurements are not
meaningful,  due to the short lead time required (days) in filling orders at any
point in time relative to sales or income for a full 12-month period.

         Research and development spending,  including overhead,  spent by KV on
research  activities  relating to the development of new products or services or
the improvement of existing products or services was approximately $4,835,000 in
fiscal 1997,  $4,559,000  in fiscal 1996,  and  $4,525,000  in fiscal 1995.  The
estimated dollar amount  contributed by customers to these amounts was $4,000 in
fiscal 1997, $70,000 in fiscal 1996 and $271,000 in fiscal 1995.

         Spending  for KV products  comes from KV internal  funding and from its
major drug Company customers who have licensed  marketing rights to KV-developed
products.  KV's internally funded research and development spending,  which does
not include licensing  partners  sponsored sources of funds, is approximately 8%
of current revenues.

         The Company  does not expect that  compliance  with  federal,  state or
local  provisions  regulating the discharge of materials into the environment or
otherwise  relating to the  protection of the  environment  will have a material
effect on the Company's capital expenditures, earnings or competitive position.

         As of May 25,  1997,  the  Company  had 333  employees.  The Company is
subject to a new five year collective bargaining agreement which was ratified in
July, 1996 and covers 61 employees. The Company believes that its relations with
its employees are good.

         The Company  presently  does not have  material  operations or sales in
foreign  countries and its domestic sales are not subject to unusual  geographic
concentration.

Item 2.  Properties.

         The Company's  corporate  headquarters  is located in a two-story brick
building at 2503 South Hanley Road in St.  Louis  County,  Missouri,  containing
approximately  25,000 square feet of floor space. The Company has a lease on the
building  for a  period  of ten  years  expiring  December  31,  2005,  with one
five-year option to renew.

                                       9
<PAGE>
         In addition, the Company has the leases and the owned facility shown in
the following table:

                                              SQ FT    LEASE        RENEWAL
FACILITY                       USAGE          LEASED   EXPIRES      OPTIONS
============================== ===========    ======== =========    =======

2629 S. Hanley Road            Mfg. Oper.      18,000  11/30/97     5 years(1)
821 Hanley Industrial Court    Mfg. Oper.       5,000  11/30/97     3 years
8046-50 Litzsinger Road        Mfg. Oper.      17,000  12/31/96     5 years(1)
8056 Litzsinger Road           Office/Maint.    3,000  12/31/96     5 years(1)
2635 S. Hanley Road            Mfg. Oper.      12,150  11/30/97     5 years(1)
819 Hanley Ind'l Ct.           Mfg. Oper.       5,000  11/30/97     3 years
2525 S. Hanley Road            Mfg. Oper.      16,800  06/30/97     5 Years
8054 Litzsinger Road           Office           3,000  12/31/96     5 years(1)
2601 S. Hanley Road            PDI Office       1,480  04/30/97      5 years(1)
10888 Metro Court              Office/         81,810  Owned         N/A
                               Warehouse
2303 Schuetz Rd.               Mfg. Oper.      90,000  Owned         N/A



------------------------------------------------------

1 Three five-year options.


         Properties used in the Company's operations are considered suitable for
the purposes for which they are used and are believed to be adequate to meet the
Company's needs for the reasonably foreseeable future.  However, the Company has
considered  leasing  additional  facilities  from time to time  when  attractive
facilities  appeared to be available to accommodate the consolidation of certain
operations and to meet future expansion plans.

Item 3. Legal Proceedings.

         On April 6, 1995,  the Company  entered into a plea  agreement with the
U.S. Department of Justice under which the Company agreed to plead guilty to (1)
two misdemeanor  violations of the Federal Food, Drug and Cosmetic Act involving
the failure to file certain  required  reports with the FDA in 1991 with respect
to  two lots of an erythromycin oral suspension product previously  manufactured
by the Company and (2) two misdemeanor counts involving the shipment of two lots
of the same product,  inappropriately  labeled as to their shelf life. Under the
plea  agreement,  the  Company  agreed  to pay a fine of  $500,000  and costs of
$100,000 in  installments of $75,000 every six months over 3 and one-half years,
beginning in July 1995 and was placed on probation during the payment period.

                                       10
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.

        Not applicable.

Item 4(a). Executive Officers of the Registrant1

         The  following  is a list  of the  current  executive  officers  of the
Company,  their ages,  their  positions  with the  Company  and their  principal
occupations for at least the past five years.

NAME                        AGE     POSITION HELD AND PAST EXPERIENCE
------------------------- --------- --------------------------------------------

Victor M. Hermelin           83     Director,   Chairman   of  the   Board   and
                                    Treasurer of the Company.

Marc S. Hermelin             55     Director,  Vice-Chairman  of the  Board  and
                                    Chief Executive Officer(2).

Alan G. Johnson              62     Director  and   Secretary  of  the  Company.
                                    Attorney  at Law and  Member in the law firm
                                    of  Gallop,  Johnson  & Neuman,  L.C.  since
                                    1976; Director of  MRL,   Inc.; and  Siboney
                                    Corporation.

Garnet E. Peck, Ph.D.        66     Director   of  the   Company   since   1994.
                                    Professor   of   Industrial   Pharmacy   and
                                    Director of  Industrial  Pharmacy for Purdue
                                    University  School of Pharmacy and Pharmacal
                                    Sciences since 1967.

Raymond F. Chiostri          63     Vice  President  and Group  President  of KV
                                    since  1986 and Chief  Executive  Officer of
                                    Particle   Dynamics,    Inc.   since   1995.
                                    President  -  Pharmaceutical  Division of KV
                                    1986 to 1995.

Gerald R. Mitchell           58     Vice President of Finance since 1981.

Mitchell I. Kirschner        51     Corporate   Vice   President   of   Business
                                    Development since 1989.2


         The term of office for each executive officer of the Company expires at
the next annual  meeting of the  directors or at such time as his  successor has
been elected and qualified.

(1)  This information is included in Part I as a separate item in accordance 
     with Instruction 3 to Item 401(b) of Regulation S-K and General Instruction
     G to Form 10-K.

(2)  Victor M. Hermelin is the father of Marc S. Hermelin and father-in-law of
     Mitchell I. Kirschner.

                                       11
<PAGE>
                                     PART II

Item 5.  Market for the  Company's  Common  Stock and  Related  Security Holder
         Matters

             a)       Principal Market

                      The  Company's  Class A Common  Stock  and  Class B Common
                      Stock are traded on the American  Stock Exchange under the
                      symbols KV.A and KV.B, respectively.

             b)       Stock Price and Dividend Information
         
                      High and low closing  sales prices on the  American  Stock
                      Exchange of the Company's Class A and Class B Common Stock
                      during  each  quarter  of  fiscal  1997 and  1996  were as
                      follows:

CLASS A COMMON STOCK

                      FISCAL 1997                    FISCAL 1996
                ------------------------        ------------------------
     QUARTER      High           Low               High           Low
     -------    ----------    -----------       -----------    ----------

     First        15 7/8          11 7/8           8 1/2           5 3/8
     Second       14 3/8           7 5/8          10 1/8           6 3/4
     Third        12 7/8          10 3/4          13 3/8           7 3/4
     Fourth       21 1/8          11 5/8          17 7/8          11 1/4


CLASS B COMMON STOCK

                      FISCAL 1997                     FISCAL 1996
                ------------------------        -------------------------
     QUARTER      High          Low                High           Low
     -------    ---------    -----------        -----------    ----------

     First        15 3/4        12                 8 1/2           5 5/8
     Second       14 1/4         7 1/2            10               7 1/2
     Third        12 3/4        10 3/4            13 3/8           7 3/4
     Fourth       21            11 1/2            17 7/8          11 1/2


         No cash dividends were paid on the Company's  Class A or Class B Common
Stock in fiscal  1997 or 1996.  Dividends  on  Preferred  Stock in the amount of
$105,437  were paid  during the  fourth  quarter  of fiscal  1997,  but no other
dividends  were paid  during  the  above  periods.  See Note 8 to the  Financial
Statements regarding limitations on the payment of dividends.

         (c) Approximate Number of Holders of Common Stock

         The number of holders  of record of the  Company's  Class A and Class B
Common Stock as of June 6, 1997 was 689 and 621,  respectively  (not  separately
counting  shareholders  whose shares are held in  "nominee"  or "street"  names,
which are estimated to represent approximately 4,000 additional shareholders for
each class of common stock).

                                       12
<PAGE>
<TABLE>

Item 6. Selected Financial Data
<CAPTION>
                                                       ($ in 000's, except per share data)
                                                              Years Ended March 31,
                        ---------------------------------------------------------------------------------------------------
                               1997                1996               1995                1994                1993
                               ----                ----               ----                ----                ----

<S>                          <C>                 <C>                 <C>                  <C>                 <C>    
Revenues                     $58,037             $49,789             $39,743              $38,171             $43,496
   % Change                    16.6                25.3                4.1                (12.2)               3.5
Net income
(loss)                         8,924               4,043              (5,375)              (8,181)              1,055

Net income (loss) per
   common share (a)
   (b)                        0.70                0.31                (.52)               (.78)                .06

Total assets                  41,362              27,948              27,975               31,802              39,331

Long-term debt and
   other                       3,071               3,452              12,153               13,323              11,886

Shareholders' Equity          33,084              20,550               9,974               13,343              21,631

<FN>

NOTES:

(a)  After deducting preferred dividends of $421,750 or $.04 per common share in
     1997,  1996, 1995, 1994 and 1993.

(b)  Dividends were paid on the Preferred  Stock in the fourth quarter of fiscal
     1997 in the amount of $105,437,  but no other cash  dividends  were paid on
     any shares of common or  preferred  stock during the five years ended March
     31, 1997.
</FN>
</TABLE>
                                       13
<PAGE>
Item 7.  Management's Discussion and Analysis of Results of Operations, and
         Liquidity and Capital Resources
        
         (a) Results of Operations

         The following  table  summarizes  the Company's  historical  results of
operations as a percentage of revenues for fiscal years 1997, 1996 and 1995.

<TABLE>
<CAPTION>

                                                                    Fiscal Year Ended
                                               1997                       1996                       1995
                                     -------------------------- ------------------------- ---------------------------
                                        Amount     Percent          Amount     Percent        Amount     Percent
                                                                  (Dollars in thousands)

<S>                                       <C>           <C>          <C>          <C>         <C>          <C>
ETHEX (generic products)                  $40,225       69%          $34,498      69%         $24,939      63%
KV (manufacturing & licensing)
                                            9,124       16             7,430      15            7,729      19
PDI (pharmaceutical compounds)
                                            8,688       15             7,861      16            7,075      18
                                         --------       --           -------     ---          -------    ----
     Net Revenues                         $58,037      100%          $49,789     100%         $39,743     100%

Costs and Expenses:
   Manufacturing costs                    $29,478       51%          $26,260      53%         $26,066      66%
   Research and development
                                            4,835        8             4,559       9            4,525      11
   Selling and administrative
                                           13,818       24            12,749      25           11,979      30
   Other, Net                                 599        1             2,088       4            2,548       6
                                         --------      ---           -------    ----          -------     ---
     Total costs & expenses                48,730       84%          $45,656      91%         $45,118     113%
   Income (loss) before income
     taxes                                  9,307       16             4,133       9           (5,375)    (13)

   Net income (loss)                       $8,924       15%           $4,043       8%         $(5,375)    (13)%
                                           ======       ===           ======       ==         ========    =====

</TABLE>

FISCAL 1997 COMPARED TO FISCAL 1996

         Revenues.  Net revenues increased $8.2 million,  or 17%, to $58 million
during  fiscal 1997 from $49.8  million in fiscal  1996.  This sales  growth was
primarily due to an increase in the volume of new and existing  generic products
sold by ETHEX, increased licensing revenues as well as increased sales volume in
contract services and Particle Dynamics.  Net revenues from ETHEX increased $5.7
million,  or 17%, to $40.2  million  during  fiscal  1997 from $34.5  million in
fiscal 1996.  This  increase was  primarily due to the launch of ten new generic
products  during  fiscal  1997,  in  addition  to  increased  sales in  products
introduced  in  the  prior  year.   Net  revenues   derived  from  the  sale  of
pharmaceutical  compounds by PDI increased $.8 million,  or 11%, to $8.7 million
during fiscal 1997.  This increase was  attributable  to increased sales volumes
related   to  the  prior   years'   introduction   of  new   products   for  the
over-the-counter  DESCOTE(R) and DESTAB(TM)  product  lines.  Contract  services
increased  $1.7  million or 23% to $9.1 million in fiscal 1997 from $7.4 million
in fiscal 1996,  primarily due to increased  licensing  revenues of $1.3 million
resulting from an agreement concluded with Roche Holding Ltd.

                                      14
<PAGE>
         Costs and Expenses. Manufacturing costs increased $3.2 million, or 12%,
to $29.5  million  during  fiscal  1997  from  $26.3  million  in  fiscal  1996.
Manufacturing  costs as a percentage of revenues decreased to 51% from 53%. This
percentage decrease was primarily due to the continued growth in sales of higher
margin  products by ETHEX and  increased  margins in the Contract  manufacturing
business.

         Research and development  costs  increased $.2 million,  or 6%, to $4.8
million  during fiscal 1997 from $4.6 million in fiscal 1996.  This increase was
due to higher  personnel  costs.  The Company  expects to continue  spending for
research  and  development  in  the  future,   emphasizing  the  development  of
additional   products  for  sale  by  ETHEX,   as  well  as  new  drug  delivery
technologies.

         Selling and administrative  expenses increased $1.1 million,  or 8%, to
$13.8 million during fiscal 1997 from $12.7 million in the same period in fiscal
1996. However, as a percentage of revenue,  selling and administrative  expenses
decreased to 24% from 25%. The increase in selling and  administrative  expenses
was  primarily  related to the  Company's  selling  and  promotional  activities
associated  with the  significant  growth  experienced  in the  sales of new and
existing generic products marketed by ETHEX and additional  personnel to support
the Company's continued growth.

         Interest  expense  decreased $1 million,  or 70%, to $.4 million during
fiscal 1997 from $1.4 million in fiscal 1996. This decrease  resulted from lower
effective interest rates and lower levels of average borrowing during the fiscal
1997 period.  The income tax  provision was $383,000 for fiscal 1997 compared to
$90,000 in fiscal 1996. The tax provision of $383,000 is for state income taxes,
while the $90,000 in 1996 was due to the effect of the alternative minimum tax.

         Net Income.  As a result of the  factors  described  above,  net income
improved  $4.9 million or 121%,  to $8.9 million for fiscal 1997 from net income
of $4.0 million in fiscal 1996.

FISCAL 1996 COMPARED TO FISCAL 1995

         Revenues.  Net  revenues  increased  $10.1  million,  or 25%,  to $49.8
million during fiscal 1996 from $39.7 million in fiscal 1995.  This sales growth
was  primarily  due to an  increase  in the volume of new and  existing  generic
products sold by ETHEX and increased licensing revenue.  Net revenues from ETHEX
increased  $9.6 million,  or 39%, to $34.5 million during fiscal 1996 from $24.9
million in fiscal 1995. This increase was primarily due to the launch of ten new
generic  products during fiscal 1996, in addition to increased sales of products
introduced in the prior year.  Licensing revenues increased $1.5 million to $2.3
million  during  fiscal  1996  due  to  an  agreement  concluded  with  a  major
pharmaceutical  manufacturer  to explore the  development of products  utilizing
KV's  drug  delivery  technologies.  The  Company  recognized  $1.7  million  of
licensing revenue from this  transaction.  Net revenues derived from the sale of
pharmaceutical  compounds by PDI increased $.8 million,  or 11%, to $7.9 million
during fiscal 1996.  This increase is  attributable  to the  introduction of new
products for the over-the-counter DESCOTE(R) and DESTAB(TM) product lines. Those
increases were partially offset by an expected decrease in revenues derived from
contract  services to $5.1 million in fiscal 1996 from $7 million in fiscal 1995
primarily  due to the  Company's  continued  de-emphasis  of  its  lower  margin
contract  manufacturing  business in order to develop and market  higher  margin
technologically distinguished generic products through ETHEX.

                                       15
<PAGE>
         Costs and Expenses.  Manufacturing costs increased $.2 million, or less
than 1%, to $26.3 million  during fiscal 1996 from $26.1 million in fiscal 1995.
Manufacturing  costs as a percentage of revenues decreased to 53% from 66%. This
percentage decrease was primarily due to the continued growth in sales of higher
margin generic products by ETHEX.

         Research and development costs increased  $34,000,  or less than 1%, to
$4.6 million during fiscal 1996 from $4.5 million in fiscal 1995.  This increase
was due to higher personnel costs. The Company expects to continue  spending for
research  and  development  in  the  future,   emphasizing  the  development  of
additional  generic  products  for sale by  ETHEX  as well as new drug  delivery
technologies.

         Selling and administrative  expenses  increased $.7 million,  or 6%, to
$12.7  million  during fiscal 1996 from $12 million in the same period in fiscal
1995. However, as a percentage of revenue,  selling and administrative  expenses
decreased to 25% from 30%. The increase in selling and  administrative  expenses
was  primarily  related to the  Company's  selling  and  promotional  activities
associated  with the  significant  growth  experienced  in the  sales of new and
existing generic products marketed by ETHEX.

         Interest expense  increased $.1 million,  or 8%, to $1.4 million during
fiscal 1996 from $1.3 million in fiscal 1995. Such increase resulted from higher
effective  interest  rates and  higher  levels of average  borrowing  to support
growth in the fiscal  1996  period.  The income tax  provision  was  $90,000 for
fiscal 1996  compared to zero in fiscal 1995.  The tax  provision of $90,000 was
due to the effect of the alternative  minimum tax.  Otherwise,  no provision was
made for income taxes as a result of available net operating loss carryforwards.
As of March 31, 1996, the Company's net operating loss  carryforwards  were $8.9
million.

         Net Income  (Loss).  As a result of the factors  described  above,  net
income  improved  $9.4  million to $4 million for fiscal 1996 from a net loss of
$5.4 million in fiscal 1995.

                                       16
<PAGE>
         (b) Liquidity and Capital Resources

         The following  table sets forth selected  balance sheet data and ratios
for fiscal years 1997, 1996 and 1995.
<TABLE>
<CAPTION>

                                                                          At March 31,
                                                                          ($ in 000's)
                                                                          ------------
                                                          1997                1996                 1995
                                                   ------------------- -------------------- -------------------

        <S>                                             <C>                 <C>                  <C>      
        Working Capital Ratio                           5.8 to 1            4.6 to 1             2.5 to 1
        Quick Ratio                                     3.1 to 1            2.4 to 1             1.4 to 1
        Debt to Debt Plus Equity                        .07 to 1            .14 to 1             .57 to 1
        Total Liabilities to Equity                     .25 to 1            .36 to 1            1.80 to 1
        Cash and Equivalents                            $  7,628            $  2,038            $   1,076
        Working Capital                                   25,017              14,053                8,927
        Long Term Liabilities                              3,071               3,452               12,153
        Stockholders' Equity                              33,084              20,550                9,974

</TABLE>

         Working  capital for fiscal 1997 increased $11 million,  or 78%, to $25
million due to an increase in current assets of $12.2 million and an increase in
current liabilities of $1.3 million.  Net cash provided by operating  activities
for  fiscal  1997  included   increases  in  receivables  of  $1.3  million  and
inventories of $4.3 million to improve service levels,  which resulted primarily
from  increased  sales  volume of ETHEX  products,  and an  increase in accounts
payable and accrued  liabilities of $1.6 million.  These changes in receivables,
inventories  and  payables  were more than  offset by net  income  and  non-cash
charges  aggregating  $10.6  million,  resulting  in cash  provided by operating
activities of $5.6 million for fiscal 1997.

         At the end of fiscal 1997, the Company's  "quick  assets",  cash,  cash
equivalents and accounts receivable  increased $6.9 million (74%) from the prior
year,  while current  liabilities  increased  $1.3 million (32%)  resulting in a
"quick ratio" of 3.1 to 1 compared to 2.4 to 1 at the end of 1996.

         The debt to debt plus equity and total liabilities to equity ratios for
fiscal 1997 decreased  because of the impact of the net income for the year, the
repayment of debt and $3.5 million  proceeds from the private  placement sale of
200,000  shares of Class A Common  Stock to Roche  Holding  Ltd.,  completed  in
March, 1997.

         Investing  activities in fiscal 1997 reflected capital  expenditures of
$2 million and net  expenditures  for other  assets of $.8  million,  which were
provided for through operations.

         In  January,  1996 the  Company  concluded  an  agreement  with a major
pharmaceutical  marketer  whereby the Company  received  $5,000,000  and certain
other  considerations,  plus  $5,000,000  for the sale of certain Class A common
stock options  exercisable in various periods through September,  1998 (See Note
12). Under the transaction, which was entered into between the parties partially
in  consideration  of and replacing  certain other  products,  the two companies
entered into an agreement for future  royalties and product  opportunities.  The
Company  gave the  marketer  the right to explore the  Company's  drug  delivery
technologies  with the  possibility  of  entering  into  future  agreements  for
individual  products.  The transaction  (other than the sale of the options) was
recorded as a  reimbursement  to the Company  for, and thus the removal from its
balance  sheet,   of   approximately   $2,500,000  of  Deferred   Improved  Drug

                                       17
<PAGE>
Entities(TM),  receivables and inventory of approximately  $400,000, and patents
and trademarks relating to the Company's technologies of approximately $200,000.
As a result,  approximately  $1,700,000  was included in licensing  revenues and
$200,000 as a reimbursement of expenses.

         In January,  1997, the Company  concluded a broad-based  agreement with
Roche Holding Ltd. of Basel,  Switzerland.  (Roche).  As part of the  agreement,
Roche  purchased  200,000  shares of Common  Class A stock  for  $3,500,000.  In
addition,  the  agreement  included  an  initial  cash  payment of $3 million on
January 1, 1997. Two additional payments of $3 million annually will be received
through January 1, 1999,  unless  regulatory  approval of a potential  follow on
product in the same  therapeutic  area is  received  prior to these  dates.  The
initial  $3,000,000  payment  has been  included  in  revenue,  while the future
payments  will be similarly  treated,  when  received.  Upon  approval,  KV will
receive royalties on sales of the product.

         The Company's  cash and cash  equivalents on hand at year-end were $7.6
million.  The  Company  also had in place at March 31,  1997,  a secured  credit
facility aggregating $17.5 million, which is in the process of being replaced by
an unsecured revolving line of credit and letter of credit facility  aggregating
$22,600,000 with LaSalle  National Bank.  Completion of the transition in credit
facilities  occurred  as of June  18,  1997.  The  Company's  capital  equipment
commitments  at  year-end  totaled  approximately  $1.7  million  and a  planned
expansion of its corporate  headquarters  approximating $1.8 million is expected
to occur in fiscal 1998.

         On June 15, 1997,  the Company  exercised its right of first refusal to
purchase  for  $4,300,000  the facility it had been renting at 10888 Metro Court
and a separate  long-term  financing  of the  purchase  has been  arranged  with
LaSalle  National  Bank  in the  amount  of  $3,500,000.  This  transaction  was
completed on June 24, 1997.

         Although  the  Company  generally  has been  able to pass  along to its
customers at least a portion of cost increases in labor,  manufacturing  and raw
material costs under its agreements, in certain instances no increases have been
effected due to market  conditions.  It is not  meaningful  to compare  changing
prices over the past three years because the products, product formulas, product
mix and sources of raw materials have varied substantially.

         The Company has  transitioned  its revenue  structure from one based on
lower margin, highly competitive,  short-term contract manufacturing to focusing
on higher margin,  drug delivery product marketing through ETHEX Corporation and
Particle  Dynamics,  Inc., its  wholly-owned  subsidiaries,  as well as advanced
technology drug delivery products to be marketed and co-marketed under long-term
licensing  agreements.  These  advanced  technology  drug delivery  products and
systems  are the  subject of a number of  long-term  business  arrangements  and
provide  differentiated and/or improved benefits derived from incorporating KV's
drug delivery  system  technologies.  For the most part,  these  products can be
produced with existing manufacturing  processes. The Company expects to continue
a relatively  high level of expenditures  and investment for research,  clinical
and regulatory  efforts  relating to the  development and  commercialization  of
proprietary new products and advanced technology products and their approval for
marketing.

         The  implementation  of these  strategies  of focusing on drug delivery
technology  distinguished  product marketing  capabilities through its ETHEX and
Particle Dynamics,  Inc.  subsidiaries and drug delivery licensing  arrangements

                                       18
<PAGE>
with  brand  pharmaceutical   marketing  clients  has  allowed  the  Company  to
de-emphasize contract services. Consequently, the Company has shifted its future
growth  internally,  with drug delivery product marketing  capabilities and drug
delivery licensing activities constituting 91% of KV's total business

             The Company believes funds generated from operating  activities and
existing cash,  together with the funds  available under its new credit facility
and the funds  provided from licensing  agreements  will be adequate to fund the
Company's  requirements  for short term needs due to the continued  sales growth
being experienced.


         (c) New Accounting Standards

         In  March  1997,  the  Financial   Accounting  Standards  Board  issued
Statement  Number 128,  Earnings Per Share.  This  pronouncement  provides for a
different  method of  calculating  earnings  per share than is  currently  used.
Management  feels  that  the  adoption  of this  pronouncement  will  not have a
significant effect on its earnings per share.


Item 8. Financial Statements and Supplementary Data.

                                       19
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
of KV Pharmaceutical Company:



We have audited the consolidated balance sheets of KV Pharmaceutical Company and
Subsidiaries  as of  March  31,  1997 and  1996,  and the  related  consolidated
statements of  operations,  shareholders'  equity and cash flows for each of the
three years in the period ended March 31, 1997.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material respects, the financial  position of KV  Pharmaceutical
Company and Subsidiaries as of March 31, 1997 and 1996, and the results of their
operations  and their cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.

BDO SEIDMAN, LLP
St. Louis, Missouri

June 18, 1997

                                       20
<PAGE>
<TABLE>

                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             March 31, 1997 and 1996

<CAPTION>
ASSETS                                                                1997                        1996
------                                                                                                
                                                               -------------------          ------------------
<S>                                                               <C>                          <C>   
Current Assets:
Cash and cash equivalents                                         $     7,627,523              $    2,038,069
Receivables, less allowance for doubtful accounts of
   $129,055 and $570,498 in 1997 and 1996, respectively                 8,579,598                   7,281,459
Inventories                                                            12,785,588                   8,450,162
Prepaid and other current assets                                        1,230,193                     229,358
                                                               ------------------           -----------------   
  Total Current Assets                                                 30,222,902                  17,999,048
                                                               ------------------           ----------------- 

 Net Property and Equipment                                             8,117,809                   7,621,217
                                                               ------------------           -----------------

Goodwill and other assets                                               3,021,009                   2,328,190
                                                               ------------------           ----------------- 
TOTAL ASSETS                                                        $  41,361,720               $  27,948,455
                                                               ===================          ================= 

LIABILITIES
Current Liabilities:
Current maturities of long-term debt                             $        351,316               $     712,328
Accounts payable                                                        2,045,048                   2,068,265
Accrued liabilities                                                     2,809,571                   1,165,506
                                                               -------------------          ------------------
  Total Current Liabilities                                             5,205,935                   3,946,099

Long-term debt                                                          2,158,025                   2,541,216
Other long-term liabilities                                               913,319                     911,230
                                                               -------------------          ------------------
TOTAL LIABILITIES                                                       8,277,279                   7,398,545
                                                               -------------------          ------------------

Commitments and Contingencies

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value; $25.00 
  stated and liquidation  value; 840,000
  shares authorized; issued and outstanding - 
  241,000 shares in 1997 and 1996                                           2,410                       2,410

Class A and Class B Common Stock, $.01 par value; 
  60,000,000 shares of each authorized;
  Class A-issued 7,717,487 and 7,120,614 in 1997 and 1996                  77,175                      71,207
  Class B-issued 4,376,570 and 4,747,357 in 1997 and 1996                  43,766                      47,474

Additional paid-in capital                                             33,844,685                  30,235,926
Retained deficit                                                         (828,642)                 (9,752,154)
Less:  Treasury stock, 23,746 shares each of
  Class A and Class B common stock, at cost                               (54,953)                    (54,953)
                                                               --------------------         -------------------

TOTAL SHAREHOLDERS' EQUITY                                             33,084,441                  20,549,910
                                                               -------------------          ------------------

TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY                                                              $  41,361,720               $  27,948,455
                                                               ===================          ==================


</TABLE>

See Accompanying Notes to Consolidated Financial Statements


                                       21
<PAGE>
<TABLE>


                                               KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>


                                            For the Years Ended March 31, 1997 1996 and 1995

                                                           1997                       1996                      1995
                                               ----------------------    ------------------------    -----------------------
<S>                                                     <C>                         <C>                      <C>         
Net Revenues                                            $ 58,037,159                $ 49,788,635             $ 39,742,554

Costs and Expenses:
Manufacturing costs                                       29,478,372                  26,259,638               26,065,642
Research and development                                   4,835,478                   4,559,360                4,524,956
Selling and administrative                                13,817,802                  12,748,726               11,978,564
Interest expense                                             411,237                   1,377,604                1,275,622
Amortization of intangible assets                            187,758                     710,647                  672,571
Litigation settlement                                              -                           -                  600,000
                                               ----------------------    ------------------------    -----------------------
Total costs and expenses                                  48,730,647                  45,655,975               45,117,355
                                               ----------------------    ------------------------    -----------------------

Income (Loss) before income taxes                          9,306,512                   4,132,660               (5,374,801)

Provision for income taxes                                   383,000                      90,000                        -   
                                               ----------------------    ------------------------    -----------------------

Net Income (Loss)                                      $   8,923,512               $   4,042,660             $ (5,374,801)
                                               =====================     ========================    =======================

Net Income (Loss) per Common Share
    (after deducting preferred dividends
    of $421,750 in 1997, 1996 and 1995):               $       0.70                $        0.31                   (0.52)
                                               =====================     ========================    =======================


</TABLE>

See Accompanying Notes to Consolidated Financial Statements

                                       22
<PAGE>
<TABLE>

                     PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                For the Years Ended March 31, 1997, 1996 and 1995
<CAPTION>

                                                         Class A  Class B      Additional     Retained                      Total
                                          Preferred      Common   Common         Paid-In      Earnings     Treasury    Shareholders'
                                            Stock         Stock    Stock         Capital     (Deficit)       Stock         Equity
                                          ------------------------------------------------------------------------------------------
<S>                                        <C>          <C>       <C>        <C>           <C>             <C>          <C>        
Balance at March 31, 1994                  $2,410       $63,050   $48,011    $21,704,514   $(8,420,013)    $(54,953)    $13,343,019
Stock Options  exercised,  
 420 shares of Class A and 370 shares
 of Class B, less 150 shares of each 
 class repurchased                              -             3         2           (239)            -            -            (234)
Sale of 375,000 shares of Class A               -         3,750         -      2,002,448             -            -       2,006,198
Conversion of 826,000 shares of Class B
  Shares to Class A shares                      -           826      (826)             -             -            -               -
Net Loss for 1995                               -             -         -              -    (5,374,801)           -      (5,374,801)
                                          ---------- ------------ --------- ------------- --------------   ----------- -------------
Balance at March 31, 1995                   2,410        67,629    47,187     23,706,723   (13,794,814)     (54,953)      9,974,182
                                          ---------- ------------ --------- ------------- --------------   ----------- -------------
Stock Options issued                            -             -         -      5,000,000             -            -       5,000,000
Stock Options exercised,
  194,242 shares of Class A                     -         1,943         -        772,107             -            -         774,050
  192,122 shares of Class B                     -             -     1,922        757,096                                    759,018
Conversion of 163,475 shares of
  Class B shares to Class A shares              -         1,635    (1,635)             -             -            -               -
Net Income for 1996                             -             -         -              -     4,042,660            -       4,042,660
                                          ---------- ------------ --------- ------------- --------------   ----------- -------------
Balance at March 31, 1996                   2,410        71,207    47,474     30,235,926    (9,752,154)     (54,953)     20,549,910
                                          ---------- ------------ --------- ------------- --------------   ----------- -------------
Sale of 200,000 Class A shares                  -         2,000         -      3,498,000             -            -       3,500,000
Stock Options issued as compensation            -             -         -        114,300             -            -         114,300
Stock Options exercised,
  13,125 shares of Class A                      -           130         -         50,188             -            -          50,318
  13,195 shares of Class B                      -             -       130         51,708             -            -          51,838
  Less 177 shares of each class
   repurchased
Conversion of 383,925 shares of
  Class B shares to Class A shares              -         3,838    (3,838)             -             -            -               -
Dividends paid on preferred stock               -             -         -       (105,437)            -            -        (105,437)
Net income for 1997                             -             -         -              -     8,923,512            -       8,923,512
                                          ---------- ------------ --------- ------------- -------------    ---------  --------------
Balance at March 31, 1997                  $2,410       $77,175   $43,766    $33,844,685     $(828,642)    $(54,953)    $33,084,441
                                          ---------- ------------ --------- ------------- --------------   ----------  -------------

</TABLE>

See Accompanying Notes to Consolidated Financial Statements

                                       23

<PAGE>
<TABLE>

                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Years Ended March 31, 1997, 1996, and 1995
<CAPTION>


                                                                                 1997                 1996                1995
                                                                                 ----                 ----                ----
<S>                                                                         <C>                 <C>                 <C>
OPERATING ACTIVITIES
Net Income (Loss)                                                           $  8,923,512        $  4,042,660        $ (5,374,801)
Adjustments to reconcile net income (loss)
   to net cash provided by operating activities:
   Depreciation, amortization and other non-cash charges                       1,594,300                               1,961,975
   Stock options issued as compensation                                          114,300           2,098,622                   -
                                                                                                           -

Changes in operating assets and liabilities:
   (Increase) in receivables                                                  (1,298,139)           (440,836)           (448,347)
   (Increase) decrease in inventories and other current
     assets                                                                   (5,336,261)
                                                                                                  (1,820,982)          3,212,927
   (Increase) decrease  in accounts payable and
     accrued liabilities                                                       1,620,848                                 483,761
                                                                                                    (799,676)
   Other                                                                           2,089              (7,861)            574,991
                                                                       ------------------   ------------------  -----------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES                                                                     5,620,649           3,071,927             410,506
                                                                       ------------------   -----------------   -----------------

INVESTING ACTIVITIES
   Purchase of property and equipment                                         (1,903,134)           (841,318)           (334,404)
   Decrease in Deferred Improved Drug Entities                                         -           2,450,241                   -
   Other                                                                        (880,577)           (457,006)           (315,840)
                                                                       -------------------  ------------------  ------------------
NET CASH PROVIDED BY (USED IN) INVESTING
 ACTIVITIES                                                                   (2,783,711)          1,151,917            (650,244)
                                                                       -------------------  -----------------   ------------------

FINANCING ACTIVITIES
   Proceeds from credit facilities                                                     -          28,311,372           6,086,046
   Repayment of credit facilities                                                      -         (34,130,635)         (6,800,000)
   Proceeds from term loan facility                                                    -           6,820,189                   -
   Principal payments on long-term debt                                         (744,203)        (10,795,482)           (483,541)
   Proceeds from sale of common stock                                          3,500,000                   -           2,006,198
   Dividends paid on preferred stock                                            (105,437)                  -                   -
   Exercise (repurchase) of common stock options                                 102,156           1,533,068                (234)
   Proceeds from sale of stock options                                                 -           5,000,000                   -
                                                                       ------------------   -----------------   -----------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES                                                                     2,752,516          (3,261,488)            808,469
                                                                       ------------------   ------------------  -----------------

INCREASE IN CASH AND CASH EQUIVALENTS                                          5,589,454             962,356             568,731
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                 2,038,069           1,075,713             506,982
                                                                       ------------------   -----------------   -----------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                    $  7,627,523        $  2,038,069        $  1,075,713
                                                                       ==================   =================   =================

</TABLE>


See Accompanying Notes to Consolidated Financial Statements

                                       24
<PAGE>
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies


Principles of Consolidation

         The  consolidated  financial  statements  include  the  accounts  of KV
Pharmaceutical  Company (the  Company) and its  wholly-owned  subsidiaries.  All
material   intercompany  accounts  and  transactions  have  been  eliminated  in
consolidation.

Cash Equivalents

         Cash  equivalents  consist of highly  liquid  instruments  that have an
original maturity of three months or less.

Inventories

         Inventories  are stated at the lower of cost or  market,  with the cost
determined on the first-in, first-out (FIFO) basis.

Property and equipment

         Property and  equipment  are stated at cost.  Depreciation  is computed
over the estimated useful lives using the straight line method.

Goodwill and other assets

         The excess of cost of  investment  over the fair value of net assets of
the  subsidiaries  at the time of acquisition  is being  amortized on a straight
line basis over 40 years.  All other deferred  charges are being  amortized over
periods varying from 5 to 17 years on a straight line basis.

Revenue Recognition

         The Company  recognizes revenue from product sales upon shipment to its
customer.  Provisions  for estimated  sales  allowances,  returns and losses are
accrued at the time  revenues  are  recognized.  The  Company  also  enters into
long-term agreements under which it assigns marketing rights for the products it
has developed to pharmaceutical  marketers. The Company recognizes royalties and
other payments  specified in the agreements as income when the earnings  process
is completed.

Earnings Per Share

         Earnings (Loss) per share after  deducting/adding  preferred  dividends
are based on the weighted  average number of common and common  equivalent share
outstanding  during each year.  Common equivalent shares consist of the dilutive
effect of unissued  shares that would be issued upon the exercise of outstanding
stock  options.  The weighted  average number of shares  aggregated  12,106,992,
11,814,097 and 11,178,495 in 1997, 1996 and 1995, respectively.

                                       25
<PAGE>
Income Taxes

         The Company accounts for income taxes on the liability method. Deferred
income taxes are provided on the differences between the tax basis of assets and
liabilities  and their financial  reporting  amounts based on enacted tax rates.
These  temporary   differences   relate  primarily  to  depreciation,   accounts
receivable and inventory  reserves,  deferred  compensation,  net operating loss
carryforward and various tax credits.

         Valuation  allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized.

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Long-Lived Assets

         Long-lived assets and certain identifiable intangibles are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount of the  asset  may not be  recoverable  through  the  estimated
un-discounted  future  cash  flows from the use of these  assets.  When any such
impairment  exists,  the related  assets  will be written  down to fair value in
accordance with Statement of Financial  Accounting Standards No 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." No impairment losses have been necessary through March 31, 1997.

Stock-Based Compensation

         The  Company  grants  stock  options  for a fixed  number  of shares to
employees  with an exercise price greater than or equal to the fair value of the
shares at the date of grant.  The Company  accounts for stock  option  grants in
accordance  with  Accounting  Principles  Board Opinion No. 25,  "Accounting for
Stock Issued to Employees  "(APB  Opinion No. 25").  That Opinion  requires that
compensation cost related to fixed stock options plans be recognized only to the
extent that the fair value of the shares at the grant date  exceeds the exercise
price. Accordingly, the Company recognizes no compensation expense for its stock
option grants.

         In October  1995,  the Financial  Accounting  Standards  Board,  issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"  (SFAS No.  123).  SFAS No. 123 allows  companies  to  continue to
account for their stock option plans in accordance  with APB Opinion No. 25, but
encourages the adoption of a new  accounting  method based on the estimated fair
value of  employee stock  options.  Pro forma net  income  and income per share,
determined as if the Company had applied the new method,  are  disclosed  within
Note 10.

                                       26
<PAGE>
New Accounting Standards

         In  March  1997,  the  Financial   Accounting  Standards  Board  issued
Statement  Number 128,  Earnings Per Share.  This  pronouncement  provides for a
different  method of  calculating  earnings  per share than is  currently  used.
Management  feels  that  the  adoption  of this  pronouncement  will  not have a
significant effect on its earnings per share.

Reclassifications

         Certain  amounts from the prior years'  financial  statements have been
reclassified to conform to the current year presentation.

Fair Value of Financial Instruments

         The carrying  amounts of all short-term  asset and liability  financial
instruments  are  reasonable  estimates of their fair value because of the short
maturity  of  these  items.  The  carrying  amount  of all long  term  financial
instruments  approximates  their fair value  because their terms are similiar to
those which can be obtained  for similar  financial  instruments  in the current
marketplace.

2. Nature of Operations

         The  Company  and its  subsidiaries  develop,  manufacture  and  market
technology-distinguished    pharmaceuticals   and   pharmaceutical    compounds.
Prescription   pharmaceuticals  are  sold  primarily  to  domestic  wholesalers,
drugstore chains,  distributors and independent pharmacies nationwide.  Contract
manufacturing  and  pharmaceutical  compounds are sold to major  domestic  drug,
nutritional and food companies.

         Sales to a single  company  aggregated 15% for the year ended March 31,
1997. No single customer  accounted for 10% or more of consolidated  revenues in
fiscal  1996.  In  addition,  the  balance  due from  this  company  represented
approximately 23% and 15% of consolidated  accounts  receivables as of March 31,
1997 and 1996, respectively.

         The Company extends unsecured credit to its customers.

3. Inventories

         Inventories as of March 31 consist of the following:


                                              1997                 1996
                                              ----                 ----
            Finished goods                $  6,941,864          $ 4,087,636
            Work-in-process                  1,645,879            1,772,711
            Raw materials                    4,494,167            2,814,815
                                           -----------         ------------
                                            13,081,910            8,675,162
            Reserves for obsolescence         (296,322)            (225,000)
                                         -------------         ------------
                                           $12,785,588          $ 8,450,162
                                           ===========          ===========

                                       27
<PAGE>
4. Property and Equipment

         Property and equipment as of March 31 consists of:
                                                       1997           1996
                                                       ----           ----
               Land and improvements              $    499,567   $    499,567
               Building and building
               improvements                          3,482,812      3,439,159
               Machinery and equipment              11,792,688     11,386,962
               Office furniture and equipment        3,403,378      3,053,811
               Leasehold improvements                2,363,555      2,281,162
               Construction-in-progress
                  (estimated costs to
                  complete at March 31,
                  1997 - $1,700,000)                 1,114,837        176,026
                                                     ---------        -------
                                                    22,656,837     20,836,687
               Less accumulated depreciation
               and amortization
                                                   (14,539,028)   (13,215,470)
                                                   ------------   ------------
               Net property and equipment
                                                  $  8,117,809   $  7,621,217
                                                  ============   ============

         Depreciation of property and equipment was  $1,406,542,  $1,390,790 and
$1,259,922 for 1997, 1996 and 1995, respectively.

5. Other Assets

         Other  assets  include  goodwill,   deferred  financing  charges,  cash
surrender value of life insurance, deposits, trademarks and patents. As of March
31, 1997 and 1996,  the  unamortized  excess of  purchase  price over net assets
acquired,  net of accumulated  amortization  of $1,305,092 and  $1,249,688,  was
$833,469 and $888,873,  respectively.  Amortization of goodwill is being charged
to operations at $55,404 per year.  Amortization  of all other deferred  charges
was $132,354, $655,244 and $646,439 for 1997, 1996 and 1995, respectively.

6. Accrued Liabilities

         Accrued liabilities as of March 31, consist of the following:

                                               1997                  1996
                                               ----                  ----
           Salaries, wages and
              benefits                       $1,352,951        $    279,385
           Interest                              85,777             153,159
           Income Taxes                         476,000                   -
           Other                                894,843             732,962
                                            -----------        ------------
                                            $ 2,809,571        $  1,165,506
                                            ===========        ============

                                       28
<PAGE>
7. Long Term Debt

         Long-term debt at March 31 consists of the following:

                                                   1997            1996
                                                   ----            ----

          Industrial revenue bonds              2,480,000        2,805,000
          Capital lease                            29,341          448,544
                                               ----------        ---------
          Total                                 2,509,341        3,253,544
          Less current portion                    351,316          712,328
                                               ----------        ---------
          Long-term debt                       $2,158,025       $2,541,216
                                               ==========       ==========

         The industrial  revenue  bonds,  which bear interest at 7.35% per annum
mature  serially  through 2004 and are  collateralized  by certain  property and
equipment, as well as through a letter of credit.

         The capital  lease at March 31, 1997,  which bears  interest at 11%, is
payable monthly over the next two years.

         The aggregate  maturities of long-term debt as of March 31, 1997 are as
follows:

                         1998           $ 351,316  
                         1999             328,025  
                         2000             325,000 
                         2001             325,000 
                         2002             325,000
                         Later Years      855,000 
                                       ---------- 
                                       $2,509,341 
                                       ========== 

         The Company  paid  interest of  $482,471,  $1,352,823,  and  $1,420,581
during the years ended March 31, 1997, 1996 and 1995, respectively.

8. Commitments and Contingencies

Leases

         The Company has  noncancelable  commitments for rental of office space,
plant and warehouse  facilities,  transportation  equipment  and other  personal
property under  operating  leases.  Future minimum lease  commitments  under all
noncancelable operating leases are as follows:

                       1998            $   744,206
                       1999                625,679
                       2000                578,811
                       2001                543,685
                       2002                514,366
                       Later Years       2,676,236
                                        ----------
                                        $5,682,983
                                        ==========

                                       29
<PAGE>
         Total rent  expense for the years ended March 31,  1997,  1996 and 1995
was $1,189,349, $1,229,881 and $1,260,026, respectively.

         On June 15, 1997,  the Company  exercised its right of first refusal to
purchase  for  $4,300,000  the facility it had been renting at 10888 Metro Court
and a separate  long-term  financing  of the  purchase  has been  arranged  with
LaSalle  National  Bank  in the  amount  of  $3,500,000.  This  transaction  was
completed on June 24, 1997.

Contingencies

         The Company currently carries product liability coverage of $10,000,000
per occurrence and $10,000,000 in the aggregate on a "claims made" basis.  There
is no assurance  that the Company's  present  insurance will cover any potential
claims that may be asserted in the future.  In addition,  the Company is subject
to legal proceedings and claims which arise in the ordinary course of business.

Employment Agreements

         The Company has  employment  agreements  with certain  officers and key
employees which extend for one to five years.  These agreements provide for base
levels of  compensation  and, in certain  instances,  also provide for incentive
bonuses and separation  benefits.  Also, the agreement with one officer contains
provisions for partial salary  continuation under certain conditions  contingent
upon noncompete restrictions and providing consulting services to the Company as
specified in the agreement.  The Company accrued  $152,089 and $142,139 for this
liability in 1997 and 1996, respectively.

Credit Facility

         As of March 31, 1997, the Company had a loan agreement  expiring in May
1998.  The agreement  provided for (1) a revolving line of credit for borrowings
up to $17,500,000,  subject to certain collateral requirements,  (2) a term loan
which was fully  amortized as of March 31, 1997, and (3) letters of credit up to
$6,000,000. The aggregate amount of outstanding debt under this agreement cannot
exceed  $17,500,000.  At March 31, 1997 there was no outstanding debt under this
agreement.  Interest charged has been renegotiated to its current level of prime
plus 1/2 percent. Accounts receivable,  inventories,  equipment, real estate and
intangibles  are  pledged as  collateral  on the  agreement.  Certain  covenants
require  minimum  levels  of  operating   ratios,   working   capital,   capital
expenditures, net worth and restrict payment of dividends. As of March 31, 1997,
the Company had  approximately  $4,500,000  of open letters of credit under this
agreement that reduced the total available to $13,000,000. The Company's current
credit  facility is being replaced by an unsecured  revolving line of credit and
letter of credit facility  aggregating  $22,600,000  with LaSalle National Bank,
with a three-year term and interest  charged at the prime rate.  Closing of this
transaction occurred as of June 18, 1997.

9. Income Taxes

         The  provision  for income  taxes  consists of state taxes for 1997 and
alternative minimum tax for 1996. No provision for income taxes was required for
1995.


                                       30
<PAGE>
         The reasons for the differences  between the provision for income taxes
and the expected federal income taxes at the statutory rate are as follows:

<TABLE>
<CAPTION>

                                        1997                     1996                 1995
                                        ----                     ----                 ----
<S>                                   <C>                    <C>                 <C>  
Computed income tax expense
   (benefit) at statutory rate        $3,164,000             $1,536,211          $(2,062,000)
Change in valuation allowance         (3,392,000)            (1,596,200)           1,926,100
Alternative minimum tax                        -                 90,000                    -
State income taxes, less
    federal income tax benefit           383,000                      -                    -
Other                                    228,000                 59,989              135,900
                                     -----------          -------------           ----------
Provision for income taxes           $   383,000           $     90,000     $              0
                                     ===========           ============     ================

</TABLE>


                                       31
<PAGE>
         As of March 31, 1997, and 1996, the tax effect of temporary differences
between the tax basis of assets and liabilities  and their  financial  reporting
amount are as follows:
<TABLE>
<CAPTION>

                                                  1997                   1997              1996                   1996
                                                Current              Non-Current          Current             Non-Current
                                                -------              -----------          -------             -----------
<S>                                       <C>                         <C>             <C>                    <C>    
Fixed asset basis
  differences                             $             -             $(1,132,000)    $             -        $(1,052,400)
Reserve for inventory and
   receivables                                    775,000                       -             302,300                  -
Capitalized inventory costs                       228,000                       -             163,600                  -
Vacation pay reserve                              203,000                       -                   -                  -
Deferred compensation                                   -                 290,000                   -            232,300
Reserve for medical
  self insurance                                   47,500                       -              34,300                  -
Net operating loss
  carryforward                                          -                       -                   -          3,369,300
Research and development
  credit                                                -                 958,000                   -          1,594,000
Minimum tax credit                                      -                 963,000                   -            129,000
Other                                             125,500                       -                   -            187,700
                                             ------------             -----------      --------------        -----------
                                                1,379,000               1,079,000             500,200          4,459,900
Valuation allowance                            (1,379,000)               (189,000)           (500,200)        (4,459,900)
                                              -----------             -----------           ---------        -----------
   Net deferred taxes                     $             0           $     890,000      $            0       $          0
                                          =================           ===========      ==============       ============

</TABLE>




         The  components  of deferred  taxes are as follows as of March 31, 1997
and 1996:

                                        1997                      1996
                                        ----                      ----
  Deferred tax liability             $(1,132,000)              $(1,052,400)
  Deferred tax asset                   3,590,000                 6,012,500
  Valuation allowance                 (1,568,000)               (4,960,100)
                                      ----------               -----------
                                     $   890,000               $         0
                                     ===========               ===========

         The  valuation  allowance  decreased by  approximately  $3,392,100  and
$1,596,200 during 1997 and 1996 respectively.

         At  March  31,  1997,   the  Company  has  the  following   income  tax
carryforwards available:

                                                 Amount        Expiration Dates
                                                 ------        ----------------

      Regular tax credit carryforwards
          (primarily research &
           development credits)                 $958,000           1998-2010
      AMT credit carryforwards                  $963,000              N/A

         The Company paid income taxes of $846,000,  $90,000 and $0,  during the
years ended March 31, 1997, 1996 and 1995 respectively.

                                       32
<PAGE>
10. Employee Benefits

Stock Option Plan

         The Company has established  the KV  Pharmaceutical  Company  Incentive
Stock  Option Plan for key  employees  and reserved  1,965,000  shares of common
stock for such plan.  Under the plan, the Stock Option Committee may grant stock
options to key employees at not less than one hundred percent (100%) of the fair
market value of the Company's  Common Stock at the date of grant.  The durations
and  exercisability of the grants vary over a period of up to ten years from the
date of grant.  During 1997 the Company granted options for 391,932 shares,  but
had 46,550  shares  forfeited.  As of March 31,  1997,  options  with  remaining
contractual  lives of up to ten  years to  purchase  828,087  shares at the fair
market  value  at the  grant  date  were  outstanding,  342,323  of  which  were
exercisable.

         The following summary shows the transactions for the fiscal years 1997,
1996, and 1995 under option arrangements:
<TABLE>
<CAPTION>

                                                     Options Outstanding                  Options Exercisable
                                                     -------------------                  -------------------
                                                                    Average                              Average
                                                    No. of         Price Per            No.             Price per
                                                     Shares          Share          of Shares             Share
                                                     ------          -----          ---------             -----

<S>                                                 <C>               <C>             <C>                 <C> 
Balance, March 31, 1994                             753,876           5.29            461,731             4.33
Options granted                                      52,500           6.94
Options becoming exercisable                                                           64,573             5.13
Options exercised                                      (790)          2.65               (790)            2.65
Options canceled                                   (125,870)          7.99            (26,267)            5.71
                                                -------------                     -------------

Balance, March 31, 1995                             679,716           4.92            499,247             4.36
 Options granted                                    239,825           7.29
Options becoming exercisable                                                           86,599             6.75
Options exercised                                  (386,364)          3.97           (386,364)            3.97
Options canceled                                    (24,032)          6.35            (10,773)            4.66
                                                -------------                     -------------

Balance, March 31, 1996                             509,145           6.70            188,709             6.25
Options granted                                     391,932          12.00
Options becoming exercisable                                                          205,529            10.58
Options exercised                                   (26,440)          3.91            (26,440)            3.91
Options canceled                                    (46,550)          8.44            (25,475)            7.89
                                                -------------                     -------------

Balance, March 31, 1997                             828,087           9.20            342,323             8.91
                                                    =======                           =======

</TABLE>

         As discussed in the Summary of Accounting Policies, the Company applies
APB Opinion  No. 25 and related  interpretations  in  accounting  for this plan.
Accordingly,  no  compensation  cost has been recognized for its incentive stock
option plan.

                                       33
<PAGE>
         The  weighted-average  grant date fair value per share of stock options
granted during the year was $5.23 for A options,  $4.02 for B options, and $2.79
for A  options,  and  $1.78 for B options  in 1997 and 1996,  respectively.  The
weighted-average  significant  assumptions  used to determine those values using
the  Black-Sholes  option pricing model for 1997 and 1996,  respectively,  were:
Volatility  of .6212 and .4972;  dividend  yield of 0% in both years;  risk-free
interest  rate of return of 6.6% and 6.0% and  expected  option lives of 5 or 10
years.

         The  following  table  summarizes   information   about  stock  options
outstanding at March 31, 1997:
<TABLE>
<CAPTION>


                                                Options Outstanding                                    Options Exercisable
                              ----------------------------------------------------------        ----------------------------------

  Range of Exercise            Number             Weighted Average           Weighted              Number             Weighted
        Prices               Outstanding             Remaining                Average           Exercisable            Average 
                             at 3/31/97           Contractual Life        Exercise Price         at 3/31/97        Exercise Price
----------------------------------------------------------------------------------------        ---------------------------------
<C>                           <C>                     <C>                      <C>                  <C>                  <C>  
$3.00 to $6.00                103,405                 4 years                  $4.09                86,860               $3.65
$6.00 to $9.00                349,470                 6 years                  $7.30               144,946               $7.26
$9.00 to $12.00               356,712                 7 years                 $12.03                32,023              $10.52
$12.00 to $16.43               18,500                10 years                 $16.43                78,494              $12.89
                              -------                                                              -------                 
                              828,087                                                              342,323

</TABLE>


         The fair market value of options  granted  during the years ended March
31, 1997 and 1996 was $1,754,000 and $467,000, respectively.

         The pro-forma  effect on earnings for the year ended March 31, 1997 and
1996 of the method  consistent with SFAS No. 123 would be to reduce reported net
income  by  approximately  $1.7 million  and  $.4  million,   respectively,  to
approximately $7.2 million and $3.7 million.

         The  pro-forma  effect on earnings  per share for the years ended March
31,  1997 and 1996 of this method was to reduce net income per share by $.13 per
share and $.03 per share, respectively, to $.57 per share and $.28 per share.


                                       34
<PAGE>
Profit Sharing Plan

         The Company has a qualified  trustee  profit  sharing plan (the "Plan")
covering   substantially   all  non-union   employees.   The  Company's   annual
contribution  to  the  Plan,  as  determined  by  the  Board  of  Directors,  is
discretionary  and was $50,000 for fiscal 1997. No profit  sharing  contribution
was made in fiscal years 1996 and 1995. The Plan includes  features as described
under Section  401(k) of the Internal  Revenue Code.  The Company is required to
make  contributions to the 401(k)  investment funds quarterly in an amount equal
to  twenty-five  (25%) of the first 4% of the salary amount  contributed by each
participant.  Contributions  to the  401(k)  investment  funds of  approximately
$78,000, $71,000 and $103,000 were made in 1997, 1996 and 1995, respectively.

         The Plan was  amended as of April 1, 1997,  to require  the  Company to
make  contributions to the 401(k)  investment funds quarterly in an amount equal
to  fifty  percent  (50%)  of the  first 7% of the  salary  contributed  by each
participant.


Health and Medical Insurance Plan

         The Company  contributes to health and medical  insurance  programs for
its non-union and union  employees.  For non-union  employees,  the Company self
insures the first $50,000 of each employee's  covered  medical claims  annually.
The Company has recorded  approximately  $125,000 and $90,000 of accrued  health
insurance  expense  reserves  as of March 31, 1997 and 1996,  respectively,  for
incurred but not reported claims. For union employees,  the Company participates
in a fully funded  insurance  plan sponsored by the union.  Expenses  related to
both plans charged to operations was approximately $1,200,840,  $1,058,000,  and
$1,375,000 in fiscal 1997, 1996 and 1995, respectively.

11. Related Party Transactions

         A director of the Company is  associated  with a law firm that rendered
various  legal  services  for the  Company.  The Company  paid the firm,  in the
aggregate,  approximately $257,216, $243,512 and $122,000 during the years ended
March 31, 1997, 1996 and 1995, respectively.

         In addition, the Company currently leases certain real property from an
affiliated  partnership of another director of the Company.  Lease payments made
for this property  during the years ended March 31, 1997,  1996 and 1995 totaled
approximately $231,885, $222,910 and $199,000, respectively.

12. Equity Transactions

         As of March 31, 1997, the Company has outstanding  241,000 shares of 7%
Cumulative  Convertible  preferred  stock (par value $.01 per share) at a stated
value of $25 per share. The preferred stock is non-voting with dividends payable
quarterly.  The preferred stock is redeemable at its stated value. Each share of
preferred stock is convertible  into Class A Common Stock at a conversion  price
of $10 per share.  The preferred  stock has a liquidation  preference of $25 per
share  plus  all  accrued  but  unpaid   dividends   prior  to  any  liquidation
distributions  to holders  of Class A or Class B Common  Stock.  Undeclared  and
unaccrued  cumulative  preferred  dividends  at March  31,  1997  and 1996  were
$2,203,644 and $1,887,331, respectively.

                                       35
<PAGE>
         Holders of Class A Common Stock are entitled to receive  dividends  per
share equal to 120% of the  dividends per share paid on the Class B Common Stock
and have  one-twentieth  vote per share.  No dividends may be paid on Class A or
Class B Common Stock unless all  dividends on the  convertible  preferred  stock
have been declared and paid.

         Under the terms of the  Company's  current  loan and  replacement  loan
agreements (See Note 8), the Company has limitations on paying dividends, except
in stock,  on its Class A and B Common  Stock.  Payment of dividends may also be
restricted under Delaware Corporation law.

         In connection with an agreement entered into in January, 1996 (See Note
14), the Company  received  $5,000,000  for the purchase of Class A Common Stock
options  exercisable  through  September 29, 1998.  Options valued at $1,150,000
expired at March 31, 1997. Of the funds  received for the common stock  purchase
options,  $1,250,000  was  allocated to an option to purchase  shares of Class A
Common  Stock at a  minimum  price of $40 per  share,  exercisable  for a 30 day
period ending  September 29, 1997. An additional  $1,300,000 was allocated to an
option to purchase  Class A Common Stock at a minimum  purchase price of $45 per
share,  exercisable  for a 30 day  period  ending  March  30,  1998.  The  final
$1,300,000  was  allocated  to an option to purchase  Class A Common  Stock at a
minimum price of $50 per share, exercisable for a 30 day period ending September
29, 1998. The actual exercise price and number of shares of Class A Common Stock
to be  purchased  are  dependent on the fair market value of the stock for a ten
day period prior to exercise.

         In January 1997, the Company  entered into an agreement  under which it
agreed  to sell  200,000  shares of Class A Common  Stock  (par  value  $.01 per
share).  The sale was  completed  in March of 1997,  with  proceeds  aggregating
$3,500,000 (See note 14).

13. Litigation

         In  April,  1995,  a plea  agreement  was  entered  into  with the U.S.
Department of Justice.  Under the agreement,  the Company agreed to plead guilty
to  certain  misdemeanor  violations  and to pay a fine  of  $500,000  and  cost
reimbursements  of  $100,000.  Payments  are to be  made in  eight  semi-annual,
interest free  installments  of $75,000  beginning in July 1995. The Company was
also placed on probation by the FDA during the payment  period.  The full amount
of all  costs  associated  with the plea  agreement  was  also  recorded  in the
Company's statement of operations for the fiscal year ended March 31, 1995.

         From time to time,  the  Company  becomes  involved  in  various  legal
matters which it considers to be in the ordinary  course of business.  While the
Company is not  presently  able to determine the  potential  liability,  if any,
related to such matters, the Company believes none of the matters,  individually
or in the  aggregate,  will have a  material  adverse  effect  on its  financial
position.

14. Agreements

         In  January,  1996 the  Company  concluded  an  agreement  with a major
pharmaceutical  marketer  whereby the Company  received  $5,000,000  and certain
other  considerations,  plus  $5,000,000  for the sale of certain Class A common
stock options  exercisable in various periods through September,  1998 (See Note
12). Under the transaction, which was entered into between the parties partially
in  consideration  of and replacing  certain other  products,  the two companies
entered into an agreement for future  royalties and product  opportunities.  The
Company  gave the  marketer  the right to explore the  Company's  drug  delivery
technologies  with the  possibility  of  entering  into  future  agreements  for
individual  products.  The transaction  (other than the sale of the options) was

                                       36
<PAGE>
recorded as a  reimbursement  to the Company  for, and thus the removal from its
balance  sheet,   of   approximately   $2,500,000  of  Deferred   Improved  Drug
Entities(TM),  receivables and inventory of approximately  $400,000, and patents
and trademarks relating to the Company's technologies of approximately $200,000.
As a result,  approximately  $1,700,000 was allocated to licensing  revenues and
$200,000 as a reimbursement of expenses.

         In January,  1997, the Company  concluded a broad-based  agreement with
Roche Holding, Ltd. Of Basel, Switzerland (Roche).  Included in the terms of the
agreement,   Roche  purchased  200,000  shares  of  Common  Class  A  Stock  for
$3,500,000.  The  agreement  also  provides for the  marketing by Roche,  or its
licensee,  of a  prescription,  one dose cure vaginal  antifungal  product.  The
product combines Roche's proprietary  butoconazole nitrate with KV's proprietary
SITE RELEASE(R) drug delivery  technology.  The product was originally developed
by KV for Syntex  (U.S.A.),  Inc.,  which was  acquired by a Roche  affiliate in
1995.  The product  received FDA approval in February,  1997. The agreement also
gives KV the right to market the  product  in North  America  and the  exclusive
right to market or license the prescription product in the rest of the world.

         The  agreement  included an initial  cash payment of $3 million made in
January 1997.  Two additional  payments of $3 million  annually will be received
through January 1, 1999,  unless  regulatory  approval of a potential  follow-on
product in the same  therapeutic  area is  received  prior to these  dates.  The
initial  $3,000,000  payment  has been  included  in  revenue,  while the future
payments  will be similarly  treated,  when  received.  Upon  approval,  KV will
receive royalties on the sales of the follow-on product. Under the agreement, KV
also has the exclusive right to market or license the follow-on  product outside
of North America.

         Also,  as part of the  agreement,  three  additional  products  will be
developed for Roche using KV's proprietary drug delivery technologies.  KV would
receive  manufacturing  revenues  and  royalties  at the time the  products  are
marketed under separate agreements for each product.

         As  part  of  a  further   collaboration  under  the  agreement,   KV's
wholly-owned  subsidiary,  ETHEX  Corporation,  will market two of Roche's brand
name products generically.

15. Industry Segments

         The  Company   operates  in  one  industry   segment,   "Pharmaceutical
Development, Manufacturing and Marketing."

                                       37
<PAGE>
Item 9.   Changes  in and  Disagreements  with Accountants  on  Accounting  and 
          Financial Disclosure

         The  information  contained  in  Registrant's  Report  on  [Form  8-K-A
(Amendment  No. 1) filed June 18,  1996]  under  Item 4,  entitled  "Changes  in
Registrant's Certified Accountant," is incorporated herein by this reference.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

         The  information  contained under the caption  "INFORMATION  CONCERNING
NOMINEE AND DIRECTORS  CONTINUING IN OFFICE" in the Company's  definitive  proxy
statement to be filed pursuant to Regulation 14(a) for the Company's 1997 annual
meeting  of  shareholders,   which  involves  the  election  of  directors,   is
incorporated herein by this reference. Also see Item 4(a) of Part I hereof.

Item 11. Executive Compensation.

         The information  contained under the captions "EXECUTIVE  COMPENSATION"
and  "INFORMATION  AS TO  STOCK  OPTIONS"  in  the  Company's  definitive  proxy
statement to be filed pursuant to Regulation 14(a) for the Company's 1997 annual
meeting  of  shareholders,   which  involves  the  election  of  directors,   is
incorporated herein by this reference.

Item 12. Security Ownership of Certain Beneficial Owners and  Management.

         The  information  contained  under the caption  "SECURITY  OWNERSHIP OF
PRINCIPAL HOLDERS AND MANAGEMENT" in the Company's definitive proxy statement to
be filed  pursuant to Regulation  14(a) for the Company's 1997 annual meeting of
shareholders,  which involves the election of directors,  is incorporated herein
by this reference.

Item 13. Certain Relationships and Related Transactions

         The information  contained under the caption "TRANSACTIONS WITH ISSUER"
in the Company's  definitive  proxy statement to be filed pursuant to Regulation
14(a) for the Company's 1997 annual meeting of shareholders,  which involves the
election of directors, is incorporated herein by this reference.

                                       38
<PAGE>

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
   (a)     1.  Financial Statements:                                     Page

           The  following  consolidated  financial  statements of the
           Company are included in Part II, Item 8:

           Report of Independent Certified Public Accountants             20

           Consolidated Balance Sheets as of
           March 31, 1997 and 1996                                        21

           Consolidated Statements of Operations
           for the Years Ended March 31, 1997, 1996 and 1995              22

           Consolidated Statements of Shareholders'
           Equity for the Years Ended March 31,
           1997, 1996 and 1995                                            23

           Consolidated Statements of Cash Flows
           for the Years Ended March 31, 1997, 1996 and 1995              24

           Notes to Financial Statements                                 25-38


                                       39
<PAGE>
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
of KV Pharmaceutical Company:



The  audits  referred  to in our  report  dated June 18,  1997  relating  to the
consolidated   financial  statements  of  KV  Pharmaceutical  Company  which  is
contained  in Item 8 of this  Form  10-K  included  the  audit of the  financial
statement  schedule listed in the accompanying  index. This financial  statement
schedule is the responsibility of the Company's  management.  Our responsibility
is to express an opinion on this  financial  statement  schedule  based upon our
audits.

In our  opinion  such  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.

BDO SEIDMAN, LLP

St. Louis, Missouri
June 18, 1997


                                       40
<PAGE>

2.  Financial Statement Schedules:
<TABLE>
<CAPTION>

                                                   Schedule II
                                        Valuation and Qualifying Accounts

                                         Balance at       Additions charged    Amounts          Balance
                                         beginning           to costs and     charged to         at end
                                          of year              expenses        reserves         of year
                                          -------              --------        --------         -------

<S>                                    <C>                 <C>                 <C>             <C>     
Year Ended March 31, 1995:
Allowance for doubtful accounts        $   83,633          $  135,000          $   49,446     $   169,187
Inventory obsolescence                    710,089           2,735,154           1,559,672       1,885,571
                                          -------           ---------           ---------       ---------
                                          793,722           2,870,154           1,609,118       2,054,758
                                          =======           =========           =========       =========

Year Ended March 31, 1996:
Allowance for doubtful accounts           169,187             736,757             335,446         570,498
Inventory obsolescence                  1,885,571           1,399,966           3,060,537         225,000
                                        ---------           ---------           ---------        --------
                                        2,054,758           2,136,723           3,395,983         795,498
                                        =========           =========           =========         =======
Year Ended March 31, 1997:
Allowance for doubtful accounts           570,498             440,911             882,355          129,054
Inventory obsolescence                    225,000           1,180,516           1,109,194          296,322
                                        ---------           ---------           ---------          -------
                                          795,498           1,621,427           1,991,549          425,376
                                         ========           =========           =========          =======
</TABLE>

Financial  Statements  of KV  Pharmaceutical  Company  (separately)  are omitted
because KV is primarily an operating  company and its  subsidiaries  included in
the financial statements are wholly-owned and are not materially indebted to any
person other than through the ordinary course of business.


3. Exhibits:

See Exhibit  Index on pages 43 through 49 of this Report.  Management  contracts
and compensatory plans are designated on the Exhibit Index.

     (b)     Reports on Form 8-K:

             One report on Form 8-K was filed on March 20, 1997  disclosing the
             sale of 200,000 Class A shares.



                                       41
<PAGE>
                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                            KV PHARMACEUTICAL COMPANY

Date:    June 27, 1997                 By   /s/  Marc S. Hermelin
                                            ---------------------
                                            Vice Chairman of the Board
                                            (Principal Executive Officer)



Date:    June 27, 1997                 By   /s/  Gerald R. Mitchell
                                            -----------------------
                                            Vice President, Finance
                                            (Principal Financial and
                                            Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on the dates indicated by the following  persons on behalf
of the Company and in their  capacities  as members of the Board of Directors of
the Company:



Date:    June 27, 1997                     By  /s/  Marc S. Hermelin
                                               ---------------------
                                               Marc S. Hermelin



Date:    June 27, 1997                    By  /s/  Victor M. Hermelin
                                              -----------------------
                                              Victor M. Hermelin



                                              /s/ Garnet E. Peck, Ph.D.
                                              -------------------------
                                              Garnet E. Peck, Ph.D.



Date:    June 27, 1997                    By  /s/  Alan G. Johnson
                                              --------------------
                                              Alan G. Johnson

<PAGE>
                                  EXHIBIT INDEX


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

      3(a)           The Company's Certificate of Incorporation, which
                     was filed as Exhibit 3(a) to the Company's Annual
                     Report on Form 10-K for the year ended  March 31,
                     1981, is incorporated herein by this reference.

      3(b)           Certificate   of  Amendment  to   Certificate  of
                     Incorporation of the Company,  effective March 7,
                     1983,  which  was  filed as  Exhibit  3(c) to the
                     Company's Annual Report on Form 10-K for the year
                     ended March 31, 1983, is  incorporated  herein by
                     this reference.

      3(c)           Certificate   of  Amendment  to   Certificate  of
                     Incorporation  of the Company,  effective June 9,
                     1987,  which  was  filed as  Exhibit  3(d) to the
                     Company's Annual Report on From 10-K for the year
                     ended March 31, 1987, is  incorporated  herein by
                     this reference.

      3(d)           Certificate   of  Amendment  to   Certificate  of
                     Incorporation of the Company, effective September
                     24, 1987,  which was filed as Exhibit 3(f) to the
                     Company's Annual Report on Form 10-K for the year
                     ended March 31, 1988, is  incorporated  herein by
                     this reference.

      3(e)           Certificate   of  Amendment  to   Certificate  of
                     Incorporation of the Company,  which was filed as
                     Exhibit 3(e) to the  Company's  Annual  Report on
                     Form 10-K for the year ended March 31,  1996,  is
                     incorporated herein by this reference.

      3(f)           Certificate   of  Amendment  to   Certificate  of
                     Incorporation of the Company,  which was filed as
                     Exhibit 3(f) to the  Company's  Annual  Report on
                     Form 10-K for the year ended March 31,  1996,  is
                     incorporated herein by this reference.

      3(g)           Bylaws  of  the  Company,   as  amended   through
                     November  18,  1982,  which was filed as  Exhibit
                     3(e) to the Company's  Annual Report on Form 10-K
                     for  the  year   ended   March   31,   1993,   is
                     incorporated hereby by this reference.

      3(h)           Amendment  to  Bylaws of the  Company,  which was
                     filed as  Exhibit  3(h) to the  Company's  Annual
                     Report on Form 10-K for the year ended  March 31,
                     1996, is incorporated herein by this reference.
<PAGE>
      4(a)           Certificate   of   Designation   of  Rights   and
                     Preferences   of   7%   Cumulative    Convertible
                     preferred stock of the Company, effective June 9,
                     1987,  and  related  Certificate  of  Correction,
                     dated June 17,  1987,  which was filed as Exhibit
                     4(f) to the Company's  Annual Report on Form 10-K
                     for  the  year   ended   March   31,   1987,   is
                     incorporated herein by this reference.

      4(b)           Loan Agreement dated as of November 1, 1989, with
                     the  Industrial   Development  Authority  of  the
                     County of St. Louis, Missouri,  regarding private
                     activity  refunding  and revenue  bonds issued by
                     such Authority, including form of Promissory Note
                     executed in connection therewith, which was filed
                     as Exhibit 4(b) to the Company's Quarterly Report
                     on Form 10-Q for the quarter  ended  December 31,
                     1989, is incorporated herein by this reference.

      4(c)           Loan and  Security  Agreement,  dated as of April
                     27,   1995,   between   the   Company   and   its
                     subsidiaries  and Foothill  Capital  Corporation,
                     which was filed as Exhibit 4(n) to the  Company's
                     Annual  Report  on Form  10-K for the year  ended
                     March 31, 1995,  is  incorporated  herein by this
                     reference.

      4(d)           Revolving Loan Note,  dated as of April 27, 1995,
                     by the Company and its  subsidiaries  in favor of
                     Foothill Capital Corporation,  which was filed as
                     Exhibit 4(c) to the  Company's  Annual  Report on
                     Form 10-K for the year ended March 31,  1995,  is
                     incorporated herein by this reference.

      4(e)           Term  Note,  dated as of April 27,  1995,  by the
                     Company and its subsidiaries in favor of Foothill
                     Capital  Corporation,  which was filed as Exhibit
                     4(d) to the Company's  Annual Report on Form 10-K
                     for  the  year   ended   March   31,   1995,   is
                     incorporated herein by this reference.

      4(f)           Form of Capital  Equipment Note to be executed by
                     the  Company  and its  subsidiaries  in  favor of
                     Foothill Capital Corporation,  which was filed as
                     Exhibit 4(e) to the  Company's  Annual  Report on
                     Form 10-K for the year ended March 31,  1995,  is
                     incorporated herein by this reference.

      4(g)           Deed of Trust and Security Agreement, dated as of
                     April  27,  1995,  in favor of  Foothill  Capital
                     Corporation,  which was filed as Exhibit  4(f) to
                     the Company's  Annual Report on Form 10-K for the
                     year ended March 31, 1995, is incorporated herein
                     by this reference.
<PAGE>
      4(h)           First  Amendment to Loan and Security  Agreement,
                     dated as of April 27,  1995,  between the Company
                     and  its   subsidiaries   and  Foothill   Capital
                     Corporation,  dated as of March 29,  1996,  which
                     was filed as Exhibit 4(s) to the Company's Annual
                     Report on Form 10-K for the year ended  March 31,
                     1996, is incorporated herein by this reference.

      4(i)           Loan  Agreement  dated June 18, 1997  between the
                     Company and its subsidiaries and LaSalle National
                     Bank, filed herewith.

      4(j)           Revolving  Note,  dated  June  18,  1997,  by the
                     Company and its  subsidiaries in favor of LaSalle
                     National Bank, filed herewith.

      4(k)           Term Note,  dated June 24,  1997,  by the Company
                     and its subsidiaries in favor of LaSalle National
                     Bank, filed herewith.

     10(a)*          Stock  Option  Agreement  between the Company and
                     Marc  S.   Hermelin,   Vice  Chairman  and  Chief
                     Executive  Officer,  dated  February 18, 1986, is
                     incorporated herein by this reference.

     10(b)*          First  Amendment  to  and  Restatement  of the KV
                     Pharmaceutical   1981  Employee  Incentive  Stock
                     Option Plan,  dated March 9, 1987 (the  "Restated
                     1981  Option  Plan"),  which as filed as  Exhibit
                     10(t) to the Company's Annual Report on Form 10-K
                     for  the  year   ended   March   31,   1988,   is
                     incorporated herein by this reference.

     10(c)*          Second  Amendment  to the  Restated  1981  Option
                     Plan,  dated  June 12,  1987,  which was filed as
                     Exhibit 10(u) to the  Company's  Annual Report on
                     Form 10- K for the year ended March 31, 1988,  is
                     incorporated herein by this reference.

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*        Management contract or compensation plan.


<PAGE>
     10(d)*          Revised Form of Stock Option Agreement, effective
                     June 12, 1987, for the Restated 1981 Option Plan,
                     which was filed as Exhibit 10(v) to the Company's
                     Annual  Report  on From  10-K for the year  ended
                     March 31, 1988,  is  incorporated  herein by this
                     reference.

     10(e)*          Consulting  Agreement  between  the  Company  and
                     Victor M. Hermelin,  Chairman of the Board, dated
                     October 30,  1978,  as amended  October 30, 1982,
                     and Employment Agreement dated February 20, 1974,
                     referred  to therein  (which was filed as Exhibit
                     10(m) to the Company's Annual Report on From 10-K
                     for the year ended March 31, 1983) and subsequent
                     Amendments dated as of August 12, 1986, which was
                     filed as Exhibit  10(f) to the  Company's  Annual
                     Report on Form 10-K for the year ended  March 31,
                     1987,  and dated as of September  15, 1987 (which
                     was  filed  as  Exhibit  10(s)  to the  Company's
                     Annual  Report  on Form  10-K for the year  ended
                     March 31,  1988),  and  dated  October  25,  1988
                     (which  was  filed  as   Exhibit   10(n)  to  the
                     Company's  Annual  Report  on Form  10- K for the
                     year ended March 31, 1989), and dated October 30,
                     1989  (which  was filed as  Exhibit  10(n) to the
                     Company's Annual Report on Form 10-K for the year
                     ended March 31, 1990), and dated October 30, 1990
                     (which  was  filed  as   Exhibit   10(n)  to  the
                     Company's Annual Report on Form 10-K for the year
                     ended  March 31,  1991),  and dated as of October
                     30, 1991 (which was filed as Exhibit 10(i) to the
                     Company's Annual Report on Form 10-K for the year
                     ended March 31, 1992), are incorporated herein by
                     this reference.

     10(f)*          Restated and Amended Employment Agreement between
                     the   Company  and  Gerald  R.   Mitchell,   Vice
                     President,  Finance,  dated as of March 31, 1994,
                     is incorporated herein by this reference.

     10(g)*          Employment  Agreement  between  the  Company  and
                     Raymond F. Chiostri, Corporate Vice-President and
                     President-Pharmaceutical   Division,   which  was
                     filed as Exhibit  10(l) to the  Company's  Annual
                     Report on Form 10-K for the year ended  March 31,
                     1992, is incorporated herein by this reference.
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*        Management contract or compensation plan.
<PAGE>
      10(h)          Lease of the  Company's  facility  at 2503  South
                     Hanley Road, St. Louis,  Missouri,  and amendment
                     thereto,  between  the Company as Lessee and Marc
                     S. Hermelin as Lessor, which was filed as Exhibit
                     10(n) to the Company's Annual Report on Form 10-K
                     for  the  year   ended   March   31,   1983,   is
                     incorporated herein by this reference.

      10(i)          Amendment to the Lease for the  facility  located
                     at 2503 South Hanley Road,  St. Louis,  Missouri,
                     between   the  Company  as  Lessee  and  Marc  S.
                     Hermelin  as  Lessor,  which was filed as Exhibit
                     10(p) to the Company's Annual Report on Form 10-K
                     for  the  year   ended   March   31,   1992,   is
                     incorporated herein by this reference.

      10(j)          Amendment  to  Lease   Agreement,   dated  as  of
                     September  30,  1985,   between  the   Industrial
                     Development Authority of the County of St. Louis,
                     Missouri, as Lessor and KV Pharmaceutical Company
                     as Lessee, regarding lease of facility located at
                     2303 Schuetz Road,  St. Louis  County,  Missouri,
                     which was filed as Exhibit 10(q) to the Company's
                     Report  on  Form  10-Q  for  the  quarter   ended
                     December 31, 1985, is incorporated herein by this
                     reference.

     10(k)*          KV Pharmaceutical  Company Fourth Restated Profit
                     Sharing Plan and Trust  Agreement dated September
                     18,  1990,  which was filed as Exhibit 4.1 to the
                     Company's  Registration Statement on Form S-8 No.
                     33-36400,   is   incorporated   herein   by  this
                     reference.

     10(l)*          First Amendment to the KV Pharmaceutical  Company
                     Fourth  Restated  Profit  Sharing  Plan and Trust
                     dated September 18, 1990, is incorporated  herein
                     by this reference.

     10(m)*          KV  Pharmaceutical  Company 1991 Incentive  Stock
                     Option Plan, adopted as of October 7, 1991, which
                     was filed as Exhibit 4 to the Company's  Form S-8
                     Registration   Statement  No.   33-44927,   filed
                     January 6, 1992, is  incorporated  herein by this
                     reference.

      10(n)          Consent Decree and Civil Actions Nos. 4:93CV00918
                     and   4:93CV00919   filed  June  14,   1993,   in
                     connection with Complaint of Forfeiture on behalf
                     of FDA,  which was filed as Exhibit  10(s) to the
                     Company's  Annual  Report  on Form  10- K for the
                     year ended March 31, 1993, is incorporated herein
                     by this reference.

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*        Management contract or compensation plan.


<PAGE>
      10(o)          Modification  of Consent  Decree of  Condemnation
                     and Permanent Injunction filed December 13, 1993,
                     which was filed as Exhibit 10(r) to the Company's
                     Annual  Report  on From  10-K for the year  ended
                     March 31, 1994,  is  incorporated  herein by this
                     reference.

      10(p)          Second   Modification   of   Consent   Decree  of
                     Condemnation and Permanent Injunction filed April
                     6, 1994,  which was filed as Exhibit 10(s) to the
                     Company's Annual Report on Form 10-K for the year
                     ended March 31, 1994, is  incorporated  herein by
                     this reference.

     10(q)*          Employment Agreement between the Company and Marc
                     S. Hermelin,  Vice- Chairman,  dated November 15,
                     1993,  which  was filed as  Exhibit  10(u) to the
                     Company's Annual Report on Form 10-K for the year
                     ended March 31, 1994, is  incorporated  herein by
                     this reference.

     10(r)*          Amendment  to  Consulting  Agreement  between the
                     Company and Victor M.  Hermelin,  Chairman of the
                     Board, dated October 30, 1978, which was filed as
                     Exhibit 10(v) to the  Company's  Annual Report on
                     Form 10-K for the year ended March 31,  1994,  is
                     incorporated herein by this reference.

     10(s)*          Stock  Option   Agreement  dated  June  1,  1995,
                     granting stock option to Marc S. Hermelin,  which
                     was  filed  as  Exhibit  10(w)  to the  Company's
                     Quarterly  Report  on Form  10-Q for the  quarter
                     ended June 30, 1996,  is  incorporated  herein by
                     this reference.

     10(t)*          Second  Amendment  dated as of June 1,  1995,  to
                     Employment Agreement between the Company and Marc
                     S. Hermelin,  which was filed as Exhibit 10(x) to
                     the Company's  quarterly  Report on Form 10-Q for
                     the quarter ended June 30, 1996, is  incorporated
                     herein by this reference.

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*        Management contract or compensation plan.


<PAGE>
     10(u)*          Amendment   to   and   Restatement   of   the  KV
                     Pharmaceutical  Company's  1991  Incentive  Stock
                     Optation Plan dated as of November 1, 1995, which
                     was  filed  as  Exhibit  10(y)  to the  Company's
                     Annual  Report  on Form  10-K for the year  ended
                     March 31, 1996,  is  incorporated  herein by this
                     reference.

     10(v)*          Stock  Option  Agreement  dated as of January 22,
                     1996,  granting stock options to MAC & Co., which
                     was  filed  as  Exhibit  10(z)  to the  Company's
                     Annual  Report  on Form  10-K for the year  ended
                     March 31, 1996,  is  incorporated  herein by this
                     reference.

     10(w)*          Third Amendment dated as of November 22, 1995, to
                     Employment Agreement between the Company and Marc
                     S. Hermelin, which was filed as Exhibit 10(aa) to
                     the Company's  Annual Report on Form 10-K for the
                     year ended March 31, 1996, is incorporated herein
                     by this reference.

     10(x)*          Stock Option  Agreement  dated as of November 22,
                     1995,  granting  a  stock  option  to  Victor  M.
                     Hermelin,  which was filed as  Exhibit  10(bb) to
                     the Company's  Annual Report on Form 10-K for the
                     year ended March 31, 1996.

     10(y)*          Fourth Amendment to and Restatement,  dated as of
                     January 2, 1997, of the KV Pharmaceutical Company
                     1991 Incentive Stock Option Plan, filed herewith.

     10(z)*          Agreement  between the Company Marc S.  Hermelin,
                     Vice  Chairman,  dated  December 16,  1996,  with
                     supplemental letter attached, filed herewith.

     10(aa)          Amendment to Lease dated  February 17, 1997,  for
                     the  facility  located at 2503 South Hanley Road,
                     St. Louis, Missouri between the Company as Lessee
                     and Marc S. Hermelin as Lessor, filed herewith.

       11            Computation of per share earnings, filed
                     herewith.

       21            List of Subsidiaries, filed herewith.

       23            Consent of BDO Seidman, L.L.P., filed herewith.

       27            Financial Data Schedule, filed herewith.

   
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*        Management contract or compensation plan.