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, 1999 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                     New York Stock Exchange
$.01 per share

Class B Common Stock par value                     New York Stock Exchange
$.01 per share

          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 8,808,787 shares of Class A and 2,966,697
shares of Class B Common Stock held by nonaffiliates of the Registrant as of May
4, 1999, was $131,581,256 and $44,685,874,  respectively. As of May 4, 1999, the
Registrant had outstanding  11,889,604 and 6,360,215 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  1999 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

     KV Pharmaceutical  Company ("KV", or the "Company") 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 and patented a
wide  variety of drug  delivery and  formulation  technologies,  including  four
controlled release, eight oral and topical  site-specific,  one quick dissolving
tablet and three  tastemasking  systems.  The Company uses these  systems in the
development  of  the  products  KV  markets  as  well  as  the  products  of its
pharmaceutical  marketing  licensees  to improve and  control  the human  body's
absorption and utilization of the active pharmaceutical  compounds.  This allows
the compounds to be administered  less frequently with potentially  reduced side
effects, improved drug efficacy and/or enhanced patient compliance.

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

     During  fiscal  1999,  the  Company  began  the  process  of  building  the
infrastructure   necessary   to  support   its   expansion   into  the   branded
pharmaceuticals   business  with  the   establishment  of  Ther-Rx   Corporation
("Ther-Rx"). Ther-Rx markets technology enhanced brand-name products directly to
physician specialists.

     KV's wholly-owned  operating subsidiary,  Particle Dynamics,  Inc. ("PDI"),
was  incorporated  in New York in 1948 and acquired by KV in 1972.  Through PDI,
the Company develops and markets specialty value added raw materials,  including
drugs, directly compressible and microencapsulated  products, and other products
used in the pharmaceutical,  nutritional,  food, cosmetic,  industrial and other
industries.

     The Company also licenses the marketing rights for products  developed with
KV 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.

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

     (b) Industry Segments

     The Company operates  principally in two industry  segments,  consisting of
pharmaceutical, manufacturing and marketing. Revenues are derived primarily from
directly  marketing  its own  technology  distinguished  generic and  brand-name
products. Revenues may also be received in the form of licensing revenues and/or
royalty payments based upon a percentage of the licensee's sales of the product,
in addition to manufacturing  revenues,  when marketing rights to products using
its  advanced  drug  delivery  technologies  are  licensed.  (see Note 18 to the
Company's financial statements).

     (c) Narrative Description of Business

     For  the  fiscal  year  ended  March  31,  1999,  approximately  80% of the
Company's net revenues  were derived from the sale of  technology  distinguished
generic  products,  approximately  7%  from  manufacturing  and  licensing,  and
approximately  12% from the sale of  specialty  value added  pharmaceutical  raw
material compounds.

     The Company  established  its  Ther-Rx  subsidiary  during  fiscal 1999 and
launched its first brand name  prescription  product with the acquisition of the
Micro-K(R)  product  line in March 1999.  Ther-Rx  expects to launch  internally
developed  products during fiscal 2000 that use the Company's  proprietary  drug
delivery  technologies.  The products the Company has targeted to launch will be
detailed to focused physician specialists through its own detail force.

     The  Company  has  also  developed  generic  drugs  using  its  proprietary
technologies. The Company markets and distributes its generic products under the
ETHEX label. The Company  continues to apply its technologies in the development
of  technologically  distinguished  generic  pharmaceuticals  and  currently  is
developing  an  additional 25 products of which 10 are planned for launch during
fiscal 2000. The 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 that  require FDA approval  generally  contain
pharmaceutical  compounds previously approved by the FDA and qualify for the use
of an abbreviated testing and approval process.

     The  Company's  Particle  Dynamics  subsidiary  has developed and currently
markets   lines  of  specialty   value  added  raw  material   products  to  the
pharmaceutical,  nutritional,  food,  cosmetic  and other  industries.  Two main
franchises of Particle Dynamics are DESCOTE(R), which is a family of tastemasked
vitamin,  mineral,  and  drug  products;  and  DESTAB(TM),  a family  of  direct
compression  products  which  enable  pharmaceutical  manufacturers  to  produce
tablets and caplets in a more efficient manner.

     The Company also develops  pharmaceutical products for the prescription and
OTC markets that its pharmaceutical  marketing company licensees  commercialize.
Typically,  the Company 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 its proprietary
drug delivery  technologies,  or (ii) are developing new therapeutic agents that
require delivery systems or formulation  capabilities  such as those the Company
offers to improve drug efficacy or enhance commercial value and (iii) can market
and sell the  products  that the  Company  develops.  To date,  the  Company has
entered into agreements with various pharmaceutical marketers,  including Pfizer
Canada,  Inc., Taisho  Pharmaceutical Ltd. of Japan, SS Pharmaceutical of Japan,
J. Uriach of Spain and others.

Strategy

     The  Company's  strategy is to expand its  position as a  technology-driven
specialty  pharmaceutical  marketer of specialty  value added raw  materials and
finished dosage form drug products that are an outgrowth of its broad-based drug
delivery  technologies.  As a recognized  leading  developer of innovative  drug
delivery  technologies,  the Company will continue to apply its  technologies to
the development and commercialization of its brand name and generic drugs. These
products will be marketed through the broad  pharmaceutical  distribution system
established by ETHEX, the generic division,  Ther-Rx, the brand division calling
on doctors, and Particle Dynamics, Inc., the special raw materials division. The
Company also markets other products through pharmaceutical marketing licensees.

     Development  of Brand Name  Pharmaceuticals.  The Company is  applying  its
proprietary  drug  delivery  technologies  in  the  development  of  brand  name
prescription  and OTC  pharmaceutical  products  to improve  the  effectiveness,
safety or commercial  appeal of the drug compound.  These products are developed
for direct marketing by Ther-Rx  (prescription only) or under license agreements
with other  pharmaceutical  marketers  (prescription  or OTC). Under a licensing
agreement,   the  Company   generally  applies  drug  delivery  systems  to  the
development  of a product  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.

     Development and Marketing of Technologically  Distinguished  Generic Drugs.
The Company has successfully  applied and will continue to apply its proprietary
drug delivery  systems and formulation  capabilities to develop  technologically
distinguished  generic  drugs.  The  Company  does this by (i)  identifying  and
replicating  brand name  drugs  that are  either  off patent or are  approaching
patent  expiration  and which require  advanced  drug  delivery  systems or (ii)
applying  its  tastemasking  formulations  to an off  patent  drug in  order  to
meaningfully  increase patient  compliance and the drug's commercial appeal. The
Company  believes  that  the  potential  profitability  of  its  technologically
distinguished  generic  drugs is higher than typical  generic  drugs because the
technologies  employed  by the  brand  name  innovator  and the  Company  create
barriers  to entry for  typical  generic  drug  competitors.  In  addition,  the
development  of generic drugs  generally is less costly and time  consuming than
brand name drugs. A significant  number of technologically  distinguished  brand
name  drugs  are off  patent or are  approaching  patent  expiration,  which the
Company   believes  it  is  in  a  better   position  to  market  than   generic
pharmaceutical  companies  who  do  not  have  a  strong  drug  delivery  system
technology base.

     Selective Acquisitions and In-licensing Opportunities. The Company actively
seeks opportunities to acquire additional products, product rights, technologies
and  distribution  channels  that are  complementary  to its business and can be
integrated   into  its  research,   manufacturing,   marketing  or  distribution
operations,  or that can provide it with  additional  products,  technologies or
sales and  marketing  capabilities.  In March  1999,  the Company  acquired  the
Micro-K(R)  prescription  potassium supplement product line for $36 million from
American  Home  Product  Corporation's  Wyeth-Ayerst  division.  Micro-K(R)  had
worldwide 1998 sales of approximately  $18 million and competes in a U.S. market
for potassium supplements of approximately $315 million in annual sales.

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

<PAGE>

The Company's Proprietary Drug Delivery Technologies

     The Company is a pioneer in the  development of  proprietary  drug delivery
systems and  formulation  technologies  which enhance the  effectiveness  of new
therapeutic   agents,   existing   pharmaceutical   products   and   nutritional
supplements, such as vitamins and minerals. Many of these technologies have been
used successfully for the commercialization of products that the Company and its
pharmaceutical    marketing   company   licensees   are   currently   marketing.
Additionally,  the Company  continues to invest its resources in the development
of new  technologies.  The  following  describes the  Company's  principal  drug
delivery technologies.

Oral 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 single oral doses that release the active ingredients
over  periods  ranging  from 6 to 24 hours,  are  designed  to  improve  patient
compliance,  improve drug  effectiveness and reduce potential side effects.  The
Company's 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  patented,  multi-particulate  drug  delivery  system  that
     encapsulates  one or more drug  compounds into  spherical  particles  which
     release the active drug or drugs systemically over an 18 to 24 hour period,
     permitting the  development of once-a-day  drug  formulations.  The Company
     believes that its KV/24(R) oral dosing system is the only commercialized 24
     hour  oral  controlled   release  system  that   successfully  is  able  to
     incorporate more than one active compound.

     METER  RELEASE(R)  is  a  polymer-based  drug  delivery  system that offers
     different  release  characteristics  than KV/24(R) and is used for products
     that require drug release  rates of between 8 to 12 hours.  The Company has
     developed METER RELEASE(R) systems in tablet,  capsule and caplet form that
     have been commercialized in the cardiovascular,  gastrointestinal and upper
     respiratory product categories.

     MICRO  RELEASE(R)  is  a  microparticulate  formulation  that  encapsulates
     therapeutic  agents  employing  smaller  particles than  KV/24(R) and METER
     RELEASE(R).  This system is used to extend the release of drugs in the body
     where precise  release  profiles are less important.  MICRO  RELEASE(R) has
     been  commercialized in prescription  products marketed by ETHEX as well as
     OTC nutritional products.

SITE-RELEASE(R) Technologies

     The Company's  SITE-RELEASE(R)  technologies  are based on the concept that
isolating a drug in a specific  location  for an extended  period of time offers
the opportunity to meaningfully  increase the drug's  efficacy.  For example,  a
vaginal  yeast  infection may be  effectively  treated using a single dose of an
anti-fungal  medication  by developing a drug  formulation  that will adhere the
anti-fungal  compound to the infected  area over a period of time  sufficient to
maximize the drug's  efficacy.  The  Company's  site specific  technologies  use
advanced  polyphasic  (hydrophilic  and lipophilic)  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.  Of these
technologies,  only products using DermaSite(TM)  technology are currently being
marketed.  To date, the Company has applied its  site-specific  technologies  in
cream,  lotion,  lozenge and suppository form to deliver  therapeutic  agents to
oral, skin, pharyngeal, esophageal, vaginal and rectal tissues.

     VagiSite(TM) is a patented,  controlled release bioadhesive delivery system
     that incorporates  advanced polyphasic  principles to create a bio-emulsion
     system  capable  of  delivering  therapeutic  agents in oral,  topical  and
     vaginal  forms.  VagiSite(TM)  is the subject of licensing and  development
     agreements  to develop  products  for the  treatment of topical and vaginal
     fungal infections.

     OraSite(TM)  is  a  controlled   release   mucoadhesive   delivery   system
     administered  orally in a solid or liquid form. A drug  formulated with the
     OraSite(TM)  technology  may be  formulated  as a liquid or as a lozenge in
     which the dosage form  liquifies  upon insertion and adheres to the mucosal
     surface  of  the  mouth,  throat  and  esophagus.   OraSite(TM)   possesses
     characteristics particularly advantageous to therapeutic categories such as
     oral hygiene, sore throat and periodontal and upper  gastrointestinal tract
     disorders.  The  Company  has filed a patent  application  relating  to its
     OraSite(TM) technology.

     DermaSite(TM) is  a semi-solid  SITE-RELEASE(R)  configuration  for topical
     applications to the skin. The bioadhesive and controlled release properties
     of the delivery  platform  have made possible the  development  of products
     requiring a significantly reduced frequency of application.

     Trans-EP(TM) (trans esophageal) is a novel bio-adhesive, controlled release
     delivery  system that may permit oral  delivery of compounds  that normally
     would  be  degraded  if  administered  orally,  such  as  growth  hormones,
     calcitonin,   other   protein/peptides   and   other   complex   compounds.
     Trans esophageal(TM) was specifically  designed to provide an oral delivery
     alternative  to  biotechnology  and  other  compounds  that  currently  are
     delivered  as  injections  or infused.  The  Company has  received a patent
     relating to its Trans-EP(TM) technology.

Tastemasking Technologies

     The Company is a leader in the development of  pharmaceutical  formulations
capable of improving the flavor of unpleasant  tasting drugs.  The Company first
introduced  tastemasking  technologies  in  1991  and has  employed  them in the
formulation  of five  commercially  available  products.  The  Company  has also
developed  numerous  platforms  for  its  tastemasking  technologies,  including
liquid, chewable and dry powder formulations.

     LIQUETTE(R) is a patented tastemasking system that incorporates  unpleasant
     tasting drugs into a hydrophilic and lipophilic  polymer matrix to suppress
     the taste of the drug.  This  technology  is used for mildly to  moderately
     distasteful drugs where low manufacturing costs are particularly important.

     FlavorTech(TM) is a liquid  formulation  technology  designed to reduce the
     objectionable   taste  of  a  wide   variety   of   therapeutic   products.
     FlavorTech(TM)  technology has been used in cough/cold  syrup products sold
     by ETHEX and has special application to other products, such as antibiotic,
     geriatric and pediatric pharmaceuticals.  The Company has received a patent
     for its FlavorTech(TM) technology.

     MicroMask(TM) is a patented tastemasking technology that incorporates a dry
     powder,  microparticulate  approach  to  reducing  objectionable  tastes by
     sequestering  the  unpleasant  drug  agent in a  specialized  matrix.  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.  MicroMask(TM)  is a more
     potent  tastemasking  technology  than  LIQUETTE(R)  and  may  be  used  in
     connection  with such  products  as  macrolide  antibiotics,  amino  acids,
     vitamins and other unpleasant tasting drug compounds.


Marketing and Distribution

     Through ETHEX,  the Company  directly  markets and  distributes its generic
products to national drug store chains, wholesalers and distributors, as well as
independent  pharmacies and mail order firms.  ETHEX's marketing  strategy is to
provide its customers with quality products,  a broad product line,  competitive
prices  and a high  level of  customer  service.  ETHEX's  sales  force  targets
national and regional buyers of pharmaceutical  products, while its inside sales
group targets the approximately  28,000 independent drug stores operating in the
United  States.  During  fiscal  1999,  1998 and  1997,  the  Company's  largest
customer, McKesson Drug Company, a wholesale distributor, accounted for 19%, 12%
and 15%, respectively of its total revenue.

     The Company  believes that industry trends favor generic product  expansion
into the managed care,  long-term  care and  government  contract  markets.  The
Company  further  believes  that  its  competitively   priced,   technologically
distinguished  generic products can fulfill the increasing need of these markets
to contain  costs and  improve  patient  compliance.  Accordingly,  the  Company
intends to devote  significant  marketing  resources to the  penetration of such
markets.

     Ther-Rx has established a direct sales force dedicated to the marketing and
distribution of brand name products through selling efforts focused on physician
specialists.

     The  Company  licenses  the  right to  market  and  distribute  brand  name
pharmaceutical   products   incorporating  its  drug  delivery  technologies  to
licensees in the U.S. and internationally. The Company has also executed several
agreements,   and  intends  to  pursue  additional   development  and  licensing
arrangements,  under which it is granted the right to market and distribute such
products using its own marketing subsidiaries along with its licensee.

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

Research and Development

     The Company's  research and development  activities include the development
of new and next generation drug delivery technologies,  the formulation of brand
name proprietary  products and the development of technologically  distinguished
generic versions of previously approved brand name pharmaceutical products.

     In  connection  with  proprietary  products to be licensed to its corporate
marketing licensees,  the Company develops the product utilizing its formulation
expertise  and  proprietary  delivery  systems,  and the  licensee is  typically
responsible  for  the  performance  of any  required  clinical  studies  and the
submission  of the  product  for  governmental  approval.  However,  the Company
participates in all phases of the  development  process.  In general,  corporate
licensees  reimburse  the  Company  for a portion  of its  development  expenses
incurred in connection with the  formulation,  clinical supply and validation of
the technologically enhanced drug product.
<PAGE>

     In fiscal 1999, 1998 and 1997, total research and development expenses were
$6.9 million, $5.8 million and $4.8 million, respectively. Spending for research
and  development  is funded  primarily  from  operations  and was 6% of revenues
during fiscal 1999.

Patents and Proprietary Rights

     The  Company's  policy  is  to  file  patent  applications  in  appropriate
situations to protect and preserve, for its own use, technology,  inventions and
improvements  that the Company  considers  important to the  development  of its
business.  The Company has been  granted  patent  protection  for certain of its
proprietary   technologies  and  products  in  the  United  States,  Europe  and
Australia,  and is  currently  seeking  patent  protection  for  certain  of its
technologies and products in the United States, Canada, Europe, Australia, Japan
and South Korea.  The Company  currently  holds 54 domestic  and foreign  issued
patents expiring through 2016 relating to its controlled release, site-specific,
quick dissolve and tastemasking technologies.

     The Company also relies upon trade secrets, unpatented proprietary know-how
and continuing  technological innovation to develop and maintain its competitive
position.  The Company enters into  confidentiality  agreements with each of its
employees and consultants  upon the  commencement of an employment or consulting
relationship.  These agreements  generally  provide that all inventions,  ideas,
discoveries,  improvements and  copyrightable  material made or conceived by the
individual  arising out of the  employment  or consulting  relationship  and all
confidential  information  developed or made known to the individual  during the
term of the  relationship  are the  Company's  exclusive  property.  The Company
cannot guarantee,  however, that others may not acquire or independently develop
similar  technology  or, if patents  are not  issued  with  respect to  products
arising  from  research,  that the  Company  will be able to retain  information
pertinent to such research as proprietary technology or trade secrets.

     The Company currently holds 27 trademarks  expiring through 2017 (which are
renewable  subject  to  continuous  use)  and has  also  applied  for  trademark
protection   for  the  trade  names  of  its   proprietary   controlled-release,
site-specific, quick dissolve and tastemasking technologies. The Company intends
to continue to trademark new technology and product names as they are developed.

Manufacturing and Facilities

     The Company conducts its brand name, generic and raw material manufacturing
in an aggregate of 164,000 square feet of manufacturing space located on two St.
Louis  area  campuses.   The  Company  manufactures  drug  products  in  liquid,
semi-solid,  tablet, capsule and caplet forms for distribution by ETHEX, Ther-Rx
and its corporate  licensees.  The Company  believes that all of its  facilities
comply with applicable regulatory requirements.

     The  Company's  business is generally  not  seasonal,  although a number of
cough/cold  products  marketed  through ETHEX can be subject to seasonal demand.
The  nature  of  its  business  does  not  include   unusual   working   capital
requirements. Inventories are maintained at sufficient levels to support current
production  and sales levels.  During fiscal 1999,  the Company  encountered  no
serious  shortage of any  particular  raw materials  and has no indication  that
significant shortages will occur.

     The  Company's   administrative  offices  and  research  facilities  occupy
approximately  57,612  square  feet and an  additional  142,207  square  feet is
devoted to product  warehousing.  Other than four  facilities  totaling  299,000
square feet that the Company owns, all  facilities are leased at  pre-determined
annual rates under agreements  expiring from November 30, 1999 through September
30, 2002 subject in most cases to renewal at its option.

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 the  Company's,  are
engaged in  developing,  marketing and selling  products that compete with those
the Company offers. Competitors may develop their products more rapidly than the
Company  does,  and the selling  prices of such  products  typically  decline as
competition  increases.  Further, other products now in use or under development
by others may be more effective than its current or future products. The Company
believes that its patents,  proprietary trade secrets,  technological expertise,
product  development and manufacturing  capabilities  position it to continue to
develop  products to compete  effectively in the  marketplace  and to maintain a
leadership position in the field of advanced drug delivery technologies.

Employees

     As of March 31, 1999, the Company  employed a total of 455  employees.  The
Company is party to a collective  bargaining  agreement that expires in May 2001
and covers 80  employees.  The  Company  believes  that its  relations  with its
employees are good.
<PAGE>

Environment

     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 its capital expenditures, earnings or competitive position.

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 they can be marketed in the United
States. Obtaining FDA approval 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.

     With respect to potential  new products,  there are two principal  ways the
Company can 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").  The Company  does not  disclose  information  on the
specific  products  covered  by its FDA  applications  in order to  protect  its
competitive  position and that of its customers  with respect to products  which
the Company has developed and expects to market in the future.

     The Company was informed by the FDA on April 22, 1998 that it had satisfied
all of the  requirements of the agency's  "Application  Integrity  Policy." As a
result,  the FDA will  process  the  Company's  applications  for new  NDA's and
ANDA's. The Company has regulatory  submissions filed with the FDA for approval.
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 or to
predict when or if any particular product may be approved.

     The  Company  cannot  predict  whether  future  legislative  or  regulatory
developments  might have an adverse  effect on the Company.  It is the Company's
belief that generic and branded drugs enhanced by drug delivery technologies can
provide cost savings  opportunities  for the  consumer,  which the Company could
benefit  from  through the growth of ETHEX and Ther-Rx and in its drug  delivery
research business.


Item 2.  Properties

     The Company's  corporate  headquarters is located at 2503 South Hanley Road
in St. Louis County,  Missouri, and contains 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.

     In  addition,  the  Company  leases  or owns  the  facilities  shown in the
following table:

                                              SQ. FT.    LEASE         RENEWAL
FACILITY                   USAGE              LEASED     EXPIRES       OPTIONS
--------------------------------------------------------------------------------

2629 S. Hanley Road        Mfg. Oper.         18,000    09/30/02      5 years(1)
821 Hanley Industrial      Mfg. Oper.          5,000    11/30/99      2 years
  Court
8046-50 Litzsinger Road    Mfg. Oper.         17,000    10/31/01      5 years(1)
8056 Litzsinger Road       Office/Maint.       3,000    10/31/01      5 years(1)
2635 S. Hanley Road        Mfg. Oper.         12,150    09/30/02      5 years(1)
819 Hanley Industrial      Mfg. Oper.          5,000    11/30/99      2 years
  Court
2525 S. Hanley Road        Mfg. Oper.         16,800    06/30/02      5 years
8054 Litzsinger Road       Office              3,000    10/31/01      5 years(1)
2601 S. Hanley Road        PDI Office          1,480    09/30/02      5 years(1)
10888 Metro Court          Office/Warehouse   81,810    Owned         N/A
2303 Schuetz Road          Mfg. Oper.         90,000    Owned         N/A
10850 Metro Court          Rental Property    40,540    Owned         N/A
13622 Lakefront Drive      Office/Warehouse   87,020    Owned         N/A
11880 Lackland             Office/Warehouse   14,260    01/25/00      ---

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

(1) Two five-year options.

<PAGE>

     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 will
consider  leasing or purchasing  additional  facilities  from time to time, when
attractive  facilities  become  available,  to accommodate the  consolidation of
certain operations and to meet future expansion plans.


Item 3.  Legal Proceedings

     Under a contract  that the Company has with a supplier,  issues  arose with
respect  to the  timing of supply of a product  and the  supplier's  failure  to
pursue another product.  The terms of the contract  provided for binding private
arbitration  between the parties which resulted in the Company  receiving notice
of an award in December, 1998 of $13,253,000. The Arbitration Panel subsequently
directed the parties to have further discussions  including possible replacement
products.  Payment  of the award  was  deferred  pending  the  outcome  of these
discussions.   Subsequent   attempts  to  obtain   replacement   products   were
unsuccessful  and the  Company  expects to be paid the  arbitration  award on or
before June 15, 1999.

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 and directors 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         85     Director, Chairman of the Board and Treasurer
                                  of the Company.2

Marc S. Hermelin           57     Director, Vice-Chairman of the Board and Chief
                                  Executive Officer.2

Alan G. Johnson            64     Director and Secretary of the Company;
                                  Attorney at Law and Chairman of Pauli,
                                  Johnson Capital & Research Incorporated, an
                                  investment banking and institutional research
                                  boutique, since January, 1999; Member of the
                                  law firm Gallop, Johnson & Neuman,  L.C. 1976
                                  to 1998; Director, Siboney Corporation.

Garnet E. Peck, Ph.D.      68     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.

Norman Schellenger         67     Director of the Company since November 1998;
                                  Retired since January 1997; President of
                                  Whitby Pharmaceuticals 1992 to 1997.

Raymond F. Chiostri        65     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         60     Vice President of Finance and Chief Financial
                                  Officer since 1981.

Mitchell I. Kirschner      53     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.


<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 New York Stock Exchange under the symbols KV.A and KV.B,  respectively.  The
Company's  common stock moved to the New York Stock  Exchange  from the American
Stock Exchange on March 25, 1999.

     b) Stock Price and Dividend Information

     The high and low closing sales prices of the Company's  Class A and Class B
Common Stock during each quarter of fiscal 1999 and 1998 were as follows:

CLASS A COMMON STOCK

                       FISCAL 1999                         FISCAL 1998
               ---------------------------     ---------------------------------
QUARTER            High            Low              High                Low
-----------    ----------    -------------     -------------    ----------------

First            22  3/4          17 3/16       11 21/32               9 15/32
Second           23  1/8          14 3/8        15 3/4                 9 29/32
Third            23  1/8          17 1/4        15 21/32              12 13/32
Fourth           21  1/2          14 1/2        18 25/32              13 3/32


CLASS B COMMON STOCK

                       FISCAL 1999                        FISCAL 1998
                ----------------------------   ---------------------------------
QUARTER            High            Low              High                 Low
------------    -----------    -------------   ----------------     ------------

First              23 1/16        17 3/32        11  3/4               9 1/2
Second             23 5/16        14 1/2         15 3/32               10
Third              23 1/4         17 3/8         15 5/8                12 27/32
Fourth             21 5/16        14             18 21/32              13 1/32


     All per share data reflects the  three-for-two  stock split effected in the
form of a 50% stock dividend to shareholders of record as of April 3, 1998.

     No  dividends  may be paid on Class A or Class B Common  Stock  unless  all
dividends on the Cumulative  Convertible  Preferred Stock have been declared and
paid.  Undeclared and unaccrued cumulative preferred dividends at both March 31,
1999 and 1998 were  $2,203,644 or $9.14 per share on 241,000 shares of Preferred
Stock. Also, under the terms of the Company's credit agreement,  the Company may
not pay cash  dividends  in excess of 25% of the prior year's  consolidated  net
income. The Company historically has not paid cash dividends on common stock and
does not plan to do so in the  near  future.  The  Company  intends  to use cash
generated from  operations to support  future  growth.  Dividends on Convertible
Preferred Stock in the amount of $421,751 were paid during fiscal 1999 and 1998.

     c) Approximate Number of Holders of Common Stock

     The number of  holders of record of Class A and Class B Common  Stock as of
May  4,  1998  was  1,164  and  1,241,  respectively  (not  separately  counting
shareholders  whose shares are held in "nominee"  or "street"  names,  which are
estimated to represent  approximately  6,000  additional  shareholders  for each
class of common stock).

<PAGE>

<TABLE>
<CAPTION>

Item 6.   Selected Financial Data

                                                   ($ in 000's, except per share data)
                                                          Years Ended March 31,
                               -----------------------------------------------------------------------
                                  1999            1998             1997          1996          1995
                                  ----            ----             ----          ----          ----
<S>                          <C>            <C>              <C>           <C>           <C>
BALANCE  SHEET  DATA:

Total assets                   $ 127,990      $ 68,361         $ 41,362       $ 27,948       $27,975

Long-term debt                 $  31,491      $  4,902         $  2,158       $  2,541       $11,233

Shareholders' equity           $  67,548      $ 44,164         $ 33,084       $ 20,550       $ 9,974

INCOME  STATEMENT  DATA:

Revenues                       $ 114,860      $ 98,486         $ 57,891       $ 49,729       $39,743

   % Change                         16.6          70.1             16.4           25.1          4.1

Net income
   (loss)(a)                   $  23,340      $ 11,304         $  8,924       $  4,043       $(5,375)

Net income (loss) per
   common share-diluted
   (b) (c)                     $    1.17      $   0.58         $   0.47       $   0.21       $ (0.35)


<FN>

(a)  Net income in fiscal 1999 includes a  non-recurring  gain associated with a
     $13.3  million  arbitration  award.  The award net of related  expenses  of
     $530,000 and net of applicable income taxes, represents $7.9 million in net
     income or $.40 per common share on a diluted basis (see Note 19 of Notes to
     Consolidated Financial Statements) as follows:



                                                                 Per diluted
                                                   Net Income       share
                                                   -----------   -----------

     KV net income without nonrecurring gain       $15,384,633       $0.77
     KV nonrecurring gain                          $ 7,955,568       $0.40
                                                   -----------       -----
       Total KV net income                         $23,340,201       $1.17


(b)  Dividends  were paid on the Preferred  Stock during fiscal 1999 and 1998 in
     the amount of $421,751  and  $105,437  during the fourth  quarter of fiscal
     1997,  but no other  cash  dividends  were paid on any  shares of Common or
     Preferred Stock during the five years ended March 31, 1999.

(c)  Diluted  common  shares were  restated to reflect a 3 for 2 stock split
     effected  in the form of a 50%  stock  dividend,  declared  by the Board of
     Directors on March 23, 1998 and distributed  April 17, 1998 to shareholders
     of record as of April 3, 1998. The Company  adopted  Statement of Financial
     Accounting  Standards  No.  128,  "Earnings  Per Share" in fiscal  1998 and
     restated all  prior-period  earnings per share data (see Note 1 of Notes to
     Consolidated Financial Statements).

</FN>
</TABLE>

<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 with revenue contribution by operating segment and consolidated costs
and expenses as a percent of total revenue.  This information  should be read in
conjunction with the Company's financial statements and related notes.

<TABLE>
<CAPTION>

                                                           Fiscal Year Ended March 31,
                                           1999                       1998                       1997
                                           ----                       ----                       ----
                                    Amount      Percent        Amount      Percent         Amount     Percent
                                    ------      -------        ------      -------         ------     -------
                                                            (Dollars in thousands)
<S>                           <C>             <C>         <C>           <C>           <C>         <C>

Net Revenues
Generic Products                 $  91,833        80.0%      $79,193         80.4%        $40,225     69.5%
Brand Products                       1,795         1.6             -            -               -        -
Contract Services/Licenses           7,827         6.8         8,290          8.4           8,978     15.5
Specialty Materials                 13,405        11.6        11,003         11.2           8,688     15.0
                                  --------      ------        ------        -----         -------    ------
   Total Net Revenues              114,860       100.0        98,486        100.0          57,891    100.0
                                   =======       =====        ======        =====          ======    =====

Costs and Expenses
Manufacturing Costs                 61,415        53.5        56,483         57.3          29,478     50.9
Research and Development             6,884         6.0         5,752          5.8           4,835      8.3
Selling and Administrative          22,201        19.3        19,104         19.4          13,818     23.8
Other (Income) Expense, net        (13,516)      (11.8)          (98)        (0.1)            265      0.5
Amortization                           244         0.2           254          0.3             188      0.4
                                  --------       -----      --------        -----        --------    -----
   Total Costs and Expenses         77,228        67.2        81,495         82.7          48,584     83.9
                                    ======        ====        ======         ====          ======    =====

Earnings before Taxes               37,632        32.8        16,991         17.3           9,307     16.1
Provision for Income Taxes          14,292        12.4         5,687          5.8             383      0.7
                                    ------        ----       -------        -----          ------    -----
Net Income                          23,340        20.4        11,304         11.5           8,924     15.4
                                    ======        ====        ======         ====           =====    =====


</TABLE>

FISCAL 1999 COMPARED TO FISCAL 1998

     Revenues.  Net revenues  increased $16.4 million,  or 16.6%,  during fiscal
1999.  The increase in net sales is due to higher sales of generic  products and
specialty  materials,  and brand product sales resulting from the acquisition of
the  Micro-K(R)  product line during the fourth  quarter (see Note 2 of Notes to
Consolidated  Financial  Statements),  which  were  partially  offset  by  lower
contract services' sales and licensing revenues, as shown in the following table
($ in 000's):

                                                        Increase (Decrease)
                                                           vs Prior Year
                                                        -------------------
                                                     Amount              Percent
                                                     ------              -------
 Generic Products                                  $ 12,640               16.0%
 Brand Products                                       1,795                nm
 Specialty Materials                                  2,402               21.8
 Contract Services/Licensing Revenues                  (463)              (5.6)
                                                   --------
    Total Increase                                 $ 16,374               16.6%
                                                   ========

     Generic product sales  increased $12.6 million,  or 16%, during fiscal 1999
due to the  introduction  of 10 new products and higher sales volume  across the
majority of the existing  products.  New products  contributed $5.8 million (7%)
and existing products contributed $16.1 million (21%) of the increase;  however,
such  increases  were  partially  offset by price declines of $9.3 million (12%)
against  total  sales for the prior  year.  The  increase  in sales on  existing
products  reflected  increased  market  share  on  an  expanded  customer  base,
increased generic  substitution rates and a full year's sales impact of products
introduced  in the prior  year  across  several  product  categories.  The price
decline  was  confined  largely to a single  product  category  where  increased
competition  on  revenue  sharing  products  (based on sales  and gross  margin)
adversely affected prices.

     Brand  name  product  sales  represented  a  partial  month's  sales of the
Micro-K(R) product lines which was acquired from American Home Products in March
1999.  The product line had annual sales of  approximately  $18.5 million at the
time  of  the  acquisition  and  will  be  marketed  by  the  Company's  Ther-Rx
subsidiary.  The Company is in the  process of  completing  the  building of the
sales,  marketing  and  administrative  infrastructure  to  support  its  direct
marketing of brand name  products.  This effort  supports the Company's  plan to
directly market and distribute  technology enhanced,  brand name pharmaceuticals
in specific  niche  therapeutic  areas.  Micro-K(R)  is the first  product to be
marketed in support of this strategy.

     Sales of specialty  materials  increased  $2.4  million,  or 21.8%,  during
fiscal  1999  due  primarily  to a full  year's  sales  impact  of two  products
introduced  in the prior year by the  Company's  Particle  Dynamics  subsidiary,
which  contributed $2.1 million,  or 19.1%, of the increase.  Particle  Dynamics
also  increased its customer base during fiscal 1999,  primarily for its line of
calcium carbonate products, which accounted for approximately 51% of total sales
for the fiscal year. Calcium carbonate sales were up 28.6% for the fiscal year.

     Contract Services' and licensing  revenues decreased $.5 million,  or 5.6%,
due to  lower  volume,  reflecting  a  smaller  customer  base  as  the  Company
de-emphasized lower margin contract manufacturing in its business strategy.

     While the  Company  anticipates  continued  overall  growth in sales of the
products the Company markets, there are no assurances that the annual percentage
rate of sales growth will continue at past levels.

     Costs and Expenses. Manufacturing costs increased $4.9 million, or 8.7%, to
$61.4  million  during  fiscal  1999 from $56.5  million  in fiscal  1998 due to
increased  volume.  Manufacturing  costs as a percentage of revenues declined to
53.5% from 57.3%, due primarily to a favorable shift in the mix of products sold
toward  higher  margin  products,  which was  partially  offset by lower average
pricing, as shown in the following table:

                                                              % Revenues
                                                              ----------
     FY 1998 Manufacturing Costs                                  57.3
     Change due to:
        Price decline                                              4.1
        Product mix                                               (7.9)
                                                                  ----
     FY 1999 Manufacturing Costs                                  53.5
                                                                  ====

     The price  decline  and  improvement  in product mix was due  primarily  to
changes in the generic  business.  Lower  pricing due to  increased  competition
eroded margins on certain  products.  The improvement in product mix reflected a
decrease in volume on the lower margin business and increases in sales of higher
margin new products introduced in fiscal 1999 and 1998.

     Research and development  costs  increased $1.1 million,  or 19.7%, to $6.9
million  during  fiscal 1999 from $5.8 million in fiscal 1998.  The increase was
due to higher  personnel  costs ($.4  million,  or 7%),  increased  usage of R&D
materials and  laboratory  supplies  ($.3  million,  or 5%) and higher levels of
clinical testing ($.2 million, or 3%). The Company increased its R&D activity in
fiscal  1999 and is  currently  developing  more than 25 drug  compounds  in its
development pipeline. The Company expects to continue a relatively high level of
expenditures  and  investment  for  research,  clinical and  regulatory  efforts
relating to the development of proprietary new products and advanced  technology
products and their approval for marketing.

     Selling and administrative  expenses  increased $3.1 million,  or 16.2%, to
$22.2  million  during  fiscal  1999 from  $19.1  million in fiscal  1998.  As a
percentage of revenues,  selling and administrative expenses remained relatively
flat with the prior year, decreasing nominally to 19.3% from 19.4%. The increase
in expenses was related  primarily to higher costs  associated  with  additional
personnel to support the Company's  continued growth ($1.3 million,  or 7%), the
branded sales initiative ($.7 million, or 4%) and increased marketing activities
associated with sales of generic products ($1.1 million, or 6%).

     Amortization  expense  decreased  nominally in fiscal 1999 due primarily to
lower expense  associated  with  amortization  of financing  fees ($.1 million),
partially  offset by one-half  month's  amortization  of the Micro-K(R)  product
rights  acquired near the end of the fourth  quarter of fiscal 1999. The product
rights are being amortized over twenty years at an annual rate of $1.8 million.

     Other income,  net,  increased $13.4 million to $13.5 million during fiscal
1999  due to a  non-recurring  gain  related  to an  arbitration  award of $13.3
million in  connection  with a supplier who was unable to supply  product.  (See
Note 19 of Notes to Consolidated Financial Statements.)

     Income  taxes were  provided at an  effective  rate of 38.0% in fiscal 1999
compared  to 33.5% in fiscal  1998.  The  lower  effective  rate in fiscal  1998
reflected the utilization of the deferred tax asset valuation reserve.

     Net Income. As a result of the factors described above, net income improved
$12.0  million,  or 106.5% to $23.3  million  for fiscal 1999 from net income of
$11.3 million in fiscal 1998.

FISCAL 1998 COMPARED TO FISCAL 1997

     Revenues.  Net revenues  increased $40.6 million,  or 70%, to $98.5 million
during  fiscal 1998 from $57.9  million in fiscal  1997.  This sales  growth was
primarily  due to an  increase  in the  volume of new (64%)  and  existing  (7%)
generic  products sold by ETHEX and  pharmaceutical  compounds  sold by Particle
Dynamics,  partially offset by lower Contract Services sales (-1%). Net revenues
from ETHEX increased $39.0 million,  or 97%, to $79.2 million during fiscal 1998
from $40.2 million in fiscal 1997. This increase was primarily due to the launch
of twelve new  generic  products  during  fiscal  1998 which  contributed  $34.9
million  of the  sales  increase.  The  remainder  of the sales  increase  ($4.1
million) was due to higher  volume across the existing  ETHEX product line.  Net
revenues derived from the sale of specialty  pharmaceutical  compounds increased
$2.3  million,  or 27%, to $11 million  during  fiscal 1998.  This  increase was
attributable entirely to the increased sales volumes related to the introduction
of new  products for the  DESCOTE(R)  and  DESTAB(TM)  product  lines.  Contract
Services revenues decreased $.5 million,  or 10%, to $4.8 million in fiscal 1998
from $5.3 million in fiscal 1997 due to reduced sales volume.

     Costs and Expenses.  Manufacturing  costs increased $27 million, or 92%, to
$56.5  million  during  fiscal  1998 from $29.5  million  in fiscal  1997 due to
increased volume.  Manufacturing  costs as a percentage of revenues increased to
57% from 51% primarily due to an unfavorable  change in the mix of products sold
and lower prices as shown in the following table:

                                                             % Revenues
                                                             ----------
          FY1997  Manufacturing  Costs                           50.9%
          Change due to:
               Lower prices                                       2.0
               Product mix                                        4.4
                                                                -----
          FY1998  Manufacturing  Costs                           57.3%
                                                                =====

     Research and  development  costs  increased  $.9  million,  or 19%, to $5.8
million  during fiscal 1998 from $4.9 million in fiscal 1997.  This increase was
due to higher  personnel  costs ($.4  million,  or 9%),  increased  usage of R&D
materials  ($.1  million,  or 1%) and higher  levels of  clinical  testing  ($.4
million, or 9%).

     Selling and  administrative  expenses  increased  $5.3 million,  or 38%, to
$19.1 million during fiscal 1998 from $13.8 million in the same period in fiscal
1997. As a percentage of revenue,  selling and administrative expenses decreased
to 19% from 24%.  The  increase  in  selling  and  administrative  expenses  was
primarily  related to selling and  promotional  activities  associated  with the
significant growth experienced in the sales of new and existing generic products
marketed by ETHEX and Particle  Dynamics ($.7 million,  or 5%),  higher  outside
professional services ($1.8 million, or 13%) and additional personnel to support
its continued growth ($1.7 million, or 13%).

     The income tax provision was $5.7 million for fiscal 1998,  compared to $.4
million in fiscal 1997. The increase is  attributable to the utilization of loss
carry   forwards   generated  in  prior  years  during   fiscal  1997.  No  loss
carryforwards were available in fiscal 1998.

     (b) Regarding Commodity Prices

     The Company utilizes various raw materials in its manufacturing  processes.
Although the Company historically has not encountered  material  fluctuations in
pricing  of  such  commodities,  there  is no  assurance  that  pricing  of such
commodities will remain  relatively  constant,  and the Company's  manufacturing
costs could increase  significantly if raw material commodity prices increase by
amounts substantially above current prices.

     (c) Variable Rate Risks

     Advances to the Company under the Company's  credit  facility bear interest
at  a  rate  which  varies   consistent  with  increases  or  decreases  in  the
publicly-announced   prime  rate   [and/or  the  LIBOR  rate  with   respect  to
LIBOR-related  loans, if any]. These rates have remained relatively constant for
a substantial period of time. A material increase in such rates, however,  could
significantly increase borrowing expenses. For example, an increase of 1% in the
prime rate would increase the borrowing  expense to the Company by approximately
$250,000  annually on the principal  balance of the Company's credit facility at
March 31, 1999.

     (d) Year 2000 Project

     The Company  utilizes  computer  technologies  throughout  its  business to
effectively carry out its day-to-day  operations.  Computer technologies include
both  information  technology in the form of hardware and  software,  as well as
embedded technology in the Company's  facilities and equipment.  Similar to most
companies,  the  Company  must  determine  whether  its  systems  are capable of
recognizing and processing date-sensitive  information properly as the year 2000
("Y2K") approaches.  The Company is utilizing a multi-phased concurrent approach
to address this issue.  The phases  included in its approach are the  awareness,
assessment,  remediation,  validation and implementation phases. The Company has
completed  the  awareness  and  assessment  phases  and are very  active  in the
remediation phase.

     The  Company  has  initiated  formal  communications  and has  developed  a
monitoring  program with all of its significant  suppliers and critical business
partners to determine Y2K compliance and is  implementing  contingency  plans to
minimize  interruptions  in  business  in the  event a third  party is unable to
perform.  An interruption of the Company's  ability to conduct business due to a
Y2K readiness  problem could have a material adverse effect on the Company.  The
Company is  continuing  to assess  such  third-party  risks.  The Company is not
presently aware of any such significant exposure; but, there can be no guarantee
that the systems of third parties on which the Company  relies will be converted
in a timely  manner or that a failure to  properly  convert  by another  company
would not have a material adverse effect on the Company.

     The Company  currently  intends to  substantially  complete  the  remaining
phases of the Y2K project,  including the  finalization of contingency  plans in
the event of disruptions  in obtaining  needed  supplies and services,  prior to
June 30, 1999. The costs  associated with the project are not expected to exceed
$766,000  (of which  approximately  $580,766  had been  incurred as of March 31,
1999),  and are not  deemed to  materially  impact  the  Company's  consolidated
financial position,  results of operations or cash flows in future periods.  The
Company is actively  correcting and replacing the  identified  systems which are
not Y2K ready in order to ensure its ability to  continue  to meet its  internal
needs and those of its customers and suppliers.

     The Company believes that the most reasonably likely  worst-case  scenarios
that it might  confront with respect to Y2K issues have to do with third parties
not  being  Y2K  compliant.  The  Company  has  evaluated  vendor  and  customer
compliance  and will  implement  contingency  plans,  such as  alternate  vendor
opportunities, after examining compliance evaluations.

     Based upon the planning and  implementation  completed to date, the Company
believes  that,  with  modifications  to existing  software,  conversions to new
software, and appropriate remediation of embedded chip equipment,  the Y2K issue
is not  reasonably  likely  to pose  significant  operational  problems  for the
Company's information technology systems and embedded chip equipment.

     (e) Liquidity and Capital Resources

     The  following  table lists  selected  cashflow and balance  sheet data for
fiscal years 1999, 1998 and 1997:

           ($ in 000's)                    1999            1998          1997
                                         ---------------------------------------
         Cashflow from operations        $ 9,499         $13,755       $ 4,740
         Quick assets                     42,381          33,462        16,207
         Working Capital                  43,112          35,403        25,017
         Long-Term Liabilities            33,973           7,040         3,071
         Shareholders' Equity             67,548          44,164        33,084


     Cashflow from operations of $9.5 million for fiscal 1999 was primarily from
net income enhanced by an increase in accounts payable and accrued  liabilities,
partially  offset by  increases  in accounts  receivable  and  inventories.  The
increases in accounts  payable and  inventories  are due to higher levels of raw
material  and  packaging  inventories  acquired  to support  increased  sales of
generic  products and higher  finished  goods  inventories  associated  with the
acquisition  of Micro-K(R).  Receivables  also increased due to the higher sales
and the $13.3 million  arbitration  award (See Note 19 of Notes to  Consolidated
Financial  Statements).  Accrued  liabilities  increased  due to an  increase in
salaries,  wages,  benefits and income taxes. These changes in the components of
current  assets  and  liabilities,  partially  offset by a  decline  in cash and
marketable securities, resulted in a $7.7 million increase in working capital in
fiscal 1999.

     Long-term  liabilities  increased  to $34  million  in fiscal  1999 from $7
million  as a result of $25  million  in  borrowings  incurred  to  finance  the
acquisition  of the  Micro-K(R)  product  line and the partial  financing of the
purchase of a new  facility of $2.3  million.  The new  facility was acquired to
provide  additional  distribution and office space for the Company's branded and
generic pharmaceutical businesses.

     Investing  activities for fiscal 1999 included capital expenditures of $5.8
million,  the investment of $7.6 million of cash in marketable  securities and a
cash  payment  of  $11.1  million  in  connection  with the  acquisition  of the
Micro-K(R)   product  line.  Capital   expenditures   relate  primarily  to  the
acquisition of the new facility and equipment to expand production  capacity for
generic products.  In addition,  the Company had capital projects in progress at
March 31, 1999 that it  estimates  will  require $1.3 million to complete in the
next fiscal year.  The  majority of this amount  relates to the cost to complete
the upgrade of the  Company's  business  software and network  systems  which is
estimated at $0.6 million.

     The Company  believes  that  existing cash and  securities  balances,  cash
generated  from  operating  activities  and funds  available  under  its  credit
facility  will be adequate to fund  operating  activities  in the short and long
term,  including  near and long term  debt  obligations,  capital  improvements,
product development  activities and expansion of marketing  capabilities for the
branded  pharmaceutical  business for the presently  foreseeable  future.  As of
March 31,  1999 the  Company has a loan  agreement  expiring  June 18, 2000 with
LaSalle National Bank. The agreement provides for a revolving line of credit for
borrowing up to $40 million.  The Company had cash  borrowing of $25 million and
$4.2 million in open letters of credit issued under this facility.

     Ratios.  The following table lists selected financial ratios for the fiscal
years 1999, 1998 and 1997:

                                        1999            1998            1997
                                  --------------- --------------- --------------
 Working Capital Ratio               2.6 to 1        3.1 to 1        5.8 to 1
 Quick Ratio                         1.6 to 1        2.0 to 1        3.1 to 1
 Debt to Equity                      .48 to 1        .12 to 1        .08 to 1
 Total Liabilities to Equity         .89 to 1        .55 to 1        .25 to 1
<PAGE>

     The Company's  working capital ratio declined in fiscal 1999 as a result of
a  decrease  in the year end cash and  marketable  securities  balance  to $10.2
million  from $18.2  million at the end of fiscal  1998.  The  decrease  relates
primarily  to the  $11.1  million  cash  payment  made in  connection  with  the
acquisition of the Micro-K(R) product line.

     The  Company's  debt to equity  and  total  liabilities  to  equity  ratios
increased  due to the $25  million  increase in long term debt  associated  with
increased  borrowings  from  its  credit  facility  to  finance  the  Micro-K(R)
acquisition  and $2.3  million in mortgage  debt  incurred  to purchase  the new
office and distribution facility.

     Inflation.  Although at reduced levels in recent years, inflation continues
to apply upward  pressure on the cost of goods and services used by the Company.
However, the Company believes that the net effect of inflation on its operations
has been minimal during the past three years. In addition, changes in the mix of
products sold and the effect of competition  has made a comparison of changes in
selling  prices  less  meaningful  relative  to changes in the  overall  rate of
inflation over the past three years.

     (f) New Accounting Standards

     In June 1998, the FASB issued SFAS No. 133 " Accounting for Derivatives and
Hedging  Activities," which establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  (collectively  referred  to as  derivatives),  and for hedging
activities.  SFAS No. 133 is effective for years  beginning  after June 15, 2000
and requires  comparative  information  for all fiscal  quarters of fiscal years
beginning  after June 15, 2000. The Company does not expect the adoption of this
statement to have a significant  impact on its results of operations,  financial
position or cash flows.

     SOP 98-5  "Reporting  on the Costs of Start-up  Activities,"  requires that
costs be expensed  as  incurred.  This  statement  is  effective  for  financial
statements  issued for fiscal years  beginning  after  December  15,  1998.  The
Company  believes that the adoption of SOP 98-5 will have no material  effect on
its financial statements.

Item 8.   Financial Statements and Supplementary Data.


<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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


We have audited the consolidated balance sheets of KV Pharmaceutical Company and
Subsidiaries  as of  March  31,  1999 and  1998,  and the  related  consolidated
statements of income,  shareholders' equity and cash flows for each of the three
years  in  the  period  ended  March  31,  1999.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  the  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  at March 31, 1999 and 1998,  and the results of their
operations  and their cash flows for each of the three years in the period ended
March 31, 1999, in conformity with generally accepted accounting principles.

BDO SEIDMAN, LLP
St. Louis, Missouri

May 14, 1999


<PAGE>

                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             March 31, 1999 and 1998



ASSETS                                          1999                    1998
------                                    ----------------    ---------------
Current Assets:
Cash and cash equivalents                 $    2,616,857        $  18,157,595
Marketable securities,
  available-for-sale                           7,523,380                    -
Receivables, less allowance for
   doubtful accounts of $631,006
   and $332,244 in 1999 and 1998,
   respectively                               18,988,162           15,304,340
Receivable, arbitration award                 13,253,000                    -
Inventories                                   23,652,712           15,606,037
Deferred income taxes                          3,379,434            2,949,434
Prepaid and other current assets                 167,736              541,989
                                          ---------------     ---------------
  Total Current Assets                        69,581,281           52,559,395

Property and equipment, less
  accumulated depreciation                    18,966,483           12,436,533

Intangibles and other assets,
  net of amortization                         39,442,396            3,364,899
                                          ===============     ===============
TOTAL ASSETS                                $127,990,160        $  68,360,827
                                          ===============     ===============

LIABILITIES
Current Liabilities:
Accounts payable                          $    8,667,394       $    4,280,492
Accrued liabilities                           17,090,215           12,317,432
Current maturities of long-term debt             711,669              558,333
                                          ---------------     ---------------
  Total Current Liabilities                   26,469,278           17,156,257

Long-term debt                                31,490,553            4,902,222
Deferred income taxes                            379,000              535,000
Other long-term liabilities                    2,103,696            1,603,131
                                          ---------------     ---------------
TOTAL LIABILITIES                             60,442,527           24,196,610
                                          ---------------     ---------------

SHAREHOLDERS' EQUITY

7% Cumulative Convertible
  Preferred Stock, $.01 par value;
  $25.00 stated and liquidation
  value; 840,000 shares authorized;
  issued and outstanding - 241,000
  shares in 1999 and 1998                          2,410               2,410

Class A and Class B Common Stock,
  $.01 par value; 150,000,000 and
  75,000,000 shares authorized,
  respectively;
  Class A-issued 11,923,319 and
  11,760,078 in 1999 and 1998                    119,233             117,601
  Class B-issued 6,393,867 and
  6,442,914 in 1999 and 1998 -                    63,939              64,429
  (convertible into Class A shares
   on a one-for-one basis)

Additional paid-in capital                    34,531,297          34,042,044
Retained earnings                             32,910,844           9,992,686
Accumulated comprehensive
  loss, net                                      (25,137)                  -
Less: Treasury Stock, 35,619 shares
  each of Class A and Class B Common
  Stock, at cost                                 (54,953)            (54,953)
                                           --------------     --------------

TOTAL SHAREHOLDERS' EQUITY                    67,547,633          44,164,217
                                           --------------     --------------

TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY                                      $127,990,160       $  68,360,827
                                           ==============     ==============


See Accompanying Notes to Consolidated Financial Statements


<PAGE>

                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

                For the Years Ended March 31, 1999, 1998 and 1997

                                         1999           1998            1997
                                   --------------------------------------------

  Net Revenues                     $ 114,860,315  $  98,486,060    $ 57,890,678
                                   -------------  -------------    ------------
Costs and Expenses:
     Manufacturing costs              61,414,775     56,482,539      29,478,372
     Research and development          6,883,642      5,751,995       4,835,478
     Selling and administrative       22,201,114     19,104,051      13,817,802
     Amortization of intangible
       assets                            243,550        254,261         187,758
                                   -------------  -------------   -------------
Total costs and expenses              90,743,081     81,592,846      48,319,410
                                   -------------  -------------   -------------

Operating income                      24,117,234     16,893,214       9,571,268
                                   -------------  -------------   -------------

Other income (expense):
      Arbitration award,
        net of expenses              12,722,956              -               -
      Interest and other income       1,290,892         550,186         146,481
      Interest expense                 (498,335)       (452,262)       (411,237)
                                   -------------  -------------   -------------

Total other income (expense)          13,515,513         97,924        (264,756)
                                   -------------  -------------   -------------

Income before income taxes            37,632,747     16,991,138       9,306,512
Provision for income taxes            14,292,546      5,687,382         383,000
                                   -------------  -------------   -------------

Net Income                         $  23,340,201  $  11,303,756   $   8,923,512
                                   =============  =============   =============

Net Income per Common Share-Basic
    (after deducting preferred
    dividends of $421,751 in 1999,
    1998 and 1997, respectively)   $        1.26  $       0.60    $       0.48
                                   =============  ============    =============


Net Income per Common
    Share-Diluted                  $        1.17  $       0.58    $       0.47
                                   =============  ============    =============


See Accompanying Notes to Consolidated Financial Statements


<PAGE>
<TABLE>
<CAPTION>


                                                       KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                                                     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                    For the Years Ended March 31, 1999, 1998 and 1997


                                             Class A    Class B     Additional                Retained    Accumulated       Total
                                 Preferred    Common     Common       Paid In    Treasury     Earnings  Comprehensive  Shareholders'
                                   Stock      Stock      Stock        Capital      Stock      (Deficit)    Loss, Net        Equity
                                ---------------------------------------------------------------------------------------------------
<S>                              <C>       <C>        <C>       <C>           <C>          <C>            <C>         <C>

Balance at March 31, 1996           $2,410    $71,207    $47,474   $30,235,926    $(54,953)   $(9,752,154)   $     -    $20,549,910
Net income                               -          -          -             -           -      8,923,512          -      8,923,512
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)
                                    ------------------------------------------------------------------------------------------------
Balance at March 31, 1997            2,410     77,175     43,766    33,844,685     (54,953)      (828,642)         -     33,084,441
Net income                               -          -          -             -           -     11,303,756          -     11,303,756
Stock Options exercised,
     24,165 shares of Class A            -        240          -       127,930           -              -          -        128,170
     17,206 shares of Class B            -          -        172        69,429           -              -          -         69,601
Conversion of 98,500 shares of                                                                                                    -
     Class B shares to Class A
       shares                            -        985       (985)            -           -              -          -              -
Dividends paid on preferred stock        -          -          -             -           -       (421,751)         -       (421,751)
Three for two stock split effected
  in the form of a
  50% stock dividend                     -     39,201     21,476             -           -        (60,677)         -              -
                                    ------------------------------------------------------------------------------------------------
 Balance at March 31, 1998           2,410    117,601     64,429    34,042,044     (54,953)     9,992,686          -     44,164,217
Comprehensive income
Net income                               -          -          -             -           -     23,340,201          -     23,340,201
Other comprehensive loss,
  net of tax:
   Net unrealized loss on
     available-for-sale
     securities                          -          -          -             -           -              -    (25,137)       (25,137)
                                                                                                             --------    -----------
Total comprehensive income               -          -          -             -           -              -    (25,137)    23,315,064
Dividends paid on preferred
  stock                                  -          -          -             -           -       (421,751)         -       (421,751)
Conversion of 123,000
  shares of Class B shares
   to Class A shares                     -      1,231     (1,231)            -           -              -          -              -
Stock Options exercised,
   46,478 shares of Class A              -        462          -       260,301           -              -          -        260,763
   And 74,129 of Class B
   Less 88 shares of Class A
   repurchased                           -          -        741       228,952           -              -          -        229,693
Class A shares canceled -
  6,146 shares                           -        (61)         -             -           -              -          -            (61)
Stock Split - payment of partial
  shares from 1998                       -          -          -             -           -           (292)         -           (292)
                                    ------------------------------------------------------------------------------------------------
Balance at March 31, 1999           $2,410   $119,233    $63,939   $34,531,297    $(54,953)   $32,910,844   $(25,137)   $67,547,633
                                    ================================================================================================

</TABLE>


     See Accompanying Notes to Consolidated Financial Statements


<PAGE>

<TABLE>
<CAPTION>

                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Years Ended March 31, 1999, 1998 and 1997


                                                                        1999                  1998               1997
                                                                        ----                  ----               ----
<S>                                                              <C>                   <C>               <C>
OPERATING ACTIVITIES
Net Income                                                          $23,340,201           $11,303,756       $  8,923,512
Adjustments to reconcile net income
   to net cash provided by operating activities:
   Depreciation, amortization and other non-cash charges              1,875,322             1,887,996          1,594,300
   Stock options issued as compensation                                       -                     -            114,300
   Changes in deferred taxes                                           (586,000)           (1,524,434)          (890,000)
   Changes in deferred compensation                                     500,565               689,812            152,089
Changes in operating assets and liabilities:
   Increase in receivables                                           (3,683,822)           (6,724,742)        (1,298,139)
   Increase in receivable arbitration award                         (13,253,000)                    -                  -
   Increase in inventories                                           (8,046,675)           (2,820,449)        (4,335,426)
   Decrease (increase) in prepaid and other assets                      193,206              (799,947)          (991,412)
   Increase  in accounts payable and
     accrued liabilities                                              9,159,685            11,743,305          1,470,848
                                                               -------------------  -----------------  ------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                             9,499,482            13,755,297          4,740,072
                                                               -------------------  -----------------  ------------------

INVESTING ACTIVITIES
   Purchase of property and equipment, net                           (5,846,313)           (2,452,459)        (1,903,134)
   Purchase of marketable securities                                 (7,563,926)                    -                  -
   Product acquisition                                              (36,140,000)                    -                  -
                                                               -------------------  -----------------  ------------------
NET CASH (USED IN) INVESTING ACTIVITIES                             (49,550,239)           (2,452,459)        (1,903,134)
                                                               -------------------  -----------------  ------------------

FINANCING ACTIVITIES
   Principal payments on long-term debt                                (558,333)             (548,786)          (744,203)
   Proceeds from credit facility                                     25,000,000                     -                  -
   Proceeds from sale of Common Stock                                         -                     -          3,500,000
   Dividends paid on Preferred Stock                                   (421,751)             (421,751)          (105,437)
   Exercise of Common Stock options                                     490,103               197,771            102,156
                                                               -------------------  -----------------  ------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                  24,510,019              (772,766)         2,752,516
                                                               -------------------  -----------------  ------------------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    (15,540,738)           10,530,072          5,589,454
CASH AND CASH EQUIVALENTS AT:
 BEGINNING OF YEAR                                                   18,157,595             7,627,523          2,038,069
                                                               -------------------  -----------------  ------------------
 END OF YEAR                                                       $  2,616,857           $18,157,595       $  7,627,523
                                                               ===================  =================  ==================

Non-cash investing and financing activities:
     Portion of building acquired through proceeds
     from a term loan                                              $  2,300,000          $  3,500,000


</TABLE>

See Accompanying Notes to Consolidated Financial Statements


<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.

         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
manufactured  products and  pharmaceutical  compounds are sold to major domestic
drug, nutritional and food companies.

         Cash Equivalents

         Cash  equivalents  consist of highly  liquid  instruments  that have an
original maturity of three months or less. Cash equivalents consist primarily of
government  backed  securities  aggregating  $1,778,000  at March  31,  1999 and
$10,000,000 at March 31, 1998.

         Accounts Receivable-Trade

         The  Company  extends  unsecured  credit to its  customers.  Sales to a
single company  aggregated  19%, 12% and 15% for the years ended March 31, 1999,
1998 and 1997,  respectively.  In  addition,  the balance due from this  company
represented  approximately 30% and 18% of consolidated accounts receivable as of
March 31, 1999 and 1998.

         Marketable Securities

         Marketable  securities  are stated at fair market  value or  historical
cost in accordance  with  Statement of Financial  Accounting  Standards No. 115,
"Accounting for Certain  Investments in Debt and Equity Securities," and consist
of investments in U.S. government agency securities and corporate bonds maturing
through 2001.

         Available-for-sale securities, which include any security for which the
Company has no immediate  plan to sell but which may be sold in the future,  are
valued at fair value.  Realized gains and losses, based on the amortized cost of
the  specific  security,  are  included  in other  income  as  investment  gains
(losses).  Unrealized  gains and losses are recorded,  net of related income tax
effects, as a separate component of equity.

         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 life using the straight line method.

         Intangibles and Other Assets

         The  excess  of cost  over the  fair  value  of the net  assets  of the
Company's  Particle  Dynamics  subsidiary,  at the time of  acquisition is being
amortized  on a  straight  line  basis  over 40 years.  The  Micro-K(R)  product
acquisition is being amortized on a straight line basis over 20 years. All other
intangible  assets and deferred charges are being amortized over periods varying
from 5 to 17 years on a straight  line  basis.  The Company  reviews  intangible
assets  for  possible   impairment  if  there  is  a   significant   event  that
detrimentally effects operations.  Impairment is assessed using estimates of the
non-discounted  future earnings potential of the entity or assets acquired.  The
Company has estimated that no impairment  losses have occurred through March 31,
1999.

         Revenue Recognition

         The Company  recognizes revenue from product sales upon shipment to its
customers.  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. Royalties are earned based on sale of
products.  Other  non-refundable payments specified in the agreements, for which
there are no future  obligations,  such as  milestone  payments and research and
development reimbursements, are recognized as income when due.

         Research and Development

         Research  and  development  costs,  including  costs  funded  by  third
parties,  are  expensed in the period  incurred.  Payments  received  from third
parties for  research  and  development  are offset  against  expenses  when the
parties are billed.

         Earnings Per Share

         Basic  earnings per share is  calculated by dividing net income for the
period by the  weighted  average  number of shares of Common  Stock  outstanding
during the  period.  The  assumed  exercise  of stock  options  and the  assumed
conversion  of  Preferred  Stock are  included  in the  calculation  of  diluted
earnings per share.

         Income Taxes

         Income taxes are accounted for under the asset and liability method, in
which deferred income taxes are recognized as a result of temporary  differences
between  the  financial  reporting  basis  and  tax  basis  of  the  assets  and
liabilities.

         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.

         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, ("APB Opinion No.
25")  "Accounting  for Stock Issued to  Employees".  That Opinion  requires that
compensation  cost related to fixed stock option 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 stock
option grants.

         In October 1995, the Financial  Accounting  Standards  Board,  ("FASB")
issued SFAS No. 123,  "Accounting  for Stock-Based  Compensation".  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  has
applied the new method, are disclosed in Note 12.

         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 similar to
those which can be obtained  for similar  financial  instruments  in the current
marketplace.

         New Accounting Pronouncements

     In June 1998, the FASB issued SFAS No. 133  "Accounting for Derivatives and
Hedging  Activities," which establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts,  (collectively  referred  to as  derivatives)  and for hedging
activities.  SFAS No. 133 is effective for years  beginning  after June 15, 2000
and requires  comparative  information  for all fiscal  quarters of fiscal years
beginning  after June 15, 2000. The Company does not expect the adoption of this
statement to have  significant  impact on its results of  operations,  financial
position or cash flows.

         SOP 98-5 "Reporting on the Costs of Start-up Activities," requires that
costs be expensed  as  incurred.  This  statement  is  effective  for  financial
statements issued for fiscal years beginning after December 15, 1998. Management
believes  that the  adoption  of SOP 98-5  will have no  material  effect on its
financial statements.


<PAGE>


         Reclassifications

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

2.       Acquisition

         In the  fourth  quarter  of  fiscal  1999,  the  Company  acquired  the
world-wide  rights and trademark to Micro-K(R) from  Wyeth-Ayerst  Laboratories,
the  pharmaceutical  division of American Home Products  Corporation  for a cash
payment of $36 million, consisting of an $11 million payment from available cash
and $25 million  drawn on its revolving  line of credit.  The  intangible  asset
(product   rights)  related  to  the  acquisition  is  being  amortized  on  the
straight-line basis over a period of 20 years.

     The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition of Micro-K(R) had occurred on April 1, 1997,
after giving effect to certain  adjustments for interest  expense,  amortization
and income taxes.  These pro forma  results have been  prepared for  comparative
purposes  only and do not purport to be  indicative  of what would have occurred
had the  acquisition  been made on April 1,  1997,  nor are they  indicative  of
future results.  The Company  intends to pursue a strategy  designed to increase
sales of the Micro-K product line through promotion to physicians. In connection
with  the  implementation  of  such  strategy,  the  Company  expects  to  incur
additional  selling and  administrative  costs, which cannot be included as "pro
forma" adjustments under Regulation S-X of the Securities Act because the amount
of these costs are not reliably  determinable.  As a result,  the  unaudited pro
forma net income and pro forma per share  amounts  do not  purport to  represent
what the Company's  results of operations  would have been if the acquisition of
the Micro-K  product line had occurred on April 1, 1997,  and is not intended to
project the Company's results of operations for any future period (in thousands,
except per share amounts):

                                                   Year Ended March 31,
                                                 1999                  1998
                                                 ----                  ----

Total Revenues as reported                    $114,860             $  98,486
Total Revenues - Pro forma (unaudited)         133,372               124,322
Net Income as reported                          23,340                11,304
Net Income - Pro forma (unaudited)              26,591                18,437
Earnings Per Share:
   Basic as reported                            $ 1.26                $ 0.60
                                                ======                ======
   Diluted as reported                          $ 1.17                $ 0.58
                                                ======                ======
   Basic - Pro forma (unaudited)                $ 1.44                $ 1.00
                                                ======                ======
   Diluted - Pro forma (unaudited)              $ 1.33                $ 0.94
                                                ======                ======

3.       Inventories

         Inventories as of March 31, consist of:


                                                1999                  1998
                                                ----                  ----
        Finished goods                      $11,732,630          $ 8,954,290
        Work-in-process                       2,283,110            1,883,395
        Raw materials                        10,185,260            5,130,103
                                           ------------         ------------
                                             24,201,000           15,967,788
        Reserves for obsolescence              (548,288)            (361,751)
                                           --------------       --------------
                                            $23,652,712          $15,606,037
                                            ===========          ===========


<PAGE>

4.       Marketable Securities

         The  composition  of the  available-for-sale  investments  portfolio at
March 31, 1999 was:

                                 Amortized        Unrealized           Market
                                   Cost             Losses             Value
                                 ---------        ----------           ------
U.S. Government agency
  securities                    $ 1,000,000         $(1,934)        $   998,066
Corporate bonds                   6,563,926         (38,612)          6,525,314
                               ------------       ---------         -----------
                                $ 7,563,926        $(40,546)         $7,523,380
                                ===========        =========         ==========

         All securities mature in one to three years. Management does not intend
to hold these securities to maturity and expects to liquidate them during fiscal
year 2000,  accordingly  they are  classified as current  assets.  There were no
marketable securities in fiscal 1998.

5.       Comprehensive Income

         Effective  April 1, 1998 the Company  adopted SFAS No. 130,  "Reporting
Comprehensive Income". This Statement establishes standards for reporting of all
changes in equity  from  non-shareholder  sources.  There was no effect on prior
year financial statements.

         Changes in  accumulated  comprehensive  loss for the year end March 31,
1999 are as follows:

                                           Before-Tax       Tax       Net-of-Tax
                                             Amount       Benefit       Amount
                                          --------------------------------------
 Unrealized losses on securities:
    Unrealized losses arising
      during the period                    $ (40,546)     $ 15,409    $ (25,137)
    Less:  reclassification adjustment
      for losses realized in net income            -             -            -
                                          ----------      ---------   ----------
    Net unrealized losses                  $ (40,546)     $ 15,409    $ (25,137)
                                           =========      ========    ==========

6.       Property and Equipment

         Property and equipment as of March 31, consist of:

                                                    1999               1998
                                                    ----               ----
 Land and improvements                        $  2,055,567       $  1,490,567
 Building and building improvements              9,625,596          6,860,735
 Machinery and equipment                        14,989,656         13,267,562
 Office furniture and equipment                  3,830,360          3,323,955
 Leasehold improvements                          2,873,788          2,526,950
 Construction-in-progress (estimated
   costs to complete at
   March 31, 1999 - $1,258,000)                  2,840,330            600,618
                                              ------------        -----------
                                                36,215,297         28,070,387
 Less accumulated depreciation and
    amortization                               (17,248,814)       (15,633,854)
                                              ------------        -----------
Net property and equipment                     $18,966,483        $12,436,533
                                               ===========        ===========

<PAGE>


         Estimated useful lives:

           Land improvements                                10 years
           Building                                      25 to 40 years
           Building improvements                            10 years
           Machinery and equipment                        3 to 15 years
           Leasehold improvements                Lease life plus renewal period,
                                                           or 10 years
           Office furniture and equipment                 3 to 10 years

         Purchases of property and equipment were  $8,146,313 and $5,952,459 for
fiscal  years  1999 and 1998, respectively.  Depreciation  and  amortization  of
property and equipment was $1,616,363,  $1,633,735 and $1,406,542 for 1999, 1998
and 1997, respectively.


7.       Intangibles and Other Assets

         Intangibles and other assets as of March 31, consist of:

                                                     1999                1998
                                                     ----                ----
           Goodwill                              $2,138,561         $2,138,561
           Product rights                        36,140,000                  -
           Financing charges                        400,689            586,656
           Cash surrender value of  life
            insurance and split-dollar
            life insurance                          942,787            850,989
           Trademarks and patents                 1,047,249            865,206
           Deposits                                 341,015            446,807
           Other                                    291,200            351,200
                                                 ----------          ---------
                                                 41,301,501          5,239,419
           Less accumulated amortization         (1,859,105)        (1,874,520)
                                                 ----------         ----------
            Net intangibles and other assets    $39,442,396         $3,364,899
                                                ===========         ==========

         Amortization  of goodwill is being charged to operations at $55,404 per
year.  Amortization  of  product  rights  and all  other  deferred  charges  was
$188,146, $198,857 and $132,354 for 1999, 1998 and 1997, respectively.


8.       Accrued Liabilities

         Accrued liabilities as of March 31, consist of:

                                                      1999              1998
                                                      ----              ----
         Salaries, wages, incentives
            and benefits                          $3,481,503         $2,214,662
         Interest                                    125,424             72,999
         Income taxes                              7,855,331          2,884,522
         Professional fees                           763,530            875,891
         Revenue sharing (see Note 16)             3,300,000          4,911,634
         Other                                     1,564,427          1,357,724
                                                  ----------        -----------
                                                 $17,090,215        $12,317,432

9.       Long-Term Debt

         Long-term debt as of March 31, consists of:

                                                     1999               1998
                                                     ----               ----
          Revolving credit line                  $25,000,000       $          -
          Industrial revenue bonds                 1,830,000          2,155,000
          Building mortgages                       5,372,222          3,305,555
                                                 -----------        -----------
                                                  32,202,222          5,460,555
          Less current portion                     (711,669)          (558,333)
                                                 -----------        -----------
          Long-term debt                         $31,490,553         $4,902,222
                                                 ===========         ==========

         As of March 31, 1999,  the Company has a loan  agreement  expiring June
18, 2000 with LaSalle National Bank. The agreement provides for a revolving line
of credit for borrowing up to $40,000,000.  The credit facility is unsecured and
interest is  currently  charged at the LIBOR rate of 4.94% plus 200 basis points
or 6.94% at March 31, 1999. At March 31, 1999, the Company had cash borrowing of
$25,000,000 and $4,149,746 in open letters of credit issued under this facility.
The agreement  includes  covenants  that impose  minimum  levels of tangible net
worth and earnings before  interest,  taxes,  depreciation and  amortization,  a
maximum leverage ratio, and limit capital expenditures and dividend payments.

         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, which may only be accessed in
case of default on the bonds.  The bonds do not allow the holder to require  the
Company to redeem the bonds.

         The building  mortgages  bear  interest at 8.53% and 7.95% with monthly
principal  payments of $19,444 and $12,778 plus  interest  through June 30, 2002
and March 11,  2004 with final  payments  of the  remaining  principal  balances
outstanding  plus accrued and unpaid interest due on June 18, 2002 and March 11,
2004, respectively.

         The aggregate  maturities of long-term debt as of March 31, 1999 are as
follows:

               2000                              $    711,669
               2001                                25,711,669
               2002                                   711,669
               2003                                 2,850,559
               2004                                 2,011,656
               Later Years                            205,000
                                                 -------------
                                                 $ 32,202,222
                                                 =============

         The Company paid interest of $445,910,  $465,040,  and $482,471  during
the years ended March 31, 1999, 1998 and 1997, respectively.


10.      Commitments and Contingencies

         Leases

         The Company has non-cancelable  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
non-cancelable operating leases are as follows:

                 2000                              $  1,264,269
                 2001                                 1,153,955
                 2002                                 1,123,391
                 2003                                 1,030,555
                 2004                                   993,728
                 Later Years                            939,831
                                                   ------------
                                                   $  6,505,729
                                                   ============

         Total rent  expense for the years ended March 31,  1999,  1998 and 1997
was $1,456,540, $1,076,628 and $1,189,349, respectively.

         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 its present  insurance will cover any potential claims that
may be asserted in the future.

         The Company is subject to legal  proceedings  and claims which arise 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 or operations.

         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 expensed $500,565, $689,812 and $152,089
under this agreement in 1999, 1998 and 1997, respectively.

11.      Income Taxes

         The fiscal 1999 provision was based on the estimated  federal and state
taxable income using the statutory rates. The fiscal 1998 provision was based on
the estimated federal and state taxable income using statutory rates, as well as
utilization of its general  business  credit carry  forwards  generated in prior
years, while the fiscal 1997 provision was based on an estimate of state taxable
income using  statutory  rates. No loss carry forwards were available for fiscal
1999 or 1998.

<PAGE>

                                         Years Ended March 31,
                                         -------------------
                                1999              1998                 1997
                                ----              ----                 ----
   Provision
       Current
          Federal            $ 13,373,000       $ 6,233,000         $  804,000
          State                 1,506,000           978,000            469,000
                             ------------       -----------         ----------
                               14,879,000         7,211,000          1,273,000
                             ------------       -----------         ----------

       Deferred
          Federal                (528,000)       (1,365,000)          (804,000)
          State                   (58,000)         (159,000)           (86,000)
                             ------------       -----------         ----------
                                 (586,000)       (1,524,000)          (890,000)
                             ------------       -----------         ----------
                              $14,293,000       $ 5,687,000         $  383,000
                             ============       ===========         ==========

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

                                      1999            1998              1997
                                      ----            ----              ----
Computed income tax expense
   at statutory rate              $13,171,000      $5,947,000        $3,164,000
Change in valuation allowance               -      (1,568,000)       (3,392,000)
State income taxes, less
   federal income tax benefit       1,070,000         696,000           383,000
Other                                  52,000         612,000           228,000
                                  -----------      ----------       -----------
Provisions for income taxes       $14,293,000      $5,687,000       $   383,000
                                  ===========      ==========       ===========

         As of March 31, 1999, and 1998, the tax effect of temporary differences
between the tax basis of assets and liabilities  and their  financial  reporting
amount are as follows:

<TABLE>
<CAPTION>

                                          1999                            1998
                                   Current     Non-Current        Current        Non-Current
                                   -------     -----------        -------        -----------
<S>                           <C>            <C>            <C>              <C>

Fixed asset basis differences    $        -    $(1,167,000)    $          -     $(1,136,000)
Reserve for inventory and
  receivables                     2,281,000               -       2,506,000               -
Vacation pay reserve                469,000               -         381,000               -
Deferred compensation                     -         788,000               -         601,000
Other                               629,000               -          62,000               -
                                 ----------   --------------   ------------    --------------
Net deferred tax asset
  (liability)                    $3,379,000    $   (379,000)    $ 2,949,000    $   (535,000)
                                 ==========    =============    ===========    =============

</TABLE>

<PAGE>

         The Company paid income taxes of  $9,213,000,  $4,754,088  and $846,000
during the years ended March 31, 1999, 1998 and 1997, respectively.

12.      Employee Benefits

         Stock Option Plan

         The Company  established the KV Pharmaceutical  Company Incentive Stock
Option Plan for key employees and reserved  3,000,000 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 its 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.

         The following summary shows the transactions for the fiscal years 1999,
1998 and 1997 under option arrangements:

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

Balance, March 31, 1996           763,718    $  4.47       283,064      $  4.17
Options granted                   587,898       8.00             -            -
Options becoming exercisable            -          -       308,294         7.06
Options exercised                 (39,660)      2.61       (39,660)        2.61
Options canceled                  (69,825)      5.44       (38,213)        5.26
                                ---------                 --------

Balance, March 31, 1997         1,242,131       6.14       513,485         5.94
Options granted                   523,500      11.59             -            -
Options becoming exercisable            -          -       483,750         9.85
Options exercised                 (62,057)      3.21       (62,057)        3.21
Options canceled                  (47,820)      8.95        (8,352)        7.56
                                ---------                ---------


Balance, March 31, 1998         1,655,754       7.89       926,826         8.15
Options granted                   423,398      15.77             -            -
Options becoming exercisable            -          -       234,136         8.61
Options exercised                (120,607)      5.22      (120,607)        5.22
Options canceled                 (103,370)     11.31       (19,946)        9.57
                                ---------                ---------

Balance, March 31, 1999         1,855,175    $  9.67     1,020,409      $  8.58
                                =========                =========

         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.

         The  weighted-average  grant date fair value per share of stock options
granted during the year was $3.48 for A options,  $2.21 for B options, $9.17 for
A options,  $5.29 for B options,  $5.23 for A options and $4.02 for B options in
1999, 1998 and 1997, respectively.  The weighted-average significant assumptions
used to determine those values using the Black-Scholes  option pricing model for
1999, 1998 and 1997,  respectively,  were: volatility of .6630, .6700 and .6212;
dividend  yield of 0% in all three years;  average  risk-free  interest  rate of
return of 5.0%, 6.3% and 6.6%; expected option lives ranging from 3 to 10 years.

         The  following  table  summarizes   information   about  stock  options
outstanding at March 31, 1999:

<TABLE>
<CAPTION>

                                Options Outstanding                      Options Exercisable
                  -----------------------------------------------  -----------------------------
    Range of         Number      Weighted Average     Weighted         Number          Weighted
    Exercise      Outstanding          Life           Average        Exercisable       Average
     Prices        at 3/31/99        Remaining     Exercise Price    at 3/31/99     Exercise Price
------------------------------ ---------------------------------- --------------- -----------------
<S>                <C>          <C>             <C>              <C>                <C>

$ 1.84 - $ 3.00        52,667      2 Years          $ 2.22            42,829           $ 2.21
$ 3.01 - $ 6.00       470,346      3 Years          $ 4.88           300,223           $ 4.88
$ 6.01 - $ 9.00       465,545      5 Years          $ 8.17           272,856           $ 8.37
$ 9.01 - $12.00       413,325      2 Years          $11.47           339,150           $11.71
$12.01 - $20.88       452,938      9 Years          $15.37            64,996           $15.32

</TABLE>


         The  pro-forma  effect on earnings  for the year ended March 31,  1999,
1998 and 1997 of the  method  consistent  with  SFAS No.  123 would be to reduce
reported  net  income by  approximately  $0.8  million,  $2.2  million  and $1.7
million,  respectively,  to approximately  $22.5 million,  $9.1 million and $7.2
million.

         The  pro-forma  effect on basic  earnings per share for the years ended
March 31,  1999,  1998 and 1997 of this method would be to reduce net income per
share by $.05 per  share,  $.12 per share and $.10 per share,  respectively,  to
$1.21 per share, $.48 per share and $.38 per share.

         The pro-forma  effect on diluted earnings per share for the years ended
March 31,  1999,  1998 and 1997 of this method would be to reduce net income per
share by $.04 per  share,  $.12 per share and $.09 per share,  respectively,  to
$1.13 per share, $.46 per share and $.38 per share.

         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 $100,000 for fiscal 1999 and 1998 and $50,000 in 1997. The
Plan includes features as described under Section 401(k) of the Internal Revenue
Code.

         The Plan was  amended  as of April 1,  1997,  to change  the  Company's
contributions to the 401(k) investment funds to fifty percent (50%) of the first
7% of the salary  contributed by each  participant.  Contributions to the 401(k)
investment  funds of approximately  $421,000,  $222,000 and $78,000 were made in
1999, 1998 and 1997, respectively.

         Contributions  are also made to  multi-employer  defined  benefit plans
administered  by labor unions for certain union  employees.  Amounts  charged to
pension expense and contributed to these plans were $86,218, $79,560 and $63,770
in 1999, 1998 and 1997, respectively.

         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. The Company
has recorded  $225,000 of accrued health insurance  expense reserves as of March
31,  1999 and  $125,000  as of March  31,  1998,  for  claims  incurred  but not
reported.  For union  employees,  the  Company  participates  in a fully  funded
insurance plan sponsored by the union. Expenses related to both plans charged to
operations were approximately $1,390,000,  $1,095,000,  and $1,090,000 in fiscal
1999, 1998 and 1997, respectively.

13.      Related Party Transactions

         A director of the Company was associated  with a law firm that rendered
various legal services to the Company.  The Company paid the firm  approximately
$221,460,  $239,000 and $257,000 during the years ended March 31, 1999, 1998 and
1997, 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, 1999,  1998 and 1997 totaled
$241,143, $237,164 and $231,885, respectively.

14.      Equity Transactions

         As of March 31, 1999,  the Company had 241,000  shares of 7% Cumulative
Convertible  Preferred Stock (par value $.01 per share)  outstanding 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 $6.67 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. No dividends may be
paid on Class A or Class B Common Stock unless all  dividends on the  Cumulative
Convertible  Preferred  Stock  have  been  declared  and  paid.  Undeclared  and
unaccrued  cumulative  preferred  dividends at both March 31, 1999 and 1998 were
$2,203,644 or $9.14 per share.  Also,  under the terms of its credit  agreement,
the  Company  may not pay cash  dividends  in excess of 25% of the prior  fiscal
year's consolidated net income.

         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 in the election of directors and on other
matters.

         Under the terms of the Company's  current loan  agreement (see Note 9),
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.

         On March  23,  1998,  the  Company's  Board  of  Directors  declared  a
three-for-two  stock  split in the form of a 50% stock  dividend  of its  Common
Stock to  shareholders  of record on April 3, 1998,  payable on April 17,  1998.
Common Stock was credited  and retained  earnings was charged for the  aggregate
par value of the  shares  issued.  The  stated  par value of each  share was not
changed from $.01.

<PAGE>
         All per share data in this  report  has been  restated  to reflect  the
aforementioned three-for-two stock split in the form of a 50% stock dividend.


15.      Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
earnings per share:

<TABLE>
<CAPTION>

                                                       1999               1998              1997
                                                       ----               ----              ----
Numerator:
<S>                                             <C>               <C>              <C>

Net income                                         $23,340,201        $11,303,756      $  8,923,512

Preferred Stock dividends                             (421,751)          (421,751)         (421,751)
                                                 -------------      --------------    --------------

Numerator for basic earnings per
   share--income available to common
   shareholders                                     22,918,450         10,882,005         8,501,761

Effect of dilutive securities:
   Preferred Stock dividends                           421,751            421,751           421,751
                                                 -------------      -------------     -------------

Numerator for diluted earnings per
   share-income available to common share-
   holders after assumed conversions               $23,340,201        $11,303,756      $  8,923,512
                                                  ============      =============      ============
Denominator:

Denominator for basic earnings per
   share--weighted-average shares                   18,201,287         18,093,896        17,758,992
                                                  ------------      -------------     -------------
Effect of dilutive securities:
   Employee stock options                              866,490            642,912           359,055
   Convertible Preferred Stock                         903,750            903,750           903,750
                                                  ------------      -------------     -------------

Dilutive potential Common Shares                     1,770,240          1,546,662         1,262,805
                                                  ------------       ------------     -------------
Denominator for diluted earnings
      per share--adjusted weighted-average
      shares and assumed conversions                19,971,527         19,640,558        19,021,797
                                                  ===========        ============      ============

Basic Earnings per Share (1):                       $     1.26         $     0.60        $     0.48
                                                    ==========         ==========        ==========
Diluted Earnings per Share (1)(2)                   $     1.17         $     0.58        $     0.47
                                                    ==========         ==========        ==========

<FN>

(1)  The two-class  method for Class A and Class B Common Stock is not presented
     because the earnings per share are  equivalent  to the if converted  method
     since  dividends  were not  declared or paid and each class of common stock
     has equal ownership of the Company.

(2)  Employee stock options to purchase 58,838 shares of Class A Common Stock at
     March 31, 1998 and 28,350  shares of Class A Common Stock at March 31, 1997
     are not presented  because these  options are  anti-dilutive.  The exercise
     prices of these  options  exceeded the average  market prices of the shares
     under  option  in each  respective  period.  There  were  no  anti-dilutive
     employee stock options as of March 31, 1999.

     Options to purchase  500,000  shares of Class A Common Stock in each of the
     three years ended March 31,  1999,  sold in  connection  with an  agreement
     entered  into in  January  1996,  are not  presented  because  the  minimum
     exercise prices of these options  exceeded the average market prices of the
     shares under option in each  respective  period.  As of March 31, 1999, all
     options sold under this agreement had expired.


</FN>
</TABLE>

16.      Agreements

         In January 1997,  the Company  concluded a broad-based  agreement  with
Roche Holdings,  Ltd. of Basel,  Switzerland  ("Roche"),  which provides for the
marketing by Roche, or its licensee,  of a  prescription,  one dose cure vaginal
antifungal  product.  The product  received FDA approval in February  1997.  The
agreement  also gave 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  cash  payments  of  $3,000,000  to be made in
January 1997, 1998 and 1999, respectively.  All of these non-refundable payments
were received and recorded as licensing revenue in the fourth quarter of each of
the respective fiscal years.

         As  part  of  a  further   collaboration  under  the  agreement,   KV's
wholly-owned subsidiary,  ETHEX Corporation,  began marketing in fiscal 1998 two
of Roche's brand name products  generically under a revenue sharing  arrangement
based on sales and gross margin.


<TABLE>
<CAPTION>

17.      Quarterly Financial Results (Unaudited)

                       ($ in 000's, except per share data)

FISCAL  1999                         1st Quarter      2nd Quarter       3rd Quarter      4th Quarter            Year
------------                         -----------      -----------       -----------      -----------            ----
<S>                                <C>              <C>              <C>               <C>              <C>
Net Sales                              $ 25,670         $  26,406        $  27,022         $  35,762       $  114,860

Gross Profit                             10,515            11,759           13,517            17,655           53,446

Pretax Income (a)                         4,150             4,956            6,454            22,073           37,633

Net Income (a)                            2,570             3,062            4,020            13,688           23,340

Earnings Per Share-Basic (b)               0.14              0.16             0.21              0.75             1.26

Earnings Per Share-Diluted (b)             0.13              0.15             0.20              0.69             1.17

FISCAL  1998
------------
Net Sales                                18,202            21,887           28,434            29,963           98,486

Gross Profit                              7,984             9,459           11,393            13,167           42,003

Pretax Income (a)                         2,761             3,556            4,030             6,644           16,991

Net Income (a)                            1,841             2,182            2,763             4,518           11,304

Earnings Per Share-Basic (b)               0.10              0.11             0.15              0.24             0.60

Earnings Per Share-Diluted (b)             0.09              0.11             0.14              0.23             0.58

Note:
----
<FN>

(a)    The  fourth  quarter  of  fiscal  1999  includes  a  non-recurring   gain
       associated  with a $7.9 million  arbitration  award,  net of expenses and
       taxes (see Note 19) and a $3.0 million  non-refundable payment associated
       with an agreement with Roche Holdings, Ltd. (see Note 16). A $3.0 million
       non-refundable  payment was also received in the fourth quarter of fiscal
       1998.

(b)    All  earnings per share  amounts have been  restated to reflect a 3 for 2
       stock split in the form of a 50% stock dividend, declared by the Board of
       Directors  on  March  23,  1998  and   distributed   April  17,  1998  to
       shareholders of record as of April 3, 1998.

</FN>
</TABLE>

<PAGE>


18.      Segment Reporting

         In fiscal 1999,  the Company  adopted SFAS No. 131,  "Disclosure  about
Segments of an Enterprise and Related  Information," which revises reporting and
disclosure  requirements for operating  segments.  The following  information is
provided in accordance with the requirements of this statement.

     The Company's operations are principally managed on a products and services
basis and are  comprised  of two  reportable  segments:  Contract  Services  and
Generic Drugs. Contract Services sales are primarily  inter-segment sales to the
Generic Drugs segment with sales to outside  customers  contributing  13% of its
revenues.  The generic  business  sells  prescription  pharmaceuticals  to major
wholesalers,  chains and buying groups.  All other  includes the  pharmaceutical
compound,  licensing  and  branded  businesses  which do not  meet the  required
quantitative thresholds for reportability.

         Segment  profits  are  comprised  of  segment  revenues  less  cost  of
materials,  production costs, depreciation and operating expenses. Only selling,
general  and  administrative  expenses  directly  identifiable  with a segment's
operations  are included in profits.  The majority of research and  development,
general  and  administrative,  amortization  and  interest  expense,  as well as
interest and other income, are not allocated to segments.

<TABLE>
<CAPTION>

         Revenues and profits for these segments are as follows:


                               Fiscal Year                                                         Corporate
                                  Ended          Contract        Generic           All           Expenses and
                                March 31         Services         Drugs           Other          Eliminations       Consolidated
                               -----------       --------        -------          -----          ------------       ------------
(Thousands of Dollars)
<S>                            <C>             <C>             <C>            <C>              <C>                    <C>

Total Revenues                    1999            $33,234         $91,834        $18,970           $(29,178)            $114,860
                                  1998             27,063          79,193         20,096            (27,866)              98,486
                                  1997             24,173          40,225         12,794            (19,301)              57,891
---------------------------- ---------------- --------------- -------------- ---------------- ------------------ ----------------

Segment Profits                   1999              1,390          36,351          5,463             (5,571)              37,633
                                  1998                817          25,090          9,142            (18,058)              16,991
                                  1997                946          17,509          3,875            (13,023)               9,307
---------------------------- ---------------- --------------- -------------- ---------------- ------------------ ----------------

Identifiable Assets               1999             40,431         133,649         79,727           (125,817)             127,990
                                  1998             37,193          95,152         21,940            (85,924)              68,361
                                  1997             20,861          63,254          9,328            (52,081)              41,362
---------------------------- ---------------- --------------- -------------- ---------------- ------------------ ----------------

Property and
equipment additions               1999              4,433              93            498              3,122                8,146
                                  1998              1,486              24            137              4,305                5,952
                                  1997              1,640             227             73                  -                1,940
---------------------------- ---------------- --------------- -------------- ---------------- ------------------ ----------------

Depreciation and
Amortization                      1999              1,457              74            116                213                1,860
                                  1998              1,479              78            104                227                1,888
                                  1997              1,280              54             72                188                1,594

</TABLE>


         Elimination of intersegment  revenues  consists of revenues reported in
the  internal  management  system  which are not  reportable  as revenues  under
generally accepted accounting principles.  Consolidated revenues are principally
derived from customers in North America.

         Property and equipment is all located in St. Louis, Missouri.


19.      Nonrecurring Gain

         Under a contract  that the Company has with a  supplier,  issues  arose
with respect to the timing of supply of a product and the supplier's  failure to
pursue another product.  The terms of the contract  provided for binding private
arbitration  between the parties which resulted in the Company  receiving notice
of an award in December, 1998 of $13,253,000. The Arbitration Panel subsequently
directed the parties to have further discussions  including possible replacement
products.  Payment  of the award  was  deferred  pending  the  outcome  of these
discussions.   Subsequent   attempts  to  obtain   replacement   products   were
unsuccessful  and the  Company  expects to be paid the  arbitration  award on or
before  June 15,  1999.  The award,  net of related  expenses  of  $530,000,  is
reflected  in  Other  Income  in the  Statement  of  Income  and  as an  account
receivable in the Balance Sheet at March 31, 1999, and, net of applicable income
taxes, represents $.40 per common share on a diluted basis.

<PAGE>

Item  9. Changes In and Disagreements With Accountants on Accounting and
         Financial Disclosure

         Not Applicable.


                                    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 its 1999 Annual Meeting
of  Shareholders,  which  involves the election of a director,  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 its 1999 Annual Meeting
of  Shareholders,  which  involves the election of a director,  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  its  1999  Annual  Meeting  of
Shareholders,  which involves the election of a director is incorporated  herein
by this reference.

Item 13. Certain Relationships and Related Transactions

         The information  contained under the caption "TRANSACTIONS WITH ISSUER"
in its definitive  proxy statement to be filed pursuant to Regulation  14(a) for
its 1999  Annual  Meeting of  Shareholders,  which  involves  the  election of a
director, is incorporated herein by this reference.


<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         36

               Consolidated Balance Sheets as of
               March 31, 1999 and 1998                                    18

               Consolidated Statements of Income
               for the Years Ended March 31, 1999, 1998 and 1997          19

               Consolidated Statements of Shareholders'
               Equity for the Years Ended March 31, 1999,
                1998 and 1997                                             20

               Consolidated Statements of Cash Flows
               for the Years Ended March 31, 1999, 1998 and 1997          21

               Notes to Financial Statements                              22

               2.   Financial Statement Schedules:

               Report of Independent Certified Public Accountants
               regarding financial statement schedules

               Schedule II - Valuation and Qualifying Account

       (b)     Reports on Form 8-K.  A report on Form 8-K dated  April 5,
               1999 reporting KV Pharmaceutical  Company's acquisition of
               the  world-wide  rights and trademark to  Micro-K(R)  from
               Wyeth Ayerst Laboratories,  the pharmaceutical division of
               American Home Products Corporation.


<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



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



The  audits  referred  to in our  report  dated  May 14,  1999  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
May 14, 1999



<PAGE>
<TABLE>
<CAPTION>

2.      Financial Statement Schedules:
        -----------------------------
                                                   Schedule II
                                            Valuation and Qualifying Accounts
                                            Balance at      Additions charged    Amounts charged         Balance
                                            beginning          to costs and             to                at end
                                             of year             expenses            reserves            of year
                                            ---------       -----------------    ---------------         -------
<S>                                      <C>                 <C>                <C>               <C>

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
                                                =======           =========           =========        =========

Year Ended March 31, 1998:
Allowance for doubtful accounts             $   129,054         $ 1,086,961         $   883,771      $   332,244
Inventory obsolescence                          296,322           1,363,908           1,298,479          361,751
                                                -------           ---------           ---------        ---------
                                            $   425,376         $ 2,450,869         $ 2,182,250      $   693,995
                                                =======           =========           =========        =========

Year Ended March 31, 1999:
Allowance for doubtful accounts             $   332,244         $   412,566         $   113,804      $   631,006
Inventory obsolescence                          361,751           1,031,569             845,032          548,288
                                                -------           ---------           ---------        ---------
                                            $   693,995         $ 1,444,135         $   958,836      $ 1,179,294
                                                =======           =========           =========        =========

</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 47 through 52 of this Report.  Management contracts
and compensatory plans are designated on the Exhibit Index.




<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 4, 1999                    By  /s/  Marc S. Hermelin
                                             ----------------------------------
                                             Vice Chairman of the Board
                                             (Principal Executive Officer)



Date:    June 4, 1999                    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 4, 1999                     By  /s/  Marc S. Hermelin
                                              ---------------------------------
                                              Marc S. Hermelin




Date:    June 4, 1999                     By  /s/  Victor M. Hermelin
                                              ---------------------------------
                                              Victor M. Hermelin




Date:                                     By
                                              ---------------------------------
                                              Garnet E. Peck, Ph.D.




Date:    June 4, 1999                     By  /s/ Norman D. Schellenger
                                              ---------------------------------
                                              Norman D. Schellenger



Date:    June 4, 1999                     By  /s/  Alan G. Johnson
                                              ---------------------------------
                                              Alan G. Johnson



<PAGE>
                                  EXHIBIT INDEX
                                  -------------

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

      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 Form 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.

      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  Agreement  dated June 18, 1997  between the Company and
                   its subsidiaries and LaSalle National Bank ("LaSalle"), which
                   was filed as Exhibit 4(i) to the  Company's  Annual Report on
                   Form 10-K for the year ended March 31, 1997, is  incorporated
                   herein by this reference.

      4(d)         Revolving  Note,  dated June 18, 1997, by the Company and its
                   subsidiaries in favor of LaSalle,  which was filed as Exhibit
                   4(j) to the Company's Annual Report on Form 10-K for the year
                   ended  March  31,  1997,  is  incorporated   herein  by  this
                   reference.

      4(e)         Term  Note,  dated  June 24,  1997,  by the  Company  and its
                   subsidiaries in favor of LaSalle,  which was filed as Exhibit
                   4(k) to the Company's Annual Report on Form 10-K for the year
                   ended  March  31,  1997,  is  incorporated   herein  by  this
                   reference.

      4(f)         Reimbursement Agreement dated as of October 16, 1997, between
                   the Company and  LaSalle,  which was filed as Exhibit 4(f) to
                   the  Company's  Annual Report or Form 10-K for the year ended
                   March 31, 1998, is incorporated herein by this reference.

      4(g)         Deed of Trust and Security  Agreement dated as of October 16,
                   1997,  between the Company  and  LaSalle,  which was filed as
                   Exhibit 4(g) to the Company's  Annual Report or Form 10-K for
                   the year ended March 31, 1998, is incorporated herein by this
                   reference.

      4(h)         First  Amendment,  dated  as of  October  28,  1998,  to Loan
                   Agreement  between  the  Company  and  its  subsidiaries  and
                   LaSalle, filed herewith.

      4(i)         Second  Amendment,  dated  as of  March  11,  1999,  to  Loan
                   Agreement  between  the  Company  and  its  subsidiaries  and
                   LaSalle, 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.

     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 Form 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 Form 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.

     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.

     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 Form 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.

     10(u)*        Amendment  to  and  Restatement  of  the  KV   Pharmaceutical
                   Company's  1991  Incentive  Stock  Option  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, is  incorporated
                   herein by this reference.

     10(y)*        Fourth Amendment to and  Restatement,  dated as of January 2,
                   1997, of the KV  Pharmaceutical  Company 1991 Incentive Stock
                   Option  Plan,  which  was  filed  as  Exhibit  10(y)  to  the
                   Company's Annual Report on Form 10-K for the year ended March
                   31, 1997, is incorporated herein by this reference.

     10(z)*        Agreement  between  the  Company and Marc  S.  Hermelin, Vice
                   Chairman,  dated December 16, 1996, with supplemental  letter
                   attached,  which was filed as Exhibit  10(z) to the Company's
                   Annual Report on Form 10-K for the year ended March 31, 1997,
                   is incorporated herein by this reference.

     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,
                   which was filed as  Exhibit  10(aa) to the  Company's  Annual
                   Report on Form 10-K for the year  ended  March 31,  1997,  is
                   incorporated herein by this reference.

     10(bb)*       Stock Option Agreement dated as of January 3, 1997,  granting
                   a stock option to Marc S. Hermelin, filed herewith.

     10(cc)*       Stock Option  Agreement dated as of May 15, 1997,  granting a
                   stock option to Marc S. Hermelin, filed herewith.

     10(dd)        Asset  Purchase  Agreement by and between K-V  Pharmaceutical
                   Company  and  American  Home  Products  Corporation,   acting
                   through its Wyeth-Ayerst  Laboratories division,  dated as of
                   February  11,  1999,  which was filed as  Exhibit  2.1 to the
                   Company's  Report  on  Form  8-K  filed  April  5,  1999,  is
                   incorporated herein by this reference.

     10(ee)*       Amendment,  dated  as of  October  30,  1998,  to  Employment
                   Agreement  between  the Company  and Marc S.  Hermelin,  Vice
                   Chairman,  filed  herewith.

     10(ff)        Exclusive  License  Agreement,  dated  as of  April  1,  1999
                   between  Victor M.  Hermelin  as licensor and the Company as
                   licensee, filed herewith.

     21            List of Subsidiaries, filed herewith.

     23            Consent of BDO Seidman, LLP, filed herewith.

     27            Financial Data Schedule, filed herewith.



     *   Management contract or compensation plan.