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, 1998 OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                        For the Transition period from to

                          Commission file number 1-9601

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

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

           Securities registered pursuant to Section 12(b) of the Act:

Class A Common Stock par value $.01 per share            American Stock Exchange
Class B Common Stock par value $.01 per share            American Stock Exchange

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or such shorter  period that the registrant
was  required  to file such  reports)  and (2) has been  subject to such  filing
requirements for the past 90 days. Yes X No

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

         The  aggregate  market  value of the  8,566,250  shares  of Class A and
3,105,137 shares of Class B Common Stock held by nonaffiliates of the Registrant
as of April 30, 1998, was  $185,245,156  and  $67,536,730,  respectively.  As of
April 30, 1998, the Registrant had outstanding  11,733,323 and 6,404,877  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  1998 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.

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

Item     1. Description of Business

         (a) General Development of Business

         K-V  Pharmaceutical  Company ("KV", 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 a
diverse  portfolio  of sixteen  technologies,  including  three oral  controlled
release technologies,  six site-specific oral and topical delivery technologies,
three tastemasking  technologies and a quick dissolve tablet  technology.  These
technologies,  which are used in the Company's  products and the products of its
marketing  licensees,  are  designed to improve and control the  absorption  and
utilization by the human body of active pharmaceutical  compounds,  allowing the
compounds to be  administered  less  frequently  with  potentially  reduced side
effects,   improved   drug  efficacy   and/or   enhanced   patient   compliance.
Additionally,  the Company  continually  applies its  scientific  expertise  and
development  experience  to refine and enhance its  existing  drug  delivery and
formulation  technologies and to create new technologies that may be used in its
drug development programs.
 
         KV licenses the marketing rights for products developed with these drug
delivery   technologies   to  major  domestic  and   international   brand  name
pharmaceutical  marketers  in  return  for  license  fees,  milestone  payments,
research reimbursement and manufacturing and royalty revenues.

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

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

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

         (b) Industry Segments

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

         (c) Narrative Description of Business

         The Company's  business is the  formulation  and  commercialization  of
pharmaceutical  products, both prescription and over-the-counter,  utilizing the
Company's proprietary drug delivery technologies.

         An important profit center of the Company is the development of generic
drugs using its proprietary technologies that it markets and distributes through
its  wholly-owned  subsidiary,  ETHEX  Corporation.  ETHEX  currently  sells  46
products,  22 of which were  launched over the past two fiscal years and many of
which  utilize KV's drug  delivery  systems.  Approximately  8 to 10  additional
products  are expected to be launched  during  fiscal  1999.  ETHEX  Corporation
distributes and markets these technology distinguished generic products directly
to various  markets  and  classes  of trade  customers,  including  wholesalers,
chains, distributors,  mail order houses, independent pharmacies, large HMOs and
PPOs.  ETHEX has achieved 100%  penetration  in the 25 largest  wholesalers  and
chains.  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  typically  contain  pharmaceutical  compounds
previously  approved  by  the  FDA  and  generally  qualify  for  the  use of an
abbreviated testing and approval process.

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

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

         During the mid-1990's,  the Company  implemented an integrated business
strategy to commercialize  its drug delivery  technologies in a variety of ways,
principally  by  developing  and  marketing  of  both  brand  name  and  generic
pharmaceutical  products,  and by  licensing  marketing  rights to  products  to
pharmaceutical  clients.  During fiscal 1998,  1997 and 1996,  revenues from the
implementation  of  these  strategies  were  approximately  95%,  91%  and  90%,
respectively, of the Company's total net revenues.

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

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

         The  Development  and  Marketing  of Brand  Name  Pharmaceuticals.  The
Company  applies its proprietary  drug delivery  technologies in the formulation
and development of brand name prescription and OTC pharmaceutical  products. The
Company also plans to directly market and distribute enhanced technology branded
products in specific niche  therapeutic  areas. The Company plans to continue to
enter  into  long  term  licensing  agreements  with  pharmaceutical   marketing
companies  under  which the Company  develops  products  which  utilize its drug
delivery  technologies in return for license fees, milestone payments,  research
reimbursement and manufacturing and royalty revenues on sales of the products.
 
         Selective Acquisitions and In-Licensing  Opportunities.  The Company is
actively seeking  opportunities to acquire additional products,  product rights,
technologies and distribution  channels that complement the Company's technology
base and  business  and  which can be  integrated  into the  Company's  existing
research, manufacturing, marketing and distribution capabilities. The Company is
also evaluating the acquisition of individual  branded products and/or companies
with branded products and marketing capability.

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

DRUG DELIVERY TECHNOLOGIES
 
         KV's proprietary drug delivery and formulation technologies enhance the
effectiveness of new therapeutic agents,  existing  pharmaceutical  products and
nutritional  supplements,  such as vitamins and minerals.  During the 1990's, KV
has continued to develop and introduce important new generations of technologies
which  represent  significant   advancements  in  the  field  of  drug  delivery
technologies.  These drug delivery  technologies are generally  organized in the
areas of  "controlled  release",  "site  release",  "tastemasking",  and  "quick
dissolve"  technologies.  Many of these technologies have been used successfully
for the  commercialization  of products  currently being marketed by the Company
and  its  pharmaceutical   marketing  licensees.  The  following  describes  the
Company's principal drug delivery technologies.
 
Oral Controlled Release Technologies
 
         The Company has developed a number of controlled  release drug delivery
technologies and formulation techniques that tailor the drug release profiles of
certain orally administered  pharmaceuticals and nutritional supplements.  These
technologies,  which  provide  for a single oral dose that  releases  the active
ingredient  over periods  ranging  from 12 to 24 hours,  are designed to improve
patient  compliance,  improve  drug  effectiveness  and  reduce  potential  side
effects.  These technologies have been used to formulate  tablets,  capsules and
caplets that deliver single  therapeutic  compounds,  as well as multiple active
compounds,  each requiring  different  release  patterns  within a single dosage
form.

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

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

         SYMATRIX(TM) is a  micro-particulate  formulation  that employs smaller
particles  than  KV/24(R)  and  METER  RELEASE(R).   SYMATRIX(TM)   encapsulates
therapeutic  agents which improve a drug's  absorption in the body where precise
release profiles are less important. MICRO RELEASE(R) has been commercialized in
prescription  and  OTC  nutritional  products,  including  various  prescription
prenatal vitamins marketed through ETHEX Corporation.
 
Site Release Technologies
 
         KV's Site Release(R)  technologies use advanced  polyphasic  principles
that  result in a complex  emulsion  which  adheres  to the  desired  tissue and
controls  the release of the drug.  The  Company has  developed a number of site
specific  technologies and formulations  that it tailors to the desired route of
administration.  To date, the Company has applied its site specific technologies
in cream, lotion,  lozenge and suppository form to deliver therapeutic agents to
vaginal, rectal, oral, skin, pharyngeal and esophageal tissues.
 
         VAGISITE(TM)  is the subject of licensing  and  development  agreements
with such companies as Roche Holding Ltd., Taisho Ltd. of Japan, J. Uriach & Cia
of Spain and  others,  to develop  products  for the  treatment  of topical  and
vaginal fungal infections.
 
         OraSite(R)  is  a  controlled  released  mucoadhesive  delivery  system
administered  orally  in a solid or  liquid  form.  A drug  formulated  with the
OraSite(R) technology may be formulated as a liquid or as a lozenge in which the
dosage form liquefies  upon insertion and adheres to the mucosal  surface of the
mouth, throat and esophagus.  OraSite(R) possesses characteristics  particularly
advantageous  to  therapeutic  areas  such  as oral  hygiene,  sore  throat  and
periodontal and upper gastrointestinal tract disorders.

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

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

         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.
 
Tastemasking Technologies

         KV has  been at the  forefront  in the  development  of  pharmaceutical
formulations  capable of improving the flavor of unpleasant  tasting drugs.  The
Company has  developed  numerous  platforms for its  tastemasking  technologies,
including liquid, chewable and dry powder formulations.
 
         FlavorTech(R) is a liquid formulation technology designed to reduce the
bad taste of therapeutic  products.  FlavorTech(R)  has been  commercialized  in
cough/cold  syrup products  marketed  through ETHEX  Corporation and has special
application  to other  products,  such as  antibiotic,  geriatric  and pediatric
pharmaceuticals.
 
         MICRO MASK(TM) is a tastemasking  technology  which  incorporates a dry
powder,   microparticulate   approach  to  reducing   objectionable   tastes  by
sequestering  the  unpleasant  drug  agent in a  specialized  matrix.  The MICRO
MASK(TM) technology can be formulated into chewable tablets or into packets that
can be sprinkled on food,  taken directly into the mouth,  or stirred into water
or other liquid before swallowing.  This formulation technique has the effect of
"shielding"  the drug  from the taste  receptors  without  interfering  with the
dissolution  and ultimate  absorption  of the agent within the  gastrointestinal
tract.  MICRO MASK(TM) may be used in connection with such products as macrolide
antibiotics, amino acids, vitamins and other unpleasant tasting drug compounds.
 
         LIQUETTE(R) is a tastemasking  technology which incorporates unpleasant
tasting drugs into a hydrophilic  and lipophilic  polymer matrix to suppress the
taste of a drug.  This  technology is used for mildly to moderately  distasteful
drugs. The LIQUETTE(R) technology has been successfully  commercialized in Japan
through a licensing agreement with SS Pharmaceutical.

COMPETITION

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

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

REGULATION

         The design,  development and marketing of pharmaceutical  compounds are
intensively  regulated by the Federal Food and Drug  Administration  ("FDA") and
comparable  agencies in foreign countries.  For example,  The Federal Food, Drug
and Cosmetic Act, the Controlled  Substances Act and other United States federal
statutes and regulations impose  requirements on the testing,  manufacturing and
approval of the Company's  products  before a drug can be marketed in the United
States. Obtaining FDA 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.
 
         Since 1992,  the Company has  implemented  new  programs to ensure full
compliance with all of the FDA's regulatory  requirements and their increasingly
vigorous  interpretation by the agency. In addition,  KV has agreed with the FDA
in a June 1993 Consent  Decree to operate in  compliance  with FDA  requirements
and,  in the event of  violations  of FDA  requirements,  has  agreed to certain
procedures with respect to corrective actions that may be warranted.

         With respect to potential  new products,  there are two principal  ways
for the Company to satisfy the FDA's safety and efficacy  requirements for a new
drug product:  a new drug  application  (an "NDA") and an  abbreviated  new drug
application  (an  "ANDA").  The Company  does not  disclose  information  on the
specific  products  covered  by its FDA  applications  in order to  protect  the
confidentiality  and competitive  position of the Company and its customers with
respect to products which it has developed and expects to 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." This will now allow the FDA to process  applications  for new NDA's and
ANDA's  that the  Company  may submit.  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  drugs and drug  delivery  products can provide cost savings
opportunities which the Company could benefit from in ETHEX Corporation's growth
and in its drug delivery research business.

         During fiscal 1998, the Company encountered no serious shortages of any
particular raw materials and has no indications that significant  shortages will
occur.  However,  a serious  shortage  of  certain  raw  materials  could have a
material adverse effect upon the Company.

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

         The Company  presently  owns 66 domestic and foreign  patents  expiring
through  2012 and 12  trademarks  expiring  through  2011  (which are  renewable
assuming continuous use), none of which is considered material to the continuing
operations  and success of the Company.  The Company  considers its  proprietary
know-how and processing techniques to be of greater importance to its continuing
operations than such patents.
 
         In order to protect its goodwill, the Company has applied for trademark
protection  for  its  technology  names  such  as  SITE  RELEASE(R),   KV/24(R),
FlavorTech(TM),  OraSite(R),  METER RELEASE(R),  SYMATRIX(TM),  DESCOTE(R),  and
others.  The Company intends to continue to trademark new technology and product
names as they are developed.

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

         The nature of the Company's  business does not involve  unusual working
capital requirements. Inventories are maintained at sufficient levels to support
current production and sales levels.
 
         Customers  of the  Company  consist  of large and small  pharmaceutical
marketing companies,  drug chains and wholesalers.  During fiscal 1998 and 1997,
one  unaffiliated  customer,  McKesson  Drug Company,  a wholesale  distributor,
individually  accounted  for  12%  and  15%,  respectively,   of  the  Company's
consolidated revenues.
 
         The majority of the  Company's  sales are related to directly  marketed
generic products through ETHEX  Corporation  where backlog  measurements are not
meaningful,  due to the short lead time required (days) in filling orders at any
point in time relative to sales or income for a full 12-month period.
 
         Research  and  development  spending  for  activities  relating  to the
development of new products or services or the improvement of existing  products
or services was  approximately  $5,752,000 in fiscal 1998,  $4,835,000 in fiscal
1997, and $4,559,000 in fiscal 1996.

         Spending  for  research  and  development  is  funded  internally  from
operations  and  also  by  major  pharmaceutical  companies  who  have  licensed
marketing rights to KV-developed  products.  KV's internally funded research and
development spending is approximately 6% of current revenues.
 
         The Company  does not expect that  compliance  with  federal,  state or
local  provisions  regulating the discharge of materials into the environment or
otherwise  relating to the  protection of the  environment  will have a material
effect on the Company's capital expenditures, earnings or competitive position.

         As of April 26,  1998,  the Company had 353  employees.  The Company is
subject to a five year  collective  bargaining  agreement  which expires in July
2001 and covers 64 employees.  The Company  believes that its relations with its
employees are good.

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

Item 2.  Properties.

         The Company's  corporate  headquarters  is located 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 years1
821 Hanley Industrial Court     Mfg. Oper.          5,000  11/30/99    -
8046-50 Litzsinger Road         Mfg. Oper.         17,000  10/31/01    5 years1
8056 Litzsinger Road            Office/Maint.       3,000  10/31/01    5 years1
2635 S. Hanley Road             Mfg. Oper.         12,150  09/30/02    5 years1
819 Hanley Industrial Court     Mfg. Oper.          5,000  11/30/99    -
2525 S. Hanley Road             Mfg. Oper.         16,800  06/30/02    5 years
8054 Litzsinger Road            Office              3,000  10/31/01    5 years1
2601 S. Hanley Road             PDI Office          1,480  09/30/02    5 years1
10888 Metro Court               Office/Warehouse   81,810  Owned       N/A
2303 Schuetz Road               Mfg. Oper.         90,000  Owned       N/A
10858 Metro Court               Rental Property    40,540  Owned       N/A

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

1  Two five-year options.

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

Item 3.  Legal Proceedings

         Not applicable.

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

         Not applicable.

Item 4(a).   Executive Officers of the Registrant1

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


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

Victor M. Hermelin            84      Director,   Chairman   of  the  Board  and
                                      Treasurer of the Company.

 
Marc S. Hermelin              56      Director,  Vice-Chairman  of the Board and
                                      Chief Executive Officer.2
 

Alan G. Johnson               63      Director  and  Secretary  of the  Company.
                                      Attorney at Law and Member in the law firm
                                      of Gallop,  Johnson & Neuman,  L.C.  since
                                      1976;  Director of MRL,  Inc.  and Siboney
                                      Corporation.

Garnet E. Peck, Ph.D.         67      Director  of  the   Company   since  1994.
                                      Professor  of   Industrial   Pharmacy  and
                                      Director of Industrial Pharmacy for Purdue
                                      University    School   of   Pharmacy   and
                                      Pharmacal Sciences since 1967.

Raymond F. Chiostri           64      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            59      Vice President of Finance since 1981.

Mitchell I. Kirschner         52      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 American Stock Exchange under the symbols KVA and KVB, respectively.

         b) Stock Price and Dividend Information

         High and low closing sales prices on the American Stock Exchange of the
Company's  Class A and Class B Common Stock each quarter of fiscal 1998 and 1997
were as follows:

 CLASS A COMMON STOCK

                           FISCAL 1998                      FISCAL 1997
                    ---------------------------      ---------------------------
   QUARTER             High             Low              High            Low
   -------------    ----------    --------------     -------------    ----------

   First              11 21/32         9 15/32         10 19/32         7 29/32
   Second             15  3/4          9 29/32          9 19/32         5 3/32
   Third              15 21/32        12 13/32          8 19/32         7 5/32
   Fourth             18 25/32        13 3/32          14 3/32          7 3/4


 CLASS B COMMON STOCK

                           FISCAL 1998                      FISCAL 1997
                  ----------------------------      --------------------------
   QUARTER             High            Low               High            Low
   -------------- -----------    -------------      ------------   ------------
 
    First             11  3/4          9   1/2         10 1/2           8
    Second            15  3/32        10                9 1/2           5
    Third             15  5/8         12 27/32          8 1/2           7 5/32
    Fourth            18 21/32        13 1/32          14               7 21/32


         All per share data reflects the  three-for-two  stock split effected in
the form of a 50% stock dividend.
 
         No cash dividends were paid on the Company's  Class A or Class B Common
Stock in fiscal  1998 or 1997.  Dividends  on  Preferred  Stock in the amount of
$421,751 were paid during  fiscal 1998,  and $105,437 was paid during the fourth
quarter of 1997.

         c) Approximate Number of Holders of Common Stock
 
         The number of holders  of record of the  Company's  Class A and Class B
Common  Stock  as of April  30,  1998 and June 6,  1997  was  1,241  and  1,310,
respectively  (not  separately  counting  shareholders  whose shares are held in
"nominee" or "street"  names,  which are  estimated  to represent  approximately
4,000 additional shareholders for each class of common stock).
 

<PAGE>


Item 6.   Selected Financial Data
<TABLE>
<CAPTION>

                                                         ($ in 000's, except per share data)
                                                                Years Ended March 31,
                           ------------------------------------------------------------------------------------------------
                                   1998              1997               1996                1995                 1994
                                   ----              ----               ----                ----                 ----
<S>                           <C>             <C>                 <C>                 <C>                 <C>
INCOME  STATEMENT  DATA:

Revenues                          $98,486         $57,891             $49,729             $39,743              $38,171
   % Change                          70.1            16.4                25.1                 4.1                (12.2)

Net income
   (loss)                         $11,304          $8,924             $ 4,043             $(5,375)            $ (8,181)

Net income (loss) per
   common share-diluted
   (a) (b)                          $0.58           $0.47               $0.21               $(.35)               $(.52)

BALANCE  SHEET  DATA:

Total assets                      $68,361         $41,362            $ 27,948             $ 27,975             $ 31,802

Long-term debt, deferred
   taxes and other
   liabilities                     $7,040          $3,071             $ 3,452             $ 12,153             $ 13,323

 
Shareholders' equity              $44,164         $33,084             $20,550              $ 9,974             $ 13,343

NOTES:

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

(b)  Fully 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 SFAS No. 128,  "Earnings
     Per Share" in fiscal 1998 and restated all prior-period  earnings per share
     data. (see Note 1).
 
</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 as a percentage of revenues for fiscal years 1998, 1997 and 1996.
<TABLE>
<CAPTION>


                                                                    Fiscal Year Ended
                                               1998                       1997                     1996
                                        ------------------        ---------------------    -------------------
                                          Amount     Percent         Amount     Percent        Amount     Percent
                                                                 (Dollars in thousands)
<S>                                   <C>           <C>          <C>          <C>           <C>         <C>
ETHEX (generic products)                  $79,193       80%          $40,225      69%          $34,498      69%

KV (manufacturing and licensing)            8,290        9             8,978      16             7,370      15

PDI (pharmaceutical compounds)             11,003       11             8,688      15             7,861      16
                                         --------      ---          --------     ---          --------    ----
   Net revenues                            98,486      100%           57,891     100%           49,729     100%

Costs and expenses:
   Manufacturing costs                     56,483       57%           29,478      51%           26,260      53%
   Research and development                 5,752        6             4,835       8             4,559       9
   Selling and administrative              19,104       20            13,818      24            12,749      26
   Other, net                                 156        -               453       1             2,028       4
                                         --------    -----         ---------     ---           -------    ----
     Total costs & expenses                81,495       83%           48,584      84%           45,596      92%

   Income before income taxes              16,991       17             9,307      16             4,133       8
   Net income                             $11,304       11%           $8,924      15%           $4,043       8%
                                          =======       ===           ======      ===           ======       ==

</TABLE>

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 and existing products sold
by ETHEX and Particle  Dynamics,  partially  offset by lower  contract  services
sales.  Net revenues from ETHEX increased $39 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,
in addition  to  increased  sales of products  introduced  in prior  years.  Net
revenues derived from the sale of specialty  pharmaceutical raw materials by PDI
increased $2.3 million, or 27%, to $11 million during fiscal 1998. This increase
was  attributable to the increased sales volumes related to the  introduction of
new products for the  over-the-counter  DESCOTE(R) and DESTAB(TM) product lines.
As expected,  contract services revenues  decreased $.7 million,  or 8%, to $8.3
million in fiscal 1998 from $9 million in fiscal 1997 which is  attributable  to
reduced sales volume. While the Company anticipates continued growth in sales of
the products it markets, there are no assurances that the annual percentage rate
of sales growth will continue at past levels.
 
         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 the change in the mix of  products  sold and the
effect of the competitive pricing in the generic pharmaceutical industry.

         Research and development  costs increased $.9 million,  or 19%, to $5.8
million  during fiscal 1998 from $4.8 million in fiscal 1997.  This increase was
due to higher personnel, raw material and clinical costs. The Company expects to
continue  spending for research and  development in the future,  emphasizing the
development of additional  products for sale by ETHEX,  new branded products and
new drug delivery technologies.
 
         Selling and administrative  expenses increased $5.3 million, or 38%, to
$19.1  million  during  fiscal  1998 from  $13.8  million in fiscal  1997.  As a
percentage of revenue, selling and administrative expenses decreased to 20% from
24%. The increase in selling and  administrative  expenses was primarily related
to  the  Company's  selling  and  promotional  activities  associated  with  the
significant  growth  experienced  in the  sales  of new  and  existing  products
marketed by ETHEX and Particle Dynamics, and additional personnel to support the
Company's continued growth.
 
         Income taxes were provided at an effective rate of 33.5% in fiscal 1998
compared to 4.1% 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.
 
         Net Income.  As a result of the  factors  described  above,  net income
improved $2.4 million,  or 27%, to $11.3 million for fiscal 1998 from net income
of $8.9 million in 1997.

FISCAL 1997 COMPARED TO FISCAL 1996
 
         Revenues. Net revenues increased $8.2 million, or 16%, to $57.9 million
during  fiscal 1997 from $49.7  million in fiscal  1996.  This sales  growth was
primarily due to an increase in the volume of new and existing  generic products
sold by ETHEX,  increased licensing revenues and volume in contract services and
Particle  Dynamics.  Net revenues from ETHEX increased $5.7 million,  or 17%, to
$40.2 million  during fiscal 1997 from $34.5 million in 1996.  This increase was
primarily due to the launch of ten new generic  products  during fiscal 1997, in
addition to  increased  sales of  products  introduced  in the prior  year.  Net
revenues derived from the sale of specialty  pharmaceutical raw materials by PDI
increased $.8 million, or 11%, to $8.7 million during fiscal 1997. This increase
was  attributable  to the increased  sales  volumes  related to the prior years'
introduction of new products for the over-the-counter  DESCOTE(R) and DESTAB(TM)
product lines.  Contract services and licensing revenues increased $1.6 million,
or 22%, to $9 million in fiscal 1997 from $7.4 million in fiscal 1996, primarily
due to  increased  licensing  revenues  from an agreement  concluded  with Roche
Holding, Ltd.

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

         Research and development  costs  increased $.2 million,  or 6%, to $4.8
million  during fiscal 1997 from $4.6 million in fiscal 1996.  This increase was
due to higher personnel costs.

         Selling and administrative  expenses increased $1.1 million,  or 8%, to
$13.8 million during fiscal 1997 from $12.7 million in fiscal 1996.  However, as
a percentage of revenue,  selling and  administrative  expenses decreased to 24%
from 26%. The  increase in selling and  administrative  expenses  was  primarily
related to the Company's selling and promotional  activities associated with the
significant growth experienced in the sales of new and existing generic products
marketed by ETHEX and  additional  personnel to support the Company's  continued
growth.

         Other, net decreased $1.5 million, or 75%, to $.5 million during fiscal
1997  from $2  million  in  fiscal  1996.  This was  primarily  attributable  to
increased  interest  income of $.1  million  as a result of  interest  earned on
increased average daily cash balances,  decreased interest expense of $1 million
as a result of lower effective interest rates as well as lower levels of average
borrowing and reduced amortization cost.
 
         The tax  provision  of $383,000  for fiscal  1997 was for state  income
taxes,  while  the  $90,000  in 1996 was due to the  effect  of the  alternative
minimum tax.

         Net Income.  As a result of the  factors  described  above,  net income
improved $4.9 million,  or 121%, to $8.9 million for fiscal 1997 from $4 million
in fiscal 1996.

         (b) Year 2000 Readiness

         The Company's computer systems,  software and related  technologies are
affected by the Year 2000 compliance issue. The Company has been identifying and
correcting affected  applications to ensure that all of its key computer systems
will be Year 2000  compliant  by early 1999,  and has also been working with its
vendors  and  suppliers  to  ensure  their  compliance.  Costs  to  modify  such
applications have been, and are estimated to remain, immaterial to the Company's
results of operations or financial condition.

         (c) Liquidity and Capital Resources

         The following  table sets forth selected  balance sheet data and ratios
for fiscal years 1998, 1997 and 1996.

                                                    At March 31,
                                                    ($ in 000's)
                                                    ------------
                                      1998              1997             1996
                                  ----------         ----------       ----------
 
Working Capital Ratio               3.1 to 1         5.8 to 1         4.6 to 1
Quick Ratio                         2.0 to 1         3.1 to 1         2.4 to 1
Debt to Debt Plus Equity            .11 to 1         .07 to 1         .14 to 1
Total Liabilities to Equity         .55 to 1         .25 to 1         .36 to 1
Cash and Cash Equivalents           $ 18,158         $  7,628         $  2,038
Working Capital                     $ 35,403          $25,017          $14,053
Long-Term Liabilities               $  7,040         $  3,071         $  3,452
Shareholders' Equity                $44,164          $33,084          $20,550
 

         Working  capital for fiscal 1998 increased  $10.4  million,  or 42%, to
$35.4  million  due  primarily  to the  Company's  net income in 1998.  Net cash
provided  by  operating   activities  for  fiscal  1998  included  increases  in
receivables  of $6.7 million and  inventories  and other current  assets of $5.1
million to improve service levels, which resulted primarily from increased sales
volume of ETHEX  products,  and an  increase  in  accounts  payable  and accrued
liabilities  of $11.7 million.  These changes in  receivables,  inventories  and
payables  of  $1.2  million  combined  with  net  income  and  non-cash  charges
aggregating $13.2 million,  resulted in cash provided by operating activities of
$14.4 million for fiscal 1998, an improvement of $8.7 million or 155%.

         At the end of fiscal 1998, the Company's  "quick assets",  (cash,  cash
equivalents  and accounts  receivable)  increased  $17.3 million (106%) from the
prior year, while current liabilities increased $11.9 million (229%),  resulting
in a  "quick  ratio"  of 2 to 1  compared  to 3.1 to 1 at the end of  1997.  The
increase  in current  liabilities  is due  primarily  to an increase in accounts
payable  and  accruals  for  salaries  and  benefits,  income  taxes and revenue
sharing, all associated with increased sales and earnings.
 
         The debt to debt plus equity and total liabilities to equity ratios for
fiscal 1998  increased  due to the addition of $3.5 million in debt used for the
purchase of a facility which was previously leased, and an adjacent facility.

         Investing  activities in fiscal 1998 reflected capital  expenditures in
cash of $2.5 million  excluding  the facility  purchase  which was financed with
long-term debt, and net expenditures for other assets of $.6 million, which were
provided for through operations.

         In January  1996,  the  Company  concluded  an  agreement  with a major
pharmaceutical marketer whereby the Company received $5 million ($1.7 million of
which was included in revenue) and certain other considerations, plus $5 million
for the sale of certain  Class A Common  Stock  options  exercisable  in various
periods  through  September  1998 (See Notes 12 and 15).  The  transaction  was
entered  into  between the  parties in  consideration  for giving the  marketing
company the right to explore the  Company's  drug delivery  technologies  and to
replace  certain other product  agreements and to provide  royalties and product
opportunities.

         In January 1997,  the Company  concluded a broad-based  agreement  with
Roche Holding Ltd. of Basel,  Switzerland  ("Roche")  (See Notes 12 and 15). As
part of the agreement,  Roche  purchased  200,000 shares of Common Class A Stock
for $3.5  million.  In addition,  the  agreement  included  cash  payments of $3
million made in January 1997 and 1998, respectively,  and one additional payment
to be  received  in January  1999,  unless  regulatory  approval  of a potential
follow-on  product in the same  therapeutic area is received prior to that date.
Such  payments  have been  included in  revenue,  and the last  payment  will be
similarly treated when received.  Upon marketing,  KV would receive royalties on
sales of the follow-on product.

         The Company's cash and cash  equivalents on hand at year-end were $18.2
million.  The  Company  had in place at March  31,  1998,  an  unsecured  credit
facility  aggregating  $20 million with LaSalle  National  Bank. As of March 31,
1998, the Company had no cash borrowings,  however, $2.2 million of open letters
of credit  were issued  under the  facility.  The  Company's  capital  equipment
commitments at year-end totaled approximately $1.1 million.

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

         The Company expects to continue a relatively high level of expenditures
and investment for research,  clinical and  regulatory  efforts  relating to the
development  and  commercialization  of  proprietary  new  products and advanced
technology products and their approval for marketing.
 
         The Company  believes funds  generated  from  operating  activities and
existing cash,  together with the funds  available under its credit facility and
funds provided from licensing  agreements will be adequate to fund the Company's
short term needs.

         (d) New Accounting Standards
 
         In 1997,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of  Financial  Accounting  Standards  ("SFAS") No. 128, "Earnings  per
Share".  SFAS No. 128 replaced the previously reported primary and fully diluted
earnings  per share with basic and diluted  earnings per share.  Unlike  primary
earnings per share,  basic earnings per share  excludes any dilutive  effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the  previously  reported  fully  diluted  earnings  per  share.  All
earnings  per share  amounts  for all  periods  have been  presented,  and where
necessary, restated to conform to the SFAS No. 128 requirements.

         In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive
Income", which requires the reporting of comprehensive income and its components
in the 1998 financial statements.  Comprehensive income is defined as the change
in equity from  transactions and other events and  circumstances  from non-owner
sources, and excludes investments by and distributions to owners.  Comprehensive
income includes net income and other items of  comprehensive  income meeting the
above criteria.  There is no impact on the Company's financial statements due to
the issuance of this statement.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related  Information." SFAS No. 131 is effective for fiscal
years beginning  after December 15, 1997 and requires  reporting about operating
segments,  products and  services,  geographic  areas and major  customers.  Its
objective  is to  provide  information  about the  different  types of  business
activities and economic  environments  in which  businesses  operate.  The first
disclosures  will be required in the Company's 1999 Annual  Report.  The Company
does not expect substantial changes in its definition of segments.
 
         In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about  Pensions  and Other  Postretirement  Benefits,"  which  standardizes  the
disclosure  requirements  for  pensions  and other  postretirement  benefits and
requires  additional  information on changes in the benefit obligations and fair
values of plan assets that will facilitate  financial analysis.  SFAS No. 132 is
effective for years beginning after December 15, 1997, and requires  comparative
information  for earlier years to be restated,  unless such  information  is not
readily available.  The Company has no pensions or postretirement  benefit plans
in place at this time. There is no impact on the Company's financial  statements
due to the issuance of this statement.
 
Item 8.   Financial Statements and Supplementary Data.


<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


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

         We have audited the  consolidated  balance sheets of KV  Pharmaceutical
Company  and  Subsidiaries  as of March  31,  1998  and  1997,  and the  related
consolidated statements of income,  shareholders' equity and cash flows for each
of the  three  years  in the  period  ended  March  31,  1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of KV Pharmaceutical
Company and Subsidiaries as of March 31, 1998 and 1997, and the results of their
operations  and their cash flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted accounting principles.

BDO SEIDMAN, LLP
St. Louis, Missouri

 
May 21, 1998
 


<PAGE>
                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             March 31, 1998 and 1997

ASSETS                                               1998               1997
------                                               ----               ----
Current Assets:
Cash and cash equivalents                      $  18,157,595          7,627,523
Receivables, less allowance for 
  doubtful accounts of $332,244 and 
  $129,054 in 1998 and 1997, respectively         15,304,340          8,579,598
Inventories                                       15,606,037         12,785,588
Deferred income taxes                              2,949,434            890,000
Prepaid and other current assets                     541,989            340,193
                                              ---------------    ---------------
  Total Current Assets                            52,559,395         30,222,902
                                              ---------------    ---------------
Net property and equipment                        12,436,533          8,117,809
                                              ---------------    ---------------
Goodwill and other assets                          3,364,899          3,021,009
                                              ===============    ===============
TOTAL ASSETS                                   $  68,360,827      $  41,361,720
                                              ===============    ===============
LIABILITIES
Current Liabilities:
Accounts payable                              $    4,280,492     $    2,045,048
Accrued liabilities                               12,317,432          2,809,571
Current maturities of long-term debt                 558,333            351,316
                                              ---------------    ---------------
  Total Current Liabilities                       17,156,257          5,205,935

Long-term debt                                     4,902,222          2,158,025
Deferred income taxes                                535,000                  -
Other long-term liabilities                        1,603,131            913,319
                                              ---------------    ---------------
TOTAL LIABILITIES                                 24,196,610          8,277,279
                                              ---------------    ---------------
Commitments and Contingencies

SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value;  
  $25.00 stated and liquidation  value;  
  840,000 shares authorized; issued
  and outstanding - 241,000 shares in 
  1998 and 1997                                          2,410            2,410

Class A and Class B Common  Stock,  
  $.01 par  value;  60,000,000  shares of each
  authorized; Class A-issued 11,760,078 and 
  11,576,231 in 1998 and 1997                          117,601          116,376
  Class B-issued 6,442,914 and 6,564,855 in 
  1998 and 1997                                         64,429           65,242

Additional paid-in capital                          34,042,044       33,844,685
Retained earnings (deficit)                          9,992,686         (889,319)
Less:  Treasury Stock, 35,619 shares each of
  Class A and Class B Common Stock, at cost            (54,953)         (54,953)
                                                 ---------------  --------------
TOTAL SHAREHOLDERS' EQUITY                          44,164,217       33,084,441
                                                 --------------   --------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY                                           $  68,360,827    $  41,361,720
                                                 ==============   ==============

 
See Accompanying Notes to Consolidated Financial Statements
 
<PAGE>
                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

                              For the Years Ended March 31, 1998, 1997 and 1996

                                         1998           1997           1996
                                     ------------  -------------   ------------
  Net Revenues                      $  98,486,060  $ 57,890,678    $ 49,729,046

Costs and Expenses:
 
     Manufacturing costs               56,482,539    29,478,372      26,259,638
     Research and development           5,751,995     4,835,478       4,559,360
     Selling and administrative        19,104,051    13,817,802      12,748,726
     Amortization of intangible 
       assets                             254,261       187,758         710,647
                                    -------------    ----------   --------------
Total costs and expenses               81,592,846    48,319,410      44,278,371
                                    -------------     ---------   --------------
Operating income                       16,893,214     9,571,268       5,450,675
                                    -------------    ----------   --------------
  Other income (expense):
       Interest expense                  (452,262)     (411,237)     (1,377,604)
      Interest and other income           550,186       146,481          59,589
                                    -------------    -----------    ------------
Total other income (expense)               97,924      (264,756)     (1,318,015)
                                    -------------   ------------   -------------

Income before income tax               16,991,138     9,306,512       4,132,660
Provision for income taxes              5,687,382       383,000          90,000
                                    -------------   -----------    -------------
Net Income                          $  11,303,756    $ 8,923,512   $  4,042,660
                                     ============   ============   ============

Net Income per Common Share-Basic
    (after deducting preferred 
    dividends of $421,751 in 1998, 
    1997 and 1996)                  $       0.60     $     0.48    $       0.21
                                    ============     ==========    ============
Net Income per Common 
    Share-Diluted                   $       0.58     $     0.47    $       0.21
                                    ============     ==========    ============


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, 1998, 1997 and 1996

                                                      Class A      Class B     Additional     Retained                      Total
                                        Preferred      Common      Common       Paid-In       Earnings      Treasury   Shareholders'
                                          Stock        Stock        Stock        Capital      (Deficit)       Stock        Equity
                                        ----------   ----------    ---------  -----------   ------------    ----------  ------------
<S>                                    <C>          <C>         <C>         <C>         <C>               <C>           <C>
Balance at March 31, 1995                  $2,410      $67,629      $47,187   $23,706,723  $(13,794,814)     $(54,953)    $9,974,182
Stock Options issued                            -            -            -     5,000,000             -            -       5,000,000
Stock Options exercised,
  194,242 shares of Class A                     -        1,943            -       772,107             -            -         774,050
  192,122 shares of Class B                     -            -        1,922       757,096             -            -         759,018
Conversion of 163,475 shares of
  Class B shares to Class A 
  shares                                        -        1,635       (1,635)            -             -            -              -
                                
Net Income for 1996                             -            -            -             -     4,042,660            -       4,042,660
                                       -----------     -------     ---------   ----------    -----------      ---------   ----------
Balance at March 31, 1996                   2,410       71,207       47,474    30,235,926    (9,752,154)       (54,953)   20,549,910
Sale of 200,000 Class A shares                  -        2,000            -     3,498,000             -             -      3,500,000
Stock Options issued as 
  compensation                                  -            -            -       114,300             -             -        114,300
Stock Options exercised,
  13,125 shares of Class A                      -          130            -        50,188             -             -         50,318
  13,195 shares of Class B                      -            -          130        51,708             -             -         51,838
     Less 177 shares of each class 
       repurchased
Conversion of 383,925 shares of
  Class B shares to Class A shares              -        3,838       (3,838)             -            -             -             -
Dividends paid on preferred stock               -            -            -       (105,437)           -             -      (105,437)
Net income for 1997                             -            -            -             -     8,923,512             -      8,923,512
                                       ----------      -------     ---------    -----------  ----------    ----------    -----------
Balance at March 31, 1997                   2,410       77,175       43,766     33,844,685    (828,642)       (54,953)    33,084,441
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)
Net income for 1998                             -            -            -              -   11,303,756            -      11,303,756
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   $9,992,686      $(54,953)   $44,164,217
                                       ==========     ========      =======    ===========   ==========     ==========   ===========

See Accompanying Notes to Consolidated Financial Statements

</TABLE>
<PAGE>


                   KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Years Ended March 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                           1998                 1997                1996
                                                           ----                 ----                ----
<S>                                                    <C>               <C>                 <C> 
OPERATING ACTIVITIES
Net Income                                               $11,303,756        $  8,923,512        $  4,042,660
Adjustments to reconcile net income
  to net cash provided by operating activities:
  Depreciation, amortization and other 
    non-cash charges                                       1,887,997           1,594,300           2,098,622
  Stock options issued as compensation                            -              114,300                   -

Changes in operating assets and liabilities:
  Increase in receivables                                (6,724,742)         (1,298,139)           (440,836)
  Increase in inventories and other current
    assets                                               (5,081,678)         (5,336,261)         (1,820,982)
  Increase (decrease)  in accounts payable and
    accrued liabilities                                  11,743,305           1,620,848            (799,676)
  Increase (decrease) other                               1,224,811               2,089              (7,861)
                                                        -----------          ----------          ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES                                               14,353,449           5,620,649           3,071,927
                                                        ------------         -----------         ------------
INVESTING ACTIVITIES
  Purchase of property and equipment, net                (2,452,459)         (1,903,134)           (841,318)
  Decrease in deferred improved drug entities                     -                   -           2,450,241
  Other                                                    (598,153)           (880,577)           (457,006)
                                                        ------------         -----------         -----------
NET CASH (USED IN) PROVIDED BY INVESTING
 ACTIVITIES                                               (3,050,612)         (2,783,711)         1,151,917
                                                        -------------        ------------        -----------

FINANCING ACTIVITIES
  Proceeds from credit facilities                                 -                   -          28,311,372
  Repayment of credit facilities                                  -                   -         (34,130,635)
  Proceeds from term loan facility                                -                   -           6,820,189
  Principal payments on long-term debt                     (548,785)           (744,203)        (10,795,482)
  Proceeds from sale of Common Stock                                          3,500,000                   -
  Dividends paid on Preferred Stock                        (421,751)           (105,437)                  -
   Exercise of Common Stock options                          197,771             102,156          1,533,068
   Proceeds from sale of stock options                            -                   -           5,000,000
                                                        ------------          -----------      ------------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES                                                  (772,765)          2,752,516         (3,261,488)
                                                        -------------         ----------       -------------

INCREASE IN CASH AND CASH EQUIVALENTS                     10,530,072           5,589,454            962,356

CASH AND CASH EQUIVALENTS AT:
 BEGINNING OF YEAR                                         7,627,523           2,038,069          1,075,713
                                                        ------------          ----------         ----------
 END OF YEAR                                             $18,157,595        $  7,627,523       $  2,038,069
                                                        ============        ============       ============

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

 
See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Summary of Significant Accounting Policies

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

         Cash Equivalents

         Cash  equivalents  consist of highly  liquid  instruments  that have an
original maturity of three months or less. Cash equivalents consist primarily of
government backed securities aggregating $10,000,000 at March 31, 1998 and $0 at
March 31, 1997.
 
         Inventories

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

         Property and Equipment

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

         Goodwill and Other Assets

         The excess of cost of  investment  over the fair value of net assets of
the  subsidiaries  at the time of acquisition  is being  amortized on a straight
line basis over 40 years.  All other deferred  charges are being  amortized over
periods varying from 5 to 17 years on a straight line basis.  Management reviews
intangible  assets for possible  impairment if there is a significant event that
detrimentally  effects  operations.  Impairment is measured  using  estimates of
non-discounted future earnings potential of the entity or assets acquired.

         Revenue Recognition

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

         Earnings Per Share

         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  warrants is
included in the calculation of diluted earnings per share.

         Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," was adopted in fiscal 1998 with all prior-period  earnings per share
data restated.  The statement  requires dual  presentation of basic earnings per
share and diluted  earnings per share on the  Consolidated  Statements of Income
and other  computational  changes.  The  adoption of SFAS No. 128 did not have a
material effect on previously reported 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 its 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  had
applied the new method, are disclosed within Note 10.

         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  1997,  the  FASB  issued  SFAS No.  130,  which  requires  the
reporting  of  comprehensive  income and its  components  in the 1998  financial
statements.  Comprehensive  income is  defined  as the  change  in  equity  from
transactions  and other events and  circumstances  from non-owner  sources,  and
excludes  investments  by and  distributions  to  owners.  Comprehensive  income
includes net income and other items of  comprehensive  income  meeting the above
criteria.  There is no impact on the Company's  financial  statements due to the
issuance of this statement.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an  Enterprise  and Related  Information,"  which  requires  reporting  about
operating segments, products and services, geographic areas and major customers.
Its objective is to provide  information  about the different  types of business
activities and economic  environments  in which  businesses  operate.  The first
disclosures  will be required in the Company's 1999 Annual  Report.  The Company
does not expect substantial changes in its definition of segments.

         In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about  Pensions  and Other  Postretirement  Benefits,"  which  standardizes  the
disclosure  requirements  for  pensions  and other  postretirement  benefits and
requires  additional  information on changes in the benefit obligations and fair
values of plan assets that will facilitate  financial analysis.  SFAS No. 132 is
effective for years beginning  after December 15, 1997 and requires  comparative
information  for earlier years to be restated,  unless such  information  is not
readily available. The Company has no pension or postretirement benefit plans in
place at this time. There is no impact on the Company's financial statements due
to the issuance of this statement.
 
         Reclassifications

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

2.       Nature of Operations

         The  Company  and its  subsidiaries  develop,  manufacture  and  market
technology-distinguished    pharmaceuticals   and   pharmaceutical    compounds.
Prescription   pharmaceuticals  are  sold  primarily  to  domestic  wholesalers,
drugstore chains,  distributors and independent pharmacies nationwide.  Contract
manufactured  products and  pharmaceutical  compounds are sold to major domestic
drug, nutritional and food companies.
 
         Sales to a single  company  aggregated  12% and 15% for the years ended
March 31, 1998 and 1997,  respectively.  In addition,  the balance due from this
company  represented   approximately  18%  and  23%  of  consolidated   accounts
receivable  as of March 31,  1998 and  1997,  respectively.  No single  customer
accounted for 10% or more of consolidated revenues in fiscal 1996.

         The Company extends unsecured credit to its customers.

3.       Inventories
 
         Inventories as of March 31, consist of:

                                            1998                   1997
                                            ----                   ----
      Finished goods                      $ 8,954,290          $  6,941,864
      Work-in-process                       1,883,395             1,645,879
      Raw materials                         5,130,103             4,494,167
                                          -----------         -------------
                                           15,967,788            13,081,910
      Reserves for obsolescence              (361,751)             (296,322)
                                          ------------       --------------
                                          $15,606,037           $12,785,588
                                          ===========           ===========

<PAGE>
4.     Property and Equipment
 
Property and equipment as of March 31, consist of:

                                                     1998                 1997
                                                     ----                 ----
 Land and improvements                         $  1,490,567        $    499,567
 Building and building improvements               6,860,735           3,482,812
 Machinery and equipment                         13,267,562          11,792,688
 Office furniture and equipment                   3,323,955           3,403,378
 Leasehold improvements                           2,526,950           2,363,555
 Construction-in-progress (estimated 
 costs to complete at
 March 31, 1998 - $1,090,000)                       600,618           1,114,837
                                                 ----------         -----------
                                                 28,070,387          22,656,837
 Less accumulated depreciation and 
   amortization
                                                 15,633,854          14,539,028
                                                 ----------         -----------
 Net property and equipment                     $12,436,533      $    8,117,809
                                                ===========      ==============

         Depreciation and amortization of property and equipment was $1,633,736,
$1,406,542 and $1,390,790 for 1998, 1997 and 1996, respectively.
 
5.       Goodwill and Other Assets

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

                                                       1998               1997
                                                       ----               ----
        Goodwill                                  $2,138,561         $2,138,561
        Financing charges                            586,656            370,934
         cash surrender value of
         life insurance and split-dollar 
         life insurance                              850,989            759,624
        Trademarks and patents                       865,206            749,018
        Deposits                                     446,807            448,899
        Other                                        351,200            189,735
                                                  ----------          ---------
                                                   5,239,419          4,656,771
        Less accumulated amortization              1,874,520          1,635,762
                                                  ----------          ---------
           Net goodwill and other assets          $3,364,899         $3,021,009
                                                  ==========         ==========
 
         Amortization  of goodwill is being charged to operations at $55,404 per
year.  Amortization  of all other  deferred  charges was $198,857,  $132,354 and
$655,244 for 1998, 1997 and 1996, respectively.

<PAGE>

6.        Accrued Liabilities

         Accrued liabilities as of March 31, consist of:

                                              1998                   1997
                                              ----                   ----
  Salaries, wages, incentives
     and benefits                         $2,214,662           $ 1,522,951
  Interest                                    72,999                85,777
  Income taxes                             2,884,522               476,000
  Professional fees                          875,891               273,464
  Revenue sharing                          4,911,634                     -
  Other                                    1,357,724               451,379
                                           ---------               -------
                                         $12,317,432           $ 2,809,571
                                         ===========           ===========

7.       Long-Term Debt

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

                                              1998                   1997
                                              ----                   ----
Industrial revenue bonds                  $2,155,000            $2,480,000
Building mortgage                          3,305,555                     -
Capital lease                                      -                29,341
                                          ----------            ----------
                                           5,460,555             2,509,341
Less current portion                         558,333               351,316
                                          ----------            ----------
Long-term debt                            $4,902,222            $2,158,025
                                          ==========            ==========

         The industrial  revenue bonds,  which bear interest at 7.35% per annum,
mature  serially  through 2004 and are  collateralized  by certain  property and
equipment, as well as through a letter of credit.
 
         The building  mortgage bears  interest at 8.53% with monthly  principal
payments of $19,444 plus interest  through May 30, 2002, with a final payment of
the remaining principal balance outstanding plus accrued and unpaid interest due
on June 18, 2002.

         The aggregate  maturities of long-term debt as of March 31, 1998 are as
follows:

                    1999                                $558,333
                    2000                                 558,333
                    2001                                 558,333
                    2002                                 558,332
                    2003                               2,697,224
                    Later Years                          530,000
                                                      ----------
                                                      $5,460,555
                                                      ==========

         The Company paid interest of $465,040,  $482,471, and $1,352,823 during
the years ended March 31, 1998, 1997 and 1996, respectively.

<PAGE>


8.       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:

                1999                                $1,111,919
                2000                                 1,024,129
                2001                                   994,692
                2002                                   989,856
                2003                                   905,643
                Later Years                          1,012,937
                                                     ---------
                                                    $6,039,176
                                                    ==========

         Total rent  expense for the years ended March 31,  1998,  1997 and 1996
was $1,076,628, $1,189,349 and $1,229,881, 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 the Company's  present  insurance will cover any potential
claims that may be asserted in the future.  In addition,  the Company is subject
to legal proceedings and claims which arise in the ordinary course of business.

         Employment Agreements
 
         The Company has  employment  agreements  with certain  officers and key
employees which extend for one to five years.  These agreements provide for base
levels of  compensation  and, in certain  instances,  also provide for incentive
bonuses and separation  benefits.  Also, the agreement with one officer contains
provisions for partial salary  continuation under certain conditions  contingent
upon noncompete restrictions and providing consulting services to the Company as
specified in the agreement. The Company expensed $839,812, $152,089 and $142,139
under this agreement in 1998, 1997 and 1996, respectively.

         Credit Facility

         As of March 31, 1998,  the Company had a loan  agreement  expiring June
18, 2000 with LaSalle National Bank. The agreement provides for a revolving line
of credit for borrowing up to $20,000,000.  The credit facility is unsecured and
interest is charged at the prime rate. As of March 31, 1998,  the Company had no
cash borrowing, however, $2,248,202 in an open letter of credit was issued under
this facility.  The agreement  includes  covenants that impose minimum levels of
tangible  net  worth and  earnings  before  interest,  taxes,  depreciation  and
amortization,  set a maximum leverage ratio, and limit capital  expenditures and
dividend payments.

9.       Income Taxes
 
         The fiscal 1998 provision was based on the estimated  federal and state
taxable income using  statutory  rates,  as well as utilization of the Company's
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  carryforwards  were  available for fiscal 1998.  For
fiscal 1996,  $90,000  provision for income taxes was required due to the effect
of the alternative minimum tax.

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


<PAGE>

                                      1998               1997           1996
                                      ----               ----           ----
  Computed income tax expense
      at statutory rate            $5,947,000       $3,164,000      $1,536,211
  Change in valuation allowance    (1,568,000)      (3,392,000)     (1,596,200)
  Alternative minimum tax                   -                -          90,000
  State income taxes, less
      federal income tax benefit      696,000          383,000               -
  Other                               612,000          228,000          59,989
                                  -----------      -----------   -------------
  Provision for income taxes      $ 5,687,000      $   383,000    $     90,000
                                  ===========      ===========    ============

         As of March 31, 1998, and 1997, the tax effect of temporary differences
between the tax basis of assets and liabilities  and their  financial  reporting
amount are as follows:
<TABLE>
<CAPTION>

                                             1998                  1998                 1997                  1997
                                           Current             Non-Current            Current             Non-Current
 
<S>                                     <C>                <C>                 <C>                      <C>
Fixed asset basis differences               $        -         $(1,136,000)      $             -           $(1,132,000)
Reserve for inventory and receivables        2,506,000                   -             1,003,000                     -
Vacation pay reserve                           381,000                   -               250,500                     -
Deferred compensation                                -             601,000                     -               290,000
Research and development credit                      -                   -                     -               958,000
Minimum tax credit                                   -                   -                     -               963,000
Other                                           62,000                   -               125,500                     -
                                          ------------          ----------          ------------            ----------
Gross deferred tax asset (liability)         2,949,000            (535,000)            1,379,000             1,079,000
Valuation allowance                                  -                   -              (489,000)           (1,079,000)
                                          ------------          ----------          ------------          ------------
   Net deferred taxes                     $  2,949,000         $  (535,000)       $      890,000                     -
                                          ============         ===========        ==============          $===========
 

</TABLE>

         The  components  of deferred  taxes are as follows as of March 31, 1998
and 1997:

                                            1998                      1997
                                            ----                      ----
   Deferred tax liability                 $(1,136,000)              $(1,132,000)
   Deferred tax asset                       3,550,000                 3,590,000
   Valuation allowance                              -                (1,568,000)
                                         -------------                ----------
                                          $ 2,414,000              $    890,000
                                         ============               ============
 
         The  Company  paid income  taxes of  $4,754,088,  $846,000  and $90,000
during the years ended March 31, 1998, 1997 and 1996, respectively.

10.      Employee Benefits

         Stock Option Plan
 
         The Company  established the KV Pharmaceutical  Company Incentive Stock
Option Plan for key employees and reserved  2,947,500 shares of Common Stock for
such plan. Under the plan, the Stock Option Committee may grant stock options to
key  employees  at not less than one hundred  percent  (100%) of the fair market
value of the  Company's  Common Stock at the date of grant.  The  durations  and
exercisability of the grants vary over a period of up to ten years from the date
of grant.  During 1998, the Company granted options for 523,500 shares,  but had
47,820  shares  forfeited.   As  of  March  31,  1998,  options  with  remaining
contractual  lives of up to ten years to purchase  1,655,754  shares at the fair
market  value  at the  grant  date  were  outstanding,  926,826  of  which  were
exercisable.

         The following summary shows the transactions for the fiscal years 1998,
1997 and 1996 under option arrangements (as restated, see Note 12):
 
<TABLE>
<CAPTION>
                                      Options  Outstanding                Options  Exercisable
                                      --------------------                --------------------
                                                     Average                              Average
                                     No. of         Price Per           No. of           Price Per
                                     Shares           Share             Shares             Share
                                     -------        ---------           -------          ---------
 <S>                             <C>                 <C>             <C>               <C> 
Balance, March 31, 1995            1,019,574           3.28            748,871             2.90
Options granted                      359,738           4.86                  -                -
Options becoming exercisable               -              -            129,899             4.50
Options exercised                   (579,546)          2.65           (579,546)            2.65
Options canceled                     (36,048)          4.23            (16,160)            3.11
                                     -------                           -------
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
                                   =========                           =======             
</TABLE>

         As discussed in the Summary of Accounting Policies, the Company applies
APB Opinion  No. 25 and related  interpretations  in  accounting  for this plan.
Accordingly,  no  compensation  cost has been recognized for its incentive stock
option plan.
 
         The  weighted-average  grant date fair value per share of stock options
granted during the year was $9.17 for A options,  $5.29 for B options, $5.23 for
A options,  $4.02 for B options,  $2.79 for A options and $1.78 for B options in
1998, 1997 and 1996 respectively.  The weighted-average  significant assumptions
used to determine those values using the Black-Scholes  option pricing model for
1998, 1997 and 1996,  respectively,  were: volatility of .6700, .6212 and .4972;
dividend  yield of 0% in all three years;  risk-free  interest rate of return of
6.3%, 6.6% and 6.0%; expected option lives of 3, 5 or 10 years.

         The  following  table  summarizes   information   about  stock  options
outstanding at March 31, 1998:
<TABLE>
<CAPTION>

                                  Options  Outstanding                                     Options  Exercisable
                                  --------------------                                     --------------------
       Range of              Number       Weighted Average         Weighted               Number         Weighted
       Exercise           Outstanding          Life               Average              Exercisable       Average
        Prices             at 3/31/98       Remaining           Exercise Price          at 3/31/98      Exercise Price
-----------------------   -----------      ---------------      --------------         ------------     --------------
<S>                     <C>              <C>                    <C>                   <C>             <C>  
    $1.84 to $3.00          72,372           3 Years                $2.23                  47,900          $2.23
    $3.01 to $6.00         537,494           4 Years                $4.86                 278,997          $4.83
    $6.01 to $9.00         521,132           6 Years                $8.04                 268,298          $8.16
   $9.01 to $12.00         465,543           4 Years               $11.28                 325,743         $11.75
   $12.01 to $15.01         59,213          10 Years               $14.03                   5,888         $14.04
                            ------                                                         ------
                         1,655,754                                                        926,826
                         =========                                                        =======
</TABLE>

         The fair market value of options  granted  during the years ended March
31, 1998, 1997, and 1996 was $3,286,000, $1,754,000 and $467,000, respectively.
 
         The  pro-forma  effect on earnings  for the year ended March 31,  1998,
1997 and 1996 of the  method  consistent  with  SFAS No.  123 would be to reduce
reported net income by approximately $2.2 million,  $1.7 million and $.4 million
respectively, to approximately $9.1 million, $7.2 million and $3.6 million.

         The pro-forma  effect on fully diluted earnings per share for the years
ended March 31, 1998, 1997 and 1996 of this method would be to reduce net income
per share by $.12 per share, $.09 per share and $.03 per share, respectively, to
$.46 per share, $.38 per share and $.18 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 1998. The profit sharing  contribution
for fiscal 1997 was $50,000.  No  contributions  were made for fiscal 1996.  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  $222,000,  $78,000 and $71,000 were made in
1998, 1997 and 1996, 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 $79,560, $63,770 and $59,032
in 1998, 1997 and 1996, 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  $125,000 of accrued health insurance  expense reserves as of March
31,  1998 and 1997,  respectively  and  $90,000 as of March 31,  1996 for claims
incurred but not reported claims. For union employees,  the Company participates
in a fully funded  insurance  plan sponsored by the union.  Expenses  related to
both plans charged to operations were approximately $1,180,000,  $1,200,000, and
$1,058,000 in fiscal 1998, 1997 and 1996, respectively.

11.      Related Party Transactions

         A director of the Company is  associated  with a law firm that rendered
various legal  services to the Company.  The Company paid the firm approximately
$239,000,  $257,000 and $243,000 during the years ended March 31, 1998, 1997 and
1996, 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, 1998,  1997 and 1996 totaled
$237,164, $231,885 and $222,910, respectively.

12.      Equity Transactions

         As of March 31, 1998, the Company has outstanding  241,000 shares of 7%
Cumulative  Convertible  Preferred  Stock (par value $.01 per share) at a stated
value of $25 per share. The Preferred Stock is non-voting with dividends payable
quarterly.  The Preferred Stock is redeemable at its stated value. Each share of
Preferred Stock is convertible  into Class A Common Stock at a conversion  price
of $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.  Undeclared  and
unaccrued  cumulative  preferred  dividends at both March 31, 1998 and 1997 were
$2,203,644.

         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 one vote
per  share  on other  matters.  No  dividends  may be paid on Class A or Class B
Common Stock unless all dividends on the  Convertible  Preferred Stock have been
declared and paid.

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

         In connection with an agreement entered into in January 1996, (see Note
15),  the  Company  received  $5,000,000  for the sale of  Class A Common  Stock
options  exercisable  through September 29, 1998. At March 31, 1998, all options
had expired  except an option valued at  $1,300,000  to purchase  Class A Common
Stock at a minimum  price of $33.33  per share  exercisable  for a 30 day period
ending  September 29, 1998.  The actual  exercise  price and number of shares of
Class A Common Stock to be purchased  are  dependent on the fair market value of
the stock for a ten-day period prior to exercise.

         In connection with an agreement  entered into in January 1997 (see Note
15), the Company sold 200,000 shares of Class A Common Stock (par value $.01 per
share) in March of 1997 with proceeds aggregating $3,500,000.

         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 the Company's
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.

         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.


<PAGE>

13.      Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
 
                                                   1998                1997                1996
                                                   ----                ----                ----
Numerator:
<S>                                        <C>                <C>                   <C> 
Net income                                    $11,303,756       $  8,923,512           $ 4,042,660

Preferred Stock dividends                        (421,751)          (421,751)             (421,751)
                                              ------------     --------------          ------------
Numerator for basic earnings per
   share--income available to common
   shareholders                                10,882,005          8,501,761             3,620,909

Effect of dilutive securities:
   Preferred Stock dividends                      421,751            421,751                     -
                                              -----------      -------------         --------------
Numerator for diluted earnings per
   share-income available to
   common shareholders after
   assumed conversions                        $11,303,756       $  8,923,512          $  3,620,909

Denominator:
Denominator for basic earnings per
   share--weighted-average shares              18,093,896         17,758,992            17,282,826

Effect of dilutive securities:
   Employee stock options                         642,912            359,055               214,361
   Convertible Preferred Stock                    903,750            903,750                     -
                                              -----------      -------------         -------------
Dilutive potential Common Shares                1,546,662          1,262,805               214,361

Denominator for diluted earnings
      per share--adjusted weighted-average
      shares and assumed conversions           19,640,558         19,021,797            17,497,187
                                               ==========         ==========            ==========
Basic Earnings per Share (1):                       $0.60              $0.48                 $0.21
                                                    =====              =====                 =====
Diluted Earnings per Share (1), (2):                $0.58              $0.47                 $0.21
                                                    =====              =====                 =====

<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)  The options to purchase  Class A Common  Stock  sold in connection  with an
     agreement  entered  into in January  1996 (see Note 12) are not included in
     the computation of diluted EPS because the options'  minimum exercise price
     was greater than the average market price of the Class A Common shares.
</FN>
</TABLE>
 
14.      Litigation

         In April 1995, the Company  entered into a plea agreement with the U.S.
Department  of Justice in which the  Company  agreed to plead  guilty to certain
misdemeanor  violations and to pay a fine of $500,000 and cost reimbursements of
$100,000,  payable in eight semi-annual,  interest-free  installments of $75,000
beginning in July 1995. The costs associated with the agreement were recorded in
the Company's statement of income for fiscal year ended March 31, 1995.

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

15.     Agreements

         In January 1996, the Company received  $5,000,000  ($1,700,000 of which
was  allocated to licensing  revenues,  with the remaining  $3,300,000  recorded
primarily as a reimbursement of capitalized charges) in consideration for giving
a  marketing   company  the  right  to  explore  the  Company's   drug  delivery
technologies  with the  possibility of entering into future  individual  product
agreements to replace  certain other products,  and to provide future  royalties
and  product  opportunities.  In  connection  with this  agreement,  the Company
received  $5,000,000  for the  sale of  certain  Class A  Common  Stock  options
exercisable in various periods through September 1998 (see Note 12).

         In January 1997,  the Company  concluded a broad-based  agreement  with
Roche  Holding,  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 made in January 1997
and 1998, respectively, with one additional payment of $3,000,000 to be received
in January 1999, unless regulatory  approval of a potential follow-on product in
the same therapeutic area is received prior to that date. Such payments received
have been  included in revenue and the last payment  will be  similarly  treated
when received.  Upon  marketing,  KV will receive  royalties on the sales of the
follow-on  product.  Under the  agreement,  KV also has the  exclusive  right to
market or license the follow-on product outside of North America.
 
         Also, as part of the agreement, additional products are to be developed
for Roche using KV's  proprietary drug delivery  technologies.  KV would receive
manufacturing revenues and royalties at the time the products are marketed under
separate agreements for each product.

         As  part  of  a  further   collaboration  under  the  agreement,   KV's
wholly-owned subsidiary, ETHEX Corporation, began marketing two of Roche's brand
name products generically under a revenue sharing arrangement in fiscal 1998.
<TABLE>
<CAPTION>

16.       Quarterly Financial Results (Unaudited)

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

 
                                              1st Quarter      2nd Quarter       3rd Quarter      4th Quarter            Year
                                              -----------      -----------       -----------      -----------            ----
<S>                                           <C>               <C>              <C>              <C>              <C> 
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                                     $2,761            $3,556          $ 4,030            $6,644          $16,991

Net Income                                        $1,841            $2,182          $ 2,763            $4,518          $11,304

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

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

FISCAL  1997
Net Sales                                        $13,068           $13,094          $14,727           $17,002          $57,891

Gross Profit                                      $5,930            $6,453           $6,546           $ 9,484          $28,413

Pretax Income                                     $1,315            $1,628           $1,837           $ 4,527          $ 9,307
                                           
Net Income                                        $1,285            $1,598           $1,807           $ 4,234          $ 8,924

Earnings Per Share-Basic (a)                      $ 0.07            $ 0.08           $ 0.10           $  0.23          $  0.48

Earnings Per Share-Diluted (a)                    $ 0.07            $ 0.08           $ 0.09           $  0.22          $  0.47
<FN>

Note:

(a)    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>

17.      Industry Segments

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

<PAGE>


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

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

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant
 
         The  information  contained under the caption  "INFORMATION  CONCERNING
NOMINEE AND DIRECTORS  CONTINUING IN OFFICE" in the Company's  definitive  proxy
statement to be filed pursuant to Regulation 14(a) for the Company's 1998 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 the Company's 1998 Annual
Meeting  of  Shareholders,   which  involves  the  election  of  directors,   is
incorporated herein by this reference.
 
Item 12.   Security Ownership of Certain Beneficial Owners and  Management
 
         The  information  contained under the captions  "SECURITY  OWNERSHIP OF
PRINCIPAL HOLDERS AND MANAGEMENT" in the Company's definitive proxy statement to
be filed  pursuant to Regulation  14(a) for the Company's 1998 Annual Meeting of
Shareholders, which involves the election of directors is incorporated herein by
this reference.
 
Item 13.  Certain Relationships and Related Transactions
 
         The information  contained under the caption "TRANSACTIONS WITH ISSUER"
in the Company's  definitive  proxy statement to be filed pursuant to Regulation
14(a) for the Company's 1998 Annual Meeting of Shareholders,  which involves the
election of directors, 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:                                       

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

  Report of Independent Certified Public Accountants                     

  Consolidated Balance Sheets as of
  March 31, 1998 and 1997                                                

  Consolidated Statements of Income
  for the Years Ended March 31, 1998, 1997 and 1996                      

  Consolidated Statements of Shareholders'
  Equity for the Years Ended March 31, 1998,
   1997 and 1996                                                         

  Consolidated Statements of Cash Flows
  for the Years Ended March 31, 1998, 1997 and 1996                      

  Notes to Financial Statements                                          

(a)      2.  Financial Statement Schedule

         The following consolidated financial statement schedule
         of K-V Pharmaceutical Company and subsidiaries is included
         in Item 14(d):

         Schedule II - Valuation and Qualifying Accounts

(a)      3.  Exhibits:

         See Exhibit Index

(b)      Reports on Form 8-K:

         No Reports on Form 8-K were filed during the fourth
         quarter of the Registrant's fiscal year ended
         March 31, 1998.

(c)      Exhibits:

         See Exhibit Index

<TABLE>
<CAPTION>

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

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

</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.


<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 24, 1998              By       /s/  Marc S. Hermelin
                                             ---------------------
                                             Vice Chairman of the Board
                                             (Principal Executive Officer)



Date:    June 24, 1998              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 24, 1998              By       /s/  Marc S. Hermelin
                                             ---------------------
                                             Marc S. Hermelin



Date:    June 24, 1998              By       /s/  Victor M. Hermelin
                                             -----------------------
                                             Victor M. Hermelin



Date:    June 24, 1998              By       /s/ Garnet E. Peck, Ph.D.
                                             -------------------------
                                             Garnet E. Peck, Ph.D.



Date:    June 24, 1998              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 From 10-K for
          the year ended March 31, 1987, is incorporated herein by this
          reference.

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

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

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

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

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

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, filed herewith.

4(g)      Deed of Trust and Security  Agreement dated as of October 16,
          1997, between the Company 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 From 10-K for
          the year ended March 31, 1988, is incorporated herein by this
          reference.

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

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

10(g)*    Employment  Agreement  between  the  Company  and  Raymond F.
          Chiostri,         Corporate         Vice-President        and
          President-Pharmaceutical Division, which was filed as Exhibit
          10(l) to the  Company's  Annual  Report  on Form 10-K for the
          year ended March 31,  1992,  is  incorporated  herein by this
          reference.

 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 From 10-K for
          the year ended March 31, 1994, is incorporated herein by this
          reference.

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

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

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

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

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

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  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.

21        List of Subsidiaries, filed herewith.

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

27        Financial Data Schedule, filed herewith.


     *   Management contract or compensation plan.