<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D. C.  20549



                                   FORM 10-Q



(Mark One)

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

For the quarterly period ended SEPTEMBER 30, 1997
                               ------------------

                                       OR

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

For the transition period from                to
                               ---------------   ----------------------

Commission File Number:  0-10736
                         -------


                                MGI PHARMA, INC.
                                ----------------
             (Exact name of registrant as specified in its charter)


 
            Minnesota                                    41-1364647
----------------------------------          ----------------------------------
(State or other jurisdiction of             (I.R.S. employer identification 
incorporation or organization)                           number)

 
Suite 300E, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343                            (612) 935-7335
----------------------------------          ----------------------------------
(Address of principal executive              (Registrant's telephone number, 
offices and zip code)                         including area code)


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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


   Common Stock, $.01 par value                     14,142,501 shares
----------------------------------          ---------------------------------- 
            (Class)                          (Outstanding at October 23, 1997)
 
<PAGE>
 
                               FORM 10-Q INDEX

                              MGI PHARMA, INC.
                                        



                                                                 Page
                                                                 Number
                                                                 ------

PART I.   FINANCIAL INFORMATION

  Item 1.  Financial Statements (Unaudited)

              Balance Sheets - September 30, 1997
              and December 31, 1996

              Statements of Operations - Three Months and
              Nine Months Ended September 30, 1997 and 1996

              Statements of Cash Flows - Nine Months
              Ended September 30, 1997 and 1996

              Notes to Financial Statements

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


PART II.  OTHER INFORMATION

  Item 5.  Other Information

  Item 6.  Exhibits and Reports on Form 8-K


SIGNATURES
<PAGE>
 
                       PART I - FINANCIAL INFORMATION


                                        

Item 1. Financial Statements
----------------------------


                               BALANCE SHEETS

                              MGI PHARMA, INC.

                                 (Unaudited)

                                        


                                              September 30,    December 31,
                                                  1997             1996
                                              -------------    ------------
ASSETS
 
Current assets:
 
  Cash and cash equivalents                     $ 4,660,704     $ 8,220,569
 
  Short-term investments                          9,046,467       9,667,254

  Receivables, less allowances of $84,497
    and $68,254                                   1,585,524       1,079,970
 
  Inventories, net                                  732,611         594,164
 
  Prepaid expenses                                  205,959          53,436
                                              -------------    ------------ 
     Total current assets                        16,231,265      19,615,393
 
Equipment and furniture, at cost
  less accumulated depreciation of
  $903,652 and $775,810                             509,784         227,134
 
Other assets                                        398,873         320,517
                                              -------------    ------------
Total assets                                    $17,139,922     $20,163,044  
                                              =============    ============

(Continued)
<PAGE>
 
BALANCE SHEETS
(Unaudited)
Page 2

                                              September 30,    December 31,
                                                  1997             1996
                                              -------------    ------------ 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
 
  Accounts payable                              $   369,208     $   744,052
 
  Accrued expenses                                1,658,489       3,043,993
 
  Other current liabilities                          45,446           7,711
                                              -------------    ------------ 
     Total current liabilities                    2,073,143       3,795,756
                                              -------------    ------------ 
Stockholders' equity:
 
  Common stock, $.01 par value,
    30,000,000 authorized shares,
    14,135,964 and 14,081,574
    issued shares                                   141,360         140,816
 
  Additional paid-in capital                     88,981,509      88,789,495
 
  Notes receivable from officers                   (102,575)       (104,933)
 
  Accumulated deficit                           (73,953,515)    (72,458,090)
                                              -------------    ------------ 
     Total stockholders' equity                  15,066,779      16,367,288
                                              -------------    ------------ 
Total liabilities and
  stockholders' equity                          $17,139,922     $20,163,044
                                              =============    ============


_____________________________________

See accompanying notes to financial statements.
<PAGE>
 
                            STATEMENTS OF OPERATIONS

                                MGI PHARMA, INC.

                                  (Unaudited)


                            Three Months Ended      Nine Months Ended
                               September 30,           September 30,
                       ------------------------ -------------------------
                          1997         1996         1997         1996
                       -----------  ----------- ------------  -----------
Revenues: 
 Sales                  $2,576,662  $ 1,535,916  $ 6,764,453  $ 4,430,680
 Licensing                 786,382      469,509    1,761,617    1,490,777
 Interest and
   other                   206,240      223,779      674,020      683,179
                        ----------  -----------  -----------   ----------
                         3,569,284    2,229,204    9,200,090    6,604,636
                        ----------  -----------  -----------   ----------

Costs and Expenses:
 Research and
  development            1,184,103    2,282,037    3,629,292    4,775,385
   Cost of sales           205,439      168,455      596,872      477,275
   Selling,
    general and
     administrative      2,316,584    1,761,364    6,469,351    5,393,000
                        ----------  -----------  -----------   ----------
 
                         3,706,126    4,211,856   10,695,515   10,645,660
                        ----------  -----------  -----------   ---------- 

Net loss               $  (136,842) $(1,982,652) $(1,495,425) $(4,041,024)
                       ===========  ===========  ===========  ===========

Loss per common
  share                $     (0.01) $     (0.15) $     (0.11) $     (0.31)

Weighted average
  number of common
  shares outstanding    14,135,191   13,096,384   14,108,178   12,893,031



See accompanying notes to financial statements.
<PAGE>
 
                            STATEMENTS OF CASH FLOWS

                                MGI PHARMA, INC.
                                        
                                  (Unaudited)



                                               Nine Months Ended September 30,
                                              --------------------------------
                                                    1997           1996
                                                ------------   ------------
OPERATING ACTIVITIES:
Net loss                                        $ (1,495,425)  $ (4,041,024)
Adjustments for non-cash items:
  Depreciation and amortization                      127,842         72,300
  Benefit plan contribution                           95,787         72,137
Changes in operating assets and liabilities:
  Receivables                                       (505,554)        81,924
  Inventories                                       (138,447)       247,773
  Prepaid expenses                                  (152,523)       (42,981)
  Accounts payable and accrued expenses           (1,768,696)    (1,193,308)
  Other current liabilities                           37,735         39,569
                                                ------------   ------------
Net cash used in operating activities             (3,799,281)    (4,763,610)
                                                ------------   ------------
 
INVESTING ACTIVITIES:
  Purchase of investments                        (11,771,378)   (21,388,022)
  Maturity of investments                         12,392,165     15,574,823
  Purchase of equipment and furniture               (410,492)       (50,765)
  Payments on notes receivable                         2,358        480,924
  Other                                              (78,356)      (115,932)
                                                ------------   ------------
Net cash provided by (used in) investing
  activities                                         134,297     (5,498,972)
                                                ------------   ------------
 
FINANCING ACTIVITIES:
  Proceeds from issuance of shares                        --      5,497,611
  Issuance of shares under stock
    plans                                            105,119         77,183
                                                ------------   ------------
Net cash provided by financing
  activities                                         105,119      5,574,794
                                                ------------   ------------
Decrease in cash and cash equivalents             (3,559,865)    (4,687,788)
 
Cash and cash equivalents at
  beginning of period                              8,220,569      9,075,569
                                                ------------   ------------
 
Cash and cash equivalents at
  end of period                                 $  4,660,704   $  4,387,781
                                                ============   ============


-----------------------------------------
See accompanying notes to financial statements.
<PAGE>
 
                         NOTES TO FINANCIAL STATEMENTS

                                MGI PHARMA, INC.

                                  (Unaudited)


(1)  Basis of Presentation
     ---------------------

MGI PHARMA, INC. (MGI or the company) is a pharmaceutical company that acquires,
develops and markets innovative and differentiated products for niche markets of
unmet medical need.  The company is primarily focused on products that treat
cancer or improve the quality of life for cancer patients.  It intends to expand
into the rheumatology market upon approval of Salagen(R) Tablets as a treatment
of symptoms associated with Sjogren's syndrome.  The company markets its
products to physicians throughout the United States, with sales made to
pharmaceutical wholesalers for distribution to the ultimate consumers of company
products.  Sales of Salagen(R) account for the vast majority of company sales.
The company is commercializing its products outside the United States through
various alliances, and has agreements with several pharmaceutical companies to
commercialize Salagen( internationally including the major markets of Europe,
Japan and Canada.  Exclusive rights to MGI 114 for Japan were granted to
Dainippon Pharmaceutical Co., Ltd. under a cooperative development and
commercialization agreement in 1995.  Product development efforts include
development of MGI 114 and continued clinical support of Salagen(R) Tablets.

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the footnotes required by generally
accepted accounting principles for complete financial statements.  In the
opinion of management, all adjustments (consisting of normal, recurring
accruals) considered necessary for fair presentation have been included.
Interim results may not be indicative of annual results.  For further
information, refer to the financial statements and footnotes included in the
company's report on Form 10-K for the year ended December 31, 1996.
<PAGE>
 
(2)  Loss Per Common Share
     ---------------------

Loss per common share is based upon the weighted average number of shares
outstanding during each period.  Common stock equivalents are not included, as
their effect is antidilutive.


(3)  Short-Term Investments
     ----------------------

Because the company has the intent and ability to hold its investments to
maturity, they are considered held-to-maturity investments.  As such, they are
stated at amortized cost, which approximates estimated fair value.  Held-to-
maturity investments at September 30, 1997, are summarized in the following
table:
 
      European certificates of deposit       $2,096,358
      Commercial paper                        5,058,992
      Corporate notes                         1,891,117
                                             ----------
                                             $9,046,467
                                             ==========
 
(4)  Inventories
     -----------
 
Inventories at September 30, 1997, and December 31, 1996, are summarized
in the following table:


                                                1997          1996
                                             ----------    ----------
Raw materials and supplies                   $  472,254    $   25,856
Work in process                                  18,624       107,080
Finished goods                                  594,282       847,710
Valuation allowance                            (352,549)     (386,482)
                                              ----------   ----------
      Total                                  $  732,611    $  594,164
                                             ==========    ==========
 
Inventories are stated at the lower of cost or market.  Cost is
determined on a first-in, first-out basis.
 
(5)  Accrued Expenses
     ----------------
 
Accrued expenses at September 30, 1997, and December 31, 1996, are
summarized in the following table:
 
                                           1997          1996
                                        ----------    ----------
Product development commitments         $  278,094    $1,615,397
Bonuses                                    421,838       493,519
Product return accrual                     165,625       122,453
Retirement plan contribution               127,915       110,374
Medicaid accrual                           106,994       105,508
Retirement commitment                        --          243,721
Other accrued expenses                     558,023       353,021
                                        ----------    ----------
                                        $1,658,489    $3,043,993
                                        ==========    ==========
<PAGE>
 
(6)  Stock Incentive Plans
     ---------------------

Under stock incentive plans, designated persons (including officers, directors
and employees) are granted rights to acquire company common stock. These
rights include stock options and other equity rights.

At September 30, 1997, 3,464,470 shares of common stock remain reserved for
issuance, of which 1,369,248 remain available for grant. Options to purchase
2,095,222 shares of common stock were outstanding, of which 1,123,359 were
exercisable. Options outstanding had a weighted average exercise price of
$6.39 per share.

Loans to officers were made for the purchase of stock, exercise of options and
payment of associated tax obligations. The loans are full recourse, unsecured
obligations and are payable on demand. At September 30, 1997, $102,575 of
principal remains outstanding, and is presented as "Notes receivable from
officers" within stockholders' equity in the accompanying balance sheet.

(7)   Stockholders' Equity
      --------------------

Changes in selected stockholders' equity accounts were as follows:
<TABLE>
<CAPTION>
 
                                                                                Notes
                                                                Additional   receivable
                                             Common stock         paid-in       from
                                         ---------------------
                                           Shares    Par value    capital     officers
                                         ----------  ---------  -----------  -----------
<S>                                      <C>         <C>        <C>          <C>
NINE MONTHS ENDED SEPTEMBER 30, 1996:
Balance at December 31, 1995             12,781,608   $127,816  $82,872,883   $(432,082)
Employee retirement savings
  plan contribution                          12,489        125       70,104          --
Exercise of stock options                     6,323         63       30,395          --
Employee stock purchase plan                 11,859        119       46,606          --
Issuance of shares                        1,200,000     12,000    5,485,611          --
Other issuances                              11,692        117       56,882     (56,999)
Note payments                                    --         --           --     384,148
                                         ----------   --------  -----------   ---------
 
Balance at September 30, 1996            14,023,971   $140,240  $88,562,481   $(104,933)
                                         ==========   ========  ===========   =========
 
NINE MONTHS ENDED SEPTEMBER 30, 1997:
Balance at December 31, 1996             14,081,574   $140,816  $88,789,495   $(104,933)
Exercise of stock options                     5,675         57       24,715          --
Employee retirement savings
  plan contribution                          21,753        217       87,221          --
Employee stock purchase plan                 26,962        270       80,078          --
Note payments                                    --         --           --       2,358
                                         ----------   --------  -----------   ---------
 
Balance at September 30, 1997            14,135,964   $141,360  $88,981,509   $(102,575)
                                         ==========   ========  ===========   =========
</TABLE>
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Overview
--------

MGI PHARMA, INC. (MGI or the company) is a pharmaceutical company that
acquires, develops and markets innovative and differentiated products for
niche markets of unmet medical need. The company is primarily focused on
products that treat cancer or improve the quality of life for cancer patients.
It intends to expand into the rheumatology market upon approval of Salagen(R)
Tablets for treatment of symptoms associated with Sjogren's syndrome. The
company currently markets its products to physicians throughout the United
States, with sales made to pharmaceutical wholesalers for ultimate delivery to
patients through drug distribution channels. Sales of Salagen(R) comprise the
vast majority of company sales. The company is commercializing its products
outside the United States through various alliances, and has agreements with
several pharmaceutical companies to commercialize Salagen(R) internationally,
including the major markets of Europe, Japan and Canada. Exclusive rights to
MGI 114 for Japan were granted to Dainippon Pharmaceutical Co., Ltd. under a
cooperative development and commercialization agreement in 1995.
Pharmaceutical development efforts include development of MGI 114 and
continued clinical support of Salagen(R) Tablets.

Results of Operations
---------------------

The company's net loss of $136,842 in the 1997 third quarter compares with a
net loss of $1,982,652 in the 1996 third quarter. For the nine month period
ended September 30, 1997, the net loss decreased to $1,495,425 from $4,041,024
in the corresponding 1996 period. The smaller 1997 net losses were due to
increased sales revenue and decreased research and development expenses,
partially reduced by increased selling expenses.

Sales revenue increased 68% from $1,535,916 in the 1996 third quarter to
$2,576,662 in the 1997 third quarter, and increased 53% from $4,430,680 in the
nine month period ended September 30, 1996, to $6,764,453 in the corresponding
1997 period. The 1997 increases reflect increased sales of Salagen(R) Tablets,
as well as increased sales of DIDRONEL(R) I.V. Infusion. Quarter-to-quarter
sales revenues increased 29% in the 1997 third quarter, following a 9%
decrease in the 1997 second quarter. The recent trend in retail demand, as
estimated using shipment activity from wholesalers to pharmacies, has
continued to grow. MGI sales revenues will fluctuate from quarter to quarter,
due to periodic adjustments in wholesaler buying patterns.
<PAGE>
 
Cost of sales increased 22% from $168,455 in the 1996 third quarter to
$205,439 in the 1997 third quarter, and increased 25% from $477,275 in the
nine month period ended September 30, 1996 to $596,872 in the corresponding
1997 period. The 1997 increases are due to increases in unit sales. Management
believes that cost of sales as a percent of sales of approximately 10% should
continue for its current products.

Licensing revenue increased 67% from $469,509 in the 1996 third quarter to
$786,382 in the 1997 third quarter, and increased 18% from $1,490,777 in the
nine month period ended September 30, 1997 to $1,761,617 in the corresponding
1997 period. The increases are primarily due to increased royalties related to
non-core agricultural technology, and the scheduled increase in quarterly
milestone payments from Dainippon Pharmaceutical Co., Ltd. Future licensing
revenues will likely fluctuate between years and from one quarter to the next
depending on the achievement of milestones by the company's partners, their
level of recurring royalty generating activities, and the timing of initiating
additional licensing relationships.

Interest and other income decreased 8% from $223,779 in the 1996 third quarter
to $206,240 in the 1997 third quarter, and decreased 1% from $683,179 in the
nine month period ended September 30, 1996, to $674,020 in the corresponding
1997 period. The 1997 decreases are due to a decrease in the average amount of
funds available for investment in 1997, partially reduced by an increased
investment yield in 1997. Until the company achieves positive cash flow, funds
available for investments will continue to decline. Interest income would
correspondingly decline, if yields were to remain constant.

Research and development expense decreased 48% from $2,282,037 in the 1996
third quarter to $1,184,103 in the 1997 third quarter, and decreased 24% from
$4,775,385 in the nine month period ended September 30, 1996, to $3,629,292 in
the corresponding 1997 period. The 1997 decreases reflect declining spending
for Salagen(R), in conjunction with submission of a supplemental New Drug
Application (sNDA) to the U.S. Food and Drug Administration in February 1997.
Research and development spending is expected to increase markedly when Phase
II studies of MGI 114 commence, which are currently planned for 1998.

Selling, general and administrative expenses increased 32% from $1,761,364 in
the 1996 third quarter to $2,316,584 in the 1997 third quarter, and increased
20% from $5,393,000 in the nine month period ended September 30, 1996, to
$6,469,351 in the corresponding 1997 period. The 1997 increases are due to
full staffing of the company's sales force in 1997, compared to 1996 when
restructuring of the sales force was underway, and promotion costs associated
with the launch of INFeD(R), in the third quarter of 1997. MGI began promoting
INFeD(R) for use in cancer therapy in July 1997, under a promotion agreement
with Schein Pharmaceutical, Inc. Schein continues to own the product and
promote it for other uses. Selling expenses are expected to increase in 1998,
especially in conjunction with the anticipated launch of Salagen(R) for
Sjogren's syndrome patients.
<PAGE>
 
Liquidity and Capital Resources
-------------------------------

At September 30, 1997, the company had cash and cash equivalents and
investments of $13,707,171 and working capital of $14,158,122 compared to
$17,887,823 and $15,819,637, respectively, at December_31, 1996. During the
nine month period ended September 30, 1997, the company used cash of
$3,799,281 to fund its operating activities.

Cash in excess of current operating needs is invested in marketable securities
in accordance with the company's investment policy. This policy emphasizes
principal preservation, so it requires strong issuer credit ratings and limits
the amount of credit exposure from any one issuer or industry.

Substantial amounts of capital are required for pharmaceutical development and
commercialization efforts. For continued development and commercialization of
its products, the company plans to utilize cash provided from growth in sales
of Salagen(R), collaborative arrangements and existing liquid assets. If these
sources of capital are insufficient, the company will seek other sources of
funding, including additional equity issuances, or it will manage the pace of
developing its product candidates.

Pending Adoption of Recently Issued Accounting Standard
-------------------------------------------------------

The company will adopt Statement of Financial Accounting Standards No. 128,
Earnings per Share, for the year ended December 31, 1997 and subsequent
periods. SFAS No. 128 prescribes computation, presentation and disclosure
requirements of earnings per share data for public companies. Until the
company becomes profitable, adoption of SFAS No. 128 is not expected to impact
its computation of earnings per share.

Cautionary Statement
--------------------

This Form 10-Q contains forward-looking statements within the meaning of
federal securities laws. These statements include statements regarding intent,
belief, or current expectations of the company and its management. These
forward-looking statements are not guarantees of future performance and
involve a number of risks and uncertainties that may cause the company's
actual results to differ materially from the results discussed in these
statements. Factors that might cause such differences include, but are not
limited to, dependence on sales of Salagen(R) Tablets, dependence on license
acquisition strategy, uncertainty of strategic alliances, and other risks and
uncertainties detailed from time to time in the company's filings with the
Securities and Exchange Commission, including Exhibit 99 to this Form_10-Q.
<PAGE>
 
                                MGI PHARMA, INC.

                          PART II - OTHER INFORMATION

Item 5.  Other Information
--------------------------

In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the company is hereby filing cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in forward looking statements of the
company made by, or on behalf of the company. See Exhibit 99 to this report.

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------
 
(a)    LISTING OF EXHIBITS:

Exhibit
Number                            Description
-------  -------------------------------------------------------------
    3.1  Restated Articles of Incorporation (Incorporated by
         reference to Exhibit 3.1 to the company's Registration
         Statement on Form S-2, File No. 33-40763).
    3.2  Restated Bylaws of the company, as amended to date
         (Incorporated by reference to Exhibit 3.2 to the company's
         Annual Report on Form 10-K for the year ended December 31,
         1994).
    4.1  Specimen certificate for shares of Common Stock of the
         company (Incorporated by reference to Exhibit 4.1 to the
         company's Annual Report on Form 10-K for the year ended
         December 31, 1994).
    4.2  Rights Agreement, dated as of January 19, 1988, between
         the company and Norwest Bank Minneapolis, National
         Association (including the form of Right Certificate
         attached as Exhibit A thereto) (Incorporated by reference
         to Exhibit 4.2 to the company's Annual Report on Form 10-K
         for the year ended December 31, 1994).
     11  Computation of Net Loss per Common Share
     27  Financial Data Schedule
     99  Cautionary Statements

(b)  REPORTS ON FORM 8-K
 
     There were no reports on Form 8-K filed during the three months
     ended September 30, 1997.
 
<PAGE>
 
                                   SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

   
                              MGI PHARMA, INC.


Date:    October 30, 1997     By: /s/ James V. Adam
        -----------------        ------------------------------
                                 James V. Adam, Vice President,
                                 Chief Financial Officer
                                 (authorized signatory and
                                 principal financial officer)
<PAGE>
 
                                MGI PHARMA, INC.
                                        


                         Quarterly Report on Form 10-Q
                                    for the
                        Quarter Ended September 30, 1997



                                 EXHIBIT INDEX
                                 -------------
                                        

 
 Exhibit     
  Number                             Description
---------    -----------------------------------------------------------
 
  3.1        Restated Articles of Incorporation (Incorporated by reference to
             Exhibit 3.1 to the company's Registration Statement on Form S-2,
             File No. 33-40763).
              
  3.2        Restated Bylaws of the company, as amended to date (Incorporated by
             reference to Exhibit 3.2 to the company's Annual Report on Form 10-
             K for the year ended December 31, 1994).
 
  4.1        Specimen certificate for shares of Common Stock of the company
             (Incorporated by reference to Exhibit 4.1 to the company's Annual
             Report on Form 10-K for the year ended December 31, 1994).
 
  4.2        Rights Agreement, dated as of January 19, 1988, between the company
             and Norwest Bank Minneapolis, National Association (including the
             form of Right Certificate attached as Exhibit A thereto)
             (Incorporated by reference to Exhibit 4.2 to the company's Annual
             Report on Form 10-K for the year ended December 31, 1994).
 
  11         Computation of Net Loss per Common Share
 
  27         Financial Data Schedule
 
  99         Cautionary Statements