FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   (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, 1996

                                       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 No. 1-13690

                           PolyMedica Industries, Inc.
             (Exact name of registrant as specified in its charter)

        Massachusetts                                                04-3033368
State or other jurisdiction of                                  (I.R.S. Employer
incorporation or organization                                Identification No.)

11 State Street, Woburn, Massachusetts                                     01801
(Address of principal executive offices)                              (Zip Code)

Registrant's telephone number, including area code                (617) 933-2020

Securities registered pursuant to Section 12(b) of the Act:  None

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

                     Common Stock, $.01 par value per share
                                (Title of class)

                         Preferred Stock Purchase Rights
                                (Title of class)

     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

         The number of shares  outstanding of the  registrant's  class of Common
Stock as of November 13, 1996 was 8,555,369  which includes  163,659 shares held
in treasury.



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                           POLYMEDICA INDUSTRIES, INC.
                                TABLE OF CONTENTS



                                                                            Page

     PART I  -   FINANCIAL INFORMATION

     Item 1  -   Financial Statements

                   Consolidated Balance Sheets at
                            September 30, 1996 and March 31, 1996              3

                   Consolidated Statements of Operations
                            for the three and six months
                            ended September 30, 1996 and 1995                  5

                   Consolidated Statements of Cash Flows
                            for the six months ended
                            September 30, 1996 and 1995                        6

                   Notes to Consolidated Financial Statements                  7

     Item 2  -     Management's Discussion and Analysis of Financial
                            Condition and Results of Operations                9


     PART II -    OTHER INFORMATION

     Item 4  -    Submission of Matters to a Vote of Security Holders         19

     Item 6  -    Exhibits and Reports on Form 8-K                            20

     Signatures                                                               21

     Exhibit Index                                                            22



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                         PART I - FINANCIAL INFORMATION

Item 1.   Uaudited Financial Statements


                           POLYMEDICA INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)


                                                 Sept. 30,            March  31,
                                                   1996                  1996
                                                (unaudited)

ASSETS

Current assets:
    Cash and cash equivalents                    $ 12,768              $  23,302
    Accounts receivable -- trade (net of
      allowance for doubtful accounts of
      $434 and $82 as of September 30
      and March 31, 1996)                           5,401                  2,558
    Inventories                                     4,409                  4,163
    Prepaid expenses and other
      current assets                                  731                    416

             Total current assets                  23,309                 30,439

Property, plant, and equipment, net                 6,171                  6,273
Intangible assets, net                             42,313                 35,500
Other assets, net                                     351                    361

             Total assets                        $ 72,144              $  72,573








The  accompanying  notes are an integral  part of these  unaudited  consolidated
financial statements.

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                           POLYMEDICA INDUSTRIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)

                                                Sept. 30,              March 31,
                                                  1996                   1996
                                               (unaudited)


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                          $      1,570            $   1,288
    Accrued expenses                                 2,229                3,605
    Notes payable                                      625                   --

        Total current liabilities                    4,424                4,893

 Senior debt (net of unamortized discount
    of $556 and $600 as of
    Sept. 30 and March 31, 1996)                    24,444               24,400
 Notes payable - long term                             625                   --

        Total liabilities                           29,493               29,293

Commitments

Stockholders' equity:
    Preferred stock $.01 par value; 
       2,000,000 shares authorized, none 
       issued or outstanding                            --                   --
    Common stock, $.01 par value, 20,000,000
       shares authorized, 8,555,369 and 
       8,112,635 shares issued as of Sept. 30
       and March 31, 1996                               86                   81
    Less treasury stock, at cost, 173,578 and
       and 159,905 shares as of Sept. 30
       and March 31, 1996                           (1,166)              (1,036)
    Additional paid-in capital                      53,248               54,917
    Accumulated deficit                             (9,007)             (10,105)
    Notes receivable from officers                    (322)                (415)
    Currency translation adjustment                   (188)                (162)

        Total stockholders' equity                  42,651               43,280

        Total liabilities and
           stockholders' equity                  $  72,144             $ 72,573

The  accompanying  notes  are an  integral  part  of  these  unaudited
consolidated financial statements.

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                            POLYMEDICA INDUSTRIES, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                       (In thousands, except per share data)
 
                                    Three Months Ended        Six Months Ended
                                   Sept. 30,  Sept. 30,     Sept. 30,  Sept. 30,
                                     1996       1995          1996        1995
Revenues:
  Net product sales               $ 7,063    $  6,921       $11,888     $12,504
  Royalties, exclusivity,
     development and license
     fees                              40          72           208         293

Total revenues                      7,103       6,993        12,096      12,797

Cost of product sales               2,691       2,729         4,518       4,839

Total revenues, less cost of 
     product sales                  4,412       4,264         7,578       7,958

Operating expenses:
  Selling, general, and 
     administrative                 3,122       2,546         5,269       4,751
  Research and development            197         196           317         390
                                    3,319       2,742         5,586       5,141
Income from operations              1,093       1,522         1,992       2,817

Other income and expense:
  Investment income                   228         186           510         387
  Interest expense                   (689)       (666)       (1,370)     (1,332)
                                     (461)       (480)         (860)       (945)

Income from continuing
  operations before income taxes      632       1,042         1,132       1,872
Provision for income taxes             19          30            34          50
Income from continuing operations     613       1,012         1,098       1,822

Loss from discontinued operations      --        (207)           --        (441)

Net income                        $   613     $   805       $ 1,098    $  1,381

Net income (loss) per common share:
  Continuing operations            $  .07     $   .14      $    .13    $    .25
  Discontinued operations              --        (.03)           --        (.06)

Net income                        $   .07     $   .11       $   .13    $    .19

Weighted average number of
  common shares outstanding         8,361       7,320         8,421       7,211

The  accompanying  notes are an integral  part of these  unaudited  consolidated
financial statements.

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                           POLYMEDICA INDUSTRIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)
                                                            Six Months Ended
                                                         Sept. 30,     Sept. 30,
                                                            1996          1995
Cash flows from operating activities:
    Net income                                          $  1,098      $   1,381
    Loss from discontinued operations                         --            441
    Adjustments to reconcile net income to net 
     cash flows from operating activities:
         Depreciation and amortization                     1,389          1,349
         Gain on disposal of fixed assets                     --             (6)
         Provision for bad debts                              33             18
         Provision for sales allowances                      444            562
         Provision for inventory obsolescence                 33             63
         Changes in assets and liabilities:
             Accounts receivable--trade                   (1,518)        (2,094)
             Inventories                                      37           (457)
             Prepaid expenses and other current assets      (197)          (158)
             Other assets                                     (1)            10
             Accounts payable -- trade                      (813)          (761)
             Accrued expenses                             (1,096)          (316)

                 Total adjustments                        (1,689)        (1,790)

                 Net cash flows from continuing 
                    operations                              (591)            32

                 Net cash flows used for 
                    discontinued operations                   --           (396)

                 Net cash flows from operating 
                    activities                              (591)          (364)

Cash flows from investing activities:
    Acquisition, net of cash acquired                     (6,648)            --
    Spinoff of CardioTech                                 (3,830)            --
    Purchase of property, plant, and equipment              (329)          (914)
    Proceeds from sale of equipment                           --            123

                 Net cash flows from investing 
                    activities                           (10,807)          (791)

Cash flows from financing activities:
    Proceeds from issuance of common stock                   848             78
    Purchase of common stock                                  --           (173)

                Net cash flows from financing 
                    activities                               848            (95)

                Net decrease in cash and cash 
                    equivalents                          (10,550)        (1,250)

                Effect of exchange rate changes 
                    on cash                                   16             (8)

                Cash and cash equivalents at 
                    beginning of period                   23,302         14,006

                Cash and cash equivalents at 
                    end of period                        $12,768        $12,748

The accompanying notes are an integral part of these unaudited consolidated 
financial statements.

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                           POLYMEDICA INDUSTRIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   The  unaudited  consolidated  financial  statements  included  herein  have
been  prepared  by  the  Company,  without  audit,  pursuant  to the  rules  and
regulations  of the  Securities  and Exchange  Commission  and  include,  in the
opinion  of  management,  all  adjustments,   consisting  of  normal,  recurring
adjustments,  necessary  for a fair  presentation  of  interim  period  results.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or omitted  pursuant  to such rules and  regulations.  The
Company  believes,  however,  that  its  disclosures  are  adequate  to make the
information  presented  not  misleading.  The results  for the  interim  periods
presented are not necessarily  indicative of results to be expected for the full
fiscal year.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting principles requires management to make certain 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 reported
period. Actual results could differ from those estimates.

     The financial  statements and the notes  included  herein should be read in
conjunction  with the financial  statements  and notes for the fiscal year ended
March 31, 1996 and with the section entitled "Factors Affecting Future Operating
Results"  included in the  Company's  Annual  Report on Form 10-K for the fiscal
year ended  March 31,  1996,  as well as the section of the same title set forth
herein.

2.   Inventories consist of the following:
     (In thousands)
                                                     Sept. 30,         March 31,
                                                       1996              1996

              Raw materials                          $ 1,808            $ 1,465
              Work in process                            709                902
              Finished goods                           1,892              1,796
                                                     $ 4,409            $ 4,163

3.   In   connection  with   the  spinoff  of  CardioTech  International,   Inc.
("CardioTech"),  for  the  three  and  six  months  ended  September  30,  1995,
CardioTech's  operations  are  accounted for as  discontinued  operations in the
Company's  statement  of  operations,   and  accordingly,   its  operations  are
segregated in the  accompanying  consolidated  statements of operations for that
period.  Net sales,  operating costs and expenses,  and other income and expense
have been  reclassified for amounts  associated with  CardioTech's  discontinued
operations.  CardioTech's  net  revenues  were  not  material  for  all  periods
presented.

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<PAGE>




4.   On August 30, 1996, the Company  acquired all of the  outstanding  stock of
Liberty  Medical Supply,  Inc. for an aggregate  purchase price of $9.36 million
(including  $363,000 of related  expenses) in a transaction  accounted for under
the purchase method of accounting. Accordingly, the net assets and operations of
Liberty Medical have been included in the Company's  financial  statements since
the date of  acquisition.  The purchase price was comprised of (i) $6.75 million
in cash, (ii) two-year 7% subordinated  promissory notes in the aggregate amount
of $1.25 million and (iii) 200,000 shares of the Company's  common stock. In the
event that Liberty  Medical's  performance  in any of the calendar  years ending
December 31, 1997,  1998, and 1999 exceeds  certain  projections  for that year,
certain of the stockholders of Liberty Medical will be entitled to receive up to
an  aggregate of $1 million  over the three year  period.  Liberty  Medical is a
leading mail-order marketer and distributor of diabetes-related  products to the
home market.

     The purchase  price was assigned to the net assets  acquired based on their
fair value at the date of acquisition, and the excess of the purchase price over
the fair value of the assets acquired was recorded as attributable to a customer
list ($1.82  million,  to be amortized  over seven  years) and  goodwill  ($5.92
million, to be amortized over twenty years).

     If the  acquisition  had taken  place at the  beginning  of the year ending
March 31, 1997,  giving effect to  adjustments  for  amortization  of intangible
assets,  interest income and interest expense, the Company's pro forma revenues,
net income and net income per share for the six months ended  September 30, 1996
would have been $17.27 million,  $1.32 million, and $.15,  respectively.  If the
acquisition  had taken place at the  beginning of the year ended March 31, 1996,
the  Company's pro forma  revenues,  net income and net income per share for the
six months  ended  September  30,  1995 would have been  $17.88  million,  $1.20
million, and $.16, respectively.

5.   In October  1996,  PolyMedica  Pharmaceuticals  (U.S.A.),  Inc.  received a
waiver from John Hancock Mutual Life Insurance  Company of a certain fiscal 1997
financial covenant with which it was not in compliance as of September 30, 1996.

6.   In  connection with  the  acquisition of Liberty Medical and the adjustment
provisions in the Hancock warrant, the exercise price of the Hancock warrant was
adjusted to $5.18 per share of common stock for the 543,464  shares  exercisable
under the warrant.

7.   Certain  amounts  in  the  prior  period  financial  statements  have  been
reclassified to conform with the current year presentation.








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

Overview

     With the recent acquisition of Liberty Medical Supply,  Inc. the Company is
now transitioning  from a manufacturer of wound care products and distributor of
consumer  healthcare  products  to an  integrated  developer,  manufacturer  and
marketer of medical products.  The Company offers a number of products which are
based on proprietary  technologies  that deliver  performance  which the Company
believes to be superior to that of competitive products. PolyMedica operates its
businesses   in  the  Medical   Products,   Consumer   Healthcare   and  Ethical
Pharmaceuticals Groups.

     The Company generates  revenues from sales of medical devices and products,
consisting  of  reimbursable   diabetes-related  products,  consumer  healthcare
products,  wound dressings and prescription and non-prescription  pharmaceutical
products.  In  addition,  it generates  revenues  from  royalties,  exclusivity,
development and license fees on certain of its products.

     The  Company  sells its  products  through  a  combination  of  mail-order,
wholesalers, retail chains and national distributors.  Diabetes-related products
are sold directly to consumers through a mail-order network. Consumer healthcare
and over-the-counter  pharmaceutical products are sold through a network of more
than 100 independent  sales  representatives  and national  wholesalers  such as
McKesson Drug Company, Bergen Brunswig Corporation and FoxMeyer Corporation, and
to retailers  including CVS HC Inc., Jack Eckerd Co., OSCO (American Drug Stores
Inc.) and Rite-Aid Corp.  Advanced wound dressings are sold through  established
exclusive  relationships  with  Bristol-Myers  Squibb,  Mylan Laboratories Inc.,
Perstorp AB, Hisamitsu Pharmaceutical Co., Inc., Kuraray Co. Ltd. and others for
use by  institutional  customers,  such as  hospitals,  nursing  homes and other
healthcare  providers,  for patients with chronic wounds.  The Company  promotes
sales of its  products  through  local  print  media,  national  advertising  in
consumer and  professional  publications,  on television and at professional and
trade group meetings, as well as through retail advertising.

     Although  certain of the  Company's  products are  seasonal in nature,  the
Company does not believe its net product sales, in the aggregate,  are generally
subject to material  seasonal  fluctuations.  Thermometer sales to consumers are
higher  during the winter cold and flu season.  The  Company's  non-prescription
urological  products  show higher retail sales during the warmer  months,  as do
Patch Kits for People(TM), the Company's over-the-counter wound care line, which
are  primarily  used in connection  with outdoor  sports  activities  during the
summer and fall seasons.

     The Company has recently  recruited and hired an experienced Vice President
of  Marketing  to  bring  sophisticated  marketing  techniques  to its  consumer
business  through  the  application  of  market  research  and a focus  on those
products  with the greatest  potential.  This is an  expansion of the  Company's
marketing and distribution focus. PolyMedica's goal is to provide superior wound
management  in  each  major  Medicare  reimbursement  category  and to  use  its


                                    9

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competitive  edge as an efficient,  vertically-integrated  manufacturer of wound
care products to offer high  technology,  low-cost wound  dressings  directly to
wholesalers,   distributors   and  buying  groups   already  in  its  healthcare
distribution network.

     The Company  operates from  manufacturing,  distribution,  and research and
development  facilities  located in  Massachusetts,  Florida,  Colorado  and the
United Kingdom.  Virtually all of the Company's product sales are denominated in
U.S. dollars. The Company produces proprietary polyurethane materials from which
it manufactures advanced wound dressings. The Company's research and development
activities  are  principally  funded from ongoing  operations and consist of the
design,  development  and  manufacture of  polyurethane-based  medical  products
derived from proprietary technology and manufacturing processes.

     Integral  to  the  Company's  growth  strategy  is the  acquisition  of new
products  and   businesses.   The  Company  has   successfully   integrated  six
acquisitions since 1990.

     Period  to period  comparisons  of  changes  in net  product  sales are not
necessarily indicative of results to be expected for any future period.

Acquisition of Liberty Medical Supply, Inc.

     On August 30, 1996, the Company  acquired all of the  outstanding  stock of
Liberty  Medical Supply,  Inc. for an aggregate  purchase price of $9.36 million
(including  $363,000 of related  expenses) in a transaction  accounted for under
the purchase method of accounting. Accordingly, the net assets and operations of
Liberty Medical have been included in the Company's  financial  statements since
the date of  acquisition.  The purchase price was comprised of (i) $6.75 million
in cash, (ii) two-year 7% subordinated  promissory notes in the aggregate amount
of $1.25 million and (iii) 200,000 shares of the Company's  common stock. In the
event that Liberty  Medical's  performance  in any of the calendar  years ending
December 31, 1997,  1998, and 1999 exceeds  certain  projections  for that year,
certain of the stockholders of Liberty Medical will be entitled to receive up to
an aggregate of $1 million over the three year period.

     Liberty Medical,  headquartered in Palm City, Florida,  was founded in 1989
and  is  a  leading   mail-order   marketer  and   distributor  of  reimbursable
diabetes-related products to the home market. Liberty Medical is a participating
Medicare provider which accepts payments  directly from Medicare,  typically 80%
of a  product's  purchase  price,  before any  amounts are billed to the patient
and/or the  patient's  medi-gap  insurer.  The benefits to a patient  range from
automatic  shipment of supplies to the  elimination  of  preparing  paperwork or
using personal resources while waiting for reimbursement.  Liberty Medical ships
to more than 20,000 customers in the U.S., making it one of the largest diabetic
suppliers in the country. Its products address a market estimated to include 1.5
million  insulin-dependent  patients,  of which  it is  estimated  that  125,000
patients  currently  receive supplies through  mail-order  companies  similar to
Liberty.  Based  upon an  estimated  $720  annual  reimbursement  level for each
patient,   the  Company  believes  that  Liberty  Medical   participates  in  an
approximately $1 billion market.

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     In  addition  to the above  market,  the  Company  believes  that  there is
significant  growth  potential for Liberty  Medical's  products by expanding the
market to include non-insulin  dependent diabetics.  There are current proposals
in Congress to include non-insulin  dependent diabetics under Medicare following
a Congressional  Budget Office study indicating that improving diabetes coverage
would reduce Medicare expenditures.

Results of Operations

Three Months Ended September 30, 1996 Compared to Three Months Ended 
September 30, 1995

     The  Company's net income was  $613,000,  or $.07 per share,  for the three
months ended  September  30, 1996.  This  performance  compares to net income of
$805,000,  or $.11 per share,  for the three months ended September 30, 1995. In
the three months ended September 30, 1995, income from continuing operations was
$1.01  million,  offset by a loss from  discontinued  operations  of $207,000 in
connection with the spinoff of CardioTech International, Inc.

     Net product sales in the Medical  Products Group decreased by 3.9% to $1.48
million in the three  months  ended  September  30, 1996 as compared  with $1.54
million in the three months ended September 30, 1995. Included in this group are
sales of  diabetes-related  products  from  Liberty  Medical  and the  Company's
advanced wound  dressings to the chronic market through  national  distributors.
This net decrease was  primarily due to a reduction in  professional  wound care
sales offset by $900,000 of first time sales of diabetes-related products.

     The Company is beginning to  implement an enhanced  promotional  program to
allow Liberty Medical to take advantage of its buying  efficiencies and customer
service to grow its  customer  base.  The  Company is using  working  capital to
purchase additional advertising to inform insulin-dependent diabetes patients on
Medicare about the benefits of becoming a Liberty Medical customer.

     To help protect the Company  from the effect of future  changes in Medicare
reimbursement  levels,  the Company  plans to introduce the SPYRO line family of
wound dressings, which includes all reimbursement categories.  Currently ongoing
telemarketing research conducted by the Company will permit it to best apply its
resources to promote these dressings. In addition, the Company is test marketing
LASERSITE,  a high margin niche wound dressing product for cosmetic facial laser
resurfacing.

     The Company has recently signed an agreement with Perstorp AB ("Perstorp"),
pursuant to which Perstorp will become the exclusive pan-European distributor of
SPYROSORB. Previously, the Company reacquired all rights to distribute SPYROSORB
wound  dressings to the  professional  health care market in the U.K. and Europe
effective  January  1, 1997.  This  action  gave the  Company  control  over the
marketing  and  distribution  of  SPYROSORB  and  enables  the  Company  to take
advantage of this wound  dressing's  position as a tariffied  product,  which is
fully reimbursable in the U.K.

                                       11

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     The decrease in wound  dressing sales is due in part to changes in Medicare
reimbursement   methodology  for  chronic  wounds  and  a  resulting  switch  by
healthcare providers to more frequent and less costly dressing changes using low
technology  textile  dressings and in part to reduced purchases by Bristol-Myers
Squibb,  as discussed  below. The overall decrease in total unit volume of wound
dressings was partially offset by an approximate 20% increase in average selling
price of all dressing  sizes,  stated on a 4" x 4"  equivalent  basis,  due to a
change in the product mix.

     The  Company  has  renegotiated  its  Supply   Requirements  and  Licensing
Agreement with  Bristol-Myers  Squibb.  Under the amended terms of the contract,
the Company has acquired  the rights to  MITRAFLEX  in the U.S.,  which gives it
greater  control  over future  marketing  and sales  initiatives.  Bristol-Myers
Squibb has retained U.S. exclusivity to distribute MITRAFLEX in the U.S. through
December 31, 1996 and is not required to make additional  purchases  thereafter.
In the three months ended September 30, 1996 net product sales to  Bristol-Myers
Squibb  decreased by 46.6% when compared to the three months ended September 30,
1995 as  reimbursement  and managed care influences  affected the entire chronic
wound care market.

     The Company expects the uneven ordering  patterns for FLEXZAN from its U.S.
distributor  will  continue  for the  remainder  of calendar  1996.  The Company
believes  that the  changes in  ordering  patterns  are due to  inventory  level
adjustments at that  distributor  and ongoing changes in the  reimbursement  and
managed care marketplaces.

     Net product sales in the Consumer  Healthcare  Group  increased by 10.1% to
$2.75  million in the three months  ended  September  30, 1996 as compared  with
$2.49  million in the three months ended  September  30, 1995.  Included in this
group are sales to the over-the-counter market of: (i) medical devices including
thermometry,  home  healthcare  kits and skin care; (ii) wound dressings sold in
burn,  abrasion  and  blister  kits and  (iii)  urological  remedies,  including
AZO-STANDARD  and  AZO-CRANBERRY.  This division  manufactures  and  distributes
nearly  100  products  through a  network  of more than  36,000  retail  stores.
Approximately  half of the  increase  in net product  sales in the three  months
ended  September  30, 1996 is due to  increased  shipments  of  SPYROFLEX  wound
dressings sold in abrasion, blister and burn kits.

     To support this growth,  the Company market tested  SPYROFLEX in spring and
summer 1996 for  introduction  into the estimated  $450 million retail market in
order to gain  distribution  and prepare for a product launch.  The Company used
national  television  spots on ESPN and ESPNII and major  print  media,  such as
Sports  Illustrated.  With  enhanced  market  research  conducted  by  the  Vice
President of Marketing,  the Company expects to apply future  resources to build
upon consumer awareness of how minor burns, abrasions,  blisters and lacerations
can be treated by advanced wound dressings.

     Major  customers in this group  include the top 20 pharmacy  chains,  major
supermarkets and mass merchandisers.  AZO-STANDARD is the leading product in its
category  of  urinary-tract  analgesics.  This  growth has  attracted  Johnson &
Johnson to become a category  developer with its version of AZO-STANDARD,  which
should expand the market segment.  In addition,  the Company expects to market a
urinary tract infection test strip suitable for use in the home.

                                       12

<PAGE>




     Net product sales in the Ethical Pharmaceuticals Group decreased by 1.7% to
$2.83  million in the three months  ended  September  30, 1996 as compared  with
$2.88  million in the three  months ended  September 30, 1995.  Included in this
group are branded products used for the treatment of urinary tract infections.

     Royalty,   exclusivity,   development  and  license  fees  from  continuing
operations decreased by 44.6% to $40,000 in the three months ended September 30,
1996 as compared with $72,000 in the three months ended September 30, 1995. This
decrease is due to reduced royalties in the U.S. from sales of MITRAFLEX.

     As a percentage of net product  sales,  overall gross margins were 61.9% in
the three months ended  September 30, 1996,  which compares to 60.6% reported in
the three months ended September 30, 1995. Gross margins increased primarily due
to the Company's  ability to find lower cost products and suppliers of materials
needed to manufacture its products.

     Selling,  general, and administration  expenses ("SG&A expenses") increased
by 22.6% in the three  months  ended  September  30,  1996 to $3.12  million  as
compared  with $2.55 million  (exclusive  of  CardioTech  expenses) in the three
months ended September 30, 1995. Included in SG&A expenses were depreciation and
amortization,  wages, benefit costs, and outside professional  services totaling
$1.38  million in the three months ended  September  30, 1996,  or 44.1% of SG&A
expenses, as compared with $1.12 million, or 43.9% of SG&A expenses in the three
months ended September 30, 1995.

     Research and  development  expenses were $197,000 in the three months ended
September  30,  1996,  as  compared  with  $196,000  in the three  months  ended
September 30, 1995.

     Investment  income increased by 22.3% to $228,000 in the three months ended
September 30, 1996, as compared with $186,000 in the six months ended  September
30, 1995, as the Company earned  interest on larger  average cash  balances,  at
higher overall  interest rates.  Interest expense was $689,000 in the six months
ended  September  30, 1996,  as compared  with  $666,000 in the six months ended
September 30, 1995, as the Company accrued  interest  expense in both periods on
$25  million of  Guaranteed  Senior  Secured  Notes due  January  31,  2003 (the
"Hancock Notes") to the John Hancock Mutual Life Insurance Company  ("Hancock").
The  interest  rate on the Hancock  Notes  increased  from 10.65% to 10.90% as a
result of a January 1, 1996 amendment.

Six Months Ended September 30, 1996 Compared to Six Months Ended 
September 30, 1995

     The Company's net income was $1.10 million,  or $.13 per share, for the six
months ended  September  30, 1996.  This  performance  compares to net income of
$1.38 million,  or $.19 per share,  for the six months ended September 30, 1995.
In the six months ended September 30, 1995,  income from  continuing  operations
was $1.82 million,  offset by a loss from discontinued operations of $441,000 in
connection with the spinoff of CardioTech.

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<PAGE>




     Net product sales in the Medical Products Group decreased by 31.2% to $2.22
million  in the six months  ended  September  30,  1996 as  compared  with $3.22
million in the six months  ended  September  30,  1995.  This net  decrease  was
primarily due to a reduction in professional wound care sales offset by $900,000
of first time sales of diabetes-related products. The decrease in wound dressing
sales is due to reasons  described  above.  The  overall  decrease in total unit
volume of wound dressings was partially  offset by an approximate 5% increase in
average  selling  price of all dressing  sizes,  stated on a 4" x 4"  equivalent
basis, due to a change in the product mix.

     Net product sales in the Consumer  Healthcare  Group  increased by 16.9% to
$4.96 million in the six months ended  September 30, 1996 as compared with $4.24
million in the six months ended September 30, 1995. This increase is principally
due to higher  shipments of  AZO-STANDARD  in the six months ended September 30,
1996.

     Net product sales in the Ethical Pharmaceuticals Group decreased by 6.5% to
$4.71 million in the six months ended  September 30, 1996 as compared with $5.04
million in the six months ended September 30, 1995.

     Royalty,  exclusivity,  development  and license fees decreased by 29.2% to
$208,000 in the six months ended September 30, 1996 as compared with $293,000 in
the six  months  ended  September  30,  1995.  This  decrease  is due to reduced
royalties in the U.S. from sales of MITRAFLEX,  partially offset by license fees
from Kuraray Co. Ltd. of Japan in the six months ended September 30, 1996.

     As a percentage of net product  sales,  overall gross margins were 62.0% in
the six months ended September 30, 1996, which compares to 61.3% reported in the
six months ended September 30, 1995.  Gross margins  increased  primarily due to
the  Company's  ability to source lower cost products and suppliers of materials
needed to manufacture its products.

     SG&A expenses increased by 10.9% in the six months ended September 30, 1996
to $5.27  million  as  compared  with $4.75  million  (exclusive  of  CardioTech
expenses) in the six months ended September 30, 1995.  Included in SG&A expenses
were   depreciation  and  amortization,   wages,   benefit  costs,  and  outside
professional  services  totaling $2.38 million in the six months ended September
30, 1996, or 45.2%, of SG&A expenses, as compared with $2.21 million or 46.5% of
SG&A expenses in the six months ended  September 30, 1995.  SG&A expenses in the
six months ended  September 30, 1996 include  costs  related to Liberty  Medical
operations.

     As  a  result  of  the  CardioTech  spinoff,  the  Company  estimates  that
approximately  $500,000 of related  costs have been saved  during the six months
ended September 30, 1996. The Company expects its marketing costs to increase in
the future as a result of the marketing initiatives described above.



                                       14

<PAGE>



     Research and development expenses decreased by 18.9% to $317,000 in the six
months ended  September  30, 1996,  as compared  with $391,000 in the six months
ended September 30, 1995.

     Investment  income  increased  by 31.7% to $510,000 in the six months ended
September 30, 1996, as compared with $387,000 in the six months ended  September
30, 1995, as the Company earned  interest on larger  average cash  balances,  at
higher overall  interest  rates.  Interest  expense was $1.37 million in the six
months ended  September  30,  1996,  as compared  with $1.33  million in the six
months ended September 30, 1995, as the Company accrued interest expense in both
periods on the Hancock Notes.

Liquidity and Capital Resources

     Since its inception,  the Company has raised $53.46 million in gross equity
capital,  of which $7.16 million was from venture capital  financings before the
Company's  initial public  offering,  $39.00 million from its March 1992 initial
public  offering,  $4.55 million from a November 1995 public  offering of common
stock,  and  $2.75  million  from  the sale of its  common  stock,  pursuant  to
Regulation S promulgated  under the Securities Act of 1933. In January 1993, the
Company sold to Hancock $25 million of 10.65%  Guaranteed  Senior  Secured Notes
due January 31, 2003.

     As of September 30, 1996,  working  capital was $18.89  million,  including
cash and cash equivalents of $12.77 million.

     In connection  with the  acquisition of Liberty  Medical and the adjustment
provisions in the Hancock warrant, the exercise price of the Hancock warrant was
adjusted to $5.18 per share of common stock for the 543,464  shares  exercisable
under the warrant.

     In October  1996,  PolyMedica  Pharmaceuticals  (U.S.A.),  Inc.  received a
waiver from Hancock of a certain  fiscal 1997  financial  covenant with which it
was not in compliance as of September 30, 1996.

     The Company  expects that its current  working  capital and funds generated
from  future  operations  will be  adequate  to meet its  liquidity  and capital
requirements for current operations. In the event that the Company undertakes to
make  acquisitions  of  complementary  businesses  or products,  the Company may
require  substantial  additional  funding  beyond  currently  available  working
capital  and  funds  generated  from  operations.   Currently,  the  Company  is
conducting  an active  search for the  strategic  acquisition  of  complementary
businesses  or products.  The Company has no present  commitments  or agreements
with respect to any such acquisition.




                                       15

<PAGE>



Factors Affecting Future Operating Results

     The future  operating  results of the Company remain  difficult to predict.
The Company  continues to face many risks and  uncertainties  which could affect
its operating results, including without limitation, those described below.

     Reliance on Distributors;  Limited Direct Marketing Experience. The Company
has a limited direct marketing and sales  organization and relies on its current
distributors,  including primarily  Bristol-Myers  Squibb and Mylan Laboratories
Inc.,  to sell its wound care  products in the  institutional  marketplace.  The
Company  has a limited  direct  sales  force  which it may need to  broaden  for
certain  of its  products.  There  can be no  assurance  that the  Company  will
establish  such a direct  sales  force or that any such sales  force that may be
established  will be able to  successfully  market and  distribute the Company's
products or to offset any  decline in sales to its  existing  distributors.  The
Company's ability to sell its new products will depend in part on its ability to
enter into marketing and distribution  agreements with  pharmaceutical,  medical
device,  personal  care and other  distributors  in the United  States and other
countries.  If the  Company  enters  into any such  agreements,  there can be no
assurance that the Company's third party distributors will be able to market the
products effectively.

     Acquisitions  of  Other  Businesses. As part of its  growth  strategy,  the
Company currently intends to expand through the acquisition of other businesses,
as  well  as  internal  growth  and  strategic  business  alliances  with  other
companies.  The Company regularly  reviews  potential  acquisitions and business
alliances, some of which may be material. The acquisition of other businesses is
integral to the Company's business strategy;  however, there can be no assurance
that the Company will successfully acquire any businesses, or that such acquired
businesses, if any, will be profitable.  The Company does not currently have any
commitments or agreements  with respect to the  acquisition of any businesses or
products.

     Competition  and  Technological  Change. The  Company is engaged in rapidly
evolving and highly  competitive  fields.  The Company  competes  with  numerous
companies in the healthcare  industry,  including  Bristol-Myers Squibb which is
also the exclusive  distributor of the Company's MITRAFLEX product in the United
States. Competition from medical device manufacturers,  pharmaceutical companies
and other  competitors  is  intense  and  expected  to  increase.  Many of these
companies have substantially greater capital resources, research and development
staffs and facilities,  and greater experience in obtaining regulatory approvals
and in  marketing  and  distribution  of products,  than the  Company.  Academic
institutions,  hospitals,  governmental  agencies  and other  public and private
research   organizations  are  also  conducting   research  and  seeking  patent
protection  and may develop  competing  products  on their own or through  joint
ventures.  There can be no assurance  that the  Company's  competitors  will not
succeed in developing technologies and products that are more effective than any
that are being developed or sold by the Company.

     Patents and Trade Secrets. The Company's  success will depend,  in part, on
its ability to obtain  patents,  maintain  trade secrets  protection and operate



                                       16

<PAGE>



without  infringing on the proprietary  rights of third parties.  The Company is
the owner of five, and the co-owner of one,  issued patents in the United States
and has filed  applications  for  additional  patents in the  United  States and
abroad.  There can be no assurance  that any pending  patent  applications  will
result in issued patents. In addition, there can be no assurance that any issued
patents   will  provide  the  Company  with   significant   protection   against
competitors.  Moreover,  there can be no assurance that any patents issued to or
licensed by the Company will not be infringed upon or designed around by others.

     The  Company  also  relies on  unpatented  proprietary  technology,  and no
assurance can be given that others will not independently  develop substantially
equivalent  proprietary   information,   techniques  or  processes,   that  such
technology  will not be disclosed or that the Company can  meaningfully  protect
its rights to such unpatented proprietary technology.  There can be no assurance
that the Company's non-disclosure  agreements will provide meaningful protection
for the Company's trade secrets or other proprietary know-how. In the absence of
patent  protection,   the  Company's  business  may  be  adversely  affected  by
competitors who independently develop substantially equivalent technology.

     Moreover,  there can be no assurance  that the patents held by others might
not have an adverse effect on some of the Company's products or require that the
Company obtain licenses to continue to test,  manufacture or market the affected
product,  and,  if so,  there can be no  assurance  that such  licenses  will be
available on acceptable terms, if at all.

     Product Liability.  The testing,  marketing and sale of wound care products
and other  medical and consumer  products  entail an inherent  risk that product
liability  claims  will be  asserted  against  the  Company  or its third  party
distributors.  A  product  liability  claim or a  product  recall  could  have a
material  adverse effect on the business or financial  condition of the Company.
Certain   manufacturers  of  materials  and/or  implantable  devices  have  been
subjected  to  significant  claims for damages  allegedly  resulting  from their
products.  The Company currently  maintains product liability insurance coverage
which it believes to be adequate for its present  purposes,  but there can be no
assurance  that in the future the Company will be able to maintain such coverage
on acceptable terms or that current insurance or insurance subsequently obtained
will provide adequate coverage against any or all potential claims.

     Healthcare Reimbursement. Political, economic and regulatory influences are
resulting  in  fundamental  changes  in the  healthcare  industry  in the United
States.  The Company  anticipates  that  Congress  and state  legislatures  will
continue  to review and  assess  alternative  healthcare  delivery  systems  and
payment  methods and that public debate of these issues will likely  continue in
the future.  Sales of the  Company's  products will depend to some extent on the
availability  of  reimbursement  to certain of the Company's  customers by third
party payors such as government and private insurance plans. No assurance can be
given that such reimbursement will be available.

     Government Regulation.  The  production  and  marketing  of  the  Company's
products and its ongoing  research  and  development  activities  are subject to
regulation by numerous governmental authorities in the United States, the United

                                       17

<PAGE>



Kingdom  and other  countries,  and may  become  subject to the  regulations  of
additional countries. The rigorous preclinical and clinical testing requirements
and regulatory  approval  process  required to introduce new products can take a
number of years and  require  the  expenditure  of  substantial  resources.  The
Company has limited  experience in conducting and managing  preclinical  testing
and relies on third  parties to conduct  clinical  testing  necessary  to obtain
government  approvals.  Delays in obtaining regulatory approvals would adversely
affect the  marketing  of products  developed  by the Company and the  Company's
ability to receive  product  revenues or  royalties.  In  addition,  the Company
cannot predict the extent to which  government  regulations  or changes  thereto
might have an adverse  effect on the  production  and marketing of the Company's
existing  or  future  products.   A  number  of  the  Company's  products  under
development will require clearance by the Food and Drug  Administration  ("FDA")
in the United States.  Although the Company believes each of these products,  if
successfully developed, will obtain FDA clearance, no assurance can be made that
each will  obtain  such  clearance,  or that the  process of  clearance  will be
without undue delay or expense.




                                       18

<PAGE>



                                            PART II - OTHER INFORMATION

                                            PolyMedica Industries, Inc.


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

         At the Company's  Annual Meeting of Stockholders  held on September 12,
1996, the following proposals were adopted by the vote specified below:

Proposal                                                              Broker
                                   For     Against      Abstain     Non votes(1)
Election of Directors:
 Richard H. Bard                5,958,565             1,323,251(2)
 Thomas S. Soltys, Jr.          6,945,055               336,761(2) 

Amendment to 1990 Stock
 Option Plan increasing
 by 400,000 the number
 of shares available for
 issuance under the Plan        2,066,310 1,568,932     263,215       3,383,359

Amendment to 1992 Directors'
 Stock Option Plan increasing
 by 137,000 the number of 
 shares available for issuance
 under the Plan                 2,074,972 1,558,992     264,493       3,383,359

Ratification of
 Coopers & Lybrand L.L.P.
 as independent public
 accountants                    7,016,817    26,864     238,135               0

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

(1) Votes counted for quorum  purposes,  as to which the broker or other nominee
holder  was  not  authorized  by the  beneficial  owner  to  cast a vote on this
particular proposal but was authorized to cast (and did cast) a vote on at least
one other proposal.

(2) Represents votes "withheld" from each respective director.




                                         19

<PAGE>



Item 6.  Exhibits and Reports on Form 8-K

         (a)      See Exhibit Index
         (b)      There was one report on Form 8-K filed during the three months
                  ended September 30, 1996.







































                                       20

<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.


                                   PolyMedica Industries, Inc.
                                          (registrant)



                                   /s/ Steven J. Lee
                                   Steven J. Lee
                                   Chairman and Chief Executive Officer
                                   (Principal Executive Officer)



                                   /s/ Eric G. Walters
                                   Eric G. Walters
                                   Chief Financial Officer, Treasurer,
                                   and Clerk (Principal Financial and
                                   Accounting Officer)





Dated: November 13, 1996

                                       21

<PAGE>



                                  Exhibit Index

                           PolyMedica Industries, Inc.


                            Exhibit Description Page


4.12     -        Letter Agreement amending the Note and Warrant Agreement dated
                  August 2, 1996.

4.13     -        Letter Agreement amending the Note and Warrant Agreement dated
                  October 30, 1996.































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