<PAGE>





                               UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, DC  20549

                                 FORM 10-Q




[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                               EXCHANGE ACT OF 1934

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                               EXCHANGE ACT OF 1934


For the Quarter Ended March 31, 1998      Commission File Number 0-27642



                      TRANSDERM LABORATORIES CORPORATION
           (Exact name of registrant as specified in its charter)


      Delaware                                     13-3518345
(State of Incorporation)              (I.R.S. Employer Identification No.)


            1212 Avenue of the Americas, 24th Floor, New York, NY  10036
                      (Address of principal executive offices)


                    Registrant's Telephone Number:  212-398-0700



The registrant 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,
and has been subject to such filing requirements for the past 90 days.

As of April 30, 1998, 40,000,000 shares of Common Stock, $.001 Par Value, were
outstanding.















                                  Page 1<PAGE>
<PAGE>
<TABLE>
                           TRANSDERM LABORATORIES CORPORATION          Part I
                         CONSOLIDATED BALANCE SHEETS  (Unaudited)      Item 1
                                   (In thousands)                      Page 2


                                                  March 31,    December 31,
<S>                                                 1998           1997    
ASSETS
                                                    <C>             <C>
CURRENT ASSETS
  Cash                                              $     9         $    18
  Accounts receivable, net                            1,114             751
  Inventories (Note 3)                                  540             759
    Total Current Assets                              1,663           1,528

PROPERTY, PLANT & EQUIPMENT
  Land and building                                   2,854           2,854
  Other property, plant & equipment                   7,917           7,909
    Total Property, Plant & Equipment                10,771          10,763
  Less accumulated depreciation & amortization        6,247           6,105
    Net Property, Plant & Equipment                   4,524           4,658

NON-CURRENT ASSETS                                        1               1

TOTAL ASSETS                                        $ 6,188         $ 6,187

LIABILITIES AND STOCKHOLDERS' EQUITY <DEFICIENCY>

CURRENT LIABILITIES
  Accounts payable                                  $   447         $   639
  Accrued expenses and other current liabilities        215             462
  Subordinated promissory note                        7,000               0
  Current portion of redeemable preferred stock       2,000           1,000
  Preferred dividends payable                           595             446
    Total Current Liabilities                        10,257           2,547

LONG-TERM LIABILITIES
  Subordinated promissory note                            0           7,000
  Long-term payable - Health-Chem                     2,257           2,087
  Other long-term debt                                   18              21

REDEEMABLE PREFERRED STOCK                            6,500           7,500

STOCKHOLDERS' EQUITY <DEFICIENCY>
  Common stock                                           40              40
  Retained deficit                                  <12,884>        <13,008>
    Total Stockholders' Equity <Deficiency>         <12,844>        <12,968>

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
<DEFICIENCY>                                        $ 6,188         $ 6,187

<FN>

See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>

</TABLE>
<TABLE>
                        TRANSDERM LABORATORIES CORPORATION             Part I
                 CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)     Item 1
                      (In thousands, except per share data)            Page 3



                                                       For the Three Months
                                                          Ended March 31,  
<S>                                                        1998        1997
REVENUE:                                                <C>         <C>
  Net sales                                             $ 2,139     $ 1,112
  Cost of goods sold                                        990         721
  Gross profit                                            1,149         391

OPERATING EXPENSES:
  Selling, general and administrative expense               372         353
  Legal expense                                             135          47
  Research and development expense                          190         621
  Net interest expense                                      204         164
    Total operating expenses                                901       1,185

INCOME <LOSS> FROM OPERATIONS                               248        <794>
  Other income                                                0          18

INCOME <LOSS> FROM OPERATIONS BEFORE TAXES                  248        <776>
  Income tax benefit (Note 2)                                25         258 

NET INCOME <LOSS>                                           273        <518>

PREFERRED DIVIDENDS                                         149         166

NET INCOME <LOSS> APPLICABLE TO COMMON STOCKHOLDERS     $   124     $  <684>


Earnings per Common Share  (basic & diluted)
 (Note 4):

NET INCOME <LOSS> PER COMMON SHARE                      $  0.00     $ <0.02>

Average number of common shares              
  outstanding  (Note 4)                                  
   Basic                                                 40,000      40,000
   Diluted                                               43,067      40,000



<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>

</TABLE>
<TABLE>

                         TRANSDERM LABORATORIES CORPORATION          Part I
                   CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)     Item 1
                                  (In thousands)                     Page 4


                                                      For the Three Months
                                                         Ended March 31,  
<S>                                                      1998         1997
Cash was Provided by <Used for>:                      <C>          <C>
OPERATIONS:
 Net income <loss>                                    $   273      $  <518>
 Adjustments to reconcile net income <loss> to
  net cash used for operations:               
   Depreciation and amortization                          142          156
   Deferred income taxes                                    0         <258>
   Gain on disposal of property, plant and equipment        0          <14>
 Changes in:  
   Accounts receivable                                   <363>         766
   Inventories                                            219          217
   Other non-current assets                                 0           <1>
   Accounts payable                                      <192>        <730>
   Accrued expenses and other current liabilities        <248>        <151>
 Net cash used for operations                            <169>        <533>

INVESTING:
 Additions to property, plant and equipment                <8>         <60>
 Disposal of property, plant and equipment                  0           16
 Net cash used for investing                               <8>         <44>

FINANCING:
 Borrowings from affiliates, net                          170        1,909
 Other long-term debt payments                             <2>          <2>
 Redemption of preferred stock                              0       <1,000>
 Preferred dividends paid                                   0         <332>
 Net cash provided by financing                           168          575

Net Decrease in Cash                                       <9>          <2>
Cash at beginning of period                                18           21
Cash at end of period                                 $     9      $    19


Supplemental Disclosures of Cash Flow Information:
  Cash paid during the period for: 
   Interest                                           $   361      $   326
   Income taxes                                             1            1

Supplemental Schedule of Noncash Investing and
 Financing:
  Acquisition of fixed assets through capital
   lease obligations                                  $     0      $    47





<FN>
See Notes to Consolidated Financial Statements.

<PAGE>
<PAGE>

                        TRANSDERM LABORATORIES CORPORATION           Part I
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      Item 1
                                   (Unaudited)                       Page 5




1.    Basis of Presentation and Nature of Operations

      The consolidated financial statements include the accounts of Transderm
      Laboratories Corporation and its subsidiary, Hercon Laboratories
      Corporation ("Hercon").  Transderm Laboratories Corporation and Hercon
      Laboratories Corporation are sometimes hereinafter referred to
      collectively as the "Company". The Company is an indirect 90% owned
      subsidiary of Health-Chem Corporation ("Health-Chem").
      
      The Consolidated Balance Sheet as of March 31, 1998, the Consolidated
      Statements of Operations and the Consolidated Cash Flow Statements for
      the interim periods ended March 31, 1998 and 1997 have been prepared by
      the Company, without audit.  In the opinion of the Company, all
      necessary adjustments, consisting of normal recurring items, have been
      made to present fairly the financial position, results of operations and
      cash flows at March 31, 1998 and for all periods presented.  Certain
      amounts included in the consolidated financial statements relating to
      prior periods have been reclassified to conform to the current
      presentation.

      Certain information and note disclosures normally included in financial
      statements prepared in accordance with generally accepted accounting
      principles have been condensed or omitted.  It is suggested that these
      consolidated financial statements be read in conjunction with the
      consolidated financial statements and notes thereto included in the
      Company's December 31, 1997 Annual Report on Form 10-K.  The results of
      operations for the periods ended March 31, 1998 and 1997 are not
      necessarily indicative of the operating results for the full years.


2.    Taxes on Income (In thousands)              For the Three Months
                                                     Ended March 31,  
                                                     1998         1997
      Taxes on income include 
        <benefit> provision for:
         Federal income taxes                     $     0      $  <264>
         State and local income taxes                 <25>           6
           Total                                  $   <25>     $  <258>

      Taxes on income are comprised of:
         Current                                  $   <25>     $     0
         Deferred                                       0         <258>
           Total                                  $   <25>     $  <258>

      A reconciliation of taxes on income to the federal statutory rate
      is as follows:
                                                  For the Three Months
                                                     Ended March 31,  
                                                     1998         1997

      Tax provision <benefit> at statutory rate   $    84      $  <264>
      Increase <decrease> resulting from: 
         State and local taxes, net of federal 
          tax benefit                                  <6>           6
         Reversal of valuation allowance             <103>           0
      Tax benefit                                 $   <25>     $  <258>



<PAGE>


                        TRANSDERM LABORATORIES CORPORATION           Part I
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      Item 1
                                   (Unaudited)                       Page 6




      At March 31, 1998, the net valuation allowance relating to tax loss and
      tax credit carryforwards was $1,104,000.  This net valuation allowance
      consists of a $1,203,000 decrease in tax loss and tax credit
      carryforwards, partially offset by a $99,000 decrease in a payable to
      Health-Chem, which is only payable as certain net operating loss and tax
      credit carryforwards are used.  Management determined the valuation
      allowance was necessary as a result of delays in the anticipated
      approvals from the United States Food and Drug Administration ("FDA")
      for the sale of the Company's new transdermal nitroglycerin patches and
      the lack of a favorable resolution to the Key Pharmaceuticals, Inc.
      litigation, with such matters contributing to the operating losses of
      the Company in 1997.


3.    Inventories  (In thousands)

                                            March 31, 1998  December 31, 1997

      Raw materials                             $  393           $  526
      Finished goods and work in process           147              233
      Total inventories                         $  540           $  759


4.    Earnings Per Share

      On December 31, 1997, the Company adopted Statement of Financial
      Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128").  SFAS
      128 establishes standards for computing and presenting earnings per
      share and applies to entities with publicly-held common stock or
      potential common stock.  SFAS 128 simplifies the standards for computing
      earnings per share previously found in APB Opinion No. 15, "Earnings Per
      Share", by replacing the presentation of primary earnings per share with
      a presentation of basic earnings per share.  It also requires dual
      presentation of basic and diluted earnings per share on the face of the
      income statement for all entities with complex capital structures. 
      Restatement of all prior-period earnings per share data is required upon
      adoption.  The impact of adopting SFAS 128 on the Company's earnings per
      share data is not material.

      Basic and diluted earnings per share are computed based upon the
      weighted average number of common shares outstanding after adjustment 
      for any dilutive effect of the Company's stock options.
<PAGE>
<PAGE>
                        TRANSDERM LABORATORIES CORPORATION           Part I
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      Item 1
                                   (Unaudited)                       Page 7



      A reconciliation of the numerators and denominators of the basic and
      diluted earnings per common share computations for income from
      continuing operations for the periods ended March 31, 1998 and 1997 is
      presented below (in thousands, except per share amounts):

                                                  For the Three Months
                                                     Ended March 31,  
                                                     1998         1997

      Net Income <Loss> Applicable to Common
       Stockholders:
        Net income <loss>                         $   273      $  <518>
        Preferred stock dividends                     149          166
        Income <loss> applicable to common
         stockholders                             $   124      $  <684>

      Basic Earnings <Loss> Per Common Share:
        Weighted average number of common
         shares outstanding                        40,000       40,000

        Earnings <loss> per common share          $  0.00      $ <0.02>

      Diluted Earnings <Loss> Per Common Share:
        Weighted average number of common
         shares outstanding                        40,000       40,000
        Stock options                               3,067            0

        Weighted average number of common
         shares outstanding - diluted              43,067       40,000

        Diluted earnings <loss> per common share  $  0.00      $ <0.02>


      Options to purchase 11,400,000 shares of common stock were outstanding
      at both March 31, 1998 and 1997.  No options were included in the
      computation of diluted earnings per common share at March 31, 1997
      because the Company reported a loss from continuing operations for that
      period.


5.    Litigation

      In August 1995, Key Pharmaceuticals, Inc. a subsidiary of Schering-
      Plough Corporation ("Key") commenced an action against Hercon in the
      United States District Court for the District of Delaware ("Delaware
      District Court") alleging that Hercon's submission to the FDA of three
      Abbreviated New Drug Applications ("ANDAs") relating to some of Hercon's
      transdermal nitroglycerin products, for which the Company is awaiting
      FDA approval, constituted infringement of Key's patent for its Nitro-
      Dur(R) products.  Key sought certain injunctive relief, monetary damages
      if commercial manufacture, use or sale occurs, and a judgment that the
      effective date for FDA approval of the above-referenced ANDAs be not
      earlier than February 16, 2010, the expiration date of Key's patent. 
      Hercon denied the material allegations of the complaint, asserting,
      among other things, that the Key patent is invalid and unenforceable and
      that Hercon had not infringed and did not infringe any claim of the
      patent.  Hercon counterclaimed against Key for declaratory judgment of
      patent noninfringement, invalidity and unenforceability.  A two-week, 



<PAGE>



                        TRANSDERM LABORATORIES CORPORATION           Part I
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS      Item 1
                                   (Unaudited)                       Page 8




      non-jury trial was completed on October 10, 1996.  On September 30,
      1997, the Delaware District Court ruled in favor of Key on its
      infringement claim and on Hercon's claim that Key's patent is invalid
      and unenforceable.  On December 17, 1997, the Delaware District Court
      issued an injunction, enjoining Hercon, except as provided for by
      statute, from making, using, offering for sale, selling or importing any
      transdermal nitroglycerin patches that have been found to infringe claim
      14 of Key's patent, before the expiration of Key's patent on February
      16, 2010.  Hercon has appealed to the United States Court of Appeals for
      the Federal Circuit in Washington, D.C. from both the September 30, 1997
      judgment and the December 17, 1997 injunction.  The appeals were
      consolidated on January 23, 1998 and are now in the briefing stage. 
      Management believes that Hercon has strong grounds for appeal.

<PAGE>
<PAGE>

                          TRANSDERM LABORATORIES CORPORATION          Part I
                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF        Item 2
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS     Page 9



In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company provides the following cautionary
remarks regarding important factors which, among others, could cause future 
results to differ materially from the forward-looking statements, expectations
and assumptions expressed or implied herein.  The following discussion
includes certain forward-looking statements.  Such forward-looking statements
are subject to a number of factors, including material risks and
uncertainties, including those referred to herein and in the Company's Reports
on Form 10-K, which could cause actual results to differ materially from the
forward-looking statements.

Results of Operations

Net sales increased $1,027,000 for the three months ended March 31, 1998 as
compared to the same period in 1997.  The increase in net sales consists of a
$982,000 increase in volume and $45,000 in higher selling prices.  The net
sales increase is due primarily to increased domestic sales volumes of
transdermal nitroglycerin patches.  During the first half of 1997, in
anticipation of increased market pressures and delays in approvals from the
FDA for the sale of new nitroglycerin patches, Hercon undertook an
organizational restructuring which is expected to reduce annual payroll-
related expenses by approximately $1,100,000.  While the Company hopes to
receive approvals for its new nitroglycerin patches in 1998, no assurances can
be made that any new nitroglycerin patches will be approved by the FDA. 
Moreover, the Company's ability to exploit its new nitroglycerin products may
be limited in the absence of a favorable resolution to its litigation with Key
(the "Key Litigation") (See Note 5 above and discussion below).

Gross profit increased $758,000, or 194%, for the three months ended March 31,
1998 as compared to the same period in 1997.  Gross profit as a percentage of
net sales increased from 35% for 1997 to 54% for 1998.  Gross profit increased
primarily due to increased domestic sales volumes of transdermal nitroglycerin
patches.  Higher margins reflect the allocation of fixed costs over increased
revenue.  Plant overhead decreased $18,000, including a $20,000 decrease for
payroll-related expenses, for the three months ended March 31, 1998 as
compared to the same period in 1997 reflecting, in part, the organizational
restructuring.

Selling, general and administrative expenses, excluding legal expenses,
increased $19,000 for the three months ended March 31, 1998 as compared to the
same period in 1997.  This increase is due primarily to a higher allocation of
expenses from affiliates of $35,000, partially offset by lower payroll-related
costs.  Pursuant to a Corporate Services Agreement between the Company and
Health-Chem, selling, general and administrative expenses incurred by Health-
Chem which cannot be directly attributed to a specific subsidiary are
allocated to the Company based upon its net sales as a percentage of Health-
Chem's consolidated net sales.  The Company's allocation of Health-Chem's
total expenses for the three months ended March 31, 1998 was higher than the
comparable period in 1997 due to the Company's share of these expenses
increasing from 13% in 1997 to 15% in 1998, partially offset by Health-Chem's
total expenses being lower.  The decrease in payroll-related expenses
reflects, in part, the organizational restructuring.

Legal expenses increased $88,000 for the three months ended March 31, 1998 as
compared to the same period in 1997.  The increased legal expenses are due
primarily to additional activity associated with the Key Litigation.




<PAGE>                    TRANSDERM LABORATORIES CORPORATION          Part I
                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF        Item 2
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS    Page 10


Research and development expenses decreased $431,000 for the three months
ended March 31, 1998 as compared to the same period in 1997.  The decrease is
due primarily to lower payroll-related, outside testing and clinical materials
expenses.  Payroll-related expenses decreased $239,000, reflecting the
organizational restructuring changes.  The Company expects total research and
development expenses related to pharmaceutical products in 1998 to be lower
than 1997 levels.

Net interest expense increased $40,000 for the three months ended March 31,
1998 as compared to the same period in 1997 due primarily to higher average
outstanding balances on borrowings from affiliates.

Other income decreased $18,000 for the three months ended March 31, 1998 as
compared to the same period in 1997 due primarily to $14,000 of first quarter
1997 nonrecurring proceeds related to an insurance recovery.  

Income from operations before taxes increased $1,024,000 for the three months
ended March 31, 1998 as compared to the same period in 1997 due primarily to
the factors discussed above.  The Company reported a $25,000 tax benefit on
income from operations of $248,000 for the three months ended March 31, 1998
as compared to a $258,000 tax benefit on a $776,000 loss from operations for
the same period in 1997.  Income tax provision or benefit varies with the
amount and nature of the components of income or loss from operations before
income taxes.  At March 31, 1998, the Company reversed a net valuation
allowance of $103,000 due to income earned during the quarter.

Preferred dividends of $149,000 for the three months ended March 31, 1998
reflect dividends associated with the Company's Redeemable Preferred Stock,
$10.00 par value.  Annual dividend payments required are $.70 per share.

The results of operations for the periods ended March 31, 1998 and 1997 are
not necessarily indicative of the operating results for the full years.


Liquidity and Capital Resources

The following measures of liquidity are drawn from the Company's consolidated
financial statements:
                                             March 31,      December 31,
                                               1998             1997    

Working capital deficit (in thousands)
  (Current assets less current liabilities)   $<8,594>          $<1,019>

Current ratio                          
  (Current assets/current liabilities)            0.2               0.6

Quick ratio                            
  (Cash and receivables/current liabilities)      0.1               0.3

Working capital deficit increased $7,575,000 from December 31, 1997 to March
31, 1998 due to a $7,710,000 increase in current liabilities, partially offset
by a $135,000 increase in current assets.  Cash and inventories decreased
$9,000 and $219,000, respectively, while accounts receivable increased
$363,000.  The increase in accounts receivable resulted from an increase in
sales in the first quarter of 1998 as compared to the fourth quarter of 1997
and also reflects the timing of domestic distributor payments.  The decrease
in inventory reflects the timing of raw material purchases.  The increase in
current liabilities is due to increases in the current portions of the
subordinated promissory note and redeemable preferred stock of $7,000,000 and
$1,000,000, respectively, and to an increase in preferred dividends payable of
$149,000, partially offset by decreases in accounts payable and accrued
expenses of $192,000 and $247,000, respectively.  
<PAGE>
                          TRANSDERM LABORATORIES CORPORATION          Part I
                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF        Item 2
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS    Page 11


Cash used for operations for the three months ended March 31, 1998 was
$169,000.

The Company has not paid cash dividends on its Common Stock and does not
anticipate doing so in the foreseeable future.

The Company has financed its capital requirements primarily from cash flow
generated from operations and borrowings from its affiliates.

Capital expenditures in 1998 for property, plant and equipment are projected
to be approximately $200,000.  The majority of these capital expenditures will
consist of equipment needed to assemble and package the Company's second
generation nitroglycerin products.

Health-Chem is a borrower along with its affiliates, including the Company,
under the terms of a secured financing agreement with IBJ Schroder Business
Credit Corporation (as successor in interest to IBJ Schroder Bank & Trust
Company) (the "Bank").  The Revolving Credit, Term Loan and Security Agreement
(the "Loan Agreement") which was entered into effective January 9, 1997, was
comprised of up to $7,000,000 in term loans and up to $8,000,000 in revolving
credit.  The line of credit's borrowing base is limited to the sum of 85% of
eligible accounts receivable and 50% of eligible inventory on a consolidated
Health-Chem basis.  Term loan advances were limited to $4,000,000 until the
resolution of the Key Pharmaceuticals, Inc. litigation in such a way as to be
immaterial on the future operations of Health-Chem.  Borrowings under the Loan
Agreement are collateralized by a pledge of substantially all of the assets of
Health-Chem, the Company and Health-Chem's other operating subsidiaries.  The
Loan Agreement, which expires on January 9, 2002, was subject to various
financial covenants.  On January 21, 1998, Health-Chem entered into a First
Amendment (the "Amendment") to the Loan Agreement with the Bank.  The
Amendment, among other things, amended the terms for drawing upon the term
loan and amended certain financial covenants.  At March 31, 1998, Health-Chem
and its affiliates were in compliance with the covenants, as amended. 
Pursuant to the Amendment, the maximum term loans amount was reduced from
$7,000,000 to $3,998,000, providing a revised aggregate of up to $11,998,000
in senior secured financing.  The revolving credit line interest rate was
increased to the Bank's prime rate plus .50% and the term loans interest rate
was increased to the Bank's prime rate plus .875%.  These rates are subject to
a .25% decrease upon the Bank's satisfactory review of Health-Chem's financial
statements for the year ended December 31, 1998.

The Company is required to make semi-annual interest payments each March and
September on its $7,000,000, 9% Subordinated Promissory Note, with the
principal amount of $7,000,000 payable on March 31, 1999.  In March 1998, the
Company made the required semi-annual interest payment.

The Company is required to make semi-annual preferred dividend payments out of
funds legally available therefor each March and September at the annual rate
of $.70 per share on the then-outstanding shares of its redeemable preferred
stock, $10.00 par value.  Legally available funds were not available to make
the September 1997 and March 1998 preferred dividend payments, nor were they
available to make the required $1,000,000 redemption payment in March 1998. 
Additional required redemption payments are $1,000,000 annually in 1999
through 2004 and $1,500,000 in 2005.  The terms of the preferred stock provide
that if either dividends payable on the preferred stock shall be in default in
an amount equal to two full semi-annual dividend payments or a mandatory
redemption payment is not made, the holder of all of the outstanding shares of
the preferred stock shall be entitled to elect the smallest number of
Directors necessary to constitute a majority of the Company's Board of
Directors until such time as the default is cured.  Health-Chem waived this
right since, as a practical matter, it already possessed such power.

<PAGE>


                          TRANSDERM LABORATORIES CORPORATION          Part I
                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF        Item 2
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS    Page 12



Pursuant to a Corporate Services Agreement between the Company and Health-
Chem, Health-Chem provides or otherwise makes available to the Company certain
general corporate services provided by Health-Chem's corporate staff,
including, but not limited to, accounting, tax, corporate communications,
legal, data processing, purchasing, human resources, financial and other
administrative staff functions, and arranges for administration of insurance
and employee benefit programs.  The Company reimburses Health-Chem for the
actual out-of-pocket cost to Health-Chem or for those services not directly
attributable to the Company, reimburses them based upon a method (allocation
based upon the Company's net sales as a percentage of Health-Chem's
consolidated net sales) which is considered by the Company to be reasonable. 
The Company reimbursed Health-Chem approximately $149,000 and $114,000 for the
three months ended March 31, 1998 and 1997, respectively.  The Agreement had
an initial term that expired on December 31, 1997 and automatically renewed
for a one-year term.  The agreement will continue to automatically renew for
successive one-year terms unless notice of non-renewal is given by either
party.

Pursuant to a tax sharing agreement between the Company and Health-Chem, the
Company is required to pay Health-Chem as the Company uses its net operating
loss and tax credit carryforwards to offset future taxable income.  At March
31, 1998, the maximum amount of such payments which may be made in the future
was $99,000.

The semi-annual interest payment on the subordinated promissory note is
$315,000 and the semi-annual dividend on the preferred stock currently
outstanding is $297,500.  In addition to the cumulative dividends and interest
payments, the Company is obligated to redeem the preferred stock and repay the
promissory note as described above.  Internally generated funds are not
currently sufficient to provide the Company with cash to meet all of these
retirement and redemption obligations and thus the Company will need to either
continue to obtain waivers of some of these payment obligations or raise
additional capital from third parties.
<PAGE>
<PAGE>
                                                                   Part II
                                                                    Item 1
                                                                   Page 13

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

There were no material developments in any pending legal proceedings in the
quarter ended March 31, 1998.


Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

      None.

(b)   During the quarter ended March 31, 1998, the Company did not file any
reports on Form 8-K.

                                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.

                               TRANSDERM LABORATORIES CORPORATION

May 12, 1998                   /s/  Robert D. Speiser            
                               By:  Robert D. Speiser
                                    President
                                    (Principal Executive Officer)

                               /s/  Ronald J. Burghauser         
                               By:  Ronald J. Burghauser
                                    Vice President-Finance
                                    (Principal Financial Officer)
                                    (Principal Accounting Officer)

</TABLE>