<PAGE>   1


                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-Q


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

FOR QUARTER 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 33-90516


                                 NEOPHARM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


           Delaware                                        51-0327886
 (State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                      Identification Number)

                               225 East Deerpath
                                   Suite 250
                         Lake Forest, Illinois   60045
              (Address of principal executive offices)  (Zip Code)

                                 (847) 295-8678
              (Registrant's telephone number, 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 close of the period covered by this report:



<TABLE>
<CAPTION>
       Title of each class          Number of shares outstanding
<S>                                 <C>
Common Stock ($.0002145 par value)           8,152,268

Warrants to purchase shares of
  Common Stock ($.0002145 par
  value)                                       837,067
</TABLE>



<PAGE>   2




                                 NEOPHARM, INC.
               (A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)


<TABLE>
<CAPTION>
                                                                                Page Number
                                                                                -----------
<S>             <C>                                                             <C>
PART I.         Financial Information (Unaudited)
                
      ITEM 1.   Financial Statements
                
                     Balance Sheets                                                    3
                     September 30, 1997 and December 31, 1996                          
                                                                                       
                     Statements of Operations                                          4
                     Three and nine months ended September 30, 1997 and 1996           
                                                                                       
                     Statements of Cash Flows                                          5
                     Nine months ended September 30, 1997 and 1996                     
                                                                                       
                     Notes to Financial Statements                                     6
                                                                                       
                                                                                       
      ITEM 2.   Management's Discussion and Analysis of Financial                      
                Condition and Results of Operations                                    8
                                                                                       
                                                                                       
PART II.        Other Information                                                     11
                                                                                       
SIGNATURE PAGE                                                                        12

</TABLE>




                                                                               2


<PAGE>   3

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS                                
NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
(Unaudited)

<TABLE>
                                                              SEPTEMBER 30,      DECEMBER 31,       
                                                                  1997               1996           
                                                                  ----               ----           
<S>                                                            <C>                <C>               
ASSETS                                                                                              
                                                                                                    
Current assets:                                                                                     
  Cash and cash equivalents                                     $3,413,085         $4,479,041       
  Prepaid expenses and other                                        67,821                 --       
                                                              ------------       ------------       
      Total current assets                                       3,480,906          4,479,041       
                                                                                                    
Equipment and furniture:                                                                            
  Equipment                                                         27,007             27,007       
  Furniture                                                         26,230             12,988       
  Less accumulated depreciation                                    (31,163)           (26,828)       
                                                              ------------       ------------       
      Total equipment and furniture, net                            22,074             13,167       
                                                              ------------       ------------       
                                                                                                    
      Total assets                                              $3,502,980         $4,492,208       
                                                              ============       ============       
                                                                                                    
                                                                                                    
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                
                                                                                                    
Current liabilities:                                                                                
 Accounts payable and accrued liabilities:                                                           
   Obligations under research agreements                          $120,000            $80,000       
   Due to related parties                                           38,698             43,239       
   Accounts payable and accrued liabilities                        165,959            232,792       
   Accrued compensation                                                 --            110,000       
                                                                                                  
      Total current liabilities                                    324,657            466,031       
                                                              ------------       ------------       
                                                                                                    
                                                                                                    
Commitments and contingencies                                           --                 --       
                                                                                                    
Stockholders' equity (deficit):                                                                     
 Common stock, $.0002145 par value;                                                                  
   15,000,000 shares authorized:                                                                      
   8,152,268 and 8,130,268 shares issued                                                              
   and outstanding, respectively                                     1,749              1,744       
 Additional paid-in capital                                      5,967,145          5,890,078       
 Deficit accumulated during the                                                                      
   development stage                                            (2,790,571)        (1,865,645)       
                                                              ------------       ------------       
      Total stockholders' equity                                 3,178,323          4,026,177       
                                                              ------------       ------------       
      Total liabilities and stockholders'                                                           
       equity                                                   $3,502,980         $4,492,208       
                                                              ============       ============       
</TABLE>



      The accompanying notes are an integral part of these balance sheets.

                                                                               3


<PAGE>   4


NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)

<TABLE>
<CAPTION>
                                                                                              INCEPTION           
                                                                                           (JUNE 15, 1990)       
                                      THREE MONTHS                  NINE MONTHS                THROUGH           
                                      SEPTEMBER 30,                 SEPTEMBER 30,            SEPTEMBER 30,        
                                   1997          1996             1997         1996              1997             
                                ----------    ----------       ---------    ----------        ----------          
<S>                             <C>           <C>             <C>         <C>                <C>                   
Revenues:                                                                                                         
  Licensing Revenues            $       --    $       --      $  550,000  $       --         $   550,000           
                                                                                                                  
Expenses:                                                                                                         
  Research and                                                                                                      
   development                     372,678       203,750         861,381     591,429           4,924,220           
  General and                                                                                                       
   administrative                  292,796       165,949         772,069     537,349           2,548,435           
                                ----------    ----------      ----------  ----------         -----------           
    Total Expenses                 665,474       369,699       1,633,450   1,128,778           7,472,655          
                                                                                                                  
Income (loss)                                                                                                     
  from operations                 (665,474)     (369,699)     (1,083,450) (1,128,778)         (6,922,655)         
                                                                                                                  
Interest income                     49,134        66,197         158,524     178,898             396,799          
Interest expense                        --            --              --     (47,364)           (735,606)         
                                ----------    ----------      ----------  ----------         -----------           
  Interest income                                                                                                   
   (expense) - net                  49,134        66,197         158,524     131,534            (338,807)         
                                                                                                                  
Net income (loss)               $ (616,340)   $ (303,502)     $ (924,926) $ (997,244)        $(7,261,462)         
                                ==========    ==========      ==========  ==========         ===========           
                                                                                                                  
Net income (loss)                                                                                                 
  per share                     $     (.08)   $     (.04)     $     (.11) $     (.13)                             
                                ==========    ==========      ==========  ==========         
Weighted average                                                                                                  
  shares used in                                                                                                  
  computing net income                                                                                            
  (loss) per share               8,150,268     8,101,936       8,137,323   7,694,350                              
                                ==========    ==========      ==========  ==========         
</TABLE>            
  
  
  
      The accompanying notes are an integral part of these balance sheets.

                                                                               4


<PAGE>   5



NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)

<TABLE>
<CAPTION>
                                                                                      INCEPTION
                                                                                   (JUNE 15, 1990)
                                                                                       THROUGH
                                                SEPTEMBER 30,     SEPTEMBER 30,     SEPTEMBER 30,   
                                                    1997              1996               1997         
                                                    ----              ----               ----
<S>                                             <C>               <C>               <C>             
Cash flows used in operating activities:                                                                  
 Net loss                                       $  (924,926)      $  (997,244)      $(7,261,462)        
 Adjustments to reconcile net loss                                                                        
  to net cash used by operating                                                                           
  activities:                                                                                             
 Depreciation and amortization                        4,335             4,835            42,962           
 Gain on disposal of equipment                                                                            
  and furniture                                          --                --              (408)           
 Services contributed (non-cash)                                                                          
  by related party                                       --                --           101,042           
 Interest payable to principal                                                                            
  shareholder converted to stock                         --           523,385           523,385           
 Compensation expense from non-employee                                                                   
  stock options                                          --                --            73,391           
 Changes in assets and liabilities:                                                                       
 (Increase) decrease in other assets                (67,821)               --           (78,921)           
 Increase (decrease) in accounts                                                                          
  payable and accrued liabilities                  (141,374)       (1,265,685)          324,657           
                                                -----------       -----------       -----------           
                                                                                                          
Net cash used in operating activities            (1,129,786)       (1,734,709)       (6,275,354)           
                                                -----------       -----------       -----------           
                                                                                                          
Cash flows used in investing activities:                                                                  
 Purchase of equipment and furniture                (13,242)           (7,172)          (54,339)      
 Proceeds from disposal of                                                                                
  equipment and furniture                                --                --               810      
                                                -----------       -----------       -----------      
                                                                                                     
Net cash used in investing activities               (13,242)           (7,172)          (53,529)      
                                                -----------       -----------       -----------      
                                                                                                     
Cash flows from financing activities:                                                                
 Proceeds from loan payable to                                                                       
  principal stockholder                                  --                --         1,500,000      
 Advance on line of credit                               --           107,000         2,114,652      
 Reduction in line of credit                             --        (2,114,652)       (2,114,652)      
 Costs incurred related to the                                                                       
  initial public offering                                --          (201,885)         (688,321)      
 Proceeds from initial public offering                   --         8,585,438         8,585,438      
 Proceeds from issuance of common stock              77,072           259,000           344,851      
                                                -----------       -----------       -----------      
                                                                                                     
Net cash provided by financing activities            77,072         6,634,901         9,741,968      
                                                -----------       -----------       -----------      
                                                                                                     
Net increase (decrease) in cash                  (1,065,956)        4,893,020         3,413,085      
 Cash, beginning of period                        4,479,041               671                --      
                                                -----------       -----------       -----------      
 Cash, end of period                            $ 3,413,085       $ 4,893,691       $ 3,413,085      
                                                ===========       ===========       ===========      

                                                                                                     
Supplemental disclosure of cash paid for:                                                            
 Interest                                        $       --       $    84,585       $   212,222      
 Income taxes                                            --                --                --      
</TABLE>


      The accompanying notes are an integral part of these balance sheets.

                                                                               5


<PAGE>   6


                                 NEOPHARM, INC.
               (A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997

NOTE 1 BASIS OF PRESENTATION

The financial information herein is unaudited, other than the Balance Sheet at
December 31, 1996, which is derived from the audited financial statements.

The accompanying unaudited statements of NeoPharm, Inc. (the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not contain all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Company, the
accompanying unaudited interim financial statements contain all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
Company's financial position as of September 30, 1997, the results of
operations for the three and nine months ended September 30, 1997 and 1996, the
results of operations from inception (June 15, 1990) to date (September 30,
1997), the changes in cash flows for the nine month periods ended September 30,
1997 and 1996 and the changes in cash flows from inception to date.

While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these financial statements
be read in conjunction with the financial statements and notes included in the
Company's 1996 Annual Report on Form 10-K filed with the Securities and
Exchange Commission.

NOTE 2 NOTE RECEIVABLE FROM OFFICER

The Company had an outstanding note receivable from the Company's Chief
Scientific Officer, Dr. Aquilar Rahman.  Terms of the note provide for payment
in full on July 31, 1998.  The balance of the loan at September 30, 1997 was
$50,000 and is included in current assets within the "Prepaid expenses and
other" line on the Company's balance sheet.

NOTE 3 ACCOUNTING POLICIES

Net Earnings (Loss) Per Share

The computation of net earnings (loss) per share is based on the weighted
average common shares outstanding during the periods, and includes, when their
effect is dilutive, common stock equivalents consisting of warrants and stock
options.

In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share, which establishes standards for
computing and presenting earnings per share for publicly held common stock or
potential common stock.  Statement No. 128 supersedes the standards for
computing earnings per share previously found in APB Opinion No. 15, Earnings
Per Share and simplifies the standards for computing earnings per share.  In
addition, Statement No. 128 replaces the presentation of primary earnings per
share with a presentation of basic earnings per share, requires dual
presentation of basic and diluted earnings per share for all entities with
complex capital structures and requires a reconciliation of the numerator and
denominator of the basic earnings per share computation to the numerator and
denominator of the diluted earnings per share computation.  The statement is
effective for financial statements for both interim and annual periods ending
after December 15, 1997.  Management believes that the adoption of the standard
would not have a material effect on the quarters presented.





                                                                               6


<PAGE>   7


Recent Pronouncements

The FASB has recently issued two new accounting standards, Statement No. 130,
"Reporting Comprehensive Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information", and if adopted will be
effective for periods presented after December 31, 1997.  The Company is
evaluating the effect of these new statements.

NOTE 4 SUBSEQUENT EVENT

On October 15, 1997, the Company announced it had signed an exclusive worldwide
licensing agreement with the National Institutes Health and the Food and Drug
Administration ("FDA") to develop and commercialize a novel chimeric human
protein known as "IL13-PE38QQR."  The Company also announced it has entered
into a Cooperative Research and Development Agreement ("CRADA") with the FDA
for the clinical and commercial development of the protein as an anticancer
agent.


                                                                               7


<PAGE>   8


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Any statements made by NeoPharm Inc. (the "Company") in this quarterly report
that are forward looking are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.  The Company cautions readers
that important factors may affect the Company's actual results and could cause
such results to differ materially from forward-looking statements made by or on
behalf of the Company.  Such factors include, but are not limited to, changing
market conditions, the impact of competitive products and pricing, the timely
development, approval by the FDA and foreign health authorities, and market
acceptance, of the Company's products in development, the Company's ability to
further raise capital, the Company's dependence on key personnel, and other
factors referenced under "Risk Factors" in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996

Overview

The Company was founded in 1990 and is a development stage company engaged in
the research and development of drugs for the diagnosis and treatment of
various forms of cancer.  Originally incorporated under the name Oncomed, Inc.,
the Company changed its name to NeoPharm, Inc. in March, 1995.  The Company has
several drugs in various stages of clinical review and testing.  The Company
has one New Drug Application ("NDA") currently under review with the Food and
Drug Administration ("FDA") which was filed in December of 1996.  The NDA
currently under review relates to the use of BUdR (Broxuridine) as a prognostic
indicator in breast cancer.

Since its inception in 1990, the Company has devoted substantially all of its
efforts and resources to sponsoring and conducting research and development on
its own behalf and through collaborations with academic research and clinical
institutions.  Through September 30, 1997, with the exception of license fees,
the Company has not generated any revenue from operations.

In addition to the recently announced collaboration regarding IL13-PE38QQR, the
Company is focused in two areas, its BUdR and IUdR (Idoxuridine) products and
its proprietary liposome products.  The Company is developing BUdR and IUdR for
use as radiation sensitizers to improve the effectiveness of radiation therapy
for certain types of cancers and as prognostic markers in cancer therapy.  The
Company is also developing liposome encapsulated chemotherapeutic agents,
including liposome encapsulated doxorubicin ("LED") and liposome encapsulated
vincristine ("LEVCR").  The Company has also acquired rights to liposome
encapsulated paclitaxel ("LEP") and liposome encapsulated antisense
oligodeoxynucleotides ("LE-AON").

The Company's BUdR and IUdR  products are the subject of a Cooperative Research
and Development Agreement ("CRADA") with the National Cancer Institute ("NCI").
The CRADA provides the Company with exclusive access to all clinical data
compiled in BUdR and IUdR studies conducted by various parties under the
sponsorship of the NCI, involving more than 6,000 patients for diagnostic
applications and 1,500 patients for therapeutic applications. Under the CRADA,
NCI has agreed to provide the Company with exclusive access to all clinical
data for the compounds from clinical trials sponsored by the NCI.

The Company also has developed proprietary liposome products (spheres of
subcellular size composed primarily of phospholipids, certain of which are the
primary components of living cell membranes). By encapsulating certain
chemotherapeutic drugs in liposomes, the toxic side effects associated with the
drug can be reduced and the dose increased, thereby potentially increasing the
effectiveness of therapy through both increased drug action against cancer
cells and reduced side effects.  The Company believes its liposomes overcome
the effects of MDR (multiple drug resistance), which is a genetic mutation
observed in an estimated 300,000 cancer patients each year. The Company has
conducted one Phase II efficacy study of its liposome-encapsulated doxorubicin
product involving patients with breast cancer, in which 45% of the patients
showed either a partial (minimum 50% shrinkage of the tumor) or complete (100%
shrinkage of the tumor) response, as compared to a reported 22% partial or
complete response observed with free doxorubicin in other studies. The study
also demonstrated a reduction in side effects. Since then, the Company has
reformulated LED with a synthetically derived lipid and has two Phase I/II
clinical trials using the synthetically derived formulation under way.


                                                                               8


<PAGE>   9


The Company's operating results may fluctuate from period to period as a result
of, among other things, the receipt of license fee payments, the timing and
costs associated with clinical trials and the regulatory approval process, and
the acquisition of additional product rights.  The Company participates in a
highly dynamic industry, which often results in significant volatility of the
Company's common stock price.  Any setbacks in clinical trials, in the
regulatory approval process or in relationships with collaborative partners,
and any shortfalls in revenue or earnings from levels expected by securities
analysts, among other developments, have in the past had and could in the
future have an immediate and significant adverse effect on the trading price of
the Company's common stock in any given period.

Results of Operations - Nine Months Ended September 30, 1997 vs. Nine Months
Ended September 30, 1996

Revenues were related to a $550,000 license fee payment from a Canadian
distribution company for the rights to distribute certain products in Canada.
The unconditional payment was received by the Company at signing.  Future
licensing income is possible if certain milestones are met.

Research and development expenses increased by 46% or $269,952 for the
nine-month period ended September 30, 1997 compared to the nine-month period
ended September 30, 1996. The increase is due primarily to regulatory and
analytical support of the Company's pending New Drug Application at the FDA,
the initiation of Phase I clinical trials for LED, formulation and scale-up of
LEP and the payment of a $100,000 licensing fee related to the IL13-PE38QQR
chimeric protein agreement.

General and administration expenses increased 44% or $234,720 for the
nine-month period ended September 30, 1997 compared to the nine-month period
ended September 30, 1996.  This increase was primarily due to payroll costs,
legal expenses, accounting fees and investor communications activities.
Salaries were not paid to officers prior to the completion of the Company's
initial public offering.  The Company expects general and administrative
expenses to vary quarter to quarter as its general and administrative
activities increase to support clinical development, regulatory and marketing
activities.

The Company generated interest income on excess cash balances of $158,524 and
$178,898 for the nine-month periods ended September 30, 1997 and September 30,
1996, respectively.  Interest expense of $47,364 was incurred during the
nine-month period ended September 30, 1996 representing the cost of borrowing
against a letter of credit and a shareholder loan for one month.   These debts
were repaid following completion of the Company's initial public offering in
January 1996.

The net loss for the nine-month period ended September 30, 1997 decreased by 7%
or $72,318 compared to the nine-month period ended September 30, 1996 due
primarily to license fee income which was offset by increases in research and
development expenses and general and administrative expenses.  The Company
expects losses to continue as planned product development continues.

Results of Operations - Three Months Ended September 30, 1997 vs. Three Months
Ended September 30, 1996

Research and development expenses increased by 83% or $168,928 for the
three-month period ended September 30, 1997 compared to the three-month period
ended September 30, 1996. The increase is due primarily to regulatory and
analytical support of the Company's pending New Drug Application at the FDA,
the initiation of Phase I clinical trial for LED, formulation and scale-up of
LEP and the payment of a $100,000 licensing fee related to the IL13-PE38QQR
chimeric protein agreement.

General and administration expenses increased 76% or $126,847 for the
three-month period ended September 30, 1997 compared to the three-month period
ended September 30, 1996.   This increase was primarily due to increased legal
and accounting expenses and to investor communications activities.  The Company
expects general and administrative expenses to vary quarter to quarter as
general and administrative activities increase to support clinical, regulatory
and marketing activities.


                                                                               9


<PAGE>   10


The Company generated interest income on excess cash balances of $49,134 for
the three-month period ended September 30, 1997 and $66,197 for the three-month
period ended September 30, 1996.  Excess cash balances for the three-month
period ended September 30, 1997 were lower than the previous comparative
quarter.

The net loss for the three-month period ended September 30, 1997 increased by
103% or $312,838 compared to the three-month period ended September 30, 1997.
The Company expects losses to continue as planned product development
continues.

Liquidity and Capital Resources

Cash expenditures have exceeded revenues since the Company's inception.
Operations have principally been funded through a loan from the Company's
Chairman, a bank line-of-credit and since January 1996, the initial public
offering of common stock.  The Company expects to incur additional expenses,
resulting in potentially significant losses, as it continues and expands its
research and development activities and undertakes additional clinical trials
of compounds obtained under proprietary licenses.  The Company also expects to
incur substantial administrative and commercialization expenditures in the
future as it seeks FDA approval of drugs under development and initiates
marketing activities.

At September 30, 1997, the Company's cash and cash equivalents were $3,413,085
compared to $4,479,041 at December 31, 1996.  The Company plans to finance its
needs principally from its existing capital resources and interest thereon, and
to the extent available, through collaborative agreements with corporate
partners and future public and private financing.  The Company's long-term
capital requirements and the adequacy of its available funds will depend upon
many factors, including results of research and development, results of product
testing, relationships with potential partnerships and collaborations, and the
FDA regulatory process.  Additional funding may not be available when needed or
on terms acceptable to the Company.  Insufficient funds my require the Company
to delay, scale-back or eliminate certain of its research and development
programs or to license third parties to commercialize products or technologies
that the Company would otherwise undertake itself.

                                                                              10


<PAGE>   11




PART II - OTHER INFORMATION


         Item 1.         Legal Proceedings                        None
                       
         Item 2.         Changes in Securities                    None
                       
         Item 3.         Defaults Upon Senior Securities          None
                       
         Item 4.         Submission of Matters to a Vote          None
                         of Security-Holders       
                       
         Item 5.         Other Information                        None
                       
         Item 6.         Exhibits and Reports on Form 8-K       

                         (a)  Exhibits                            None

                         (b)  Reports on Form 8-K                 None



                                                                              11


<PAGE>   12




                                 SIGNATURE PAGE

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.

                                               NEOPHARM, INC.

                                               By:  /s/  David E. Riggs
                                               _________________________________
                                                    David E. Riggs,
                                                    Chief Financial Officer
                                                    and authorized officer

                                                    Date: November 11, 1997



                                                                              12