<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 MARCH 31, 1998

                                       OR

[X]  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)

                               100 Corporate North
                                    Suite 215
                           Bannockburn, Illinois 60015
               (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:


    Title of each class                        Number of shares outstanding
    -------------------                        ----------------------------
Common Stock ($.0002145 par value)                      8,195,810

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




<PAGE>   2




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

<TABLE>
<CAPTION>

                                                                            Page Number
                                                                            -----------
<S>                 <C>                                                         <C>
PART I.             Financial Information

         ITEM 1.    Financial Statements

                             Balance Sheets                                      3

                             Statement of Operations                             4

                             Statement of Cash Flows                             5

                             Notes to Financial Statements                       6


         ITEM 2.    Management's Discussion and Analysis of Financial
                    Condition and Results of Operations                          7


PART II.           Other Information                                             9

SIGNATURE PAGE                                                                  10

</TABLE>



                                                                               2

<PAGE>   3


PART I - FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>

                                                        MARCH 31,           DECEMBER 31,
                                                          1998                 1997
                                                          ----                 ----
<S>                                                   <C>                 <C>        
ASSETS

Current assets:
  Cash and Cash Equivalents                           $ 2,018,055         $ 2,776,697
  Prepaid Expenses                                         51,750                  --
  Notes Receivable - Shareholder                           53,817              52,634
                                                      -----------         -----------
         Total Current Assets                           2,123,622           2,829,331

Equipment and Furniture:
  Equipment                                                67,512              32,492
  Furniture                                                54,429              26,231
  Less accumulated depreciation                           (35,301)            (33,555)
                                                      -----------         -----------
         Total equipment and furniture, net                86,640              25,168
                                                      -----------         -----------

         Total assets                                 $ 2,210,262         $ 2,854,499
                                                      ===========         ===========


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable and accrued liabilities:
    Obligations under research agreements             $    60,000         $   150,000
    Accounts payable                                      203,301             275,427
    Accrued compensation                                       --              55,000

         Total current liabilities                        263,301             480,427
                                                      -----------         -----------


Commitments and contingencies                                  --                  --

Stockholders' equity (deficit):
  Common stock, $.0002145 par value;
    15,000,000 shares authorized:
    8,195,810 shares issued and
    outstanding, respectively                               1,758               1,758
  Additional paid-in capital                            6,259,636           6,259,636
  Deficit accumulated during the
    development stage                                  (4,314,433)         (3,887,322)
                                                      -----------         -----------
         Total stockholders' equity (deficit)           1,946,961           2,374,072
                                                      -----------         -----------
         Total liabilities and stockholders'
           equity (deficit)                           $ 2,210,262         $ 2,854,499
                                                      ===========         ===========
</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 MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)

<TABLE>
<CAPTION>
                                                                               INCEPTION
                                                                             (JUNE 15, 1990)
                                                                                THROUGH
                                          MARCH 31,          MARCH 31,          MARCH 31,
                                            1998               1997               1998
                                            ----               ----               ----
<S>                                     <C>                 <C>                 <C>        
Revenues                                $        --         $        --         $   550,000

Expenses:
Research and development                    172,527             269,842           5,647,058
General and administrative                  291,966             212,011           3,438,818
                                        -----------         -----------         -----------
  Total Expenses                            464,493             481,853           9,085,876

         Loss from Operations              (464,493)           (481,853)         (8,535,876)

Interest income                              37,382              57,424             486,158
Interest expense                                 --                  --            (735,606)
                                        -----------         -----------         -----------
  Interest income(expense) - net             37,382              57,424            (249,448)

Net loss                                $  (427,111)        $  (424,429)        $(8,785,324)
                                        ===========         ===========         ===========

Net loss per share                      $      (.05)        $      (.05)
                                        ===========         ===========

Weighted average shares used in
  computing net loss per share            8,195,810           8,130,268
                                        ===========         ===========

</TABLE>

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


                                                                               4

<PAGE>   5


NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)

<TABLE>
<CAPTION>

                                                                                           INCEPTION
                                                                                        (JUNE 15, 1990)
                                                                                           THROUGH
                                                     MARCH 31,          MARCH 31,          MARCH 31,
                                                       1998               1997               1998
                                                       ----               ----               ----
<S>                                              <C>                 <C>                 <C>         
Cash flows used in operating activities:
Net loss                                         $  (427,111)        $  (424,429)        $(8,785,324)
Adjustments to reconcile net loss to
  net cash used by operating activities:
Depreciation and amortization                          1,746               1,445              47,100
Gain on disposal of equipment                             --                  --                (408)
Services contributed (non-cash)
  by related party                                        --                  --             101,042
Interest payable to principal
  shareholder converted to stock                          --                  --             523,385
Compensation expense from non-employee
  stock options                                           --                  --             219,035
Restricted stock grants in lieu of
  cash compensation                                       --                  --              48,750
Changes in assets and liabilities:
(Increase) decrease in other assets                   52,933              51,750            (116,667)
Increase (decrease) in accounts
  payable and accrued liabilities                   (217,126)            (73,422)            263,301
                                                                                         -----------

Net cash used in operating activities               (695,424)           (548,156)         (7,699,786)
                                                 -----------         -----------         -----------

Cash flows used in investing activities:
Purchase of equipment and
  furniture                                          (63,218)                 --            (123,043)
Proceeds from disposal of
  equipment and furniture                                 --                  --                 810
                                                 -----------         -----------         -----------

Net cash used in investing activities                (63,218)                 --            (122,233)
                                                 -----------         -----------         -----------

Cash flows from financing activities:
Proceeds from loan payable to
  principal stockholder                                   --                  --           1,500,000
Advance on line of credit                                 --                  --           2,114,652
Reduction in line of credit                               --                  --          (2,114,652)
Costs incurred related to the
  initial public offering                                 --                  --            (688,321)
Proceeds from initial public offering                     --                  --           8,585,438
Proceeds from issuance of common stock                    --                  --             442,957
                                                 -----------         -----------         -----------

Net cash provided by financing activities                 --                  --           9,840,074
                                                 -----------         -----------         -----------

Net increase (decrease) in cash                     (758,642)           (548,156)          2,018,055
Cash, beginning of period                          2,776,697           4,479,041                  --
                                                 -----------         -----------         -----------
Cash, end of period                              $ 2,018,055         $ 3,930,885         $ 2,018,055
                                                 ===========         ===========         ===========


Supplemental disclosure of cash paid for:
Interest                                         $        --         $        --         $   212,222
Income taxes                                              --                  --                  --

</TABLE>


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


                                                                               5

<PAGE>   6


                                 NEOPHARM, INC.
                (A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 1998

NOTE 1   BASIS OF PRESENTATION

The financial information herein is unaudited, other than the Balance Sheet at
December 31, 1997, 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 March 31, 1998, the results of operations for the three months
ended March 31, 1998 and 1997, the results of operations from inception (June
15, 1990) to date (March 31, 1998), the changes in cash flows for the three
month periods ended March 31, 1998 and 1997 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 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.

NOTE 2   ACCOUNTING POLICIES

For the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," ("SFAS No.
130"), which requires companies to report all changes in equity during a period,
except those resulting from investing by owners and distribution to owners, in a
financial statement for the period in which they are recognized. As there were
no such changes in equity, the Company does not believe that additional
financial statements or disclosures are required as a result of adopting this
pronouncement.


                                                                               6


<PAGE>   7


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 Food and Drug Administration ("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, 1997

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. Presently the Company
has several drugs which are in varying stages of development: BUdR
(Broxuridine), liposome encapsulated doxorubicin ("LED"), liposome encapsulated
paclitaxel ("LEP"), liposome encapsulated antisense oligodeoxynucleotides
("LE-AON") and IL-13 chimeric protein (IL13-PE38QQR) ("IL-13").

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 March 31, 1998, with the exception of license fees, the
Company has not generated any revenue from operations.

The Company has filed one New Drug Application ("NDA") related to the use of
BUdR as a prognostic indicator in breast cancer. This NDA was filed in December
of 1996. In December of 1997, FDA's Oncology Advisory Committee ("ODAC")
reviewed the NDA filing and voted not to recommend this indication to the FDA
for approval. Since that decision, the Company has met with the FDA to respond
to the concerns raised by ODAC. These discussions led to Company gathering
additional data and reanalyzing the existing data in order to obtain the FDA's
approval. The most recent NDA amendment was filed on March 6, 1998. However, the
review period for the BUdR submission had expired before the FDA could review
this most recent amendment. The Company intends to amend its prior NDA
submission and re-submit the NDA in accordance with FDA procedures.

The Company's BUdR product is the subject of a Cooperative Research and
Development Agreement ("CRADA") with the National Cancer Institute ("NCI").
BUdR, which is intended to be marketed under the name Broxine (formerly
NeoMark(TM)), is a compound which is intended to provide information regarding
tumor cell behavior that can assist the oncologist in selecting appropriate
therapeutic regimens for patients and enable better monitoring of the
effectiveness of the chosen therapy.

The Company's IL-13 chimeric protein product is the subject of a CRADA with the
FDA and the subject of a licensing agreement with the National Institute of
Health. The IL-13 chimeric protein is the fusion of the receptor-binding ligand
IL-13 with a derivative of Pseudomonas exotoxin (PE38QQR). Research has
demonstrated that some solid tumors express high numbers of IL-13 receptors on
their cell surfaces. These receptor sites become a specific target for the IL-13
chimeric protein for inducing cytotoxicity at nanogram concentrations. Normal
organs of the body are shown to exhibit minimal receptor sites thereby sparing
these organs from any toxic effect.

The Company's liposome products are 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, 


                                                                               7


<PAGE>   8

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 multiple drug resistance which is
observed in an estimated 300,000 cancer patients each year.

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 - Three Months Ended March 31, 1998 vs. Three Months Ended
March 31, 1997

Research and development expenses decreased by 36% or $97,315 for the three
month period ended March 31, 1998 compared to the three month period ended March
31, 1997. The decrease is due to the completion of BUdR research and development
efforts in 1997.

General and administration expenses increased 38% or $79,955 for the three month
period ended March 31, 1998 compared to the three month period ended March 31,
1997, primarily due to increased payroll expenses and investor relation
activities.

The Company generated interest income on excess cash balances of $37,382 and
$57,424 for the three month periods ended March 31, 1998 and March 31, 1997,
respectively.

The net loss for the three month period ended March 31, 1998 was essentially
unchanged when compared to the three month period ended March 31, 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 were initially funded through a loan from the Company's Chairman and
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 March 31, 1998, the Company's cash and cash equivalents were $2,018,055
compared to $2,776,697 at December 31, 1997. The Company plans to finance its
immediate 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 needs will require substantial additional funding in order to
continue its research and product development programs. 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. No assurance can be given that additional funding will
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.



                                                                               8

<PAGE>   9




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
                      of Security-Holders                                 None

         Item 5.      Other Information                                   None

         Item 6.      Exhibits and Reports on Form 8-K

                      (a)  Exhibits                                       None
                      (b)  Reports on Form 8-K                            None




                                                                               9

<PAGE>   10




                                 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: May 14, 1998