<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, 1996
                  ------------------
                                       OR

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

For the transition period from __________to__________


                        Commission file 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)                        8,120,268

  Warrants to purchase shares of
Common Stock ($.0002145 par value)                        2,079,134
</TABLE>


<PAGE>   2




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

                                                                   Page Number
                                                                   -----------

    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 Results of
                    Operations and Financial Condition                  7


    PART II.        Other Information                                   8

    SIGNATURE PAGE                                                      9




<PAGE>   3




PART I - FINANCIAL INFORMATION

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



<TABLE>
<CAPTION>
                                                                         SEPTEMBER 31,  DECEMBER 31,
                                                                             1996           1995
                                                                         -------------  ------------
                                                                          (UNAUDITED)
<S>                                                                      <C>            <C>
ASSETS
Current assets:
 Cash and cash equivalents.............................................  $  4,893,691   $      $671


Equipment and Furniture:
 Equipment.............................................................         23,515        18,745
 Furniture.............................................................         12,989        10,587
 Less accumulated depreciation.........................................        (25,384)      (20,548)
                                                                         -------------  ------------
        Total equipment and furniture, net.............................         11,120         8,784
                                                                         -------------  ------------
Deferred offering costs................................................             --       486,436
                                                                         -------------  ------------
        Total assets...................................................  $  $4,904,811  $    495,891
                                                                         =============  ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
 Accounts payable and accrued liabilities:
  Interest payable to principal stockholder............................  $          --  $    545,379

  Obligations under research agreements                                             --        34,447
  Due to related parties...............................................             --       337,740
  Professional fees....................................................         54,113       325,277
  Other................................................................         29,832       106,788
 Current portion of loan payable to principal
  stockholder..........................................................             --     1,196,445
 Line of credit with bank..............................................             --     2,007,652
                                                                         -------------  ------------
        Total current liabilities......................................         83,945     4,553,728
                                                                         -------------  ------------
Long-term obligations:
 Loan payable to principal stockholder, net of
  current portion......................................................             --       303,555
                                                                         -------------  ------------
Stockholders' equity (deficit):
 Common stock, $.0002145 par value;
  15,000,000 shares authorized
  8,120,268 and 4,700,000  share issued and outstanding, respectively            1,742         1,008
 Additional paid-in capital............................................      5,816,367       108,491

 Deficit accumulated during the development stage......................       (997,243)   (4,470,891)
                                                                         -------------  ------------
        Total stockholders' equity (deficit)...........................      4,820,866    (4,361,392)
                                                                         -------------  ------------
        Total liabilities and stockholders'
         equity (deficit)..............................................  $   4,904,811  $    495,891
                                                                         =============  ============
</TABLE>

                See accompanying notes to financial statements.

<PAGE>   4



NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)



<TABLE>
<CAPTION>
                                                                            INCEPTION
                         THREE MONTHS ENDED       NINE MONTHS ENDED      (JUNE 15, 1990)
                           SEPTEMBER 30,            SEPTEMBER 30,      THROUGH SEPTEMBER 30,
                          1996        1995        1996          1995           1996
                       ----------  ----------  ----------    ----------   ------------
<S>                    <C>         <C>         <C>          <C>           <C>
Interest Income.....   $   66,197  $       --  $  178,898   $        --   $    178,898
Expenses:
 Research and
  development.......      203,750     396,109     591,429       862,869      3,554,637
 General and
  administrative....      165,949      48,663     537,349       188,683      1,356,791
 Interest expense...           --      84,770      47,364       249,474        735,605
                       ----------  ----------  ----------  ------------   ------------
   Total expenses...      369,699     529,542   1,176,142     1,301,026      5,647,033
                       ----------  ----------  ----------  ------------   ------------
Net loss               $(303,502)  $(529,542)  $(997,244)  $(1,301,026)   $(5,468,135)
                       ==========  ==========  ==========  ============   ============
Net loss per share..   $    (.04)  $    (.11)  $    (.13)  $      (.28)
                       ==========  ==========  ==========  ============
Weighted average
number of common
equivalent shares
outstanding.........    8,101,936   4,700,000   7,694,350     4,697,926
                       ==========  ==========  ==========  ============
</TABLE>

                See accompanying notes to financial statements.

<PAGE>   5



NEOPHARM, INC.
(A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)


<TABLE>
<CAPTION>
                                                                                 INCEPTION
                                                                              (JUNE 15, 1990)
                                               SEPTEMBER 30,  SEPTEMBER 30,       THROUGH
                                                   1996           1995       SEPTEMBER 30, 1996
                                               -------------  -------------  ------------------
<S>                                            <C>            <C>            <C>
Cash flows used in operating
 activities:
 Net loss...................................   $   (997,244)  $ (1,301,026)  $      (5,468,135)
 Adjustments to reconcile net loss
  to net cash used by operating
  activities:
  Depreciation and amortization.............           4,835          5,447              37,182
  Gain on disposal of equipment
   and furniture............................              --             --               (408)
  Services contributed (non-cash)
   by related party (Note 7)................              --             --             101,042
 Interest converted to stock................         523,385             --             523,385
 Changes in assets and liabilities:
  Decrease (increase) in other
   assets...................................         486,436      (332,197)            (11,100)
  (Decrease) increase in accounts payable
   and accrued liabilities..................     (1,265,685)        461,555              83,946
                                               -------------  -------------  ------------------
    Net cash used in operating
     activities.............................     (1,248,272)    (1,166,221)         (4,734,088)
                                               -------------  -------------  ------------------
Cash flows used in investing activities:
 Purchase of equipment and
  furniture.................................         (7,172)          (583)            (37,605)
 Proceeds from disposal of
  equipment and furniture...................              --             --                 810
                                               -------------  -------------  ------------------
   Net cash used in investing
    activities..............................         (7,172)          (583)            (36,795)
                                               -------------  -------------  ------------------
Cash flows from financing
 activities:
 Proceeds from loan payable to
  principal stockholder.....................              --             --           1,500,000
 Advance on line of credit..................         107,000      1,161,000           2,114,652
 Reduction in line of credit................     (2,114,652)             --         (2,114,652)
 Proceeds from issuance of common
  stock.....................................       8,156,117              8           8,164,574
                                               -------------  -------------  ------------------
   Net cash provided by
    financing activities....................       6,148,465      1,161,008           9,664,574
                                               -------------  -------------  ------------------
Net increase (decrease) in cash.............       4,893,020        (5,796)           4,893,691
Cash, beginning of period...................             671          9,205                  --
                                               -------------  -------------  ------------------
Cash, end of period.........................   $   4,893,691  $       3,409  $        4,893,691
                                               =============  =============  ==================
Supplemental disclosure of cash paid
 for:
Interest....................................          84,585         85,581             212,222
Income taxes................................              --             --                  --
===============================================================================================

</TABLE>

                See accompanying notes to financial statements.

<PAGE>   6



                                 NEOPHARM, INC.
               (A DELAWARE CORPORATION IN THE DEVELOPMENT STAGE)
                         NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996

NOTE 1

The financial information herein is unaudited, other than the Balance Sheet at
December 31, 1995, which is derived from the audited 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, 1996, the results of operations for the three and nine months ended
September 30, 1996 and 1995 and changes in cash flows for the nine month
periods ended September 30, 1996 and 1995.

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 1995 annual report on Form 10-K filed with the Securities and
Exchange Commission.

NOTE 2

In 1996, the Company amended its Certificate of Incorporation to convert each
share of outstanding Common Stock into two shares of Common Stock and to
restate the par value of the Common Stock from $.000429 per share to $.0002145
per share.  The stock split has been reflected retroactively in these financial
statements for all periods presented.  At December 31, 1995 and September 30,
1996 as adjusted, there were 4,700,000 and 8,120,268 shares of common stock
issued and outstanding.



<PAGE>   7



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


Results of Operations - Nine Months Ended September 30, 1996 vs. Nine Months
----------------------------------------------------------------------------
Ended September 30, 1995
------------------------

Revenue, consisting of interest and dividend income for the nine months ended
September 30, 1996 was $178,898.  Interest and dividend income was earned on
the investment of the net proceeds from the Company's initial public offering
of common stock, completed January 30, 1996.  No revenue was recorded for the
nine months ended September 30, 1995, as the Company had no surplus cash
balances.

Research and development expenses decreased by 31% or $271,440 for the nine
month period ended September 30, 1996 compared to the nine month period ended
September 30, 1995.  The decrease is due to the completion of the Company's
obligation to fund certain university supportive research relating to the
liposome development program.

General and administration expense expenses increased 185% or $348,666 for the
nine month period ended September 30, 1996 compared to the nine month period
ended September 30, 1995 primarily due to salaries paid to employees and
officers of the Company in 1996.  Prior to the completion of the initial public
offering, officers of the Company were not paid salaries.

Interest expense decreased by 81% or $202,110 for the nine month period ended
September 30, 1996 compared to the nine month period ended September 30, 1995
as proceeds from the initial public offering were used to repay principal and
interest due on the Company's outstanding line-of-credit.  In addition, a loan
by the Chairman of the Company was converted into common stock at the initial
public offering price.  Both the line-of-credit and loan from the Chairman were
outstanding in the nine month period ended September 30, 1995.

The net loss for the nine month period ended September 30, 1996 decreased by
23% or $303,782 compared to the nine month period ended September, 30, 1995.
The Company expects losses to continue as planned product development
continues.

Results of Operations - Three Months Ended September 30, 1996 vs. Three Months
------------------------------------------------------------------------------
Ended September 30, 1995
------------------------

Revenue, consisting of interest and dividend income for the three months ended
September 30, 1996 was $66,197.  Interest and dividend income was earned on the
investment of the net proceeds from the Company's initial public offering of
common stock, completed January 30, 1996.  No revenue was recorded for the
three months ended September 30, 1996, as the Company had no surplus cash
balances.

Research and development expenses decreased by 49% or $192,359 for the three
month period ended September 30, 1996 compared to the three month period ended
September 30, 1995.  The decrease is due to the completion of the Company's
obligation to fund certain university supportive research relating to the
liposome development program.

General and administration expense expenses increased 241% or $117,286 for the
three month period ended September 30, 1996 compared to the three month period
ended September 30, 1995 primarily due salaries paid to employees and officers
of the Company in 1996.  Prior to the completion of the initial public
offering, officers of the Company were not paid salaries.

Interest expense decreased by 100% or 84,770 for the three month period ended
September 30, 1996 compared to the three month period ended September 30, 1995
as proceeds from the initial public offering were used to repay principal and
interest due on the Company's outstanding line-of-credit.  In addition, a

<PAGE>   8

loan by the Chairman of the Company was converted into common stock at the
initial public offering price.  Both the line-of-credit and loan from the
Chairman were outstanding in the three month period ended September 30, 1995.

The net loss for the three month period ended September 30, 1996 decreased by
43% or $226,040 compared to the three month period ended September, 30, 1995.
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, 1996, the Company's cash and cash equivalents were $4,893,691
compared to $671 at December 31, 1995.  This increase was a direct result of
completing the initial public offering of common stock in January, which
generated approximately $7.9 million, net of underwriter's discounts and
related offering costs.  After closing the initial public offering, the Company
paid accrued consulting fees, legal and accounting costs related to the public
offering, and as was previously mentioned, repaid the outstanding
line-of-credit.

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, 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.

Statements made in this document that present information that is not historic,
including among other things, anticipated financial performance, business
prospects, new products and markets, and research and development activities,
are forward-looking statements.  The risks that may affect operations,
development and results include clinical outcomes in drug development programs,
regulatory matters, proprietary rights challenges, market acceptance,
competition, and other matters discussed in the Company's Form 10-K and other
periodic reports.


<PAGE>   9




PART II - OTHER INFORMATION


          Item 1.  Legal Proceedings                       None

          Item 2.  Changes in Securities                   
                   The Board of Directors of the 
                   Corporation authorized a two-for-one
                   stock split to stockholders of
                   record as of the close of business
                   on August 26, 1996. The par value of
                   NeoPharm, Inc. common stock was 
                   adjusted from $0.000429 per share to
                   $0.0002145 per share, in connection 
                   with this stock split.

          Item 3.  Defaults Upon Senior Securities         None

          Item 4.  Submission of Matters to 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



<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

                                               Date: November 13, 1996