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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                          Commission File Number 1-6247

                                   ALZA CORPORATION
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                   77-0142070
  -------------------------------                  --------------------------
  (State or other jurisdiction of                       (I.R.S. Employer
   incorporation of organization)                      Identification No.)

950 Page Mill Road, P.O. Box 10950, Palo Alto, CA               94303-0802
--------------------------------------------------             -------------
     (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code:  (415) 494-5000
                                                   --------------------
Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of each exchange
Title of each class                                 on which registered
--------------------                              -------------------------

Common Stock                                      New York Stock Exchange

5 1/4% Liquid Yield Option-TM- Notes due 2014     New York Stock Exchange
      (Zero Coupon-Subordinated)

5% Convertible Subordinated Debentures due 2006   New York Stock Exchange

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

ALZA Corporation Warrants (to purchase Common Stock at $65 per share)

     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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [  ]

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant, as of March 17, 1997:  $2,410,274,299

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of March 17, 1997:

     Title of Class                               Number of Shares
     --------------                               -----------------
     Common Stock                                    84,912,721

                       DOCUMENTS INCORPORATED BY REFERENCE

     Part II, Items 5, 6, 7 and 8 are incorporated by reference to the
registrant's Annual Report to Stockholders for the year ended December 31,
1996; Part III, Items 10, 11, 12 and 13 are incorporated by reference to the
definitive proxy statement for the registrant's Annual Meeting of
Stockholders to be held on May 8, 1997.

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                    ALZA CORPORATION FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                                TABLE OF CONTENTS


                                                                 Page

PART I

Item 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . .3

Item 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . 19

Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 19

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . 20

        EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . . . . . . 21

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 23

Item 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . 23

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 23

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . 23

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . 23

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . 24

Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 24

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 24

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 24

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
         ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . 25

                                        -2-

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                                PART I


ITEM 1.   BUSINESS

INTRODUCTION

    ALZA Corporation ("ALZA") is a leader in the development and
commercialization of innovative pharmaceutical products that incorporate
drugs into advanced dosage forms designed to provide controlled,
predetermined rates of drug release for extended time periods.  By
administering drugs in preset patterns and by alternative routes, ALZA's
advanced dosage forms, called therapeutic systems, can add to the medical and
economic value of drug therapies by minimizing their unpleasant or harmful
side effects, optimizing their beneficial actions, simplifying drug therapy,
and increasing patient compliance by decreasing the frequency with which
medication must be administered.  ALZA was incorporated under the laws of the
State of California on June 11, 1968, and changed its legal domicile from
California to Delaware in 1987.  ALZA's mailing address is 950 Page Mill
Road, P.O. Box 10950, Palo Alto, CA  94303-0802.

    Historically, most of ALZA's product development activities have been
undertaken pursuant to joint development and commercialization agreements
with large pharmaceutical companies.  These agreements normally provide for
the pharmaceutical company client to reimburse ALZA for costs incurred in
product development and clinical evaluation of a specified product, including
a portion of general and administrative expenses.  The client receives
marketing rights to the product, and ALZA receives royalties based on the
client's sales of the product.  In some cases ALZA manufactures all or a
portion of the client's requirements of the product; in other cases the
client manufactures the product.  Among the ALZA-developed products
commercialized to date by client companies are Procardia XL-Registered
Trademark- (nifedipine) for the treatment of angina and hypertension,
Duragesic-Registered Trademark- (fentanyl) CII for the management of severe
chronic pain, Transderm-Nitro-Registered Trademark- (nitroglycerin) for the
prevention and treatment of angina and NicoDerm-Registered Trademark- CQ-TM-
(nicotine) for use as an aid in smoking cessation.

    The United States health care industry has changed dramatically in the
last several years.  Pharmaceutical companies have merged and reduced their
combined sales forces, acquired pharmacy benefit companies, and built
alliances in an effort to cut costs, ensure market share, and improve
research and development productivity.  In this environment, every new
pharmaceutical product must add value to the health care marketplace.

    Beginning in the early 1990s and accelerating over the past several
years, ALZA has embarked on a three-part strategy to capitalize on the
opportunities created by the new health care marketplace.  First, ALZA has
continued its traditional product development arrangements with client
companies.  ALZA currently has products in development with


                                        -3-

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several of the world's largest pharmaceutical companies.  Second, ALZA has
expanded its commercialization capabilities and activities as described under
"ALZA Pharmaceuticals" below.  ALZA now has an approximately 60 person sales
force which promotes Ethyol-Registered Trademark- (amifostine),
Testoderm-Registered Trademark- (testosterone) CIII, Testoderm-Registered
Trademark- with Adhesive and Mycelex-Registered Trademark- (clotrimazole)
Troche, and co-promotes Duragesic-Registered Trademark- (fentanyl) CII,
Glucotrol XL-Registered Trademark- (glipizide), the ENACT AirWatch-TM-
system, Hexalen-Registered Trademark- (altretamine) and NeuTrexin-Registered
Trademark- (trimetrexate glucuronate).  As part of its strategy to expand its
commercialization activities and in order to decrease ALZA's dependence on
client companies, in 1993 ALZA formed Therapeutic Discovery Corporation
("TDC") to develop, with ALZA, a pipeline of products for commercialization
by ALZA. At the end of 1996, ALZA submitted a New Drug Application for a
second-generation transdermal testosterone product under development with
TDC, and a number of additional products were in the ALZA/TDC pipeline,
including several in clinical evaluation.  (See "Therapeutic Discovery
Corporation" below.)  Third, in order to extend ALZA's leadership in drug
delivery technology, ALZA formed the ALZA Technology Institute ("ATI") in
1994. ATI is increasing ALZA's investment in the research and development of
therapeutic systems, including systems for the delivery of biotechnology
compounds and for use in gene therapy.

NOTICE CONCERNING FORWARD-LOOKING STATEMENTS

     Some of the statements made in this Form 10-K are forward-looking in
nature, including but not limited to ALZA's product development activities
and plans, plans concerning the commercialization of products, and other
statements that are not historical facts.  The occurrence of the events
described, and the achievement of the intended results, are subject to the
future occurrence of many events, some or all of which are not predictable or
within ALZA's control; therefore, actual results may differ materially from
those anticipated in any forward-looking statements.  Many risks and
uncertainties are inherent in the pharmaceutical industry; others are more
specific to ALZA's business. Many of the significant risks related to ALZA's
business are described in this Form 10-K, including risks associated with
technology and product development, risks relating to clinical development,
regulatory clearance to market products and medical acceptance of products,
changes in the health care marketplace, patent and intellectual property
matters, regulatory and manufacturing issues, and risks associated with
competition from other companies.


                                        -4-

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ALZA TECHNOLOGIES AND PRODUCTS

    D-TRANS-TM- TRANSDERMAL SYSTEMS.  ALZA's transdermal therapeutic systems
provide for the controlled delivery of drugs directly into the bloodstream
through intact skin. Transdermal systems are well suited for the delivery of
potent drugs that are poorly absorbed and/or extensively metabolized when
administered orally.  ALZA's D-TRANS-TM- products are thin, multilayer
systems, in the form of small adhesive patches, that combine a drug reservoir
with a polymer membrane or other mechanism to control drug release to the
surface of intact skin, and then through the skin into the bloodstream.

    The transdermal products developed by ALZA and marketed in the United
States and/or other countries include:

   -    CATAPRES-TTS-Registered Trademark- (clonidine) - Applied
        once-weekly for the treatment of hypertension, marketed
        by Boehringer Ingelheim Pharmaceutical, Inc.
        ("Boehringer").

   -    DURAGESIC-Registered Trademark- (fentanyl) CII - A
        72-hour system for management of chronic pain in patients
        who require continuous opioid analgesia for pain that
        cannot be controlled by lesser means, marketed by Janssen
        Pharmaceutica, Inc. (together with its affiliates,
        "Janssen") and co-promoted in the United States by ALZA
        Pharmaceuticals.

   -    NicoDerm-Registered Trademark- CQ-TM- / NICODERM-Registered
        Trademark- (nicotine) - Applied once-daily to aid in
        smoking cessation.  NicoDerm-Registered Trademark- CQ-TM-
        is marketed for over-the-counter use by SmithKline
        Beecham as part of a joint venture with Hoechst Marion
        Roussel, Inc. ("HMR"), and Nicoderm-Registered Trademark-
        is marketed as a prescription product by HMR in
        Australia, Canada, South Korea, New Zealand and the
        United States.

   -    TESTODERM-Registered Trademark- AND TESTODERM-Registered
        Trademark- WITH ADHESIVE (testosterone) CIII - A
        once-daily transdermal system for replacement therapy in
        males for conditions associated with a deficiency or
        absence of endogenous testosterone, marketed by ALZA
        Pharmaceuticals in the United States.  In January 1997,
        Scitech Genetics Limited introduced Testoderm-Registered
        Trademark- and Testoderm-Registered Trademark- with
        Adhesive in Singapore under a distribution agreement with
        ALZA.  ALZA has executed an agreement with Ferring N.V.
        ("Ferring") pursuant to which Ferring has the right to
        market Testoderm-Registered Trademark- and
        Testoderm-Registered Trademark- with Adhesive in 12
        European countries.

   -    TRANSDERM-NITRO-Registered Trademark- (nitroglycerin) -
        Applied once-daily for the prevention and treatment of
        angina pectoris, marketed by Novartis Pharmaceuticals
        Corporation (together with its affiliates, "Novartis").

                                        -5-

<PAGE>


   -    TRANSDERM SCOP-Registered Trademark- (scopolamine) -
        Applied once every three days for prevention of nausea
        and vomiting associated with motion sickness, marketed by
        Novartis.

    A number of additional transdermal products are in various stages of
development and clinical testing.


      ORAL SYSTEMS.  ALZA has developed several therapeutic systems for oral
administration.  ALZA's OROS-Registered Trademark- products resemble
conventional tablets or capsules in appearance, but use an osmotic mechanism
to provide pre-programmed, controlled drug delivery to the gastrointestinal
tract.  An OROS-Registered Trademark- product comprises a polymer membrane
with one or more laser-drilled holes surrounding a core containing the drug
or drugs, with or without osmotic or other agents.  Water from the
gastrointestinal tract diffuses through the membrane at a controlled rate
into the drug core, causing the drug to be released in solution or suspension
at a predetermined controlled rate out of the laser-drilled hole(s).
OROS-Registered Trademark- systems are well suited for delivering drug
compounds throughout the gastrointestinal tract in programmed delivery for
local treatment or systemic absorption.

      The OROS-Registered Trademark- products developed by ALZA and marketed
in the United States and/or other countries include:

   -          COVERA-HS-TM- (verapamil) - A once-daily
              Controlled-Onset-Extended-Release (COER-24-TM-) tablet
              for the treatment of hypertension and angina pectoris,
              marketed by G.D. Searle ("Searle").

   -          DynaCirc CR-Registered Trademark- (isradipine) - A
              once-daily system for the treatment of hypertension,
              marketed by Novartis, introduced in the United States in
              early 1997.

   -          GLUCOTROL XL-Registered Trademark- (glipizide) - A
              once-daily treatment for Type II diabetes, marketed in
              the United States by Pfizer Inc. ("Pfizer") and
              co-promoted by ALZA Pharmaceuticals.

   -          MINIPRESS XL-Registered Trademark- / ALPRESS-Registered
              Trademark- LP (prazosin) - A once-daily
              formulation for the treatment of hypertension, marketed
              in France and India by Pfizer.

   -          PROCARDIA XL-Registered Trademark- / ADALAT CR-Registered
              Trademark- (nifedipine) - A once-daily formulation for
              the treatment of both angina and hypertension, marketed
              by Pfizer in the United States and Bayer AG ("Bayer")
              outside the United States.

                                        -6-

<PAGE>

   -          VOLMAX-Registered Trademark- (albuterol) - A twice-daily
              dosage form for the treatment of asthma, marketed by Muro
              Pharmaceutical, Inc. and Forest Laboratories, Inc. in the
              United States and by Glaxo Holdings p.l.c. outside the
              United States.

       An OROS-Registered Trademark- pseudoephedrine product, an
OROS-Registered Trademark- chlorpheniramine product and an OROS-Registered
Trademark- pseudoephedrine/brompheniramine product, all once-daily
over-the-counter cold/allergy treatments, have been cleared for marketing in
the United States by the United States Food and Drug Administration ("FDA").
The pseudoephedrine and chlorpheniramine products were marketed by Ciba Self
Medication prior to the merger between Ciba Geigy Ltd. and Sandoz Ltd. (now
Novartis).  ALZA is in discussions with third parties for the
commercialization of the OROS-Registered Trademark- cold/allergy products.
Pharmagenesis, Inc. has the right to market the pseudoephedrine product in
the People's Republic of China, Hong Kong, Macao and Taiwan. Pacific
Pharmaceuticals has the right to market the pseudoephedrine product and/or
the pseudoephedrine/brompheniramine product in South Korea.

      A number of additional OROS-Registered Trademark- products are in
various stages of development and testing with TDC and other client companies.

      In addition to the OROS-Registered Trademark- systems described above,
ALZA has developed other proprietary oral delivery technologies including:

    -          CHRONSET-Registered Trademark- - ALZA's
               Chronset-Registered Trademark- therapeutic system,
               currently in development for the oral delivery of
               compounds including proteins and peptides, provides a
               predetermined delay in the release of active compounds
               from an orally administered capsule in order to target
               the location or the timing of a bolus delivery.

    -          LIQUID OROS-Registered Trademark- - ALZA is developing a
               liquid OROS-Registered Trademark- system designed for the
               delivery of highly insoluble liquid drug formulations or
               polypeptides.  A delivery orifice in the outer layers of
               a coated capsule allows controlled release of drug, while
               an internal osmotic layer pushes against the drug
               compartment, forcing the liquid drug formulation from the
               system.

    -          RingCap-TM- - ALZA has developed its RingCap-TM-
               technology, a new oral controlled release technology
               designed to have a low manufacturing cost and broad
               applicability.  By incorporating several insoluble
               polymeric rings around a tablet, the erosion of the
               tablet can be controlled, modulating the release of drug
               in the gastrointestinal tract.  RingCap-TM- systems can
               deliver the total dose of the selected drug evenly over
               an extended period.

      PERIODONTAL PRODUCTS.  The Actisite-Registered Trademark- (tetracycline
hydrochloride) periodontal fiber was developed jointly with On-Site
Therapeutics, Inc.  The thread-like polymeric fibers are designed to treat
adult periodontal disease by providing rate-controlled delivery of

                                        -7-

<PAGE>

tetracycline for ten days after placement in the periodontal pocket by a
dental practitioner.  The product was introduced in the United States in July
1994 by a partnership of ALZA and Procter & Gamble (the "ALZA/P&G
Partnership"). ALZA has the right to market the Actisite-Registered
Trademark- product in most countries outside of the United States, and is
marketing the product, through distributors, in several European countries
(see "ALZA Pharmaceuticals" below).  The product is manufactured by ALZA.

      Procter and Gamble ("P&G"), pursuant to the ALZA/P&G Partnership, has
licensed for sale in Europe a bioerodible product called the Perio-Chip-TM-,
which delivers chlorhexidine for the treatment of periodontal disease.  The
product, licensed by P&G from Perio Products Ltd., an Israeli company, is
awaiting regulatory approval in the United Kingdom and other Western European
countries.  P&G will market the product, and ALZA and P&G will share the
profits from P&G's sales of the product.

      BAXTER INFUSOR-Registered Trademark- .  The Baxter Infusor-Registered
Trademark-, a lightweight, disposable device for intravenous therapy,
resulted from a joint development arrangement between ALZA and Baxter
International Inc. ("Baxter").  The product is manufactured and marketed by
Baxter in the United States, Europe and Asia for the delivery of
chemotherapeutic agents and analgesics.

      IVOMEC SR-Registered Trademark- BOLUS (ivermectin).  Developed jointly
with Merck & Co., Inc. ("Merck"), IVOMEC SR-Registered Trademark- is a
product combining the antiparasitic agent ivermectin with ALZA's ruminal
bolus technology. The product, which controls internal and external parasites
in cattle for an entire grazing season following a single administration, was
introduced by Merck in the United States in early 1997 and is marketed by
Merck in a number of other countries.  Merck has filed regulatory
applications for clearance to market the product in other countries.

      OTHER ALZA PRODUCTS.  Three product lines developed by ALZA in its
earlier years are marketed directly by ALZA Pharmaceuticals in the United
States, and in other countries under distribution agreements with third
parties.  Those products are:

    -     OCUSERT-Registered Trademark- - Ocusert-Registered
          Trademark- (pilocarpine) Pilo-20 and Pilo-40 ocular
          therapeutic systems are used for the treatment of
          glaucoma.

    -     PROGESTASERT-Registered Trademark- - The
          Progestasert-Registered Trademark- (progesterone)
          intrauterine contraceptive device provides contraception
          for one year by releasing the natural hormone
          progesterone.

    -     ALZET-Registered Trademark- - ALZET-Registered Trademark-
          mini-osmotic pumps are implantable, capsule-shaped units
          that can deliver solutions containing a wide range of
          agents in laboratory animals at controlled rates for up
          to four weeks.

                                        -8-

<PAGE>


      E-TRANS-TM- SYSTEMS.  ALZA's E-TRANS-TM- electrotransport systems are
designed to deliver drugs across intact skin through the use of an electrical
potential gradient. ALZA's E-TRANS-TM- systems are small, easy-to-apply
devices consisting of an adhesive, a drug reservoir, electrodes and a power
source/controller.  The systems are designed to deliver large molecules
(including proteins and peptides) and potent drugs that are poorly absorbed
or extensively metabolized in the gastrointestinal tract.  ALZA has products
utilizing this technology under development, including an E-TRANS-TM-
fentanyl product under development with Janssen.

      DUROS-TM- SYSTEMS.  ALZA's DUROS-TM- human implant technology is
designed to enable the delivery of peptides, proteins and other bioactive
macromolecules arising from the biotechnology industry.  Products
incorporating DUROS-TM- implant technology have the potential to deliver
macromolecules to subcutaneous sites for systemic therapy or to specific
tissues; a single miniature implant may be able to provide therapy for up to
one year.  In early 1997, ALZA filed an Investigational New Drug application
("IND") with the FDA for a DUROS-TM- leuprolide human implant product in
development with TDC.

      SKIN INTERFACE TECHNOLOGY.  ALZA is conducting research on a new skin
interface technology designed to increase drug transport across the skin and
enable delivery of larger molecular weight compounds, including proteins and
peptides.  This new technology may be used to enhance ALZA's existing
D-TRANS-TM- transdermal and E-TRANS-TM- electrotransport technologies.  ALZA's
activities in this area include a research program with TDC related to the
E-TRANS-TM- electrotransport delivery of insulin.

THERAPEUTIC DISCOVERY CORPORATION

      FORMATION. In June 1993, ALZA distributed a special dividend of Units
to ALZA stockholders.  Each Unit consisted of one share of TDC Class A common
stock and one warrant to purchase one-eighth of one share of ALZA common
stock.  On June 11, 1996, the component parts of the Units began trading
separately on the Nasdaq Stock Market.  The TDC Class A common stock trades
under the symbol TDCA, and the ALZA warrants trade under the symbol ALZAW.
The ALZA warrants are exercisable at a price of $65 per share, and will
expire, if not previously exercised, on December 31, 1999.

      ALZA/TDC AGREEMENTS. TDC was formed by ALZA for the purpose of
selecting and developing new human pharmaceutical products combining ALZA's
proprietary drug delivery technologies with various drug compounds, and
commercializing such products, most likely through licensing to ALZA.  ALZA
and TDC have a development agreement (the "Development Contract") pursuant to
which ALZA conducts research and development activities on behalf of TDC.
ALZA has granted to TDC a royalty-free,

                                        -9-

<PAGE>

exclusive, perpetual license to use ALZA's proprietary drug delivery
technologies to develop and commercialize specified TDC products.

      ALZA has an option to license all of the products developed by TDC, on
a product-by-product and country-by-country basis, providing ALZA with access
to a potential pipeline of products for worldwide commercialization.  If ALZA
exercises its license option for any product, ALZA will make royalty payments
to TDC (if the product is sold by ALZA) generally up to a maximum of 5% of
ALZA's net sales of such a product, or if the product is sublicensed to a
third party, ALZA will pay TDC generally up to 50% of ALZA's sublicensing
revenues with respect to the product.  The exact percentages of net sales and
ALZA's sublicensing revenue payable to TDC will depend on the amount of TDC's
funding of the product.  ALZA has an option, exercisable on a
product-by-product basis, to buy out its royalty obligation to TDC by making
a one-time payment that is a multiple of royalties and sublicensing fees paid
in specified periods.

      ALZA also has an option, exercisable at ALZA's sole discretion, to
purchase, according to a predetermined formula, all (but not less than all)
of the outstanding shares of TDC Class A common stock (the "Purchase
Option").  The Purchase Option is exercisable at any time until December 31,
1999, or later under certain circumstances.  The Purchase Option will expire,
in any event, on the 60th day after TDC files a Form 10-K or Form 10-Q
containing a balance sheet showing less than an aggregate of $5.0 million in
cash, cash equivalents, short-term investments and long-term investments. At
December 31, 1996 TDC reported cash, cash equivalents, short-term investments
and long-term investments of $85.3 million.  Based on TDC's current rate of
expenditures, it can be expected that all TDC funds available for product
development will be exhausted during the second half of 1997.  Under the
formula set forth in TDC's Restated Certificate of Incorporation, if ALZA
exercises the Purchase Option, the exercise price will be the greatest of (a)
$100 million; (b) the fair market value of one million shares of ALZA common
stock; (c) the greater of (i) 25 times the worldwide royalties and
sublicensing fees paid by ALZA to TDC during four specified calendar quarters
or (ii) 100 times such royalties and sublicensing fees during a specified
calendar quarter, in either case less any amounts previously paid by ALZA to
exercise any buy-out option with respect to any product; or (d) $325 million
less all amounts paid by TDC to ALZA under the Development Contract. Based on
information available at the end of 1996, the Purchase Option exercise price
is expected to be $100 million.  The purchase price may be paid in cash, in
ALZA common stock, or any combination of the two, at the option of ALZA.
During any period when TDC no longer has funds available for product
development, but ALZA has not yet made a determination whether or not to
exercise its Purchase Option or its License Option for a particular product,
ALZA will need to continue funding TDC product development at its own expense
in order to keep the product development programs intact subject to ALZA's
determination of the continued technical and commercial feasibility of the
product and the compatibility of the product with ALZA's product portfolio
and business objectives.

      ALZA performs certain administrative services for TDC under an
administrative services agreement (terminable at the option of TDC) for which
ALZA is reimbursed its direct costs, plus certain overhead expenses.  For the
years ended 1996, 1995 and 1994, reimbursement to ALZA under this agreement
was approximately $0.2 million, $0.1 million and $0.2 million, respectively.

                                        -10-

<PAGE>

      In order to choose appropriate product candidates for development, ALZA
and TDC used a market-driven product discovery process under which they
examined unmet medical needs in selected therapeutic areas and then targeted
cost-effective products for development. The therapeutic areas on which ALZA
and TDC focused were pain management, supportive therapies in oncology and
AIDS, urology and endocrinology; however, ALZA and TDC have also pursued
product opportunities outside these therapeutic areas where ALZA's drug
delivery systems could add significant value to drug therapy.  Included in
the review of appropriate candidates for incorporation in an ALZA therapeutic
system were compounds currently off-patent or soon to be off-patent,
proprietary compounds available for license, compounds in biotechnology and
pharmaceutical pipelines, and drugs that were abandoned early in their
development due to side effects or poor efficacy in conventional dosage
forms.  By the end of 1996, these product discovery activities were
essentially completed.

      TDC PRODUCTS IN DEVELOPMENT.  ALZA and TDC have a number of products in
various stages of development, including several in clinical evaluation.  As
is true throughout the pharmaceutical industry, products in development must
overcome a number of technological, clinical, regulatory, proprietary and
commercial hurdles in order to become successful products.  Development of
some TDC products has been terminated, and there can be no assurance that any
or all of the products in development by ALZA and TDC will reach the
marketplace or will become commercially successful products.

      In 1996 ALZA and TDC focused their product development activities on
products having the greatest commercial potential, some of which are
described below.  In the pain management area, ALZA and TDC had in
development at the end of 1996 an OROS-Registered Trademark- hydromorphone
product intended to provide 24-hour pain management for chronic pain
requiring potent opioid analgesia.  In early 1997, ALZA licensed the product
worldwide from TDC, and ALZA entered into an agreement with Knoll
Pharmaceutical Company and its parent company Knoll AG for the continued
clinical development and worldwide commercialization of the product.

      In the urology area, ALZA and TDC have under development an
OROS-Registered Trademark- oxybutynin product, a once-a-day dosage form
intended to provide treatment for urge urinary incontinence.  At the end of
1996, the product was in Phase III clinical studies.

      In the area of oncology, ALZA and TDC have in development a DUROS-TM-
leuprolide human implant product designed for the palliative treatment of
prostate cancer for an extended period, with discontinuation of treatment
possible at any time.  The IND was submitted for this product in early 1997
and clinical studies are expected to begin during 1997.

                                        -11-

<PAGE>

      In the endocrinology area, at the end of 1996 ALZA submitted a New Drug
Application to the FDA for a second-generation transdermal testosterone
product to follow Testoderm-Registered Trademark- and Testoderm-Registered
Trademark- with Adhesive.  This product is a single patch that can be worn on
the arm or the torso and is designed to provide convenient physiologic
testosterone replacement therapy.  In addition, ALZA and TDC have in Phase
III clinical trials an intrauterine therapeutic system for the delivery of
progesterone as an adjunctive therapy to estrogen hormone replacement therapy
in women.  The product is designed to provide local delivery of progesterone
to the uterus for 18 up to 24 months.

PRODUCT DEVELOPMENT RISKS

      All pharmaceutical products require extensive development and clinical
activities before an application can be filed for regulatory approval to
market the product.  There are many risks inherent in this process and it
should be expected that many of the products for which development is
initiated ultimately will not become commercial products.  Substantial
technical, financial and human resources are required to successfully
complete the development of a product.  The proper performance
characteristics for the product must be defined, and the product must be
designed and developed to meet those characteristics.  Every product faces
significant technological hurdles, and often one or more of these cannot be
overcome.

      After a product is manufactured on a pilot scale, clinical safety and
efficacy must be shown. Clinical studies are costly, and can take many years
to complete.  There can be no assurance that the desired outcomes will be
shown in the clinical studies or that regulatory approval for the product
will be obtained.  Several years, and millions of dollars, may be spent
before it can be known whether all technical and clinical requirements for a
product can be met. There are further technology risks in converting a pilot
scale manufacturing process to commercial scale.  The regulatory clearance
process can take many years, and may vary in different countries.  Pricing
and reimbursement approvals are also required in some countries, particularly
in Europe. Finally, even once a product is developed, approved by regulatory
authorities and manufactured, there can be no assurance of its commercial
success. In order to provide added value and gain medical and commercial
acceptance, a product generally must show some performance improvement or
other benefits over products incorporating the same or similar drug
compounds.  In some cases, these benefits may be difficult to establish.
Finally, the product must be accepted for reimbursement by third-party
healthcare providers.

ALZA TECHNOLOGY INSTITUTE

      ALZA Technology Institute ("ATI"), established by ALZA in 1994,
continued its mission to extend and expand ALZA's drug delivery technologies
in 1996.  ATI has


                                        -12-

<PAGE>

further developed ALZA's E-TRANS-TM- electrotransport and DUROS-TM- implant
technologies, as well as skin interface technology and the
Chronset-Registered Trademark-, Liquid OROS-Registered Trademark- and
RingCap-TM- systems.  During 1996, ATI continued to apply ALZA's technology
in the biotechnology area and in addressing the delivery problems of gene
therapy.

RESEARCH AND DEVELOPMENT EXPENDITURES

      ALZA spent $114.8 million on client-sponsored product development
activities during 1996 ($85.8 million and $61.4 million in 1995 and 1994,
respectively); such amounts exclude reimbursable general and administrative
costs. ALZA spent $26.8 million on ALZA-sponsored research and development
activities during 1996 ($17.6 million and $14.7 million in 1995 and 1994,
respectively); such amounts exclude allocable general and administrative
costs.  Presentation of the 1995 and 1994 research and development activities
have been reclassified to conform with the 1996 presentation. The
ALZA-sponsored research and development activities include expenses of the
ALZA Technology Institute of $20.3 million, $13.8 million and $9.2 million
for 1996, 1995 and 1994, respectively.  Research and development costs are
expensed as incurred.  ALZA had research and development revenue of $131.2
million during 1996, $104.0 million during 1995 and $68.7 million during 1994
from clients with which ALZA has joint product development agreements
(including $100.7 million in 1996, $70.1 million in 1995 and $31.6 million in
1994 from TDC).  ALZA's research and development revenue generally represents
clients' reimbursement of costs, including a portion of general and
administrative expenses. Therefore product development activities do not
contribute significantly to current net income.

MANUFACTURING

      ALZA manufactures some or all of the product requirements for certain
client companies, including Duragesic-Registered Trademark- for Janssen,
NicoDerm-Registered Trademark- CQ-TM- and Nicoderm-Registered Trademark- for
HMR, Covera-HS-TM- for Searle, Procardia XL-Registered Trademark- and Adalat
CR-Registered Trademark- for Pfizer and Catapres-TTS-Registered Trademark-
for Boehringer.  ALZA also manufactures the Progestasert-Registered
Trademark-, ALZET-Registered Trademark-, Ocusert-Registered Trademark-,
Testoderm-Registered Trademark-, Testoderm-Registered Trademark- with Adhesive
and Actisite-Registered Trademark- products.  ALZA's 255,000 square foot
commercial manufacturing facility is in Vacaville, California.

      ALZA's products can be more complex to manufacture than more
traditional dosage forms and can require a more labor-intensive manufacturing
process.  As a result, the cost of manufacturing may be higher than that of
other pharmaceutical products, and the time required to develop an
appropriate manufacturing process may be extensive.  Converting a pilot scale
manufacturing process to a robust commercial manufacturing process requires
substantial investment of technical and financial resources.

      Some of the materials used in manufacturing ALZA-developed products are
unique and may be available from only one or a limited number of suppliers.
ALZA attempts, where appropriate, to negotiate long-term supply arrangements
for some of these materials. With the increasing costs associated with
product liability claims in the

                                        -13-

<PAGE>


pharmaceutical and medical device industries, particularly in the area of
implantable materials, it may become increasingly difficult, more expensive,
or in some cases impossible for ALZA to obtain some of the materials it may
need for certain of its products.  Scarcity or unavailability of materials
could make products more costly, prevent the commercialization of some
products, or cause delays in development due to the necessity to design
products to incorporate available or obtainable materials.

      To the extent ALZA licenses-in products, or promotes products developed
by third parties, ALZA will be dependent on third parties to manufacture
those products.  The Ethyol-Registered Trademark- (amifostine) product, a
very important contributor to ALZA's net sales, is manufactured for U.S.
Bioscience, Inc. ("U.S. Bioscience") by a third party contract manufacturer,
and is expected to be manufactured by U.S. Bioscience at its facility in the
Netherlands in the near future.  A lack of supply of product from a third
party could adversely affect ALZA's net sales revenues.

ALZA PHARMACEUTICALS

      ALZA established its ALZA Pharmaceuticals division in 1993 to expand
ALZA's marketing capabilities in order to commercialize ALZA-developed
products, including those under development with TDC, as well as licensed-in
products.  ALZA Pharmaceuticals now has a sales force of approximately 60
people located throughout the United States.  In 1996 ALZA Pharmaceuticals
began marketing Ethyol-Registered Trademark- in the United States.
Ethyol-Registered Trademark- is a unique cytoprotective agent developed by
U.S. Bioscience, indicated for the reduction of cumulative renal toxicity
associated with repeated administration of the chemotherapeutic drug
cisplatin in patients with advanced ovarian or non-small cell lung cancer.
U.S. Bioscience co-promotes the product with ALZA.  ALZA has the right to
market the product for five years, with an option for a sixth year, and will
receive residual payments for a specified period after the end of ALZA's
marketing term.  In 1996 ALZA Pharmaceuticals also began promoting in the
United States Bayer Corporation's Mycelex-Registered Trademark-
(clotrimazole) Troche and co-promoting U.S. Bioscience's Hexalen-Registered
Trademark- (altretamine) and NeuTrexin-Registered Trademark- (trimetrexate
glucuronate) products in the United States.  ALZA Pharmaceuticals also
co-promotes Duragesic-Registered Trademark- with Janssen, Glucotrol
XL-Registered Trademark- with Pfizer and the ENACT AirWatch-TM- system, all
in the United States. ALZA Pharmaceuticals also markets ALZET-Registered
Trademark- mini-osmotic pumps, Progestasert-Registered Trademark- and
Ocusert-Registered Trademark-, and supports P&G in the marketing and
promotion of Actisite-Registered Trademark-.

      ALZA Pharmaceuticals is establishing international commercialization
capabilities by developing distribution arrangements to market several
ALZA-developed products. Actisite-Registered Trademark- is distributed in
Austria, Denmark, Germany, Italy, Spain, Sweden, Switzerland and the United
Kingdom by distributors, and agreements were recently signed for the
distribution of the product in Japan and South Korea, following regulatory
approval.  In 1997, ALZA signed an agreement with Ferring for the rights to
market Testoderm-Registered Trademark- with


                                        -14-

<PAGE>


Adhesive, as well as the second-generation testosterone product under
development with TDC, in 12 European countries.  In order to enter into the
agreement with Ferring, ALZA exercised its license option for the TDC
testosterone product for those 12 countries.  ALZA has also signed
distribution agreements for 17 Asian countries for Testoderm-Registered
Trademark- and for five Asian countries for OROS-Registered Trademark-
pseudoephedrine.

      There can be no assurance that ALZA Pharmaceuticals will be successful
in its marketing and sales efforts.  There are numerous risks associated with
the marketing and sales of pharmaceutical products, including the
availability of products (whether through development by ALZA and TDC,
in-licensing or otherwise) for ALZA Pharmaceuticals to market in specialty
areas that match the expertise of the sales force, market acceptance of the
products, and changes in the health care marketplace, including cost
containment efforts and the concentration of providers of medical and
pharmaceutical benefits through health maintenance organizations, formularies
and other mechanisms.

GOVERNMENTAL REGULATION

      Under the United States Food, Drug and Cosmetic Act, "new drugs" must
obtain clearance from the FDA before they lawfully can be marketed in the
United States.  Applications for marketing clearance must be based on
extensive clinical and other testing, the cost of which is very substantial.
The packaging and labeling of all new drug products are also subject to FDA
regulation.  Approvals (sometimes including pricing approvals) are required
from health regulatory authorities in foreign countries before marketing of
pharmaceutical products may commence in those countries.  Requirements for
approval may differ from country to country, and can involve additional
testing.  There can be substantial delays in obtaining required clearances
from both the FDA and foreign regulatory authorities after applications are
filed.  Even after clearances are obtained, further delays may be encountered
before the products become commercially available.

      ALZA's manufacturing activities, and the products sold by ALZA and its
client companies in the United States and/or exported to other countries, are
subject to extensive regulation by the FDA and comparable agencies in other
countries where the products are distributed.  FDA regulations govern a range
of activities including manufacturing, quality assurance, advertising and
record-keeping. The continuing trend of stringent FDA oversight in product
clearance and enforcement has caused more uncertainty, greater risks and
higher costs of obtaining clearance to market a product, and sometimes longer
clearance cycles.  Failure to obtain, or delays in obtaining, FDA and other
regulatory clearance to market new products, as well as other regulatory
actions and recalls, could adversely affect ALZA's financial results.


                                        -15-

<PAGE>


      Environmental regulations may also affect the manufacturing process.
As a pharmaceutical company, ALZA uses in its business chemicals and
materials which may be classified as hazardous or toxic which require special
handling and disposal.  In addition, ALZA undertakes to minimize releases to
the environment and exposure of its employees and the public to such
materials.  The costs of these activities have increased substantially in
recent years, and it is possible that such costs may continue to increase
significantly in the future.

PATENTS AND PATENT APPLICATIONS

      As of December 31, 1996, ALZA owned approximately 500 United States
patents and had approximately 200 pending United States patent applications
relating to its products and other technologies.  ALZA has in excess of 2,400
foreign patents and pending patent applications covering its various
technologies and products.  Patents have been issued, or are expected to be
issued, covering ALZA's current technologies and products, as well as
products under development.

      Patent protection generally has been important in the pharmaceutical
industry.  ALZA believes that its current patents, and patents that may be
obtained in the future, are important to current and future operations.
There can be no assurance that ALZA's existing patents will cover future
products, that additional patents will be issued, or that any patents now or
hereafter issued will be of commercial benefit.  In the United States,
patents generally are granted for specified periods of time.  Some of ALZA's
earlier patents covering various aspects of certain OROS-Registered
Trademark- and D-TRANS-TM- dosage forms have begun to expire, or will expire,
over the next several years; however, ALZA technologies and products are
generally covered by multiple patents.

      Although a patent has a statutory presumption of validity in the United
States, the issuance of a patent is not conclusive as to such validity or as
to the enforceable scope of the claims of the patent.  There can be no
assurance that patents of ALZA will not be successfully challenged in the
future. In some cases, third parties have initiated reexamination by the
Patent and Trademark Office of patents issued to ALZA, and have opposed ALZA
patents in other jurisdictions.  The validity or enforceability of ALZA
patents after their issuance have also been challenged in litigation.  If the
outcome of such litigation is adverse to ALZA, third parties may then be able
to use the invention covered by the patent, in some cases without payment.
There can be no assurance that ALZA patents will not be infringed or
successfully avoided through design innovation.

      It is also possible that third parties may obtain patent or other
proprietary rights that may be necessary or useful to ALZA. With numerous
other companies engaged in developing drug delivery technologies, it can be
expected that other parties may in some circumstances file patent
applications or obtain patents that compete in priority


                                        -16-

<PAGE>


with ALZA's patent applications.  Such competition may result in adversarial
proceedings such as patent interferences and oppositions, which can increase
the uncertainty of patent coverage.  In cases where third parties are first
to invent a particular product or technology, it is possible that those
parties will obtain patents that will be sufficiently broad so as to prevent
ALZA from using certain technology or from further developing or
commercializing certain products.  As ALZA expands its direct marketing of
products, ALZA may attempt to license-in products or compounds or
technologies for use in products.  In each of these cases, if licenses from
third parties are necessary but cannot be obtained, commercialization of the
products would be delayed or prevented.

      In addition, ALZA utilizes significant unpatented proprietary
technology, and there can be no assurance that others will not develop
similar technology.

      For a description of certain legal proceedings relating to patents, see
"Legal Proceedings" below.

COMPETITION

      All of ALZA's current and future drug delivery products will face
competition both from traditional forms of drug delivery and from advanced
delivery systems being developed by others.  Licensed-in products will face
competition from competing therapies for the same indications.  ALZA's
competition potentially includes all of the pharmaceutical companies in the
world, including current ALZA clients.  Many of these other pharmaceutical
companies have greater financial resources, technical staff and manufacturing
and marketing capabilities than ALZA.  A number of companies are developing
drug delivery technologies.  To the extent that ALZA develops or markets
products incorporating drugs that are off-patent, or are being developed by
multiple companies, ALZA will face increased competition from other companies
developing and marketing similar products.

      As the pharmaceutical industry continues to consolidate, and as
pressures increase for cost-effective research and development, some
pharmaceutical companies have reduced, and may continue to reduce, their
funding of research and development.  Competition for limited client dollars
may therefore increase, and this competition could include the clients'
internal research and development programs, other drug delivery programs and
other technologies and products of third parties.  Similarly, as
pharmaceutical companies search to fill gaps in their product pipelines with
licensed-in products, ALZA will be competing for product in-licensing
opportunities with companies with far greater financial and other resources
than ALZA.

      Competition in drug delivery systems is generally based on performance
characteristics and price.  Acceptance by hospitals, physicians and patients
is crucial


                                        -17-

<PAGE>

to the success of a product.  Health care reimbursement policies of managed
care organizations, insurers and government agencies will continue to exert
pressure on pricing, and various federal and state agencies have enacted
regulations requiring rebates of a portion of the purchase price of many
pharmaceutical products.  Cost-effectiveness, although often difficult to
measure, is becoming increasingly critical.

      The health care industry has continued to change rapidly as the public,
government, medical practitioners and the pharmaceutical industry focus on
ways to expand medical coverage while controlling the growth in health care
costs.  The growth of managed care organizations and the resulting pressures
for cost-containment in the United States health care system are expected to
continue to put pressures on the prices charged for pharmaceutical products.
Prescription drug reimbursement practices and the growth of large managed
care organizations, as well as generic and therapeutic substitution
(substitution of a different product for the same indication), could
significantly affect ALZA's business.  While ALZA believes the changing
health care environment may increase the value of ALZA's drug delivery
products over the long term, it is impossible to predict the impact these
changes may have on ALZA.

REVENUES

      In 1996, ALZA received royalty revenue from 16 products in the
marketplace.  Sales of Procardia XL-Registered Trademark- in the United
States by Pfizer accounted for approximately 40% of ALZA's royalties and fees
in 1996 (more than 40% in 1995 and more than 50% in 1994). Because the basic
patents covering the drug nifedipine expired several years ago, other
companies are attempting to develop products similar to Procardia
XL-Registered Trademark-.  To date no product has been introduced which is
bioequivalent to Procardia XL-Registered Trademark-.  If such a product were
to be developed and introduced, its marketing could have a significant impact
on Procardia XL-Registered Trademark- pricing and sales, and therefore on
ALZA's royalties.

      Information about ALZA's revenues is presented below:

                                               1996        1995         1994
(in millions)                               -------     -------      -------
Royalties and fees                           $171.4      $145.4       $123.8
Research and development                      131.2       104.0         68.7
Net sales                                     108.6        76.9         68.5
Interest and other                             54.8        24.3         17.8
                                            -------     -------      -------
     Total revenues                          $466.0      $350.6       $278.8
                                            -------     -------      -------
                                            -------     -------      -------

      TDC accounted for 22% of ALZA's total revenues in 1996, 20% in 1995 and
11% in 1994; Pfizer accounted for 20% of ALZA's total revenues in 1996, 23%
in 1995 and

                                        -18-

<PAGE>

30% in 1994; Janssen accounted for 13% of ALZA's total revenues in 1996 and
12% in each of 1995 and 1994; and HMR accounted for 10% of ALZA's total
revenues in each of 1996 and 1995. The loss of revenues from one or more of
these clients would have a material adverse effect on ALZA's profitability.

INDUSTRY SEGMENTS; EXPORTS

      ALZA's business comprises one industry segment.  Export sales were
$23.0 million in 1996, $20.1 million in 1995 and $16.9 million in 1994,
principally to distributors and client companies in Europe.

EMPLOYEES

      On December 31, 1996, ALZA had 1,652 employees, of whom approximately
820 were engaged in research and development activities, approximately 491
were engaged in manufacturing activities and the remainder were working in
general, administrative and marketing areas.

ITEM 2.   PROPERTIES

      ALZA's corporate offices are located in Palo Alto, California, and its
two primary research and development campuses are in Palo Alto and Mountain
View, California.  ALZA also occupies a small research facility in Spring
Lake Park, Minnesota.  ALZA's large-scale commercial manufacturing facility
is located in Vacaville, California.  While ALZA believes that its facilities
and equipment are sufficient to meet its current operating requirements, ALZA
is actively planning to expand its facilities and equipment to support its
long-term requirements.

ITEM 3.   LEGAL PROCEEDINGS

      In December 1991, a patent infringement suit was filed by Ciba-Geigy
Inc. ("Ciba-Geigy"), now Novartis Pharmaceuticals Corporation, against Marion
Merrell Dow Inc. (now HMR) and ALZA in connection with the commercialization
of Nicoderm-Registered Trademark-.  In October 1994, the Court granted a
motion for summary judgment in favor of ALZA and HMR.  During October 1995,
the Court of Appeals for the Federal Circuit upheld the most significant
portions of the summary judgment decision, and sent back to the District
Court the issue of validity of certain other more limited claims of a patent
licensed to Ciba-Geigy.  During January 1995 ALZA and HMR filed a separate
suit against Ciba-Geigy and LTS Lohmann Therapy Systems Corporation in the
United States District Court for the Southern District of New York for
infringement of two United States patents issued to ALZA in 1994 relating to
the transdermal administration of nicotine. In June 1996, ALZA and HMR
entered into a settlement agreement with Ciba-Geigy which resolved these
disputes.  Ciba-Geigy made a one-time settlement

                                        -19-

<PAGE>


payment to HMR and ALZA, and is paying ongoing royalties on its U.S. nicotine
patch sales retroactive to January 1, 1996.  ALZA and HMR share the royalty
payments in accordance with the agreements between them.

      During January 1994, a suit was filed against ALZA by Cygnus Inc.
("Cygnus") in the United States District Court for the Northern District of
California, seeking a declaration of unenforceability and invalidity of an
ALZA patent relating to transdermal administration of fentanyl and alleging
violation of antitrust laws.  In April 1995 the District Court granted ALZA's
motion to dismiss the lawsuit; Cygnus appealed that ruling.  During 1996, the
Court of Appeals of the Federal Circuit upheld the District Court's dismissal
of Cygnus' claims against ALZA.  Cygnus has no further right of appeal.

      Product liability suits have been filed against Janssen and ALZA from
time to time relating to the Duragesic-Registered Trademark- product.
Janssen is managing the defense of these suits in consultation with ALZA
under an agreement between the parties.

      ALZA has been named as a potentially responsible party in connection
with the cleanup and environmental remediation of the Hillview-Porter
Regional Site Project near ALZA's Palo Alto facilities.  ALZA believes that
it did not discharge any of the chemicals of concern at this site.  ALZA does
not believe that its liability in this matter, if any, will be material.
However, because the action involves many parties and multiple regulatory
authorities, and the cleanup and allocation of financial responsibility may
not be resolved for several years, it is impossible to predict the timing or
amount of ALZA's potential liability.

      Historically, the cost of resolution of ALZA's liability (including
product liability) claims has not been significant, and ALZA is not aware of
any asserted or unasserted claims pending against it, including the suits
mentioned above, the resolution of which would have a material adverse impact
on the operations or financial position of ALZA.

   ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

                                        -20-

<PAGE>


                    EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>

                                            Principal Occupations for
    Name                  Age                      Past Five Years
-------------------     ------   ---------------------------------------------------------
<S>                      <C>     <C>
Dr. Ernest Mario          58     Co-Chairman of the Board and Chief Executive Officer of
                                 ALZA (since 1993); Chief Executive of Glaxo Holdings,
                                 p.l.c. (1989-1993).


Dr. Felix Theeuwes        59     President, Research and Development of ALZA (since
                                 1994); Executive Vice President, Research and
                                 Development (1991-1994) and Chief Scientist (since
                                 1982).

Bruce C. Cozadd           33     Senior Vice President and Chief Financial Officer of
                                 ALZA (since 1997); Vice President and Chief Financial
                                 Officer (1994-1996); Vice President, Corporate Planning
                                 and Analysis (1993); Manager, Strategic Projects (1991-
                                 1993).

Dr. Gary V. Fulscher      53     Senior Vice President, Operations of ALZA (since 1994);
                                 Vice President, Administration (1987-1994).

Dr. Samuel R. Saks        42     Senior Vice President, Medical Affairs of ALZA (since
                                 1994); Vice President, Medical Affairs (1992-1994); Vice
                                 President, Clinical Research, Oncology, Schering-Plough
                                 Corporation (1991-1992).

Peter D. Staple           45     Senior Vice President and General Counsel of ALZA (since
                                 1997); Vice President and General Counsel (1994-1996);
                                 Vice President and Associate General Counsel of Chiron
                                 Corporation (1992-1994); Vice President (from 1990-1992)
                                 and Associate General Counsel of Cetus Corporation
                                 (1983-1992).

</TABLE>

                                        -21-

<PAGE>
<TABLE>

<S>                      <C>     <C>
Dr. James W. Young        52     Senior Vice President, Commercial Development of ALZA
                                 (since October 1995); Vice President and Managing
                                 Director of ALZA Technology Institute (June 1995 -
                                 September 1995); President, Pharmaceuticals Division,
                                 Affymax N.V., (1992-1995); Senior Vice President and
                                 General Manager of Pharmaceuticals at Sepracor Inc.
                                 (1987-1992).

James Butler              56     Vice President, Sales and Marketing of ALZA (since
                                 1993); Vice President and General Manager of Glaxo,
                                 Inc.'s corporate division (1987-1993).

Harold Fethe              52     Vice President, Human Resources of ALZA (since 1991).


</TABLE>

                                        -22-



<PAGE>


                                     PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      ALZA incorporates by reference the information concerning the market
for its common stock and related stockholder matters set forth at page 38 in
the Annual Report to Stockholders (the "Annual Report") attached as Exhibit
13.

ITEM 6.   SELECTED FINANCIAL DATA

      ALZA incorporates by reference the selected consolidated financial data
set forth at page 39 in the Annual Report.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

      ALZA incorporates by reference Management's Discussion and Analysis of
Financial Condition and Results of Operations set forth at pages 17 to 22 in
the Annual Report.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      ALZA incorporates by reference the consolidated financial statements
and notes thereto set forth at pages 23 to 37 in the Annual Report and the
Report of Ernst and Young LLP, Independent Auditors, at page 37 in the Annual
Report.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

     Not applicable.

                                        -23-

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     ALZA incorporates by reference the information concerning its directors
set forth under the heading "Election of Directors" on pages 1 to 4 in ALZA's
definitive proxy statement dated March 27, 1997, for its Annual Meeting of
Stockholders to be held on May 8, 1997 (the "Proxy Statement").  Information
concerning ALZA's executive officers appears at the end of Part I of this
report on pages 21 and 22.

ITEM 11.  EXECUTIVE COMPENSATION

     ALZA incorporates by reference the information ("Summary Compensation
Table", "1996 Option Grants", "1996 Aggregated Option Exercises and Fiscal
Year-End Option Values" and "Certain Executive Agreements") set forth under
the heading "Executive Compensation" on pages 5 to 10 in the Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     ALZA incorporates by reference the information set forth under the
heading "Beneficial Stock Ownership" on page 13 in the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     ALZA incorporates by reference the information set forth under the
heading "Certain Transactions" on page 14 in the Proxy Statement.


                                        -24-

<PAGE>


                             PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Documents filed as part of this Annual Report on Form 10-K:

      1.  Consolidated Financial Statements:  Incorporated by reference
          to the Annual Report (see accompanying Index to Consolidated
          Financial Statements).

      2.  Consolidated Financial Statement Schedule:  (see accompanying
          Index to Consolidated Financial Statement Schedule).

      3.  Exhibits:

            3.1 Restated Certificate of Incorporation of ALZA Corporation
                filed with the Delaware Secretary of State on February 14,
                1994(1)

            3.2 Composite Bylaws of ALZA Corporation as restated on February
                10, 1994 and amended on August 11, 1994, February 16, 1995,
                February 15, 1996 and August 13, 1996(2)

            4.1 Indenture dated July 7, 1994 between ALZA Corporation and the
                Chase Manhattan Bank, N.A. as Trustee, relating to ALZA's
                5 1/4% Liquid Yield Option-TM- Notes(3)

            4.2 Specimen of LYONs-TM- Certificate (included in Exhibit 4.1)

            4.3 Form of Warrant Agreement between ALZA Corporation and the
                Chase Manhattan Bank (with attached Warrant Certificate)(4)

            4.4 Indenture dated April 23, 1996 between ALZA Corporation and
                the Chase Manhattan Bank, N.A., as Trustee, relating to ALZA's
                5% Convertible Subordinated Debentures(5)

            4.5 Specimen of 5% Convertible Subordinated Debenture (included in
                Exhibit 4.4)

           10.1 Technology License Agreement between ALZA Corporation and
                Therapeutic Discovery Corporation(6)

           10.2 Development Agreement between ALZA Corporation and Therapeutic
                Discovery Corporation(6)

           10.3 License Option Agreement between ALZA Corporation and
                Therapeutic Discovery Corporation(6)

See footnotes on following page

                                        -25-

<PAGE>

          10.4  Restated Certificate of Incorporation of Therapeutic Discovery
                Corporation(6)

          10.5  Agreement Regarding Certain Products and Activities and
                Amendment No. 1 to Development Agreement between ALZA
                Corporation and Therapeutic Discovery Corporation(7)

          10.6  Executive Deferral Plans II(8)*

          10.7  Executive Deferral Plan Amendments(9)*

          10.8  Amendment Number 2 to Executive Deferral Plans II(10)*

          10.9  ALZA Corporation Amended and Restated Stock Plan(11)*

          10.10 Form of Executive Agreement between ALZA Corporation and
                Certain Executive Officers(7)*

          11    Statement regarding computation of per share earnings

          13    Portions of Annual Report to Stockholders expressly
                incorporated by reference herein

          21    Subsidiaries

          23    Consent of Ernst & Young LLP, Independent Auditors

          27    Financial Data Schedule

(b)  No reports on Form 8-K were filed during the quarter ended December 31,
1996.

______________________________________________________________

1 Incorporated by reference to ALZA's Form 10-K Annual Report for the year
  ended December 31, 1993.

2 Incorporated by reference to ALZA's Form 10-Q Quarterly Report for the
  period ended September 30, 1996.

3 Incorporated by reference to ALZA's Form 10-Q Quarterly Report for the
  period ended June 30, 1994.

4 Incorporated by reference to ALZA's Form 8-A Registration Statement
  (Commission File No. 0-11234) dated March 31, 1993, as amended.

5 Incorporated by reference to ALZA's Form S-3 Registration Statement
  (Commission File No. 333-2343) dated April 8, 1996, as amended.

6 Incorporated by reference to the Form 10 of Therapeutic Discovery
  Corporation (Commission File No. 0-21478) dated March 31, 1993, as amended.

7 Incorporated by reference to ALZA's Form 10-K Annual Report for the year
  ended December 31, 1995.

8 Incorporated by reference to ALZA's Form 10-K Annual Report for the year
  ended December 31, 1992, and ALZA's Form 10-Q Quarterly Report for the period
  ended September 30, 1993.

9 Incorporated by reference to ALZA's Form 10-K Annual Report for the year
  ended December 31, 1992.

10 Incorporated by reference to ALZA's Form 10-K Annual Report for the year
   ended December 31, 1994.

11 Incorporated by reference to ALZA's Form 10-Q Quarterly Report for the
   period ended June 30, 1995.

* A management contract or compensatory plan or arrangement required to be
  filed as an Exhibit pursuant to Item 14(c) of Form 10-K.


                                        -26-

<PAGE>

                                 ALZA CORPORATION

              INDEX TO CONSOLIDATED FINANCIAL STATEMENTS, REPORT OF
                   ERNST & YOUNG LLP, INDEPENDENT AUDITORS AND
                    CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
                                  (Item 14(a))

                                                  Page Number Reference
                                              ----------------------------
                                               Annual Report       Form
                                              to Stockholders      10-K
                                              ---------------      ----

Consolidated statement of income for the
years ended December 31, 1996, 1995 and 1994        23

Consolidated balance sheet at
December 31, 1996 and 1995                          24

Consolidated statement of stockholders'
equity for the years ended December 31, 1996,
1995 and 1994                                       25

Consolidated statement of cash flows for
the years ended December 31, 1996, 1995
and 1994                                            26

Notes to consolidated financial statements         27-37

Report of Ernst & Young LLP, Independent
Auditors                                            37

The following consolidated financial statement
schedule of ALZA Corporation is included:

II-   Consolidated valuation and qualifying                        28
      accounts

All other schedules have been omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements, including the notes thereto.


                                        -27-

<PAGE>

                                                                 SCHEDULE II



                                ALZA CORPORATION
                 CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994



                    Balance at     Additions
                     Beginning    Charged to    Deductions   Balance at
                      of Year       Income     (write-offs)  End of Year
                   ------------  ------------  ------------- -------------
(In millions)

Allowance for doubtful
 receivables:

 1996                   $0.2           $0.4         $ -           $0.6
                   ------------  ------------  ------------- -------------
                   ------------  ------------  ------------- -------------
 1995                   $0.3           $ -          $(0.1)        $0.2
                   ------------  ------------  ------------- -------------
                   ------------  ------------  ------------- -------------
 1994                   $0.2           $0.1         $ -           $0.3
                   ------------  ------------  ------------- -------------
                   ------------  ------------  ------------- -------------

                                        -28-

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                                       ALZA CORPORATION



                                   By   /s/ [Ernest Mario]
                                     -------------------------------
                                            Dr. Ernest Mario
                                        Chief Executive Officer






Date:   March 31, 1997


                                        -29-


<PAGE>


      Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on  behalf of the
registrant and in the capacities and on the dates indicated.

   /s/  [Alejandro Zaffaroni]                   /s/ [Dean O. Morton]
  ---------------------------                 ------------------------
  Dr. Alejandro Zaffaroni                      Dean O. Morton
  Co-Chairman of the Board of                  Director
  Directors and Director                       Date:  March 31,  1997
  Date:  March 31,  1997


    /s/ [Ernest Mario]                           /s/ [Denise M. O'Leary]
  ---------------------------                 ------------------------
  Dr. Ernest Mario                             Denise M. O'Leary
  Co-Chairman of the Board of                  Director
  Directors, Director and Chief                Date:  March 31,  1997
  Executive Officer
  Date:  March 31,  1997


    /s/ [William R. Brody]                      /s/ [Issac Stein]
  ---------------------------                 ------------------------
  Dr. William R. Brody                         Isaac Stein
  Director                                     Director
  Date:  March 31,  1997                       Date:  March 31,  1997


   /s/ [William G. Davis]                       /s/ [Julian N. Stern]
  ---------------------------                 ------------------------
  William G. Davis                             Julian N. Stern
  Director                                     Director
  Date:  March 31,  1997                       Date:  March 31,  1997


    /s/ [Robert J. Glaser]                      /s/ [Bruce C. Cozadd]
  ---------------------------                 ------------------------
  Dr. Robert J. Glaser                         Bruce C. Cozadd
  Director                                     Senior Vice President, Chief
  Date:  March 31, 1997                        Financial Officer and
                                               Principal Accounting Officer
                                               Date:  March 31,  1997

                                        -30-

<PAGE>
                                  EXHIBIT INDEX



Exhibit
-------

  11       Statement regarding computation of per share earnings

  13       Portions of Annual Report to Stockholders expressly incorporated by
           reference into Annual Report on Form 10-K

  21       Subsidiaries

  23       Consent of Ernst & Young LLP, Independent Auditors

  27       Financial Data Schedule



                                        -31-