--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                       ---------------------------------

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                     SECURITIES EXCHANGE ACT OF 1934 For the
                    quarterly period ended September 30, 2002

                          Commission File No. 000-30123

                       ---------------------------------


                    FIRST HORIZON PHARMACEUTICAL CORPORATION
             (Exact name of registrant as specified in its charter)


            DELAWARE                                   58-2004779
    (State of incorporation)             (I.R.S. Employer Identification Number)


                   6195 SHILOH ROAD, ALPHARETTA, GEORGIA 30005
    (Address of registrant's principal executive offices, including zip code)




                        ---------------------------------

      (Registrant's telephone number, including area code): (770) 442-9707


     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 [ ]

     As of November 5, 2002,  there were 35,443,392  shares of the  Registrant's
Common Stock outstanding.



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<PAGE>



--------------------------------------------------------------------------------

                    FIRST HORIZON PHARMACEUTICAL CORPORATION
                                    FORM 10-Q
                                      INDEX



PART I.          FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                                                        <C>
          Item 1.  Consolidated Balance Sheets at September 30, 2002 and
                   December 31, 2001                                                         1

                   Consolidated Statements of Operations for the three and nine
                   months ended September 30, 2002 and September 30, 2001                    2

                   Consolidated  Statements  of Cash Flows for the nine  months
                   ended September 30, 2002 and September 30, 2001                           3

                   Notes to Consolidated Financial Statements                                4

          Item 2.  Management's  Discussion and Analysis of Financial  Condition
                   and Results of Operations                                                10

          Item 3.  Quantitative and Qualitative Disclosures about Market Risk               16

          Item 4.  Controls and Procedures                                                  16

PART II.         OTHER INFORMATION

          Item 1.  Legal Proceedings                                                        17

          Item 2.  Changes in Securities and Use of Proceeds                                17

          Item 3.  Defaults Upon Senior Securities                                          18

          Item 4.  Submission of Matters to a Vote of Security Holders                      18

          Item 5.  Other Information                                                        18

          Item 6.  Exhibits and Reports on Form 8-K                                         18

                   Signatures                                                               19

                   Certifications                                                           20

</TABLE>

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
   <S>                                                              <C>                        <C>

                                                                     September 30,              December 31,
                                                                          2002                      2001
                                                                          ----                      ----
    ASSETS
    Current Assets:
         Cash and cash equivalents                                     $     19,322               $    53,458
         Accounts receivable, net of allowance for
             doubtful accounts, discounts and
             contractual adjustments of $1,141,000 and
             $1,087,000 at September 30,2002 and
             December 31, 2001, respectively                                 25,756                    12,244
         Inventories                                                         15,547                     4,363
         Samples and other prepaid expenses                                   4,469                     1,243
         Taxes receivable                                                       184                     1,674
         Deferred tax assets                                                  5,955                       323

                                                                     ---------------            --------------
                        Total current assets                                 71,233                    73,305

    Property and equipment, net                                               1,520                       710
    Other Assets:
         Other assets                                                            61                     1,056
         Intangibles, net                                                   263,791                    92,849
         Long term deferred tax asset                                             -                     2,230

                                                                     ---------------            --------------
                        Total other assets                                  263,852                    96,135

                        Total assets                                   $    336,605               $   170,150
                                                                     ===============            ==============

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
         Accounts payable                                              $      4,576               $     4,540
         Accrued expenses                                                    30,523                    22,102
                                                                     ---------------            --------------
                   Total current liabilities                                 35,099                    26,642

    Long-Term Liabilities:
         Other long-term liabilities                                              -                       144
         Deferred tax liabilities                                               682                         -
                                                                     ---------------            --------------

                    Total liabilities                                        35,781                    26,786

    Commitments and contingencies

    Stockholders' Equity:
         Preferred stock, 1,000,000 share authorized and none                     -                         -
         outstanding
    Common stock,  $0.001 par value;  100,000,000 shares
         authorized, 35,295,837 and 27,626,002 outstanding at
         September 30, 2002 and December 31, 2001, respectively                  35                        28
    Additional paid in capital                                              287,102                   131,560
    Deferred compensation                                                      (294)                     (557)
    Retained earnings                                                        13,981                    12,333
                                                                     ---------------            --------------

                   Total stockholder's equity                               300,824                   143,364

                   Total liabilities and stockholders' equity          $    336,605               $     170,150
                                                                     ===============             ==============

</TABLE>

                (See notes to consolidated financial statements)

                                       1
<PAGE>


                    First Horizon Pharmaceutical Corporation
                      Consolidated Statements of Operations
                (unaudited, in thousands, except per share data)

<TABLE>
<CAPTION>
  <S>                                          <C>                    <C>                    <C>
                                                         For The Quarter Ended                    For The Nine Months Ended
                                                September 30, 2002    September 30, 2001     September 30, 2002   September 30, 2001
                                                ------------------    ------------------     ------------------   ------------------

  Net Revenues
         Net revenues from product sales          $        28,244       $         18,510       $       81,370       $        43,942
         Reduction of product returns accrual               2,633                      -                2,633                     -
         Tanafed accrual                                  (3,771)                      -              (3,771)                     -
                                                -------------------    ------------------     ----------------     -----------------
               Total net revenues                          27,106                 18,510               80,232                43,942

  Operating costs and expenses
         Cost of revenues from product sales                5,505                  2,830               14,502                 6,307
         Prenate GT write-off                                 700                      -                  700                     -
         Tanafed inventory write-off                        1,220                      -                1,220                     -
                                                -------------------    ------------------     ----------------     -----------------
               Total cost of revenues                       7,425                  2,830               16,422                 6,307

         Selling, general and administrative
         expenses                                          15,125                  9,733               46,029                25,216
         Depreciation and amortization                      4,115                    930               10,450                 1,724
         Research and development expense                     217                    538                  819                 1,389
                                                -------------------    ------------------     ----------------     -----------------
               Total operating costs and
               expenses                                    26,882                 14,031               73,720                34,636
                                                -------------------    ------------------     ----------------     -----------------

  Operating income                                            224                  4,479                6,512                 9,306
                                                -------------------    ------------------     ----------------     -----------------

  Other income (expense)
         Interest expense                                     (45)                      -              (2,776)                   (2)
         Interest income                                       82                    689                  383                 1,588
         Other                                                  8                      1                    9                     3
                                                -------------------    ------------------     ----------------     -----------------
               Total other income (expense)                    45                    690               (2,384)                1,589
                                                -------------------    ------------------     ----------------     -----------------

  Income before provision for income taxes                    269                  5,169                4,128                10,895
  Provision for income taxes                                (131)                (2,010)              (1,617)               (4,240)
                                                -------------------    ------------------     ----------------     -----------------

  Net income before extraordinary items           $           138       $          3,159       $        2,511       $         6,655

  Extraordinary loss on debt extinguishment,
  net of taxes                                    $             -       $              -       $        (863)       $             -

  Net income                                      $           138       $          3,159       $        1,648       $         6,655
                                                ===================    ==================     =================  ===================

  Basic:
  Income before extraordinary loss                $          0.00       $           0.12       $         0.08       $          0.28
         Extraordinary loss on debt
         extinguishment, net of taxes                        0.00       $           0.00       $       (0.03)                  0.00
                                                ===================    ==================     ================== ===================

         Basic earnings per common share:         $          0.00       $           0.12       $         0.05                  0.28
                                                ===================    ==================     ================== ===================

  Diluted:
  Income before extraordinary loss                $          0.00       $           0.11       $         0.08       $          0.26
         Extraordinary loss on debt
         extinguishment, net of taxes                        0.00                   0.00               (0.03)                  0.00
                                                -------------------    ------------------     ----------------     -----------------
  Diluted earnings per common share:              $          0.00       $           0.11       $         0.05       $          0.26

  Weighted average common shares outstanding:
         Basic                                             35,265                 26,969               32,129                23,537
                                                ===================    ==================     ================== ===================
         Diluted                                           35,757                 29,212               33,006                25,590
                                                ===================    ==================     ================== ===================

                                         (See notes to consolidated financial statements)

</TABLE>
                                       2
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                   <C>                         <C>
                    First Horizon Pharmaceutical Corporation
                      Consolidated Statements of Cash Flows
                            (unaudited, in thousands)


                                                                                 For The Nine Months Ended
                                                                        September 30, 2002        September 30, 2001
                                                                        ------------------        ------------------

Cash flows from operating activities:
Net income                                                                    $        1,648             $        6,655
Adjustments to reconcile net income to net cash provided by operating
     activities:
          Depreciation and amortization                                               10,450                      1,724
          Non-cash interest expense                                                    1,678                          -
          Non-cash extraordinary item                                                  1,404                          -
          Deferred tax provision                                                     (2,719)                      (555)
          Non-cash compensation expense                                                  262                        268
          Reduction in taxes payable - stock option exercises                            899                      3,922
          Changes in assets and liabilities, net of acquired assets and
                  liabilities:
                  Accounts receivable                                                (13,512)                   (5,143)
                  Inventories                                                         (4,938)                     (320)
                  Samples and other prepaid expenses                                  (2,230)                     (263)
                  Accrued expenses and other                                            9,766                     4,054
                  Accounts payable                                                         36                     2,885
                                                                              ----------------           ----------------

             Net cash provided by operating activities                                  2,744                    13,227

Cash flows from investing activities:
       Purchase of product licenses and other intangibles                           (187,297)                  (51,877)
       Purchase of property and equipment                                             (1,152)                     (206)
                                                                              ----------------           ----------------

             Net cash used in investing activities                                  (188,449)                  (52,083)

Cash flows from financing activities:
       Capitalized financing costs incurred                                           (3,081)                         -
       Principal payments on long-term debt                                         (137,000)                     (221)
       Proceeds from secondary offering                                              154,726                    84,325
       Proceeds from long-term debt                                                  137,000                         -
       Repurchase of common stock                                                        (76)                         -
                                                                              ----------------           ----------------

             Net cash provided by financing activities                                151,569                    84,104

Net change in cash and cash equivalents                                              (34,136)                    45,248
Cash and cash equivalents, beginning of period                                         53,458                    14,228
                                                                              ----------------           ----------------
Cash and cash equivalents, end of period                                      $        19,322            $       59,476
                                                                              =================          ================
Supplemental Cash Flow Information:
Cash paid for taxes                                                           $         1,482            $          513
                                                                              ----------------           ----------------

Cash paid for interest                                                        $         1,109            $            2
                                                                              ----------------           ----------------
                                   (See notes to consolidated financial statements)


</TABLE>




                                       3
<PAGE>



                    FIRST HORIZON PHARMACEUTICAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2002
                                   (unaudited)


1.   Basis of Presentation

          The accompanying  unaudited interim financial  statements  reflect all
     adjustments  (consisting  solely of  normal  recurring  adjustments)  which
     management  considers  necessary  for fair  presentation  of the  financial
     position,  results  of  operations  and cash flows of the  Company  for the
     interim  periods.   Certain  footnote   disclosures  normally  included  in
     financial  statements  prepared according to generally accepted  accounting
     principles  have been  condensed  or omitted from these  interim  financial
     statements as permitted by the rules and  regulations of the Securities and
     Exchange  Commission.  Interim  results are not  necessarily  indicative of
     results  for  the  full  year.  The  interim  results  should  be  read  in
     conjunction with the financial statements and notes thereto included in the
     Company's  Annual Report on Form 10-K for the year ended  December 31, 2001
     (File No.  000-30123)  and the Company's  Prospectus  (File No.  333-83698)
     filed on April 19, 2002.

2.   New Accounting Pronouncements

          In July 2001, the Financial Accounting Standards Board ("FASB") issued
     Statement  of Financial  Accounting  Standard  ("SFAS") No. 141,  "Business
     Combinations."  SFAS No. 141 eliminates the pooling-of  interest  method of
     accounting  for business  combinations.  SFAS No. 141 is effective  for any
     business  combination  completed  after June 30, 2001. The adoption of SFAS
     No.  141 on  January  1,  2002  did not  have an  impact  on the  Company's
     financial condition or results of operations.

          In July  2001,  the FASB  issued  SFAS No.  142  "Goodwill  and  Other
     Intangible  Assets."  Under SFAS No. 142,  goodwill  and  indefinite  lived
     intangible assets are no longer amortized.  Separate intangible assets that
     are not deemed to have an  indefinite  life will  continue to be  amortized
     over their  useful  lives.  SFAS No. 142 also  establishes  a new method of
     testing goodwill and other unamortized  intangible assets for impairment on
     an annual basis or on an interim basis if an event occurs or  circumstances
     change  that  would  reduce  the  fair  value  of that  goodwill  or  other
     intangible asset below its carrying value.  The amortization  provisions of
     SFAS No. 142 apply to goodwill and other  intangible  assets acquired after
     June 30, 2001. The adoption of SFAS No. 142 on January 1, 2002 did not have
     a  material  impact on the  Company's  financial  condition  or  results of
     operations.

          In August  2001,  the FASB issued SFAS No.  144,  "Accounting  for the
     Impairment  or Disposal of  Long-Lived  Assets." SFAS No. 144 addresses the
     financial  accounting  and  reporting  for the  impairment  or  disposal of
     long-lived  assets and is effective for financial  periods after January 1,
     2002.  The  adoption  of SFAS No.  144 on  January  1,  2002 did not have a
     material  impact  on  the  Company's  financial  condition  or  results  of
     operations.

          In April 2002, the FASB issued SFAS No. 145,  "Revision of FAS Nos. 4,
     44 and 64,  Amendment of FASB 13 and Technical  Corrections."  SFAS No. 145
     rescinds, amends or makes various technical corrections to certain existing
     authoritative  pronouncements  and is effective for fiscal years  beginning
     after  May 2002 for the  rescission  of FAS No. 4 and FAS No.  13,  and all
     other provisions are effective for financial  statements issued on or after
     May 15, 2002.  Early adoption is  encouraged.  The Company does not believe
     the adoption of SFAS No. 145 will have a material  impact on the  Company's
     financial condition or results of operations.

          In June 2002,  the FASB  issued SFAS No.  146,  "Accounting  for Costs
     Associated  with  Exit or  Disposal  Activities."  SFAS  No.  146  requires
     recording costs  associated with exit or disposal  activities at their fair
     values when a liability has been incurred. Under previous guidance, certain
     exit costs were accrued upon management's commitment to an exit plan, which
     is generally before an actual  liability has been incurred.  The provisions
     of SFAS No. 146 are  effective  for exit or  disposal  activities  that are


                                       4
<PAGE>

     initiated  after  December  31, 2002 with early  adoption  encouraged.  The
     Company  does not expect the  adoption of SFAS No. 146 will have a material
     impact on the Company's financial condition or results of operations.

3.   Accounts Receivable

          The Company is required to estimate  the level of accounts  receivable
     recorded in its balance sheet that will ultimately not be paid. Among other
     things,  this assessment requires analysis of the financial strength of the
     Company's  customers,  which can be highly subjective,  particularly in the
     recent  difficult  general  economic  environment.  Based on an analysis of
     actual historical bad debt experience, the Company revised its estimate for
     bad debt  allowance.  As a result of this  revised  estimate,  the  Company
     reduced the outstanding  allowance for doubtful accounts by $363,000 during
     the  quarter  ending  September  30,  2002 and  recorded  the  change  as a
     reduction in selling,  general and administrative  expenses for the quarter
     ended  September  30, 2002.  The Company  will  continue to record bad debt
     expense  based on prior  experience  supplemented  by a  periodic  customer
     specific review.

4.   Inventories

          Inventories  consist  of  purchased  pharmaceutical  products  and are
     stated  at the  lower  of cost or  market.  Cost is  determined  using  the
     first-in,  first-out method,  and market is considered to be net realizable
     value.  Inventories  consist of finished  product and bulk product awaiting
     processing and packaging into finished product.  At September 30, 2002, the
     Company  had  an  allowance   for  obsolete   inventory  of  $2.0  million.
     Inventories  at September  30, 2002 and December 31, 2001  consisted of (in
     thousands):

                                              September 30,   December 31,
                                                   2002           2001
                                                   ----           ----

         Bulk product.....................    $    2,567     $      581
         Finished product.................        12,980          3,782
                                              -----------    -----------
                                              $   15,547     $   4,363
                                              ===========    ===========

          Samples  primarily  consist of product  samples  used in the sales and
     marketing  efforts of the  Company's  products.  Samples are expensed  upon
     distribution.  Sample  inventories  at September  30, 2002 and December 31,
     2001 were $2.2 million and $827,000, respectively.

5.   Accrued Expenses

          Accrued  expenses at September  30, 2002 and December 31, 2001 consist
     of the following (in thousands):

                                                     September 30,  December 31,
                                                         2002           2001
                                                         ----           ----

         Employee compensation and benefits             $1,342       $3,325
         Product returns                                 6,393        3,374
         Accrued rebates                                 6,291        3,866
         Sales deductions                                2,068        1,771
         Tanafed accrual                                 4,655            -
         Accrued royalties                                 517        1,042
         Assumed liabilities - product acquisitions      3,768        5,593
         Other                                           5,489        3,131
                                                       -------      -------
                                                       $30,523      $22,102
                                                       =======      =======




                                       5
<PAGE>


6.   Tanafed Accrual

          In September  2002, the Company  launched  Tanafed DP and Tanafed DMX,
     line  extensions  to the Company's  Tanafed and Tanafed DM products.  These
     line  extensions  were  launched in response to increasing  competition  by
     generic products to Tanafed and Tanafed DM. Due to the launch of Tanafed DP
     and Tanafed  DMX,  the Company  expects  increased  returns of Tanafed,  as
     prescriptions  will  be  filled  with  the  line  extensions.  The  Company
     estimates that additional returns will total approximately $3.8 million and
     has provided for this amount as a deduction of revenue in the quarter ended
     September 30, 2002.

          In relation to the launch of Tanafed DP and Tanafed  DMX,  the Company
     also  established  a reserve for obsolete  inventory  for existing  Tanafed
     inventory on hand at September 30, 2002, of $1.2 million.

7.   Reduction of Product Returns Accrual

          In connection  with the  acquisition  of rights for Robinul,  Ponstel,
     Cognex,   Prenate,   Furadantin  and  Sular  the  Company  assumed  certain
     liabilities  for  returns  of product  shipped  by the seller  prior to the
     acquisition date. At the acquisition date, the Company estimated the amount
     of the assumed  liabilities  based on actual  sales  returns  data from the
     seller and included  that amount in the  allocation  of the total  purchase
     price. The Company periodically reviews the estimated liability. Generally,
     no adjustment is made to the reserve until two to three years subsequent to
     the acquisition due to the lag time between when a product is sold and when
     it is returned.  During the quarter  ended  September  30, 2002 the Company
     determined  that the  established  reserves  for Ponstel and Cognex were in
     excess  of the  currently  expected  returns.  As a result  of the  revised
     estimate,  the Company  reduced the liability and increased net revenues by
     $2.6 million for the quarter ended September 30, 2002.

8.   Earnings Per Share

          Below is the calculation of basic and diluted net income per share (in
     thousands, except per share data):

<TABLE>
<CAPTION>
        <S>                        <C>                       <C>                     <C>
                                     Quarter ended             Quarter ended           Nine months ended        Nine months ended
                                   September 30, 2002        September 30, 2001       September 30, 2002        September 30, 2001
                                   ------------------        ------------------       ------------------        ------------------
        Net income before                 $138                    $3,159                   $2,511                    $6,655
        extraordinary loss
        Extraordinary loss on
        debt extinguishment, net
        of taxes                             -                         -                    (863)                         -
                                   ------------------        ------------------       ------------------        ------------------
        Net  income                       $138                    $3,159                   $1,648                    $6,655
        Weighted average common
        shares outstanding - basic      35,265                    26,969                   32,129                    23,537
        Dilutive effect of stock
        options                            492                     2,243                      877                     2,053
                                   ------------------        ------------------       ------------------        ------------------
        Weighted average common
        shares outstanding -
        diluted                         35,757                    29,212                   33,006                    25,590
        Basic net  income per
        share                            $0.00                      $.12                     $.05                      $.28
        Diluted net  income per
        share                            $0.00                      $.11                     $.05                      $.26
                                   ==================        ==================       ==================       ===================

</TABLE>


                                       6
<PAGE>

9.   License Agreement with Jame Fine Chemical

          On June 27, 2002, the Company entered into an agreement with Jame Fine
     Chemical  for a ten  year  exclusive  license  to  make,  have  made,  use,
     distribute, market, promote, advertise and sell pharmaceutical formulations
     containing the ingredients dextromethorphan tannate and dexchlorpheniramine
     tannate.   The   Company's   Tanafed  DP  and  Tanafed  DMX  contain  these
     ingredients.  The agreement became effective upon the first sale of product
     containing the ingredients, which occurred in August 2002. The Company paid
     a license fee of $508,500 in cash in  connection  with the first sale.  The
     Company has also  committed  to fund a maximum  royalty of $2.5  million in
     installments  through March 2005. This royalty is refundable  under certain
     circumstances.  A nonrefundable  royalty will commence in January 2005. The
     Company will amortize the license fee over the life of the agreement.

10.  Sular Acquisition

          On March 6, 2002,  the Company  acquired  from  AstraZenca  UK Limited
     certain  U.S.   rights  relating  to  the   antihypertensive   prescription
     medication  Sular,  which the Company believes will complement its existing
     cardiology product, Nitrolingual Pumpspray. The Company also entered into a
     long-term  manufacturing,  supply, and distribution  agreement with Sular's
     current manufacturer,  Bayer AG. The purchase price paid was $184.3 million
     in cash,  including  $623,000 in acquisition  costs, plus the assumption of
     liabilities of $1,895,000 related to the return of product shipped prior to
     the acquisition  date. In addition,  the Company must pay up to $30 million
     in additional  purchase  price after closing,  based on the  achievement of
     certain  performance  milestones  during a  specified  period of time.  The
     agreements include the purchase of the Sular license rights,  certain trade
     names and managed care contracts and a distribution agreement. The purchase
     price also included $6,246,000 of product inventory. The purchase price was
     allocated  among the fair  values of the  intangible  and  tangible  assets
     acquired and the  liabilities  assumed and is being amortized over a period
     of five to twenty years.  The managed care  contracts  are being  amortized
     over a  period  of five  years  and the  distribution  agreement  is  being
     amortized  over a period  of ten  years.  All other  intangibles  are being
     amortized over twenty years.  The weighted average  amortization  period is
     seventeen  years.  The  results  of the  Sular  line  are  included  in the
     consolidated  statements of operations  from March 6, 2002. The preliminary
     purchase price allocation was as follows (in thousands):

         License rights.....................................    $  160,199
         Distribution agreement.............................    $   10,350
         Managed care contracts.............................    $    6,870
         Trade name.........................................    $    2,560
                                                                ----------
         Total intangibles..................................    $  179,979
         Inventory..........................................    $    6,246
                                                                ----------
         Total assets.......................................    $  186,225
         Liabilities assumed................................    $   (1,895)
                                                                -----------
         Total acquisition..................................    $  184,330
                                                                ===========

11.  Intangible Assets

          The following table reflects the components of intangible assets as of
     September 30, 2002 (in thousands):
<TABLE>
<CAPTION>
        <S>                                    <C>           <C>                <C>         <C>

                                                 Gross       Accumulated          Net         Weighted
                                                 Amount      Amortization        Amount     Average Life
                                                 ------      ------------        ------     ------------
        Licensing rights                        $243,745         (11,099)       $232,646       20 years
        Trade names                               11,060            (490)         10,570       20 years
        Contracts                                  8,300          (1,052)          7,248       5 years
        Supply/Distribution agreements            11,490          (1,010)         10,480    1.4 to 3 years
        Other intangibles                          3,081            (234)          2,847       20 years
                                                ---------       ---------       ---------   --------------
        Total                                   $277,676        $(13,885)       $263,791        18.85
                                                =========       =========       =========   ==============
</TABLE>

                                       7
<PAGE>

          For the three months ended  September 30, 2002,  amortization  expense
     related to the intangible assets was $4,020,000.  Amortization for the nine
     months ended September 30, 2002 was $10,107,000. Amortization is calculated
     on a straight-line  basis over the estimated  useful life of the intangible
     asset. Estimated annual amortization expense (in thousands) for each of the
     five succeeding fiscal years is as follows:

          Fiscal year ended December 31:     Amount
                                           ----------
                  2002                      $ 14,166
                  2003                      $ 16,043
                  2004                      $ 15,870
                  2005                      $ 15,670
                  2006                      $ 15,567


12.  Segment Reporting

          The Company  operates in a single  segment,  the sale and marketing of
     prescription products.

13.  Follow-On Offering

          On April 19, 2002,  the Company  completed its  follow-on  offering of
     6,500,000 shares of common stock.  The underwriters  exercised an option to
     purchase an additional  975,000  shares of common stock from the Company to
     cover any over-allotments, bringing the total shares sold to 7,475,000. The
     net proceeds  from the offering  were $152.6  million after the exercise of
     the over-allotment  option and after deducting offering expenses.  Proceeds
     from the offering,  which closed on April 24, 2002,  were used to repay the
     debt incurred under the Company's  senior  secured credit  facility and the
     balance of the proceeds will be used for other general corporate needs.

14.  Extraordinary Item

          In order to finance the Sular acquisition, the Company obtained a $152
     million senior secured credit  facility.  The Company incurred $3.1 million
     of deferred  financing costs  associated with this credit  facility.  These
     deferred financing costs were being amortized over the anticipated facility
     repayment period. On April 24, 2002 the credit facility was repaid with the
     offering  proceeds.   The  Company  recognized  an  extraordinary  loss  of
     $863,000,  net of income  tax  benefit  of  $540,000,  related to the early
     retirement of debt. The Company will assess the classification of this loss
     under  SFAS  No.  145 in the  second  fiscal  quarter  of 2003.  Under  the
     provisions of SFAS No. 145,  this  extraordinary  loss may be  reclassified
     into other income.

15.  Share buyback program

          On July 8, 2002, the Company  announced a share buyback program.  This
     program allows for the repurchase of up to $8 million in common stock until
     July 5, 2003.  Through  September  30,  2002,  the Company had  repurchased
     16,400 shares of common stock.

16.  Termination of Credit Agreement

          By notice given on July 12, 2002, the Company  voluntarily  terminated
     its credit facility arranged through Deutsche Bank Securities, Inc pursuant
     to Section 3.02 of the Credit Agreement.  As of June 30, 2002, there was no
     outstanding  balance  on the credit  facility  and the  Company  was not in
     compliance with the financial covenants of that credit facility.


                                       8
<PAGE>



17.  Shareholder Rights Plan

          On July 15, 2002, the Company  announced the adoption of a shareholder
     rights  plan.  The plan is designed to protect  Company  shareholders  from
     coercive or unfair takeover techniques that could deny them the opportunity
     to  realize  the  full  value of their  investment.  The  terms of the plan
     provide  for a dividend of one right to purchase a fraction of a share of a
     newly  created  class of  preferred  stock for each  share of common  stock
     outstanding as of the close of business on July 26, 2002, payable on August
     9, 2002.  The rights  expire on July 26, 2012 and may only be  exercised if
     certain conditions are met.



                                       9
<PAGE>

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

     The  following  should be read with the  financial  statements  and related
footnotes and Management's  Discussion and Analysis of Results of Operations and
Financial Condition included in the Company's Annual Report on Form 10-K for the
year  ended  December  31,  2001  (File No.  000-30123)  as well as  information
included  in the  Company's  Prospectus,  dated  April  19,  2002.  The  results
discussed below are not necessarily  indicative of the results to be expected in
any future periods. The following discussion contains forward-looking statements
that are subject to risks and uncertainties, which could cause actual results to
differ from the statements made.

OVERVIEW

     The Company is a specialty  pharmaceutical  company that currently  markets
and sells 17 brand name  prescription  products through its nationwide sales and
marketing force of approximately 210  professionals.  The Company focuses on the
treatment  of  cardiovascular,  obstetrical  and  gynecological,  pediatric  and
gastroenterological  conditions and disorders.  The Company seeks to acquire and
obtain licenses for pharmaceutical products that other companies do not actively
market  that have high  sales  growth  potential,  are  promotion-sensitive  and
complement the Company's  existing products.  In addition,  the Company seeks to
increase the value of existing  products by developing new  formulations,  using
new delivery  methods and seeking  regulatory  approval for new  indications for
existing  products.  The Company may also acquire  companies with  complementary
products or development pipelines consistent with its therapeutic focus.

RESULTS OF OPERATIONS

     Net Revenues.  Net revenues from product sales  increased $9.7 million,  or
53%, over the quarter ended September 30, 2001, to $28.2 million for the quarter
ended  September  30, 2002.  Net revenues  from product  sales  increased  $37.4
million,  or 85%,  over the nine month period ended  September 30, 2001 to $81.4
million for the nine months ended  September 30, 2002. Net revenues from product
sales of existing  products  decreased $9.1 million or 49% for the quarter ended
September 30, 2002, as compared to the quarter ended  September 30, 2001, due to
decreases in net sales of cough,  cold and allergy products  including  Tanafed.
Net revenues of products ("New  Products")  acquired or licensed since September
30, 2001 (namely  Furadantin,  Sular,  Tanafed DM,  Tanafed DP and Tanafed DMX),
were $18.9 million for the quarter ended  September 30, 2002.  Included in third
quarter 2002 net  revenues was  customary  wholesaler  and pharmacy  stocking of
Tanafed DP and Tanafed DMX of  approximately  $7.1  million.  Net revenues  from
product sales of existing  products  increased $14,000 for the nine months ended
September 30, 2002, as compared to the nine months ended  September 30, 2001 due
to decreases  in net sales of Tanafed  offset by an increase in net sales of the
Prenate line which was acquired in August 2001.  Net revenues from product sales
of New Products were $37.4 million for the nine months ended September 30, 2002.

     Prescriptions  of our other key brands  continue to increase.  According to
IMS Health's National  Prescription Audit Plus(TM) data, total  prescriptions of
Ponstel  increased 17% and Robinul products  increased 24% for the quarter ended
September  30, 2002 as compared to the quarter ended  September 30, 2001.  Total
dispensed  prescriptions  of  Prenate GT  increased  28% for the  quarter  ended
September 30, 2002 as compared to the quarter  ended June 30, 2002  according to
IMS Health's National  Prescription Audit Plus(TM) data. Total  prescriptions of
Sular for the quarter ended  September 30, 2002 were  substantially  the same as
total prescriptions for the quarter ended June 30, 2002, while new prescriptions
increased 1.1%  sequentially,  according to IMS Health's  National  Prescription
Audit Plus(TM) data.

     In connection with the acquisition of rights for Robinul,  Ponstel, Cognex,
Prenate,  Furadantin  and Sular the  Company  assumed  certain  liabilities  for
returns of product shipped by the seller prior to the  acquisition  date. At the
acquisition  date, the Company  estimated the amount of the assumed  liabilities
based on actual sales  return data from the seller and  included  that amount in
the allocation of the total purchase price. The Company periodically reviews the
estimated liability.  Generally,  no adjustment is made to the reserve until two
to three years  subsequent to the acquisition due to the lag time between when a


                                       10
<PAGE>

product is sold and when it is returned.  During the quarter ended September 30,
2002 the Company determined that the established reserves for Ponstel and Cognex
were in excess of the  currently  expected  returns.  As a result of the revised
estimate,  the Company  reduced the liability and increased net revenues by $2.6
million for the quarter ended September 30, 2002.

     The  Company  has  experienced  erosion of sales of its Tanafed and Prenate
products  during the nine  months  ended  September  30,  2002 due to  increased
competition from knock-off  products  resulting from  pharmacists'  substituting
such  knock-off  products  for  the  Company's  products.  In  response  to  the
substituting for Tanafed,  the Company launched two line extensions,  Tanafed DP
and Tanafed DMX, in September 2002. A process patent currently  protects Tanafed
DP and Tanafed DMX. The Company recently received a notice of allowance from the
U.S. Patent and Trademark Office for one of its pending patent  applications for
Tanafed DP and Tanafed DMX. The patent  contains  claims which  protect  against
knock off products to Tanafed DP and DMX. The Company and the manufacturer  have
filed several other patent applications. The Company is implementing a strategic
education program to mitigate pharmacists' substitutions for Prenate.

     As  a  result  of  launching  Tanafed  DP  and  Tanafed  DMX,  the  Company
anticipates  higher than normal returns of Tanafed.  The Company  estimates that
additional  returns will total  approximately  $3.8 million and has provided for
this amount as a deduction of revenue in the quarter ended September 30, 2002.

     Cost of  Revenues.  Cost of revenues  from  product  sales  increased  $2.7
million,  or 95%,  to $5.5  million  for the quarter  ended  September  30, 2002
compared to $2.8  million for the quarter  ended  September  30,  2001.  Cost of
revenues from product sales  increased  $8.2 million,  or 130%, to $14.5 million
for the nine months ended  September  30, 2002  compared to $6.3 million for the
nine months ended September 30, 2001.

     Due  to  decreased  sales  rates  and  the  introduction  of  product  line
extensions  in the third  quarter,  the Company  recorded as cost of revenues an
allowance for obsolete  inventory for existing Tanafed and Prenate  inventory of
$1.2 million and $700,000, respectively.

     Gross Margin. Gross margin,  defined as net revenue from product sales less
cost of revenues  from product sales as a percentage of net revenue from product
sales,  for the quarter ended September 30, 2002 was 81% compared to 85% for the
quarter ended September 30, 2001. For the nine-month  period ended September 30,
2002 gross  margin  was 82%  compared  to 86% for the  nine-month  period  ended
September 30, 2001.  This decrease in gross margin  resulted  primarily from the
change in product sales mix and Sular having a lower gross margin as compared to
our other products.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative expenses increased $5.4 million, or 56%, to $15.1 million for the
quarter ended September 30, 2002. Selling,  general and administrative  expenses
increased  $20.8 million,  or 83%, for the nine months ended September 30, 2002.
As a  percentage  of net  revenues  from  product  sales,  selling,  general and
administrative  expenses were 54% for the quarter  ended  September 30, 2002, as
compared  to 53% for the quarter  ended  September  30,  2001.  Selling  related
expenses increased due to the outside commission and co-promotion  expenses paid
to Professional  Detailing,  Inc. for the Company's Prenate co-promotion and the
new Sular  co-promotion  that began in the second  quarter of 2002.  The Company
also incurred  additional  marketing expenses in the quarter ended September 30,
2002, related to the launch of Tanafed DP and Tanafed DMX.

     General and  administrative  expenses for the quarter and nine months ended
September 30, 2002  increased  due to higher rent and operating  expenses at the
Company's new headquarters, increased support staff and higher insurance costs.

     The Company  recorded in the third  quarter of 2002  expenses for state and
local taxes  associated  with prior  periods.  The Company  has  estimated  this
expense at $590,000,  but has not yet settled the amount of its  obligations for


                                       11
<PAGE>

such  taxes.   Partially  offsetting  this  expense,  the  Company  reduced  its
outstanding  allowance  for doubtful  accounts  receivable  by $363,000 in third
quarter 2002 based on a review of its historical bad debt experience.

     Depreciation  and  Amortization  Expense.   Depreciation  and  amortization
expense increased $3.2 million,  to $4.1 million for the quarter ended September
30, 2002. Depreciation and amortization expense increased $8.7 million, to $10.5
million for the nine months ended  September 30, 2002.  This  increase  resulted
from higher amortization expense related to the acquisition of Prenate in August
2001,  Furadantin in December 2001, and Sular in March 2002 as well as increased
depreciation  expense  for  new  furniture,  computer  equipment  and  leasehold
improvements at the Company's new corporate headquarters.

     Research  and  Development   Expense.   Research  and  development  expense
decreased $321,000, or 60%, to $217,000 for the quarter ended September 30, 2002
compared to the quarter  ended  September  30, 2001.  Research  and  development
expense  decreased  $570,000,  or 41%,  to $819,000  for the nine  months  ended
September 30, 2002 compared to $1.4 million for the nine months ended  September
30, 2001. For the three and nine month period ended September 30, 2002, research
and  development  expenses were primarily  related to the Robinul line extension
development project.

     Interest Expense.  Interest expense increased $45,000 for the quarter ended
September  30,  2002  compared to no  interest  expense  for the  quarter  ended
September 30, 2001.  Interest expense was $2.8 million for the nine months ended
September  30, 2002  compared to $2,000 for the nine months ended  September 30,
2001. This increase is a result of the amortization of deferred  financing costs
and other interest  expenses  associated  with the credit  facility  obtained on
March 5, 2002 to finance  the  acquisition  of Sular.  The  Company  recorded an
extraordinary  write-off of $1.4  million of  remaining  debt fees in the second
quarter of 2002 related to the  Company's  retirement  of its term loan on April
24,  2002.  The Company  repaid all  indebtedness  outstanding  under the credit
facility in the second quarter of 2002 and has terminated the credit facility in
July 2002.

     Interest  Income.  Interest  income  was  $82,000  for  the  quarter  ended
September  30, 2002  compared to $689,000 for the quarter  ended  September  30,
2001.  Interest income was $383,000 for the nine months ended September 30, 2002
compared to $1.6  million for the nine months  ended  September  30,  2001.  The
decrease  in  interest  income  was the  result  of the  reduced  amount of cash
invested as the Company used the cash proceeds from the Company's  2001 offering
for the Prenate,  Furadantin, and Sular acquisitions.  Most of the cash proceeds
from the Company's  2002 offering  were used to repay  indebtedness  outstanding
under the credit facility obtained to finance the Sular acquisition.

     Provision for Income Taxes. Income taxes were provided for at a rate of 49%
for the quarter  ended  September 30, 2002 compared to 39% for the quarter ended
September 30, 2001. Income taxes were provided for at a rate of 39% for the nine
months ended  September  30, 2002  compared to 39% in 2001.  The increase in the
effective tax rate for the quarter and nine-months  ended September 30, 2002 was
the result of increased non-deductible expenses.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company's  liquidity  requirements  arise from debt  service,  working
capital   requirements,   product   development   activities   and   funding  of
acquisitions.  The Company  has met these cash  requirements  through  cash from
operations,  borrowings  for  product  acquisitions  and the  issuance of common
stock.

     The Company's cash and cash equivalents were $19.3 million at September 30,
2002.  Net cash  provided by  operating  activities  for the nine  months  ended
September  30,  2002 was $2.7  million.  This source of cash was  primarily  the
result of net income  plus  non-cash  depreciation,  amortization,  compensation
expense, and interest expense,  increased accrued expenses,  offset by increased
accounts receivables, inventories, and samples and prepaid expenses.



                                       12
<PAGE>

     Net cash used in investing  activities for the nine months ended  September
30, 2002 was $188.5  million.  The use of this cash was  primarily for the Sular
acquisition.

     Net cash provided by financing  activities  was $151.6 million for the nine
months ended September 30, 2002. This source of cash was primarily the result of
the  follow-on  stock  offering  in  April.  This  amount  was  reduced  by  the
capitalized  financing  costs incurred to obtain the credit  facility  mentioned
below.

     On March 5, 2002 we entered into a Credit  Agreement  for a senior  secured
credit facility arranged by Deutsche Bank Securities for $152 million consisting
of a $127  million  term  loan  and a $25  million  revolving  loan to fund  the
purchase of Sular and the Company's  working capital  requirements.  The Company
borrowed  $127 million  under the term loan  facility and $10 million  under the
revolving loan facility in connection with its acquisition of Sular. The Company
completed a follow-on  offering of its common  stock on April 24,  2002.  In the
offering,  the Company sold 7,475,000 shares of common stock for net proceeds of
$152.6  million.  Proceeds  from the offering were used to repay all of the debt
incurred under the Company's  senior secured credit  facility.  Borrowings under
the revolving  loan bore  interest at the  Company's  option at the base rate in
effect from time to time plus an applicable  margin or the Eurodollar  rate plus
an  applicable  margin.  The  credit  facility  contained  various   restrictive
covenants,  including  covenants  relative to maintaining  financial  ratios and
earnings,  limitations on acquisitions,  dispositions and capital  expenditures,
limitations on incurring  additional  indebtedness and prohibition on payment of
dividends  and other  payments  on our common  stock.  The  Company  voluntarily
terminated  this credit  facility in July 2002  pursuant to Section  3.02 of the
Credit Agreement.

     The Company  believes that its cash and cash equivalents and cash generated
from   operations   will  be  adequate  to  fund  its  current  working  capital
requirements  for at least the next 12  months.  However,  in the event that the
Company  makes  significant  acquisitions  in the future,  it may be required to
raise additional funds through additional  borrowings or the issuance of debt or
equity securities.

INFLATION

     The Company has only moderate price  increases  under its  agreements  with
third-party manufacturers as a result of raw material and labor price increases.
The Company has generally passed these price increases along to its customers.

SEASONALITY

     Although the Company's business is generally non-seasonal, sales of certain
products, such as cough and cold products, increase slightly between October and
March  due to the cold  and flu  season.  The  Company  expects  the  impact  of
seasonality to decrease as the Company acquires or obtains licenses for products
that  treat  chronic  conditions.  However,  the  Company  anticipates  that the
seasonality may continue to affect sales for the foreseeable future.

CRITICAL ACCOUNTING POLICIES

     The Company  views its critical  accounting  policies to be those  policies
which are very important to the portrayal of the Company's  financial  condition
and results of operations,  and require management's most difficult,  complex or
subjective  judgments.  The circumstances that make these judgments difficult or
complex relate to the need for management to make estimates  about the effect of
matters  that are  inherently  uncertain.  The  Company  believes  its  critical
accounting policies to be as follows:

     o    Allowance for doubtful  accounts.  The Company is required to estimate
          the level of accounts  receivable  recorded in its balance  sheet that
          will  ultimately  not be paid.  Among other  things,  this  assessment
          requires   analysis  of  the  financial   strength  of  the  Company's
          customers, which can be highly subjective,  particularly in the recent


                                       13
<PAGE>

          difficult general economic environment. Based on an analysis of actual
          historical bad debt  experience,  the Company revised its estimate for
          bad debt allowance.  As a result of this revised estimate, the Company
          reduced the  outstanding  allowance for doubtful  accounts by $363,000
          during the quarter  ending  September 30, 2002 and recorded the change
          as a reduction in selling, general and administrative expenses for the
          quarter ended  September 30, 2002. The Company will continue to record
          bad debt expense based on prior experience  supplemented by a periodic
          customer specific review.

     o    Sales  deductions.  The Company  provides volume rebates,  contractual
          price  reductions with drug wholesalers and insurance  companies,  and
          certain other sales related  deductions on a regular basis.  The exact
          level of these deductions is not always immediately known and thus the
          Company  must record an estimate  at the time of sale.  The  Company's
          estimates are based on historical  experience  with similar  programs,
          and since the Company has a relatively  small customer base,  customer
          specific  historical  experience  is often useful in  determining  the
          estimated level of deductions expected to be refunded to the Company's
          customers when sales incentives are offered.

     o    Product  returns.  In  the  pharmaceutical  industry,   customers  are
          normally  granted  the  right to  return  product  for a refund if the
          product  has not been  used  prior to its  expiration  date,  which is
          typically two to three years from the date of  manufacture.  Beginning
          January 1, 2002,  the  Company's  return  policy was  revised to allow
          product returns for products within an eighteen-month  window from six
          months prior to the expiration  date and up to twelve months after the
          expiration  date.  Previously,  the Company's  return policy was for a
          twelve-month  window. The Company changed its return policy to conform
          to  industry  standard  practices.  The Company  believes  that it has
          sufficient  data to estimate  future  returns  over the  revised  time
          period at the time of sale.  Management  is required  to estimate  the
          level of sales  that  will  ultimately  be  returned  pursuant  to the
          Company's  return policy,  and record a related reserve at the time of
          sale.  These amounts are deducted  from the  Company's  gross sales to
          determine the Company's net  revenues.  The Company's  estimates  take
          into consideration historical returns of a given product, all of which
          have been on the market for many years,  product specific  information
          provided by the  Company's  customers  and  information  obtained from
          independent  sources  regarding the levels of inventory  being held by
          the Company's customers, as well as overall purchasing patterns by the
          Company's customers.

     o    Intangible assets. When the Company acquires the rights to manufacture
          and sell a product, the Company records the cash purchase price, along
          with the value of the product related liabilities the Company assumes,
          as  intangible  assets.  The Company uses the  assistance of valuation
          experts to help the Company  allocate the  purchase  price to the fair
          value of the various intangible assets the Company has acquired. Then,
          the Company must  estimate  the economic  useful life of each of these
          intangible assets in order to amortize their cost as an expense in the
          Company's  statement of operations over the estimated  economic useful
          life of the related asset.  The factors that drive the actual economic
          useful life of a pharmaceutical product are inherently uncertain,  and
          include patent protection, physician loyalty and prescribing patterns,
          competition  by products  prescribed for similar  indications,  future
          introductions of competing  products not yet FDA approved,  the impact
          of promotional  efforts and many other issues. The Company uses all of
          these factors in initially estimating the economic useful lives of the
          Company's products,  and the Company also continuously  monitors these
          factors for indications of appropriate revisions.

FORWARD LOOKING STATEMENTS

     The Management's Discussion and Analysis of Financial Condition and Results
of Operations  discussion  as well as  information  contained  elsewhere in this
Report contains forward-looking  statements within the meaning of Section 21E of
the Securities  Exchange Act of 1934. These  forward-looking  statements include
statements about the following:



                                       14
<PAGE>

     o    the  impact  of  recent  accounting  pronouncements  on the  Company's
          financial condition or results of operations;
     o    bad debt allowance estimates;
     o    estimated returns of Tanafed and the resulting deduction of revenue;
     o    estimated future amortization expenses;
     o    the ability to acquire or license products;
     o    developing  new  formulations,  new  delivery  methods and seeking new
          indications for existing products;
     o    the ability to acquire other businesses;
     o    expected  issuance of and the protection  afforded by a pending patent
          related to Tanafed DP and Tanafed DMX;
     o    mitigation  of the pharmacy  substitutions  for Prenate as a result of
          the Company's  strategic  education  program;
     o    estimated expenses for state and local taxes for prior periods;
     o    adequacy of capital resources;
     o    adequacy of funds to fund working capital requirements; and
     o    the ability to obtain  future funds through  additional  borrowings or
          the issue of debt or equity securities.

          When  used in this  Report,  the  Company  intends  the  words  "may",
     "believe,"  "anticipate,"  "planned,"  "expect,"  "require,"  "intend," and
     "depend"   to  identify   "forward-looking   statements."   The   Company's
     forward-looking   statements  involve   uncertainties  and  other  factors,
     including  those  described in the "Risk Factors"  section of the Company's
     Prospectus dated April 19, 2002 under the headings "We expect our operating
     results to be  substantially  dependent upon our results of operations from
     Sular,  and any  factor  adversely  effecting  sales of Sular  could have a
     materially  adverse  effect  on  our  sales  and  profits,"  "We  may  have
     difficulty   maintaining  our  increasing  sales  of  Sular,   Prenate  and
     Furadantin and successfully  integrating these products into our business,"
     "The costs we may incur to sell our new products may be  disproportionately
     high relative to their expected  revenues," "The potential  growth rate for
     Sular may be limited by slower growth for the class of drugs to which Sular
     belongs,"  "We  have  no  experience   selling  Sular,  have  only  limited
     experience  selling  Furadantin  and the Prenate  products  and there is no
     established  market for  Prenate  GT," "The  regulatory  status of prenatal
     vitamins makes Prenate  products  subject to increased  competition,"  "Our
     level of debt could reduce our growth and profitability,"  "Our growth will
     suffer if we do not  acquire  rights to new  products  and  integrate  them
     successfully,"  "We  may  encounter  problems  in  the  manufacture  of our
     products that could limit our ability to sell our  products,"  "Part of our
     growth strategy is to acquire  businesses,  which subjects us to additional
     risks," "We face generic and other  competition that could lower prices and
     unit sales," "Strong  competition exists for our products,  and competitors
     have recently  introduced  new products and  therapies  that could make our
     products  obsolete,"  "A small  number  of  customers  account  for a large
     portion  of our  sales  and the  loss of one of them or  changes  in  their
     purchasing patterns, could result in reduced sales," "If our products under
     development fail in clinical studies, if we fail or encounter  difficulties
     in obtaining  regulatory  approval for new products or new uses of existing
     products,  or if our development  agreements are  terminated,  we will have
     expended  significant  resources  for no return," "We or third  parties may
     violate government regulations," "If third-parties payors do not adequately
     reimburse  patients for our products,  doctors may not prescribe them," "We
     depend on highly trained management, and we may not be able to keep current
     management or hire qualified  management personnel in the future," "Product
     liability claims and product recalls could limit sales and increase costs,"
     "We expect to require additional  funding,  and if we cannot obtain it, our
     sales,  profits,  acquisitions  and  development  projects  could  suffer,"
     "Competitors  could offer a product  competitive with Sular," "If we do not
     secure or enforce patents and other intellectual  property rights, we could
     encounter  increased  competition that would adversely affect our operating
     results," "Our products could infringe the intellectual  property rights of
     third  parties,  which  could  require  us to pay  license  fees to  defend
     litigation  that would be expensive  or prevent us from selling  products,"
     "The regulatory  status of some or products makes these products subject to
     increased  competition  and other  risks,"  "We face risks under one of our
     development  agreements  because  the  other  party to the  agreement  is a
     related  party,"  "Pohl-Boskamp  can terminate  our rights to  Nitrolingual
     Pumpspray,"  and  "We  have  no  experience   selling   products  in  other
     countries,"  The Company does not  undertake to update the  forward-looking
     statements to reflect  future events or  circumstances.  These risk factors


                                       15
<PAGE>

     along  with  the  others  may  cause   actual   results,   performance   or
     achievements,  to  be  different  from  that  suggested  by  the  Company's
     forward-looking   statements.  You  should  not  place  undue  reliance  on
     forward-looking   statements.   The  Company  does  not  intend  to  update
     prescription  data  contained  in this report or to publicly  announce  the
     results of any revisions to any of these forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          The  Company's  operating  results  and  cash  flows  are  subject  to
     fluctuations  from changes in foreign currency  exchange rates and interest
     rates.  The  Company's  purchases  of  Nitrolingual   Pumpspray  under  its
     agreement with  Pohl-Boskamp  and its purchases of Sular product  inventory
     from Bayer are made in Euros.  In addition,  sales of Cognex are recognized
     in the foreign currencies of the respective  European countries in which it
     is sold.  While the effect of foreign  currency  translations  has not been
     material  to  the  Company's  results  of  operations  to  date,   currency
     translations  on  export  sales or  import  purchases  could  be  adversely
     affected in the future by the  relationship of the U.S. dollar with foreign
     currencies.

ITEM 4. CONTROLS AND PROCEDURES

          Based on their  evaluation  of the Company's  disclosure  controls and
     procedures (as defined in Rule 13a-14(c) of the Securities  Exchange Act of
     1934) as of a date  within 90 days  prior to the  filing of this Form 10-Q,
     the Company's Chief Executive Officer and Chief Financial Officer concluded
     that the Company's  disclosure  controls and procedures  were effective for
     their purposes.

          Subsequent  to the date when the  disclosure  controls and  procedures
     were  evaluated,  there have been no  significant  changes in the Company's
     internal controls or in other factors that could significantly affect these
     controls subsequent to the date of such evaluation.



                                       16
<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1: LEGAL PROCEEDINGS

          There were no  material  developments  during the three  months  ended
     September  30,  2002  in  the  Company's  legal   proceedings   with  Ethex
     Corporation and Ther-Rx  previously  reported in the Form 10-K for the year
     ended December 31, 2001 filed with the  Securities and Exchange  Commission
     on March 28,  2002.  The  Company  and Ethex  Corporation  and  Ther-Rx had
     previously  filed  motions to dismiss the other  party's  claims.  In March
     2002,  and October 2002,  the United States  District Court for the Eastern
     District  of  Missouri  granted  in part and  denied  in part,  some of the
     Company's and the plaintiffs'  motions to dismiss.  The litigation is still
     ongoing.

          A  putative  class  action  lawsuit  was  filed in the  United  States
     District Court for the Northern District of Georgia on August 22, 2002 (and
     two subsequent  lawsuits have been filed based upon  substantially the same
     allegations)  against  the  Company,  members  of its  Board of  Directors,
     certain  officers  of  the  Company   ("Company-related   Defendants")  and
     representatives  of the  Company's  underwriters  for its  public  offering
     completed  on April 24,  2002.  The  complaints  generally  allege that the
     Company issued a series of materially  false and  misleading  statements to
     the market in connection  with the Company's  public  offering on April 24,
     2002  and  thereafter,  relating  to the  sales  of  two  of the  Company's
     products, Tanafed Suspension and Prenate GT. The complaints assert that the
     defendants  violated  Section  11 and that  the  Company  violated  Section
     12(a)(2) of the  Securities  Act of 1933.  The  complaints  further  allege
     violations by the Company and  Company-related  Defendants of Section 10(b)
     of  the  Securities  Exchange  Act  of  1934  and  Rule  10b-5  promulgated
     thereunder.  The complaints  also allege  controlling  person  liability on
     behalf  of  certain  officers  of  the  Company  under  Section  15 of  the
     Securities Act and Section 20 of the Securities Exchange Act.

          The  plaintiffs  in  these  class  action  lawsuits  seek  unspecified
     compensatory  damages  in an amount to be  proven  at  trial.  The  Company
     believes  these cases will be  consolidated  into one putative class action
     lawsuit.  The Company denies the claims made in the lawsuits and intends to
     vigorously defend against these claims.  Due to the inherent  uncertainties
     involved  in  litigation,  the  Company is unable to predict the outcome of
     this litigation and an adverse result could have a material  adverse effect
     on the Company's financial position and results of operations.

ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

          On July 15, 2002, the Company  announced the adoption of a shareholder
     rights  plan.  The plan is designed to protect  Company  shareholders  from
     coercive or unfair takeover techniques that could deny them the opportunity
     to  realize  the  full  value of their  investment.  The  terms of the plan
     provide  for a dividend of one right to purchase a fraction of a share of a
     newly  created  class of  preferred  stock for each  share of common  stock
     outstanding as of the close of business on July 26, 2002, payable on August
     9, 2002.  The rights  expire on July 26, 2012 and may only be  exercised if
     certain  conditions  are met. The Company  also entered into a  Shareholder
     Protection   Rights  Agreement  with  LaSalle  Bank  National   Association
     ("LaSalle")  whereby  LaSalle  agreed to act as rights agent. A copy of the
     Shareholder  Protection  Rights  Agreement  was filed as an  exhibit to the
     Company's  Registration  Statement  on Form  8-A  filed  on July  16,  2002
     (Commission File No. 000-30123).



                                       17
<PAGE>

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None

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

        None

ITEM 5. OTHER INFORMATION

     In accordance  with Section 10A of the Securities  Exchange Act of 1934, as
added by Section 202 of the Sarbanes-Oxley Act of 2002, during the quarter ended
September 30, 2002,  non-audit  services  were  approved by the Company's  Audit
Committee to be performed  by Deloitte & Touche LLP, the  Company's  independent
auditors, relating to the preparation and filing of federal and state income tax
returns and other tax consulting.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          (a) Exhibits

               3.1*     -     Restated Certificate of Incorporation, as Amended
               3.2**    -     Amended and Restated By-Laws
               4.1**    -     Form of Stock Certificate
               4.2***   -     Shareholder Protection Rights Agreement
               10.1*+   -     Exclusive  License  Agreement  dated June 27, 2002
                              between the Company and Jame Fine Chemicals Inc.
               10.2*    -     Nonexclusive  Sublicense  Agreement dated June 27,
                              2002  between the Company and Jame Fine  Chemicals
                              Inc.
               10.3*+   -     Exclusive  Distribution  Agreement  dated June 27,
                              2002 between the Company and Unisource, Inc.
               ______________________________

               *    Filed herein.
               **   Incorporated   by  reference  from  Company's   Registration
                    Statement on Form S-1 (Commission File No.333-30764).
               ***  Incorporated  by reference  from the Company's  Registration
                    Statement  on Form 8-A  filed on July 16,  2002  (Commission
                    File No. 000-30123).
               +    The  Company  has  requested   confidential   treatment  for
                    portions  of this  exhibit  pursuant  to Rule  24b-2  of the
                    Securities Exchange Act of 1934.


          (b)  The Registrant  filed the following  Forms 8-K during the quarter
               ended September 30, 2002:

               On July 16, 2002, the Registrant  filed a Form 8-K dated July 12,
               2002  pursuant to Item 5 adopting  the  Registrant's  Shareholder
               Protection  Rights Plan (the "Plan") and the Board's  declaration
               of a  dividend  of a Right  (as  defined  in the  Plan)  for each
               outstanding  share of the  Registrant's  Common Stock pursuant to
               the Plan.






                                       18
<PAGE>

                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized on November 12, 2002.


                           FIRST HORIZON PHARMACEUTICAL CORPORATION


                           By:      /s/ Mahendra G. Shah, Ph.D.
                                    ------------------------------------
                                    Mahendra G. Shah, Ph.D.
                                    Chairman and Chief Executive Officer





                           By:      /s/ Balaji Venkataraman
                                    ------------------------------------
                                    Balaji Venkataraman
                                    Executive Vice President,
                                    Chief Operating Officer,
                                    Chief Financial Officer and Secretary
                                    (Principal Accounting and Financial Officer)


                                       19
<PAGE>


                                 CERTIFICATIONS

I,  Mahendra  G.  Shah,   Ph.D.,   Chief  Executive  Officer  of  First  Horizon
Pharmaceutical Corporation, certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q of  First  Horizon
     Pharmaceutical Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within these
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



November 12, 2002
                                    /s/ Mahendra G. Shah, Ph.D.
                                    ---------------------------
                                    Mahendra G. Shah, Ph.D.
                                    Chairman, Chief Executive Officer
                                    and President



                                       20
<PAGE>



I, Balaji Venkataraman,  Chief Financial Officer of First Horizon Pharmaceutical
Corporation, certify that:

1.   I have  reviewed  this  quarterly  report  on Form  10-Q of  First  Horizon
     Pharmaceutical Corporation;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within these
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's other certifying  officers and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent function):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     quarterly report whether or not there were significant  changes in internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

November 12, 2002            /s/ Balaji Venkataraman
                             -----------------------------------
                             Balaji Venkataraman
                             Executive Vice President, Chief Financial Officer,
                             Chief Operating Officer and Secretary



                                       21

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