<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                                ---------------------

                                      FORM 10-Q

(Mark One)
[ X ]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended September 30, 1997.


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

                           Commission File number 000-19809

                              DURA PHARMACEUTICALS, INC.
                (Exact name of registrant as specified in its charter)

         DELAWARE                                     95-3645543
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                   Identification Number)

7475 LUSK BLVD., SAN DIEGO, CALIFORNIA                     92121
    (Address of principal executive offices)            (Zip Code)

         REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE IS (619) 457-2553


    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.
    [ X ] Yes   [   ]  No

The number of shares of the Registrant's Common Stock outstanding as of October
1, 1997 was 43,897,053.


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

<PAGE>

                              DURA PHARMACEUTICALS, INC.
                                        INDEX

                                                                        Page No.
                                                                        --------
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated Balance Sheets -
         December 31, 1996 and September 30, 1997. . . . . . . . . . .       3
         Consolidated Statements of Operations -
         Three and nine months ended September 30, 1996 and 1997 . . .       4
         Consolidated Statements of Cash Flows -
         Nine months ended September 30, 1996 and 1997 . . . . . . . .       5
         Notes to Consolidated Financial Statements. . . . . . . . . .     6-8

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations . . . . . . . . . . . .    8-13
         Risks and Uncertainties . . . . . . . . . . . . . . . . . . .   13-18

PART II - OTHER INFORMATION

Item 2.  Changes in Securities . . . . . . . . . . . . . . . . . . . .      19

Item 6.  Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . .      19

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      20


                                         -2-
<PAGE>

                            PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
                              DURA PHARMACEUTICALS, INC.
                             CONSOLIDATED BALANCE SHEETS
                                 DOLLARS IN THOUSANDS
 
<TABLE>
<CAPTION>
 ASSETS                                                                      DECEMBER 31,  SEPTEMBER 30,
                                                                                 1996           1997
                                                                             ------------  -------------
                                                                                              (UNAUDITED)
<S>                                                                          <C>           <C>
 CURRENT ASSETS:
    Cash and cash equivalents. . . . . . . . . . . . . . . . . . . .           $  131,101     $  166,583
    Short-term investments . . . . . . . . . . . . . . . . . . . . .              109,244        288,127
    Accounts and other receivables . . . . . . . . . . . . . . . . .               24,092         27,849
    Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . .                7,544         15,858
                                                                               ----------     ----------
         Total current assets. . . . . . . . . . . . . . . . . . . .              271,981        498,417

 PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               27,500         44,148
 LICENSE AGREEMENTS AND PRODUCT RIGHTS . . . . . . . . . . . . . . .              186,750        248,743
 GOODWILL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                6,630          8,468
 OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               11,809         21,329
                                                                               ----------     ----------
               Total . . . . . . . . . . . . . . . . . . . . . . . .           $  504,670     $  821,105
                                                                               ----------     ----------
                                                                               ----------     ----------

 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES:
    Accounts payable and accrued liabilities . . . . . . . . . . . .            $  25,819      $  38,193
    Current portion of long-term obligations . . . . . . . . . . . .               26,298          2,948
                                                                               ----------     ----------
         Total current liabilities . . . . . . . . . . . . . . . . .               52,117         41,141

 CONVERTIBLE SUBORDINATED NOTES. . . . . . . . . . . . . . . . . . .                    -        287,500
 LONG-TERM OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . .                6,670          7,035
 OTHER NON-CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . .                2,306          3,132
                                                                               ----------     ----------
         Total liabilities . . . . . . . . . . . . . . . . . . . . .               61,093        338,808
                                                                               ----------     ----------

 SHAREHOLDERS' EQUITY:
   Preferred stock, no par value, shares authorized - 5,000,000;
      no shares issued or outstanding. . . . . . . . . . . . . . . .                  --             -- 
   Common stock, par value $.001, shares authorized - 100,000,000;
      issued and outstanding - 43,183,591 and 43,890,806,
      respectively . . . . . . . . . . . . . . . . . . . . . . . . .              525,350             44
    Additional paid-in capital . . . . . . . . . . . . . . . . . . .                    -        533,003
    Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . .              (78,992)       (49,597)
    Unrealized gain (loss) on investments. . . . . . . . . . . . . .                  (38)           195
    Warrant subscriptions receivable . . . . . . . . . . . . . . . .               (2,743)        (1,348)
                                                                               ----------     ----------
         Total shareholders' equity. . . . . . . . . . . . . . . . .              443,577        482,297
                                                                               ----------     ----------
         Total . . . . . . . . . . . . . . . . . . . . . . . . . . .           $  504,670     $  821,105
                                                                               ----------     ----------
                                                                               ----------     ----------

</TABLE>
 
             See accompanying notes to consolidated financial statements.

                                         -3-
<PAGE>
                              DURA PHARMACEUTICALS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                         IN THOUSANDS, EXCEPT PER SHARE DATA
                                     (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED       NINE MONTHS ENDED
                                                             SEPTEMBER 30,           SEPTEMBER 30,
                                                       ---------------------   ---------------------
                                                          1996        1997        1996        1997
                                                       ---------   ---------   ---------   ---------
<S>                                                    <C>         <C>         <C>         <C>
REVENUES:
   Sales . . . . . . . . . . . . . . . . . . . .       $  18,940   $  36,098   $  45,900   $ 105,437
   Contract. . . . . . . . . . . . . . . . . . .           6,980       7,245      17,407      22,430
                                                       ---------   ---------   ---------   ---------
          Total revenues . . . . . . . . . . . .          25,920      43,343      63,307     127,867
                                                       ---------   ---------   ---------   ---------

OPERATING COSTS AND EXPENSES:
   Cost of sales . . . . . . . . . . . . . . . .           5,129       7,426      12,553      23,373
   Clinical, development and regulatory. . . . .           5,001       5,807      12,121      18,160
   Selling, general and administrative . . . . .          11,188      16,733      26,460      49,485
                                                       ---------   ---------   ---------   ---------
          Total operating costs and expenses . .          21,318      29,966      51,134      91,018
                                                       ---------   ---------   ---------   ---------

OPERATING INCOME . . . . . . . . . . . . . . . .           4,602      13,377      12,173      36,849
                                                       ---------   ---------   ---------   ---------

OTHER:
   Interest income . . . . . . . . . . . . . . .           2,253       5,044       4,662      11,434
   Interest expense. . . . . . . . . . . . . . .             (87)     (2,242)       (602)     (2,531)
                                                       ---------   ---------   ---------   ---------
          Total other. . . . . . . . . . . . . .           2,166       2,802       4,060       8,903
                                                       ---------   ---------   ---------   ---------

INCOME BEFORE INCOME TAXES . . . . . . . . . . .           6,768      16,179      16,233      45,752
PROVISION FOR INCOME TAXES . . . . . . . . . . .             962       4,854       1,762      16,357
                                                       ---------   ---------   ---------   ---------

NET INCOME . . . . . . . . . . . . . . . . . . .       $   5,806   $  11,325   $  14,471   $  29,395
                                                       ---------   ---------   ---------   ---------
                                                       ---------   ---------   ---------   ---------

NET INCOME PER SHARE . . . . . . . . . . . . . .       $    0.14   $    0.24   $    0.37    $   0.62

WEIGHTED AVERAGE NUMBER OF
   COMMON AND COMMON
   EQUIVALENT SHARES . . . . . . . . . . . . . .          42,266      47,606      38,890      47,392

</TABLE>
 

             See accompanying notes to consolidated financial statements.


                                         -4-
<PAGE>

                              DURA PHARMACEUTICALS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     IN THOUSANDS
                                     (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED
                                                                             SEPTEMBER 30,
                                                                         1996           1997
                                                                      ---------      ---------
<S>                                                                   <C>            <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES. . . . . . . . . . . .      $  17,270      $  44,504
                                                                      ---------      ---------

INVESTING ACTIVITIES:
  Purchases of short-term investments. . . . . . . . . . . . . .       (103,902)      (335,983)
  Sales and maturities of short-term investments . . . . . . . .         92,697        157,334
  Purchases of long-term investments . . . . . . . . . . . . . .         (5,000)             -
  Company/product acquisitions, net of cash received . . . . . .       (128,600)       (71,973)
  Capital expenditures . . . . . . . . . . . . . . . . . . . . .         (5,477)       (18,757)
  Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (526)           842
                                                                      ---------      ---------
    Net cash used for investing activities . . . . . . . . . . .       (150,808)      (268,537)
                                                                      ---------      ---------

FINANCING ACTIVITIES:                                                   
  Issuance of common stock and warrants. . . . . . . . . . . . .        154,389          4,840
  Issuance of convertible subordinated notes, net. . . . . . . .              -        278,175
  Principal payments on notes payable. . . . . . . . . . . . . .         (7,056)             -
  Principal payments on long-term obligations. . . . . . . . . .         (5,500)       (23,500)
                                                                      ---------      ---------
    Net cash provided by financing activities. . . . . . . . . .        141,833        259,515
                                                                      ---------      ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . .          8,295         35,482

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . . .         25,554        131,101
                                                                      ---------      ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . .      $  33,849      $ 166,583
                                                                      ---------      ---------
                                                                      ---------      ---------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (net of amounts capitalized). . . . . . . . . . . .      $       -      $     206
    Income taxes . . . . . . . . . . . . . . . . . . . . . . . .      $      51      $   1,215

</TABLE>
 
             See accompanying notes to consolidated financial statements.

                                         -5-
<PAGE>

                              DURA PHARMACEUTICALS, INC.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (UNAUDITED)

1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
by Dura Pharmaceuticals, Inc. ("Dura" or the "Company") in accordance with the
instructions to Form 10-Q.  The consolidated financial statements reflect all
adjustments, consisting of only normal recurring accruals, which are, in the
opinion of management, necessary for a fair statement of the results of the
interim periods presented.  These consolidated financial statements and notes
thereto should be read in conjunction with the audited financial statements and
notes thereto included in the Company's 1996 Annual Report to Shareholders,
which statements and notes are incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.  The results of
operations for the interim periods are not necessarily indicative of results to
be expected for any other interim period or for the year as a whole.

The consolidated financial statements include the accounts of Dura and its
wholly owned subsidiaries, Health Script Pharmacy Services, Inc. ("Health
Script") and Dura Delivery Systems, Inc. ("DDSI").  All intercompany
transactions and balances are eliminated in consolidation.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported in the consolidated financial statements and related
notes.  Changes in the estimates may affect amounts reported in future periods.

Certain reclassifications have been made to amounts included in the prior year's
financial statements to conform with the financial statement presentation for
the quarter ended September 30, 1997.

2.  CONVERTIBLE SUBORDINATED NOTES

In the third quarter of 1997, the Company issued $287.5 million principal amount
of 3 1/2% Convertible Subordinated Notes (the "Notes") due July 15, 2002 with
interest payable semiannually January 15 and July 15, commencing January 15,
1998.  The Notes are convertible, at the option of the holder, into shares of
Common Stock at any time prior to maturity or redemption at a conversion price
of $50.635 per share, subject to adjustment under certain conditions.  The
Company cannot redeem the Notes prior to July 15, 2000.  Thereafter, the Company
can redeem the Notes from time to time, in whole or in part, at specified
redemption prices.  The Notes are unsecured and subordinated to all existing and
future senior indebtedness of the Company.  The indenture governing the Notes
does not restrict the incurrence of senior indebtedeness or other indebtedeness
by the Company.

                                         -6-
<PAGE>

3.  LICENSE AGREEMENTS AND PRODUCT RIGHTS

On May 7, 1997, the Company acquired from Syntex (USA), Inc. and other 
members of the Roche Group (collectively, "Syntex") exclusive U.S. rights to 
the intranasal steroid products Nasarel-Registered Trademark- and 
Nasalide-Registered Trademark- for $70 million, which was paid at closing.  
Additional future contingent payments totaling $15 million are due through 
December 1998, subject to the products remaining without a competing nasal 
formulation of flunisolide.

4.  LOAN AGREEMENT

In April 1997, the Company entered into a loan agreement with a bank which
provides for the borrowing of up to $50 million on an unsecured basis through
May 1, 1999.  Borrowings under the agreement bear interest at the bank's
reference rate or an offshore rate plus 1.5% as selected by the Company.  The
agreement places restrictions on the payment of cash dividends and on the
incurrence of additional indebtedness by the Company.  As of September 30, 1997,
no borrowings were outstanding under this loan.

5.  COMMON STOCK

Effective July 2, 1997, the Company changed its state of incorporation from
California to Delaware.  In connection with this change, the outstanding shares
of the Company's no par value common stock were automatically converted into and
exchanged for an equal number of shares of $.001 par value common stock of the
Delaware entity.

6.  INCOME TAXES

The provision for income taxes for the periods ended September 30, 1996 and 1997
reflect management's estimate of the effective tax rate expected to be
applicable for the full fiscal year.  During the quarter ended September 30,
1997, the Company reduced its estimate of the combined effective tax rate for
fiscal 1997 from 39 percent to 36 percent, resulting in an effective tax rate of
30 percent for the third quarter.

The effective tax rates for the periods ended September 30, 1996 were
significantly less than the combined statutory tax rates due primarily to the
utilization of net operating loss carryforwards.  For the periods ended
September 30, 1997, substantially all of the benefit from available net
operating loss carryforwards relates to tax deductions from the exercise of
previously granted stock options and, as such, has been credited directly to
shareholders' equity.

7.  NET INCOME PER SHARE

Net income per share is computed based on the weighted average number of common
and common equivalent shares outstanding during the period.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128


                                         -7-
<PAGE>

requires the presentation of basic and diluted earnings per share amounts.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding during the period while diluted earnings per share
also gives effect to all potential dilutive common shares outstanding during the
period such as options, warrants, convertible securities, and contingently
issuable shares.  SFAS No. 128 is effective for periods ending after December
15, 1997.  If SFAS No. 128 had been applied for the three and nine month periods
ended September 30, 1996 and 1997, basic and diluted net income per share would
have been as follows:

                                    Three Months              Nine Months
                                 Ended September 30,      Ended September 30,
                                   1996      1997           1996      1997
                                  -----     -----          -----     -----
Net income per share - basic      $0.15     $0.26          $0.42     $0.67
Net income per share - diluted    $0.14     $0.24          $0.37     $0.62

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

This information should be read in conjunction with the consolidated financial
statements and the notes thereto included in Item 1 of this Quarterly Report and
the audited financial statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1996 contained in the Company's 1996 Annual Report to Shareholders,
which is incorporated by reference in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.  See "Risks and Uncertainties" for trends
and uncertainties known to the Company that could cause reported financial
information not to be necessarily indicative of the future, including discussion
of the effects of seasonality on the Company.

OVERVIEW

During the second half of 1996 and the first half of 1997, the Company made
significant acquisitions of product rights and licenses.  In July 1996, the
Company acquired the worldwide rights to the Entex-Registered Trademark-
products, consisting of four prescription upper respiratory drugs.  In September
1996, the Company acquired the U.S. marketing rights to the patented antibiotics
Ceclor-Registered Trademark- CD and Keftab-Registered Trademark-.  In May 1997,
the Company acquired the U.S. rights to the intranasal steroid products
Nasarel-Registered Trademark- and Nasalide-Registered Trademark-.  The
acquisition of these products has had a material impact on the Company's
financial position and results of operations.

In the third quarter 1997, the Company issued $287.5 million principal amount of
3 1/2% Convertible Subordinated Notes (the "Notes") due July 15, 2002 with
interest payable semiannually January 15 and July 15. The Notes are convertible,
at the option of the holder, into shares of Common Stock at any time prior to
maturity or redemption at a conversion price of $50.635 per share, subject to
adjustment under certain conditions.  The Notes are unsecured and subordinated
to all existing and future senior indebtedness of the Company.


                                         -8-
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997

Total revenues for the three months ended September 30, 1997 were $43.3 million,
an increase of $17.4 million, or 67%, over the same period in 1996.  Net income
for the three months ended September 30, 1997 was $11.3 million, an increase of
$5.5 million, or $0.10 per share, over the same period in 1996.  The principal
factors causing these increases are discussed below.

Pharmaceutical sales for the three months ended September 30, 1997 were $36.1 
million, an increase of 91% over the same period in 1996.  This increase is 
due primarily to new product acquisitions of Ceclor CD, Keftab, Nasarel and 
Nasalide and the expansion of the Company's sales force.

Gross profit (pharmaceutical sales less cost of sales) for the three months
ended September 30, 1997 was $28.7 million, an increase of $14.9 million as
compared to the same period in 1996.  Gross profit as a percentage of sales for
the three months ended September 30, 1997 was 79%, compared to 73% for the same
period in 1996.  This increase is due primarily to higher average gross margins
earned on sales of Ceclor CD, Keftab, Nasarel and Nasalide as compared to the
average gross margins earned on the Company's other products.

Contract revenues for the three months ended September 30, 1997 were $7.2 
million, an increase of $265,000, or 4%, as compared to the same period in 
1996. The Company, under agreements with several companies, conducts 
feasibility testing and development work on various compounds for use with 
Spiros-TM-, a pulmonary drug delivery system ("Spiros").  Contract revenues 
from Spiros-related development and feasibility agreements for the three 
months ended September 30, 1997 were $6.7 million, including $6.1 million 
from Spiros Development Corporation ("Spiros Corp."), as compared to $5.7 
million, including $5.0 million from Spiros Corp., for the same period in 
1996.  The Company also earns contract revenues under various agreements for 
the co-promotion of pharmaceutical products.  Contract revenues from such 
agreements were $536,000 for the three months ended September 30, 1997 as 
compared to $1.3 million for the same period in 1996.

Clinical, development and regulatory expenses for the three months ended
September 30, 1997 were $5.8 million, an increase of $806,000 over the same
period in 1996.  The increase reflects additional expenses incurred by the
Company under feasibility and development agreements covering the use of various
compounds with Spiros.

Selling, general and administrative expenses for three months ended September
30, 1997 were $16.7 million, an increase of $5.5 million as compared to the same
period in 1996, but decreased as a percentage of total revenues to 39% as
compared to 43% for the same period in 1996. The dollar increase is primarily
due to increased costs incurred to support the Company's sales and contract
revenue growth, including costs associated with expanding the Company's sales
force, higher marketing costs relating to the newly-acquired products, and
amortization of newly-


                                         -9-
<PAGE>

acquired product rights.  The decrease as a percentage of revenues reflects the
growth of pharmaceutical sales due primarily to new product acquisitions.

Interest income for the three months ended September 30, 1997 was $5.0 million,
an increase of $2.8 million as compared to the same period in 1996.  The
increase is due primarily to higher balances of cash and short-term investments
resulting from public stock and the Notes offerings completed in November 1996
and July 1997, as well as cash generated from operations.

Interest expense for the three months ended September 30, 1997 was $2.2 million
compared to $87,000 for the same period in 1996.  The increase in interest
expense is primarily due to interest accrued on the Notes issued by the Company
in the third quarter of 1997.

The Company's effective tax rate for the three months ended September 30, 1997
was 30 percent, compared to 14 percent for the same period in 1996.  This
increase is primarily due to the utilization of available net operating loss
carryforwards in 1996.  Net operating loss carryforwards available in 1997
relate primarily to tax deductions for previously exercised stock options and,
as such, the benefit from their utilization has been credited directly to 
shareholders' equity.

The Company records interim provisions for income taxes based on the estimated
effective combined tax rate to be applicable for the fiscal year.  This estimate
is reevaluated by management each quarter based on forecasts of income before
income taxes for the year as well as anticipated modifications to statutory
federal and state tax rates.  During the three months ended September 30, 1997,
the Company reduced its estimate of the combined effective tax rate expected to
be applicable for fiscal 1997 from 39 percent to 36 percent, resulting in a 30
percent effective tax rate for the third quarter.

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997

Total revenues for the nine months ended September 30, 1997 were $127.9 million,
an increase of $64.6 million, as compared to the same period in 1996.  Net
income for the nine months ended September 30, 1997 was $29.4 million, an
increase of $14.9 million, or $0.25 per share, over the same period in 1996.
The principal factors causing these increases are discussed below.

Pharmaceutical sales for the nine months ended September 30, 1997 were $105.4 
million, an increase of 130%, over the same period in 1996.  This increase is 
due primarily to the acquisition of the Entex products, Ceclor CD, Keftab, 
Nasarel and Nasalide and the expansion of the Company's sales force.

Gross profit for the nine months ended September 30, 1997 was $82.1 million, 
an increase of $48.7 million as compared to the same period in 1996.  Gross 
profit as a percentage of sales for the nine month period ended September 30, 
1997 was 78%, as compared to 73% for the same period in 1996.  This increase 
is due primarily to higher average gross margins earned on sales of the Entex 
products, Ceclor CD, Keftab, Nasarel and Nasalide as compared to the average 
gross margins earned on the Company's other products.

                                         -10-
<PAGE>

Contract revenues for the nine months ended September 30, 1997 were $22.4
million, an increase of $5.0 million, or 29%, as compared to the same period in
1996.  The Company, under agreements with several companies, conducts
feasibility testing and development work on various compounds for use with
Spiros.  Contract revenues from Spiros-related development and feasibility
agreements for the nine months ended September 30, 1997 were $21.2 million,
including $18.3 million from Spiros Corp., as compared to $14.4 million,
including $12.8 million from Spiros Corp., for the same period in 1996.  The
Company also earns contract revenues under various agreements for the
co-promotion of pharmaceutical products.  Contract revenues from such agreements
were $1.2 million for the nine months ended September 30, 1997 compared to $3.0
million for the same period in 1996.

Clinical, development and regulatory expenses for the nine months ended
September 30, 1997 were $18.2 million, an increase of $6.0 million over the same
period in 1996.  The increase reflects additional expenses incurred by the
Company under feasibility and development agreements covering the use of various
compounds with Spiros.

Selling, general and administrative expenses for the nine months ended September
30, 1997 were $49.5 million, an increase of $23.0 million as compared to the
same period in 1996, but decreased as a percentage of total revenues to 39% as
compared to 42% for the same period in 1996. The dollar increase is primarily
due to increased costs incurred to support the Company's sales and contract
revenue growth, including costs associated with expanding the Company's sales
force, higher marketing costs relating to the newly-acquired products, and
amortization of newly-acquired product rights.  The decrease as a percentage of
revenues reflects the growth of pharmaceutical sales due to new product
acquisitions and the growth of contract revenues.

Interest income for the nine months ended September 30, 1997 was $11.4 million,
an increase of $6.8 million as compared to the same period in 1996. The increase
is due primarily to higher balances of cash and short-term investments resulting
from public stock and the Notes offerings completed in May and November 1996 and
July 1997, as well as cash generated from operations.

Interest expense for the nine months ended September 30, 1997 was $2.5 million
compared to $602,000 for the same period in 1996.  The increase in interest
expense is primarily due to interest accrued on the Notes issued by the Company
in the third quarter of 1997.

The Company's effective tax rate was 36 percent for the nine month period ended
September 30, 1997 compared to 11 percent for the same period in 1996.  This
increase is primarily due to the utilization of net operating loss carryforwards
in 1996.  Net operating loss carryforwards available in 1997 relate primarily to
tax deductions for previously exercised stock options and, as such, the related
benefit from their utilization has been credited directly to shareholders' 
equity.

The Company records interim provisions for income taxes based on the 
estimated effective combined tax rate to be applicable for the fiscal year.  
This estimate is reevaluated by management each quarter based on forecasts of 
income before income taxes for the year as well as anticipated modifications 
to statutory federal and state tax rates.  During the three months

                                         -11-
<PAGE>

ended September 30, 1997, the Company reduced its estimate of the combined
effective tax rate expected to be applicable for fiscal 1997 from 39 percent
to 36 percent.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments increased by $214.4 million to
$454.7 million at September 30, 1997 from $240.3 million at December 31, 1996.
The increase resulted primarily from the net proceeds of the offering of the
Notes as well as from cash generated from operations, partially offset by the
acquisition of the intranasal steroid products Nasarel and Nasalide for $70
million in May 1997 and capital expenditures of $18.8 million.  Working capital
increased by $237.4 million to $457.3 million at September 30, 1997 from $219.9
million at December 31, 1996.

At September 30, 1997, the Company had an aggregate of $297.7 million in
long-term obligations, of which $2.9 million is to be paid during the next 12
months.  As of September 30, 1997, additional future contingent obligations
totaling $97.9 million relating to product acquisitions are due through 2004.

In April 1997, the Company entered into a loan agreement which provides for the
borrowing of up to $50 million on an unsecured basis through May 1, 1999.  As of
September 30, 1997, no borrowings were outstanding under this loan.

The Company provides development and management services to Spiros Corp. 
pursuant to various agreements for the development of Spiros for use with 
certain respiratory drugs.  Dura records contract revenues from Spiros Corp. 
equal to amounts due for such services, less a pro rata amount allocated to 
warrant subscriptions receivable.  On October 10, 1997, the Company announced 
its intention to exercise, prior to the completion of a proposed offering of 
securities by Spiros Development Corporation II, Inc. ("Spiros Corp. II") as 
discussed below and subject to providing formal notice of exercise, its 
option to acquire all of the callable common stock of Spiros Corp. for an 
aggregate purchase price estimated to be $45.7 million payable in cash, 
shares of the Company's common stock, or any combination thereof.

Also on October 10, 1997, the Company and Spiros Corp. II filed a combined 
registration statement (the "Registration Statement") with the Securities and 
Exchange Commission with respect to a proposed public offering of units, each 
unit consisting of one share of callable common stock of Spiros Corp. II and 
one warrant to purchase one-fourth of one share of Dura common stock.  Spiros 
Corp. II was formed to continue to fund the development of Spiros for use 
with certain respiratory drugs.  Immediately prior to the consummation of the 
proposed offering, Dura will contribute $75 million in cash to Spiros Corp. 
II. Dura expects to record charges to its earnings for this contribution and 
for substantially all of the Spiros Corp. purchase price in the respective 
periods in which these transactions occur.  The foregoing information 
regarding the proposed public offering of units should be read in conjunction 
with, and is qualified in its entirety by, the more detailed information set 
forth in the Registration Statement and underlying Prospectus, including 
without limitation the "Risk Factors" section of such Registration Statement 
and Prospectus.

                                         -12-
<PAGE>

The Company anticipates that its existing capital resources, together with cash
expected to be generated from operations and available bank borrowings, should
be sufficient to finance the transactions discussed above and its operations
through at least the next 12 months.  Significant additional resources, however,
may be required in connection with product or company acquisitions or
in-licensing opportunities.  At present, the Company is actively pursuing the
acquisition of rights to several products and/or companies which may require the
use of substantial capital resources; however, there are no present agreements
or commitments with respect to such acquisitions.

RISKS AND UNCERTAINTIES

FORWARD-LOOKING STATEMENTS

The Company cautions readers that the statements in this quarterly report that
are not descriptions of historical facts may be forward-looking statements that
are subject to risks and uncertainties.  Actual results could differ materially
from those currently anticipated due to a number of factors, including those
identified below.  The Company undertakes no obligation to release publicly the
results of any revisions to these forward-looking statements to reflect events
and circumstances arising after the dates hereof.

REDUCTION IN GROSS MARGINS

There is no proprietary protection for most of the products sold by the 
Company and substitutes for such products are sold by other pharmaceutical 
companies.  The Company expects average selling prices for many of its 
products to decline over time due to competitive and reimbursement pressures. 
 While the Company will seek to mitigate the effect of this decline in 
average selling prices, there can be no assurance that the Company will be 
successful in these efforts.

THIRD-PARTY REIMBURSEMENT; PRICING PRESSURES

The Company's commercial success will depend in part on the availability of 
adequate reimbursement from third-party health care payers, such as 
government and private health insurers and managed care organizations.  
Third-party payers are increasingly challenging the pricing of medical 
products and services.  There can be no assurance that reimbursement will be 
available to enable the Company to achieve market acceptance of its products 
or to maintain price levels sufficient to realize an appropriate return on 
the Company's investment in product acquisition, in-licensing and 
development.  The market for the Company's products may be limited by actions 
of third-party payers. For example, many managed health care organizations 
are now controlling the pharmaceuticals that are on their formulary lists.  
The resulting competition among pharmaceutical companies to place their 
products on these formulary lists has created a trend of downward pricing 
pressure in the industry.  In addition, many managed care organizations are 
pursuing various ways to reduce pharmaceutical costs and are considering 
formulary contracts primarily with those pharmaceutical companies that can 
offer a full line of products for a given therapy sector or disease state.  
There can be no assurance that the Company's products will be included on the 
formulary lists of managed care organizations or that downward pricing 
pressure in the industry generally will not negatively impact the Company's 
operations.

DEPENDENCE ON ACQUISITION OF RIGHTS TO PHARMACEUTICAL PRODUCTS

The Company's strategy for growth is dependent, in part, upon acquiring, 
in-licensing and co-promoting pharmaceuticals targeted primarily at 
allergists, ear, nose and throat specialists, pulmonologists and a selected 
subset of pediatricians and generalist physicians. Other companies, including 
those with substantially greater resources, are competing with the Company 
for the rights to such products. There can be no assurance that the Company 
will be able to acquire, in-license or co-promote additional pharmaceuticals 
on acceptable terms, if at all.  The failure of the Company to acquire, 
in-license, co-promote, develop or market commercially successful 
pharmaceuticals would have a material adverse effect on the Company. 
Furthermore, there can be no assurance that the Company, once it has obtained

                                      -13-
<PAGE>


rights to a pharmaceutical product and committed to payment terms,
will be able to generate sales sufficient to create a profit or otherwise avoid
a loss.

DEVELOPMENT RISKS ASSOCIATED WITH SPIROS

Spiros will require significant additional clinical studies and product 
development.  There can be no assurance that development of Spiros will be 
completed successfully, that Spiros will not encounter problems in clinical 
trials that will cause the delay or suspension of such trials, that current 
or future testing will show Spiros to be safe or efficacious or that Spiros 
will receive regulatory approval.  In addition, regulatory approvals will 
have to be obtained for each drug to be delivered through the use of Spiros 
prior to commercialization.  Moreover, even if Spiros does receive regulatory 
approval, there can be no assurance that Spiros will be commercially 
successful, have all of the patent and other protections necessary to prevent 
competitors from producing similar products and not infringe on patent or 
other proprietary rights of third parties.  The failure of Spiros to receive 
timely regulatory approval and achieve commercial success would have a 
material adverse effect on the Company.

RISKS ASSOCIATED WITH RECENT ACQUISITIONS OF PRODUCTS

In September 1996, the Company acquired from Lilly the exclusive U.S. rights 
to market and distribute Keftab and Ceclor CD and entered into a 
manufacturing agreement with Lilly which terminates in certain circumstances. 
In May 1997, the Company acquired from Syntex the exclusive U.S. rights to 
the intranasal steroid products Nasarel and Nasalide.  Any interruption in 
the supply of these products due to regulatory or other causes could result 
in the inability of the Company to meet demand and could have a material 
adverse impact on the Company.

The Company has limited experience in marketing antibiotic products, such as 
Keftab and Ceclor CD, and steroid products, such as Nasarel and Nasalide. 
Ceclor CD was not previously marketed to physicians prior to its October 1996 
launch by the Company, and no assurance can be given that the Company will be 
able to continue to successfully compete with currently available products.  
Failure to successfully market and sell Keftab, Ceclor CD, Nasarel or 
Nasalide would have a material adverse effect on the Company's business, 
financial condition and results of operations.

The Company is currently considering transferring a substantial portion of 
its recently acquired product rights to foreign subsidiaries. Risks inherent 
in having assets in foreign subsidiaries include those relating to political 
and economic instability and the burden of complying with a wide variety of 
complex foreign laws and treaties.

CUSTOMER CONCENTRATION; CONSOLIDATION OF DISTRIBUTION NETWORK

The distribution network for pharmaceutical products has in recent years been 
subject to increasing consolidation.  As a result, a few large wholesale 
distributors control a significant share of the market and the number of 
independent drug stores and small chains has decreased.  Further 
consolidation among, or any financial difficulties of, distributors or 
retailers could result in the combination or elimination of warehouses 
thereby stimulating product returns to the Company.  Further consolidation or 
financial difficulties could also cause customers to reduce their inventory 
levels, or otherwise reduce purchases of the Company's products which could 
result in a material adverse effect on the Company's business, financial 
condition or results of operations.

The Company's principal customers are wholesale drug distributors and major 
drug store chains.  For the first nine months of 1997, three wholesale 
customers individually accounted for 11%, 11%, and 10% of sales.  For 1996, 
three wholesale customers individually accounted for 17%, 14% and 13% of 
sales.  Two wholesale customers individually accounted for 16% and 11% of 
1995 sales, and three wholesale customers individually accounted for 21%, 14% 
and 12% of 1994 sales.  The loss of any of these customers could have a 
material adverse effect upon the Company's business, financial condition or 
results of operations.

SEASONALITY AND FLUCTUATING QUARTERLY RESULTS

Historically, as a result of the winter cold and flu season, industry-wide 
demand for respiratory products has been stronger in the first and fourth 
quarters than in the second and third quarters of the year. In addition, 
variations in the timing and severity of the winter cold and flu season have 
influenced the Company's results of operations in the past.  While the growth 
and productivity of the Company's sales force and the introduction by the 
Company of new products have historically mitigated the impact of seasonality 
on the Company's results of operations, recent

                                      -14-
<PAGE>

product acquisitions by the Company, especially Keftab and Ceclor CD, which 
are used to treat respiratory infections, are likely to increase the impact 
of seasonality on the Company's results of operations.  No assurances can be 
given that the Company's results of operations will not be materially 
adversely affected by the seasonality of product sales.

COMPETITION

Many companies, including large pharmaceutical firms with financial and 
marketing resources and development capabilities substantially greater than 
those of the Company, are engaged in developing, marketing and selling 
products that compete with those offered or planned to be offered by the 
Company.  The selling prices of such products typically decline as 
competition increases.  Further, other products now in use or under 
development by others may be more effective than the Company's current or 
future products.  The industry is characterized by rapid technological 
change, and competitors may develop their products more rapidly than the 
Company.  Competitors may also be able to complete the regulatory process 
sooner, and therefore, may begin to market their products in advance of the 
Company's products.  The Company believes that competition among both 
prescription pharmaceuticals and pulmonary drug delivery systems aimed at the 
respiratory infection, allergy, cough and cold, and asthma and chronic 
obstructive pulmonary disease markets will be based on, among other things, 
product efficacy, safety, reliability, availability and price.

There are at least 25 other companies in the U.S. that are currently engaged 
in developing, marketing and selling respiratory pharmaceuticals.  
Additionally, there are at least 10 companies currently involved in the 
development, marketing or sales of dry powder pulmonary drug delivery 
systems.  There are two types of dry powder inhalers ("DPIs") currently in 
commercial use worldwide.  In the U.S., only individual dose DPIs currently 
are marketed, including the Rotohaler-TM- (developed and marketed by Glaxo 
Wellcome, Inc.) and the Spinhaler-R- (developed and marketed by Fisons 
Limited).  The Turbuhaler-R- (developed and marketed by Astra 
Pharmaceuticals), a multiple dose DPI, is the leading DPI in worldwide sales. 
In June 1997, the United States Food and Drug Administration ("FDA") approved 
the first Turbuhaler product, the Pulmicort Turbuhaler, for marketing in the 
United States.

DEPENDENCE ON THIRD PARTIES

The Company's strategy for development and commercialization of certain of 
its products is dependent upon entering into various arrangements with 
corporate partners, licensors and others and upon the subsequent success of 
these partners, licensors and others in performing their obligations.  There 
can be no assurance that the Company will be able to negotiate acceptable 
arrangements in the future or that such arrangements or its existing 
arrangements will be successful.  In addition, partners, licensors and others 
may pursue alternative technologies or develop alternative compounds or drug 
delivery systems either on their own or in collaboration with others, 
including the Company's competitors.  The Company has limited experience 
manufacturing products for commercial purposes and currently does not have 
the capability to manufacture its pharmaceutical products and therefore is 
dependent on contract manufacturers for the production of such products for 
development and commercial purposes.  The manufacture of the Company's 
products is subject to current Good Manufacturing Practice ("cGMP") 
regulations prescribed by the FDA. The Company relies on a single 
manufacturer for each of its products.  In the event that the Company is 
unable to obtain or retain third-party manufacturing, it may not be able to 
commercialize its products as planned.  There can be no assurance that the 
Company will be able to continue to obtain adequate supplies of such products 
in a timely fashion at acceptable quality and prices.  Also, there can be no 
assurance that the Company will be able to enter into agreements for the 
manufacture of future products with manufacturers whose facilities and 
procedures comply with cGMP and other regulatory requirements. The Company's 
current dependence upon others for the manufacture of its products may 
adversely affect future profit margins, if any, on the sale of those products 
and the Company's ability to develop and deliver products on a timely and 
competitive basis.

LIMITED MANUFACTURING EXPERIENCE AND RELIANCE ON THIRD PARTIES

The Company's principal manufacturing facility is intended to be used to 
formulate, mill, blend and manufacture drugs to be used with Spiros, pending 
regulatory approval. The Company's manufacturing facility must be registered 
with and licensed by various regulatory authorities and

                                      -15-

<PAGE>

must comply with cGMP requirements prescribed by the FDA and the State of 
California.  The Company is currently expanding its facilities to provide 
additional manufacturing capabilities.  The Company will need to 
significantly scale up its current manufacturing operations and comply with 
cGMPs and other regulations prescribed by various regulatory agencies in the 
United States and other countries to achieve the prescribed quality and 
required levels of production of such products and to obtain marketing 
approval. Any failure or significant delay in the validation of or obtaining 
a satisfactory regulatory inspection of the new facility or failure to 
successfully scale up could have a material adverse effect on the Company's 
ability to manufacture products in connection with Spiros. Dura intends to 
utilize third parties to produce components of and assemble the Spiros 
aerosol generator. Such third parties have only produced limited quantities 
of components and assembled generators and will be required to significantly 
scale up their activities. There can be no assurance that such third parties 
will be successful in completing these activities in a timely manner or can 
meet cGMP requirements. Any failure or delay in the scale up of aerosol 
generator manufacturing would have a material adverse effect on the ability 
of the Company to manufacture Spiros products.

MANAGING GROWTH OF BUSINESS

The Company has experienced significant growth as total revenues increased 
58% in fiscal 1995, 102% in fiscal 1996, and 102% for the first nine months 
of 1997, as compared to prior periods, primarily as a result of the 
acquisition or in-licensing of additional respiratory pharmaceutical 
products.  During fiscal 1997, the Company executed an agreement relating to 
the acquisition of the rights to the Nasarel and Nasalide products.  During 
fiscal 1996, the Company executed agreements relating to the acquisition of 
the rights to the Entex, Ceclor CD and Keftab products.  During fiscal 1995, 
the Company executed three agreements relating to the acquisition, 
in-licensing and co-promotion of products and acquired Health Script.  Due to 
the Company's emphasis on acquiring and in-licensing respiratory 
pharmaceutical products, the Company anticipates that the integration of the 
recently acquired businesses and products, as well as any future 
acquisitions, will require significant management attention and expansion of 
its sales force.  The Company's ability to achieve and maintain profitability 
is based on management's ability to manage its changing business effectively.

UNCERTAINTY OF PROFITABILITY; NEED FOR ADDITIONAL FUNDS

The Company has experienced significant operating losses in the past, and, at 
September 30, 1997, the Company's accumulated deficit was $49.6 million. 
Although the Company achieved profitability on an annual basis in 1996 and in 
the first nine months of 1997, there can be no assurance that revenue growth 
or profitability will continue on an annual or quarterly basis in the future. 
In addition, any exercise of the Company's option to acquire the common stock 
of Spiros Corp. ("Purchase Option") and the currently proposed $75.0 million 
contribution to Spiros Corp. II will result in significant, non-recurring 
charges to earnings in the periods in which such transactions are completed. 
The acquisition and in-licensing of products, the expansion of the Company's 
sales force in response to acquisition and in-licensing of products, the 
maintenance of the Company's existing sales force, the upgrade and expansion 
of its facilities, continued pricing pressure and the exercise of the 
Purchase Option, as well as funds that the Company, at its option, may 
provide for Spiros development or to acquire Spiros technology, both 
internally and through Spiros Corp. II, will require the commitment of 
substantial capital resources and may also result in significant losses. 
Depending upon, among other things, the acquisition and in-licensing 
opportunities available, the Company may need to raise additional funds for 
these purposes.  The Company may seek such additional funding through public 
and private financing, including equity or debt financing.  Adequate funds 
for these purposes, whether through financial markets or from other sources, 
may not be available when needed or on terms acceptable to the Company.  
Insufficient funds may require the Company to delay, scale back or suspend 
some or all of its product acquisition and in-licensing programs, the upgrade 
and expansion of its facilities and further development of Spiros.  The 
Company anticipates that its existing capital resources, together with cash 
expected to be generated from operations and available bank borrowings, 
should be sufficient to finance its current operations and working capital 
requirements through at least 12 months following the date of this prospectus.

GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL

Development, testing, manufacturing and marketing of pharmaceutical products, 
including drug delivery systems, are subject to extensive regulation by 
numerous governmental authorities in the U.S. and other countries.  The 
process of obtaining FDA approval of pharmaceutical products and drug 
delivery systems is costly and time-consuming.  Any new pharmaceutical 
product must undergo rigorous preclinical and clinical testing and an 
extensive regulatory approval process mandated by the FDA.  Such regulatory 
review includes the determination of manufacturing capability and product 
performance. Marketing of drug delivery systems also requires FDA approval, 
which can be costly and time consuming to obtain.  The Company will need to 
obtain a separate regulatory approval for each Spiros drug delivery system. 
The Company expects to submit an abbreviated NDA called a 505(b)(2) 
application for the use of albuterol and other drugs with the Spiros system. 
No assurances can be given that all of the Company's drugs identified for 
development with Spiros will be suitable for, or approved under, abbreviated 
application procedures. Certain abbreviated application procedures have been 
the subject of petitions filed by brand name manufacturers which seek changes 
in the FDA's approval process for such abbreviated applications. These 
requested changes include, among other things, disallowance of the use by an 
applicant of an abbreviated application with data considered proprietary by 
the original manufacturer that was submitted to the FDA as part of an 
original NDA. The Company is unable to predict at this time whether the FDA 
will make any changes to its abbreviated application procedures as a result 
of such petitions or the effect that such changes or challenges may have on 
the Company. There can be no assurance that the pharmaceutical products 
currently in development, or those products acquired or in-licensed by the 
Company, will be approved by the FDA.  In addition,

                                      -16-
<PAGE>

there can be no assurance that all necessary approvals will be granted for 
future products or that FDA review or actions will not involve delays caused 
by the FDA's request for additional information or testing that could 
adversely affect the time to market and sale of the products.  For both 
currently marketed and future products, failure to comply with applicable 
regulatory requirements can, among other things, result in the suspension of 
regulatory approval, as well as possible civil and criminal sanctions.

The Company, on behalf of Spiros Corp. II, plans to submit an NDA for an 
albuterol based product (the "Albuterol Product"), in November 1997. The FDA 
may determine to reject the Company's NDA at any time within 60 days of 
submission based on a determination that the NDA is incomplete or that 
additional information is required prior to consideration of the NDA. Prior 
to the FDA's approval of an Albuterol Product the Company will be required to 
complete an ongoing open label study with respect to the Albuterol Product. 
Since completion of the pivotal trials, the Company has made, and is 
proposing to make, a number of additional modifications to the Spiros system, 
some of which address problems encountered with the mechanical features of 
the Spiros delivery system during the pivotal trials. These changes are 
intended to improve the reliability, performance, manufacturability, and 
customer acceptance of the mechanical features of the Spiros delivery system. 
The Company expects that it will be required to complete testing and 
validation pursuant to cGMP requirements of the Spiros system as modified for 
commercial distribution, which could be costly and time-consuming. There can 
be no assurance that the FDA will not require the Company to undertake 
further laboratory testing, field testing and/or clinical studies in order to 
ensure the safety and effectiveness of the Albuterol Product intended to be 
commercialized by the Company and to ensure that it can be reliably 
manfactured. If a proposed change is deemed to be a major modification by the 
FDA, the Company could be required to repeat one or more of the clinical 
studies. Moreover, because of the time necessary to validate the changes to 
the Spiros system, there can be no assurance that the Company will be 
prepared for any FDA preapproval inspection of the Company's manufacturing 
facilities in a timely manner. If the Company is required to undertake 
additional laboratory testing and/or clinical studies or to postpone the 
preapproval inspection, or if the Company fails to complete the open label 
study in a timely manner, the Company could receive a non-approval letter 
and, in any event, there could be a substantial delay in completion of the 
approval process. FDA approval to market the Albuterol Product could take 
several months to several years, or approval may ultimately be denied.

The FDA is required to conduct biennial inspections of drug manufacturing 
establishments. Since the planned NDA submission for the Albuterol Product 
will be the Company's first for a Spiros product, the FDA will inspect the 
Company's manufacturing facility as part of the review process. The Company 
may also be subject to State of California inspection. There can be no 
assurance that the Company will be able to satisfy such inspections in a 
timely manner, if at all.

In addition, changes in regulations could have a material adverse effect on 
the Company. The FDA is continuing an evaluation of the effectiveness of all 
drug products containing ingredients marketed prior to 1962 (the year of 
enactment of the "Drug Amendments of 1962" to the Federal Food, Drug and 
Cosmetic Act) as part of its Drug Efficacy Study Implementation ("DESI") 
program and will determine which drugs are considered "new drugs" requiring 
approval through a New Drug Application ("NDA") for marketing.  A Policy 
Guide (CPG 440.100) issued by the FDA indicates that the FDA will implement 
procedures to determine whether the new drug provisions are applicable to 
existing products.  This Policy Guide requires that products covered by 
paragraph B not be similar or related to any drug included in the DESI 
program, or have a different formulation or conditions for use than products 
marketed before November 13, 1984. If a final determination is made that a 
particular drug requires an approved NDA, such approval will be required for 
marketing to continue.  If such a determination is made, the FDA might impose 
various requirements; for example, it might require that the current product 
be the subject of an approved NDA, that the product be reformulated and an 
NDA approval be obtained, that the product must be sold on an 
over-the-counter basis rather than as a prescription drug or that the product 
must be removed from the market.  The Company believes that nine of its 
prescription pharmaceutical products may be covered by paragraph B of the 
Policy Guide and is aware that one of its products may be considered to be 
similar or related to a DESI drug.  Also, it is not aware of evidence to 
substantiate that three of its products have the same formulation or 
conditions for use as products marketed before November 13, 1984.  There can 
be no assurance as to which regulatory course the FDA will follow, if any, 
with respect to many of the Company's pharmaceutical products or whether the 
Company will be able to obtain any approvals that the FDA may deem necessary. 
If any negative actions are taken by the FDA, such actions could have a 
material adverse effect on the Company's business.  Health Script is subject 
to regulation by state regulatory authorities, principally state boards of 
pharmacy.  In addition, Health Script is subject to regulation by other state 
and federal agencies with respect to reimbursement for prescription drug 
benefits provided to individuals covered primarily by publicly-funded 
programs.

PATENTS AND PROPRIETARY RIGHTS; UNPREDICTABILITY OF PATENT PROTECTION

The Company's success will depend in part on its ability to obtain patents on 
current or future products or formulations, defend its patents, maintain 
trade secrets and operate without infringing upon the proprietary rights of 
others, both in the U.S. and abroad.  However, only six of the 
pharmaceuticals currently marketed by the Company are covered by patents.  
The Company also has licenses or license rights to certain other U.S. and 
foreign patent and patent applications.  There can be no assurance that 
patents, U.S. or foreign, will be obtained, or that, if issued or licensed to 
the Company, they will be enforceable or will provide substantial protection 
from competition or be of commercial benefit to the Company or that the 
Company will possess the financial resources necessary to enforce or defend 
any of its patent rights. Federal court decisions establishing legal 
standards for determining the validity and scope of patents in the field are 
in transition.  There can be no assurance that the historical legal standards 
surrounding questions of validity and scope will continue to be applied or 
that current defenses as to issued patents in the field will offer protection 
in the future.  The commercial success of the Company will also depend upon 
avoiding the infringement of patents issued to competitors and upon 
maintaining the technology licenses upon which certain of the Company's 
current products are, or any future products under development might be, 
based.  Litigation, which could result in substantial cost to the Company, 
may be necessary to enforce the Company's patent and license rights or to 
determine the scope and validity of proprietary rights of third parties.  If 
any of the Company's products are found to infringe upon patents or other 
rights owned by third parties, the Company could be required to obtain a 
license to continue to manufacture or market such products.  There can be no 
assurance that licenses to such patent rights would be made available to the 
Company on commercially reasonable terms, if at all. If the Company does not 
obtain such licenses, it could encounter delays in marketing affected 
products while it attempts to design around such patents or it could find 
that the development, manufacture or sale of products requiring such licenses 
is not possible.  The Company currently has certain licenses from third 
parties and in the future may require additional licenses from other parties 
to develop, manufacture and market commercially viable products effectively.  
There can be no assurance that such licenses will be obtainable on 
commercially reasonable terms, if at all, or that the patents underlying such 
licenses will be valid and enforceable.

                                      -17-
<PAGE>

PRODUCT LIABILITY AND RECALL

The Company faces an inherent business risk of exposure to product liability 
claims in the event that the testing, manufacturing, marketing or use of its 
technologies or products is alleged to have resulted in adverse effects.  
Such risks will exist even with respect to those products that receive 
regulatory approval for commercial sale. While the Company has taken, and 
will continue to take, what it believes are appropriate precautions, there 
can be no assurance that it will avoid significant product liability 
exposure.  The Company currently has limited product liability insurance; 
however, there can be no assurance that the Company will be able to maintain 
such insurance, that such insurance can be maintained on acceptable terms or 
that the level or breadth of any insurance coverage will be sufficient to 
fully cover potential claims.  There can be no assurance that adequate 
insurance coverage will be available in the future at acceptable costs, if at 
all, or that a product liability claim or recall would not materially and 
adversely affect the business or financial condition of the Company.

ATTRACTION AND RETENTION OF KEY PERSONNEL

The Company is highly dependent on the principal members of its scientific 
and management staff, the loss of whose services might impede the achievement 
of development objectives.  Recruiting and retaining management and 
operational personnel and qualified scientific personnel to perform research 
and development work will also be critical to the Company's success. Although 
the Company believes that it is adequately staffed in key positions and that 
it will be successful in attracting and retaining skilled and experienced 
management, operational and scientific personnel, there can be no assurance 
that the Company will be able to attract and retain such personnel on 
acceptable terms given the competition among numerous pharmaceutical 
companies, universities and research institutions for such personnel.  The 
loss of the services of key scientific, technical and management personnel 
could have a material adverse effect on the Company, especially in light of 
the Company's recent significant growth.

ABILITY TO SERVICE INDEBTEDNESS

In the third quarter of 1997, the Company issued $287.5 million principal 
amount of 3-1/2% Convertible Subordinated Notes due 2002.  There can be no 
assurance that the Company will have the necessary funds available to pay the 
interest on the principal of the Notes or that the Notes will be able to be 
refinanced.  Any inability to service the obligation in respect to the Notes 
could have a material adverse effect on the Company and the market value of 
its common stock.

CHANGE IN CONTROL

Certain provisions of the Company's charter documents and terms relating to 
the acceleration of the exercisability of certain warrants and options 
relating to the purchase of such securities by the Company in the event of a 
change in control may have the effect of delaying, deferring or preventing a 
change in control of the Company, thereby possibly depriving stockholders of 
receiving a premium for their shares of the Company's common stock.  In 
addition, upon certain circumstances resulting in a change in control under 
the terms of the Notes ("Change of Control"), the Company will be required to 
offer to purchase for cash all of the outstanding Notes at a purchase price 
of 100% of the principal amount thereof, plus accrued but unpaid interest 
through a date that is 30 business days after the Company's notice of the 
occurrence of such Change of Control.  This Change in Control purchase 
feature of the Notes may in certain circumstances have an anti-takeover 
effect.  If a Change in Control were to occur, there can be no assurance that 
the Company would have sufficient funds to repurchase all Notes tendered by 
the holders thereof and to repay other indebtedness that may become due as a 
result of any Change in Control.

VOLATILITY OF COMPANY STOCK PRICE

The market prices for securities of emerging companies, including the 
Company, have historically been highly volatile.  Future announcements 
concerning the Company or its competitors may have a significant impact on 
the market price of the Company's common stock. Such announcements might 
include financial results, the results of testing, technological innovations, 
new commercial products, changes to government regulations, government 
decisions on commercialization of products, developments concerning 
proprietary rights, litigation or public concern as to safety of the 
Company's products.

ABSENCE OF DIVIDENDS

The Company has never paid any cash dividends on its common stock.  In
accordance with a bank loan agreement, the Company is prohibited from paying
cash dividends without prior bank approval.  The Company currently anticipates
that it will retain all available funds for use in its business and does not
expect to pay any cash dividends in the foreseeable future.

                                      -18-


<PAGE>

PART II - OTHER INFORMATION

Item 2. Changes in Securities

         The Company reincorporated in Delaware through the merger of Dura 
         Pharmaceuticals, Inc., a California corporation, with and into a 
         wholly-owned Delaware subsidiary of Dura Pharmaceuticals, Inc. In 
         connection with this change, the outstanding shares of the Company's 
         no par value common stock were automatically converted into and 
         exchanged for an equal number of shares of common stock, $.001 par 
         value per share, of the Delaware entity.


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits.

         Exhibit
         Number
         ------
           1.1     Purchase Agreement, dated July 24, 1997 in connection with
                   the offering of Notes.

           2.1     Agreement and Plan of Merger of Dura Pharmaceuticals, Inc. 
                   (a Delaware corporation) and Dura Pharmaceuticals, Inc. (a 
                   California corporation) incorporated by reference from 
                   Exhibit 2.1 to the Form 10-Q for the quarterly period ended 
                   June 30, 1997.

           3.1     Bylaws incorporated by reference from Exhibit 3.1 to the 
                   Form 10-Q for the quarterly period ended June 30, 1997.

           3.2     Certificate of Incorporation incorporated by reference 
                   from Exhibit 3.2 to the Form 10-Q for the quarterly period 
                   ended June 30, 1997.

           4.1     Indenture, including form of Note, dated July 30, 1997,
                   between the Company and Chase Trust Company of California,
                   with respect to 3 1/2% Convertible Subordinated Notes due
                   2002.

           4.2(1)  Form of 3 1/2 % Convertible Subordinated Note.

          10.1     Amendment No. 1 to Business Loan Agreement dated May 8, 1997
                   between the Company and Bank of America National Trust and
                   Savings Association.

          10.2     Amendment No. 2 to Business Loan Agreement dated July 30,
                   1997 between the Company and Bank of America National Trust
                   and Savings Association.

          10.3     1992 Stock Option Plan, as amended.

          10.4(2)  Form of Notice of Grant of Stock Option.

          10.5(2)  Form of Stock Option Agreement.

          10.6     Form of Indemnification Agreement between the Company and
                   each of its directors.

          10.7     Form of Indemnification Agreement between the Company and
                   each of its officers.

          11       Statements re: Computations of Net Income Per Share.

          27       Financial Data Schedule.

(1) Incorporated by reference to Exhibit 4.1 contained herein.

(2) Incorporated by reference to exhibits to Form S-8 Registration Statement
    (No.333-34551) filed 8-28-97.

(b) No reports on Form 8-K were filed during the quarter ended September 30,
1997.


                                         -19-
<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.

                            DURA PHARMACEUTICALS, INC.



DATE:   OCTOBER 21, 1997                    /S/ JAMES W. NEWMAN
------------------------                    --------------------
                                            (JAMES W. NEWMAN)
                                Senior Vice President, Finance & Administration
                                           and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)


                                         -20-
<PAGE>
                                    EXHIBIT INDEX
                                          TO
                                      FORM 10-Q

                              DURA PHARMACEUTICALS, INC.

Exhibit  No.  Description
------------  -----------
                                                                       
     1.1      Purchase Agreement, dated July 24, 1997 in connection with
              the offering of Notes.
                                                                 
     2.1      Agreement and Plan of Merger of Dura Pharmaceuticals, Inc. 
              (a Delaware corporation) and Dura Pharmaceuticals, Inc. (a 
              California corporation) incorporated by reference from 
              Exhibit 2.1 to the Form 10-Q for the quarterly period ended 
              June 30, 1997.
                                                                 
     3.1      Bylaws incorporated by reference from Exhibit 3.1 to the 
              Form 10-Q for the quarterly period ended June 30, 1997.
                                                                 
     3.2      Certificate of Incorporation incorporated by reference 
              from Exhibit 3.2 to the Form 10-Q for the quarterly period 
              ended June 30, 1997.

     4.1      Indenture, including form of Note, dated July 30, 1997, between
              the Company and Chase Trust Company of California, with respect
              to 3 1/2% Convertible Subordinated Notes due 2002.

     4.2(1)   Form of 3 1/2 % Convertible Subordinated Note.

    10.1      Amendment No. 1 to Business Loan Agreement dated May 8, 1997
              between the Company and Bank of America National Trust and
              Savings Association.

    10.2      Amendment No. 2 to Business Loan Agreement dated July 30, 1997
              between the Company and Bank of America National Trust and
              Savings Association.

    10.3      1992 Stock Option Plan, as amended.

    10.4(2)   Form of Notice of Grant of Stock Option.

    10.5(2)   Form of Stock Option Agreement.

    10.6      Form of Indemnification Agreement between the Company and each of
              its directors.

    10.7      Form of Indemnification Agreement between the Company and each of
              its officers.

    11        Statements re: Computations of Net Income Per Share.

    27        Financial Data Schedule.

(1) Incorporated by reference to Exhibit 4.1 contained herein.

(2) Incorporated by reference to exhibits to Form S-8 Registration Statement
    (No.333-34551) filed 8-28-97.

(b) No reports on Form 8-K were filed during the quarter ended September 30,
1997.


                                         -21-