<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 March 31, 1998.

[ ]  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 April
30, 1998 was 46,239,648.

===============================================================================

<PAGE>

                             DURA PHARMACEUTICALS, INC.
                                       INDEX

                                                                       Page No.
PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements

          Consolidated Balance Sheets -
            December 31, 1997 and March 31, 1998 . . . . . . . . . . . . .3
          Consolidated Statements of Operations -
            Three months ended March 31, 1997 and 1998 . . . . . . . . . .4
          Consolidated Statements of Cash Flows -
            Three months ended March 31, 1997 and 1998 . . . . . . . . . .5
          Notes to Consolidated Financial Statements . . . . . . . . . . .6

Item 2.   Management's Discussion and Analysis of Financial 
            Condition and Results of Operations  . . . . . . . . . . . . .7
          Risks and Uncertainties  . . . . . . . . . . . . . . . . . . . 10

Item 3.   Quantitative and Qualitative Disclosures about Market Risk . . 18

PART II - OTHER INFORMATION

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

SIGNATURES   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

                                       2

<PAGE>

                          PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                            DURA PHARMACEUTICALS, INC.
                           CONSOLIDATED BALANCE SHEETS
                        In thousands, except share amounts
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                           DECEMBER 31,    MARCH 31,
ASSETS                                                        1997           1998
                                                           -----------    -----------
                                                                          (unaudited)
<S>                                                         <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                                 $  72,003      $  91,634
  Short-term investments                                      313,218        304,162
  Accounts and other receivables                               40,987         30,620
  Inventory                                                    15,201         13,835
                                                           ----------     ----------
           Total current assets                               441,409        440,251

License agreements and product rights                         250,781        247,769
Property                                                       48,525         53,257
Other assets                                                   34,165         33,987
                                                           ----------     ----------
TOTAL                                                      $  774,880     $  775,264
                                                           ----------     ----------
                                                           ----------     ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable and accrued liabilities                  $  45,741      $  36,824
  Current portion of long-term obligations                      2,798          2,846
                                                           ----------     ----------
           Total current liabilities                           48,539         39,670

Convertible subordinated notes                                287,500        287,500
Other long-term obligations                                     9,564          9,975
                                                           ----------     ----------
           Total liabilities                                  345,603        337,145

SHAREHOLDERS' EQUITY:
  Preferred stock, par value $.001; shares authorized - 
    5,000,000; no shares issued or outstanding
  Common stock, par value $.001; shares authorized - 
    100,000,000; issued and outstanding - 45,608,414 
    and 46,195,817, respectively                                   46             46
  Additional paid-in capital                                  604,991        605,998
  Accumulated other comprehensive income                          176            260
  Warrant subscriptions receivable                            (12,252)       (11,665)
  Accumulated deficit                                        (163,684)      (156,520)
                                                           ----------     ----------
           Total shareholders' equity                         429,277        438,119
                                                           ----------     ----------
TOTAL                                                      $  774,880     $  775,264
                                                           ----------     ----------
                                                           ----------     ----------
</TABLE>

See accompanying notes to consolidated financial statements.


                                        3


<PAGE>

                              DURA PHARMACEUTICALS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                        In thousands, except per share amounts
                                     (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                         ----------------------
                                                           1997          1998
                                                         ----------------------
<S>                                                      <C>            <C>
REVENUES:
  Sales                                                  $33,935        $35,885
  Contract                                                 6,958         12,881
                                                         -------        -------
           Total revenues                                 40,893         48,766
                                                         -------        -------

OPERATING COSTS AND EXPENSES:
  Cost of sales                                            7,970          8,093
  Clinical, development and regulatory                     5,761          9,151
  Selling, general and administrative                     15,992         22,953
                                                         -------        -------

           Total operating costs and expenses             29,723         40,197
                                                         -------        -------

OPERATING INCOME                                          11,170          8,569
                                                         -------        -------

OTHER:
  Interest income                                         3,387           5,417
  Interest expense                                         (173)         (3,142)
  Other - net                                                20              13
                                                         -------        -------
                                                         -------        -------

           Total other                                     3,234          2,288
                                                         -------        -------

INCOME BEFORE INCOME TAXES                                14,404         10,857
PROVISION FOR INCOME TAXES                                 5,617          3,693
                                                         -------        -------

NET INCOME                                               $ 8,787        $ 7,164
                                                         -------        -------
                                                         -------        -------

NET INCOME PER SHARE:
  Basic                                                  $  0.20        $  0.16
                                                         -------        -------
                                                         -------        -------
  Diluted                                                $  0.19        $  0.15
                                                         -------        -------
                                                         -------        -------

WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
  Basic                                                   43,351         45,975
                                                         -------        -------
                                                         -------        -------
  Diluted                                                 47,240         48,523
                                                         -------        -------
                                                         -------        -------

</TABLE>

           See accompanying notes to consolidated financial statements.

                                        4



<PAGE>

                              DURA PHARMACEUTICALS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     In thousands
                                     (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                                                MARCH 31,
                                                         ----------------------
                                                            1997         1998
                                                         ----------------------
<S>                                                     <C>           <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES               $  19,809     $  14,514
                                                        ---------     ---------
INVESTING ACTIVITIES:
  Purchases of short-term investments                    (126,131)     (102,211)
  Sales and maturities of short-term investments           41,121       111,351
  Capital expenditures                                     (3,835)       (5,768)
  Other                                                      (416)         (449)
                                                        ---------     ---------

      Net cash provided by (used for) 
       investing activities                               (89,261)        2,923
                                                        ---------     ---------

FINANCING ACTIVITIES:
  Issuance of common stock and warrants - net               1,410         2,194
                                                        ---------     ---------

      Net cash provided by financing activities             1,410         2,194
                                                        ---------     ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS      (68,042)       19,631
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD          131,101        72,003
                                                        ---------     ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD              $  63,059     $  91,634
                                                        ---------     ---------
                                                        ---------     ---------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest (net of amounts capitalized)               $       0     $   5,272
    Income taxes                                        $     338     $     370
                                                        ---------     ---------
</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 1997 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, 1997.  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.  All intercompany transactions and balances are 
eliminated in consolidation. 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 March 31, 1998.

The preparation of financial statements in conformity 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 those estimates may affect amounts reported in 
future periods.

2.   NEW ACCOUNTING STANDARD

Effective January 1, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").  
SFAS 130 requires reporting and displaying comprehensive income and its 
components which, for Dura, includes net income and unrealized gains and 
losses on investments. In accordance with SFAS 130, the accumulated balance 
of other comprehensive income is disclosed as a separate component of 
shareholders' equity.  Prior year financial statements have been reclassified 
to conform to the requirements of SFAS 130.

                                       6

<PAGE>


For the three months ended March 31, 1997 and 1998, comprehensive income
consisted of (in thousands):

<TABLE>
<CAPTION>
                                                      1997      1998
                                                    ------     ------
       <S>                                          <C>        <C>
       Net income                                   $8,787     $7,164
       Other comprehensive income:
         Unrealized gain(loss) on investments         (465)        84
                                                    ------     ------
       Comprehensive income                         $8,322     $7,248
                                                    ------     ------
                                                    ------     ------
</TABLE>

3.   COMMITMENTS AND CONTINGENCIES

On December 1, 1997, the Company terminated a merger agreement with 
Scandipharm, Inc. ("Scandipharm") entered into on October 20, 1997. On 
January 16, 1998, Scandipharm filed suit against the Company for breach of 
contract. On January 19, 1998, the Company filed suit against Scandipharm 
seeking a declaratory judgment that Dura's termination of the merger did not 
breach the merger agreement and for damages against Scandipharm. The Company 
believes that it had the right to terminate the merger agreement, and that 
Scandipharm's claims for specific performance under the agreement or for 
unspecified damages are without merit, and that outcome of this matter will 
not have a material adverse effect on the Company's financial position or 
results of operations.

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, 1997 contained in the Company's 
1997 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, 1997.  
See "Risks and Uncertainties" for a discussion of factors known to the 
Company that could cause reported financial information not to be necessarily 
indicative of future results, including discussion of the effects of 
seasonality on the Company.  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 date hereof.

RECENT DEVELOPMENTS

On February 22, 1998, the Company announced that it planned to begin expanding
its sales force immediately from approximately 270 representatives to over 450
representatives by the end of 1998 to increase the promotional activity of its
current products and to prepare for the launch, subject to 

                                       7

<PAGE>


receiving regulatory approval, of Albuterol Spiros-TM-.  The Company expects 
that the rapid expansion of its sales force will result in an increase in 
fiscal 1998 in its selling, general and administrative expenses, both in 
total and as a percentage of revenues, as compared to fiscal 1997.

RESULTS OF OPERATIONS

Total revenues for the three months ended March 31, 1998 were $48.8 million, 
an increase of $7.9 million, or 19%, over the same period in 1997.  Net 
income for the three months ended March 31, 1998 was $7.2 million, or $0.15 
per diluted share, a decrease of $1.6 million over the same period in 1997.  
The principal factors causing these changes are discussed below.

Pharmaceutical sales for the three months ended March 31, 1998 were $35.9 
million, an increase of  $2 million, or 6%, over the same period in 1997.  
This increase is due primarily to sales of Nasarel-Registered Trademark- and 
Nasalide-Registered Trademark-, acquired in May 1997, partially offset by a 
decrease in sales of certain of the Company's existing products.

Gross profit (pharmaceutical sales less cost of sales) for the three months 
ended March 31, 1998 was $27.8 million, an increase of $1.8 million, or 7%, 
as compared to the same period in 1997.  This increase is due to the increase 
in pharmaceutical sales discussed above.  Gross profit as a percentage of 
sales was 77% for the three months ended March 31, 1998 and 1997.

Contract revenues in the three months ended March 31, 1998 were $12.9 
million, an increase of $5.9 million, or 85%, over the same period in 1997.  
The Company, under agreements with several companies, conducts feasibility 
testing and development work on various compounds for use with 
Spiros-Registered Trademark-, a proprietary dry powder pulmonary drug 
delivery system.  Contract revenues from Spiros-related development and 
feasibility agreements for the three months ended March 31, 1998 totaled 
$12.6 million, including $10.4 million from Spiros Development Corporation 
II, Inc. ("Spiros Corp. II"), as compared to $6.8 million, including $5.5 
million from Spiros Development Corporation, for the same period in 1997.

Clinical, development and regulatory expenses for the three months ended 
March 31, 1998 were $9.2 million, an increase of $3.4 million, or 59%, over 
the same period in 1997. 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 three months ended March 
31, 1998 were $23 million, an increase of $7 million, or 44%, over the same 
period in 1997, and increased as a percentage of total revenues to 47% in the 
three months ended March 31, 1998 from 39% in the first quarter of 1997.  The 
dollar and percentage increases are 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 (increase of $4.9 
million), amortization of newly acquired product rights (increase of 
$754,000), and increased operating costs related to general corporate 
activities (increase of $1.2 million).  On February 22, 1998, the Company 
announced that it planned to begin expanding its sales force immediately from 
approximately 270 representatives to over 450 representatives by the end of 
1998 to increase the promotional activity

                                       8


<PAGE>

of its current products and to prepare for the launch, subject to receiving 
regulatory approval, of Albuterol Spiros-TM-.  The Company expects that the 
rapid expansion of its sales force will result in an increase in fiscal 1998 
in its selling, general and administrative expenses, both in total and as a 
percentage of revenues, as compared to fiscal 1997.

Interest income for the three months ended March 31, 1998 was $5.4 million, 
an increase of $2 million, or 60%, as compared to the same period in 1997.  
The increase is due to higher balances of cash and short-term investments 
resulting primarily from the Convertible Subordinated Notes issued in the 
third quarter of 1997 (see "Liquidity and Capital Resources" below), as well 
as cash generated from operations.

Interest expense for the three months ended March 31, 1998 was $3.1 million 
compared to $173,000 for the same period in 1997.  The increase is primarily 
due to interest expense on the Convertible Subordinated Notes (see "Liquidity 
and Capital Resources" below).

The Company's effective tax rate for the three months ended March 31, 1998 
was 34%, compared to 39% for the same period in 1997.  This reduction is due 
primarily to an increase in 1998 in income earned at foreign subsidiaries 
which is taxed at lower rates.  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 adjustments from statutory federal and state tax rates.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments increased by $10.6 million 
to $395.8 million at March 31, 1998 from $385.2 million at December 31, 1997. 
The increase is due primarily to cash generated from operations, partially 
offset by capital expenditures. Working capital increased by $7.7 million to 
$400.6 million at March 31, 1998 from $392.9 million at December 31, 1997.

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.  Proceeds from the offering of the 
Notes are expected to be used for general corporate purposes, including (i) 
to acquire, in-license, co-promote, develop and commercialize pharmaceuticals 
targeted at Dura's physician base or in areas related or otherwise 
complementary to Dura's existing business; (ii) to fund product development 
programs, including Spiros products; and (iii) for working capital and 
facilities expansion. To date, no proceeds from the Notes have been used. The 
Notes are convertible, at the option of the holder, into shares of Dura's 
common stock at any time prior to maturity or redemption at a conversion 
price of $50.635 per share.  At March 31, 1998, in addition to the Notes, the 
Company had outstanding an aggregate of $12.8 million in current and other 
long-term obligations, of which $2.8 million is to be paid during the next 12 
months.  Also as of March 31, 1998, additional future contingent obligations 
totaling $93 million relating to product acquisitions are due through 2004, 
including $10 million due in 1998.

                                        9


<PAGE>

The Company has 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 March 31, 1998, no borrowings were outstanding under this agreement.

The Company anticipates that its existing capital resources, together with 
cash expected to be generated from operations and available bank borrowings, 
will be sufficient to finance its operations and working capital 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. There can be no assurance that such additional resources will 
be available to the Company when needed or on terms acceptable to the 
Company.  At present, the Company is actively pursuing the acquisition of 
rights to 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.  

The Company recognizes the need to ensure its operations will not be 
adversely impacted by the inability of the Company's systems to process data 
having dates on or after January 1, 2000 ("Year 2000").  Processing errors 
due to software failure arising from calculations using the Year 2000 date 
are a recognized risk.  The Company is currently addressing the risk, with 
respect to the availability and integrity of its financial systems and the 
reliability of its operating systems, and is in the process of communicating 
with suppliers, customers, financial institutions and others with whom it 
conducts business to assess whether they are or will be Year 2000 compliant.  
While the Company believes its planning efforts are adequate to address the 
Year 2000 concerns, there can be no assurance that the systems of other 
companies on which the Company's systems and operations rely will be 
converted on a timely basis and will not have a material effect on the 
Company.  In addition, the potential impact of the Year 2000 on others with 
whom the Company does business and any resulting effects on the Company 
cannot be reasonably estimated at this time. The cost of the Company's Year 
2000 initiatives is not expected to be material to the Company's results of 
operations or financial position.

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.

REDUCTION IN GROSS MARGINS.  There is no proprietary protection for most of 
the products sold by Dura and substitutes for such products are sold by other 
pharmaceutical companies.  Dura expects average selling prices for many of 
its products to decline over time due to competitive and reimbursement 
pressures. While Dura will seek to mitigate the effect of this decline in 
average selling prices, there can be no assurance that Dura 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 healthcare payors, 

                                        10


<PAGE>

such as government and private health insurers and managed care 
organizations.  Third-party payors 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 payors.  For example, many managed 
healthcare 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 PHARMACEUTICALS.  Dura's strategy for 
growth is dependent, in part, upon acquiring, in-licensing and co-promoting 
pharmaceuticals to targeted physicians.  Other companies, including those 
with substantially greater resources, are competing with Dura for the rights 
to such products.  There can be no assurance that Dura will be able to 
acquire, in-license or co-promote additional pharmaceuticals on acceptable 
terms, if at all. The failure to acquire, in-license, co-promote, develop or 
market commercially successful pharmaceuticals would have a material adverse 
effect on the Company's business, financial condition and results of 
operations.  Furthermore, there can be no assurance that Dura, once it has 
obtained rights to a pharmaceutical and committed to payment terms, will be 
able to generate sales sufficient to create a profit or otherwise avoid a 
loss on such product.

DEVELOPMENT RISKS ASSOCIATED WITH SPIROS-Registered Trademark-.  Spiros will 
require significant additional development efforts.  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 
any Spiros product to be safe or efficacious or that any Spiros product will 
receive regulatory approval in a timely manner, if at all.  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 any Spiros product to receive timely regulatory approval and 
achieve commercial success would have a material adverse effect on the 
Company's business, financial condition or results of operations.

CUSTOMER CONCENTRATION; CONSOLIDATION OF DISTRIBUTION NETWORK.  The 
distribution network for pharmaceutical products is largely controlled by a 
few large wholesale distributors, and, in recent years, the number of 
independent and small chain drug stores 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 Dura.  Further


                                        11


<PAGE>

consolidation or financial difficulties could also cause customers to reduce 
their inventory levels or otherwise reduce purchases of Dura's products which 
could result in a material adverse effect on Dura's business, financial 
condition or results of operations. 

Dura's principal customers are wholesale drug distributors and major drug 
store chains.  For the first quarter of 1998, one wholesale customer 
(McKesson Corporation) accounted for 10% of sales. For the first quarter of 
1997, four wholesale customers (Bergen Brunswig Corporation, Cardinal Health, 
Inc., McKesson Corporation, and AmeriSource) individually accounted for 18%, 
17%, 15%, and 14% of sales, respectively.  For fiscal 1997, McKesson 
Corporation and Cardinal Health, Inc. each individually accounted for 11% of 
sales.

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 Dura's results of 
operations in the past.  While the growth and productivity of Dura's sales 
force and the introduction by Dura of new products have historically 
mitigated the impact of seasonality on Dura's results of operations, recent 
product acquisitions by Dura, especially Keftab-Registered Trademark- and 
Ceclor-Registered Trademark-CD, which are used to treat respiratory 
infections, increase the impact of seasonality on Dura's results of 
operations.  No assurances can be given that Dura'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 Dura, are engaged in developing, marketing and selling 
products that compete with those offered or planned to be offered by Dura.  
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 Dura's current or future products.  The industry 
is characterized by rapid technological change, and competitors may develop 
their products more rapidly than Dura.  Competitors may also be able to 
complete the regulatory process sooner, and therefore, may begin to market 
their products in advance of Dura's products.  Dura 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 ("COPD") 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, individual dose and multiple dose.  Individual dose 
DPIs currently marketed in the U.S. include the Rotohaler-TM- (developed and 
marketed by Glaxo Wellcome ("Glaxo")) and the Spinhaler-Registered Trademark- 
(developed and marketed by Fisons Limited).  The Turbuhaler-Registered 
Trademark- (developed and marketed by Astra Pharmaceuticals, Inc. ("Astra")), 
a multiple dose DPI, is the leading DPI in worldwide sales.  In June 1997, 
the Food and Drug Administration ("FDA") approved the first 


                                         12


<PAGE>


Turbuhaler product, the Pulmicort Turbuhaler, for marketing in the U.S., 
which Astra launched in early 1998.  Recently the FDA also approved two 
multiple dose DPIs developed by Glaxo.

DEPENDENCE ON THIRD PARTIES.  Dura'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 Dura 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 Dura's competitors.  Dura 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 Dura's 
products is subject to Good Manufacturing Practice ("cGMP") regulations 
prescribed by the FDA.  Dura relies on a single manufacturer for each of its 
products.  There can be no assurance that Dura 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 Dura will be able to 
enter into agreements for the manufacture of future products, including 
Spiros products, with manufacturers whose facilities and procedures comply 
with cGMP and other regulatory requirements.  In the event that Dura is 
unable to obtain or retain third-party manufacturing, it may not be able to 
commercialize its products as planned.  Dura's current dependence upon others 
for the manufacture of its products may adversely affect future profit 
margins on the sale of those products and Dura's ability to develop and 
deliver products on a timely and competitive basis. 

LIMITED MANUFACTURING EXPERIENCE.  Dura's principal manufacturing facility is 
intended to be used to formulate, mill, blend and manufacture drugs to be 
used with Spiros, pending regulatory approval. Equipment purchases and 
validation are currently scheduled through 1998.  Dura's manufacturing 
facility must be registered with and licensed by various regulatory 
authorities and must comply with current cGMP requirements prescribed by the 
FDA and the State of California.  Dura will need to significantly scale up 
its current manufacturing operations and comply with cGMPs and other 
regulations prescribed by various regulatory agencies in the U.S. and other 
countries to achieve the prescribed quality and required levels of production 
of such products to obtain marketing approval.  Any failure or significant 
delay in the validation of or obtaining a satisfactory regulatory inspection 
of the new facility, failure to successfully scale up or failure to maintain 
necessary regulatory approvals for such facilities could have a material 
adverse effect on the ability of Dura 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 limited numbers of 
generators and will be required to significantly scale up their activities 
and to produce components on a timely and consistent basis and which meet 
applicable specifications.  There can be no assurance that such third parties 
will be successful in attaining acceptable service levels or meeting cGMP 
requirements.  Any failure or delay in the scale up of 


                                        13


<PAGE>

aerosol generator manufacturing would have a material adverse effect on the 
ability of Dura to commercialize Spiros products. 

MANAGING GROWTH OF BUSINESS.  Dura has experienced significant growth as 
total revenues increased 102% in 1996, 74% in 1997, and 19% for the first 
quarter of 1998 as compared to prior periods, primarily as a result of the 
acquisition and in-licensing of additional respiratory pharmaceutical 
products.  Due to Dura's emphasis on acquiring and in-licensing respiratory 
pharmaceutical products, Dura anticipates that the integration of the 
recently acquired products, as well as any future acquisitions, will require 
significant management attention and expansion of its sales force.  On 
February 22, 1998, the Company announced that it planned to begin expanding 
its sales force immediately from approximately 270 representatives to over 
450 representatives by the end of 1998 to increase the promotional activity 
of its current products and to prepare for the launch, subject to receiving 
regulatory approval, of Albuterol Spiros.  Dura'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.  Dura has 
experienced significant operating losses in the past and at March 31, 1998, 
Dura's accumulated deficit was $156.5 million.  The acquisition and 
in-licensing of products, the expansion and maintenance of Dura's sales force 
in response to acquisition, in-licensing, and enhanced promotion of products 
and planned introduction of Spiros products, the upgrade and expansion of its 
facilities, continued pricing pressure on its pharmaceutical products, or the 
exercise of the Stock Purchase Option or Product Options (defined below) will 
require the commitment of substantial capital resources and may also result 
in significant impairment of profits, or losses.  Depending upon, among other 
things, the acquisition and in-licensing opportunities available, Dura may 
need to raise additional funds for these purposes.  Adequate funds for these 
purposes may not be available when needed or on terms acceptable to Dura.  
Insufficient funds may require Dura to delay, scale back or suspend some or 
all of its product acquisition, in-licensing and promotional programs, the 
upgrade and expansion of its facilities, or the potential exercise of the 
Stock Purchase Option and/or the Product Options.  Dura 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 the next 
12 months. 

EFFECT OF EXERCISE OF THE STOCK PURCHASE OPTION AND THE PRODUCT OPTIONS; 
DILUTION.  Dura has a purchase option with respect to the outstanding shares 
of callable common stock of Spiros Corp. II which expires on December 31, 
2002 ("Stock Purchase Option").  If Dura exercises the Stock Purchase Option, 
it will be required to make a substantial cash payment or to issue shares of 
Dura common stock, or both.  A payment in cash would reduce Dura's capital 
resources.  A payment in shares of Dura common stock would result in a 
decrease in the percentage ownership of Dura's shareholders at that time.  
The exercise of the Stock Purchase Option will likely require Dura to record 
a significant charge to earnings and may adversely impact future operating 
results.  If Dura does not exercise the Stock Purchase Option prior to its 
expiration, Dura's rights in and to Spiros with respect to certain compounds 
will terminate. 


                                         14


<PAGE>

As part of Dura's contractual relationship with Spiros Corp. II, Dura 
received options to purchase certain rights to the use of Spiros with 
albuterol and with an additional product other than albuterol ("Product 
Options").  If Dura exercises either of the Product Options, it will be 
required to make a significant cash payment which could have an adverse 
effect on its capital resources.  Dura may not have sufficient capital 
resources to exercise the Product Options, which may result in Dura's loss of 
valuable rights. 

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.  A separate regulatory approval will need to be obtained for each 
Spiros drug delivery system.  There can be no assurance that the 
pharmaceutical products currently in development by Dura or those products 
acquired or in-licensed will be approved by the FDA.  In addition, 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 products and future products of Dura, 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 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 DESI program and will determine which drugs are considered "new drugs" 
requiring approval through a 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 
required 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 products must be removed 
from the market.  Dura 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, Dura 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 Dura's 
pharmaceutical products or whether Dura will be 


                                         15


<PAGE>

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 business of Dura.  Dura's Health Script Pharmacy Services, 
Inc. ("Health Script") subsidiary 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.  Dura'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 Dura are covered by 
patents.  Dura 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 
Dura, they will be enforceable or will provide substantial protection from 
competition or be of commercial benefit to Dura or that Dura 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 Dura will also depend upon avoiding the infringement of 
patents issued to competitors and upon maintaining the technology licenses 
upon which certain of Dura's current products are, or any future products 
under development might be, based. Litigation, which could result in 
substantial cost to Dura, may be necessary to enforce Dura's patent and 
license rights or to determine the scope and validity of proprietary rights 
of third parties.  If any of Dura's products are found to infringe upon 
patents or other rights owned by third parties, Dura 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 Dura on commercially reasonable terms, if at all.  If Dura 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.  Dura 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.

PRODUCT LIABILITY AND RECALL.  Dura faces an inherent business risk of 
exposure to product liability claims in the event that the 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 Dura 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.  Dura 
currently has product liability insurance; however, there can be no assurance 
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 


                                        16


<PAGE>

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 Dura. 

ATTRACTION AND RETENTION OF KEY PERSONNEL.  The Company is highly dependent 
on the principal members of its management staff, the loss of whose services 
might impede the achievement of corporate objectives. Although the Company 
believes that it is adequately staffed in key positions and that it will be 
successful in 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.  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.

TERMINATION OF MERGER AGREEMENT WITH SCANDIPHARM, INC.  On December 1, 1997, 
the Company terminated a merger agreement with Scandipharm, Inc. 
("Scandipharm") entered into on October 20, 1997.  On January 16, 1998, 
Scandipharm filed suit against the Company for breach of contract.  On 
January 19, 1998, the Company filed suit against Scandipharm seeking a 
declaratory judgment that Dura's termination of the merger did not breach the 
merger agreement, and for damages against Scandipharm.  The Company believes 
that it had the right to terminate the merger agreement and that 
Scandipharm's claims for specific performance under the agreement or for 
unspecified damages are without merit, and that outcome of this matter will 
not have a material adverse effect on the Company's financial position or 
results of operations. 

CHANGE IN CONTROL.  Certain provisions of Dura's charter documents and terms 
relating to the acceleration of the exercisability of certain warrants and 
options in the event of a change in control may have the effect of delaying, 
deferring or preventing a change in control of Dura, thereby possibly 
depriving shareholders of receiving a premium for their shares of the Dura 
common stock. In addition, upon a Change in Control (as defined), Dura will 
be required to offer to purchase for cash all of the outstanding 31/2% 
Convertible Subordinated Notes (the "Notes") at a purchase price of 100% of 
the principal amount thereof, plus accrued but unpaid interest through the 
Change in Control Purchase Date (as defined).  The Change in Control purchase 
features 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 
Dura would have sufficient funds to pay the Change in Control Purchase Price 
(as defined) for 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 DURA STOCK PRICE.  The market prices for securities of emerging 
companies, including Dura, have historically been highly volatile.  Future 
announcements concerning Dura or its competitors may have a significant 
impact on the market price of the Dura common stock.  Such announcements 
might include financial results, the results of testing, regulatory 
developments, 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 Dura's products. 

                                       17


<PAGE>

ABSENCE OF DIVIDENDS.  The Company has never paid any cash dividends on its 
common stock.  In accordance with a bank loan agreement, Dura is prohibited 
from paying cash dividends without prior bank approval.  Dura 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. 

YEAR 2000 COMPLIANCE CONSIDERATIONS.  The Company recognizes the need to 
ensure its operations will not be adversely impacted by the inability of the 
Company's systems to process data having dates on or after January 1, 2000 
("Year 2000"). Processing errors due to software failure arising from 
calculations using the Year 2000 date are a recognized risk.  The Company is 
currently addressing the risk, with respect to the availability and integrity 
of its financial systems and the reliability of its operating systems, and is 
in the process of communicating with suppliers, customers, financial 
institutions and others with whom it conducts business to assess whether they 
are or will be Year 2000 compliant.  While the Company believes its planning 
efforts are adequate to address the Year 2000 concerns, there can be no 
assurance that the systems of other companies on which the Company's systems 
and operations rely will be converted on a timely basis and will not have a 
material effect on the Company. In addition, the potential impact of the Year 
2000 on others with whom the Company does business and any resulting effects 
on the Company cannot be reasonably estimated at this time.  The cost of the 
Company's Year 2000 initiatives is not expected to be material to the 
Company's results of operations or financial position.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.



                            PART II - OTHER INFORMATION


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     EXHIBIT NO.

     11   Statements re Computations of Net Income Per Share

     27   Financial Data Schedule

(b)  Reports on Form 8-K
          
     On January 5, 1998, the Company filed a Current Report on Form 8-K dated
     December 19, 1997.


                                        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.

                                          DURA PHARMACEUTICALS, INC.

DATE   MAY 6, 1998                        /S/ JAMES W. NEWMAN
                                          --------------------------
                                          (JAMES W. NEWMAN)
                                          Senior Vice President,
                                            Finance & Administration 
                                            and Chief Financial Officer
                                          (Principal Financial and 
                                            Accounting Officer)


                                          19


<PAGE>


                                   EXHIBIT INDEX
                                         TO
                                     FORM 10-Q


                             DURA PHARMACEUTICALS, INC.

EXHIBIT  NO.   DESCRIPTION

    11         Statements re Computations of Net Income Per Share

    27         Financial Data Schedule