<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, 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)

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

5880 PACIFIC CENTER 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 1,
1997 was 43,522,286.

     None

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


<PAGE>

                          DURA PHARMACEUTICALS, INC.
                                    INDEX

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

Item 1.  Financial Statements

         Consolidated Balance Sheets -
           December 31, 1996 and March 31, 1997.....................         3
         Consolidated Statements of Operations -
           Three months ended March 31, 1996 and 1997...............         4
         Consolidated Statements of Cash Flows -
           Three months ended March 31, 1996 and 1997...............         5
         Notes to Consolidated Financial Statements.................       6-7
Item 2.  Management's Discussion and Analysis of Financial 
           Condition and Results of Operations......................       7-10
         Risks and Uncertainties....................................      10-17

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
                             DOLLARS IN THOUSANDS

<TABLE>
<CAPTION>

ASSETS                                                             DECEMBER 31,      MARCH 31,
                                                                       1996             1997
                                                                   ------------     ----------
                                                                                    (unaudited)
<S>                                                                 <C>              <C>
CURRENT ASSETS:
   Cash and cash equivalents. . . . . . . . . . . . . . . . . .      $  131,101      $  63,059
   Short-term investments . . . . . . . . . . . . . . . . . . .         109,244        193,789
   Accounts and other receivables . . . . . . . . . . . . . . .          24,092         19,027
   Inventory  . . . . . . . . . . . . . . . . . . . . . . . . .           7,544          8,305
                                                                    -----------     -----------
      Total current assets. . . . . . . . . . . . . . . . . . .         271,981        284,180
 
PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . .          27,500         30,765
LICENSE AGREEMENTS AND PRODUCT RIGHTS . . . . . . . . . . . . .         186,750        184,485
GOODWILL. . . . . . . . . . . . . . . . . . . . . . . . . . . .           6,630          6,517
OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,809         12,200
                                                                    -----------     ----------
      Total . . . . . . . . . . . . . . . . . . . . . . . . . .      $  504,670     $  518,147
                                                                    -----------     ----------
                                                                    -----------     ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES: 
   Accounts payable and accrued liabilities . . . . . . . . . .      $   25,819      $  27,269
   Current portion of long-term obligations . . . . . . . . . .          26,298         26,346
                                                                    -----------     ----------
      Total current liabilities . . . . . . . . . . . . . . . .          52,117         53,615

LONG-TERM OBLIGATIONS . . . . . . . . . . . . . . . . . . . . .           6,670          6,789
OTHER NON-CURRENT LIABILITIES . . . . . . . . . . . . . . . . .           2,306          2,710
                                                                    -----------     ----------
      Total liabilities . . . . . . . . . . . . . . . . . . . .          61,093         63,114
                                                                    -----------     ----------

SHAREHOLDERS' EQUITY:
   Preferred stock, no par value, shares authorized - 5,000,000;
      no shares issued or outstanding
   Common stock, no par value, shares authorized - 100,000,000;
      issued and outstanding - 43,183,591 and 43,522,286,
      respectively . . . . . . . . . . . . . . . . . . . . . . .        525,350        528,069
   Accumulated deficit . . . . . . . . . . . . . . . . . . . . .        (78,992)       (70,205)
   Unrealized gain (loss) on investments . . . . . . . . . . . .            (38)          (503)
   Warrant subscriptions receivable. . . . . . . . . . . . . . .         (2,743)        (2,328)
                                                                    -----------     ----------
      Total shareholders' equity . . . . . . . . . . . . . . . .        443,577        455,033
                                                                    -----------     ----------
      Total. . . . . . . . . . . . . . . . . . . . . . . . . . .     $  504,670     $  518,147
                                                                    -----------     ----------
                                                                    -----------     ----------
</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 
                                                                          MARCH 31,
                                                                  ------------------------
                                                                     1996           1997
                                                                  ---------      ---------
<S>                                                               <C>            <C>
REVENUES:
   Sales  . . . . . . . . . . . . . . . . . . . . . . . . .       $  14,055      $  33,935
   Contract . . . . . . . . . . . . . . . . . . . . . . . .           4,532          6,958
                                                                  ---------      ---------
      Total revenues. . . . . . . . . . . . . . . . . . . .          18,587         40,893
                                                                  ---------      ---------

OPERATING COSTS AND EXPENSES:
   Cost of sales  . . . . . . . . . . . . . . . . . . . . .           3,623          7,970
   Clinical, development and regulatory . . . . . . . . . .           3,399          5,761
   Selling, general and administrative. . . . . . . . . . .           7,853         15,992
                                                                  ---------      ---------
      Total operating costs and expenses. . . . . . . . . .          14,875         29,723
                                                                  ---------      ---------

OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . .           3,712         11,170
                                                                  ---------      ---------

OTHER:
   Interest income. . . . . . . . . . . . . . . . . . . . .             909          3,387
   Other (net). . . . . . . . . . . . . . . . . . . . . . .            (294)          (153)
                                                                  ---------      ---------
      Total other   . . . . . . . . . . . . . . . . . . . .             615          3,234
                                                                  ---------      ---------

INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . .           4,327         14,404
PROVISION FOR INCOME TAXES. . . . . . . . . . . . . . . . .             270          5,617
                                                                  ---------      ---------

NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . .       $   4,057      $   8,787
                                                                  ---------      ---------
                                                                  ---------      ---------

NET INCOME PER SHARE. . . . . . . . . . . . . . . . . . . .       $    0.11      $    0.19

WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
   EQUIVALENT SHARES. . . . . . . . . . . . . . . . . . . .          35,700         47,240

</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,
                                                                    -----------------------
                                                                      1996          1997
                                                                    --------      ---------
<S>                                                                 <C>           <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES  . . . . . . . . .        $  4,381      $  19,809
                                                                    --------      ---------
INVESTING ACTIVITIES:
   Purchases of short-term investments . . . . . . . . . . .         (14,531)      (126,131)
   Sales and maturities of short-term investments. . . . . .          15,683         41,121
   Purchases of long-term investments. . . . . . . . . . . .          (5,000)
   Capital expenditures. . . . . . . . . . . . . . . . . . .          (1,744)        (3,835)
   Other   . . . . . . . . . . . . . . . . . . . . . . . . .            (229)          (416)
                                                                    --------      ---------
      Net cash used for investing activities . . . . . . . .          (5,821)       (89,261)
                                                                    --------      ---------
FINANCING ACTIVITIES:
Issuance of common stock and warrants. . . . . . . . . . . .             989          1,410
   Principal payments on notes payable . . . . . . . . . . .             (95)
   Principal payments on other long-term obligations . . . .          (4,000)
                                                                    --------      ---------
      Net cash provided by (used for) financing activities .          (3,106)         1,410
                                                                    --------      ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . .          (4,546)       (68,042)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . .          25,554        131,101
                                                                    --------      ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . .        $ 21,008      $  63,059
                                                                    --------      ---------
                                                                    --------      ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest (net of amounts capitalized). . . . . . . . . .      $     48      $       0
      Income taxes . . . . . . . . . . . . . . . . . . . . . .      $     23      $     338
</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.

2.  INCOME TAXES

The provisions for income taxes for the quarters ended March 31, 1996 and 1997
reflect the expected combined Federal and state tax rates offset by the benefit
from the utilization of net operating loss carryforwards.  For the period ended
March 31, 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 common stock.

3.  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.  Net income per
share is unchanged on a fully diluted basis for both periods presented.  Net
income per share for the three months ended March 31, 1996 has been restated to
reflect the Company's two-for-one stock split effective July 1, 1996.

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 

                                      6

<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 
months ended March 31, 1996 and 1997, basic and diluted net income per share 
would have been as follows:

                                              1996              1997
                                             -----             -----
Net income per share - basic                 $0.13             $0.20
Net income per share - diluted               $0.11             $0.19

4.  SUBSEQUENT EVENTS

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.

On May 7, 1997, the Company acquired from Syntex (USA), Inc., and other 
members of the Roche Group, the 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 
are due through December 1998, subject to the products remaining without a 
competing nasal formulation of flunisolide.

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

On September 5, 1996, the Company acquired from Eli Lilly and Company 
("Lilly") the U.S. marketing rights in perpetuity to the patented antibiotics 
Keftab-Registered Trademark- and Ceclor-Registered Trademark- CD.  The 
purchase price consisted of $100.0 million paid in cash at closing plus 
additional future contingent payments (see Liquidity and Capital Resources 
below).  The Company began marketing Keftab-Registered Trademark- in 
September 1996, and launched Ceclor-Registered Trademark- CD in late October 
1996.

                                      7

<PAGE>

On July 3, 1996, the Company acquired from Procter & Gamble Pharmaceuticals, 
Inc. the worldwide rights in perpetuity to the Entex-Registered 
Trademark-products, consisting of four prescription upper respiratory drugs.  
The purchase price of $45.0 million consisted of $25.0 million in cash paid 
at closing and $20.0 million due on July 3, 1997.  The Company began 
marketing the Entex-Registered Trademark-products in July 1996.

The acquisition of the above product rights has a material impact on the
Company's financial position and results of operations.

RESULTS OF OPERATIONS

Total revenues for the first quarter of 1997 were $40.9 million, an increase 
of $22.3 million, or 120%, compared to the first quarter of 1996.  Net income 
for the first quarter of 1997 was $8.8 million, or $0.19 per share, compared 
to $4.1 million, or $0.11 per share, for the first quarter of 1996. 

Pharmaceutical sales in the first quarter of 1997 increased by $19.8 million, 
or 141%, to $33.9 million from $14.1 million in the first quarter of 1996.  
The increase was due primarily to sales generated in the first quarter of 
1997 from Entex-Registered Trademark- products, acquired July 3, 1996, and 
Ceclor-Registered Trademark- CD and Keftab-Registered Trademark- products, 
acquired September 5, 1996. 

Gross profit (pharmaceutical sales less cost of sales) for the first quarter 
of 1997 increased by $15.6 million, or 149%, to $26.0 million from $10.4 
million in first quarter of 1996.  Gross profit as a percentage of sales 
increased to 77% in the first quarter of 1997 from 74% in the first quarter 
of 1996.  This increase is due to higher gross margins earned on sales of 
Entex-Registered Trademark-, Ceclor-Registered Trademark- CD, and 
Keftab-Registered Trademark- products. 

Contract revenues in the first quarter of 1997 increased by $2.5 million, or
54%, to $7.0 million from $4.5 million in the first quarter of 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.  Contract revenues from Spiros-related development and
feasibility agreements generated $6.8 million, including $5.5 million from
Spiros Development Corporation ("Spiros Corp."), for the first quarter of 1997,
as compared to $4.1 million, including $3.7 million from Spiros Corp., in the
first quarter of 1996.  Contract revenues from royalties were $167,000 in the
first quarter of 1997, as compared to $390,000 for the first quarter of 1996.

Clinical, development and regulatory expenses for the first quarter of 1997
increased by $2.4 million, or 69%, to $5.8 million from $3.4 million in the
first quarter of 1996. The increase reflects 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 first quarter of 1997
increased by $8.1 million, or 105%, to $16.0 million from $7.9 million in the
first quarter of 1996, but decreased as a percentage of total revenues to 39% in
the first quarter of 1997 from 42% in the first quarter of 

                                      8

<PAGE>

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 first quarter of 1997 increased by $2.5 million as
compared to the first quarter of 1996 due to cash generated primarily from
public stock offerings in May and November 1996. 

The Company's effective tax rate increased to 39% in the first quarter of 1997
compared to 6% in the first quarter of 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 previously granted stock
options; accordingly, the related benefit from their utilization will be
credited to common equity.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments increased by $16.5 million 
to $256.8 million at March 31, 1997 from $240.3 million at December 31, 1996. 
The increase is due primarily to cash generated from operations, partially 
offset by capital expenditures of $3.8 million. Working capital increased by 
$10.7 million to $230.6 million at March 31, 1997 from $219.9 million at 
December 31, 1996. As discussed in note 4 to the consolidated financial 
statements, on May 7, 1997 the Company acquired the intranasal steroid 
products Nasarel-Registered Trademark- and Nasalide-Registered Trademark- for 
$70 million in cash plus additional contingent payment amounts.

At March 31, 1997, the Company had an aggregate of $33.0 million in long-term 
obligations, of which $26.3 million is to be paid during 1997. At May 7, 
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 $50.0 million on an unsecured basis through May 1, 1999. 

The Company provides development and management services to Spiros Corp.
pursuant to various agreements for the development of Spiros Corp.'s dry powder
drug delivery technology.  Dura records contract revenues from Spiros Corp.
equal to amounts due for such services, less a pro rata amount allocated to a
warrant subscription receivable.  The Company has a purchase option to acquire
all of the shares of Spiros Corp. which is exercisable through December 31,
1999, at predetermined prices, payable at the Company's option in cash or common
stock or a combination thereof.  In addition, the Company has an option, through
specified dates, to acquire Spiros Corp.'s exclusive rights for use of Spiros
with albuterol in the cassette version for a minimum of $15.0 million in cash.

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 operations and working capital through at least
March 1998.  Significant additional resources, 

                                      9

<PAGE>

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.  

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 right 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 

                                      10

<PAGE>

a material adverse effect on the Company.  Furthermore, there can be no 
assurance that the Company, once it has obtained 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-TM- - Spiros will require significant
additional 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 - In September 1996, the Company
acquired from Lilly exclusive U.S. rights to market and distribute Keftab-
Registered Trademark- and Ceclor-Registered Trademark- CD and entered into a
manufacturing agreement with Lilly which terminates in certain circumstances.
Any interruption in the supply of Keftab or Ceclor CD from Lilly 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.

Both Keftab and Ceclor CD are antibiotics, and the Company has limited
experience in marketing such products. There can be no assurance that the
Company will be able to successfully market and distribute Keftab or that Keftab
will continue to be accepted by the market at the levels previously achieved by
Lilly or at a level sufficient to maintain growth of the product.  In addition,
Ceclor CD has not previously been marketed to physicians, and no assurance can
be given that the Company will be able to successfully compete with currently
available products. Failure to successfully market and sell Keftab and Ceclor CD
would have a material adverse effect on the Company's business, financial
condition and results of operations. 

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.

Dura's customers include McKesson Drug Company, Bergen Brunswig Drug Company,
Cardinal Health Inc., Bindley Western Drug Company and major drug store chains. 
For the first quarter of 1997, four wholesale customers individually accounted
for 18%, 17%, 15% and 14% of sales.  For 1996, three wholesale customers
individually accounted for 17%, 14% and 13% of 

                                      11

<PAGE>

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 during 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 product
acquisitions by the Company 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 Dura, are engaged in developing, marketing and selling
products that compete with those 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
Dura's current or future products.  The industry is characterized by rapid
technological changes, 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 delivery systems aimed at the asthma and allergy,
cough and cold markets will be based on, among other things, product efficacy,
safety, reliability, availability and price.

Dura directly competes with at least 25 other companies in the U.S. which 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 are
marketed, including the Rotohaler (developed and marketed by Glaxo Wellcome,
Inc.) and the Spinhaler (developed and marketed by Fisons Limited).  The
Turbuhaler (developed and marketed by Astra Pharmaceuticals), a multiple dose
DPI and the leading DPI in worldwide sales, is considered the current industry
standard.  It is not yet marketed in the U.S., although the Food and Drug
Administration ("FDA") has issued an approvable letter for the first Turbuhaler
product.  

DEPENDENCE ON THIRD PARTIES; LIMITED MANUFACTURING EXPERIENCE - 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, 

                                      12

<PAGE>

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.

In June 1995, the Company completed construction of its manufacturing 
facility located in a Company-owned building adjacent to its headquarters.  
The Company is currently expanding its facilities to provide additional 
manufacturing capabilities.  The facility initially 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 1997.  The Company's manufacturing facility must be 
registered with and licensed by various regulatory authorities and comply 
with cGMP requirements prescribed by the FDA and the State of California.  
Any failure or significant delay in the validation of or obtaining a 
satisfactory regulatory inspection of the new facility could have a material 
adverse effect on the Company's ability to manufacture products in connection 
with Spiros.  

MANAGING GROWTH OF BUSINESS - The Company has experienced significant growth 
as total revenues increased 58% in fiscal 1995, 102% in fiscal 1996, and 120% 
for the first quarter of 1997, as compared to prior periods.  During 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 March 31, 1997, 
the Company's accumulated deficit was $70.2 million.  Although the Company 
has achieved profitability on a annual basis in fiscal 1994, 1995 (prior to 
the charge of approximately $43.8 million in the fourth quarter of 1995 in 
connection with the exercise of its option to purchase all of the outstanding 
stock of Dura 

                                      13

<PAGE>

Delivery Systems, Inc. and its cash contributions to Spiros Corp.), 1996, and 
in the first quarter of 1997, there can be no assurance that revenue growth 
or profitability will continue on an annual or quarterly basis in the future. 
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 potential exercise of 
the Spiros Purchase Option or the Albuterol Purchase Option (as defined 
below), as well as funds that Dura, at its option, may provide for Spiros 
development, both internally and through Spiros Corp., 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 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 
prevent some or all of its product acquisition and in-licensing programs, the 
upgrade and expansion of its facilities, the potential exercise of the Spiros 
Purchase Option and/or the Albuterol Purchase Option 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 March 1998.  

POTENTIAL EXERCISE OF PURCHASE OPTIONS FOR SPIROS CORP. CALLABLE COMMON STOCK 
AND ALBUTEROL PRODUCT; DILUTION - Dura has a purchase option with respect to 
all of the currently outstanding shares of callable common stock of Spiros 
Corp.("Spiros Purchase Option").   If Dura exercises the Spiros Purchase 
Option, it will be required to make a substantial cash payment or to issue 
shares of its common stock, or both.  A payment in cash would reduce Dura's 
capital resources. A payment in shares of common stock would result in a 
decrease in the percentage ownership of Dura's shareholders at that time.  
The exercise of the Spiros 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 Spiros Purchase Option prior to its 
expiration, the Company's rights in and to Spiros with respect to certain 
compounds will terminate.  Dura also has the option to provide funding for 
Spiros development in certain circumstances. Dura believes that the current 
funds of Spiros Corp. will be sufficient to fund product development by 
Spiros Corp. through 1997. Development of Spiros Corp. products will require 
significant additional funds.

As part of the Company's contractual relationship with Spiros Corp., the 
Company received an option to purchase certain rights to an albuterol product 
in a cassette version of Spiros ("Albuterol Purchase Option") exercisable at 
any time through the earlier of 60 days after FDA approval of such albuterol 
product or December 31, 1999.  If the Company exercises the Albuterol 
Purchase Option, it will be required to make a cash payment of at least $15.0 
million which could have an adverse effect on its capital resources.  The 
Company may not have sufficient capital resources to exercise the Albuterol 
Purchase Option which may result in the Company's loss of valuable rights.  
In addition, continuation of development and commercialization of an 
albuterol product in a cassette version of Spiros may require substantial 
additional expenditures by Dura.  Dura has not made any determination as to 
the likelihood of its exercise of the Spiros Purchase Option or the Albuterol 
Purchase Option.  

                                      14

<PAGE>

GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL - Development, testing, 
manufacturing and marketing of the Company's products 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 must undergo rigorous preclinical and clinical testing and an 
extensive regulatory approval process mandated by the FDA.  Marketing of drug 
delivery systems also requires FDA approval, which can be costly and time 
consuming to obtain.  The Company will need to obtain regulatory approval for 
each drug to be delivered through the use of Spiros.  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, there can be no assurance that all necessary clearances will be 
granted to the Company or its licensors for future products or that FDA 
review or actions will not involve delays adversely affecting the marketing 
and sale of the Company's 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.  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 issued by the FDA indicates
that the FDA will implement procedures to determine whether the new drug
provisions are applicable to existing products.  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.  There can be no assurance as to which of these
courses the FDA will require, if any, with respect to most 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 of these actions are taken by
the FDA, such actions could have a material adverse effect on the Company's
business.  In addition, the Company's Tornalate Metered Dose Inhaler uses
chlorofluorocarbon ("CFC") propellants.  If CFCs are banned for use in the
Tornalate Metered Dose Inhaler, then the Company will not be able to market that
product for sale.  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 - 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
four of the pharmaceuticals currently marketed by the Company are 

                                      15

<PAGE>

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.

PRODUCT LIABILITY AND RECALL - The Company 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 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 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 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 management staff, the loss of whose services might
impede the achievement of development 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, 

                                      16

<PAGE>

technical and management personnel could have a material adverse effect on 
the Company, especially in light of the Company's recent significant growth.

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 certain bank loan agreements, the Company is
restricted 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.

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 shareholders of
receiving a premium for their shares of the common stock. 

                                      17

<PAGE>

                         PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K
        (a)  Exhibits.

             Exhibit
             Number
             -------

             11    Statements re Computations of Net Income Per Share
             27    Financial Data Schedule

        (b)  Reports on Form 8-K

             No Reports on Form 8-K were filed during the quarter ended 
             March 31, 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 14, 1997                /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                                     







                                      20