<PAGE>
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                       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, 1999.

[ ]        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 March
31, 1999 was 44,104,851.

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<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

                          DURA PHARMACEUTICALS, INC.
                          CONSOLIDATED BALANCE SHEETS
                       In thousands, except share amounts

<TABLE>
<CAPTION>
                                                                           March 31,         December 31,
                                                                             1999                1998
                                                                           ---------         ------------
ASSETS                                                                    (unaudited)
<S>                                                                        <C>                <C>
Current assets:                                                                         
  Cash and cash equivalents                                                $  57,575          $  31,113
  Short-term investments                                                     218,620            238,299
  Accounts and other receivables                                              33,616             24,627
  Inventory                                                                   11,827              9,006
                                                                           ---------          ---------
           Total current assets                                              321,638            303,045
                                                                                        
License agreements and product rights                                        366,539            377,250
Property                                                                      87,533             85,374
Other assets                                                                  65,869             59,790
                                                                           ---------          ---------
Total                                                                      $ 841,579          $ 825,459
                                                                           ---------          ---------
                                                                           ---------          ---------
                                                                  
LIABILITIES AND SHAREHOLDERS' EQUITY                              
                                                                  
Current liabilities:                                              
  Accounts payable                                                         $   8,801          $   8,893
  Accrued liabilities                                                         57,697             46,557
  Current portion of long-term obligations                                     5,846              6,798
                                                                           ---------          ---------
     Total current liabilities                                                72,344             62,248
                                                                  
Convertible subordinated notes                                               287,500            287,500
Other long-term obligations                                                   62,862             65,339
                                                                           ---------          ---------
     Total liabilities                                                       422,706            415,087
                                                                           ---------          ---------
                                                        
Shareholders' equity:                                   
  Preferred stock, par value $.001, shares authorized - 5,000,000; no
    shares issued or outstanding                        
  Common stock, par value $.001, shares authorized - 200,000,000;
    issued and outstanding - 44,104,851 and 44,083,652, respectively              44                44
  Additional paid-in capital                                                 607,667           607,436
  Accumulated other comprehensive income                                         227               454
  Warrant subscriptions receivable                                            (8,654)           (9,385)     
  Accumulated deficit                                                       (153,185)         (160,951)   
  Treasury stock, at cost; shares outstanding - 2,327,500                    (27,226)          (27,226)
                                                                           ---------          ---------
     Total shareholders' equity                                              418,873           410,372     
                                                                           ---------          ---------
Total                                                                      $ 841,579         $ 825,459                              
                                                                           ---------          ---------
                                                                           ---------          ---------
</TABLE>

See accompanying notes to consolidated financial statements.


                                        2
<PAGE>

                           DURA PHARMACEUTICALS, INC.                        
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    In thousands, except per share amounts
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                 March 31,
                                                            --------------------
                                                             1999         1998
<S>                                                         <C>         <C>
Revenues:
  Sales                                                     $ 55,081    $ 35,885
  Contract                                                    16,166      12,881
                                                            --------    --------
     Total revenues                                           71,247      48,766

Operating costs and expenses:
  Cost of sales                                               10,491       8,093
  Clinical, development and regulatory                        11,491       9,590
  Selling, general and administrative                         37,290      22,514
                                                            --------    --------
     Total operating costs and expenses                       59,272      40,197
                                                            --------    --------

Operating income                                              11,975       8,569
                                                            --------    --------
Other:
  Interest income                                              4,303       5,417
  Interest expense                                            (4,064)     (3,142)
  Other - net                                                   (228)         13
                                                            --------    --------
     Total other                                                  11       2,288
                                                            --------    --------

Income before income taxes                                    11,986      10,857
Provision for income taxes                                     4,220       3,693
                                                            --------    --------

Net income                                                  $  7,766    $  7,164
                                                            --------    --------
                                                            --------    --------
Net income per share:
  Basic                                                     $   0.18    $   0.16
  Diluted                                                   $   0.17    $   0.15

Weighted average number of common shares:
  Basic                                                       44,100      45,975
  Diluted                                                     45,686      48,523
</TABLE>

See accompanying notes to consolidated financial statements.


                                        3

<PAGE>

                          DURA PHARMACEUTICALS, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 In thousands
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                         Three months ended
                                                                              March 31,
                                                                         ------------------
                                                                         1999          1998
                                                                       --------     ---------
<S>                                                                    <C>          <C>
Net cash provided by operating activities                              $ 19,179     $  14,514
                                                                       --------     ---------
                                                                         
Investing activities:                                                    
    Purchases of short-term investments                                 (69,454)     (102,211)
    Sales and maturities of short-term investments                       88,907       111,351
    Capital expenditures                                                 (4,172)       (5,768)
    Product acquisitions                                                 (3,679)
    Other                                                                (4,280)         (449)
                                                                       --------     ---------
         Net cash provided by investing activities                        7,322         2,923
                                                                       --------     ---------
                                                                         
Financing activities:                                                    
    Issuance of common stock and warrants - net                             961         2,194
    Principal payments on long-term obligations                          (1,000)
                                                                       --------     ---------
         Net cash provided by (used for) financing activities               (39)        2,194
                                                                       --------     ---------
Net increase in cash and cash equivalents                                26,462        19,631
Cash and cash equivalents at beginning of period                         31,113        72,003
                                                                       --------     ---------
Cash and cash equivalents at end of period                             $ 57,575     $  91,634
                                                                       --------     ---------
                                                                       --------     ---------
                                                                         
Supplemental disclosure of cash flow information:                        
    Cash paid during the period for:                                     
         Interest (net of amounts capitalized)                         $  6,494     $   5,272
         Income taxes                                                  $    281     $     370
</TABLE>

See accompanying notes to consolidated financial statements.





                                        4


<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 
annual report on Form 10-K for the year ended December 31, 1998. 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 to the 
financial statement presentation for the three months ended March 31, 1999.

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.       REPORTING COMPREHENSIVE INCOME

Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive 
Income" ("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.

For the three months ended March 31, 1999 and 1998, comprehensive income 
consisted of (in thousands):

<TABLE>
<CAPTION>
                                                    1999              1998
                                                  -------           -------
         <S>                                      <C>               <C>
         Net income                               $ 7,766           $ 7,164
         Other comprehensive income:
              Unrealized gain(loss) on
                investments                          (227)               84
                                                  -------           -------
         Comprehensive income                     $ 7,539           $ 7,248
                                                  -------           -------
                                                  -------           -------
</TABLE>


                                        5
<PAGE>

3.       LICENSE AGREEMENTS AND PRODUCT RIGHTS

On December 31, 1998, the Company acquired from Bristol-Myers Squibb Company 
the exclusive U.S. distribution rights for the patented hospital antibiotic 
products Maxipime-R- (cefepime hydrochloride) for Injection and Azactam-R- 
(aztreonam) for Injection. The Company began selling these products effective 
January 1, 1999. The purchase price consisted of $60 million paid in cash at 
closing, payments totaling $4 million due in 1999 and a payment of $70 
million due in 2003, plus additional contingent payments due from 1999 
through 2003 based on sales of Maxipime and Azactam during that period. Based 
on historical sales data, the Company estimates that such future contingent 
payments could approximate $90 million.

4.       COMMITMENTS AND CONTINGENCIES

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 
20, 1998, the Company filed suit against Scandipharm seeking a declaratory 
judgment that Dura's termination of the merger agreement did not breach the 
agreement and for damages against Scandipharm. The Company believes that it 
had the right to terminate the merger agreement, that Scandipharm's claims in 
its lawsuit and its claims for damages are without merit, and the outcome of 
this matter will not have a material adverse effect on the Company's 
financial condition or operations.

SHAREHOLDER CLASS ACTION LITIGATION - Commencing on January 27, 1999, several 
class action suits were filed against the Company, various current or former 
officers and directors of the Company, and one of the Company's investment 
bankers in the United States District Court for the Southern District of 
California. The lawsuits allege violations of the federal securities laws, 
and purport to seek damages on behalf of a class of shareholders who 
purchased Dura common stock during a defined period. The Company believes 
that the claims in the lawsuits are without merit and intends to defend 
against them vigorously.

5.       SEGMENT INFORMATION

The Company operates in two business segments: (1) Pharmaceutical Products 
and (2) Research and Development. The Pharmaceutical Products segment markets 
prescription pharmaceutical products for the treatment of respiratory 
ailments. The Research and Development segment manages the development of 
Spiros-R-, the Company's proprietary dry powder delivery technology. Each of 
the Company's segments operates solely within the United States. Three 
wholesale customers accounted for 12%, 14%, and 16% of sales, respectively, 
for the first quarter of 1999, while one wholesale customer accounted for 10% 
of sales for the first quarter of 1998.


                                        6
<PAGE>



The following table summarizes information about the Company's operating
segments for the three months ended March 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                 Pharmaceutical    Research and
                                    Products        Development      Consolidated
<S>                     <C>        <C>               <C>               <C>
Total revenues          1999       $ 55,668          $ 15,579          $ 71,247
                        1998       $ 35,885          $ 12,881          $ 48,766
                        
Operating income        1999       $  9,442          $  2,533          $ 11,975
                        1998       $  6,176          $  2,393          $  8,569
</TABLE>




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

The following information should be read in conjunction with the consolidated 
financial statements and the accompanying notes included in Item 1 of this 
quarterly report and the audited financial statements and accompanying notes 
and Management's Discussion and Analysis of Financial Condition and Results 
of Operations for the year ended December 31, 1998 contained in our 1998 
annual report on Form 10-K. See "Risks and Uncertainties" below for trends 
and uncertainties known to us that could cause reported financial information 
not to be necessarily indicative of future results.

RECENT DEVELOPMENTS

On December 31, 1998, we acquired from Bristol-Myers Squibb Company the 
exclusive U.S. distribution rights for the patented hospital antibiotic 
products Maxipime-R- (cefepime hydrochloride) for Injection and 
Azactam-R(aztreonam) for Injection. The Company began selling these products 
effective January 1, 1999. The purchase price consisted of $60 million paid 
in cash at closing, payments totaling $4 million due in 1999 and a payment of 
$70 million due in 2003, plus additional contingent payments due from 1999 
through 2003 based on sales of Maxipime and Azactam during that period. Based 
on historical sales data, we estimate that such future contingent payments 
could approximate $90 million.

RESULTS OF OPERATIONS

Total revenues for the three months ended March 31, 1999 were $71.2 million, 
an increase of $22.5 million, or 46%, over the same period in 1998. Net 
income for the three months ended March 31, 1999 was $7.8 million, or $0.17 
per diluted share, as compared to $7.2 million, or $0.15 per diluted share, 
for the same period in 1998. The principal factors causing these results are 
discussed below.



                                        7
<PAGE>

Pharmaceutical sales for the three months ended March 31, 1999 were $55.1 
million, an increase of $19.2 million, or 53%, over 1998. This increase is 
due primarily to sales of Maxipime and Azactam (acquired in December 1998) 
and Myambutol (acquired in August 1998) and increases in sales of Ceclor-R- 
CD, Nasarel-R- and Nasalide-R- resulting from increased prescription volumes 
for those products.

Gross profit (pharmaceutical sales less cost of sales) for the three months 
ended March 31, 1999 was $44.6 million, an increase of $16.8 million, or 60%, 
over 1998. This increase is due primarily to the increase in pharmaceutical 
sales discussed above. Gross profit as a percentage of sales was 81% for the 
three months ended March 31, 1999 as compared to 77% for the same period in 
1998. The increase in the gross profit percentage is due to differences in 
product mix for the first quarter of 1999 as compared to the same period in 
1998.

Contract revenue relates primarily to amounts received by us for the 
development of our Spiros-R- system. Under agreements with several companies, 
we conduct feasibility testing and development work on various compounds for 
use with Spiros. Contract revenues include payment for feasibility and 
development work performed by us as well as milestone and technology access 
payments. Contract revenue for the three months ended March 31, 1999 was 
$16.2 million, an increase of $3.3 million, or 26%, over 1998. This increase 
is due to increased development activity conducted on behalf of Spiros 
Development Corporation II, Inc. and Eli Lilly and Company. Contract revenue 
totaled $12.2 million from Spiros Corp. II for the three months ended March 
31, 1998 as compared to $10.4 million for the same period in 1998. Contract 
revenue may fluctuate from period to period based on the level of research 
funding as well as the achievement of milestones and receipt of technology 
access payments from partners.

Clinical, development and regulatory expenses for the three months ended 
March 31, 1999 were $11.5 million, an increase of $1.9 million, or 20%, over 
1998. The increase reflects additional expenses incurred by us under 
feasibility and development agreements covering the use of various compounds 
with Spiros as discussed above.

Selling, general and administrative expenses for the three months ended March 
31, 1999 were $37.3 million, an increase of $14.8 million, or 66%, over 1998. 
These expenses increased as a percentage of total revenues to 52% for the 
three months ended March 31, 1999 as compared to 46% for 1998. The dollar and 
percentage increases are primarily due to costs incurred to support the 
expansion of our sales organization from approximately 270 field sales 
representatives in the first quarter of 1998 to approximately 400 in the 
first quarter of 1999 (increase of $7.8 million) and to promote the newly 
acquired products, Maxipime and Azactam (increase of $5.7 million). We 
anticipate that our selling, general and administrative expenses will 
increase during fiscal 1999 as we establish our hospital-based sales force of 
approximately 120 representatives and associated field management.

Interest income for the three months ended March 31, 1999 was $4.3 million, a 
decrease of $1.1 million, or 21%, from 1998. The decrease is due to lower 
balances of cash and short-term investments resulting from the acquisition of 
product rights and the repurchase of shares of our common stock in the second 
half of 1998.

                                        8
<PAGE>

Interest expense for the three months ended March 31, 1999 was $4.1 million, 
an increase of $922,000, or 29%, over 1998. The increase is primarily due to 
the amortization of the discounts recorded in connection with the 
acquisitions of Myambutol-R-, Maxipime and Azactam in the second half of 1998.

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. The Company's effective tax rate 
for the three months ended March 31, 1999 was 35%, as compared to 34% for the 
same period in 1998.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments totaled $276.2 million at 
March 31, 1999 as compared to $269.4 million at December 31, 1998. Working 
capital increased by $8.5 million from $240.8 million at December 31, 1998 to 
$249.3 million at March 31, 1999.

In the third quarter of 1997, we issued $287.5 million principal amount of 
notes due July 15, 2002 with interest payable semiannually at a coupon rate 
of 3.5%. The notes are convertible, at the option of the holder, into shares 
of common stock at any time prior to maturity or redemption at a conversion 
price of $50.635 per share.

In addition to the notes, as of March 31, 1999, we had outstanding an 
aggregate of $68.7 million in current and other long-term obligations, of 
which $5.8 million is to be paid during the next 12 months. As of March 31, 
1999, additional future contingent obligations existed relating to product 
acquisitions. Payments totaling approximately $135 million, estimated based 
on historical sales levels of the related products, are contingent upon the 
levels of future sales of certain products, and approximately $80 million are 
contingent upon the continued absence of competing formulations of certain 
products as defined in the respective agreements. Such contingent amounts are 
payable through 2004, including approximately $35 million contingently due 
within the next 12 months.

We have entered into a loan agreement which provides for the borrowing of up 
to $50 million, subject to maintaining certain financial ratios, through 
August 1, 1999. As of March 31, 1999, no borrowings have been or were 
outstanding under this agreement.

We anticipate that our existing capital resources, cash generated from 
operations and available bank borrowings will be sufficient to finance our 
operations through at least the next 12 months. Product or company 
acquisitions or in-licensing opportunities, however, may require significant 
additional resources. Such additional resources may not be available when 
needed or on terms acceptable to us. We are 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 for such acquisitions.


                                        9
<PAGE>

YEAR 2000

We utilize computer systems throughout our business to carry out our 
day-to-day operations. Beginning in 1997, we implemented a program designed 
to enable our computer operating systems to process data having dates on or 
after January 1, 2000. The program assesses our information technology 
systems as well as technology systems embedded in our facilities and 
equipment.

The first phase in our year 2000 program was to identify the systems with 
year 2000 exposure. This phase was completed during 1998. Substantially all 
the hardware and software comprising our information technology systems were 
replaced in 1997 with systems that are year 2000 compliant. Accordingly, no 
further evaluation or testing of these systems is required. We are currently 
evaluating our other systems to assess whether they are year 2000 compliant 
or, if not, whether the systems will be impacted by the change in year. When 
the evaluation phase is complete, we will assess if any remediation to these 
other systems will be necessary.

We have contacted our significant suppliers, customers, and key business 
partners to determine if our business may be affected if these parties fail 
to address their year 2000 issues. We intend to monitor the progress made by 
these parties and to address any risks arising from their failure to 
adequately prepare for the year 2000. In addition, we will test key 
interfacing data systems with our business partners to ensure that all 
measures taken to become year 2000 compliant are effective.

We are developing a contingency plan to address any year 2000 exposures from 
internal and third-party systems that may not be adequately remediated or 
replaced. While it is difficult to identify all potential year 2000 
exposures, the greatest risks to us are our inability to receive and process 
orders from our customers and our vendors' inability to supply product 
inventory. If necessary, our contingency plan will address these risks by 
identifying alternative suppliers, stocking additional inventory, and 
developing back-up systems to process sales orders.

We expect to complete our year 2000 evaluation, testing and contingency 
planning by September 30, 1999. We estimate that the aggregate costs of our 
year 2000 program will be less than $1 million, including costs incurred to 
date. This estimate excludes the cost of the information technology systems 
implemented in 1997 as the implementation was not in response to the year 
2000 issue. The majority of the costs are not expected to be incremental 
expenses but rather an allocation of existing resources. The estimated 
impact, cost, and timing of our year 2000 program are based on our best 
estimates using information currently available. These estimates may not be 
achieved, and actual results could differ materially from our plans.

RISKS AND UNCERTAINTIES

FORWARD-LOOKING STATEMENTS. We caution 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.


                                        10
<PAGE>

SPIROS-R- REQUIRES SIGNIFICANT ADDITIONAL DEVELOPMENT WHICH IS COSTLY, 
TIME-CONSUMING AND MAY NEVER BE COMMERCIALLY SUCCESSFUL. Spiros, our 
proprietary dry powder pulmonary drug delivery system, will require 
significant additional development efforts as well as clinical testing. This 
work is very costly and time consuming. Even after spending significant 
amounts of money and time, the development and commercialization, if any, of 
any Spiros product may not be successful.

BEFORE WE CAN MARKET ANY SPIROS PRODUCT, WE WILL HAVE TO OBTAIN REQUIRED 
GOVERNMENTAL APPROVALS, WHICH IS NOT ASSURED; FAILURE TO OBTAIN SUCH 
APPROVALS WOULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS. The development, 
testing, manufacturing and marketing of pharmaceutical products are subject 
to extensive regulation by governmental authorities, including the FDA. Each 
Spiros product will have to obtain approval from the FDA before that product 
can be manufactured or marketed. The review and approval process mandated by 
the FDA is very rigorous, requiring extensive preclinical and clinical 
testing as well determining manufacturing capability and product performance. 
None of the products currently in development by Dura or in collaboration 
with third parties may ever be approved by the FDA. Failure to obtain such 
approvals would have an adverse effect on our business and results of 
operations.

OUR REGULATORY APPLICATION SUBMITTED TO THE FDA FOR ALBUTEROL SPIROSTM WILL 
NOT BE APPROVED WITHOUT ADDITIONAL CLINICAL TRIALS, WHICH WILL DELAY THE 
COMMERCIALIZATION OF ALBUTEROL SPIROS. On November 4, 1998 Dura and Spiros 
Corp. II announced the receipt of a complete response letter from the FDA. 
The letter indicated that the new drug application submitted by Dura on 
behalf of Spiros Corp. II for Albuterol Spiros will not be approved unless 
certain deficiencies are addressed. The FDA requested that additional 
clinical trials on the Spiros inhaler be completed to ensure the inhaler is 
reliable and to replicate clinical outcomes of the initial trials. The FDA 
also requested that several chemistry, manufacturing and control issues, as 
well as certain electromechanical reliability issues be resolved. As a result 
of a series of meetings with the FDA, Dura and Spiros Corp. II have 
determined the requirements to address these issues to support the 
resubmission of the new drug application for Albuterol Spiros. Dura, on 
behalf of Spiros Corp. II, expects to initiate clinical trials for both 
Albuterol Spiros and Beclomethasone SpirosTM in the fourth quarter of 1999 
and to commercialize these products in 2001, pending successful development 
and FDA approval. We cannot predict or assure the successful outcome of 
additional trials to support the resubmission of the new drug application, or 
if the FDA will ever approve this new drug application.

WE WILL NEED TO SIGNIFICANTLY EXPAND OUR MANUFACTURING CAPABILITY AND COMPLY 
WITH GOVERNMENT REGULATIONS BEFORE WE CAN MANUFACTURE OUR SPIROS PRODUCT. We 
will need to significantly expand our current manufacturing operations and 
comply with current good manufacturing practices and other regulations 
prescribed by various regulatory agencies in the U.S. and other countries to 
achieve the quality and required levels of production of such products to 
obtain marketing approval. In addition, our manufacturing facility must be 
registered with and licensed by various regulatory authorities and must 
comply with current good manufacturing practice requirements prescribed by 
the FDA and the State of California. We intend to utilize third parties to 
produce components of and assemble the Spiros inhaler. Such third parties 
have only produced limited 


                                        11
<PAGE>

quantities of components and assembled limited numbers of inhalers. These 
third parties will be required to significantly scale up their activities and 
to produce components which meet applicable specifications on a timely and 
consistent basis. Such third parties may not be successful in attaining 
acceptable service levels or meeting regulatory requirements which would have 
an adverse effect on our ability to commercialize the Spiros products.

WE INTEND TO CONTINUE TO PURSUE OUR STRATEGY OF ACQUIRING COMPLEMENTARY 
PRODUCTS AND TECHNOLOGIES WHICH COULD RESULT IN SIGNIFICANT CHARGES TO 
EARNINGS AND REQUIRE THE USE OF CAPITAL RESOURCES. As part of our business 
strategy, we intend to continue to pursue the acquisition of complementary 
product rights and technologies. Such acquisitions could result in 
significant charges to earnings as well as require the use of a large amount 
of our available capital resources. Depending on the acquisition 
opportunities available and our use of existing funds to fund existing 
capital and operating needs, Dura may need to raise additional funds to 
finance such transactions. If adequate funds are not available when needed on 
terms acceptable to us, our ability to complete acquisitions could be 
limited. Further, there can be no assurance that reimbursement will be 
available to enable us to achieve market acceptance of our products or to 
maintain price levels sufficient to realize an appropriate return on our 
investment in product acquisition, in-licensing and development.

THE PHARMACEUTICAL INDUSTRY IS EXTREMELY COMPETITIVE. 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 our current or 
future products. The industry is characterized by rapid technological change, 
and competitors may develop their products more rapidly than we are able. 
Competitors may also be able to complete the regulatory process sooner, and 
therefore, may begin to market their products in advance of our products. Our 
failure to effectively respond to the competitive pressures of our industry 
would have an adverse effect on our business and results of operations.

WE NEED TO BUILD A HOSPITAL-BASED FIELD SALES FORCE BY THE END OF 1999 TO BE 
ABLE TO EFFECTIVELY MARKET OUR NEWLY ACQUIRED PRODUCTS, MAXIPIME AND AZACTAM. 
Effective January 1, 1999, we acquired the rights to two hospital-based 
products, Maxipime-R- (cefepime hydrochloride) for Injection and 
Azactam-R-(aztreonam) for Injection. In the first quarter of 1999 we built 
our acute care sales and marketing management team, and by the end of 1999 we 
expect to have an additional 120 field sales representatives and associated 
field management who will be fully dedicated to the hospital-based products. 
We may not be able to hire qualified field sales representatives with the 
necessary experience selling to hospitals. Even if we are successful in 
identifying and hiring such representatives, we may not be able to hire the 
numbers needed in the appropriate time frame. Our success with these products 
is dependent upon effectively building this sales and marketing capability.


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<PAGE>

WE COMPETE WITH MANY COMPANIES FOR THE ACQUISITION OF PRODUCT RIGHTS; FAILURE 
TO ACQUIRE PRODUCT RIGHTS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS. Our 
strategy for growth is dependent, in part, on our ability to continue to 
acquire product rights. Other companies, including those with substantially 
greater resources, are competing with us for the rights to such products. We 
may not be able to acquire, in-license or co-promote additional 
pharmaceuticals on acceptable terms, or at all. The failure to acquire, 
in-license, co-promote, develop or market commercially successful 
pharmaceuticals would have an adverse effect on our ability to achieve our 
targeted growth rates.

GROSS MARGINS ON PHARMACEUTICAL PRODUCTS MAY DECREASE AS A RESULT OF A NUMBER 
OF FACTORS OUTSIDE OUR CONTROL, WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR 
BUSINESS. We do not have proprietary protection for several of the products 
we sell and substitutes for such products are sold by other pharmaceutical 
companies. In addition, the average selling prices for many of our products 
may decline over time due to competitive and reimbursement pressures. We may 
not be successful in any efforts we take to mitigate the effect of a decline 
in average selling prices. Our commercial success will depend in part on the 
price that third-party healthcare payors, such as government and private 
health insurers and managed care organizations, are willing to pay for our 
products. Third-party payors continually challenge the pricing of medical 
products and services. Many managed care organizations limit the number of 
pharmaceutical products they approve for reimbursement. The competition 
between pharmaceutical companies to get their products approved for 
reimbursement may also result in downward pricing pressure in the industry. 
Any of these factors causing a decline in average selling prices would also 
reduce the gross margins we achieve.

ALTERNATIVE SUPPLIERS TO OUR THIRD-PARTY MANUFACTURERS MAY NOT BE AVAILABLE 
ON A TIMELY BASIS WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS. We do 
not have the capability to manufacture the pharmaceutical products we 
currently sell. As a result, we are dependent on third-party contract 
manufacturers for the supply of our products. These products are supplied 
under short-term and long-term supply agreements. If these manufacturers were 
unable to supply product, it could be difficult for us to secure alternative 
sources of supply in a timely manner. This would impair our ability to ship 
product to our customers and could have an adverse effect on our business and 
results of operations.

OUR EXERCISE OF THE SPIROS CORP. II STOCK PURCHASE OPTION MAY HAVE AN ADVERSE 
EFFECT ON OUR BUSINESS. We have a purchase option with respect to the 
outstanding shares of callable common stock of Spiros Corp. II which expires 
on December 31, 2002. We may or may not exercise this option. If we exercise 
our stock purchase option, we will be required to make a substantial cash 
payment or to issue shares of our common stock, or both. A payment in cash 
would reduce our capital resources. A payment in shares of our common stock 
would result in a decrease in the percentage ownership of our shareholders at 
that time and have a dilutive effect on future earnings per share. If we 
determine to exercise the stock purchase option, it will likely require us to 
record a significant charge to earnings. If we do not exercise our stock 
purchase option prior to its expiration in December 2002, our rights in and 
to Spiros with respect to certain compounds will terminate.

                                        13
<PAGE>

WE ALSO HOLD OPTIONS TO PURCHASE FROM SPIROS CORP. II CERTAIN RIGHTS TO 
ALBUTEROL SPIROS AND RIGHTS TO USE SPIROS WITH AN ADDITIONAL PRODUCT OTHER 
THAN ALBUTEROL. We may or may not exercise either of these options. If we 
exercise either of our product options, we will need to make a significant 
cash payment which could have an adverse effect on our capital resources. Any 
such cash payment also may result in a significant charge to our earnings in 
the period we exercise the option. We may not have sufficient capital 
resources to exercise the product options, which may result in our loss of 
valuable rights.

OUR ABILITY TO OBTAIN PATENTS AND PROTECT OUR PROPRIETARY RIGHTS IS UNCERTAIN 
AND COULD RESULT IN AN ADVERSE EFFECT ON OUR BUSINESS. Our ability to obtain 
patents on current or future products or formulations, defend our patents, 
maintain trade secrets and operate without infringing upon the proprietary 
rights of others both in the U.S. and abroad is uncertain. Patents may never 
issue. Even if issued or licensed to us, patents may not be enforceable, 
provide substantial protection from competition or be of commercial benefit 
to Dura. Even if all these are true, we may not possess the financial 
resources necessary to enforce or defend any of our patent rights. Our 
commercial success will also depend upon avoiding the infringement of patents 
issued to competitors and upon maintaining the technology licenses upon which 
certain of our products are based. Litigation, which is costly, may be 
necessary to enforce our patent and license rights or to determine the scope 
and validity of proprietary rights of third parties. If any of our products 
are found to infringe upon patents or other rights owned by third parties, we 
could be required to obtain a license to continue to manufacture or market 
such products. Licenses to such patent rights may not be available to us on 
commercially reasonable terms, if at all. If we do not obtain such licenses, 
we could encounter delays in marketing affected products or we could find 
that the development, manufacture or sale of products requiring such licenses 
is not possible.

OUR STOCK PRICE IS VOLATILE. The market prices for securities of emerging 
companies, including ours, have historically been highly volatile. Future 
announcements concerning us or our competitors may have a significant impact 
on the market price of our common stock. Such announcements might include:

    -  financial results,
    -  the results of clinical testing of our or our competitors' products,
    -  regulatory developments,
    -  technological innovations,
    -  new commercial products,
    -  changes to government regulations,
    -  regulatory decisions on commercialization of products,
    -  developments concerning proprietary rights,
    -  litigation or public concern as to safety of our products or
    -  our failure to achieve securities analysts' expectations concerning our
       earnings per share or revenues. 

WE ARE INVOLVED IN CERTAIN LAWSUITS AND CANNOT PREDICT THEIR OUTCOME. We are 
involved in certain lawsuits as described in note 4 of the notes to 
consolidated financial statements. The outcome of these lawsuits and any 
other suits we may become involved in cannot be predicted. An adverse outcome 
could have an adverse effect on our business or results of operations.


                                        14
<PAGE>

SEASONALITY AND THE TIMING AND SEVERITY OF THE WINTER COLD AND FLU SEASON CAN 
HAVE AN ADVERSE EFFECT ON OUR OPERATING 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 our results of 
operations in the past.

A PROPOSED NEW ACCOUNTING STANDARD MAY REQUIRE US TO CONSOLIDATE SPIROS CORP. 
II WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS. In 
February 1999, the Financial Accounting Standards Board issued an exposure 
draft of a proposed new statement of financial accounting standards entitled 
"Consolidated Financial Statements: Purpose and Policy." This proposed 
standard, if adopted, would modify existing standards which govern when 
entities should be consolidated. During its exposure period, interested 
parties have the opportunity to comment on the proposed changes and these 
comments will be considered prior to issuing the standard in its final form, 
if one is issued at all. If adopted as initially proposed, this standard may 
require us to consolidate Spiros Corp. II into our financial statements. Such 
consolidation would have an adverse effect on our results of operations.

OUR PRODUCTS MAY CAUSE PRODUCT LIABILITY CLAIMS OR NEED TO BE RECALLED, 
EITHER OF WHICH WOULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS. We face an 
inherent business risk of exposure to product liability claims in the event 
that the use of our technologies or products is alleged to have resulted in 
adverse effects. The level or breadth of any insurance coverage we currently 
maintain may not be sufficient to fully cover potential claims. Adequate 
insurance coverage may not be available in the future at acceptable costs, if 
at all.

CERTAIN OF OUR CHARTER AND OTHER CONTRACTUAL PROVISIONS MAY PREVENT A CHANGE 
OF CONTROL WHICH COULD BE BENEFICIAL TO OUR SHAREHOLDERS. Certain provisions 
of our charter documents, outstanding securities, including certain warrants, 
options and our notes, and our shareholder rights plan may have the effect of 
delaying, deferring or preventing a change in control. This could deprive you 
of an opportunity to receive a premium for your shares of common stock.

WE MAY NOT ADEQUATELY ADDRESS YEAR 2000 ISSUES WHICH COULD HAVE AN ADVERSE 
EFFECT ON OUR BUSINESS. We are currently evaluating certain of our systems to 
assess whether they are year 2000 compliant or, if not, whether the systems 
will be impacted by the change in year. We will not be able to assess what, 
if any, remediation to these systems will be necessary until the evaluation 
phase is complete. We have not yet completed our audit of the compliance 
efforts of our significant suppliers, customers and key business partners to 
determine the extent to which our business may be affected if these parties 
fail to address their year 2000 issues. We estimate that the aggregate costs 
of our year 2000 program will be less than $1 million, including costs 
incurred to date. There can be no guarantee that these estimates will be 
achieved and actual results could differ materially from those plans. Our 
failure to adequately address our year 2000 risks would have an adverse 
effect on our business and results of operations. For a more complete 
description of the initiatives we have implemented with respect to the year 
2000 issue, please see "Management's Discussion and Analysis of Financial 
Condition and Results of Operations - Year 2000."


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<PAGE>

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest our excess cash and short-term investments in U.S. government and 
corporate debt securities with high quality credit ratings and maturities of 
less than two years. These investments are not held for trading or other 
speculative purposes. Changes in interest rates affect the investment income 
we earn on our investments and, therefore, impact our cash flows and results 
of operations. At March 31, 1999, we had outstanding subordinated notes 
totaling $287.5 million which mature in July 2002. The notes have a fixed 
interest rate of 3 1/2 percent. Accordingly, while changes in interest rates 
may affect the fair market value of the notes, they do not impact our cash 
flows or results of operations. As of March 31, 1999, the notes had a fair 
market value of $217.8 million. We are not exposed to risks for changes in 
foreign currency exchange rates, commodity prices, or any other market rates.

                           PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

         Exhibit No.

      (1)3.1      Certificate of Incorporation
      (2)3.2      Certificate of Amendment of Certificate of Incorporation, 
                  effective May 21, 1998
      (2)3.3      Certificate of Designation of Series A Junior Participating 
                  Preferred Stock
      (1)3.4      Bylaws
      (3)10.1     Distribution Agreement for Maxipime-R- and Azactam-R- between
                  the Company and Bristol-Myers SquIbb Company (with certain
                  confidential portions omitted).
      (3)10.2     Supply Agreement for Maxipime-R- and Azactam-R- between the
                  Company and Bristol-Myers SquIbb Company (with certain
                  confidential portions omitted).
         11       Statements re Computations of Net Income Per Share
         27       Financial Data Schedule

         (1) Incorporated by reference to the Company's Form 10-Q for the
             quarter ended June 30, 1997.
         (2) Incorporated by reference to the Company's Registration Statement
             on Form 8-A filed on May 22, 1998.
         (3) Incorporated by reference to the Company's Form 8-K, dated January
             1, 1999.


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<PAGE>



(b)  Reports on Form 8-K

         On January 15, 1999, the Company filed a current report on Form 8-K
         dated January 1, 1999, reporting the Company's acquisition of product
         rights from Bristol-Myers Squibb Company.


<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 3, 1999                     /s/ MICHAEL T. BORER 
                                       ----------------------
                                       (MICHAEL T. BORER)
                                       Senior Vice President and Chief 
                                       Financial Officer
                                       (Principal Financial and Accounting 
                                        Officer)




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