<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended September 30, 1996 or

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from ___ to ___.

                         Commission file number 0-26862

                              DEPOTECH CORPORATION
             (Exact name of Registrant as specified in its charter)

           CALIFORNIA                                      33-0387911
  (State or Other Jurisdiction                          (I.R.S. Employer
       of Incorporation or                            Identification No.)
          Organization)


                           10450 SCIENCE CENTER DRIVE
                           SAN DIEGO, CALIFORNIA 92121
               (Address of principal executive offices, zip code)


                                 (619) 625-2424
                         (Registrant's telephone number)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes  X          No
                                  ---            ---


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

      Common Stock: No par value, 11,513,376 shares as of October 31, 1996
<PAGE>   2
                              DEPOTECH CORPORATION

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                           <C>
PART I    FINANCIAL INFORMATION

          Item 1   Financial Statements

                   Condensed Balance Sheets as of
                   September 30, 1996 and December 31, 1995...............     1

                   Condensed Statements of Operations
                   for the Three Months and Nine Months ended
                   September 30, 1996 and 1995............................     2

                   Condensed Statements of Cash Flows
                   for the Nine Months ended
                   September 30, 1996 and 1995............................     3

                   Notes to Condensed Financial Statements................     4

          Item 2   Management's Discussion and Analysis
                   of Financial Condition and Results of Operations.......     6

PART II   OTHER INFORMATION

          Items 1 to 6 are either inapplicable or nonexistent.............    13

Signatures ...............................................................    14
</TABLE>
<PAGE>   3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS




                              DEPOTECH CORPORATION

                            CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,       DECEMBER 31,
                                                                             1996                1995
                                                                             ----                ----
ASSETS                                                                    (Unaudited)           (Note)
<S>                                                                      <C>                 <C>         
Current assets:
     Cash and cash equivalents                                           $  6,076,557        $  5,883,911
     Short-term investments                                                18,169,195          32,777,623
     Accounts receivable from Chiron collaboration                            131,694             400,000
     Other current assets                                                     966,374             566,924
                                                                         ------------        ------------
Total current assets                                                       25,343,820          39,628,458
Property and equipment, net                                                15,247,397           8,610,978
Other assets                                                                  813,896             738,137
                                                                         ------------        ------------
Total assets                                                             $ 41,405,113        $ 48,977,573
                                                                         ============        ============


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable and other accrued liabilities                      $  1,746,647        $  2,447,592
     Current portion of obligations under capital leases and loans          2,003,028           1,805,494
     Notes payable, short-term                                                238,310                  --
                                                                         ------------        ------------
Total current liabilities                                                   3,987,985           4,253,086
Deferred rent                                                               1,132,733             387,947
Obligations under capital leases, less current portion                      4,653,886           2,831,010
Notes payable, long-term                                                    1,180,151                  --
Shareholders' equity:
     Common stock, no par value; 30,000,000 shares authorized,
        11,512,058 and 11,285,630 shares issued and outstanding at
        September 30, 1996 and December 31, 1995, respectively             67,506,524          67,133,738
     Deferred compensation                                                   (175,082)           (214,448)
     Unrealized gain (loss) on investments                                    (18,531)            206,172
     Accumulated deficit                                                  (36,862,553)        (25,619,932)
                                                                         ------------        ------------
Total shareholders' equity                                                 30,450,358          41,505,530
                                                                         ------------        ------------
Total liabilities and shareholders' equity                               $ 41,405,113        $ 48,977,573
                                                                         ============        ============
</TABLE>

See accompanying notes to condensed financial statements.

Note:  The balance sheet at December 31, 1995 has been derived from the audited
       financial statements at that date, but does not include all of the
       disclosures required by generally accepted accounting principles.




                                       1
<PAGE>   4
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS




                              DEPOTECH CORPORATION

                       CONDENSED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                    SEPTEMBER 30,                           SEPTEMBER 30,
                                               1996                1995                1996                1995
                                               ----                ----                ----                ----
                                                     (Unaudited)                            (Unaudited)
<S>                                        <C>                 <C>                 <C>                 <C>         
Contract revenue                           $    698,725        $    589,625        $  3,363,680        $  4,394,879
Marketing rights fee                                 --                  --                  --           1,000,000
                                           ------------        ------------        ------------        ------------

              Total revenue                     698,725             589,625           3,363,680           5,394,879

Costs and expenses:
      Research and development                5,000,516           3,117,349          12,721,014           8,492,049
      General and administrative              1,060,232             879,806           2,665,260           1,905,819
                                           ------------        ------------        ------------        ------------

            Total costs and expenses          6,060,748           3,997,155          15,386,274          10,397,868
                                           ------------        ------------        ------------        ------------

Loss from operations                         (5,362,023)         (3,407,530)        (12,022,594)         (5,002,989)

Interest income                                 392,284             143,028           1,328,055             503,086
Interest expense                               (225,756)           (111,760)           (548,082)           (235,531)
                                           ------------        ------------        ------------        ------------

Net loss                                   $ (5,195,495)       $ (3,376,262)       $(11,242,621)       $ (4,735,434)
                                           ============        ============        ============        ============


Net loss per share                         $      (0.45)       $      (0.42)       $      (0.98)       $      (0.60)
                                           ============        ============        ============        ============

Shares used in computing
     net loss per share                      11,509,142           7,972,152          11,429,098           7,886,432
                                           ============        ============        ============        ============
</TABLE>

See accompanying notes to condensed financial statements.




                                       2
<PAGE>   5
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS




                              DEPOTECH CORPORATION

                       CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                 NINE MONTHS ENDED
                                                                                   SEPTEMBER 30,
                                                                              1996                1995
                                                                              ----                ----
                                                                                    (Unaudited)
<S>                                                                       <C>                 <C>          
OPERATING ACTIVITIES
Net cash used by operating activities                                     $(10,597,204)       $ (5,491,946)

INVESTING ACTIVITIES
Purchases of short-term investments                                         (9,215,055)        (10,311,725)
Proceeds from sale of short-term investments                                23,598,780           8,750,630
Purchases of property and equipment                                         (4,123,967)         (1,753,759)
Restricted cash                                                                 55,895             129,200
                                                                          ------------        ------------
Net cash provided (used) by investing activities                            10,315,653          (3,185,654)

FINANCING ACTIVITIES
Repayments of capital lease obligations                                     (1,320,304)           (521,401)
Reimbursement for assets refinanced as capital leases                            3,254             323,119
Proceeds from issuance of common stock                                         372,786              21,569
Proceeds from bank credit line                                                      --           4,000,000
Proceeds from notes payable                                                  1,418,461             351,993
                                                                          ------------        ------------
Net cash provided by financing activities                                      474,197           4,175,280
                                                                          ------------        ------------

Net increase (decrease) in cash and cash equivalents                           192,646          (4,502,320)
Cash and cash equivalents at beginning of period                             5,883,911           4,624,340
                                                                          ------------        ------------
Cash and cash equivalents at end of period                                   6,076,557             122,020
Short-term investments at end of period                                     18,169,195           6,919,801
                                                                          ------------        ------------
Cash, cash equivalents and short-term investments at end of period        $ 24,245,752        $  7,041,821
                                                                          ============        ============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired through capital leases and loans          $  3,337,461        $  1,928,341
                                                                          ============        ============
Stock subscription receivable from initial public offering                $         --        $ 33,480,000
                                                                          ============        ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid                                                             $    548,082        $    235,531
                                                                          ============        ============
</TABLE>

See accompanying notes to condensed financial statements.




                                       3
<PAGE>   6
                              DEPOTECH CORPORATION

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


1.       Basis of Presentation and Significant Accounting Policies

         The interim unaudited condensed financial statements contained herein
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These interim unaudited condensed financial
statements should be read in conjunction with the Company's December 31, 1995
audited financial statements. In management's opinion, the unaudited information
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented. Interim results are not
necessarily indicative of results to be expected for the full year. Certain
prior year amounts have been reclassified to conform with current year
presentation.

         Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The adoption of
the new standard had no effect on the financial statements.

         Effective January 1, 1996, the Company adopted SFAS No. 123,
"Accounting and Disclosure of Stock-Based Compensation". As allowed under SFAS
No. 123, the Company has elected to continue to follow Accounting Principles
Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" in
accounting for its employee stock options. The adoption of the standard had no
effect on the financial statements.

2.       Net Loss Per Share

         For the three and nine months ended September 30, 1996, net loss per
share is computed using the weighted average number of common shares outstanding
during the period. Common share equivalents have not been included in the
computation, since their effect would have been anti-dilutive.

         For the three and nine months ended September 30, 1995, net loss per
share is computed using the weighted average number of common shares outstanding
during the period, as adjusted for the effects of certain rules of the
Securities and Exchange Commission ("SEC") for the periods prior to the
Company's initial public offering ("IPO") in October 1995.




                                        4
<PAGE>   7
                              DEPOTECH CORPORATION

               NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

         The following supplemental net loss per share data includes weighted
average common and preferred shares outstanding but excludes all common stock
equivalents and the effects of certain rules of the SEC for the periods prior to
the Company's IPO in October 1995 as the effect would be anti-dilutive.

<TABLE>
<CAPTION>
                                                       Three Months Ended                  Nine Months Ended
                                                         September 30,                       September 30,
                                                    1996               1995              1996              1995
                                                    ----               ----              ----              ----
<S>                                             <C>                <C>               <C>                <C>        
Shares used in computing supple-
mental net loss per share                        11,509,142         7,673,543         11,429,098         7,587,823

Supplemental net loss per share                 $     (0.45)       $    (0.44)       $     (0.98)       $    (0.62)
</TABLE>

3.       Chiron Collaboration

         In March 1994, the Company entered into a collaborative agreement with
Chiron Corporation ("Chiron") to develop and commercialize sustained-release
formulations of DepoCyt(TM) and certain Chiron proprietary products using the
Company's drug delivery technology.

         Cumulative reimbursable costs incurred by the Company under the Chiron
agreement totaled $3.9 million through September 30, 1995 and $8.4 million
through September 30, 1996. Reimbursable costs totaling $2.5 million due through
December 31, 1994, became billable and were recognized as contract revenue upon
the achievement of a development milestone in January 1995.

4.       Commitments

         During April 1996, the Company entered into an agreement to expand an
existing lease line from $2.6 million to $5.1 million. The incremental borrowing
amount of $2.5 million was used principally to finance certain tenant
improvement and equipment costs incurred in the first quarter of 1996. In May
1996, the Company signed a bank credit facility for $9.0 million to finance
future capital equipment purchases, of which $1.4 million has been utilized
through September 30, 1996.





                                        5
<PAGE>   8
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

OVERVIEW

         Since its inception in October 1989, DepoTech Corporation ("DepoTech"
or the "Company") has devoted substantially all of its resources to the
development of its potential products. To date, the Company has not received any
revenues from the sale of products. The Company has funded its development
programs primarily from equity-derived working capital, equipment lease
financing and through strategic alliances with other companies. The Company has
been unprofitable since its inception and expects to incur substantial losses
over at least the next two years. As of September 30, 1996, the Company's
accumulated deficit was approximately $36.9 million.

         The following discussion is qualified in its entirety by the more
detailed information and the Condensed Financial Statements and Notes thereto
appearing elsewhere in this Quarterly Report, including the information under
"Risk and Uncertainties." This Quarterly Report contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed under "Risk and
Uncertainties," as well as those discussed elsewhere in this Quarterly Report.

RESULTS OF OPERATIONS

         The Company had total revenues of $0.7 million for the three months
ended September 30, 1996 compared to $0.6 million for the same period in 1995.
Total revenues for the nine month period ended September 30, 1996 decreased to
$3.4 million from $5.4 million for the comparable period in 1995. Total revenues
in 1996 were primarily derived from reimbursement of 50% of the clinical trial
and manufacturing scale-up expenses for the Company's lead product, DepoCyt,
under a collaborative agreement with Chiron. In addition, Chiron reimbursed
DepoTech for 100% of feasibility studies performed on their behalf. Total
revenues in 1995 included a one-time marketing rights fee and reimbursement of
prior year clinical trial expenses for DepoCyt totaling $3.5 million earned by
the Company in January 1995 upon achievement of a development milestone under
the Chiron collaboration. Revenues derived from this milestone will not re-occur
in future periods. Revenues may fluctuate from period to period depending on the
level of clinical and process development activity for projects under
collaborative agreements and the achievement of future milestones.

         Research and development expenses for the third quarter ended September


                                        6
<PAGE>   9
30, 1996 increased to $5.0 million compared to $3.1 million for the same period
in 1995. Research and development expenses for the nine months ended September
30, 1996 increased to $12.7 million from $8.5 million in 1995. Factors
contributing to this increase include expanded efforts in Phase III and Phase IV
clinical trials and manufacturing scale-up for DepoCyt, and preclinical
development efforts associated with other potential DepoFoam(TM) products. In
April 1996, DepoTech completed a Phase I clinical trial of DepoAmikacin(TM), a
sustained-release antibiotic. In June 1996, the Company began a Phase IV
clinical trial for DepoCyt. Other pre-clinical development programs under way
include DepoMorphine and DepoIGF-1. In addition, the Company is evaluating the
feasibility of developing several early stage compounds. Research and
development expenses are expected to continue to increase during 1996.

         General and administrative expenses for the third quarter of 1996
increased to $1.1 million from $0.9 million for the same period in 1995. General
and administrative expenses for the nine months ended September 30, 1996
increased to $2.7 million from $1.9 million for the comparable period in the
prior year. The increase was primarily due to expansion in administrative
staffing, higher facility expenses and costs associated with being a public
company. Included in general and administrative expenses for 1996 are 50% of the
sales and marketing expenses incurred for DepoCyt prior to the onset of any
product revenue. Under the collaborative agreement with Chiron, the Company is
obligated to share in the funding of these expenses. General and administrative
expenses are expected to continue to increase during 1996.

         Interest income increased to $0.4 million and $1.3 million for the
three and nine months ended September 30, 1996 from $0.1 million and $0.5
million for the same periods in 1995, respectively. The increase was principally
due to higher average cash investment balances following the Company's initial
public offering in October 1995 and increases in available market interest
rates. Interest expense increased to $0.2 million and $0.5 million for the three
and nine months ended September 30, 1996 from $0.1 million and $0.2 million for
the comparable periods in 1995, respectively. The increase in interest expense
was due to higher balances outstanding for obligations under capital leases and
loans.

LIQUIDITY AND CAPITAL RESOURCES

         Since its inception through September 30, 1996, DepoTech has financed
its operations primarily through public and private placements of equity
securities, which provided aggregate net proceeds of approximately $67.2
million, and through capital equipment leases and loans. In October 1995, the
Company completed its initial public offering of common stock with net proceeds
of $38.1 million.


                                        7
<PAGE>   10
         As of September 30, 1996, the Company had cash, cash equivalents and
short-term investments of $24.2 million as compared to $38.7 million at December
31, 1995. The decrease of $14.5 million in cash, cash equivalents and short-term
investments was due primarily to net cash used to fund operations of $10.6
million and payments totaling $4.6 million for new capital expenditures and
repayment of capital lease obligations. During April 1996, the Company entered
into an agreement to expand an existing lease line from $2.6 million to $5.1
million. The incremental borrowing amount of $2.5 million was used principally
to finance certain tenant improvement and equipment costs incurred in the first
quarter of 1996. In May 1996, the Company signed a bank credit facility for $9.0
million to finance future capital equipment purchases, of which $1.4 million has
been utilized through September 30, 1996. Working capital decreased to $21.4
million as of September 30, 1996 compared to $35.4 million as of December 31,
1995.

         For the nine months ended September 30, 1996, the Company financed an
aggregate of $4.7 million for property and equipment through capital equipment
leases and loans. The Company intends to continue to fund capital expenditures
through external financing supplemented by internal cash resources where
appropriate. In September 1995, the Company occupied the initial phase (50,000
square feet) of a build-to-suit facility housing its administrative, research
and clinical activities. DepoTech began paying rent in mid-March 1996 for the
remaining space (32,000 square feet) which is intended to provide future
multi-line manufacturing and process development capabilities. The minimum
rental commitment for this facility ranges from $2.1 million to $4.3 million per
year, over 20 years, based upon pre-established annual rent increases. The
Company plans to install a manufacturing line in this facility to support
clinical and commercial production of products under development. The cost of
equipment and tenant improvement expenses are estimated to total approximately
$8.1 million through 1997. DepoTech intends to finance such expenditures through
new and existing bank credit facilities. The Company has a right of first
refusal and right of first offer to purchase land located adjacent to its
headquarters which must be exercised on or before October 15, 1997. At present,
the Company has not made a decision concerning the exercise of such option in
1997.

         The Company's operations to date have consumed substantial amounts of
cash, which is expected to continue over the foreseeable future. The amount of
net losses and the time required for the Company to achieve profitability are
highly uncertain. There can be no assurance that the Company will be able to
achieve profitability at all or on a sustained basis. It is the Company's
intention to fund product research, development, manufacturing, and sales and
marketing costs through additional collaborative relationships with suitable
corporate partners. There can be no assurance that the Company will enter into
collaborative arrangements with corporate partners or that any agreements
resulting from these

                                        8
<PAGE>   11
discussions will successfully reduce the Company's funding requirements.
Additional equity or debt financing will be required, and there can be no
assurance that these funds will be available on terms favorable to the Company,
if at all. If adequate funds are not available, the Company may be required to
delay, scale back or eliminate one or more of its product development programs
or obtain funds through arrangements with collaborative partners or others that
may require the Company to relinquish rights to certain of its technologies,
product candidates or products that the Company would not otherwise relinquish.

         DepoTech anticipates that its existing available cash, cash equivalents
and short-term investments, committed future contract revenue, projected funding
from equipment financing and interest income will be adequate to satisfy its
capital requirements and fund operating losses through late 1997. The Company's
future capital requirements will depend on many factors, including continued
scientific progress in its products and process development programs, progress
with preclinical testing and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in filing patents, competing
technological and market developments, changes in existing collaborative
relationships, the ability of the Company to establish development arrangements,
the cost of manufacturing scale-up, and the establishment of effective sales and
marketing arrangements.

RISK AND UNCERTAINTIES

         This Quarterly Report contains, in addition to historical information,
forward-looking statements that involve risk and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below under "Risk and Uncertainties,' as
well as those discussed elsewhere in this Quarterly Report.

         EARLY STAGE COMPANY. DepoTech's products are at an early stage of
development, and, to date, only two of the Company's DepoFoam formulations,
DepoCyt and DepoAmikacin, have been subject to human clinical testing. Although
many of the drug compounds which the Company has encapsulated in DepoFoam have
been tested in humans by others using alternate delivery routes, the Company's
potential products will require extensive research, formulation, development,
preclinical and clinical testing, and may involve a lengthy regulatory approval
process prior to commercialization. There can be no assurance that DepoCyt,
DepoAmikacin or any of the Company's other products or potential products will
prove safe and effective in clinical trials, meet applicable regulatory
standards, be capable of being produced in commercial quantities at acceptable
cost or be successfully commercialized. In addition, there can be no assurance
that preclinical or clinical testing will accurately

                                        9
<PAGE>   12
predict safety or efficacy in broader human use, or that delays in the
regulatory approval process will not result in longer clinical trial schedules
than those currently expected by the Company. Even if all of the Company's
products prove to be safe and effective and are approved for marketing by the
United States Food and Drug Administration ("FDA") and other regulatory
authorities, there can be no assurance that health care providers, payers and
patients will accept the Company's products. Any failure of the Company to
achieve technical feasibility, demonstrate safety, achieve clinical efficacy,
obtain regulatory approval or, together with its partners, successfully market
products would have a material adverse effect on the Company.

         DepoCyt is the Company's only product currently in the pivotal Phase
III trials. Data from the solid arm of the trial was reported in June and
October 1996 and the other two arms of the trial, for neoplastic meningitis
("NM") arising from leukemia and lymphoma, are expected to be completed by the
end of 1997. The Company expects to file an new drug application ("NDA") under
the FDA's expedited approval process for the treatment of NM arising from solid
tumors in the fourth quarter of 1996. In the case of DepoCyt, as with all drugs
subject to accelerated approval, the FDA requested that the Company submit a
Phase IV protocol prior to the submission of an NDA. This protocol was
submitted, has been cleared by the FDA and the study is in progress. There can
be no assurance that the data reported to date regarding DepoCyt will be
sufficient to gain FDA approval, that additional results from the pivotal Phase
III trial will confirm earlier results or that the Phase IV and other clinical
trials of DepoCyt will generate positive results. Any of these occurrences could
have a material adverse effect on the Company and its ability to fund the
further development and commercialization of DepoCyt and its other products.

         GOVERNMENT REGULATION; UNCERTAINTY OF OBTAINING REGULATORY APPROVAL.
DepoTech's research and development activities are, and its future business will
be, subject to significant regulation by governmental authorities in the United
States, primarily by the FDA, and internationally. The clinical testing and the
regulatory review process for new drugs or biologics requires substantial time,
effort and expense. There can be no assurance that any approval will be granted
to the Company on a timely basis, if at all. The FDA or its international
equivalent may refuse to approve a drug or biological product for commercial
sale or shipment of a drug for noninvestigational uses if applicable statutory
and/or regulatory criteria are not satisfied, or may require additional testing
or information. There can be no assurance that such additional testing or the
provision of such information, if required, will not have a material adverse
effect on the Company. Also, the regulatory process can be modified by
legislatures, the FDA, or international regulators, in a manner that could
materially affect the Company.

                                       10
<PAGE>   13
         LIMITED MANUFACTURING EXPERIENCE; RISK OF SCALE-UP; RELIANCE ON
MANUFACTURING PROCESS. Although DepoTech is currently manufacturing materials
for human clinical trials, the Company has no experience manufacturing products
for commercial purposes. The Company will need to scale-up its current
manufacturing processes and comply with current Good Manufacturing Practices
("cGMPs") and other regulations prescribed by various regulatory agencies in the
United States and other countries to achieve the required levels of production
of such products and to obtain marketing approval. Failure by the Company to
successfully scale-up its manufacturing processes or to comply with cGMPs and
other regulations would have a material adverse effect on the Company, including
the loss of manufacturing rights under the Chiron agreement. To date, the
Company has relied on a particular proprietary method of manufacture. There can
be no assurance that this method will be applicable to all pharmaceuticals or
biologics the Company desires to commercialize. Further, the yield of product
incorporated into the delivery system may be highly variable for different
therapeutic agents. Finally, the Company will need to successfully meet any
manufacturing challenges associated with the characteristics of the drug to be
encapsulated.

         DEPENDENCE UPON PARTNERS FOR DEVELOPMENT AND COMMERCIALIZATION. The
Company does not currently possess all of the resources necessary to develop,
complete the FDA approval process for and commercialize all of its potential
therapeutic products. The Company hopes to enter into collaborative arrangements
with other companies to fund research, development and clinical trials, to
assist in obtaining regulatory approvals in the United States and
internationally and to commercialize its products. In addition, the Company's
ability to apply its drug delivery technology to a broad range of
pharmaceuticals will depend upon its ability to establish and maintain
collaborative arrangements because the rights to many of the pharmaceuticals
most suited to the Company's drug delivery technology are currently owned by
third parties. While the Company has entered into preliminary collaborations to
test feasibility of its delivery technology with certain pharmaceuticals and has
entered into a more extensive collaboration with Chiron, there can be no
assurance that the Company will be able to enter into additional collaborations
to develop commercial applications of its drug delivery technology. In addition,
there can be no assurance that the Company will be able to enter into or
maintain existing or future collaborations or that such collaborations will be
successful. The failure of the Company to enter into a collaboration with the
owner of rights to a particular formulation or pharmaceutical would preclude the
Company from developing its drug delivery technology with respect to such
formulation or pharmaceutical. The failure to enter into or maintain existing or
future collaborations would have a material adverse effect on the Company.

                                       11
<PAGE>   14
         POSSIBLE VOLATILITY OF STOCK PRICE. Factors such as the announcements
of technological innovations or new products by the Company, its competitors and
other third parties, as well as variations in the Company's results of
operations, market conditions, analysts' estimates and the stock market may
cause the market price of the Company's common stock to fluctuate significantly.
Also, future sales of shares by existing shareholders pursuant to Rule 144 of
the Securities Act of 1933, as amended, or through the exercise of outstanding
registration rights, could have an adverse effect on the price of the Company's
common stock.




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<PAGE>   15
PART II - OTHER INFORMATION

Item 1     Legal Proceedings.  None

Item 2     Change in Securities.  None

Item 3     Defaults Upon Senior Securities.  None

Item 4     Submission of Matters to a Vote of Security Holders.  None

Item 5     Other Information.  None

Item 6     Exhibits and Reports on Form 8-K.  None




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                              DEPOTECH CORPORATION

                                   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.




                                    DEPOTECH CORPORATION


                                /s/ Edward L. Erickson
                                    ---------------------------------
Date:  November 11, 1996            Edward L. Erickson
                                    President and Chief Executive Officer
                                    (Principal Executive Officer)


                                /s/ Dana S. McGowan
                                    ----------------------------------
Date:  November 11, 1996            Dana S. McGowan
                                    Director of Finance and Administration
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




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