<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, 1997 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, 14,175,303 shares as of October 31, 1997


<PAGE>   2
                              DEPOTECH CORPORATION

                                TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----

PART I    FINANCIAL INFORMATION

          Item 1 Financial Statements

                 Condensed Balance Sheets as of
                 September 30, 1997 (Unaudited) and December 31, 1996......   1

                 Condensed Statements of Operations
                 for the Three and Nine Months ended
                 September 30, 1997 and 1996 (Unaudited)...................   2

                 Condensed Statements of Cash Flows
                 for the Nine Months ended
                 September 30, 1997 and 1996 (Unaudited)...................   3

                 Notes to Condensed Financial Statements (Unaudited).......   4

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

PART II   OTHER INFORMATION

          Item 2 Changes in Securities ....................................  13

          Item 6 Exhibits and Reports on Form 8-K .........................  14

          Signatures.......................................................  15


<PAGE>   3
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



                              DEPOTECH CORPORATION

                            CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30,       DECEMBER 31,
                                                                           1997                1996
                                                                       -------------       ------------
                                                                       (Unaudited)           (Note)
<S>                                                                    <C>                 <C>
ASSETS                                                                  
Current assets:
    Cash and cash equivalents                                          $   8,730,596       $  1,966,626
    Short-term investments                                                26,022,818         16,231,471
    Accounts receivable from collaborations                                1,825,338            614,580
    Other current assets                                                   3,130,900          1,160,394
                                                                       -------------       ------------
Total current assets                                                      39,709,652         19,973,071
Property and equipment, net                                               24,862,674         16,851,574
Other assets                                                                 912,711            783,760
                                                                       -------------       ------------
Total assets                                                           $  65,485,037       $ 37,608,405
                                                                       =============       ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable and other accrued liabilities                     $   5,206,230       $  2,573,087
    Current portion of obligations under capital leases                    2,116,306          2,040,578
    Current portion of notes payable                                       1,624,273            493,481
                                                                       -------------       ------------
Total current liabilities                                                  8,946,809          5,107,146
Deferred revenue                                                             100,850             54,839
Obligations under capital leases, less current portion                     2,536,054          4,129,750
Deferred rent                                                              2,095,282          1,377,623
Notes payable, less current portion                                        6,794,605          1,709,813

Shareholders' equity:
    Common stock, no par value; 30,000,000 shares authorized,
       14,172,593 and 11,543,816 shares issued and outstanding at
       September 30, 1997 and December 31, 1996, respectively            101,805,608         67,797,617
    Deferred compensation related to stock options                          (122,594)          (161,960)
    Unrealized gain (loss) on investments                                     37,265            (10,886)
    Accumulated deficit                                                  (56,708,842)       (42,395,537)
                                                                       -------------       ------------
Total shareholders' equity                                                45,011,437         25,229,234
                                                                       -------------       ------------
Total liabilities and shareholders' equity                             $  65,485,037       $ 37,608,405
                                                                       =============       ============
</TABLE>

See accompanying notes to condensed financial statements.

Note:  The balance sheet at December 31, 1996 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,
                                           1997              1996              1997              1996
                                       ------------      ------------      ------------      ------------
                                                 (Unaudited)                         (Unaudited)
<S>                                    <C>               <C>               <C>               <C>
Contract revenue                       $  1,045,539      $    698,725      $  2,977,498      $  3,363,680
Licensing/milestone payments              2,000,000                --         3,000,000                --
                                       ------------      ------------      ------------      ------------

          Total revenue                   3,045,539           698,725         5,977,498         3,363,680

Costs and expenses:
    Research and development              3,947,542         5,000,516        14,028,748        12,721,014
    General and administrative            2,712,347         1,060,232         4,667,951         2,665,260
    Repurchase of marketing rights               --                --         2,000,000                --
                                       ------------      ------------      ------------      ------------

          Total costs and expenses        6,659,889         6,060,748        20,696,699        15,386,274
                                       ------------      ------------      ------------      ------------

Loss from operations                     (3,614,350)       (5,362,023)      (14,719,201)      (12,022,594)

Interest income                             383,919           392,284         1,228,430         1,328,055
Interest expense                           (356,269)         (225,756)         (822,534)         (548,082)
                                       ------------      ------------      ------------      ------------

Net loss                               $ (3,586,700)     $ (5,195,495)     $(14,313,305)     $(11,242,621)
                                       ============      ============      ============      ============


Net loss per share                     $      (0.27)     $      (0.45)     $      (1.09)     $      (0.98)
                                       ============      ============      ============      ============

Shares used in computing
     net loss per share                  13,382,717        11,509,142        13,178,318        11,429,098
                                       ============      ============      ============      ============
</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,
                                                                  1997               1996
                                                              ------------       ------------
                                                                          (Unaudited)
<S>                                                           <C>                <C>
OPERATING ACTIVITIES
Net cash used by operating activities                         $(12,757,725)      $(10,597,204)

INVESTING ACTIVITIES
Purchases of short-term investments                            (29,845,642)        (9,215,055)
Proceeds from sale of short-term investments                    20,102,446         23,598,780
Purchases of property and equipment                             (9,403,598)        (4,123,967)
Restricted cash                                                    (37,119)            55,895
                                                              ------------       ------------
Net cash (used) provided by investing activities               (19,183,913)        10,315,653

FINANCING ACTIVITIES
Repayments on capital lease obligations                         (1,517,967)        (1,320,304)
Reimbursement for assets refinanced as capital leases                   --              3,254
Repayments on notes payable                                       (413,118)                --
Proceeds from notes payable                                      6,628,702          1,418,461
Proceeds from issuance of common stock, net                     34,007,991            372,786
                                                              ------------       ------------
Net cash provided by financing activities                       38,705,608            474,197
                                                              ------------       ------------

Net increase in cash and cash equivalents                        6,763,970            192,646
Cash and cash equivalents at beginning of period                 1,966,626          5,883,911
                                                              ------------       ------------
Cash and cash equivalents at end of period                       8,730,596          6,076,557
Short-term investments at end of period                         26,022,818         18,169,195
                                                              ------------       ------------
Cash, cash equivalents and short-term investments
  at end of period                                            $ 34,753,414       $ 24,245,752
                                                              ============       ============

SUPPLEMENTAL INFORMATION
Property and equipment acquired through capital leases        $         --       $  3,337,461
                                                              ============       ============
Interest paid                                                 $    822,534       $    548,082
                                                              ============       ============
</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, 1996
audited financial statements included in the Company's Annual Report on Form
10-K. 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 the current year presentation.

2.    Net Loss Per Share

      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.

      In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share", regarding the calculation of primary earnings per
share, which will be adopted in January 1998. The Company does not anticipate
that the adoption of this standard will have a material impact to the Company.

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 for clinical
trials and process development incurred by the Company under this agreement
totaled $10.2 million through September 30, 1997 and $8.4 million through
September 30, 1996.

      In June 1997, DepoTech reacquired rights to DepoCyt in Canada and Europe
from Chiron for aggregate cash payments of up to $13.7 million. Chiron will
retain exclusive marketing rights to DepoCyt in the U.S. A $2.0 million cash
payment is payable by DepoTech to Chiron by December 31, 1997 and has been
expensed at June 30, 1997. If, prior to December 31, 1998, the U.S. Food and
Drug Administration ("FDA") issues a letter or other notification to DepoTech
indicating that DepoCyt is approvable or approved, the remaining balance of
$11.7 million shall be payable no later than


                                       4
<PAGE>   7
                              DEPOTECH CORPORATION

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

December 31, 1998. If no FDA notification is received prior to December 31,
1998, the remaining amount shall be payable no later than six months from the
earlier of U.S. or European Union regulatory notification that the application
to market or sell DepoCyt is approvable or approved. If all applications for
regulatory approval to sell DepoCyt in the U.S. and European Union are
permanently withdrawn, DepoTech shall be relieved of any obligation to pay the
remaining $11.7 million. Therefore, such amount will be recorded upon the
receipt of the required notification.

4.    Pharmacia & Upjohn Agreement

      In July 1997, DepoTech entered into a Marketing and Distribution Agreement
with Pharmacia & Upjohn S.p.A ("P&U"), an affiliate of Pharmacia & Upjohn Inc.,
for rights to market and sell DepoCyt in countries outside the United States.
The Company received a cash payment of $2.0 million upon execution of the
agreement. Cumulative reimbursable costs for clinical trials and regulatory
approval incurred by the Company under this agreement totaled $0.6 million
through September 30, 1997.

5.    Private Placement

      In September 1997, the Company raised net proceeds of $14.6 million
through the sale of 1.0 million shares of DepoTech common stock to a private
investment company.

6.    Subsequent Event

      In October 1997, DepoTech completed a $4.5 million bank credit facility to
finance future capital equipment purchases.


                                       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
strategic alliances with other companies. The Company has been unprofitable
since its inception and does not expect to achieve sustainable profitability for
at least 24 months. As of September 30, 1997, the Company's accumulated deficit
was approximately $56.7 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 "Risks and
Uncertainties." This Quarterly Report may contain, 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 such forward-looking statements. Factors that could cause or contribute to
such differences include those discussed under "Risks and Uncertainties."

RESULTS OF OPERATIONS

      The Company had total revenue of $3.0 million for the three months ended
September 30, 1997 compared to $0.7 million for the same period in 1996. Total
revenue for the nine months ended September 30, 1997 increased to $6.0 million
from $3.4 million in 1996. In July 1997, the Company entered into a Marketing
and Distribution Agreement with Pharmacia & Upjohn S.p.A. ("P&U"), an affiliate
of Pharmacia & Upjohn Inc., for rights to market and sell DepoCyt(TM), an
anticancer drug, outside the U.S. Included in total revenue for the three and
nine months ended September 30, 1997 is an up front payment of $2.0 million from
P&U. Also, included in total revenue for the nine months ended September 30,
1997 is a milestone payment from Chiron Corporation ("Chiron") of $1 million
paid to DepoTech upon the filing of a New Drug Application for DepoCyt in the
U.S. Contract revenue in 1997 and 1996 was derived primarily from reimbursement
of 50% of the U.S. 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 pre-clinical development costs
and feasibility studies performed on Chiron proprietary products. Revenue may
fluctuate from period to period depending on the level of development activity
for projects under collaborative agreements and the achievement of future
milestones.

      Research and development expenses for the third quarter ended September
30, 1997 decreased to $3.9 million compared to $5.0 million for the same period
in 1996. The decrease in research and development expenses in the third quarter
of 1997 is due to the completion of manufacturing scale-up for DepoCyt and
certain costs that were reclassified to general and administrative expense.
Research and development expenses for the nine 


                                       6
<PAGE>   9
months ended September 30, 1997 increased to $14.0 million from $12.7 million in
1996. Factors contributing to the year to date increase includes expanded
efforts in clinical trials, manufacturing scale-up, and preclinical development
of potential DepoFoam(TM) products. The Company is continuing Phase III clinical
studies of DepoCyt in neoplastic meningitis arising from leukemia and lymphoma,
as well as a Phase IV nonrandomized trial in solid tumor patients. Earlier this
year, DepoTech began a Phase I clinical trial of DepoCyt in pediatric patients
and a Phase I study of DepoMorphine(TM) sustained-release encapsulated morphine
sulfate to treat acute post-surgical pain. Manufacturing scale-up of
DepoMorphine is underway. The Company has completed a Phase I study of
DepoAmikacin(TM) and is engaged in work necessary to move into follow-on
clinical studies. Additionally, the Company completed certain preclinical and
feasibility studies on various formulations of DepoIGF-1 with partner, Chiron.
Further, the Company is evaluating the feasibility of developing several early
stage compounds internally and for corporate partners. Research and development
expenses are expected to increase during the remainder of 1997.

      General and administrative expenses for the third quarter of 1997
increased to $2.7 million from $1.1 million for the same period in 1996. General
and administrative expenses for the nine months ended September 30, 1997
increased to $4.7 million from $2.7 million for the comparable period in the
prior year. These increases were due primarily to expansion in administrative
staffing and higher facility and business development expenses. In addition,
certain costs were reclassified from research and development expenses. Further,
under the collaborative agreement with Chiron, the Company is obligated to share
equally in the funding of sales, marketing and distribution expenses for
DepoCyt. Included in general and administrative expenses are costs of $1.0
million incurred through September 1997, for DepoCyt prior to the onset of any
product revenue. General and administrative expenses are expected to continue to
increase during 1997.

      Chiron and DepoTech had been jointly developing DepoCyt in the U.S.,
Canada and Europe since March 1994. In June 1997, DepoTech reacquired rights to
DepoCyt in Canada and Europe from Chiron. Chiron will retain exclusive marketing
rights to DepoCyt in the U.S. Included in operating expenses for the nine months
ended September 30, 1997 were expenses of $2 million associated with the
repurchase which is payable by DepoTech to Chiron by December 31, 1997.

      Interest income was $0.4 million and $1.2 million, respectively, for the
three and nine months ended September 30, 1997 compared to $0.4 million and $1.3
million for the same periods in 1996. Interest expense was $0.4 million and $0.8
million for the three and nine months ended September 30, 1997 compared to $0.2
million and $0.5 million for the comparable periods in 1996. The increase in
interest expense was due to higher balances outstanding for obligations under
notes payable.

LIQUIDITY AND CAPITAL RESOURCES

      From its inception through September 30, 1997, DepoTech has financed its
operations primarily through public and private placements of equity securities,
which provided aggregate net proceeds of approximately $101.6 million, and
through capital 


                                       7
<PAGE>   10
equipment leases and notes payable. In October 1995, the Company completed its
initial public offering of common stock with net proceeds of $38.1 million. In
January 1997, the Company completed the private placement of 1.5 million newly
issued shares of common stock raising net proceeds of $18.9 million. In
September 1997, the Company raised net proceeds of $14.6 million through the
sale of 1.0 million shares of DepoTech common stock to a private investment
company.

      Chiron and DepoTech had been jointly developing DepoCyt in the U.S.,
Canada and Europe since March 1994. In June 1997, DepoTech reacquired rights to
DepoCyt in Canada and Europe from Chiron for aggregate cash payments of up to
$13.7 million. Chiron will retain exclusive marketing rights to DepoCyt in the
U.S. A $2 million cash payment is payable by DepoTech to Chiron by December 31,
1997. If, prior to December 31, 1998, the U.S. Food and Drug Administration
("FDA") issues a letter or other notification to DepoTech indicating that
DepoCyt is approvable or approved, the remaining balance of $11.7 million shall
be payable no later than December 31, 1998. If no FDA notification is received
prior to December 31, 1998, the remaining amount shall be payable no later than
six months from the earlier of U.S. or European Union regulatory notification
that the application to market or sell DepoCyt is approvable or approved. If all
applications for regulatory approval to sell DepoCyt in the U.S. and European
Union are permanently withdrawn, DepoTech shall be relieved of any obligation to
pay the remaining $11.7 million.

      In July 1997, DepoTech entered into a Marketing and Distribution Agreement
with P&U for rights to market and sell DepoCyt in countries outside the U.S. P&U
will generally be responsible for submitting regulatory filings, labeling,
packaging, distribution, marketing and sales of DepoCyt in this territory. The
Company will manufacture DepoCyt and receive a share of the net sales of DepoCyt
sold by P&U. The Company received a cash payment of $2.0 million upon execution
of the agreement and may receive additional payments of up to $17.0 million upon
achievement of certain regulatory milestones. The agreement also provides for
reimbursement of certain clinical trial expenses and regulatory fees incurred by
the Company. The initial cash payment of $2.0 million and future milestone
payments, if any, totaling up to the obligation to Chiron of $13.7 million will
be set aside in a restricted cash account for payment to Chiron for the
repurchase of DepoCyt rights.

      As of September 30, 1997, the Company had cash, cash equivalents and
short-term investments of $34.8 million as compared to $18.2 million at December
31, 1996. The increase of $16.6 million in cash, cash equivalents and short-term
investments was due primarily to $33.5 million of net proceeds received from two
private placements, which was partially offset by net cash used to fund
operations of $12.8 million and payments totaling $4.7 million for new capital
expenditures and repayment of capital lease obligations and notes payable. In
May 1996, the Company signed a bank credit facility for $9.0 million to finance
future capital equipment purchases, of which $8.8 million had been utilized
through September 30, 1997. In October 1997, DepoTech signed a $4.5 bank credit
facility to finance future capital equipment purchases. Working capital
increased to $30.8 million as of September 30, 1997 compared to $14.9 million as
of December 31, 1996.


                                       8
<PAGE>   11
      For the nine months ended September 30, 1997, the Company financed an
aggregate of $6.6 million for property and equipment through bank credit
facilities. The Company intends to continue to fund capital expenditures through
external financing supplemented by internal cash resources where appropriate.
The Company leases a built-to-suit facility housing most of its administrative,
research, clinical and manufacturing activities. The minimum rental commitment
for this facility ranges from $2.4 million to $4.3 million per year over the
next 19 years, based upon pre-established annual rent increases. The Company is
installing 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 $6.1 million in
1997 of which $4.9 million had been incurred through September 30, 1997.
DepoTech intends to finance such expenditures through new and existing bank
credit facilities. The Company's right of first refusal and right of first offer
to purchase land located adjacent to its headquarters expired in October 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 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 1998. The Company's
future capital requirements will depend on many factors, including continued
scientific progress on 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 and maintaining
patents, competing technological and market developments, changes in existing
collaborative relationships, the ability of the Company to establish development
or additional collaborative arrangements, the cost of manufacturing scale-up,
and the establishment of effective sales and marketing arrangements.


                                       9
<PAGE>   12
RISKS AND UNCERTAINTIES

      This Quarterly Report may contain, 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 such
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below 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 three of the Company's DepoFoam formulations
have been subject to human clinical testing. 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, DepoMorphine,
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 predict safety or efficacy
in broader human use, or that delays in the regulatory approval process will not
arise, delaying approval longer than currently anticipated. Even if all of the
Company's products prove to be safe and effective and are approved for marketing
by the FDA and other regulatory authorities, there can be no assurance that
health care providers, payors 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.

      In April 1997, the Company completed a New Drug Application ("NDA") for
DepoCyt for the treatment of neoplastic meningitis arising from solid tumors.
The FDA has advised the Company that it is currently scheduling its NDA for
review by the FDA's Oncologic Drug Advisory Committee on December 18, 1997. As
with all drugs subject to the accelerated approval, the FDA requested that the
Company conduct a Phase IV clinical trial on DepoCyt which is in process. There
can be no assurance that the data from the DepoCyt Phase III clinical trials
will be sufficient to gain FDA approval for marketing for any indication, that
additional results from ongoing pivotal Phase III trials will be consistent with
earlier results or that the Phase IV and other clinical trials of DepoCyt will
generate positive results. Any of these occurrences would have a material
adverse effect on the Company.

      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's development products on a timely basis, if at all. The FDA or
its international equivalent may refuse to 


                                       10
<PAGE>   13
approve a drug or biological product for commercial sale or shipment 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 additional 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 have a material adverse effect on the Company.

      LIMITED MANUFACTURING EXPERIENCE; RISK OF SCALE-UP; RELIANCE ON
MANUFACTURING PROCESS. The Company has no experience manufacturing products for
commercial purposes. The Company has scaled-up its manufacturing operations to
meet initial commercial requirements for DepoCyt but these operations will
require continuing satisfactory compliance with current Good Manufacturing
Practices ("cGMPs"). For all other products, the Company will need to scale-up
its current manufacturing operations. The Company will also need to comply with
cGMPs and other regulations prescribed by various regulatory agencies in the
United States and other countries to achieve the required levels of production
of each of its products and to obtain and retain marketing approval, if any.
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 to DepoCyt under the
Chiron and P&U agreements. 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 is likely to be highly variable for different therapeutic agents.
Finally, the Company will need to successfully meet any manufacturing challenges
associated with the specific 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 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 and to commercialize its products in
the United States and internationally. 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 or controlled by third parties.
While the Company has entered into preliminary arrangements to test the
feasibility of its delivery technology with certain pharmaceuticals and has
entered into more extensive collaborations with Chiron and P&U, 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 


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<PAGE>   14
or pharmaceutical. The failure to enter into or maintain existing or future
collaborations would have a material adverse effect on the Company.

      LIMITED SALES AND MARKETING CAPABILITY. Commercialization of the Company's
products is expected to be expensive and time-consuming. To the extent the
Company relies on its collaborators for sales and marketing capability, the
Company will be dependent on the efforts of third parties and there can be no
assurance that any of these collaborators will successfully market or distribute
the Company's products.

      PATENTS AND PROPRIETARY TECHNOLOGY. DepoTech relies on a combination of
technical leadership, patents, trade secrets, copyright and trademark protection
and nondisclosure agreements to protect its proprietary rights. There can be no
assurance that any patents issued to the Company will provide significant
protection or will not be challenged or that, the Company will be issued any
additional patents. Even if such patents are enforceable, the Company
anticipates that any attempts to enforce its patents would be time consuming and
costly. Additionally, the coverage claimed in a patent application can be
significantly reduced before the patent is issued. Defense of any lawsuit or
failure to obtain a license to intellectual property rights of third parties
could have a material adverse affect on the Company.

      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, the status of submissions to the FDA, as well as variations
in the Company's results of operations, market conditions, analysts' estimates
and the stock market in general 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.


                                       12
<PAGE>   15
PART II - OTHER INFORMATION

Item 1         Legal Proceedings.  None.

Item 2         Change in Securities. 
               On September 10, 1997, the Company issued 1.0 million shares of
               its Common Stock to a single private investor under Section 4(2)
               of the Securities Act of 1933, raising net proceeds of $14.6
               million. 

Item 3         Defaults Upon Senior Securities.  None.

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

Item 5         Other Information. None.


                                       13
<PAGE>   16
PART II - OTHER INFORMATION

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


          Exhibit
          Number

          10.1+     Marketing and Distribution Agreement between DepoTech
                    Corporation and Pharmacia & Upjohn S.p.A. dated July 2, 1997
                    (with certain confidential portions omitted).


          10.2      Stock Purchase Agreement between DepoTech Corporation and
                    Ross Financial Corporation dated September 10, 1997.



+     Certain confidential portions of this exhibit were omitted by means of
blacking out the text (the "Mark"). This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.

(b) Reports on Form 8-K. None.


                                       14
<PAGE>   17
                              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 13, 1997          Edward L. Erickson
                                  President and Chief Executive Officer
                                  (Principal Executive Officer)


                                  /s/  Dana S. McGowan
                                  ----------------------------------
Date:  November 13, 1997          Dana S. McGowan
                                  Vice President, Finance
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)


                                       15