<PAGE>

                     SECURITIES AND EXCHANGE COMMISSION
                     ----------------------------------
                           WASHINGTON, D.C. 20549

                                  FORM 10-Q

           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           -------------------------------------------------------
                       SECURITIES EXCHANGE ACT OF 1934
                       -------------------------------

             FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2005
                                            -----------------

                     COMMISSION FILE NUMBER 1-9601
                                            ------

                         K-V PHARMACEUTICAL COMPANY
------------------------------------------------------------------------------
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                    43-0618919
-------------------------------           ------------------------------------
(STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

              2503 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63144
------------------------------------------------------------------------------
                  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                 (ZIP CODE)

                               (314) 645-6600
------------------------------------------------------------------------------
            (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

      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 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 BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER
(AS DEFINED IN EXCHANGE ACT RULE 12b-2).  YES X  NO
                                             ---   ---


<TABLE>
<CAPTION>
               TITLE OF CLASS OF                          NUMBER OF SHARES
                 COMMON STOCK                    OUTSTANDING AS OF JANUARY 31, 2006
                 ------------                    ----------------------------------

<S>                                                         <C>
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE              36,552,765
CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE              12,855,824
</TABLE>



                                     1

<PAGE>
<PAGE>


PART I. - FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

<TABLE>
                                    K-V PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF INCOME
                             (Unaudited; dollars in thousands, except per share data)

<CAPTION>
                                                             THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                DECEMBER 31,                    DECEMBER 31,
                                                         -------------------------      --------------------------
                                                           2005             2004           2005             2004
                                                         --------         --------      ---------        ---------

<S>                                                      <C>              <C>           <C>              <C>
Net revenues.....................................        $ 98,392         $ 86,857      $ 280,188        $ 232,266
Cost of sales....................................          33,741           29,935         93,988           80,525
                                                         --------         --------      ---------        ---------
Gross profit.....................................          64,651           56,922        186,200          151,741
                                                         --------         --------      ---------        ---------

Operating expenses:
    Research and development.....................           6,817            5,988         20,869           16,813
    Purchased in-process research and
        development and transaction costs........              --               --         30,441               --
    Selling and administrative...................          35,447           29,176        109,746           79,009
    Amortization of intangible assets............           1,198            1,172          3,589            3,441
    Litigation...................................              --               --             --             (843)
                                                         --------         --------      ---------        ---------
Total operating expenses.........................          43,462           36,336        164,645           98,420
                                                         --------         --------      ---------        ---------

Operating income.................................          21,189           20,586         21,555           53,321
                                                         --------         --------      ---------        ---------

Other expense (income):
    Interest expense.............................           1,538            1,242          4,382            4,276
    Interest and other income....................          (1,272)            (718)        (3,402)          (2,151)
                                                         --------         --------      ---------        ---------
Total other expense, net.........................             266              524            980            2,125
                                                         --------         --------      ---------        ---------

Income before income taxes.......................          20,923           20,062         20,575           51,196
Provision for income taxes.......................           6,509            6,510         16,590           17,407
                                                         --------         --------      ---------        ---------

Net income.......................................        $ 14,414         $ 13,552      $   3,985        $  33,789
                                                         ========         ========      =========        =========


Earnings per common share:
    Basic - Class A common.......................        $   0.31         $   0.29      $    0.08        $    0.72
    Basic - Class B common.......................        $   0.25         $   0.24      $    0.07        $    0.60

    Diluted......................................        $   0.26         $   0.25      $    0.08        $    0.62
                                                         ========         ========      =========        =========

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>


                                     2

<PAGE>
<PAGE>

<TABLE>
                                    K-V PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
                                              (Dollars in thousands)

<CAPTION>
                                                                                         DECEMBER 31,     MARCH 31,
                                                                                             2005           2005
                                                                                             ----           ----
                                                                                         (Unaudited)

<S>                                                                                      <C>             <C>
                                            ASSETS
                                            ------
CURRENT ASSETS:
Cash and cash equivalents............................................................    $    66,839     $   159,825
Marketable securities................................................................         96,370          45,694
Receivables, less allowance for doubtful accounts of $486 and $461
   at December 31, 2005 and March 31, 2005, respectively.............................         69,159          62,361
Inventories, net.....................................................................         57,519          53,945
Prepaid and other assets.............................................................          6,621           9,530
Deferred tax asset...................................................................          9,222           5,827
                                                                                         -----------     -----------
   Total Current Assets..............................................................        305,730         337,182
Property and equipment, net..........................................................        170,398         131,624
Intangible assets and goodwill, net..................................................         73,980          76,430
Other assets.........................................................................         18,731          13,081
                                                                                         -----------     -----------
TOTAL ASSETS.........................................................................    $   568,839     $   558,317
                                                                                         ===========     ===========

                                         LIABILITIES
                                         -----------
CURRENT LIABILITIES:
Accounts payable.....................................................................    $    13,656     $    18,011
Accrued liabilities..................................................................         20,833          15,733
Current maturities of long-term debt.................................................            973             973
                                                                                         -----------     -----------
   Total Current Liabilities.........................................................         35,462          34,717
Long-term debt.......................................................................        209,069         209,767
Other long-term liabilities..........................................................          5,316           4,477
Deferred tax liability...............................................................         21,942          16,654
                                                                                         -----------     -----------
TOTAL LIABILITIES....................................................................        271,789         265,615
                                                                                         -----------     -----------

COMMITMENTS AND CONTINGENCIES........................................................             --              --

                                     SHAREHOLDERS' EQUITY
                                     --------------------

7% cumulative convertible Preferred Stock, $.01 par value; $25.00 stated and
   liquidation value; 840,000 shares authorized; issued and outstanding --
   40,000 shares at December 31, 2005 and March 31,
   2005 (convertible into Class A shares at a ratio of 8.4375 to one)................             --              --
Class A and Class B Common Stock, $.01 par value;150,000,000 and
   75,000,000 shares authorized, respectively;
     Class A - issued 39,634,921 and 39,059,428 at December 31, 2005
       and March 31, 2005, respectively..............................................            396             391
     Class B - issued 12,977,839 and 13,422,101 at December 31, 2005 and March 31,
       2005, respectively (convertible into Class A shares on a one-for-one basis)...            130             134
Additional paid-in capital...........................................................        128,775         128,182
Retained earnings....................................................................        221,712         217,779
Accumulated other comprehensive loss.................................................           (172)           (133)
Less: Treasury stock, 3,118,834 shares of Class A and 92,902 shares of Class B Common
   Stock at December 31, 2005, respectively, and 3,111,003 shares of Class A and
   92,902 shares of Class B Common Stock at March 31, 2005, respectively, at cost....        (53,791)        (53,651)
                                                                                         -----------     -----------
TOTAL SHAREHOLDERS' EQUITY...........................................................        297,050         292,702
                                                                                         -----------     -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...........................................    $   568,839     $   558,317
                                                                                         ===========     ===========


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>


                                     3

<PAGE>
<PAGE>

<TABLE>
                                K-V PHARMACEUTICAL COMPANY AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited; dollars in thousands)

<CAPTION>
                                                                                       NINE MONTHS ENDED
                                                                                          DECEMBER 31,
                                                                                  --------------------------
                                                                                    2005              2004
                                                                                  ---------        ---------
<S>                                                                               <C>              <C>
OPERATING ACTIVITIES:
Net income.............................................................           $   3,985        $  33,789
Adjustments to reconcile net income to net cash provided by
 operating activities:
   Acquired in-process research and development........................              29,570               --
   Depreciation and amortization.......................................              13,065           10,230
   Deferred income tax provision.......................................               1,668           11,013
   Deferred compensation...............................................                 839              630
   Litigation..........................................................                  --             (843)
Changes in operating assets and liabilities:
   Increase in receivables, net........................................              (6,798)         (12,302)
   (Increase) decrease in inventories, net.............................              (3,574)           1,419
   Decrease (increase) in prepaid and other assets.....................               2,805           (1,752)
   Increase (decrease) in accounts payable and accrued liabilities.....                 745          (14,215)
                                                                                  ---------        ---------
Net cash provided by operating activities..............................              42,305           27,969
                                                                                  ---------        ---------

INVESTING ACTIVITIES:
   Purchase of property and equipment, net.............................             (47,317)         (49,387)
   Purchase of marketable securities...................................             (50,735)         (10,366)
   Purchase of preferred stock.........................................             (11,300)              --
   Product acquisition.................................................             (25,643)              --
                                                                                  ---------        ---------
Net cash used in investing activities..................................            (134,995)         (59,753)
                                                                                  ---------        ---------

FINANCING ACTIVITIES:
   Principal payments on long-term debt................................                (698)            (935)
   Dividends paid on preferred stock...................................                 (52)             (52)
   Purchase of common stock for treasury...............................                (140)          (2,461)
   Exercise of common stock options....................................                 594            3,605
                                                                                  ---------        ---------
Net cash provided by (used in) financing activities....................                (296)             157
                                                                                  ---------        ---------
Decrease in cash and cash equivalents..................................             (92,986)         (31,627)
Cash and cash equivalents:
   Beginning of year...................................................             159,825          191,581
                                                                                  ---------        ---------
   End of period.......................................................           $  66,839        $ 159,954
                                                                                  =========        =========

SUPPLEMENTAL INFORMATION:
   Interest paid, net of portion capitalized...........................           $   4,640        $   4,524
   Income taxes paid...................................................               9,132            5,070

NON-CASH FINANCING ACTIVITY:
    Issuance of common stock under product development
      agreement........................................................           $      --        $     238

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>

                                     4

<PAGE>
<PAGE>


           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                    (in thousands, except per share data)

1.  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of K-V
Pharmaceutical Company ("KV" or the "Company") have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. However, in the opinion of management, all
adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. The results of
operations and cash flows for the three- and nine-month periods ended
December 31, 2005 are not necessarily indicative of the results of
operations and cash flows that may be expected for the fiscal year ending
March 31, 2006. The interim consolidated financial statements should be read
in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2005. The balance sheet information as of March 31,
2005 has been derived from the Company's audited consolidated balance sheet
as of that date.

2.  ACQUISITION AND LICENSE AGREEMENTS

In May 2005, the Company and FemmePharma, Inc. ("FemmePharma") mutually
agreed to terminate the license agreement between them entered into in April
2002. As part of this transaction, the Company acquired all of the common
stock of FemmePharma for $25,000 after certain assets of the entity had been
distributed to FemmePharma's other shareholders. Under a separate agreement,
the Company had previously invested $5,000 in FemmePharma's convertible
preferred stock. Included in the Company's acquisition of FemmePharma are
the worldwide marketing rights to an endometriosis product that has
successfully completed Phase II clinical trials. This product was originally
part of the licensing arrangement with FemmePharma that provided the
Company, among other things, marketing rights for the product principally in
the United States. In accordance with the new agreement, the Company
acquired worldwide licensing rights of the endometriosis product, no longer
is responsible for milestone payments and royalties specified in the
original licensing agreement, and secured exclusive worldwide rights for use
of the FemmePharma technology for vaginal anti-infective products. During
the nine months ended December 31, 2005, the Company recorded expense of
$30,441 in connection with the FemmePharma acquisition that consisted of
$29,570 for acquired in-process research and development and $871 in direct
expenses related to the transaction. The acquired in-process research and
development charge represented the estimated fair value of the endometriosis
product being developed that, at the time of the acquisition, had no
alternative future use and for which technological feasibility had not been
established. The FemmePharma acquisition expense was determined by the
Company to not be deductible for tax purposes. The Company also allocated
$375 of the purchase price for a non-compete agreement and $300 of the
purchase price for the royalty-free worldwide license to use FemmePharma's
technology for vaginal anti-infective products acquired in the transaction.
The allocation of the purchase price is preliminary.

In May 2005, the Company entered into a long-term product development and
marketing license agreement with Strides Arcolab, Ltd, (Strides) an Indian
generic pharmaceutical developer and manufacturer, for exclusive marketing
rights in the United States and Canada for 10 new generic drugs. Under the
agreement, Strides will be responsible for developing, submitting for
regulatory approval and manufacturing the 10 products and the Company will
be responsible for exclusively marketing the products in the territories
covered by the agreement. Under a separate agreement, the Company invested
$11,300 in Strides' redeemable preferred stock. The $11,300 investment has
been accounted for using the cost method and is included in "Other assets"
in the accompanying consolidated balance sheet at December 31, 2005.

                                     5

<PAGE>
<PAGE>

3.  STOCK-BASED COMPENSATION

The Company grants stock options for a fixed number of shares to employees
with an exercise price greater than or equal to the fair value of the shares
at the date of grant. As permissible under Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation, the
Company elected to continue to account for stock option grants to employees
in accordance with Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees and related interpretations. APB 25
requires that compensation cost related to fixed stock option plans be
recognized only to the extent that the fair value of the shares at the grant
date exceeds the exercise price. Accordingly, no compensation expense is
recognized for stock option awards granted to employees at or above fair
value. Had the Company determined compensation expense using the fair value
method prescribed by SFAS No. 123, the Company's net income and earnings per
share would have been as follows:

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                DECEMBER 31,                 DECEMBER 31,
                                                            --------------------       ----------------------
                                                             2005          2004         2005            2004
                                                             ----          ----         ----            ----

<S>                                                         <C>          <C>           <C>            <C>
   Net income, as reported........................          $14,414      $13,552       $3,985         $33,789
   Deduct: Stock based employee
      compensation expense........................             (206)        (240)        (606)           (718)
                                                            -------      -------       ------         -------
   Pro forma net income...........................          $14,208      $13,312       $3,379         $33,071
                                                            =======      =======       ======         =======

   Earnings per share:
     Basic Class A common - as reported...........          $  0.31      $  0.29       $ 0.08         $  0.72
     Basic Class A common - pro forma.............             0.30         0.28         0.07            0.71
     Basic Class B common - as reported...........             0.25         0.24         0.07            0.60
     Basic Class B common - pro forma.............             0.25         0.24         0.06            0.59
     Diluted - as reported........................             0.26         0.25         0.08            0.62
     Diluted - pro forma..........................             0.26         0.24         0.07            0.61
</TABLE>

The weighted average fair value of the options has been estimated on the
date of grant using the following weighted average assumptions for grants
during the three and nine months ended December 31, 2005 and 2004,
respectively: no dividend yield; expected volatility of 33% and 35% for
Class A common stock; expected volatility of 30% and 32% for Class B common
stock; risk-free interest rate of 4.39% and 3.49% per annum; and expected
option terms ranging from 3 to 10 years for both periods. Weighted averages
are used because of varying assumed exercise dates.

                                     6

<PAGE>
<PAGE>

4.  EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per share:

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                   DECEMBER 31,                   DECEMBER 31,
                                                              ----------------------        -----------------------
                                                                2005           2004           2005            2004
                                                                ----           ----           ----            ----
<S>                                                           <C>            <C>            <C>             <C>
Undistributed earnings:
   Net income........................................         $14,414        $13,552        $ 3,985         $33,789
   Less - preferred stock dividends..................             (17)           (17)           (52)            (52)
                                                              -------        -------        -------         -------
   Undistributed earnings - basic EPS................          14,397         13,535          3,933          33,737
   Add - preferred stock dividends...................              17             17             --              52
   Add - interest expense on convertible
    notes, net of tax................................           1,062          1,041             --           3,051
                                                              -------        -------        -------         -------
   Net income - diluted EPS..........................         $15,476        $14,593        $ 3,933         $36,840
                                                              =======        =======        =======         =======

Allocation of undistributed earnings - basic EPS:
   Class A common stock..............................         $11,081        $10,058        $ 3,018         $24,365
   Class B common stock..............................           3,316          3,477            915           9,372
                                                              -------        -------        -------         -------
     Total allocated earnings - basic EPS............         $14,397        $13,535        $ 3,933         $33,737
                                                              =======        =======        =======         =======

Weighted average shares outstanding - basic:

   Class A common stock..............................          36,314         34,833         36,156          33,667
   Class B common stock..............................          13,039         14,449         13,160          15,539
                                                              -------        -------        -------         -------
     Total weighted average shares
      outstanding-basic..............................          49,353         49,282         49,316          49,206
                                                              -------        -------        -------         -------
Effect of dilutive securities:
   Employee stock options............................           1,024          1,165            985           1,212
   Convertible preferred stock.......................             338            338             --             338
   Convertible notes.................................           8,692          8,692             --           8,692
                                                              -------        -------        -------         -------
     Dilutive potential common shares................          10,054         10,195            985          10,242
                                                              -------        -------        -------         -------
       Total weighted average shares
        outstanding - diluted........................          59,407         59,477         50,301          59,448
                                                              =======        =======        =======         =======

Basic earnings per share:
   Class A common stock..............................         $  0.31        $  0.29        $  0.08         $  0.72
   Class B common stock..............................            0.25           0.24           0.07            0.60

Diluted earnings per share(1)(2).....................            0.26           0.25           0.08            0.62
                                                              =======        =======        =======         =======

<FN>
     (1) Excluded from the computation of diluted earnings per share were
         outstanding stock options whose exercise prices were greater than
         the average market price of the common shares for the period
         reported. For the three months ended December 31, 2005 and 2004,
         excluded from the computation were options to purchase 706 and 685
         shares of Class A and Class B common stock, respectively. For the
         nine months ended December 31, 2005 and 2004, excluded from the
         computation were options to purchase 796 and 688 shares of Class A
         and Class B common stock, respectively.

     (2) For the nine months ended December 31, 2005, there were preferred
         shares convertible into 338 shares of Class A common stock and
         $200,000 principal amount of Convertible Subordinated Notes
         convertible into 8,692 shares of Class A common stock that were
         excluded from the computation of diluted earnings per share because
         their effect would have been anti-dilutive.
</TABLE>

                                     7

<PAGE>
<PAGE>

5.  REVENUE RECOGNITION

Revenue is generally realized or realizable and earned when persuasive
evidence of an arrangement exists, delivery has occurred or services have
been rendered, the seller's price to the buyer is fixed or determinable, and
the customer's payment ability has been reasonably assured. Accordingly, the
Company records revenue from product sales when title and risk of ownership
have been transferred to the customer, which is typically upon shipment to
the customer. The Company also enters into long-term agreements under which
it assigns marketing rights for the products it has developed to
pharmaceutical marketers. Royalties under these arrangements are earned
based on the sale of products.

Concurrently with the recognition of revenue, the Company records estimated
sales provisions for product returns, sales rebates, payment discounts,
chargebacks, and other sales allowances. Sales provisions are established
based upon consideration of a variety of factors, including but not limited
to, historical relationship to revenues, historical payment and return
experience, estimated customer inventory levels, customer rebate
arrangements, and current contract sales terms with wholesale and indirect
customers.

Actual product returns, chargebacks and other sales allowances incurred are,
however, dependent upon future events and may be different than the
Company's estimates. The Company continually monitors the factors that
influence sales allowance estimates and makes adjustments to these
provisions when management believes that actual product returns, chargebacks
and other sales allowances may differ from established allowances.

Accruals for sales provisions are presented in the consolidated financial
statements as reductions to net revenues and accounts receivable. Sales
provisions totaled $40,229 and $37,498 for the three months ended December
31, 2005 and 2004, respectively, and $119,203 and $96,043 for the nine
months ended December 31, 2005 and 2004, respectively. The reserve balances
related to the sales provisions totaled $32,801 and $21,056 at December 31,
2005 and March 31, 2005, respectively, and are included in "Receivables,
less allowance for doubtful accounts" in the accompanying consolidated
balance sheets.

6.  INVENTORIES

    Inventories consist of the following:

<TABLE>
<CAPTION>
                                                          DECEMBER 31, 2005   MARCH 31, 2005
                                                          -----------------   --------------

<S>                                                            <C>               <C>
            Finished goods.....................                $28,115           $30,521
            Work-in-process....................                  6,875             5,773
            Raw materials......................                 22,529            17,651
                                                               -------           -------
                                                               $57,519           $53,945
                                                               =======           =======
</TABLE>

Management establishes reserves for potentially obsolete or slow-moving
inventory based on an evaluation of inventory levels, forecasted demand and
market conditions.

                                     8

<PAGE>
<PAGE>

7.  INTANGIBLE ASSETS AND GOODWILL

    Intangible assets and goodwill consist of the following:

<TABLE>
<CAPTION>
                                                         DECEMBER 31, 2005                    MARCH 31, 2005
                                                     -------------------------          -------------------------
                                                      GROSS                              GROSS
                                                     CARRYING      ACCUMULATED          CARRYING      ACCUMULATED
                                                      AMOUNT      AMORTIZATION           AMOUNT      AMORTIZATION
                                                      ------      ------------           ------      ------------

<S>                                                  <C>            <C>                 <C>            <C>
Product rights - Micro-K(R)..................        $36,140        $(12,257)           $36,140        $(10,904)
Product rights - PreCare(R)..................          8,433          (2,705)             8,433          (2,389)
Trademarks acquired:
     Niferex(R)..............................         14,834          (2,040)            14,834          (1,484)
     Chromagen(R)/StrongStart(R).............         27,642          (3,801)            27,642          (2,764)
License agreements...........................          4,468            (255)             4,168            (120)
Covenant not to compete......................            375             (25)                 -               -
Trademarks and patents.......................          3,255            (641)             2,814            (497)
                                                     -------        --------            -------        --------
  Total intangible assets....................         95,147         (21,724)            94,031         (18,158)
Goodwill.....................................            557               -                557               -
                                                     -------        --------            -------        --------
                                                     $95,704        $(21,724)           $94,588        $(18,158)
                                                     =======        ========            =======        ========
</TABLE>


As of December 31, 2005, the Company's intangible assets have a weighted
average useful life of approximately 19 years. Amortization expense for
intangible assets was $1,198 and $1,172 for the three months ended December
31, 2005 and 2004, respectively, and $3,589 and $3,441 for the nine months
ended December 31, 2005 and 2004, respectively.

Assuming no additions, disposals or adjustments are made to the carrying
values and/or useful lives of the intangible assets, annual amortization
expense on product rights, trademarks acquired and other intangible assets
is estimated to be approximately $1,200 for the remainder of fiscal 2006 and
approximately $4,800 in each of the four succeeding fiscal years.

8.  REVOLVING CREDIT AGREEMENT

As of December 31, 2005, the Company has credit agreements with two banks
that provide for revolving lines of credit for borrowing up to $140,000. The
credit agreements provide for $80,000 in revolving lines of credit that
expire in October 2006 along with supplemental credit lines of $60,000 for
financing acquisitions. In December 2005, the expiration date of the
supplemental credit line was extended to March 2006. The revolving credit
lines are unsecured and interest is charged at the lower of the prime rate
or the one-month LIBOR rate plus 175 basis points. At December 31, 2005, the
Company had no cash borrowings outstanding under either credit facility. The
credit agreements include covenants that impose minimum levels of earnings
before interest, taxes, depreciation and amortization, a maximum funded debt
ratio, a limit on capital expenditures and dividend payments, a minimum
fixed charge ratio and a maximum senior leverage ratio.

                                     9

<PAGE>
<PAGE>

9.  LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31, 2005     MARCH 31, 2005
                                                                    -----------------     --------------

<S>                                                                     <C>                  <C>
                  Building mortgages..........................          $ 10,042             $ 10,740
                  Convertible notes...........................           200,000              200,000
                                                                        --------             --------
                                                                         210,042              210,740
                  Less current portion........................              (973)                (973)
                                                                        --------             --------
                                                                        $209,069             $209,767
                                                                        ========             ========
</TABLE>

On May 16, 2003, the Company issued $200,000 principal amount of Convertible
Subordinated Notes (the "Notes") that are convertible, under certain
circumstances, into shares of Class A common stock at an initial conversion
price of $23.01 per share. The Notes, which are due May 16, 2033, bear
interest that is payable on May 16 and November 16 of each year at a rate of
2.50% per annum. The Company also is obligated to pay contingent interest at
a rate equal to 0.5% per annum during any six-month period from May 16 to
November 15 and from November 16 to May 15, with the initial six-month
period commencing May 16, 2006, if the average trading price of the Notes
per $1,000 principal amount for the five trading day period ending on the
third trading day immediately preceding the first day of the applicable
six-month period equals $1,200 or more.

The Company may redeem some or all of the Notes at any time on or after May
21, 2006, at a redemption price, payable in cash, of 100% of the principal
amount of the Notes, plus accrued and unpaid interest, including contingent
interest, if any. Holders may require the Company to repurchase all or a
portion of their Notes on May 16, 2008, 2013, 2018, 2023 and 2028 or upon a
change in control, as defined in the indenture governing the Notes, at a
purchase price, payable in cash, of 100% of the principal amount of the
Notes, plus accrued and unpaid interest, including contingent interest, if
any. The Notes are subordinate to all of our existing and future senior
obligations.

The Notes are convertible, at the holders' option, into shares of the
Company's Class A common stock prior to the maturity date under the
following circumstances:

     o    during any quarter commencing after June 30, 2003, if the closing
          sale price of the Company's Class A common stock over a specified
          number of trading days during the previous quarter is more than
          120% of the conversion price of the Notes on the last trading day
          of the previous quarter. The Notes are initially convertible at a
          conversion price of $23.01 per share, which is equal to a
          conversion rate of approximately 43.4594 shares per $1,000
          principal amount of Notes;

     o    if the Company has called the Notes for redemption;

     o    during the five trading day period immediately following any nine
          consecutive day trading period in which the trading price of the
          Notes per $1,000 principal amount for each day of such period was
          less than 95% of the product of the closing sale price of our
          Class A common stock on that day multiplied by the number of
          shares of our Class A common stock issuable upon conversion of
          $1,000 principal amount of the Notes; or

     o    upon the occurrence of specified corporate transactions.

The Company has reserved 8,692 shares of Class A common stock for issuance
in the event the Notes are converted into the Company's common shares.

Certain conversion features of the Notes and the contingent interest feature
meet the criteria of and qualify as embedded derivatives. Although these
features represent embedded derivative financial instruments, based on the
de minimis value of them at the time of issuance and at December 31, 2005,
no value has been assigned to these embedded derivatives.

                                     10

<PAGE>
<PAGE>

The Notes, which are unsecured, do not contain any restrictions on the
payment of dividends, the incurrence of additional indebtedness or the
repurchase of the Company's securities, and do not contain any financial
covenants.

10. TAXABLE INDUSTRIAL REVENUE BONDS

In December 2005, the Company entered into a financing arrangement with St.
Louis County, Missouri related to expansion of the Company's operations in
St. Louis County. In total, up to $135,500 of industrial revenue bonds may
be issued to the Company by St. Louis County relative to capital
improvements made through December 31, 2009. This agreement provides that
50% of the real and personal property taxes on up to $135,500 of capital
improvements will be abated for a period of 10 years subsequent to the
property being placed in service. Industrial revenue bonds totaling $72,956
were outstanding at December 31, 2005.

The industrial revenue bonds are issued by St. Louis County to the Company
upon the Company's payment of qualifying costs of capital improvements,
which are then leased by the Company for a period ending December 1, 2019,
unless earlier terminated. The Company has the option at any time to
discontinue the arrangement and regain full title to the abated property.
The industrial revenue bonds bear interest at 4.25% per annum and are
payable as to principal and interest concurrently with payments due under
the terms of the lease.

The Company has classified the leased assets as property and equipment and
has established a capital lease obligation equal to the outstanding
principal balance of the industrial revenue bonds. Lease payments may be
made by tendering an equivalent portion of the industrial revenue bonds. As
the capital lease payments to St. Louis County may be satisfied by tendering
industrial revenue bonds (which is the Company's intention), the capital
lease obligation, industrial revenue bonds and related interest expense and
interest income, respectively, have been offset for presentation purposes in
the consolidated financial statements.

11. COMPREHENSIVE INCOME

Comprehensive income includes all changes in equity during a period except
those that resulted from investments by or distributions to the Company's
shareholders. Other comprehensive income refers to revenues, expenses, gains
and losses that, under generally accepted accounting principles, are
included in comprehensive income, but excluded from net income as these
amounts are recorded directly as an adjustment to shareholders' equity. For
the Company, comprehensive income is comprised of net income and the net
changes in unrealized gains and losses on available for sale marketable
securities, net of applicable income taxes. Total comprehensive income
totaled $14,389 and $13,412 for the three months ended December 31, 2005 and
2004, respectively, and $3,946 and $33,670 for the nine months ended
December 31, 2005 and 2004, respectively.

12. SEGMENT REPORTING

The reportable operating segments of the Company are branded products,
specialty generics and specialty materials. The Company has aggregated its
branded product lines in a single segment because of similarities in
regulatory environment, manufacturing processes, methods of distribution and
types of customer. This segment includes patent-protected products and
certain trademarked off-patent products that the Company sells and markets
as brand pharmaceutical products. The specialty generics business segment
includes pharmaceutical products that are sold as generics/non-branded
products. The Company sells its branded and generic products primarily to
pharmaceutical wholesalers, drug distributors and chain drug stores. The
specialty materials segment is distinguished as a single segment because of
differences in products, marketing and regulatory approval when compared to
the other segments.

Accounting policies of the segments are the same as the Company's
consolidated accounting policies. Segment profits are measured based on
income before taxes and are determined based on each segment's direct
revenues and expenses. The majority of research and development expense,
corporate general and administrative expenses, amortization and interest
expense, as well as interest and other income, are not allocated to
segments, but included in the "all other" classification. Identifiable
assets for the three reportable operating segments primarily include

                                     11

<PAGE>
<PAGE>

receivables, inventory, and property and equipment. For the "all other"
classification, identifiable assets consist of cash and cash equivalents,
corporate facilities including manufacturing and distribution property and
equipment, intangible and other assets and all income tax related assets.

The following presents information for the Company's reportable operating
segments for the three and nine months ended December 31, 2005 and 2004.

<TABLE>
<CAPTION>
                                THREE MONTHS
                                   ENDED         BRANDED      SPECIALTY     SPECIALTY     ALL
                                DECEMBER 31,     PRODUCTS      GENERICS     MATERIALS    OTHER     ELIMINATIONS   CONSOLIDATED
                                ------------     --------     ---------     ---------  --------    ------------   ------------

<S>                                 <C>           <C>          <C>            <C>      <C>           <C>            <C>
   Net revenues                     2005          $41,942      $52,664        $3,433   $    353      $     -        $ 98,392
                                    2004           26,180       55,508         4,671        498            -          86,857

   Segment profit (loss)            2005           17,411       25,880          (657)   (21,711)           -          20,923
                                    2004            9,851       30,586         1,097    (21,472)           -          20,062

   Identifiable assets              2005           29,543       71,991         8,273    460,190       (1,158)        568,839
    (at period end)                 2004           22,034       79,087         7,742    443,486       (1,158)        551,191

   Property and                     2005                -        1,005           117      9,339            -          10,461
    equipment additions             2004              651           33             -     16,177            -          16,861

   Depreciation and                 2005              146           82            43      4,405            -           4,676
    amortization                    2004               66           65            35      3,311            -           3,477


<CAPTION>
                                NINE MONTHS
                                   ENDED         BRANDED      SPECIALTY     SPECIALTY     ALL
                                DECEMBER 31,     PRODUCTS      GENERICS     MATERIALS    OTHER     ELIMINATIONS   CONSOLIDATED
                                ------------     --------     ---------     ---------  --------    ------------   ------------

<S>                                 <C>          <C>          <C>            <C>       <C>           <C>            <C>
   Net revenues                     2005         $108,058     $158,502       $12,386   $  1,242      $     -        $280,188
                                    2004           64,477      152,843        13,790      1,156            -         232,266

   Segment profit (loss)            2005           39,833       79,256         1,327    (99,841)           -          20,575
                                    2004           18,639       85,693         2,606    (55,742)           -          51,196

   Property and                     2005              124        1,048           333     45,812            -          47,317
    equipment additions             2004            1,956           33            15     47,383            -          49,387

   Depreciation and                 2005              432          233           125     12,275            -          13,065
    amortization                    2004              239          161           106      9,724            -          10,230
</TABLE>

Consolidated revenues are principally derived from customers in North
America and substantially all property and equipment is located in the St.
Louis, Missouri metropolitan area.

13. CONTINGENCIES - LITIGATION

The Company and ETHEX are named as defendants in a case brought by CIMA
LABS, Inc. and Schwarz Pharma, Inc. and styled CIMA LABS, Inc. et. al. v. KV
Pharmaceutical Company et. al. filed in Federal District Court in Minnesota.
It is alleged that the Company and ETHEX infringed on a CIMA patent in
connection with the manufacture and sale of Hyoscyamine Sulfate Orally
Dissolvable Tablets, 0.125 mg. The court has entered a stay pending the
outcome of the Patent and Trademark Offices' reexamination of the patent in
suit. ETHEX will continue to market the product during the stay. The Company
intends to vigorously defend its interests when the stay is lifted; however,
it cannot give any assurance it will prevail.

                                     12

<PAGE>
<PAGE>

The Company and ETHEX are named as defendants in a case brought by Solvay
Pharmaceuticals, Inc. and styled Solvay Pharmaceuticals, Inc. v. ETHEX
Corporation, filed in Federal District Court in Minnesota. In general,
Solvay alleges that ETHEX's comparative promotion of its Pangestyme(TM) CN
10 and Pangestyme(TM) CN 20 products to Solvay's Creon(R) 10 and Creon(R) 20
products resulted in false advertising and misleading statements under
various federal and state laws, and constituted unfair and deceptive trade
practices. Discovery is active and the case is required to be trial ready by
May 1, 2006. The Company intends to vigorously defend its interests;
however, it cannot give any assurance it will prevail.

KV previously distributed several pharmaceutical products that contained
phenylpropanolamine, or PPA, and that were discontinued in 2000 and 2001.
The Company is presently named a defendant in a product liability lawsuit in
Federal District Court in Mississippi involving PPA. The suit originated out
of a case, Virginia Madison, et al. v. Bayer Corporation, et al. The
original suit was filed in December 2002, but was not served on KV until
February 2003. The case was originally filed in the Circuit Court of Hinds
County, Mississippi, and was removed to the Federal District Court for the
Southern District of Mississippi by then co-defendant Bayer Corporation. The
case has been transferred to a Judicial Panel on Multi-District Litigation
for PPA claims sitting in the Western District of Washington. The claims
against the Company have been segregated into a lawsuit brought by Johnny
Fulcher individually and on behalf of the wrongful death beneficiaries of
Linda Fulcher, deceased, against the Company. It alleges bodily injury,
wrongful death, economic injury, punitive damages, loss of consortium and/or
loss of services from the use of the Company's distributed pharmaceuticals
containing PPA that have since been discontinued and/or reformulated to
exclude PPA. In May 2004, the case was dismissed with prejudice by the
Federal District Court for the Western District of Washington for a failure
to timely file an individual complaint as required by certain court orders.
The plaintiff filed a request for reconsideration which was opposed and
subsequently denied by the Court in June 2004. In July 2004, the plaintiff
filed a notice of appeal of the dismissal. The Company has opposed this
appeal. The Company intends to vigorously defend its interests; however, it
cannot give any assurance it will prevail.

The Company has also been advised that one of its former distributor
customers is being sued in Florida state court in a case captioned Darrian
Kelly v. K-Mart et. al. for personal injury allegedly caused by ingestion of
K-Mart diet caplets that are alleged to have been manufactured by the
Company and to contain PPA. The distributor has tendered defense of the case
to the Company and has asserted a right to indemnification for any financial
judgment it must pay. The Company previously notified its product liability
insurer of this claim in 1999, and the Company has demanded that the insurer
assume the Company's defense. The insurer has stated that it has retained
counsel to secure additional factual information and will defer its coverage
decision until that information is received. The Company intends to
vigorously defend its interests; however, it cannot give any assurance that
it will not be impleaded into the action, or that, if it is impleaded, that
it would prevail.

KV's product liability coverage for PPA claims expired for claims made after
June 15, 2002. Although the Company renewed its product liability coverage
for coverage after June 15, 2002, that policy excludes future PPA claims in
accordance with the standard industry exclusion. Consequently, as of June
15, 2002, the Company will provide for legal defense costs and indemnity
payments involving PPA claims on a going forward basis as incurred,
including the Mississippi lawsuit that was filed after June 15, 2002.
Moreover, the Company may not be able to obtain product liability insurance
in the future for PPA claims with adequate coverage limits at commercially
reasonable prices for subsequent periods. From time to time in the future,
KV may be subject to further litigation resulting from products containing
PPA that it formerly distributed. The Company intends to vigorously defend
its interests; however, it cannot give any assurance it will prevail.

After the Company filed ANDAs with the FDA seeking permission to market a
generic version of the 25 mg, 50 mg, 100 mg, and 200 mg strengths of
Toprol(R) XL in extended release capsule form, AstraZeneca filed lawsuits
against KV for patent infringement under the provisions of the Hatch-Waxman
Act. In the Company's Paragraph IV certification, KV contended that its
proposed generic versions do not infringe AstraZeneca's patents. Pursuant to
the Hatch-Waxman Act, the filing date of the suit against the Company
instituted an automatic stay of FDA approval of the Company's ANDA until the
earlier of a judgment, or 30 months from the date of the suit. The Company
filed motions for summary judgment with the Federal District Court in
Missouri alleging, among other things, that AstraZeneca's patent is invalid
and unenforceable. These motions have been granted. AstraZeneca has
announced it will appeal. The Company intends to vigorously defend its
interests; however, it cannot give any assurance it will prevail.


                                     13

<PAGE>
<PAGE>


The Company and/or ETHEX have been named as defendants in certain
multi-defendant cases alleging that the defendants reported improper or
fraudulent pharmaceutical pricing information, i.e., Average Wholesale
Price, or AWP and/or Wholesale Acquisition Cost, or WAC, information, which
caused the governmental plaintiffs to incur excessive costs for
pharmaceutical products under the Medicaid program. Cases of this type have
been filed against the Company and/or ETHEX and other pharmaceutical
manufacturer defendants by the State of Massachusetts, the State of Alabama,
the State of Mississippi, New York City, and approximately 40 counties in
New York State. The New York City case and all New York County cases have
been transferred to the Federal District Court for the District of
Massachusetts for coordinated or consolidated pretrial proceedings under the
Average Wholesale Price Multidistrict Litigation (MDL No. 1456). One of the
counties, Erie County, challenged the transfer and has been remanded to
state court. Each of these actions is in the early stages, and fact
discovery has not yet begun in any of the cases other than the Alabama case,
where the State's first discovery request has been filed. The Company
intends to vigorously defend its interests in the actions described above;
however, it cannot give any assurance it will prevail.

The Company believes that various other governmental entities have commenced
investigations into the generic and branded pharmaceutical industry at large
regarding pricing and price reporting practices. Although the Company
believes its pricing and reporting practices have complied in all material
respects with its legal obligations, it cannot give any assurance that it
would prevail if legal actions are instituted by these governmental
entities.

On May 20, 2005, the Company was notified by the SEC that a non-public
formal investigation was initiated that appears to relate to the Form 8-K
disclosures the Company made on July 13, 2004. The Company believes the
matter will be satisfactorily resolved.

From time to time, the Company is involved in various other legal
proceedings in the ordinary course of its business. While it is not feasible
to predict the ultimate outcome of such other proceedings, the Company
believes that the ultimate outcome of such other proceedings will not have a
material adverse effect on its results of operations or financial position.

There are uncertainties and risks associated with all litigation and there
can be no assurance that the Company will prevail in any particular
litigation.

14. RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an
Amendment to ARB No. 43, Chapter 4 which requires that abnormal amounts of
idle facility expense, freight, handling costs, and wasted material
(spoilage) costs be recognized as current period charges. In addition, this
statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. The Company is currently
determining the impact, if any, the adoption of this statement will have on
its financial condition and results of operations.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123R"), which replaces SFAS No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), and supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees." SFAS 123R requires all
share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair
values. The pro forma disclosures previously permitted under SFAS 123 no
longer will be an alternative to financial statement recognition. Under SFAS
123R, the Company must determine the appropriate fair value model to be used
for valuing share-based payments, the amortization method for compensation
cost and the transition method to be used at date of adoption. The
transition methods include modified prospective and modified retrospective
adoption options. Under the modified retrospective option, prior periods may
be restated either as of the beginning of the year of adoption or for all
periods presented. The modified prospective method requires that
compensation expense be recorded for all unvested stock options and
restricted stock at the beginning of the first quarter of adoption of SFAS
123R, while the modified retrospective method would record compensation
expense


                                     14

<PAGE>
<PAGE>

for all unvested stock options and restricted stock beginning with the first
period restated. The Company is evaluating the requirements of SFAS 123R.
The Company has not yet determined the method of adoption or the effect of
adopting SFAS 123R, and it has not determined whether the adoption will
result in amounts that are similar to the current pro forma disclosures
under SFAS 123.


In April 2005, the Securities and Exchange Commission announced an amendment
to Regulation S-X to amend the date for compliance with SFAS 123R. The
amendment requires each registrant that is not a small business issuer to
adopt SFAS 123R in the first fiscal year commencing after June 15, 2005. As
a result, the Company is required to adopt SFAS 123R beginning April 1,
2006. Adoption of SFAS 123R will have an impact on the Company's
consolidated financial statements, as it will be required to expense the
fair value of its employee stock option grants rather than disclose the pro
forma impact on its consolidated net income within the footnotes to the
Company's consolidated financial statements, as is its current practice.

                                     15

<PAGE>
<PAGE>

         CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Form 10-Q, including the documents that we incorporate herein by
reference, contains various forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995
("PSLRA"), and which may be based on or include assumptions concerning our
operations, future results and prospects. Such statements may be identified
by the use of words like "plans," "expect," "aim," "believe," "projects,"
"anticipate," "commit," "intend," "estimate," "will," "should," "could," and
other expressions that indicate future events and trends.

All statements that address expectations or projections about the future,
including without limitation, statements about our strategy for growth,
product development, regulatory approvals, market position, expenditures and
financial results, are forward-looking statements.

All forward-looking statements are based on current expectations and are
subject to risk and uncertainties. In connection with the "safe harbor"
provisions, we provide the following cautionary statements identifying
important economic, political and technology factors which, among others,
could cause actual results or events to differ materially from those set
forth or implied by the forward-looking statements and related assumptions.

Such factors include (but are not limited to) the following: (1) changes in
the current and future business environment, including interest rates and
capital and consumer spending; (2) the difficulty of predicting FDA
approvals, including the timing, and that any period of exclusivity may not
be realized; (3) acceptance and demand for new pharmaceutical products; (4)
the impact of competitive products and pricing; (5) new product development
and launch, including but not limited to the possibility that any product
launch may be delayed or that product acceptance may be less than
anticipated; (6) reliance on key strategic alliances; (7) the availability
of raw materials; (8) the regulatory environment; (9) fluctuations in
operating results; (10) the difficulty of predicting international
regulatory approval, including the timing; (11) the difficulty of predicting
the pattern of inventory movements by our customers; (12) the impact of
competitive response to our sales, marketing and strategic efforts; (13)
risks that we may not ultimately prevail in our litigation; (14) risks that
we may see increased spending as we ramp up our branded business; and (15)
the risks detailed from time to time in our filings with the Securities and
Exchange Commission.

This discussion is by no means exhaustive, but is designed to highlight
important factors that may impact the Company's outlook. We are under no
obligation to update any of the forward-looking statements after the date of
this report.

                                     16

<PAGE>
<PAGE>

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

Except for the historical information contained herein, the following
discussion contains forward-looking statements that are subject to known and
unknown risks, uncertainties, and other factors that may cause our actual
results to differ materially from those expressed or implied by those
forward-looking statements. These risks, uncertainties and other factors are
discussed above under the caption "Cautionary Statement Regarding
Forward-Looking Information." In addition, the following discussion and
analysis of financial condition and results of operations should be read in
conjunction with the consolidated financial statements, the related notes to
consolidated financial statements and "Management's Discussion and Analysis
of Results of Operations and Financial Condition" included in our Annual
Report on Form 10-K for the fiscal year ended March 31, 2005, and the
unaudited interim consolidated financial statements and related notes to
unaudited interim consolidated financial statements included in Item 1 of
this Quarterly Report on Form 10-Q.

BACKGROUND

We are a fully integrated specialty pharmaceutical company that develops,
acquires, manufactures and markets technologically-distinguished branded and
generic/non-branded prescription pharmaceutical products. We have a broad
range of dosage form capabilities, including tablets, capsules, creams,
liquids and ointments. We conduct our branded pharmaceutical operations
through Ther-Rx Corporation and our generic/non-branded pharmaceutical
operations through ETHEX Corporation, which focuses principally on
technologically-distinguished generic products. Through Particle Dynamics,
Inc., we develop, manufacture and market technologically advanced,
value-added raw material products for the pharmaceutical, nutritional,
personal care, food and other markets.

We have a broad portfolio of drug delivery technologies which we leverage to
create technologically-distinguished brand name and specialty generic
products. We have developed and patented 15 drug delivery and formulation
technologies primarily in four principal areas: SITE RELEASE(R)
bioadhesives, oral controlled release, tastemasking and oral quick
dissolving tablets. We incorporate these technologies in the products we
market to control and improve the absorption and utilization of active
pharmaceutical compounds. These technologies provide a number of benefits,
including reduced frequency of administration, reduced side effects,
improved drug efficacy, enhanced patient compliance and improved taste.

Our drug delivery technologies allow us to differentiate our products in the
marketplace, both in the branded and non-branded/generic pharmaceutical
areas. We believe that this differentiation provides substantial competitive
advantages for our products, allowing us to establish a strong record of
growth and profitability and a leadership position in certain segments of
our industry.

RESULTS OF OPERATIONS

Net revenues for the three months ended December 31, 2005 increased $11.5
million, or 13.3%, as we experienced sales growth of 60.2% in our branded
products segment. The resultant $7.7 million increase in gross profit was
offset in part by a $7.1 million increase in operating expenses. The
increase in operating expenses was primarily due to an increase in personnel
costs and an increase in branded marketing and promotions expense. As a
result of these factors and a $0.3 million improvement in other expense
(income), net income for the third quarter increased $0.9 million, or 6.4%,
to $14.4 million.

During the three months ended June 30, 2005, we recorded expense in
connection with the FemmePharma acquisition (see Note 2 to Consolidated
Financial Statements) of $30.4 million that consisted of $29.6 million for
acquired in-process research and development and $0.9 million for direct
expenses related to the transaction. The valuation of acquired in-process
research and development represented the estimated fair value of the
worldwide marketing rights to an endometriosis product we acquired as part
of the FemmePharma acquisition that, at the time of the acquisition, had no
alternative future use and for which technological feasibility had not been
established. As a result of the FemmePharma acquisition expense of $30.4
million, which reduced our diluted earnings per


                                     17

<PAGE>
<PAGE>

share for the nine months ended December 31, 2005 by $0.61, we earned net
income of $4.0 million, or $0.08 per diluted share for the nine-month
period.

Net revenues for the nine months ended December 31, 2005 increased $47.9
million, or 20.6%, as we experienced sales growth of 3.7% and 67.6% in our
specialty generics and branded products segments, respectively. The
corresponding $34.5 million increase in gross profit was offset by a $35.8
million increase in operating expenses before taking into account the $30.4
million of expense associated with the FemmePharma acquisition. This
increase in operating expenses was primarily due to increases in personnel
costs, branded marketing and promotions expense, legal and professional
expenses, and research and development expense.

<TABLE>
NET REVENUES BY SEGMENT
-----------------------
   ($ IN THOUSANDS)
-----------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ------------------------------------      --------------------------------------
                                                                           %                                           %
                                            2005          2004           CHANGE        2005           2004           CHANGE
                                           -------      -------          ------      --------       --------         ------

<S>                                        <C>          <C>               <C>        <C>            <C>              <C>
   Branded products                        $41,942      $26,180           60.2%      $108,058       $ 64,477          67.6%
     as % of total net revenues               42.6%        30.1%                         38.6%          27.8%
   Specialty generics                       52,664       55,508           (5.1)%      158,502        152,843           3.7%
     as % of total net revenues               53.5%        63.9%                         56.6%          65.8%
   Specialty materials                       3,433        4,671          (26.5)%       12,386         13,790         (10.2)%
     as % of total net revenues                3.5%         5.4%                          4.4%           5.9%
   Other                                       353          498          (29.1)%        1,242          1,156           7.4%
       Total net revenues                  $98,392      $86,857           13.3%      $280,188       $232,266          20.6%
</TABLE>

The increases in branded product sales of $15.8 million and $43.6 million
for the three- and nine-month periods, respectively, were due primarily to
sales of our anti-infective brand, Clindesse(TM), introduced in the fourth
quarter of fiscal 2005 and continued sales growth from our prescription
prenatal and hematinic product lines. Clindesse(TM), a single-dose
prescription cream therapy indicated to treat bacterial vaginosis,
contributed $3.1 million and $15.1 million of incremental sales during the
three- and nine-month periods, respectively. Since its launch in January
2005, Clindesse(TM) has gained 18.5% of the intravaginal bacterial vaginosis
market. Sales of Gynazole-1(R), our vaginal antifungal cream product, declined
3.2% to $9.6 million for the quarter and increased $2.8 million, or 15.1%,
to $21.6 million for the nine-month period. These fluctuations in
Gynazole-1(R) sales were partially impacted by $2.7 million of customer
purchases made during the quarter in anticipation of a December 2005 price
increase. Sales from our hematinic products increased 10.7% to $7.3 million
and 34.3% to $24.5 million during the three- and nine-month periods,
respectively. For the quarter, the growth in hematinic product sales was
primarily due to higher pricing. For the nine-month period, the increase in
hematinic sales also reflected the impact of new prescription growth for our
existing hematinic products and $1.8 million of incremental sales associated
with the introduction of two new products, Niferex(R) Gold and Repliva
21/7(TM). Also included in branded product sales is our PreCare(R) product
line which continued as the leading branded line of prescription prenatal
nutritional supplements in the United States. Sales from our PreCare(R)
product line increased $12.2 million, or 173.7% to $19.2 million and $17.2
million, or 79.9% to $38.7 million during the three- and nine-month periods,
respectively. These increases were primarily due to sales growth experienced
by PrimaCare(R) ONE, our proprietary line extension to PrimaCare(R), and
higher prices. The increase in PreCare(R) product sales was also impacted by
larger-than-normal customer purchases during the quarter in anticipation of
a December 2005 price increase, which accounted for approximately half of
the increase in sales for the quarter. The introduction of Encora(TM), a new
prescription nutritional supplement with essential fatty acids, contributed
$1.5 million of incremental revenue during the past two quarters.

The $2.8 million decrease in specialty generic sales for the quarter
resulted primarily from $3.9 million of normal and expected price reductions
due to competitive pressures on certain products primarily in the
cardiovascular, cough/cold and pain management product lines. This decrease
was offset in part by $0.7 million of incremental sales volume from new
product introductions in the pain management product line and $0.4 million
of increased sales volume for existing products, principally in the pain
management and cough/cold product lines. The $5.7 million of sales growth
for the nine-month period resulted from $14.1 million in increased sales
volume of existing


                                     18

<PAGE>
<PAGE>

products, principally in the cough/cold, pain management and digestive
enzyme product lines, coupled with $0.9 million of sales from new product
introductions in the pain management product line. These increases were
offset in part by $9.3 million of continued product price erosion on certain
cardiovascular, pain management and prenatal vitamin products.

The decreases in specialty material product sales for the three- and
nine-month periods were primarily due to reduced sales on a product that is
used by a customer in a chewable vitamin that the customer was in the
process of reformulating, coupled with increased competition on our calcium
carbonate products.

<TABLE>
GROSS PROFIT BY SEGMENT
-----------------------
    ($ IN THOUSANDS)
-----------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ------------------------------------      --------------------------------------
                                                                           %                                           %
                                            2005          2004           CHANGE        2005           2004           CHANGE
                                           -------      -------          ------      --------       --------         ------

<S>                                        <C>          <C>              <C>         <C>            <C>              <C>
   Branded products                        $36,606      $22,644           61.7%      $ 95,505       $ 56,158          70.1%
     as % of  net revenues                    87.3%        86.5%                         88.4%          87.1%
   Specialty generics                       28,437       33,030          (13.9)%       87,364         93,062          (6.1)%
     as % of net revenues                     54.0%        59.5%                         55.1%          60.9%
   Specialty materials                         458        1,894          (75.8)%        4,030          5,013         (19.6)%
     as % of net revenues                     13.3%        40.5%                         32.5%          36.4%
   Other                                      (850)        (646)         (31.6)%         (699)        (2,492)         72.0%
    Total gross profit                     $64,651      $56,922           13.6%      $186,200       $151,741          22.7%
      as % of total net revenues              65.7%        65.5%                         66.5%          65.3%
</TABLE>

The increases in gross profit of $7.7 million and $34.5 million for the
three- and nine-month periods, respectively, were mainly due to the
significant sales growth experienced by our branded products segment. The
higher gross profit percentages on a consolidated basis for both the three-
and nine-month periods reflected the impact of our higher margin branded
products comprising a larger percentage of net revenues. This effect was
offset in part by lower margins in the specialty generics segment due
primarily to the impact of price erosion on certain products that primarily
occurred during the first and third quarters, partially offset by certain
selective price increases, and a shift in the mix of sales toward lower
margin products, particularly in the cough/cold category. The gross profit
percentage decrease experienced by specialty materials for the quarter
primarily resulted from the write-off of under absorbed production overhead
due to lower volume and an unfavorable mix of products sold.

<TABLE>
RESEARCH AND DEVELOPMENT
------------------------
   ($ IN THOUSANDS)
------------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Research and development               $ 6,817      $ 5,988         13.8%      $ 20,869       $ 16,813         24.1%
      as % of total net revenues               6.9%         6.9%                        7.5%           7.2%
</TABLE>

The increases in research and development expense of $0.8 million and $4.1
million for the three- and nine-month periods, respectively, were due to
increased spending on bioequivalency studies as we continue active
development of various brand and generic/non-brand products in both our
internal and external pipelines. The increase for the nine-month period was
also reflective of a reduced level of expense in the prior year first
quarter as certain clinical studies were rescheduled for later in fiscal
2005.

We anticipate that research and development costs for the remainder of
fiscal 2006 will continue to increase based on our growing product
development pipeline and the anticipated start of the Phase III clinical
study on the endometriosis product acquired in the first quarter.

                                     19

<PAGE>
<PAGE>

<TABLE>
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT
---------------------------------------------
              ($ IN THOUSANDS)
---------------------------------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Purchased in-process research
     and development                       $     -      $     -            -%      $ 30,441        $    -             NM
     as % of total net revenues                  -%           -%                       10.9%            -%
</TABLE>

During the quarter ended June 30, 2005, we recorded expense in connection
with the FemmePharma acquisition (see Note 2 to Consolidated Financial
Statements) of $30.4 million that consisted of $29.6 million for acquired
in-process research and development and $0.9 million in direct expenses
related to the transaction. The valuation of acquired in-process research
and development represents the estimated fair value of the worldwide
marketing rights to an endometriosis product we acquired as part of the
FemmePharma acquisition that, at the time of the acquisition, had no
alternative future use and for which technological feasibility had not been
established. The FemmePharma acquisition expense of $30.4 million reduced
our diluted earnings per share for the nine months ended December 31, 2005
by $0.61.

<TABLE>
SELLING AND ADMINISTRATIVE
--------------------------
     ($ IN THOUSANDS)
--------------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Selling and administrative             $35,447      $29,176         21.5%      $109,746       $ 79,009          38.9%
        as % of total net revenues            36.0%        33.6%                       39.2%          34.0%
</TABLE>

The increases in selling and administrative expense of $6.3 million and
$30.7 million for the three- and nine-month periods were primarily due to:

     o    $3.9 million and $13.8 million increases, respectively, in
          personnel costs associated with expansion of the branded sales
          force in fiscal 2005 and 2006 and increases in management and
          other personnel;

     o    $2.4 million and $7.4 million increases, respectively, in branded
          marketing and promotions expense to expand promotion of our
          existing brands, to further promote the launch of Clindesse(TM)
          and to support the introduction of other new products; and

     o    $1.0 million and $3.1 million increases, respectively, in
          depreciation, insurance and utilities expense associated with
          facilities expansion.

The increases for the quarter were partially offset by a $1.8 million
decline in legal and professional expense due in part to the receipt of an
insurance reimbursement of $1.0 million for litigation costs. For the
nine-month period, the increases described above were further caused by a
$6.4 million increase in legal and professional expense due to an increase
in litigation activity and consideration of potential acquisition
opportunities. This increase in litigation activity included ongoing costs
associated with various patent infringement actions brought against us on
products we market or propose to market.

                                     20

<PAGE>
<PAGE>

<TABLE>
   LITIGATION
   ----------
($ IN THOUSANDS)
----------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
   Litigation                              $     -      $     -           NM       $      -       $   (843)           NM
    as % of total net revenues                   -            -                           -           (0.4)%
</TABLE>

The $843,000 benefit reflected in "Litigation" for the prior nine-month
period represented a reversal of the portion of the Healthpoint litigation
reserve that remained after consideration of the settlement payment and
related litigation costs.

<TABLE>
OPERATING INCOME
----------------
($ IN THOUSANDS)
----------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Operating income                       $21,189      $20,586          2.9%      $ 21,555       $ 53,321         (59.6)%
</TABLE>

For the nine-month period, the decrease in operating income of $31.8 million
resulted largely from the $30.4 million of expense we recorded in connection
with the FemmePharma acquisition.

<TABLE>
INTEREST EXPENSE
----------------
($ IN THOUSANDS)
----------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
Interest expense                           $ 1,538      $ 1,242         23.8%      $  4,382       $  4,276           2.5%
 as % of total net revenues                    1.6%         1.4%                        1.6%           1.8%
</TABLE>

The increases in interest expense for the three- and nine-month periods were
primarily due to a decline in the number of capital projects that we have in
process and the reduced level of capitalized interest thereon.

<TABLE>
INTEREST AND OTHER INCOME
-------------------------
    ($ IN THOUSANDS)
-------------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Interest and other income              $ 1,272      $   718         77.2%      $  3,402       $  2,151          58.2%
     as % of total net revenues                1.3%         0.8%                        1.2%           0.9%
</TABLE>

The increases in interest and other income for both the three- and
nine-month periods were primarily due to an increase in the weighted average
interest rate earned on short-term investments, offset in part by a decline
in the average balance of short-term investments.

                                     21

<PAGE>
<PAGE>

<TABLE>
PROVISION FOR INCOME TAXES
--------------------------
    ($ IN THOUSANDS)
--------------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Provision for income taxes             $ 6,509      $ 6,510            -%      $ 16,590       $ 17,407          (4.7)%
    Effective tax rate                        31.1%        32.4%                       80.6%          34.0%
</TABLE>

The decline in the effective tax rate for the quarter was due to the
reversal of certain tax reserves associated with tax issues from previous
years that on review were determined to no longer be necessary. For the
nine-month period, the higher effective tax rate was attributable to the
determination that the $30.4 million of expense we recorded for the
FemmePharma acquisition was not deductible for tax purposes. The effective
tax rate of 32.5% for the nine months ended December 31, 2005 was applied
to a pre-tax income amount that excluded the FemmePharma acquisition expense
of $30.4 million.

<TABLE>
NET INCOME AND DILUTED EARNINGS PER SHARE
-----------------------------------------
             ($ IN THOUSANDS)
-----------------------------------------
<CAPTION>
                                                   THREE MONTHS ENDED                          NINE MONTHS ENDED
                                                      DECEMBER 31,                                DECEMBER 31,
                                           ----------------------------------      --------------------------------------
                                                                         %                                           %
                                            2005          2004         CHANGE        2005           2004           CHANGE
                                           -------      -------        ------      --------       --------         ------

<S>                                        <C>          <C>             <C>        <C>            <C>              <C>
    Net income                             $14,414      $13,552          6.4%      $  3,985       $ 33,789         (88.2)%
    Diluted earnings per share                0.26         0.25          4.0%          0.08           0.62         (87.1)%
</TABLE>

For the nine-month period, the decrease in net income of $29.8 million
resulted largely from the $30.4 million of expense, or $0.61 per share, we
recorded in connection with the FemmePharma acquisition.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and working capital were $66.8 million and $270.3
million, respectively, at December 31, 2005, compared to $159.8 million and
$302.5 million, respectively, at March 31, 2005. Internally generated funds
from product sales continued to be the primary source of operating cash flow
used in the funding of our businesses. The net cash flow from operating
activities was $42.3 million for the nine months ended December 31, 2005
compared to $28.0 million for the comparable prior period. This increase
resulted primarily from the operating cash flows for the comparative prior
nine-month period including the impact of an $18.3 million reduction in
accrued liabilities attributable to settlement of the Healthpoint litigation
which was resolved during the second quarter of the prior year.

Net cash flow used in investing activities included capital expenditures of
$47.3 million for the nine months ended December 31, 2005 compared to $49.4
million for the corresponding prior year period. In April 2005, the Company
completed the purchase of a 260,000 square foot building in the St. Louis
metropolitan area for $11.8 million. The property had been leased by the
Company since April 2000 and will continue to function as the Company's main
distribution facility. The purchase price was paid with cash on hand. The
remaining capital expenditures during the nine-month period were primarily
for building renovation projects and for purchasing machinery and equipment
to upgrade and expand our pharmaceutical manufacturing and distribution
capabilities. Other investing activities for the nine-month period included
$50.7 million in purchases of marketable securities that were classified as
available for sale. In addition, in May 2005, the Company and FemmePharma
mutually agreed to terminate the license agreement we entered into with them
in April 2002 (see Note 2 to Consolidated Financial Statements). As part of
this transaction, we acquired all of the common stock of FemmePharma for a
$25.0 million cash payment after certain assets of the entity had been
distributed to FemmePharma's other shareholders. In connection with this
transaction, we acquired the worldwide marketing rights to an endometriosis
product. Also, in May 2005, we entered into a long-term product development
and marketing license agreement with Strides, an Indian generic
pharmaceutical developer and manufacturer, for exclusive marketing rights in
the United States and Canada for 10 new generic drugs. Under a separate
agreement, the Company invested $11.3


                                     22

<PAGE>
<PAGE>

million in Strides' redeemable preferred stock (see Note 2 to Consolidated
Financial Statements).

Our debt balance was $210.0 million at December 31, 2005 compared to $210.7
million at March 31, 2005 (see Note 9 to Consolidated Financial Statements).
In May 2003, we issued $200.0 million principal amount of Convertible
Subordinated Notes that are convertible, under certain circumstances, into
shares of our Class A Common Stock at an initial conversion price of $23.01
per share. The Convertible Subordinated Notes bear interest at a rate of
2.50% and mature on May 16, 2033. We are also obligated to pay contingent
interest at a rate equal to 0.5% per annum during any six-month period
commencing May 16, 2006, if the average trading price of the Notes per
$1,000 principal amount for the five trading day period ending on the third
trading day immediately preceding the first day of the applicable six-month
period equals $1,200 or more. We may redeem some or all of the Convertible
Subordinated Notes at any time on or after May 21, 2006, at a redemption
price, payable in cash, of 100% of the principal amount of the Convertible
Subordinated Notes, plus accrued and unpaid interest (including contingent
interest, if any) to the date of redemption. Holders may require us to
repurchase all or a portion of their Convertible Subordinated Notes on May
16, 2008, 2013, 2018, 2023 and 2028, or upon a change in control, as defined
in the indenture governing the Convertible Subordinated Notes, at 100% of
the principal amount of the Convertible Subordinated Notes, plus accrued and
unpaid interest (including contingent interest, if any) to the date of
repurchase, payable in cash. The Convertible Subordinated Notes are
subordinate to all of our existing and future senior obligations.

We have credit agreements with two banks that provide revolving lines of
credit for borrowing up to $140.0 million (see Note 8 to Consolidated
Financial Statements). The credit agreements provide for $80.0 million in
revolving lines of credit that expire in October 2006 along with
supplemental credit lines of $60.0 million that are available for financing
acquisitions. In December 2005, the expiration date of the supplemental
credit line was extended to March 2006. The revolving and supplemental
credit lines are unsecured and interest is charged at the lower of the prime
rate or the one-month LIBOR rate plus 175 basis points. At December 31,
2005, we had no cash borrowings under either credit facility. The credit
agreements contain financial covenants that impose minimum levels of
earnings before interest, taxes, depreciation and amortization, a maximum
funded debt ratio, a limit on capital expenditures and dividend payments, a
minimum fixed charge coverage ratio and a maximum senior leverage ratio. As
of December 31, 2005, we were in compliance with all of our covenants.

In December 2005, we entered into a financing arrangement with St. Louis
County, Missouri related to expansion of our operations in St. Louis County
(see Note 10 to Consolidated Financial Statements). In total, up to $135.5
million of industrial revenue bonds may be issued to us by St. Louis County
relative to capital improvements made through December 31, 2009. This
agreement provides that 50% of the real and personal property taxes on up to
$135.5 million of capital improvements will be abated for a period of 10
years subsequent to the property being placed in service. Industrial revenue
bonds totaling $73.0 million were outstanding at December 31, 2005. The
industrial revenue bonds are issued by St. Louis County to us upon our
payment of qualifying costs of capital improvements, which are then leased
by us for a period ending December 1, 2019, unless earlier terminated. We
have the option at any time to discontinue the arrangement and regain full
title to the abated property. The industrial revenue bonds bear interest at
4.25% per annum and are payable as to principal and interest concurrently
with payments due under the terms of the lease. We have classified the
leased assets as property and equipment and have established a capital lease
obligation equal to the outstanding principal balance of the industrial
revenue bonds. Lease payments may be made by tendering an equivalent portion
of the industrial revenue bonds. As the capital lease payments to St. Louis
County may be satisfied by tendering industrial revenue bonds (which is our
intention), the capital lease obligation, industrial revenue bonds and
related interest expense and interest income, respectively, have been offset
for presentation purposes in the Consolidated Financial Statements.

We believe our cash and cash equivalents balance, cash flows from operations
and funds available under our credit facilities, will be adequate to fund
operating activities for the presently foreseeable future, including the
payment of short-term and long-term debt obligations, capital improvements,
research and development expenditures, product development activities and
expansion of marketing capabilities for the branded pharmaceutical business.
In addition, we continue to examine opportunities to expand our business
through the acquisition of or investment in companies, technologies, product
rights, research and development and other investments that are compatible
with our existing businesses. We intend to use our available cash to help in
funding any acquisitions or investments. As such, cash has been invested in
short-term, highly liquid instruments. We also may use funds available under
our credit facilities, or financing sources that subsequently become
available, including the future


                                     23

<PAGE>
<PAGE>

issuances of additional debt or equity securities, to fund these
acquisitions or investments. If we were to fund one or more such
acquisitions or investments, our capital resources, financial condition and
results of operations could be materially impacted in future periods.

INFLATION

Inflation may apply upward pressure on the cost of goods and services used
by us in the future. However, we believe that the net effect of inflation on
our operations during the past three years has been minimal. In addition,
changes in the mix of products sold and the effect of competition has made a
comparison of changes in selling prices less meaningful relative to changes
in the overall rate of inflation over the past three years.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements are presented on the basis of U.S.
generally accepted accounting principles. Certain of our accounting policies
are particularly important to the portrayal of our financial position and
results of operations and require the application of significant judgment by
our management. As a result, these policies are subject to an inherent
degree of uncertainty. In applying these policies, we make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues
and expenses and related disclosures. We base our estimates and judgments on
historical experience, the terms of existing contracts, observance of trends
in the industry, information that is obtained from customers and outside
sources, and on various other assumptions that are believed to be reasonable
and appropriate under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Although we believe that
our estimates and assumptions are reasonable, actual results may differ
significantly from our estimates. Changes in estimates and assumptions based
upon actual results may have a material impact on our results of operations
and/or financial condition. Our critical accounting policies are described
below.

REVENUE AND PROVISION FOR SALES RETURNS AND ALLOWANCES. Revenue is generally
-------------------------------------------------------
realized or realizable and earned when persuasive evidence of an arrangement
exists, delivery has occurred or services have been rendered, the seller's
price to the buyer is fixed or determinable, and collectibility is
reasonably assured. Accordingly, we record revenue from product sales when
title and risk of ownership have been transferred to the customer, which is
typically upon shipment to the customer. We also enter into long-term
agreements under which we assign marketing rights for the products we have
developed to pharmaceutical marketers. Royalties under these arrangements
are earned based on the sale of products.

When we sell our products, we reduce the amount of revenue we recognize from
such sales by an estimate of future product returns and sales allowances.
Sales allowances include cash discounts, rebates, chargebacks, and other
similar expected future payments relating to products sold in the current
period. Factors that are considered in our estimates of future product
returns and sales allowances include historical payment experience in
relationship to revenues, estimated customer inventory levels, and current
contract prices and terms with both direct and indirect customers. If actual
future payments for product returns and sales allowances exceed the
estimates we made at the time of sale, our financial position, results of
operations and cash flows would be negatively impacted.

The provision for chargebacks is the most significant and complex estimate
used in the recognition of revenue. We establish contract prices for
indirect customers who are supplied by our wholesale customers. A chargeback
represents the difference between our invoice price to the wholesaler and
the indirect customer's contract price, which is lower. We credit the
wholesaler for purchases by indirect customers at the lower price.
Accordingly, we record these chargebacks at the time we recognize revenue in
connection with our sales to wholesalers. Provisions for estimating
chargebacks are calculated primarily using historical chargeback experience,
actual contract pricing and estimated wholesaler inventory levels. We
continually monitor our assumptions, giving consideration to estimated
wholesaler inventory levels and current pricing trends, and make adjustments
to these estimates when we believe that the actual chargeback amounts
payable in the future will differ from our original estimates.

INVENTORY VALUATION. Inventories consist of finished goods held for
-------------------
distribution, raw materials and work in


                                     24

<PAGE>
<PAGE>

process. Our inventories are stated at the lower of cost or market, with
cost determined on the first-in, first-out basis. In evaluating whether
inventory is to be stated at the lower of cost or market, we consider such
factors as the amount of inventory on hand and in the distribution channel,
estimated time required to sell existing inventory, remaining shelf life and
current and expected market conditions, including levels of competition. We
establish reserves, when necessary, for slow-moving and obsolete inventories
based upon our historical experience and management's assessment of current
product demand.

INTANGIBLE ASSETS. Our intangible assets consist of product rights, license
-----------------
agreements and trademarks resulting from product acquisitions and legal fees
and similar costs relating to the development of patents and trademarks.
Intangible assets that are acquired are stated at cost, less accumulated
amortization, and are amortized on a straight-line basis over their
estimated useful lives. Upon approval, costs associated with the development
of patents and trademarks are amortized on a straight-line basis over
estimated useful lives ranging from five to 17 years. We determine
amortization periods for intangible assets that are acquired based on our
assessment of various factors impacting estimated useful lives and cash
flows of the acquired products. Such factors include the product's position
in its life cycle, the existence or absence of like products in the market,
various other competitive and regulatory issues, and contractual terms.
Significant changes to any of these factors may result in a reduction in the
intangible asset's useful life and an acceleration of related amortization
expense.

We assess the impairment of intangible assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Some
factors we consider important which could trigger an impairment review
include: (1) significant underperformance relative to expected historical or
projected future operating results; (2) significant changes in the manner of
our use of the acquired assets or the strategy for our overall business; and
(3) significant negative industry or economic trends.

When we determine that the carrying value of an intangible asset may not be
recoverable based upon the existence of one or more of the above indicators
of impairment, we first perform an assessment of the asset's recoverability.
Recoverability is determined by comparing the carrying amount of an
intangible asset against an estimate of the undiscounted future cash flows
expected to result from its use and eventual disposition. If the sum of the
expected future undiscounted cash flows is less than the carrying amount of
the intangible asset, an impairment loss is recognized based on the excess
of the carrying amount over the estimated fair value of the intangible
asset.

CONTINGENCIES. The Company is involved in various legal proceedings, some of
-------------
which involve claims for substantial amounts. An estimate is made to accrue
for a loss contingency relating to any of these legal proceedings if it is
probable that a liability was incurred as of the date of the financial
statements and the amount of loss can be reasonably estimated. Because of
the subjective nature inherent in assessing the outcome of litigation and
because of the potential that an adverse outcome in legal proceedings could
have a material impact on our financial position or results of operations,
such estimates are considered to be critical accounting estimates. After
review, it was determined that the conditions mentioned above for accrual
were not met. We will continue to evaluate all legal matters as additional
information becomes available.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is limited to fluctuating interest rates
associated with variable rate indebtedness that is subject to interest rate
changes.

Advances to us under our credit facilities bear interest at a rate that
varies consistent with increases or decreases in the publicly announced
prime rate and/or the LIBOR rate with respect to LIBOR-related loans, if
any. A material increase in such rates could significantly increase
borrowing expenses. We did not have any cash borrowings under our credit
facilities at December 31, 2005.

In May 2003, we issued $200.0 million principal amount of Convertible
Subordinated Notes. The interest rate on the Convertible Subordinated Notes
is fixed at 2.50% and therefore not subject to interest rate changes.
Beginning May 16, 2006, we will become obligated to pay contingent interest
at a rate equal to 0.5% per annum during any six-month period, if the
average trading price of the Convertible Subordinated Notes per $1,000
principal amount for the five-trading day period ending on the third trading
day immediately preceding the first day of the applicable six-month period
equals $1,200 or more.

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<PAGE>

In April 2003, we entered into an $8.8 million term loan secured by a
building under a floating rate loan with a bank. We also entered into an
interest rate swap agreement with the same bank, which fixed the interest
rate of the building mortgage at 5.31% for the term of the loan.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including our
principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures.

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our
management, including our principal executive officer and principal
financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our principal
executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective as of the end of the
period covered by this report.

There have been no significant changes in our internal control over
financial reporting or in other factors that have materially affected, or
are reasonably likely to materially affect, our internal control over
financial reporting in the third quarter of fiscal year 2006.


                                     26

<PAGE>
<PAGE>


PART II.  - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth under Note 12 - CONTINGENCIES - LITIGATION to the
Consolidated Financial Statements included in Part I of this report is
incorporated in this Part II, Item 1 by reference.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

        PURCHASE OF EQUITY SECURITIES BY THE COMPANY

        The following table provides information about purchases the
        Company made of its common stock during the quarter ended
        December 31, 2005:

<TABLE>
<CAPTION>
                                                                              TOTAL NUMBER OF
                                                                              SHARES PURCHASED        MAXIMUM NUMBER
                                      TOTAL NUMBER                              AS PART OF A        OF SHARES THAT MAY
                                        OF SHARES       AVERAGE PRICE        PUBLICLY ANNOUNCED      YET BE PURCHASED
        PERIOD                         PURCHASED        PAID PER SHARE            PROGRAM            UNDER THE PROGRAM

<S>                                       <C>              <C>                      <C>                      <C>
  October 1-31, 2005                      217              $ 17.41                  --                       --
  November 1-30, 2005                      --                   --                  --                       --
  December 1-31, 2005                      --                   --                  --                       --
                                          ---                                      ---                      ---
              Total                       217              $ 17.41                  --                       --
                                          ===                                      ===                      ===
</TABLE>

Shares were purchased from employees upon their termination pursuant to the
terms of the Company's stock option plan.



                                     27

<PAGE>
<PAGE>

ITEM 6. EXHIBITS

             Exhibits. See Exhibit Index.


                                     28

<PAGE>
<PAGE>

                                 SIGNATURES
                                 ----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                     K-V PHARMACEUTICAL COMPANY



Date: February 7, 2006           By  /s/  Marc S. Hermelin
      ----------------               ------------------------------------------
                                     Marc S. Hermelin
                                     Vice Chairman of the Board and
                                     Chief Executive Officer
                                     (Principal Executive Officer)



Date: February 7, 2006           By  /s/  Gerald R. Mitchell
      ----------------               ------------------------------------------
                                     Gerald R. Mitchell
                                     Vice President and Chief Financial Officer
                                     (Principal Financial Officer)



Date: February 7, 2006           By  /s/ Richard H. Chibnall
      ----------------               ------------------------------------------
                                     Richard H. Chibnall
                                     Vice President, Finance
                                     (Principal Accounting Officer)


                                     29

<PAGE>
<PAGE>

                                EXHIBIT INDEX

Exhibit No.                   Description
-----------                   -----------

   31.1             Certification of Chief Executive Officer.

   31.2             Certification of Chief Financial Officer.

   32.1             Certification pursuant to 18 U.S.C. Section 1350, as
                    adopted pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.

   32.2             Certification pursuant to 18 U.S.C. Section 1350, as
                    adopted pursuant to Section 906 of the Sarbanes-Oxley
                    Act of 2002.



                                     30