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                         SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.  20549

                                     FORM 10-K

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

                      For fiscal year ended December 31, 1997

                                         OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 (NO FEE REQUIRED)


                For the transition period from ________ to ________.

                         COMMISSION FILE NUMBER:  000-19809

                             DURA PHARMACEUTICALS, INC.
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                DELAWARE                           95-3645543
       (State or other jurisdiction              (I.R.S. Employer
     or incorporation or organization)          Identification No.)

      7475 LUSK BLVD., SAN DIEGO, CALIFORNIA             92121
     (Address of principal executive offices)          (zip code)


         Registrant's telephone number, including area code (619) 457-2553

                SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
                                   THE ACT: NONE

                  SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
                                    OF THE ACT:

COMMON STOCK, $.001 PAR VALUE. WARRANTS TO PURCHASE ONE-FOURTH OF ONE SHARE
OF COMMON STOCK, PAR VALUE $.001 PER SHARE. THE WARRANTS ARE REGISTERED
PURSUANT TO SECTION 12(G) OF THE ACT SEPARATELY AND AS PART OF UNITS, EACH
UNIT CONSISTING OF ONE SHARE OF CALLABLE COMMON STOCK OF SPIROS DEVELOPMENT
CORPORATION II, INC. AND ONE WARRANT. THE WARRANTS ARE NOT SEPARATELY
TRADABLE APART FROM THE UNITS PRIOR TO DECEMBER 31, 1999 OR UPON THE EARLIER
OCCURRENCE OF CERTAIN EVENTS.

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X   No    .
                                               ---     ---

                                                                             1
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     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  [X].

     The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 27, 1998 was $1,003,649,682.  For the purposes of
this calculation, shares owned by officers, directors (and their affiliates) and
10% or greater shareholders known to the registrant have been deemed to be
affiliates, which should not be construed to indicate that any such person
possesses the power, direct or indirect, to direct or cause the direction of the
management or policies of the Registrant or that such person is controlled by or
under common control with the Registrant.

     The number of shares of the Registrant's Common Stock outstanding as of
February 27, 1998 was 46,142,915.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held on May 21, 1998, to be filed with the
Securities and Exchange Commission on or about April 16, 1998,  referred to
herein as the "Proxy Statement," are incorporated as provided in Part III, and
portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1997, attached hereto as Exhibit 13, referred to herein as
the "Annual Report," are incorporated as provided in parts II and IV.

                                                                             2
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                                       INDEX

 Part I:
      Item 1.    Business                                                4
      Item 2.    Properties                                             22
      Item 3.    Legal Proceedings                                      23
      Item 4.    Submission of Matters to a Vote of Security Holders    23

 Part II:
      Item 5.    Market for Registrant's Common Equity and Related
                 Shareholder Matters                                    23
      Item 6.    Selected Financial Data                                23
      Item 7.    Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                    24
      Item 7A.   Quantitative and Qualitative Disclosures about
                 Market Risk                                            24
      Item 8.    Financial Statements and Supplementary Data            24
      Item 9.    Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure                    24

 Part III:
      Item 10.   Directors and Executive Officers of the Registrant     24
      Item 11.   Executive Compensation                                 24
      Item 12.   Security Ownership of Certain Beneficial Owners and
                 Management                                             24
      Item 13.   Certain Relationships and Related Transactions         25

 Part IV:
      Item 14.   Exhibits, Financial Statement Schedules and
                 Reports on Form 8-K                                    25

                 Signatures                                             30

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                                        PART I

ITEM 1.   BUSINESS

The discussion of Dura Pharmaceuticals, Inc.'s ("Dura" or "the Company")
business contained in this report may contain certain projections, estimates
and other forward-looking statements that involve a number of risks and
uncertainties.  For a discussion of factors which may affect the outcome
projected in such statements, see "Risks and Uncertainties" on pages 16
through 22 of this Annual Report on Form 10-K.  While this outlook
represents management's current judgment on the future direction of the
business, such risks and uncertainties could cause actual results to differ
materially from any future performance listed below.  The Company undertakes
no obligation to release publicly the results of any revisions to these
forward-looking statements to reflect events and circumstances arising after
the date hereof.

OVERVIEW

The Company is a specialty respiratory pharmaceutical and pulmonary drug
delivery company.  The Company is engaged in developing and marketing
prescription pharmaceutical products for the treatment of asthma, hay fever,
chronic obstructive pulmonary disease ("COPD"), the common cold and related
respiratory ailments and is developing a pulmonary drug delivery system
("Spiros-Registered Trademark-").  Dura has strategically focused on the U.S.
respiratory market because of its size and growth opportunities.  The
estimated size of the target market for antihistamines, asthma/rhinitis
therapies, cough/cold preparations and anti-infectives in 1997 was
approximately $10.2 billion.  The size and fragmented nature of the market
and the identifiable base of physician prescribers allow Dura to achieve
significant market penetration with a specialized sales force.  The Company
currently markets 31 prescription products and also has a separate mail
service pharmacy, Health Script pharmacy Services, Inc. ("HealthScript"),
which dispenses respiratory pharmaceuticals.

Dura employs a dual marketing strategy utilizing its focused field sales
force of over 300 people and a dedicated managed care sales and marketing and
national account groups that cover managed care organizations and retail
pharmacy chains. Dura's field sales force targets a physician base that
includes approximately 90,000 U.S. allergists, ear, nose, and throat
specialists ("ENTs"), pulmonologists and a selected subset of pediatricians
and generalist physicians, who Dura believes collectively write a significant
portion of respiratory pharmaceutical prescriptions.  Dura believes that its
field sales force calls on approximately one-half of the target physician
base.  Dura's managed care sales and marketing group concentrates on sales to
large regional and national managed care organizations.  Dura expects to
continue expanding both the field sales force and the managed care sales and
marketing group as warranted by market opportunities.

This marketing strategy has allowed Dura to leverage its distribution
capabilities by acquiring the rights to market additional prescription
pharmaceutical products through acquisition, in-license or co-promotion
arrangements.  Since 1992, Dura has acquired 19 products targeted at the U.S.
respiratory market.  In September 1996, Dura acquired from Eli Lilly and
Company ("Lilly") exclusive U.S. marketing rights to the antibiotics
Keftab-Registered Trademark- and Ceclor-Registered Trademark- CD.  Dura began
marketing Keftab in September 1996 and launched Ceclor CD in October 1996.
In May 1997, Dura acquired from Syntex (USA) Inc. and other members of the
Roche Group (collectively, "Syntex") the exclusive U.S. rights to the
intranasal steroid products Nasarel-Registered Trademark- and
Nasalide-Registered Trademark-.

Another key component of Dura's strategy is to develop the Spiros-Registered
Trademark- pulmonary drug delivery system.  Spiros is being designed to
aerosolize pharmaceuticals in dry powder formulations for delivery to the
lungs while providing certain advantages over other currently used methods of
pulmonary drug delivery.  Dura has a three-level development program for
Spiros which entails (i) developing, on behalf of Spiros Development
Corporation II, Inc. ("Spiros Corp. II"), certain drug compounds for use in
Spiros, including in the near-term albuterol, beclomethasone and ipratropium,
three of the pharmaceutical agents most frequently prescribed to

                                                                            4

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treat respiratory conditions, (ii) licensing Spiros primarily to
pharmaceutical companies, generally for use with certain of their proprietary
respiratory products, and (iii) developing Spiros, generally in collaboration
with third parties, for the systemic delivery of compounds, including certain
proteins and peptides, through the lungs for respiratory and non-respiratory
indications as an alternative to current invasive delivery techniques.  In
March 1997, patient dosing was completed in long-term and short-term pivotal
clinical trials for albuterol in the Spiros cassette system.  In November
1997, Dura announced, on behalf of Spiros Development Corporation ("Spiros
Corp."), that it had submitted a New Drug Application ("NDA") with the United
States Food and Drug Administration ("FDA") for albuterol in the Spiros
cassette system.  In January 1998, the FDA informed Dura that the application
was accepted for filing.

RELATIONSHIP WITH SPIROS CORP. AND SPIROS CORP. II

RELATIONSHIP WITH SPIROS CORP.  On December 29, 1995, Spiros Corp. and Dura
completed a $28 million private placement to fund the development of Spiros
for use with certain compounds.  The private placement consisted of 933,334
units at $30.00 per unit.  Each unit consisted of one share of Spiros Corp.
callable common stock and a Series S warrant to purchase 2.4 shares of the
Company's common stock.  In connection with the private placement, the
Company made a $13 million contribution to Spiros Corp.  In exchange for the
Series S warrants and the $13 million contribution, the Company received the
right to purchase all of the Spiros Corp. callable common stock and to
acquire the exclusive rights for the use of Spiros with albuterol.  Pursuant
to a development and management agreement, Spiros Corp. engaged the Company
to develop the Spiros Corp. products and provide general management services
to Spiros Corp.  On December 19, 1997, the Company exercised its right to
purchase 100% of Spiros Corp.'s outstanding callable common stock.

RELATIONSHIP WITH SPIROS CORP. II.  On December 22, 1997, Dura and Spiros
Corp. II, a separate, newly-formed Delaware corporation, completed a $101
million public offering (the "Offering"). Under agreements with the Company,
Spiros Corp. II will use the net proceeds of $94 million from the Offering
and a $75 million contribution from Dura to develop Spiros and Spiros
applications for albuterol, beclomethasone, ipratropium,
albuterol-ipratropium combination, budesonide and additional designated
compounds (the "Compounds").  The Offering consisted of 6,325,000 units sold
at $16.00 per unit.  Each unit consisted of one share of Spiros Corp. II
callable common stock and a warrant (the "SDCII Warrants") to purchase
one-fourth of one share of Dura's common stock.  The SDCII Warrants will be
exercisable from January 1, 2000 through December 31, 2002 at an exercise
price of $54.84 per share of Dura common stock.  In consideration of the
SDCII Warrants and the contribution of $75 million to Spiros Corp. II, the
Company has the right through December 31, 2002, to purchase all, but not
less than all, of the then outstanding shares of Spiros Corp. II callable
common stock at predetermined prices (the "Purchase Option") and an option,
through specified dates, to acquire Spiros Corp. II's exclusive rights for
the use of Spiros with albuterol (the "Albuterol Option") and for the use of
Spiros with a second product other than albuterol (the "Product Option"). The
purchase price for the Purchase Option may be paid, at the Company's option,
in cash, shares of Dura's common stock, or a combination thereof.  The
purchase price for the Albuterol Option and the Product Option may only be
paid in cash.

In connection with the Offering, the Company also entered into certain other
agreements with Spiros Corp. II which are summarized as follows:

     TECHNOLOGY LICENSE AGREEMENT.  Under this agreement, the Company granted to
     Spiros Corp. II, subject to existing agreements, an exclusive, worldwide,
     perpetual, royalty-bearing license to use Spiros in connection with the
     Compounds.

     ALBUTEROL AND PRODUCT OPTION AGREEMENT.  Under this agreement, the Company
     has the Albuterol Option and the Product Option.

     DEVELOPMENT AGREEMENT.  Under this agreement, Spiros Corp. II has engaged
     the Company to develop the Spiros products and provide general management
     services to Spiros Corp. II.

                                                                            5

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     MANUFACTURING AND MARKETING AGREEMENT.  Under this agreement, Spiros Corp.
     II granted to the Company an exclusive worldwide license to manufacture and
     market the Spiros products in exchange for a royalty of 7% on net product
     sales, as defined.


RECENT DEVELOPMENT

On February 22, 1998, the Company announced that it planned to begin
expanding its sales force immediately from approximately 270 representatives
to over 450 representatives by the end of 1998 to increase the promotional
activity of its current products and to prepare for the launch, subject to
receiving regulatory approval, of Albuterol Spiros-TM-.  The Company expects
that the rapid expansion of its sales force will result in an increase in
1998 in its selling, general and administrative expenses, both in total and
as a percentage of revenues, as compared to 1997.

U.S. RESPIRATORY MARKET

Dura divides the U.S. respiratory market into three primary segments: (i)
respiratory infection, (ii) allergy, cough and cold and (iii) asthma and COPD.

RESPIRATORY INFECTION.  Respiratory infections are generally caused by a variety
of bacteria and can affect either the upper respiratory tract (nasal cavity,
sinuses and throat) or the lower respiratory tract (lungs).  The resulting
diagnoses include sinusitis, tonsillitis and bronchitis.  These infections are
treated with antibiotics, which kill the bacteria causing the symptoms.  There
are a variety of classes of antibiotics that treat specific ranges, or
spectrums, of bacteria.  Classes used to treat respiratory infection include
cephalosporins, broad spectrum macrolides and quinolones.  The market for these
classes is very large, totaling $4.8 billion in 1997 for the oral solid forms
alone.  The cephalosporin class accounts for approximately $1.4 billion of this
total.

ALLERGY, COUGH AND COLD.  While the causes of allergies (which can be seasonal
or perennial) and cough and colds differ, nasal congestion and sneezing are
common symptoms of these diseases.  The U.S. combined market for therapeutic
drugs to treat allergies, coughs and colds was over $2.2 billion in 1997.
Antihistamines and antihistamine/decongestant combinations are the most widely
used forms of therapy for allergies and represent the largest portion of the
allergy, cough and cold market in the U.S.  An additional form of therapy for
allergies includes intranasal steroids, such as Nasarel and Nasalide, which are
increasingly being prescribed for allergic rhinitis.  Cough and cold
preparations represent the next largest portion of the allergy, cough and cold
market and include decongestant and decongestant/expectorant combinations, cough
suppressants and antihistamine combinations and expectorants.

ASTHMA AND COPD.  Asthma is a complex physiological disorder characterized by
airway hyperactivity to a variety of stimuli such as dust, pollen, stress or
physical exercise, resulting in airway obstruction that is partially or
temporarily reversible.  The U.S. asthma population has grown steadily in recent
years.  COPD is a complex condition comprising a combination of chronic
bronchitis, emphysema and airway obstruction.  The disease affects males more
often than females and is exacerbated by smoking and other insults to the lung.
Incidence is as high as 20% of the adult male population, though only a minority
are clinically disabled.  The U.S. combined market for therapeutic drugs to
treat asthma and COPD was approximately $2.9 billion in 1997.

STRATEGY

Dura's objective is to be a leading supplier of respiratory pharmaceuticals and
pulmonary drug delivery systems.  Dura attempts to achieve this objective
through the implementation of the following strategies:

     FOCUSING MARKETING EFFORTS ON RESPIRATORY PHYSICIAN SPECIALISTS.  Dura
     employs a dual marketing strategy utilizing its focused field sales force
     and a dedicated managed care sales and marketing group.  Dura's field sales
     force targets a physician base that includes approximately 90,000 U.S.

                                                                            6

<PAGE>

     allergists, ENTs, pulmonologists and a selected subset of pediatricians and
     generalist physicians, who Dura believes collectively write a significant
     portion of respiratory pharmaceutical prescriptions. Dura believes that its
     field sales force calls on approximately one-half of the target physician
     base. Dura's managed care sales and marketing group concentrates on sales
     to large regional and national managed care organizations.  Dura expects to
     continue expanding both the field sales force and the managed care sales
     and marketing group as warranted by market opportunities.

     ACQUIRING, IN-LICENSING OR CO-PROMOTING RESPIRATORY PRESCRIPTION
     PHARMACEUTICALS.  Dura seeks to acquire, in-license or co-promote
     respiratory prescription pharmaceuticals or companies developing and/or
     marketing such pharmaceuticals.  Dura is particularly focused on
     respiratory drugs that are under-promoted by large pharmaceutical
     companies.  Dura believes that the pharmaceutical industry is undergoing a
     restructuring that may create greater opportunities for Dura.  For example,
     many large pharmaceutical companies are consolidating and merging and/or
     redirecting their sales forces, which may lead to the underpromotion of
     certain products deemed too small for large sales forces and create
     significant acquisition, in-licensing and co-promotion opportunities.
     Additionally, consolidation within the sector may make small product lines
     less desirable to large pharmaceutical companies.  Dura is actively
     pursuing the acquisition of rights to products and/or companies, which may
     require the use of substantial capital resources.

     DEVELOPING SPIROS.  Dura has a three-level development program for Spiros
     which entails (i) developing, on behalf of Spiros Corp. II, certain drug
     compounds for use in Spiros, including in the near-term albuterol,
     beclomethasone and ipratropium, three of the pharmaceutical agents most
     frequently prescribed to treat respiratory conditions, (ii) licensing
     Spiros primarily to pharmaceutical companies, generally for use with
     certain of their proprietary respiratory products, and (iii) developing
     Spiros, generally in collaboration with third parties, for the systemic
     delivery of compounds, including certain proteins and peptides, through the
     lungs for respiratory and non-respiratory indications as an alternative to
     current invasive delivery techniques.

DURA'S CURRENT PRODUCTS

Dura currently markets 31 prescription products, including 25 that are
off-patent, in the following therapeutic categories: respiratory infection (five
products); allergy, cough and cold (24 products); and asthma and COPD (two
products).  The following is a list of Dura's principal prescription
pharmaceuticals:

                                                                RIGHTS
                                                            OBTAINED FROM OR
  PRODUCTS                                                    DEVELOPED BY
  --------                                                  ----------------
  Respiratory Infection
      Ceclor-Registered Trademark- CD Tablets (anhydrous          Lilly
           cefaclor)
      Keftab-Registered Trademark- (cephalexin                    Lilly
           hydrochloride)
  Allergy, Cough and Cold
      Nasarel-Registered Trademark- (flunisolide) Nasal          Syntex
           Solution
      Nasalide-Registered Trademark- (flunisolide) Nasal         Syntex
           Solution
      Entex-Registered Trademark- Products                  Procter & Gamble
      Dura-Vent-Registered Trademark- Products                    Dura
      Rondec-Registered Trademark- Products               Abbott Laboratories,
                                                                  Dura
  Asthma and COPD
      Tornalate-Registered Trademark- Products            Sanofi-Winthrop, Inc.

                                                                             7

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In September 1996, Dura acquired the exclusive U.S. rights to the cephalosporin
antibiotics Keftab and Ceclor CD from Lilly.  The U.S. antibiotic market was
$4.8 billion in 1997, of which $1.4 billion was accounted for by cephalosporin
antibiotics.  Dura believes that this acquisition complements its existing
strategy because approximately 60% of antibiotics are prescribed for respiratory
infections.  Keftab is an antibiotic indicated for respiratory tract, skin and
soft tissue infections.  Ceclor CD is a twice-a-day dosage form of cefaclor
typically taken for seven days.  Ceclor, Lilly's currently marketed cefaclor, is
normally taken three times a day for 10 days.  Dura believes these product
acquisitions further its strategy of acquiring prescription pharmaceuticals to
be marketed by its sales force to its targeted physicians.

In May 1997, Dura acquired from Syntex the exclusive U.S. rights to the
intranasal steroid products Nasarel and Nasalide.  The U.S. market for
intranasal steroids for the treatment of perennial and allergic rhinitis was
approximately $750 million in 1997, and has averaged 19% growth over the last
three years.  Dura believes that this acquisition complements its existing
strategy because the products fit within Dura's respiratory focus while adding a
new respiratory category, nasal steroids, to its product portfolio.  In
addition, Dura believes that it will be able to further leverage its field sales
force by offering these new products acquired from Lilly and Syntex to
high-prescribing physicians during sales calls.

Keftab and Ceclor CD and the two Tornalate-Registered Trademark- products are
the subject of approved NDAs.  Dura also markets Capastat-Registered Trademark-
Sulfate and Seromycin-Registered Trademark- which are also the subject of
approved NDAs and Crolom-TM-,_which is the subject of an approved Abbreviated
New Drug Application ("ANDA").  The remaining products are branded
pharmaceuticals which are not the subject of NDAs or ANDAs.

SPIROS

Spiros is a proprietary pulmonary drug delivery system that is designed to
aerosolize pharmaceuticals in dry powder formulations for delivery to the
lungs while providing certain advantages over traditional pulmonary delivery
systems. The Company believes new inhalation systems will gradually replace
metered dose inhalers ("MDIs") as the leading pulmonary delivery systems, due
primarily to the phasing out of chloroflurocarbon ("CFCs") and coordination
problems associated with many MDIs.  Many companies are studying alternative
propellants, such as hydrofluorocarbons ("HFAs"), for use in MDIs, and the
first albuterol MDI using an HFA propellant has obtained FDA approval and is
being marketed by Schering-Plough.  However, the Company believes that any
product utilizing alternative propellants will still suffer from many of the
limitations of currently marketed MDIs, including the need for patients to
coordinate breathing with actuation of the drug delivery system.  There are
two types of dry powder inhalers ("DPI") currently in commercial use
worldwide, individual dose and multiple dose. Individual dose DPIs currently
marketed in the U.S. include the Rotohaler-TM-(developed and marketed by
Glaxo Wellcome ("Glaxo")) and the Spinhaler-Registered Trademark- (developed
and marketed by Fisons Limited).  The Turbuhaler-Registered Trademark-
(developed and marketed by Astra Pharmaceuticals ("Astra")), a multiple dose
DPI, is the leading DPI in worldwide sales.  In June 1997, the FDA approved
the first Turbuhaler product, the Pulmicort Turbuhaler, for marketing in the
U.S., which Astra launched in early 1998.  Recently the FDA also approved two
multiple dose DPIs developed by Glaxo.

POTENTIAL ADVANTAGES OF SPIROS.  The Company believes Spiros may have certain
advantages over other currently used methods of pulmonary drug delivery
including:

     INSPIRATORY FLOW RATE INDEPENDENCE.  Spiros is designed to deliver a
     relatively consistent drug dose to the lungs over a wide range of
     inspiratory flow rates, which can vary depending on a patient's health,
     effort or physical abilities.  Tests of Spiros on human subjects have shown
     a relatively consistent and significant level of drug deposition throughout
     the clinically relevant inspiratory range.  Existing DPIs can vary
     significantly in their level of drug deposition depending on the patient's
     inspiratory flow rate and can deliver significantly less drug at the lower
     flow rates typically associated with asthma attacks.

     MINIMUM NEED FOR PATIENT COORDINATION.  Spiros is breath-actuated and does
     not require the user to coordinate inhalation and actuation of the drug
     delivery system.  MDIs generally require the user to

                                                                             8

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     coordinate their breathing with actuation of the MDI.  Studies indicate
     that a significant percentage of patients, particularly young children
     and the elderly, do not use MDIs correctly.  Spiros is designed to solve
     these coordination problems by delivering the drug to patient's lungs as
     they inhale.

     REDUCED SIDE EFFECTS.  Spiros is designed to efficiently deliver drugs to
     the lungs, thereby reducing drug deposition to the mouth and throat which
     could reduce the possibility of unwanted side effects of certain
     pharmaceutical agents, such as coughing and local irritation.  With MDIs, a
     significant portion of the dose is delivered to the mouth and throat and is
     swallowed.

     PATIENT CONVENIENCE.  Spiros is designed to be convenient for patients,
     with features such as breath actuation (Spiros is triggered by inhalation),
     portability (light weight and small size), quick delivery time, simple
     operation, dose delivery feedback and multi-dose capability.  Spiros also
     allows the patient to see the actual number of doses remaining in a
     cassette or blister pack and an LED light provides a warning of the need to
     replace Spiros prior to the end of its useful life.

     FREE OF CHLOROFLUOROCARBON PROPELLANTS.  CFC propellants have ozone
     destructive characteristics and are subject to worldwide regulations aimed
     at eliminating their usage within the decade.  Spiros does not use CFCs
     while most MDIs, currently the most popular form of aerosol drug delivery,
     use CFCs. Virtually all of the world's industrial nations, under the
     auspices of the United Nations Environmental Program, have pledged to cease
     use of CFCs by the year 2000.  Continued use of CFCs in medical products
     has been permitted under annual exemptions.  As a result of the planned
     phase out of CFCs, the Company believes that DPIs will become a leading
     method for pulmonary drug delivery.

CORE SPIROS TECHNOLOGY.  The core technology contained in Spiros which gives
rise to the flow rate independent delivery is an aerosol generator that uses
electromechanical energy to disperse dry powder to form an aerosol for
inhalation.  The main components of the aerosol generator include the impeller,
the motor, the breath actuated switch, and the dosing chamber.  When the switch
is activated, the electric circuit is completed and the impeller rotates.  The
action of the impeller on the dry powder formulation supplies the energy to
disperse the drug and provides a zero-velocity cloud of aerosolized drug for
inhalation.  The cloud of aerosolized drug is suspended in the dosing chamber
and is delivered to the lungs only as the patient inhales.

Two separate Spiros systems are currently under development, both utilizing the
same core technology with distinct powder storage systems ("PSS").  Because of
the physical and chemical requirements of the specific drugs deliverable by
Spiros, as well as the varying needs of the patients and marketplace, the
Company believes that its cassette and blisterdisk systems will provide
flexibility for delivery of many different types of drugs.

DEVELOPMENT PROGRAM FOR SPIROS.   The Company has a three-level development
program for Spiros.  The first level entails developing for use in Spiros, on
behalf of Spiros Corp. II, certain drug applications which are currently used to
treat respiratory conditions, including: beta-agonist (albuterol), two steroids
(beclomethasone and budesonide), an anticholinergic (ipratropium) and a
combination of a beta-agonist and an anticholinergic (albuterol-ipratropium).
Dura currently conducts the development efforts and will conduct marketing
efforts following regulatory approval, if any, for the products listed below on
behalf of Spiros Corp. II under agreements entered into in connection with the
Offering.  There can be no assurance that the pharmaceutical products currently
in development by Spiros Corp. II or that any products that may be developed in
the future will be approved by the FDA.  In addition, there can be no assurance
that FDA review or other actions will not involve delays that could adversely
affect the time to market and the sale of the products.

ALBUTEROL.  Albuterol, a beta-agonist, provides rapid symptomatic relief of
reversible bronchospasm.  When administered by inhalation, it produces
significant bronchodilation promptly and its effects are demonstrable for a
number of hours.  Albuterol is the most widely accepted asthma medication in the
world.  In 1997, U.S. sales of albuterol were approximately $700 million as
measured by average wholesale prices.

                                                                             9

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In 1994, an Investigational New Drug ("IND") application was filed with the FDA
to begin clinical testing of an albuterol dry powder formulation with the Spiros
cassette system.  In April 1996, dosing of subjects in a clinical trial focusing
on dose selection using a formulation of powdered albuterol with Spiros was
completed. In March 1997, patient dosing was completed in long-term and
short-term pivotal clinical trials.  In November 1997, Dura, on behalf of Spiros
Corp., submitted an NDA with the FDA for albuterol in the Spiros cassette
system.  In January 1998, the FDA informed Dura that the application was
accepted for filing.  The NDA includes the results of clinical trials that were
designed to demonstrate comparability of the Spiros delivery system to a leading
branded albuterol MDI product.  Three pivotal studies in addition to a number of
dose finding and performance verification studies were conducted for the
submission.

An open label study of albuterol in the Spiros cassette system is currently in
progress.  Interim results of this study were provided to the FDA in the NDA and
results of the full study must be submitted to and reviewed by the FDA prior to
product approval, if any.  Dura, on behalf of Spiros Corp. II, is planning
market launch of albuterol in the Spiros cassette system in late 1998 or early
1999, pending FDA approval.  There can be no assurance of receipt of FDA
approval in a timely manner, if at all.

BECLOMETHASONE.  Beclomethasone is a steroid used to treat the inflammatory
component of asthma and certain symptoms of COPD.  Systemic side effects
resulting from the inhalation of beclomethasone are less than those that occur
with steroids taken in capsule, tablet or liquid form.  Beclomethasone was first
launched in MDI form as Vanceril by Schering-Plough and later as Beclovent by
Glaxo.  In 1997, U.S. sales of beclomethasone were approximately $180 million as
measured by average wholesale prices.  In the first quarter of 1997, Dura
completed dose ranging studies of a one dosage strength of beclomethasone in the
Spiros cassette system under an IND, and Dura commenced a Phase III pivotal 12-
week clinical trial to demonstrate safety and efficacy in the fourth quarter of
1997.  Enrollment of patients is currently scheduled to be completed by the
second quarter of 1998.  Dura plans to submit an NDA for beclomethasone in early
1999, on behalf of Spiros Corp. II.

IPRATROPIUM.  Ipratropium is an anticholinergic bronchodilator.  Ipratropium is
most commonly prescribed for the long term management of COPD (including chronic
bronchitis and emphysema) and for the treatment of asthmatic patients who are
poorly controlled by, or who experience troublesome side effects from,
beta-agonists such as albuterol.  Ipratropium acts at a site that is different
from the site where beta-agonists act and thus affords an alternative approach
to the treatment of airway obstruction.  In 1997, U.S. sales of ipratropium were
approximately $230 million as measured by average wholesale prices.  Dura has
conducted initial preclinical formulation studies using ipratropium in order to
demonstrate that delivery via Spiros is feasible.  The Company currently
anticipates that ipratropium will be the first compound formulated for delivery
through the Spiros blisterdisk system.  The Company, on behalf of Spiros Corp.
II, has been in product development for a formulation of ipratropium to be
delivered using Spiros and is preparing an IND under which initial dose ranging
clinical trials will be conducted.  Such trials are scheduled to begin in the
second half of 1998.

ALBUTEROL-IPRATROPIUM COMBINATION.  Albuterol and ipratropium are frequently
prescribed in combination for patients with COPD or asthma.  Boehringer
Ingelheim has marketed an albuterol-ipratropium combination product, Combivent,
outside of the U.S. for a number of years.  Combivent was approved for marketing
in the U.S. in early 1997 and has recently been launched in MDI form.  Based on
the substantial work performed with albuterol and the feasibility study
conducted with ipratropium, Dura believes that developing an
albuterol-ipratropium formulation for delivery using Spiros will be feasible and
intends, on behalf of Spiros Corp. II, to commence the development of this
formulation in 1998.

BUDESONIDE.  Budesonide is a new generation steroid used to treat the
inflammatory component of asthma. Budesonide has been marketed in several dosage
forms outside of the U.S., but to date, has only been available in the U.S. in
nasal spray form.  However, in June 1997, the FDA approved for marketing in the
U.S. a dry powder formulation of budesonide for delivery through Astra's
Pulmicort Turbuhaler.  In 1997, worldwide sales of budesonide were estimated to
be greater than $600 million as measured by average

                                                                            10

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wholesale prices.  Dura, on behalf of Spiros Corp. II, has begun formulation
of budesonide for delivery through Spiros.

The second level of Spiros development consists of licensing Spiros primarily to
pharmaceutical companies for use with certain of their proprietary respiratory
products.  Dura is currently conducting feasibility studies for pharmaceutical
companies to assess the suitability of certain compounds to be delivered using
Spiros.  There can be no assurance that any of the feasibility studies will
prove successful, or even if successful, that the pharmaceutical companies will
proceed to license Spiros for use with these compounds.

The third level of Spiros development is to develop Spiros, in collaboration
with other companies, for the systematic delivery of compounds through the lungs
for respiratory and nonrespiratory indications as an alternative to current
invasive delivery techniques.  The Company commenced development efforts on the
use of Spiros with peptides and proteins in 1995.  In 1996, Dura entered into a
collaborative agreement with Trega Biosciences, Inc. ("Trega") to develop
inhalation formulations of new compounds discovered and developed by Trega.
Dura is also performing feasibility studies for pharmaceutical companies that
desire to develop Spiros for use with both respiratory drugs and drugs for
systemic pulmonary delivery now being developed by those companies.

SALES AND MARKETING

FIELD SALES FORCE.  Dura's specialized sales and marketing organization targets
a physician base that includes approximately 90,000 U.S. allergists, ENTs,
pulmonologists, and a selected subset of pediatricians and generalist physicians
who treat a large number of allergy and asthma patients.  Dura believes this
relatively small group of physicians writes a significant portion of respiratory
pharmaceutical prescriptions.  This concentration allows for effective market
penetration by a specialized sales and marketing organization.

As of December 31, 1997, Dura had 277 pharmaceutical sales representatives
nationwide, supervised by 25 district managers, 4 area recruiter-trainers and
two regional directors.  Dura believes its focused sales force currently calls
on approximately one-half of its target physician base.  On February 22, 1998,
the Company announced that it planned to begin expanding its sales force
immediately from approximately 270 representatives to over 450 representatives
by the end of 1998 to increase the promotional activity of its current products
and to prepare for the launch, subject to regulatory approval, of Abuterol
Spiros.  The Company expects that the rapid expansion of its sales force will
result in an increase in 1998 in its selling, general and administrative
expenses, both in total and as a percentage of revenues, as compared to 1997.

Dura believes that the personal relationships of Dura's sales representatives
with their physician customers are essential to Dura's business.  Dura's sales
representatives differentiate themselves from the competition by focusing
primarily on respiratory infections, allergy, cough and cold, and asthma and
COPD, and by promoting pharmaceuticals used by respiratory specialists in
treating patients.  With a relatively small target audience, promotional
spending by Dura on advertising and direct mail is generally inexpensive and
efficient. Dura regularly participates in local, regional and national medical
meetings of the key specialty groups.  Dura believes that it has established a
national awareness of the Dura name within the U.S. respiratory market.

MANAGED CARE SALES AND MARKETING AND NATIONAL ACCOUNTS GROUPS.  To implement
Dura's marketing strategy, Dura established dedicated managed care sales and
marketing and national accounts groups, which concentrate on sales to large
regional and national managed care organizations and retail pharmacy chains.
These organizations include health maintenance organizations ("HMOs"), preferred
provider organizations ("PPOs"), large drug merchandising chains, nursing home
providers and mail order pharmacies.  A primary goal of the managed care sales
and marketing group is to place Dura's products on approved formulary lists of
HMOs and PPOs.

                                                                            11

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HEALTH SCRIPT

In March 1995, Dura acquired Health Script, located in Denver, Colorado.  Health
Script is a mail service pharmacy which dispenses respiratory pharmaceuticals.
Mail order services are particularly well-suited for respiratory patients who
are long-term, chronic users of certain pharmaceuticals and to whom the
convenience and cost efficiency of mail order is appealing.  Health Script was
formed in 1990 to supply value-priced respiratory pharmaceutical products to
patients through the mail.  Health Script currently dispenses to its
approximately 30,000 patients nationwide over 100 respiratory products
manufactured by third parties.  Health Script is focused on working with home
healthcare providers and patients to coordinate respiratory medication services
and patients' management programs.  Health Script markets its services through
specialty field sales representatives and telemarketing.  The existing patient
base is maintained by telephone contact with patients to monitor compliance with
their doctors' prescriptions.

COMPETITION

Dura directly competes with at least 25 other companies in the U.S. which are
currently engaged in developing, marketing and selling respiratory
pharmaceuticals.  Additionally, there are at least 10 companies currently
involved in the development, marketing or sales of dry powder pulmonary drug
delivery systems. There are two types of DPIs currently in commercial use
worldwide, individual dose and multiple dose.  Individual dose DPIs currently
marketed in the U.S. include the Rotohaler (developed and marketed by Glaxo)
and the Spinhaler (developed and marketed by Fisons Limited).  The Turbuhaler
(developed and marketed by Astra), a multiple dose DPI, is the leading DPI in
worldwide sales.  In June 1997, the FDA approved the first Turbuhaler
product, the Pulmicort Turbuhaler, for marketing in the U.S., which Astra
launched in early 1998.  Recently the FDA also approved two multiple dose
DPIs developed by Glaxo.

Many of these companies, including large pharmaceutical firms with financial
and marketing resources and development capabilities substantially greater
than those of Dura, are engaged in developing, marketing and selling products
that compete with those offered by Dura.  The selling prices of such products
typically decline as competition increases.  Furthermore, other products now
in use or under development by others may be more effective than Dura's
current or future products.  The industry is characterized by rapid
technological change, and competitors may develop their products more rapidly
than Dura.  Competitors may also be able to complete the regulatory process
sooner and, therefore, may begin to market their products in advance of
Dura's products.  Dura believes that competition among both prescription
pharmaceuticals and pulmonary drug delivery systems aimed at the respiratory
infection, allergy, cough and cold and asthma and COPD markets will be based
on, among other things, product efficacy, safety, reliability, availability
and price.

CLINICAL, DEVELOPMENT AND REGULATORY

Dura's clinical, development and regulatory expenses relate primarily to
product development and regulatory compliance activities.  Clinical,
development and regulatory expenses were $8,408,000, $18,540,000, and
$24,391,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.  The clinical, development and regulatory expenses associated
with Spiros development, for which Dura recorded contract revenues from Dura
Delivery Systems, Inc., Spiros Corp. and Spiros Corp. II, were $6,428,000,
$15,932,000 and $20,605,000 for the years ended December 31, 1995, 1996, and
1997, respectively.  See "Risks and Uncertainties--Patents and Proprietary
Rights."

PATENTS AND PROPRIETARY RIGHTS

The Company presently holds five U.S. patents and four U.S. patent applications
relating to the Spiros technology to be further developed by Spiros Corp. II.
The issued patents include a patent with claims covering the use in Spiros of an
impeller to create an aerosol cloud of a drug intended for inhalation, which
expires in 2011.  The Company has also filed certain continuations in part and
foreign patent applications relating to Spiros.  All of the above patents and
patent applications, relating to the Spiros technology, together with their
respective continuations in part and foreign patent applications, have been
licensed to Spiros

                                                                            12

<PAGE>

Corp. II pursuant to the Technology License Agreement.  Until the expiration
or termination of the Purchase Option, the Company is required to file patent
applications, at Spiros Corp. II's expense, with respect to inventions
included in the program technology.  The Company will be the owner and Spiros
Corp. II will be the exclusive licensee for use with the Spiros products of
any patents included in the program technology.

The Company considers the protection of discoveries in connection with its
development activities important to its business.  The Company intends to seek
patent protection in the U.S. and selected foreign countries where deemed
appropriate.  There can be no assurance that issued patents or subsequent
patents, if issued, will adequately protect the Company or that such patents
will provide protection against infringement claims by competitors.  The Company
has also filed certain foreign patent applications relating to Spiros
technology. There can be no assurance that additional patents, U.S. or foreign,
will be obtained covering the Company's products or that, if issued or licensed,
the patents covering such products will provide substantial protection or be of
commercial benefit.  Federal court decisions establishing legal standards for
determining the validity and scope of patents in the field are in transition.
There can be no assurance that the historical legal standards surrounding
questions of validity and scope will continue to be applied or that current
defenses as to issued patents in the field will offer protection in the future.

The Company also relies upon trade secrets, unpatented proprietary know-how and
continuing technological innovation to develop its competitive position.  The
Company enters into confidentiality agreements with certain of its employees
pursuant to which such employees agree to assign to the Company any inventions
relating to the Company's business made by them while in the Company's employ.
There can be no assurance, however, that others may not acquire or independently
develop similar technology or, if patents are not issued with respect to
products arising from research, that the Company will be able to maintain
information pertinent to such research as proprietary technology or trade
secrets.

In connection with one of the patents described above, in 1993, the Company
entered into an agreement with the principal inventor thereof which, among other
things, provides compensation to the inventor over the life of the patent which
is linked to annual sales of products related to such patent.  Such compensation
amounts to approximately $1 million of the first $50 million of annual sales of
such products, and $1 million of the next $100 million of annual sales, with a
maximum aggregate compensation of $6 million.

Tornalate Inhalation Solution and Tornalate MDI are covered by patents filed by
Sanofi-Winthrop, Inc. which expire in the near-term.  The Keftab, Ceclor CD,
Nasarel and Nasalide products or processes to make such products are covered by
patents which expire between 2003 and 2007.  Dura's other pharmaceutical
products are not protected by patents.

GOVERNMENT REGULATION

The manufacturing and marketing of Dura's products are subject to regulation
by Federal and state government authorities, including the FDA, the
Environmental Protection Agency and the Occupational Safety and Health
Administration, in the U.S. and other countries.  In the U.S.,
pharmaceuticals and drug delivery systems, including Spiros, are also subject
to rigorous FDA regulation and may be subject to regulation by other
jurisdictions, including the State of California.   The Federal Food, Drug,
and Cosmetic Act and the Public Health Service Act govern the testing,
manufacture, safety, efficacy, labeling, storage, record keeping, approval,
advertising and promotion of Dura's products. Product development and
approval within this regulatory framework takes a number of years and
involves the expenditure of substantial resources.

To obtain FDA approval for each of the Spiros Products, each of the following
steps and possibly others must be conducted: (i) preclinical testing (laboratory
and possibly animal tests), (ii) the submission to the FDA of an IND
application, which must become effective before human clinical trials may
commence, (iii) adequate and well-controlled human clinical trials to establish
safety and efficacy, (iv) the submission of an NDA to the FDA for marketing
approval, and (v) FDA approval of the NDA prior to any commercial sale or
shipment. The NDA must include, in addition to a compilation of preclinical and
clinical data, complete information

                                                                            13

<PAGE>

about product performance and manufacturing facilities and processes.  Prior
to completion of the NDA review process, the FDA may conduct an inspection of
the facility, manufacturing procedures, operating systems and personnel
qualifications.  In addition to obtaining FDA approval for each product, each
domestic drug and/or device manufacturing facility must be registered with
and approved by the FDA.  Domestic manufacturing facilities are subject to
biennial inspections by the FDA and inspections by other jurisdictions and
must comply with Good Manufacturing Practice ("cGMPs") for both drugs and
devices.  To supply products for use in the U.S., foreign manufacturing
establishments must comply with cGMP and other requirements and are subject
to periodic inspection by the FDA or by regulatory authorities in such
countries under reciprocal agreements with the FDA.

Preclinical testing includes laboratory evaluation of product chemistry and
animal studies, if appropriate, to assess the safety and efficacy of the product
and its formulation.  The results of the preclinical tests are submitted to the
FDA as part of an IND application, and unless the FDA objects, the IND
application will become effective 30 days following its receipt by the FDA, thus
allowing the product to be tested in humans.

Clinical trials involve the administration of the pharmaceutical product to
healthy volunteers or to patients identified as having the condition for which
the pharmaceutical agent is being tested.  The pharmaceutical product is
administered under the supervision of a qualified principal investigator.
Clinical trials are conducted in accordance with Good Clinical Practice and
protocols previously submitted to the FDA (as part of the IND application) that
detail the objectives of the study, the parameters used to monitor safety and
the efficacy criteria evaluated.  Each clinical study is conducted under the
auspices of an independent Institutional Review Board ("IRB") at the institution
at which the study is conducted.  The IRB considers, among other things, the
design of the study, ethical factors, the safety of the human subjects and the
possible liability risk for the institution.

Clinical trials for new products are typically conducted in three sequential
phases that may overlap.  In Phase I, the initial introduction of the
pharmaceutical into healthy human volunteers, the emphasis is on testing for
safety (adverse effects), dosage tolerance, metabolism, distribution, excretion
and clinical pharmacology. Phase II involves studies in a limited patient
population to determine the initial efficacy of the pharmaceutical for specific
targeted indications, to determine dosage tolerance and optimal dosage and to
identify possible adverse side effect and safety risks.  Once a compound is
found to be effective and to have an acceptable safety profile in Phase II
evaluations, Phase III trials are undertaken to more fully evaluate clinical
outcomes. The FDA reviews both the clinical plans and the results of the trials
and may require the study to be discontinued at any time if there are
significant safety issues.

The results of the preclinical and clinical trials for pharmaceutical drug
products such as those currently marketed by Dura or being developed by Dura are
submitted to the FDA in the form of an NDA for marketing approval.  FDA approval
can take several months to several years, or approval may be denied.   The
approval process can be affected by a number of factors, including the severity
of the side effects, the availability of alternative treatments and the risks
and benefits demonstrated in clinical trials.  Additional animal studies or
clinical trials may be requested during the FDA review process and may delay
marketing approval.  After FDA approval for the initial indication, further
clinical trials are necessary to gain approval for the use of the product for
any additional indications.  The FDA may also require post-marketing testing and
surveillance to monitor for adverse effects, which can involve significant
additional expense.

Although the FDA has considerable discretion to decide what requirements must be
met prior to approval, Dura believes, based upon the FDA's historical practice
with respect to drug inhalers, that the FDA is likely to regulate each
combination of Spiros with a compound as a discrete pharmaceutical or drug
product requiring separate approval as a new drug.  Dura believes that the
approval process for each drug/delivery combination now under development may be
shorter than the full NDA process described above because the safety and
efficacy of the compounds being developed on behalf of Spiros Corp. II have
already been established in currently marketed formulations and delivery
mechanisms.

                                                                            14

<PAGE>

For both currently marketed and future products, failure to comply with
applicable regulatory requirements after obtaining regulatory approval can,
among other things, result in the suspension of regulatory approval, as well as
possible civil and criminal sanctions.  In addition, changes in regulations
could have a material adverse effect on Dura.

Since completion of the pivotal trials, Dura has made a number of modifications
to the Spiros system, some of which address problems encountered with the
mechanical features of the Spiros delivery system during the pivotal trials.
These changes are intended to improve the reliability, performance,
manufacturability, and customer acceptance of the mechanical features of the
Spiros delivery system.  Dura expects that it will be required to complete
testing and validation pursuant to cGMP requirements of the Spiros system as
modified for commercial distribution, which could be costly and time-consuming.
There can be no assurance that the FDA will not require Dura to undertake
further laboratory testing, field testing and/or clinical studies in order to
insure the safety and effectiveness of the Albuterol Spiros intended to be
commercialized by Dura, on behalf of Spiros Corp. II, and to insure that it can
be reliably manufactured.  If a proposed change is deemed to be a major
modification by the FDA, Dura, on behalf of Spiros Corp. II, could be required
to repeat one or more of the clinical studies.   Moreover, because of the time
necessary to validate the changes to the Spiros system, there can be no
assurance that Dura will be prepared for any FDA preapproval inspection of
Dura's manufacturing facilities in a timely manner.  Spiros Corp. II has
contracted with Dura to have Dura manufacture Albuterol Spiros.  If Dura is
required to undertake additional laboratory testing and/or clinical studies or
to postpone the preapproval inspection, or if Dura fails to complete the open
label study in a timely manner, Dura, on behalf of Spiros Corp. II, could
receive a non-approvable letter and, in any event, there could be a substantial
delay in completion of the approval process.

The Federal Food, Drug, and Cosmetic Act requires that any "new drug" must be
approved pursuant to an NDA.  The term "new drug" is defined as any drug which
is not generally recognized among qualified experts as safe and effective for
its labeled intended uses.   Certain exemptions from this definition exist for
products marketed without change since prior to 1938 (the date of enactment of
the Federal Food, Drug, and Cosmetic Act) or, with respect to the need to show
effectiveness, for drug products marketed prior to October 10, 1962 (the date of
enactment of the "Drug Amendments of 1962").  Dura presently markets 21 drug
products for which the FDA has not yet made a determination as to their status
as new drugs under the Federal Food, Drug, and Cosmetic Act.  The FDA is
continuing an evaluation of the effectiveness of all products containing
ingredients marketed prior to 1962 that are not the subject of an approved NDA
as part of its Drug Efficacy Study Implementation ("DESI") program and will
determine which are new drugs requiring approval through an NDA for marketing.
The existence of currently-marketed prescription pharmaceuticals that contain
one or more active ingredients first introduced in the marketplace before 1962
and that are marketed based on their manufacturers' belief that such products
are not subject to the new drug provisions of the Act is recognized in paragraph
B of the Food and Drug Administration's Compliance Policy Guide, 440.100.  This
Policy Guide indicates that the FDA will implement procedures to determine
whether the new drug provisions are or are not applicable to these products.
The Policy Guide requires that products covered by paragraph B not be similar or
related to any drug included in the DESI program, or have a different
formulation or conditions for use than products marketed before November 13,
1984.  If a product is not covered by paragraph B, the FDA could make a
determination as to whether or not the new drug provisions are applicable to it
without first implementing the procedures called for by the Policy Guide.  Dura
believes that nine of its prescription pharmaceutical products may be covered by
paragraph B of the Policy Guide and it is aware that one of its products may be
considered to be similar or related to a DESI drug.  Also, it is not aware of
evidence to substantiate that three of its products have the same formulation or
conditions for use as products marketed before November 13, 1984.  These
products could be subject at any time to an FDA determination that an NDA is
required.  If a final determination is made that a particular drug requires an
approved NDA, such approval will be required for marketing to continue.  If such
a determination is made, the FDA might impose various requirements: for example,
it might require that the current product be the subject of an approved NDA,
that the product be reformulated and NDA approval obtained, that the product
must be sold on an over-the-counter basis rather than as a prescription drug, or
that the product must be removed from the market.  There can be no assurance as
to which of these courses the FDA will require or whether Dura will be able to

                                                                            15

<PAGE>

obtain any approvals which the FDA may deem necessary.  If any of these actions
are taken by the FDA, such actions could have a material adverse effect on
Dura's business.

In April 1996, the export provisions of the Federal Food, Drug, and Cosmetic Act
were relaxed to permit the export of unapproved drugs to a foreign country,
provided the product complies with the laws of that country and has valid
marketing authorization in at least one of a list of designated "Tier 1"
countries.  Once a product is exported to a qualified foreign country, Dura will
be subject to the applicable foreign regulatory requirements governing human
clinical trials and marketing approval in that country.  The requirements
relating to the conduct of clinical trials, product licensing, pricing and
reimbursement vary widely from country to country and there can be no assurance
that Dura or any of its collaborators will be able to meet and fulfill the
statutory requirements in a particular country.

Health Script is subject to regulation by state regulatory authorities,
principally state boards of pharmacy.  In addition, Health Script is subject to
regulation by other state and Federal agencies with respect to reimbursement for
prescription drug benefits provided to individuals covered primarily by publicly
funded programs.

MANUFACTURING

Dura's principal manufacturing facility is located near its headquarters in San
Diego, California.  The facility initially is intended to be used to formulate,
mill, blend and manufacture drugs to be used with Spiros, pending regulatory
approval.  Equipment purchases and validation are currently scheduled through
1998.  Dura's manufacturing facility must be registered with and licensed by
various regulatory authorities and must comply with cGMP requirements prescribed
by the FDA and the State of California.  Dura is currently expanding its
facilities to provide additional manufacturing capabilities.  Dura will need to
significantly scale up its current manufacturing operations from clinical supply
scale to commercial scale and comply with cGMPs and other regulations prescribed
by various regulatory agencies in the U.S. and other countries to achieve the
prescribed quality and required levels of production of such products and to
obtain marketing approval.  The initial scale-up of Dura's manufacturing
operations and completion of the regulatory compliance review process are
scheduled to be completed during the first half of 1998.  Dura expects that the
cost to complete these tasks will not exceed $3 million.  Any failure or
significant delay in the validation of or obtaining a satisfactory regulatory
inspection of the new facility or failure to successfully scale up could have a
material adverse effect on the ability of Dura to manufacture products in
connection with Spiros.

Dura has limited experience manufacturing products for commercial purposes and
currently does not have the capability to manufacture its pharmaceutical
products and therefore is dependent on contract manufacturers for the production
of such products for development and commercial purposes.  Dura's current
dependence upon others for the manufacture of its products may adversely affect
the future profit margin, if any, on the sale of those products and Dura's
ability to develop and deliver products on a timely and competitive basis.

HUMAN RESOURCES

Dura employed 644 employees (of which 618 are full-time) as of December 31,
1997, consisting of 349 people in sales and marketing (of which 319 constitute
the field sales force and the managed care group), 62 in administration and
finance, 90 in clinical, regulatory and research and development, 44 in
operations and 99 at Health Script.  None of Dura's employees are represented by
a labor union and Dura believes it maintains positive relations with both field
and corporate personnel.

RISKS AND UNCERTAINTIES

REDUCTION IN GROSS MARGINS.  There is no proprietary protection for most of the
products sold by Dura and substitutes for such products are sold by other
pharmaceutical companies.  Dura expects average selling prices for many of its
products to decline over time due to competitive and reimbursement pressures.

                                                                            16

<PAGE>

While Dura will seek to mitigate the effect of this decline in average selling
prices, there can be no assurance that Dura will be successful in these efforts.

THIRD-PARTY REIMBURSEMENT; PRICING PRESSURES.  The Company's commercial
success will depend in part on the availability of adequate reimbursement
from third-party healthcare payors, such as government and private health
insurers and managed care organizations.  Third-party payors are increasingly
challenging the pricing of medical products and services.  There can be no
assurance that reimbursement will be available to enable the Company to
achieve market acceptance of its products or to maintain price levels
sufficient to realize an appropriate return on the Company's investment in
product acquisition, in-licensing and development.  The market for the
Company's products may be limited by actions of third-party payors.  For
example, many managed healthcare organizations are now controlling the
pharmaceuticals that are on their formulary lists.  The resulting competition
among pharmaceutical companies to place their products on these formulary
lists has created a trend of downward pricing pressure in the industry.  In
addition, many managed care organizations are pursuing various ways to reduce
pharmaceutical costs and are considering formulary contracts primarily with
those pharmaceutical companies that can offer a full line of products for a
given therapy sector or disease state.  There can be no assurance that the
Company's products will be included on the formulary lists of managed care
organizations or that downward pricing pressure in the industry generally
will not negatively impact the Company's operations.

DEPENDENCE ON ACQUISITION OF RIGHTS TO PHARMACEUTICAL PRODUCTS.  Dura's
strategy for growth is dependent, in part, upon acquiring, in-licensing and
co-promoting pharmaceuticals to targeted physicians.  Other companies,
including those with substantially greater resources, are competing with Dura
for the rights to such products.  There can be no assurance that Dura will be
able to acquire, in-license or co-promote additional pharmaceuticals on
acceptable terms, if at all. The failure to acquire, in-license, co-promote,
develop or market commercially successful pharmaceuticals would have a
material adverse effect on the Company's business, financial condition and
results of operations.  Furthermore, there can be no assurance that Dura,
once it has obtained rights to a pharmaceutical product and committed to
payment terms, will be able to generate sales sufficient to create a profit
or otherwise avoid a loss on such product.

DEVELOPMENT RISKS ASSOCIATED WITH SPIROS-Registered Trademark-.  Spiros will
require significant additional development efforts.  There can be no assurance
that development of Spiros will be completed successfully, that Spiros will not
encounter problems in clinical trials that will cause the delay or suspension of
such trials, that current or future testing will show any Spiros product to be
safe or efficacious or that any Spiros product will receive regulatory approval
in a timely manner, if at all.  In addition, regulatory approvals will have to
be obtained for each drug to be delivered through the use of Spiros prior to
commercialization.  Moreover, even if Spiros does receive regulatory approval,
there can be no assurance that Spiros will be commercially successful, have all
of the patent and other protections necessary to prevent competitors from
producing similar products and not infringe on patent or other proprietary
rights of third parties.  The failure of any Spiros product to receive timely
regulatory approval and achieve commercial success would have a material adverse
effect on the Company's business, financial condition or results of operations.

CUSTOMER CONCENTRATION; CONSOLIDATION OF DISTRIBUTION NETWORK.  The distribution
network for pharmaceutical products has in recent years been subject to
increasing consolidation.  As a result, a few large wholesale distributors
control a significant share of the market and the number of independent drug
stores and small chains has decreased.  Further consolidation among, or any
financial difficulties of, distributors or retailers could result in the
combination or elimination of warehouses thereby stimulating product returns to
Dura.  Further consolidation or financial difficulties could also cause
customers to reduce their inventory levels or otherwise reduce purchases of
Dura's products which could result in a material adverse effect on Dura's
business, financial condition or results of operations.

Dura's principal customers are wholesale drug distributors and major drug store
chains.  For 1997, two wholesale customers (McKesson Corporation and Cardinal
Health, Inc.) each individually accounted for 11% of sales.  For 1996, three
wholesale customers individually accounted for 17% (McKesson Corporation), 14%
(Bergen Brunswig Corporation) and 13% (Cardinal Health, Inc.) of sales.  For
1995,

                                                                            17
<PAGE>

two wholesale customers individually accounted for 16% (McKesson Corporation)
and 11% (Cardinal Health, Inc.) of sales.  The loss of any of these customers
could have a material adverse effect upon Dura's business, financial
condition or results of operations.

SEASONALITY AND FLUCTUATING QUARTERLY RESULTS.  Historically, as a result of the
winter cold and flu season, industry-wide demand for respiratory products has
been stronger in the first and fourth quarters than in the second and third
quarters of the year.  In addition, variations in the timing and severity of the
winter cold and flu season have influenced Dura's results of operations in the
past.  While the growth and productivity of Dura's sales force and the
introduction by Dura of new products have historically mitigated the impact of
seasonality on Dura's results of operations, recent product acquisitions by
Dura, especially Keftab-Registered Trademark- and Ceclor-Registered Trademark-
CD, which are used to treat respiratory infections, increase the impact of
seasonality on Dura's results of operations.  No assurances can be given that
Dura's results of operations will not be materially adversely affected by the
seasonality of product sales.

COMPETITION.  Many companies, including large pharmaceutical firms with
financial and marketing resources and development capabilities substantially
greater than those of Dura, are engaged in developing, marketing and selling
products that compete with those offered or planned to be offered by Dura.  The
selling prices of such products typically decline as competition increases.
Further, other products now in use or under development by others may be more
effective than Dura's current or future products.  The industry is characterized
by rapid technological change, and competitors may develop their products more
rapidly than Dura.  Competitors may also be able to complete the regulatory
process sooner, and therefore, may begin to market their products in advance of
Dura's products.  Dura believes that competition among both prescription
pharmaceuticals and pulmonary drug delivery systems aimed at the respiratory
infection, allergy, cough and cold, and asthma and COPD markets will be based
on, among other things, product efficacy, safety, reliability, availability and
price.

There are at least 25 other companies in the U.S. that are currently engaged in
developing, marketing and selling respiratory pharmaceuticals.  Additionally,
there are at least 10 companies currently involved in the development, marketing
or sales of dry powder pulmonary drug delivery systems.  There are two types of
DPIs currently in commercial use worldwide, individual dose and multiple dose.
Individual dose DPIs currently marketed in the U.S. include the Rotohaler-TM-
(developed and marketed by Glaxo) and the Spinhaler-Registered Trademark-
(developed and marketed by Fisons Limited).  The Turbuhaler-Registered
Trademark- (developed and marketed by Astra), a multiple dose DPI, is the
leading DPI in worldwide sales.  In June 1997, the FDA approved the first
Turbuhaler product, the Pulmicort Turbuhaler, for marketing in the U.S., which
Astra launched in early 1998.  Recently the FDA also approved two multiple dose
DPIs developed by Glaxo.

DEPENDENCE ON THIRD PARTIES.  Dura's strategy for development and
commercialization of certain of its products is dependent upon entering into
various arrangements with corporate partners, licensors and others and upon the
subsequent success of these partners, licensors and others in performing their
obligations.  There can be no assurance that Dura will be able to negotiate
acceptable arrangements in the future or that such arrangements or its existing
arrangements will be successful.  In addition, partners, licensors and others
may pursue alternative technologies or develop alternative compounds or drug
delivery systems either on their own or in collaboration with others, including
Dura's competitors.  Dura has limited experience manufacturing products for
commercial purposes and currently does not have the capability to manufacture
its pharmaceutical products and therefore is dependent on contract manufacturers
for the production of such products for development and commercial purposes.
The manufacture of Dura's products is subject to Good Manufacturing Practice
("cGMP") regulations prescribed by the FDA.  Dura relies on a single
manufacturer for each of its products.  There can be no assurance that Dura will
be able to continue to obtain adequate supplies of such products in a timely
fashion at acceptable quality and prices. Also, there can be no assurance that
Dura will be able to enter into agreements for the manufacture of future
products with manufacturers whose facilities and procedures comply with cGMP and
other regulatory requirements.  In the event that Dura is unable to obtain or
retain third-party manufacturing, it may not be able to commercialize its
products as planned.  Dura's current dependence upon others for the

                                                                            18

<PAGE>

manufacture of its products may adversely affect future profit margins on the
sale of those products and Dura's ability to develop and deliver products on
a timely and competitive basis.

LIMITED MANUFACTURING EXPERIENCE.  Dura's principal manufacturing facility is
intended to be used to formulate, mill, blend and manufacture drugs to be used
with Spiros, pending regulatory approval. Equipment purchases and validation are
currently scheduled through 1998.  Dura's manufacturing facility must be
registered with and licensed by various regulatory authorities and must comply
with current cGMP requirements prescribed by the FDA and the State of
California.  Dura will need to significantly scale up its current manufacturing
operations and comply with cGMPs and other regulations prescribed by various
regulatory agencies in the U.S. and other countries to achieve the prescribed
quality and required levels of production of such products to obtain marketing
approval.  Any failure or significant delay in the validation of or obtaining a
satisfactory regulatory inspection of the new facility or failure to
successfully scale up could have a material adverse effect on the ability of
Dura to manufacture products in connection with Spiros.  Dura intends to utilize
third parties to produce components of and assemble the Spiros aerosol
generator.  Such third parties have only produced limited quantities of
components and assembled limited numbers of generators and will be required to
significantly scale up their activities and to produce components on a timely
and consistent basis and which meet applicable specifications.  There can be no
assurance that such third parties will be successful in attaining acceptable
service levels or meeting cGMP requirements.  Any failure or delay in the scale
up of aerosol generator manufacturing would have a material adverse effect on
the ability of Dura to commercialize Spiros products.

MANAGING GROWTH OF BUSINESS.  Dura has experienced significant growth as total
revenues increased 58% in 1995, 102% in 1996, and 74% in 1997, as compared to
prior periods, primarily as a result of the acquisition or in-licensing of
additional respiratory pharmaceutical products.  Due to Dura's emphasis on
acquiring and in-licensing respiratory pharmaceutical products, Dura anticipates
that the integration of the recently acquired products, as well as any future
acquisitions, will require significant management attention and expansion of its
sales force.  On February 22, 1998, the Company announced that it planned to
begin expanding its sales force immediately from approximately 270
representatives to over 450 representatives by the end of 1998 to increase the
promotional activity of its current products and to prepare for the launch,
subject to receiving regulatory approval, of Albuterol Spiros.  Dura's ability
to achieve and maintain profitability is based on management's ability to manage
its changing business effectively.

UNCERTAINTY OF PROFITABILITY; NEED FOR ADDITIONAL FUNDS.  Dura has experienced
significant operating losses in the past and at December 31, 1997, Dura's
accumulated deficit was $163.7 million.  The acquisition and in-licensing of
products, the expansion and maintenance of Dura's sales force in response to
acquisition, in-licensing, and enhanced promotion of products and planned
introduction of Spiros products, the upgrade and expansion of its facilities,
continued pricing pressure, or the exercise of the Stock Purchase Option or the
Product Options (defined below) will require the commitment of substantial
capital resources and may also result in significant impairment of profits, or
losses.  Depending upon, among other things, the acquisition and in-licensing
opportunities available, Dura may need to raise additional funds for these
purposes.  Adequate funds for these purposes may not be available when needed or
on terms acceptable to Dura.  Insufficient funds may require Dura to delay,
scale back or suspend some or all of its product acquisition, in-licensing and
promotional programs, the upgrade and expansion of its facilities, or the
potential exercise of the Stock Purchase Option, and/or the Product Options.
Dura anticipates that its existing capital resources, together with cash
expected to be generated from operations and available bank borrowings, should
be sufficient to finance its current operations and working capital requirements
through at least the next 12 months.

EFFECT OF EXERCISE OF THE STOCK PURCHASE OPTION AND THE PRODUCT OPTIONS;
DILUTION.  Dura's Purchase Option with respect to the outstanding shares of
callable common stock of Spiros Corp. II expires on December 31, 2002. If
Dura exercises the Purchase Option, it will be required to make a substantial
cash payment or to issue shares of Dura common stock, or both.  A payment in
cash could reduce Dura's capital resources.  A payment in shares of Dura
common stock would result in a decrease in the percentage ownership of Dura's
shareholders at that time.  The exercise of the

                                                                            19

<PAGE>

Purchase Option will likely require Dura to record a significant charge to
earnings and may adversely impact future operating results.  If Dura does not
exercise the Stock Purchase Option prior to its expiration, Dura's rights in
and to Spiros Corp. II with respect to certain compounds will terminate.

As part of Dura's contractual relationship with Spiros Corp. II, Dura
received the Product Options to purchase certain rights to the use of Spiros
with albuterol and with an additional product other that albuterol.  If Dura
exercises either of the Product Options, it will be required to make a
significant cash payment which could have an adverse effect on its capital
resources.  Dura may not have sufficient capital resources to exercise the
Product Options, which may result in Dura's loss of valuable rights.

GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL.  Development, testing,
manufacturing and marketing of pharmaceutical products including drug delivery
systems are subject to extensive regulation by numerous governmental authorities
in the U.S. and other countries.  The process of obtaining FDA approval of
pharmaceutical products and drug delivery systems is costly and time consuming.
Any new pharmaceutical product must undergo rigorous preclinical and clinical
testing and an extensive regulatory approval process mandated by the FDA.  Such
regulatory review includes the determination of manufacturing capability and
product performance.  Marketing of drug delivery systems also requires FDA
approval, which can be costly and time consuming to obtain.  A separate
regulatory approval will need to be obtained for each Spiros drug delivery
system.  There can be no assurance that the pharmaceutical products currently in
development by Dura or those products acquired or in-licensed will be approved
by the FDA.  In addition, there can be no assurance that all necessary approvals
will be granted for future products or that FDA review or actions will not
involve delays caused by the FDA's request for additional information or testing
that could adversely affect the time to market and sale of the products.  For
both currently marketed products and future products of Dura, failure to comply
with applicable regulatory requirements can, among other things, result in the
suspension of regulatory approval, as well as possible civil and criminal
sanctions.

The FDA is continuing an evaluation of the effectiveness of all drug products
containing ingredients marketed prior to 1962 (the year of enactment of the
"Drug Amendments of 1962" to the Federal Food, Drug and Cosmetic Act) as part
of its DESI program and will determine which drugs are considered "new drugs"
requiring approval through a NDA for marketing. A Policy Guide (CPG 440.100)
issued by the FDA indicates that the FDA will implement procedures to
determine whether the new drug provisions are applicable to existing
products.  This Policy Guide requires that products covered by paragraph B
not be similar or related to any drug included in the DESI program or have a
different formulation or conditions for use than products marketed before
November 13, 1984.  If a final determination is made that a particular drug
required an approved NDA, such approval will be required for marketing to
continue.  If such a determination is made, the FDA might impose various
requirements; for example, it might require that the current product be the
subject of an approved NDA, that the product be reformulated and an NDA
approval be obtained, that the product must be sold on an over-the-counter
basis rather than as a prescription drug or that the products must be removed
from the market.  Dura believes that nine of its prescription pharmaceutical
products may be covered by paragraph B of the Policy Guide and is aware that
one of its products may be considered to be similar or related to a DESI
drug.  Also, Dura is not aware of evidence to substantiate that three of its
products have the same formulation or conditions for use as products marketed
before November 13, 1984.  There can be no assurance as to which regulatory
course the FDA will follow, if any, with respect to many of Dura's
pharmaceutical products or whether Dura will be able to obtain any approvals
that the FDA may deem necessary.  If any negative actions are taken by the
FDA, such actions could have a material adverse effect on business of Dura.
Dura's Health Script subsidiary is subject to regulation by state regulatory
authorities, principally state boards of pharmacy.  In addition, Health
Script is subject to regulation by other state and federal agencies with
respect to reimbursement for prescription drug benefits provided to
individuals covered primarily by publicly funded programs.

PATENTS AND PROPRIETARY RIGHTS.  Dura's success will depend in part on its
ability to obtain patents on current or future products or formulations, defend
its patents, maintain trade secrets and operate without

                                                                            20

<PAGE>

infringing upon the proprietary rights of others both in the U.S. and abroad.
However, only six of the pharmaceuticals currently marketed by Dura are
covered by patents.  Dura also has licenses or license rights to certain
other U.S. and foreign patent and patent applications.  There can be no
assurance that patents, U.S. or foreign, will be obtained, or that, if issued
or licensed to Dura, they will be enforceable or will provide substantial
protection from competition or be of commercial benefit to Dura or that Dura
will possess the financial resources necessary to enforce or defend any of
its patent rights.  Federal court decisions establishing legal standards for
determining the validity and scope of patents in the field are in transition.
There can be no assurance that the historical legal standards surrounding
questions of validity and scope will continue to be applied or that current
defenses as to issued patents in the field will offer protection in the
future.  The commercial success of Dura will also depend upon avoiding the
infringement of patents issued to competitors and upon maintaining the
technology licenses upon which certain of Dura's current products are, or any
future products under development might be, based. Litigation, which could
result in substantial cost to Dura, may be necessary to enforce Dura's patent
and license rights or to determine the scope and validity of proprietary
rights of third parties.  If any of Dura's products are found to infringe
upon patents or other rights owned by third parties, Dura could be required
to obtain a license to continue to manufacture or market such products. There
can be no assurance that licenses to such patent rights would be made
available to Dura on commercially reasonable terms, if at all.  If Dura does
not obtain such licenses, it could encounter delays in marketing affected
products while it attempts to design around such patents or it could find
that the development, manufacture or sale of products requiring such licenses
is not possible.  Dura currently has certain licenses from third parties and
in the future may require additional licenses from other parties to develop,
manufacture and market commercially viable products effectively.  There can
be no assurance that such licenses will be obtainable on commercially
reasonable terms, if at all, or that the patents underlying such licenses
will be valid and enforceable.

PRODUCT LIABILITY AND RECALL.  Dura faces an inherent business risk of exposure
to product liability claims in the event that the use of its technologies or
products is alleged to have resulted in adverse effects.  Such risks will exist
even with respect to those products that receive regulatory approval for
commercial sale. While Dura has taken, and will continue to take, what it
believes are appropriate precautions, there can be no assurance that it will
avoid significant product liability exposure.  Dura currently has product
liability insurance; however, there can be no assurance that the level or
breadth of any insurance coverage will be sufficient to fully cover potential
claims.  There can be no assurance that adequate insurance coverage will be
available in the future at acceptable costs, if at all, or that a product
liability claim or recall would not materially and adversely affect the business
or financial condition of Dura.

ATTRACTION AND RETENTION OF KEY PERSONNEL.  The Company is highly dependent on
the principal members of its management staff, the loss of whose services might
impede the achievement of corporate objectives. Although the Company believes
that it is adequately staffed in key positions and that it will be successful in
retaining skilled and experienced management, operational and scientific
personnel, there can be no assurance that the Company will be able to attract
and retain such personnel on acceptable terms.  The loss of the services of key
scientific, technical and management personnel could have a material adverse
effect on the Company, especially in light of the Company's recent significant
growth.

TERMINATION OF MERGER AGREEMENT WITH SCANDIPHARM, INC.  On December 1, 1997, the
Company terminated a merger agreement with Scandipharm, Inc. ("Scandipharm")
entered into on October 20, 1997.  On January 16, 1998, Scandipharm filed suit
against the Company for breach of contract.  On January 19, 1998, the Company
filed suit against Scandipharm seeking a declaratory judgment that Dura's
termination of the merger did not breach the merger agreement, and for damages
against Scandipharm.  The Company believes that it had the right to terminate
the merger agreement and that Scandipharm's claims for specific performance
under the agreement or for unspecified damages are without merit, and that
outcome of this matter will not have a material adverse effect on the Company's
financial position or results of operations.

CHANGE IN CONTROL.  Certain provisions of Dura's charter documents and terms
relating to the acceleration of the exercisability of certain warrants and
options relating to the purchase of such securities by Dura in the event of a
change in control may have the effect of delaying, deferring or preventing a
change in

                                                                            21
<PAGE>

control of Dura, thereby possibly depriving shareholders of receiving a
premium for their shares of the Dura common stock.  In addition, upon a
Change in Control (as defined), Dura will be required to offer to purchase
for cash all of the outstanding 3 1/2% Convertible Subordinated Notes (the
"Notes") at a purchase price of 100% of the principal amount thereof, plus
accrued but unpaid interest through the Change in Control Purchase Date (as
defined).  The Change in Control purchase features of the Notes may in
certain circumstances have an anti-takeover effect.  If a Change in Control
were to occur, there can be no assurance that Dura would have sufficient
funds to pay the Change in Control Purchase Price (as defined) for all Notes
tendered by the holders thereof and to repay other indebtedness that may
become due as a result of any Change in Control.

VOLATILITY OF DURA STOCK PRICE.  The market prices for securities of emerging
companies, including Dura, have historically been highly volatile.  Future
announcements concerning Dura or its competitors may have a significant impact
on the market price of the Dura common stock.  Such announcements might include
financial results, the results of testing, technological innovations, new
commercial products, changes to government regulations, government decisions on
commercialization of products, developments concerning proprietary rights,
litigation or public concern as to safety of Dura's products.

ABSENCE OF DIVIDENDS.  The Company has never paid any cash dividends on its
common stock.  In accordance with a bank loan agreement, Dura is prohibited from
paying cash dividends without prior bank approval.  Dura currently anticipates
that it will retain all available funds for use in its business and does not
expect to pay any cash dividends in the foreseeable future.

YEAR 2000 COMPLIANCE CONSIDERATIONS.  The Company recognizes the need to ensure
its operations will not be adversely impacted by the inability of the Company's
systems to process data having dates on or after January 1, 2000 ("Year 2000").
Processing errors due to software failure arising from calculations using the
Year 2000 date are a recognized risk.  The Company is currently addressing the
risk, with respect to the availability and integrity of its financial systems
and the reliability of its operating systems, and is in the process of
communicating with suppliers, customers, financial institutions and others with
whom it conducts business to assess whether they are or will be Year 2000
compliant.  While the Company believes its planning efforts are adequate to
address the Year 2000 concerns, there can be no assurance that the systems of
other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material effect on the Company.
In addition, the potential impact of the Year 2000 on others with whom the
Company does business and any resulting effects on the Company cannot be
reasonably estimated at this time.  The cost of the Company's Year 2000
initiatives is not expected to be material to the Company's results of
operations or financial position.

ITEM 2.   PROPERTIES

The Company owns and occupies a new 77,000 square foot headquarters facility in
San Diego, California, on a parcel of land that it purchased in 1996.  Dura
commenced construction of a 125,000 square foot to be used initially for
research and development purposes.  In addition, Dura owns two buildings that
are situated on another parcel of land near its headquarters.  One building,
consisting of approximately 31,000 square feet, is currently vacant, but is
expected to be used for research and development and manufacturing purposes.
The second building, consisting of approximately 49,000 square feet, contains
Dura's manufacturing facility that will be used to formulate, mill, blend and
fill drugs to be used with Spiros, laboratory and research facilities and
warehouse space.  Dura also occupies an additional 34,000 square feet of office
and laboratory space pursuant to a short-term lease.

The Company also leases approximately 16,660 square feet of space in Denver,
Colorado, which houses the operations of Health Script's mail service pharmacy.
The lease term expires in January 2001 with one five-year renewal option.

                                                                            22

<PAGE>


The Company considers its facilities adequate for its current needs and
believes that additional space can be obtained in the future, if necessary.

ITEM 3.   LEGAL PROCEEDINGS

On December 1, 1997, the Company terminated a merger agreement with
Scandipharm entered into on October 20, 1997.  On January 16, 1998,
Scandipharm filed suit against the Company in the state court in Alabama for
breach of contract, seeking specific performance of the merger agreement and
money damages.  On January 19, 1998, the Company filed suit against
Scandipharm in the Chancery Court in Delaware seeking a declaratory judgment
that the Company had the right to terminate the merger agreement and for
damages against Scandipharm.  The Company believes that it had the right to
terminate the merger agreement and that Scandipharm's claims for specific
performance and for unspecified damages are without merit, and that the
outcome of this matter will not have a material adverse effect on its
financial position or results of operations.  One member of the Company's
Board of Directors is also on the Board of Directors of Scandipharm.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                      PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
          RELATED SHAREHOLDER MATTERS

The information required by Item 5 of Form 10-K is incorporated herein by
reference from the information contained in the sections captioned "Market
Information on Common Stock," "Shareholders," and "Dividends" in the Annual
Report, extracts of which are attached hereto as Exhibit 13.

On December 19, 1997, the Company issued 896,606 shares of its common stock
which were not registered pursuant to the Securities Act of 1933, as amended
(the "Act"). The shares were issued to the shareholders of Spiros Corp.,
primarily venture capital investors, in connection with the Company's
acquisition of all of the outstanding securities of Spiros Corp., a separate,
private company.  The purchase price of $45,707,000 consisted of the shares
of Dura common stock, valued at $43,755,000, and a cash payment of
$1,952,000.  The shares of common stock were exempt from registration
pursuant to section 4(2) of the Act.

On December 31, 1997, the Company issued a warrant to a separate,
unaffiliated company which was an existing security holder of the Company, to
purchase 200,000 shares of its common stock.  Neither the warrant nor the
underlying shares of the Company's common stock were registered pursuant to
the Act.  The warrant is exercisable through December 31, 2002 at an exercise
of $45.12 per share of common stock.  The warrant was issued as part of the
consideration paid by the Company to terminate a ten-year royalty agreement
which the Company entered into in 1994, in exchange for the security holder's
prior rights to receive certain warrants. No commission or renumeration was
paid for soliciting such exchange. The warrant was exempt from registration
pursuant to section 3(a)(9) of the Act.

ITEM 6.   SELECTED FINANCIAL DATA

The information required by Item 6 of Form 10-K is incorporated herein by
reference from the information contained in the section captioned "Selected
Financial Data" in the Annual Report, extracts of which are attached hereto as
Exhibit 13.

                                                                            23

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

The information required by Item 7 of Form 10-K is incorporated herein by
reference from the information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report, extracts of which are attached hereto as Exhibit 13.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 of Form 10-K is incorporated herein by
reference from the information contained in the section captioned "Financials"
in the Annual Report, extracts of which are attached hereto as Exhibit 13.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                      PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)  Identification of Directors.  The information under the caption "Election
of Directors," appearing in the Proxy Statement to be filed on or about April
16, 1998, is incorporated herein by reference.

(b)  Identification of Executive Officers.  The information under the caption
"Executive Officers," appearing in the Proxy Statement to be filed on or about
April 16, 1998, is incorporated herein by reference.

(c)  Compliance with Section 16 (a) of the Exchange Act.  The information under
the caption "Section 16 (a) Beneficial Ownership Reporting Compliance,"
appearing in the Proxy Statement to be filed on or about April 16, 1998, is
incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

The information under the heading "Executive Compensation and Other Information"
appearing in the Proxy Statement to be filed on or about April 16, 1998, is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

The information under the headings "Principal Stockholders" and "Common Stock
Ownership of Management," appearing in the Proxy Statement to be filed on or
about April 16, 1998, is incorporated herein by reference.

                                                                            24

<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the headings "Election of Directors," "Executive
Compensation and Other Information" and "Certain Relationships and Related
Transactions," appearing in the Proxy Statement to be filed on or about April
16, 1998, is incorporated herein by reference.


                                      PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
     AND REPORTS ON FORM 8-K

(a)  1.   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

          Consolidated Balance Sheets
          Consolidated Statements of Operations
          Consolidated Statements of Shareholders' Equity
          Consolidated Statements of Cash Flows
          Notes to Consolidated Financial Statements
          Independent Auditors' Report

(a)  2.   INDEX TO FINANCIAL STATEMENT SCHEDULES

Financial statement schedules are omitted because they are not required, are not
applicable or the information is included in the consolidated financial
statements or notes thereto.

(a)  3.   EXHIBITS

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

13)  2.1    Agreement and Plan of Merger dated July 1, 1997 of Dura
            Pharmaceuticals, Inc. (a Delaware corporation) and Dura
            Pharmaceuticals, Inc. (a California corporation).

15)  2.2    Agreement and Plan of Merger dated December 18, 1997 between the
            Company, Spiros Development Corporation and SDC Acquisition Corp.

13)  3.1    Certificate of Incorporation.

13)  3.2    Bylaws.

17)  4.1    Specimen Common Stock Certificate.

14)  4.2    Indenture, including form of Note, dated July 30, 1997, between the
            Company and Chase Trust Company of California, as trustee, with
            respect to the 3 1/2% Convertible Subordinated Notes due 2002.

                                                                           25

<PAGE>

14)  4.3    Form of 3 1/2% Convertible Subordinated Note (included in Exhibit
            4.2).

15)  4.4    Warrant Agreement dated December 22, 1997 between the Company and
            ChaseMellon Shareholder Services L.L.C., as warrant agent,
            including form of SDCII Warrant.

15)  4.5    Form of SDCII Warrant (included in Exhibit 4.4).

15)  4.8    Specimen Unit Certificate.

3)   4.9    Form of Series W Warrant.

1)   4.10   Form of Series S Warrant.

1)   10.1   License Agreement between the Company and Sterling Drug Inc.
            currently known as Sterling Winthrop, Inc., dated June 26, 1991
            (with certain confidential portions omitted).

1)   10.2   License Agreement dated June 1, 1990 between the Company and Mark
            B. Mecikalski, M.D., (with certain confidential portions omitted).

14) + 10.3  Form of Indemnification Agreement between the Company and each of
            its directors.

14) + 10.4  Form of Indemnification Agreement between the Company and each of
            its officers.

2)   10.5   Bitolterol Mesylate  0.2% Inhalation Solution and
            Tornalate-Registered Trademark- (Bitolterol Mesylate) Metered Dose
            Inhaler License Agreement dated June 24, 1992 between Sanofi
            Winthrop, Inc., as successor, and the Company (with certain
            confidential portions omitted).

14) + 10.6  1992 Stock Option Plan, as amended.

16) + 10.7  Form of Notice of Grant of Stock Option.

16) + 10.8  Form of Stock Option Agreement.

2)  + 10.9  Employment Agreement dated May 7, 1990 between the Company and Cam
            L. Garner.

4)   10.10  Assignment Agreement dated March 12, 1993 between the Company and
            Mark B. Mecikalski, M.D., (with certain confidential portions
            omitted).

5)   10.11  Registration Rights Agreement dated April 17, 1996 between the
            Company and Elan International Services Limited, as successor in
            interest.

11)  10.12  Letter Agreements between the Company and Elan International
            Services Limited, dated March 1, 1995 and September 3, 1996.

6)   10.13  Technology Access License and Royalty Agreement dated September 5,
            1994 between Elan Corporation, plc and the Company (with certain
            confidential portions omitted).

                                                                            26

<PAGE>

7)   10.14  Purchase Agreement dated June 14, 1995 between the Company and
            Abbott Laboratories, Ross Products Division, including list of
            Schedules and Exhibits thereto (with certain confidential portions
            omitted).

8)   10.15  Investors' Rights Agreement dated December 29, 1995 between the
            Company and the investors listed on Schedule A thereto.

9)   10.16  Agreement for Purchase and Sale of Assets dated June 17, 1996
            between the Company and Procter & Gamble Pharmaceuticals, Inc.
            (with certain confidential portions omitted).

10)  10.17  Licensing Agreement dated August 21, 1996 between the Company and
            Eli Lilly and Company (with certain confidential portions omitted).

11)  10.18  Manufacturing Agreement dated August 21, 1996 between the Company
            and Eli Lilly and Company  (with certain confidential portions
            omitted).

13)  10.19  Business Loan Agreement dated April 14, 1997 between the Company
            and Bank of America National Trust and Savings Association.

12)  10.20  Syntex Asset Purchase Agreement dated March 27, 1997 between the
            Company and Syntex (USA), Inc.

12)  10.21  SPIL Asset Purchase Agreement dated March 27, 1997 between the
            Company and Syntex Pharmaceuticals International Limited.

14)  10.22  Amendment No. 1 to Business Loan Agreement dated May 8, 1997
            between the Company and Bank of America National Trust and Savings
            Association.

14)  10.23  Amendment No. 2 to Business Loan Agreement dated July 30, 1997
            between the Company and Bank of America National Trust and Savings
            Association.

     10.24  Amendment No. 3 to Business Loan Agreement dated October 28, 1997
            between the Company and Bank of America National Trust and Savings
            Association.

+    10.25  Deferred Compensation Plan.

15)  10.26  Technology License Agreement dated December 22, 1997 between the
            Company, Dura Delivery Systems, Inc., Spiros Development
            Corporation and Spiros Development Corporation II, Inc.

15)  10.27  Development Agreement dated December 22, 1997 between the Company
            and Spiros Development Corporation II, Inc.

15)  10.28  Albuterol and Product Option Agreement dated December 22, 1997
            between the Company and Spiros Development Corporation II, Inc.

15)  10.29  Manufacturing and Marketing Agreement dated December 22, 1997
            between the Company and Spiros Development Corporation II, Inc.

15)  10.30  Services Agreement dated December 22, 1997 between the Company and
            Spiros Development Corporation II, Inc.

    +10.31  Employment Agreement dated May 1, 1996 between the Company and
            David S. Kabakoff.

                                                                            27

<PAGE>

     11     Statements Re Computations of Net Income (Loss) Per Share.

     13     1997 Annual Report to Shareholders (including only those items
            incorporated by reference).

     23     Independent Auditors' Consent.

     24     Power of Attorney (See Signature page).

     27.1   Financial Data Schedule for the year ended December 31, 1997.

     27.2   Financial Data Schedule for the years ended December 31, 1995 and
            December 31, 1996.

     27.3   Financial Data Schedule for the quarters ended March 31, 1997, June
            30, 1997, and September 30, 1997.

     27.4   Financial Data Schedule for the quarters ended March 31, 1996, June
            30, 1996, and September 30, 1996.

1)   Incorporated by reference to the Company's Registration Statement on Form
     S-1 (No. 33-44525), filed December 13, 1991, as amended.
2)   Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1992, as amended.
3)   Incorporated by reference to the Company's Registration Statement on Form
     S-3 (No. 33-71798), filed December 13, 1993.
4)   Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1993, as amended.
5)   Incorporated by reference to the Company's Form 10-Q for the quarter ended
     June 30, 1994.
6)   Incorporated by reference to the Company's Form 10-Q for the quarter ended
     September 30, 1994, as amended.
7)   Incorporated by reference to the Company's Form 8-K, dated June 14,
     1995, as amended.
8)   Incorporated by reference to the Company's Form 8-K, dated December 29,
     1995, as amended.
9)   Incorporated by reference to the Company's Form 8-K, dated July 3, 1996.
10)  Incorporated by reference to the Company's Form 8-K, dated September 5,
     1996, as amended.
11)  Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1996.
12)  Incorporated by reference to the Company's Form 8-K, dated May 7, 1997, as
     amended.
13)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     June 30, 1997.
14)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     September 30, 1997.
15)  Incorporated by reference to the Company's Form 8-K, dated December 19,
     1997.
16)  Incorporated by reference to the Company's Registration Statement on Form
     S-8 (No. 333-34551), filed August 28, 1997.
17)  Incorporated by reference to the Company's Registration Statement on Form
     8-A, filed December 11, 1997.
+    Management contract or compensation plan or arrangement.

                                                                            28

<PAGE>

 (b) REPORTS ON FORM 8-K.

On October 10, 1997, the Company filed a current Report on Form 8-K dated
October 10, 1997, as amended on October 21, 1997 and November 26, 1997.

On October 24, 1997, the Company filed a current Report on Form 8-K dated
October 21, 1997.

On December 1, 1997, the Company filed a current Report on Form 8-K dated
December 1, 1997.

On January 5, 1998, the Company filed a current Report on Form 8-K dated
December 19, 1997.

SUPPLEMENTAL INFORMATION

No Annual Report to Shareholders or Proxy materials have been sent to
shareholders as of the date of this report.  The Annual Report to Shareholders
and Proxy material will be furnished to the Company's shareholders subsequent to
the filing of this report and the Company will furnish such material to the
Securities and Exchange Commission at that time.

                                                                            29

<PAGE>
                                     SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:      March  27,  1998             DURA  PHARMACEUTICALS, INC.

                                        By: /s/ Cam L. Garner
                                            -----------------
                                            Cam L. Garner,
                                            Chairman, President and
                                            Chief Executive Officer

                                 POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Cam L. Garner and James W. Newman, or either of them,
as his true and lawful attorneys-in-fact and agents, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes may lawfully do or cause to be done
by virtue hereof.

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
ANNUAL REPORT ON FORM 10-K HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

Signature                              Title                        Date
---------                              -----                        ----
 /s/ Cam L. Garner            Chairman, President and           March 27, 1998
--------------------------    Chief Executive Officer
(Cam L.Garner)                (Principal Executive Officer)


/s/ David S. Kabakoff         Executive Vice President          March 27, 1998
--------------------------    and Director
(David S. Kabakoff)

/s/ James W. Newman           Senior Vice President,            March 27, 1998
--------------------------    Finance and Administration,
(James W. Newman)             and Chief Financial Officer
                              (Principal Financial and
                              Accounting Officer)

/s/ Walter F. Spath           Senior Vice President,            March 27, 1998
--------------------------    Sales and Marketing and
(Walter F. Spath)             Director

/s/ James C. Blair            Director                          March 27, 1998
--------------------------
(James C. Blair)

/s/ Herbert J. Conrad         Director                          March 27, 1998
--------------------------
(Herbert J. Conrad)

/s/ Joseph C. Cook, Jr.       Director                          March 27, 1998
--------------------------
(Joseph C. Cook, Jr.)

/s/ David F. Hale             Director                          March 27, 1998
--------------------------
(David F. Hale)

/s/ Gordon V. Ramseier        Director                          March 27, 1998
--------------------------
(Gordon V. Ramseier)

/s/ Charles G. Smith         Director                           March 27, 1998
--------------------------
(Charles G. Smith)
                                                                            30
<PAGE>

                                   EXHIBIT INDEX
                                         TO
                                     FORM 10-K

                             DURA PHARMACEUTICALS, INC.

   Exhibit
     No.                    Description
   -------                  -----------
13)  2.1    Agreement and Plan of Merger dated July 1, 1997 of Dura
            Pharmaceuticals, Inc. (a Delaware corporation) and Dura
            Pharmaceuticals, Inc. (a California corporation).

15)  2.2    Agreement and Plan of Merger dated December 18, 1997 between the
            Company, Spiros Development Corporation and SDC Acquisition Corp.

13)  3.1    Certificate of Incorporation.

13)  3.2    Bylaws.

17)  4.1    Specimen Common Stock Certificate.

14)  4.2    Indenture, including form of Note, dated July 30, 1997, between the
            Company and Chase Trust Company of California, as trustee, with
            respect to the 3 1/2% Convertible Subordinated Notes due 2002.

14)  4.3    Form of 3 1/2% Convertible Subordinated Note (included in Exhibit
            4.2).

15)  4.4    Warrant Agreement dated December 22, 1997 between the Company and
            ChaseMellon Shareholder Services L.L.C., as warrant agent,
            including form of SDCII Warrant.

15)  4.5    Form of SDCII Warrant (included in Exhibit 4.4).

15)  4.8    Specimen Unit Certificate.

3)   4.9    Form of Series W Warrant.

1)   4.10   Form of Series S Warrant.

1)   10.1   License Agreement between the Company and Sterling Drug Inc.
            currently known as Sterling Winthrop, Inc., dated June 26, 1991
            (with certain confidential portions omitted).

1)   10.2   License Agreement dated June 1, 1990 between the Company and Mark
            B. Mecikalski, M.D., (with certain confidential portions omitted).

14) + 10.3  Form of Indemnification Agreement between the Company and each of
            its directors.

14) + 10.4  Form of Indemnification Agreement between the Company and each of
            its officers.

                                                                            31

<PAGE>

2)   10.5   Bitolterol Mesylate  0.2% Inhalation Solution and
            Tornalate-Registered Trademark- (Bitolterol Mesylate) Metered Dose
            Inhaler License Agreement dated June 24, 1992 between Sanofi
            Winthrop, Inc., as successor, and the Company (with certain
            confidential portions omitted).

14) + 10.6  1992 Stock Option Plan, as amended.

16) + 10.7  Form of Notice of Grant of Stock Option.

16) + 10.8  Form of Stock Option Agreement.

2)  + 10.9  Employment Agreement dated May 7, 1990 between the Company and Cam
            L. Garner.

4)   10.10  Assignment Agreement dated March 12, 1993 between the Company and
            Mark B. Mecikalski, M.D., (with certain confidential portions
            omitted).

5)   10.11  Registration Rights Agreement dated April 17, 1996 between the
            Company and Elan International Services Limited, as successor in
            interest.

11)  10.12  Letter Agreements between the Company and Elan International
            Services Limited, dated March 1, 1995 and September 3, 1996.

6)   10.13  Technology Access License and Royalty Agreement dated September 5,
            1994 between Elan Corporation, plc and the Company (with certain
            confidential portions omitted).

7)   10.14  Purchase Agreement dated June 14, 1995 between the Company and
            Abbott Laboratories, Ross Products Division, including list of
            Schedules and Exhibits thereto (with certain confidential portions
            omitted).

8)   10.15  Investors' Rights Agreement dated December 29, 1995 between the
            Company and the investors listed on Schedule A thereto.

9)   10.16  Agreement for Purchase and Sale of Assets dated June 17, 1996
            between the Company and Procter & Gamble Pharmaceuticals, Inc.
            (with certain confidential portions omitted).

10)  10.17  Licensing Agreement dated August 21, 1996 between the Company and
            Eli Lilly and Company (with certain confidential portions omitted).

11)  10.18  Manufacturing Agreement dated August 21, 1996 between the Company
            and Eli Lilly and Company  (with certain confidential portions
            omitted).

13)  10.19  Business Loan Agreement dated April 14, 1997 between the Company
            and Bank of America National Trust and Savings Association.

12)  10.20  Syntex Asset Purchase Agreement dated March 27, 1997 between the
            Company and Syntex (USA), Inc.

12)  10.21  SPIL Asset Purchase Agreement dated March 27, 1997 between the
            Company and Syntex Pharmaceuticals International Limited.

                                                                            32

<PAGE>

14)  10.22  Amendment No. 1 to Business Loan Agreement dated May 8, 1997
            between the Company and Bank of America National Trust and Savings
            Association.

14)  10.23  Amendment No. 2 to Business Loan Agreement dated July 30, 1997
            between the Company and Bank of America National Trust and Savings
            Association.

     10.24  Amendment No. 3 to Business Loan Agreement dated October 28, 1997
            between the Company and Bank of America National Trust and Savings
            Association.

   + 10.25  Deferred Compensation Plan.

15)  10.26  Technology License Agreement dated December 22, 1997 between the
            Company, Dura Delivery Systems, Inc., Spiros Development
            Corporation and Spiros Development Corporation II, Inc.

15)  10.27  Development Agreement dated December 22, 1997 between the Company
            and Spiros Development Corporation II, Inc.

15)  10.28  Albuterol and Product Option Agreement dated December 22, 1997
            between the Company and Spiros Development Corporation II, Inc.

15)  10.29  Manufacturing and Marketing Agreement dated December 22, 1997
            between the Company and Spiros Development Corporation II, Inc.

15)  10.30  Services Agreement dated December 22, 1997 between the Company and
            Spiros Development Corporation II, Inc.

   + 10.31  Employment Agreement dated May 1, 1996 between the Company and
            David S. Kabakoff.

     11     Statements Re Computations of Net Income (Loss) Per Share.

     13     1997 Annual Report to Shareholders (including only those items
            incorporated by reference).

     23     Independent Auditors' Consent.

     24     Power of Attorney (See Signature page).

     27.1   Financial Data Schedule for the year ended December 31, 1997.

     27.2   Financial Data Schedule for the years ended December 31, 1995 and
            December 31, 1996.

     27.3   Financial Data Schedule for the quarters ended March 31, 1997, June
            30, 1997, and September 30, 1997.

     27.4   Financial Data Schedule for the quarters ended March 31, 1996, June
            30, 1996, and September 30, 1996.

1)   Incorporated by reference to the Company's Registration Statement on Form
     S-1 (No. 33-44525), filed December 13, 1991, as amended.
2)   Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1992, as amended.

                                                                            33

<PAGE>

3)   Incorporated by reference to the Company's Registration Statement on Form
     S-3 (No. 33-71798), filed December 13, 1993.
4)   Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1993, as amended.
5)   Incorporated by reference to the Company's Form 10-Q for the quarter ended
     June 30, 1994.
6)   Incorporated by reference to the Company's Form 10-Q for the quarter ended
     September 30, 1994, as amended.
7)   Incorporated by reference to the Company's Form 8-K, dated June 14,
     1995, as amended.
8)   Incorporated by reference to the Company's Form 8-K, dated December 29,
     1995, as amended.
9)   Incorporated by reference to the Company's Form 8-K, dated July 3, 1996.
10)  Incorporated by reference to the Company's Form 8-K, dated September 5,
     1996, as amended.
11)  Incorporated by reference to the Company's Form 10-K for the year ended
     December 31, 1996.
12)  Incorporated by reference to the Company's Form 8-K, dated May 7, 1997, as
     amended.
13)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     June 30, 1997.
14)  Incorporated by reference to the Company's Form 10-Q for the quarter ended
     September 30, 1997.
15)  Incorporated by reference to the Company's Form 8-K, dated December 19,
     1997.
16)  Incorporated by reference to the Company's Registration Statement on Form
     S-8 (No. 333-34551), filed August 28, 1997.
17)  Incorporated by reference to the Company's Registration Statement on Form
     8-A, filed December 11, 1997.
+    Management contract or compensation plan or arrangement.

                                                                            34