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

                                    FORM 10-Q

 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
                  For The Quarterly Period Ended June 30, 1998

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from           to
                                                 --------      --------

                           Commission File No. 0-24425

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


        TENNESSEE                                        54-1684963
 (State or other jurisdiction                         (I.R.S. EMPLOYER
 of Incorporation or organization)                    IDENTIFICATION NO.)




             501 FIFTH STREET
               Bristol, TN                                        37620
     (Address of principal executive offices)                   (Zip Code)




       Registrant's telephone number, including area code: (423) 989-8000


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         No   X
    ----       ----

                           Class             Outstanding Shares at July 30, 1998
                           -----             -----------------------------------
                           Common                        32,104,730




<PAGE>   2



                           KING PHARMACEUTICALS, INC.

                                      INDEX

<TABLE>

PART I - FINANCIAL INFORMATION

Item 1:  Financial Statements

<S>                                                                                                  <C>   
Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997                          2

Condensed Consolidated Statements of Operations for the Three Months
and Six Months ended June 30, 1998 and 1997                                                              3


Condensed Consolidated Statements of Cash Flows for the Six Months ended
June 30, 1998 and 1997                                                                                   4

Notes to Condensed Consolidated Financial Statements                                                   5-9


Item 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                                                       10-15


PART II - OTHER INFORMATION

Item 1:  Legal Proceedings                                                                              16
Item 2:  Changes in Securities and Use of Proceeds                                                      16
Item 6:  Exhibits and Reports on Form 8-K                                                               17

Signatures                                                                                              18
</TABLE>



<PAGE>   3



                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS


KING PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)


<TABLE>
<CAPTION>

                                                                            June 30,           December 31,
ASSETS                                                                       1998                  1997    
                                                                           ---------           ------------
                                                                          (Unaudited)
<S>                                                                       <C>                  <C>   
Current assets:
   Cash and cash equivalents                                               $  45,493            $      69
   Accounts receivable, net                                                   25,408                8,561
   Inventory, net                                                             32,904               10,850
   Deferred income taxes                                                       2,013                2,013
   Prepaid expenses and other assets                                           1,320                1,319
                                                                           ---------            ---------
         Total current assets                                                107,138               22,812
                                                                           ---------            ---------
Property, plant and equipment, net                                            90,803               17,170
Intangible assets, net                                                       120,596               62,783
Other assets                                                                   7,114                2,098
                                                                           ---------            ---------
         Total assets                                                      $ 325,651            $ 104,863
                                                                           =========            =========
LIABILITIES AND SHAREHOLDERS' EQUITY 
Current liabilities:
   Notes payable                                                           $     122            $     916
   Current portion of long-term debt                                          12,836                8,084
   Accounts payable                                                           23,105                5,871
   Accrued expenses                                                           13,482                6,503
   Income taxes payable                                                        5,995                1,862
                                                                           ---------            ---------
         Total current liabilities                                            55,540               23,236
                                                                           ---------            ---------
Long-term debt                                                               177,724               48,289
Deferred income taxes                                                          2,762                4,004
                                                                           ---------            ---------
         Total liabilities                                                   236,026               75,529
                                                                           ---------            ---------
Shareholders' equity:
    Common shares no par value, 150,000,000 shares authorized,
        32,000,000 and 28,000,000 shares issued and outstanding,
        respectively                                                          65,208               16,455
    Retained earnings                                                         25,013               14,550
    Due from related party                                                      (696)              (1,671)
                                                                           ---------            ---------
         Total shareholders' equity                                           89,625               29,334
                                                                           ---------            ---------
         Total liabilities and shareholders' equity                        $ 325,651            $ 104,863
                                                                           =========            =========
</TABLE>






                             See accompanying notes.

                                       2
<PAGE>   4


KING PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)


<TABLE>
<CAPTION>

                                                                 Three Months Ended             Six Months Ended
                                                                      June 30,                       June 30,
                                                                 1998         1997             1998          1997
                                                               --------     ---------       ---------      ---------
                                                                     (Unaudited)                   (Unaudited)
REVENUES:
<S>                                                            <C>            <C>            <C>            <C>   
   Net sales                                                   $ 37,639       $ 12,066       $ 59,958         21,082
   Development revenues                                           2,625            -0-          5,283            -0-
                  Total revenues                                 40,264         12,066         65,241         21,082
OPERATING COSTS AND EXPENSES:
   Cost of sales                                                 14,048          3,153         21,412          5,788
   Selling, general and administrative                            8,581          4,352         15,413          8,405
   Depreciation and amortization                                  2,823            650          3,914          1,072
                                                               --------       --------       --------       --------
                  Total operating costs and expenses             26,452          8,155         40,739         15,265
                                                               --------       --------       --------       --------

OPERATING INCOME                                                 14,812          3,911         24,502          5,817
OTHER (EXPENSES) INCOME:
   Interest expense                                              (4,447)          (722)        (7,150)        (1,166)
   Interest income                                                   40            -0-             55             60
   Other                                                             16            (26)            25            (56)
                                                               --------       --------       --------       --------
                  Total other (expenses)                         (4,391)          (748)        (7,070)        (1,162)
                                                               --------       --------       --------       --------
INCOME BEFORE INCOME TAXES AND
  EXTRAORDINARY ITEM                                             10,421          3,163         17,432          4,655
   Income tax expense                                             4,033          1,179          6,683          1,749
                                                               --------       --------       --------       --------
INCOME BEFORE EXTRAORDINARY ITEM                                  6,388          1,984         10,749          2,906
Extraordinary item net of income taxes                              -0-            -0-           (286)           -0-
                                                               --------       --------       --------       --------
NET INCOME                                                     $  6,388       $  1,984       $ 10,463       $  2,906
                                                               ========       ========       ========       ========

  Basic and diluted income per common share:
      Income before extraordinary item                         $   0.23       $   0.07       $   0.38       $   0.12
      Extraordinary item                                            -0-            -0-          (0.01)           -0-
                                                               --------       --------       --------       --------
      Net income                                               $   0.23       $   0.07       $   0.37       $   0.12
                                                               ========       ========       ========       ========
</TABLE>











                             See accompanying notes

                                       3
<PAGE>   5






KING PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                            For the Six
                                                                                           Months Ended
                                                                                             June 30,
                                                                                         1998         1997
                                                                                   -------------------------
                                                                                     (Unaudited)
<S>                                                                                <C>             <C>   
Net cash provided by (used in) operating activities:                               $    (381)      $   4,229
                                                                                   -------------------------

Cash flows from investing activities:
   Purchases of property and equipment                                               (75,502)           (496)
   Purchases of intangible assets                                                    (56,559)        (30,361)
   Other                                                                                  13             203
                                                                                   ------------------------- 
       Net cash used in investing activities                                        (132,048)        (30,654)
                                                                                   -------------------------

Cash flows from financing activities:
   Proceeds from revolving line of credit                                             17,139           8,856
   Payments on revolving line of credit                                              (17,291)         (7,160)
   Book overdraft                                                                          -             744
   Payments due from related party                                                     1.075               -
   Payments on shareholders' notes receivable                                              -           1,074
   Proceeds from short-term debt                                                           -             185
   Payments on short-term debt                                                          (238)           (105)
   Proceeds from long-term debt and capital lease obligations                        175,509          15,750
   Payments on long-term debt and capital lease obligations                          (42,066)         (1,575)
   Debt issuance costs                                                                (7,335)              -
   Proceeds from issuance of common stock, net                                        51,059           7,246
                                                                                   -------------------------
       Net cash provided by financing activities                                     177,853          25,033
                                                                                   -------------------------
Increase (decrease) in cash and cash equivalents                                      45,424          (1,392)
Cash and cash equivalents, beginning of the period                                        69           1,392
                                                                                   -------------------------
Cash and cash equivalents, end of the period                                       $  45,493       $       -
                                                                                   =========================
</TABLE>

Supplemental cash flow information:

As of June 30, 1998 $1,596 of expenses relating to the initial public offering
are included in accrued expenses.










                             See accompanying notes.


                                       4
<PAGE>   6


                           KING PHARMACEUTICALS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1998 AND 1997
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

NOTE 1.  GENERAL

The accompanying unaudited interim condensed consolidated financial statements
of King Pharmaceuticals, Inc. (the "Company") have been prepared by the Company
in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X, and accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of items
of a normal recurring nature) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. The Company believes that the disclosures are adequate to
make the information presented not misleading.

These financial statements should be read in conjunction with the audited
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations relating thereto included in the
Company's Registration Statement on Form S-1 declared effective on June 25,
1998.


NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information". SFAS No 131 requires
public business enterprises to adopt its provisions for fiscal years beginning
after December 15, 1997, and to report certain information about operating
segments in complete sets of financial statements of the enterprise issued to
shareholders. Segment disclosures will also be required in interim financial
statements beginning in the second year of application. The Company is
evaluating the provisions of SFAS No. 131, but has not yet determined if
additional disclosure will be required.

On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 is effective
for all fiscal quarters of all fiscal years beginning after June 15, 1999. SFAS
No. 133 requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
the type of hedge transaction. The Company anticipates that, due to its limited
use of derivative instruments, the adoption of SFAS No. 133 will not have a
significant effect on the Company's results of operations or its financial
position.


                                       5
<PAGE>   7



NOTE 3.  INCOME PER SHARE

The following table sets forth a reconciliation of the numerators and
denominators in computing income per share:

<TABLE>
<CAPTION>

                                             Three months ended             Six months ended
                                                 June 30,                       June 30,
Basic and diluted income per share          1998          1997             1998         1997
                                          -----------------------------------------------------
<S>                                        <C>            <C>            <C>           <C>

Net income............................     $ 6,388       $ 1,984         $ 10,463      $  2,906

Weighted average shares ..............  28,220,000    28,000,000       28,110,000    24,464,000
                                        ----------    ----------       ----------    ----------
Basic and diluted income per share....     $  0.23       $  0.07         $   0.37      $   0.12
                                        ==========    ==========       ==========    ==========
</TABLE>

NOTE 4.  INVENTORY

Inventory consists of the following:

<TABLE>
<CAPTION>

                                                             June 30,        December 31,
                                                               1998              1997
                                                        ----------------------------------
                                                           (Unaudited)
<S>                                                        <C>                  <C>  
Finished goods..........................................   $    15,517          $  7,568
Work-in-process.........................................         9,736               494
Raw materials...........................................         7,651             2,788
                                                        ----------------------------------
                                                           $    32,904          $ 10,850
                                                        ==================================
</TABLE>


NOTE 5.  PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment consists of the following:


<TABLE>
<CAPTION>
                                                              June 30,      December 31,
                                                                1998            1997
                                                        --------------------------------
                                                             (Unaudited)
                                                           <S>                  <C>
Land.................................................      $   3,949           $    319
Building and improvements............................         54,137             13,563
Machinery and equipment..............................         32,095              5,766
Construction in progress.............................          5,537                585
                                                        --------------------------------
                                                              95,718             20,233
Less accumulated depreciation........................         (4,915)            (3,063)
                                                        --------------------------------
                                                           $  90,803           $ 17,170
                                                        ================================
</TABLE>


NOTE 6.  ACQUISITIONS/INTANGIBLE ASSETS

On February 27, 1998 the Company acquired the rights, titles and interest to
certain product lines, and production facilities, and assumed manufacturing
contracts for third parties from Warner-Lambert Company (the "Sterile Products
Acquisition"). The purchase price of $127,913, including assumed liabilities of
$2,913, was allocated to real estate and equipment based on fair values
($44,130 and $28,914,


                                       6
<PAGE>   8

respectively) with the residual ($54,869) being allocated to intangible assets
and is being amortized over 5 to 40 years and 25 years, respectively. The
purchase price was financed under the Company's new Credit Agreement (Note 9).

On June 30, 1998 the Company acquired the Menest(R) product line from
SmithKline Beecham Corporation ("SKB") for $5.0 million.

The following unaudited pro forma summary presents the financial information as
if the acquisitions, including the Sterile Products Acquisition, had occurred on
January 1, 1997. These pro forma results have been prepared for comparative
purposes and do not purport to be indicative of what would have occurred had the
acquisition been made on January 1, 1997, nor is it indicative of future
results.



<TABLE>
<CAPTION>
                                                                             SIX MONTHS                   SIX MONTHS
                                                                          ENDED JUNE 30, 1998          ENDED JUNE 30, 1997
<S>                                                                       <C>                            <C>   
Net revenues.............................................................      $ 76,085                     $ 61,999
                                                                               ========                     ========
Net income...............................................................        11,434                        3,875
                                                                               ========                     ========
Net income per common share..............................................      $   0.41                     $  0 .15
                                                                               ========                     ========
</TABLE>

Intangible assets are as follows:

<TABLE>
<CAPTION>

                                                            June 30,        December, 31
                                                              1998              1997
                                                        ----------------------------------
                                                           (Unaudited)
<S>                                                        <C>              <C>   
Septra(R), Proloprim(R), Mantadil(R), Kemadrin(R) ....      $      15,425   $       15,425       
Cortisporin(R)........................................             23,694           23,694
Sterile Products......................................             54,509                -
Neosporin(R)..........................................              5,876            5,876
Viroptic(R)...........................................              5,229            5,229
Nucofed(R)/Quibron(R).................................              7,301            7,301
Polysporin(R).........................................              3,783            3,783
Menest(R).............................................              5,000                -
Other.................................................              3,377            3,017
                                                        ----------------------------------
                                                                  124,194           64,325
Less accumulated amortization.........................             (3,598)          (1,542)
                                                        ----------------------------------
                                                            $     120,596   $       62,783
                                                        ==================================
</TABLE>

NOTE 7.  CONTINGENCIES

Except as described below, the Company has not been a party to litigation or
other legal proceedings.

Many distributors, marketers and manufacturers of anorexigenic drugs have been
subject to claims relating to the use of these drugs. The Company is a defendant
in 28 lawsuits which claim damages for personal injury arising from the
Company's production of the anorexigenic drug phentermine under contract for
SKB. Generally, the lawsuits allege that the defendants (1) misled users of the
products with respect to the dangers associated with them, (2) failed to
adequately test the products, and (3) knew or should have known about the
negative effects of the drugs, and should have informed the public about the
risks of such negative effects. The actions generally have been brought by
individuals in their own right and have been filed in various state and federal
jurisdictions throughout the United States. They seek, among other things,
compensatory and punitive damages and/or court supervised medical monitoring of
persons who have ingested the product. The Company expects to be named in
additional lawsuits related to the Company's production of the anorexigenic drug
under contract for SKB.

                                       7
<PAGE>   9

While the Company cannot predict the outcome of these suits, the Company
believes that the claims against it are without merit and intends to vigorously
pursue all defenses available to it. The Company is being indemnified in all of
these suits by SKB for which it manufactures the anorexigenic product, provided
that neither the lawsuits nor the associated liabilities are based upon the
independent negligence or intentional acts of the Company, and intends to submit
a claim for all unreimbursed costs to its product liability insurance carrier.
However, in the event that SKB is unable to satisfy or fulfill its obligations
under the indemnity, the Company would have to defend the lawsuit and be
responsible for damages, if any, which are awarded against it or for amounts in
excess of the Company's product liability coverage. 

NOTE 8. OTHER TRANSACTIONS

On June 25, 1998 the Securities and Exchange Commission declared effective the
Company's Registration Statement on Form S-1 (File No. 333-38753)(the
"Registration Statement") relating to the initial public offering ("IPO") of up
to 4,000,000 primary shares of common stock. The Company closed the sale of
4,000,000 shares of common stock at $14.00 per share on June 30, 1998. The net
proceeds to the Company from the sale of stock in the IPO after deducting
underwriting discounts and commissions and offering expenses were approximately
$48,753. In June the Company used $5,000 for the acquisition of Menest(R). In
July the Company utilized $36,619 of the net proceeds from the IPO to repay
indebtedness under the Company's Credit Agreement. The balance of $7,134 was
used for repayment of debt under the Company's revolving line of credit under
the Credit Agreement and will be used for general corporate purposes including
working capital and future acquisitions. The following table sets forth a
reconciliation of the gross IPO proceeds to the net IPO proceeds.


<TABLE>

             <S>                                             <C>    
             Gross IPO proceeds                              $56,000
             Underwriters discounts and commissions            4,015
             IPO expenses paid in 1998                           926
             IPO expenses paid in 1997                           710
             IPO expenses remaining in accrued expenses        1,596
                                                             -------
                 Net equity provided from IPO                $48,753
                                                             =======

</TABLE>


On July 27, 1998 the underwriters excercised the option to purchase additional
shares to cover over-allotments of shares. Pursuant to this option, the
underwriters purchased 214,730 additional shares of which 104,730 of the shares
were purchased from the Company and 110,000 shares purchased from certain
selling shareholders. The sale of the over-allotment provided the Company with
$1,067 of net proceeds after underwriting discounts, commissions, and offering
expenses. On July 31, 1998 the Company made a required prepayment under the
Credit Agreement paying down $732 of the Tranche A Term Loan, and $68 of the
Tranche B Term Loan, with $267 remaining for general corporate purposes.

On June 15, 1998 the Company entered into an interest rate swap agreement
through June 2001 with a notional principal amount of $50.0 million whereby the
Company pays a fixed interest rate of 5.485% and receives a floating rate based
on 1-month LIBOR. On March 16, 1998 the Company entered into an interest rate
agreement through March 2001 with a notional principal amount of $50.0 million
whereby the Company pays a fixed rate of 5.52% and receives a floating rate
based on 1-month LIBOR. The Company entered into the swap agreements to hedge
against interest rate risk associated with the variable rate Tranche A and
Tranche B Term Loans.


NOTE 9.  LONG-TERM DEBT

On February 27, 1998 the Company entered into a $195.0 million credit agreement
("Credit Agreement"). The Company used the proceeds to finance the Sterile
Products Acquisition (Note 6), and repay a $40.0 million term loan and
outstanding borrowing under its revolver as of February 27, 1998. The Credit
Agreement includes Tranche A Term Loans of $90.0 million with a maturity of
December 31, 2003 with a floating interest rate swap agreement of either LIBOR
plus 2.75% or an alternative rate based on either prime or the fed 


                                       8
<PAGE>   10

funds rate plus 0.5%, plus an applicable margin of 1.75%, Tranche B Term Loans
of $85.0 million with a maturity of December 31, 2005 with a floating interest
rate of either LIBOR plus 3.25% or an alternative rate based on either LIBOR
plus 2.75% or an alternative rate based on either prime or the fed funds rate
plus 0.5%, plus an applicable margin of 1.75%, selected at the discretion of the
Company, and a $20.0 million revolving line of credit for working capital
requirements with a maturity of December 31, 2003 with a floating interest rate
of either LIBOR plus 2.75% or an alternative rate based on either prime or the
fed funds rate plus 0.5% plus an applicable margin of 1.75%. In connection with
this Credit Agreement, debt issuance costs of $7.2 million were incurred and are
being amortized over the term of the respective loans.

As a result of the early retirement of borrowing under the senior secured term
loan and senior secured revolver, debt issuance costs associated with this debt
of $461 ($287 net of tax) has been included as an extraordinary item in the
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 1998. The Credit Agreement requires the Company to maintain
certain maximum leverage and interest expense coverage ratios and minimum cash
flow and net worth ratios beginning in the first quarter of 1998. All existing
and acquired tangible and intangible assets of the Company collateralize the
Credit Agreement.


                                       9
<PAGE>   11



                          PART I- FINANCIAL INFORMATION
                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion contains certain forward-looking statements which
reflect management's current views of future events and operations. These
forward-looking statements involve certain significant risks and uncertainties,
and actual results may differ materially from the forward-looking statements.
Some important factors which may cause results to differ include: significant
leverage and debt service requirements of the Company, dependence on the
Company's ability to continue to acquire branded products, dependence on sales
of the Company's products, management of the Company's growth and integration of
its acquisitions. Other important factors that may cause actual results to
differ materially from the forward-looking statements are discussed in "Risk
Factors" and other sections of the Company's prospectus dated June 25, 1998,
which is on file with the Securities and Exchange Commission as part of the
Company's Registration Statement on Form S-1. The Company does not undertake to
publicly update or revise any of its forward-looking statements even if
experience or future changes show that the indicated results or events will not
be realized. The following presentation of management's discussion and analysis
of financial condition and results of operations should be read in conjunction
with the Company's unaudited condensed consolidated financial statements and
related notes thereto.

OVERVIEW

     The Company is a vertically integrated pharmaceutical company that
manufactures markets and sells branded and generic prescription pharmaceutical
products. The Company's strategy is to acquire branded pharmaceutical products
and increase their sales by focused promotion and marketing, as well as by
developing product line extensions and through product life cycle management.

     The Company markets a variety of branded prescription products, including a
broad line of ophthalmic and other anti-infective products (including
Cortisporin(R), Neosporin(R) and Coly-Mycin(R) M), cardiovascular products
(Thalitone(R) and Procanbid(R)), proctology products (Anusol-HC(R) and
Proctocort(R)), and women's health products (Pitocin(R) and Menest(R)). The
Company also markets biological products, including flu vaccine, tuberculin
tine tests, and other prescription pharmaceutical products.

     Since December 1994, the Company has acquired 31 branded pharmaceutical
products, developed three products internally, divested one product and
introduced eight product line extensions. The Company acquired from Glaxo
Wellcome, Inc. ("Glaxo Wellcome") the Cortisporin(R) product line in March 1997
and the Viroptic(R) product line in May 1997. The Company acquired 6 additional
branded products from Glaxo Wellcome, including Septra(R), and exclusive
license, free of royalty obligations, for the prescription formulations of
Neosporin(R) and Polysporin(R), in November 1997 (the "Glaxo Acquisition").

     In February 1998, the Company acquired from Warner-Lambert 15 branded
pharmaceutical products, a sterile manufacturing facility located in Rochester,
Michigan and certain manufacturing contracts for third parties for $125.0
million (the "Sterile Products Acquisition"). The purchase price was financed
through borrowings from a group of financial institutions (the "Credit
Agreement").

     In June 30, 1998, the Company acquired the Menest(R) product line from
Smithkline Beecham Corporation ("SKB").

     The Company's strategy is to continue to acquire branded pharmaceutical
products and to create value by leveraging its marketing, manufacturing and
product development capabilities. The Company expects that its strategy of
acquiring branded pharmaceutical products will increase its revenues as a result
of sales of such products and will increase gross margins. In general, margins
are higher on the Company's branded pharmaceutical products than on the
Company's other products, making branded products attractive to the Company. As
soon as practicable after regulatory requirements are satisfied, the Company
expects that using its manufacturing capability to ultimately produce these
acquired pharmaceutical

                                       10
<PAGE>   12

products will increase the Company's margins because the incremental cost of
producing pharmaceutical products on its own is lower than the cost of having
these products manufactured by third parties. The Company may also be required
to raise funds through additional borrowings or the issuance of debt or equity
securities in order to finance additional branded product acquisitions.

     The Company has a number of manufacturing contracts with a variety of
pharmaceutical and biotechnology companies expiring at various times within the
next five years. The Company intends to enter into additional manufacturing
contracts in cases where the Company identifies contracts that offer significant
volumes and attractive margins. The Company has not accepted or renewed
manufacturing contracts for third parties where the Company perceived
insignificant volumes or revenues. In accordance with its focus on branded
pharmaceutical products, the Company expects that, over time, its contract
manufacturing and generic pharmaceutical and companion animal health product
lines will become a smaller percentage of revenues.

     The following summarizes approximate net revenues by product categories (in
thousands).


<TABLE>
<CAPTION>

                                   Three Months Ended June 30,            Six Months Ended June 30,
                                   ---------------------------            -------------------------
                                     1998              1997                 1998           1997
                                     ----              ----                 ----           ----
<S>                               <C>              <C>                  <C>             <C> 
Branded pharmaceuticals           $   28,203       $   10,237           $    45,772     $   16,966
Generic pharmaceuticals                   82              202                   214            418
Contract manufacturing                 9,253            1,365                13,771          3,085
Companion animal health                  101              262                   201            613
Development revenues                   2,625                -                 5,283              -
                                  ----------       ----------           -----------     ---------- 
     Total                        $   40,264       $   12,066               $65,241     $   21,082
                                  ==========       ==========           ===========     ==========
</TABLE>


RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 AND 1997

Revenues

     Total revenues increased $28.2 million, or 233.1%, to $40.3 million in 1998
from $12.1 million in 1997, due primarily to the acquisition of branded
products. The Glaxo Acquisition and Sterile Products Acquisition collectively
contributed $17.6 million in total revenues in 1998.

     Revenues from contract manufacturing increased $7.9 million, or 564.3%, to
$9.3 million in 1998 from $1.4 million in 1997, due primarily to the increased
contract manufacturing related to the Sterile Products Acquisition.

     Additionally, the Company recognized $2.5 million in development revenues
as a result of the Food and Drug Administration ("FDA") approval and validation
by the Company of the process of one additional ANDA pursuant to an agreement
with Mallinckrodt Chemical, Inc.("Mallinckrodt").

Operating Costs and Expenses

     Total operating costs and expenses increased $17.3 million, or 211.0%, to
$25.5 million in 1998 from $8.2 million in 1997. This increase was due to
increases in operating costs associated with the growth of the Company,
particularly the Sterile Products Acquisition.

     Cost of sales increased $10.8 million, or 337.5%, to $14.0 million in 1998
from $3.2 million in 1997. The increase was due primarily to the costs
associated with the newly acquired branded product lines. In 1998, the
percentage increase in cost of sales was greater than the percentage increase in
net revenues due to the additional contract manufacturing related to the Sterile
Products Acquisition, which has lower gross

                                       11
<PAGE>   13

margins than the branded products.

     Selling, general and administrative expenses increased $4.2 million, or
95.5%, to $8.6 million in 1998 from $4.4 million in 1997. This increase was
primarily attributable to the hiring of additional sales representatives during
the second half of 1997 and first part of 1998; as well as other additional
personnel costs and marketing, promotion and sampling costs associated with the
new branded product lines.

     Depreciation and amortization expense increased $2.2 million, or 338.5%, to
$2.8 million in 1998 from $650,000 in 1997. This increase was primarily
attributable to the depreciation and amortization of the fixed assets and
intangible assets acquired with the branded product acquisitions in 1997 and the
Sterile Products Acquisition in 1998.

Operating Income
     Operating income increased $10.9 million, or 279.5%, to $14.8 million in
1998 from $3.9 million in 1997. This increase was primarily due to increased
revenues from the acquisition of branded products. As a percentage of total
revenues, operating income increased to 36.8% in 1998 from 32.4% in 1997.

Interest Expense

     Interest expense increased $3.7 million, or 512.5%, to $4.4 million in 1998
from $722,000 in 1997, as a result of additional term loans used to finance, in
part, the acquisitions of branded products.

Income Tax Expense

     The effective tax rate in 1998 of 38.7% and 1997 of 37.3% was higher than
the federal statutory rate of 35% primarily due to state income taxes.

Net Income

     Due to the factors set forth above,  net income  increased $4.4 million, or
220.0%,  to $6.4 million in 1998 from $2.0 million in 1997.


SIX MONTHS ENDED JUNE 30, 1998 AND 1997

Revenues

     Total revenues increased $44.1 million, or 209.0%, to $65.2 million in 1998
from $21.1 million in 1997, due primarily to the acquisition of branded
products. The Glaxo Acquisition and Sterile Products Acquisition collectively
contributed $27.4 million in total revenues in 1998.

     Revenues from contract manufacturing increased $10.7 million, or 345.2%, to
$13.8 million in 1998 from $3.1 million in 1997, due primarily to the increased
contract manufacturing related to the Sterile Products Acquisition, increases in
revenues from two contracts at the Bristol facility and offset, in part, by the
expiration of a contract.

     Additionally, the Company recognized $5.0 million in development revenues
as a result of the FDA approval and validation of the process by the Company of
two additional ANDA's pursuant to an agreement with Mallinckrodt.


                                       12
<PAGE>   14


Operating Costs and Expenses

     Total operating costs and expenses increased $25.4 million, or 166.0%, to
$40.7 million in 1998 from $15.3 million in 1997. This increase was due to
increases in operating costs associated with the growth of the Company,
particularly the Sterile Products Acquisition.

     Cost of sales increased $15.6 million, or 269.0%, to $21.4 million in 1998
from $5.8 million in 1997. The increase was due primarily to the costs
associated with the newly acquired branded product lines. In 1998, the
percentage increase in cost of sales was greater than the percentage increase in
net revenues due to the additional contract manufacturing related to the Sterile
Products Acquisition, which has lower gross margins than the branded products.

     Selling, general and administrative expenses increased $7.0 million, or
83.3%, to $15.4 million in 1998 from $8.4 million in 1997. This increase was
primarily attributable to the hiring of additional sales representatives during
1997 and in April 1998, other additional personnel costs and marketing,
promotion and sampling costs associated with the new branded product lines.

     Depreciation and amortization expense increased $2.8 million, or 254.5%, to
$3.9 million in 1998 from $1.1 million in 1997. This increase was primarily
attributable to the depreciation and amortization of the intangible and fixed
assets acquired with the branded products acquisitions in 1997 and the Sterile
Products Acquisition in 1998.

Operating Income
     Operating income increased $18.7 million, or 322.4%, to $24.5 million in
1998 from $5.8 million in 1997. This increase was primarily due to increased
revenues from the acquisition of branded products. As a percentage of net
revenues, operating income increased to 37.6% in 1998 from 27.6% in 1997.

Interest Expense

     Interest expense increased $6.0 million, or 500.0%, to $7.2 million in 1998
from $1.2 million in 1997, as a result of additional term loans used to finance,
in part, the acquisitions of branded products.

Income Tax Expense

     The  effective  tax rate in 1998 of 38.3% and 1997 of 37.6% was higher
than the  federal statutory rate of 34% primarily due to state income taxes

Net Income

     Due to the factors set forth above, net income increased $7.6 million, or
262.1%,  to $10.5 million in 1998 from $2.9 million in 1997.

LIQUIDITY AND CAPITAL RESOURCES

General

     The Company's liquidity requirements arise from debt service, working
capital requirements and funding of acquisitions of branded products.

     On February 27, 1998, the Company consummated the Sterile Products
Acquisition for $125.0 million, which was financed with the Credit Agreement.
The Company also used a portion of the Credit Agreement

                                       13
<PAGE>   15

to pay off approximately $50.0 million of long-term debt, which was then
outstanding, including the borrowings used for the Glaxo Acquisition.

     On June 25, 1998 the Company completed its initial public offering of
4,000,000 shares of common stock, raising approximately $48.8 million of equity,
net of underwriting discounts and other offering expenses. On July, 27 1998 the
underwriters exercised the option to purchase additional shares to cover
over-allotments of shares. Pursuant to this option, the underwriters purchased
214,730 additional shares with 104,730 of the shares purchased from the Company
and 110,000 shares purchased from selling shareholders. The sale of the
over-allotment provided the Company with $1.1 million of net proceeds after
underwriting discounts, commissions, and offering expenses. The Company used a
portion of the net proceeds to repay approximately $37.4 million of debt
outstanding pursuant to the Credit Agreement in July 1998.

     As of June 30, 1998 the Company had available approximately $14.0 million
under its revolving line of credit, which allows for total borrowing of up to
$20.0 million.

     Net cash used in operating activities was $381,000 for the six months ended
June 30, 1998. The Company's net cash used in operating activities was primarily
the result of $10.5 million in net income resulting from the purchase of
additional branded products and depreciation and amortization of $3.9 million.
The Company's net use in operating cash was also impacted by an increase in
receivables and inventory of $16.9 million and $22.4 million, respectively.
Additionally, the Company decreased its accounts payable, accrued expenses and
income taxes by $17.2 million, $2.5 million, and $4.1 million, respectively.

     Cash flows used in investing activities was $132.0 million due principally
to the Sterile Products Acquisition for $126.1 million, including $1.1 million
in costs, fees and expenses, the Menest(R) acquisition for $5.0 million, and
other purchases of property and equipment.

     Net cash provided by financing activities was $177.9 million, which was a
result of the net proceeds from the initial public offering additional amounts
repaid from a related party and proceeds from long term debt and capital lease
obligations of $176.6 million, offset by payments on the revolving line of
credit, debt issuance costs and other borrowings totaling 49.8 million.

     As of June 30, 1998 the Company had outstanding approximately $184.6
million of long-term debt (including current portion), $0.1 million of
short-term debt and $6.0 million in borrowings under its revolving line of
credit agreement and term loans. Of these amounts, approximately $181.1 million
were at variable rates based on LIBOR and the remainder at fixed rates. The
Company has entered into $100.0 million interest rate swap hedging transactions
with a commercial bank to exchange its variable LIBOR for fixed rate interest.
The Company does not believe its exposure to changes in interest rates under its
remaining variable rate agreements will have a material effect on its financial
condition or results of operations. Certain financing arrangements require the
Company to maintain certain minimum net worth, debt to equity, cash flow and
current ratio requirements.

     On February 27, 1998 the Company consummated the Sterile Products
Acquisition for $125.0 million. The purchase price was financed under the Credit
Agreement. The Company also used a portion of the Credit Agreement to pay off
approximately $48.2 million of long-term debt, which was then outstanding. The
Credit Agreement includes a six-year $20.0 million revolving line of credit, a
six year $90.0 million amortizing Tranche A term loan facility and an eight-year
$85.0 million amortizing Tranche B term loan facility with customary covenants
and with a floating interest rate based on either LIBOR, the prime rate, or the
fed funds rate, plus an applicable margin, selected at the discretion of the
Company. 


                                       14
<PAGE>   16

     The Company believes that existing credit facilities and cash expected to
be generated from operations are sufficient to finance its current operations
and working capital requirements. However, in the event the Company makes
significant future acquisitions, it may be required to raise funds through
additional borrowings or the issuance of additional debt or equity securities.
At present, the Company is actively pursuing the acquisition of additional
branded pharmaceutical products that may require the use of substantial capital
resources. There are, however, no present agreements or commitments with respect
to any such acquisitions.

Capital Expenditures

     Capital expenditures, including capital lease obligations, were $73.6
million and $0.2 million for the three months ended June 30, 1998 and 1997,
respectively, and $75.5 million and $0.5 million for the six months ended June
30, 1998 and 1997, respectively. The principal capital expenditures included
property and equipment purchases and building improvements. The Company is
anticipating total capital expenditures in 1998 to be approximately $5.0 million
primarily to fund additional equipment purchases and building improvements. As a
result of the Sterile Products Acquisition, the Company expects that it may need
to incur additional capital expenditures over the next few years in connection
with the maintenance and operation of the Parkedale Facility. In addition, the
Company expects to increase its capital expenditures over the next few years as
a part of its acquisition and growth strategy.

Year 2000 Compliance

     The Company is currently in the process of converting its computer systems
to year 2000 compliant software. The Company does not expect that the cost of
converting such systems will be material to its financial condition or results
of operations. The Company believes it will be able to achieve year 2000
compliance by the end of 1999, and does not currently anticipate any material
disruption in its operations as the result of any failure by the Company to be
in compliance. The Company does not currently have any information concerning
the year 2000 compliance status of its suppliers and customers.

                                       15
<PAGE>   17





                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Many distributors, marketers and manufacturers of anorexigenic drugs
have been subject to claims relating to the use of these drugs. The Company is a
defendant in 28 lawsuits which claim damages for personal injury arising from
the Company's production of the anorexigenic drug phentermine under contract for
SKB. Generally, the lawsuits allege that the defendants (1) misled users of the
products with respect to the dangers associated with them, (2) failed to
adequately test the products, and (3) knew or should have known about the
negative effects of the drugs, and should have informed the public about the
risks of such negative effects. The actions generally have been brought by
individuals in their own right and have been filed in various state and federal
jurisdictions throughout the United States. They seek, among other things,
compensatory and punitive damages and/or court supervised medical monitoring of
persons who have ingested the product. The Company expects to be named in
additional lawsuits related to the Company's production of the anorexigenic drug
under contract for SKB.

         While the Company cannot predict the outcome of these suits, the
Company believes that the claims against it are without merit and intends to
vigorously pursue all defenses available to it. The Company is being indemnified
in all of these suits by SKB for which it manufactures the anorexigenic product,
provided that neither the lawsuits nor the associated liabilities are based upon
the independent negligence or intentional acts of the Company, and intends to
submit a claim for all unreimbursed costs to its product liability insurance
carrier. However, in the event that SKB is unable to satisfy or fulfill its
obligations under the indemnity, the Company would have to defend the lawsuit
and be responsible for damages, if any, which are awarded against it or for
amounts in excess of the Company's product liability coverage.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

              The Company's Registration Statement (the "Registration
Statement") on Form S-1 (File No. 333-38753) relating to the initial public
offering ("IPO") was declared effective by the Securities and Exchange
Commission on June 25, 1998. The offering by the Company of 4,000,000 shares of
common stock commenced on June 25, 1998 and the sale of the shares closed on
June 30, 1998. All of the shares registered were sold in the IPO at an aggregate
price of $56,000,000 before deducting underwriting discounts and commissions and
underwriting expenses. The managing underwriters of the IPO were Credit Suisse
First Boston Corporation and Hambrecht & Quist LLC. The Company deducted total
expenses of $4,015,120 in underwriting discounts and commissions and $3,231,409
in offering expenses incurred through June 30,1998. The Company received net
proceeds from the IPO of $48,753,471 Through June 30, 1998 the Company paid
$494,701 to Bourne & Co., Inc. for investment banking advisory services rendered
in connection with the IPO. Ernest Bourne, a director of the Company, is the
president of Bourne & Co., Inc. No offering expenses or underwriting discounts
and commissions were paid to any other directors, officers or their associates,
or to any affiliate of the Company or any person(s) owning 10% or more of the
Company's common stock.

         The Company utilized the net proceeds from the IPO to repay
indebtedness of approximately $36.6 million outstanding under the Company's
Credit Agreement and $5.0 million for the acquisition of Menest(R). The balance
of $7.1 million was used for the repayment of the revolving line of credit under
the Company's Credit Agreement and will be used for general corporate purposes,
including working capital and future acquisitions.


                                       16
<PAGE>   18




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

              (a)  Exhibits

                  Exhibit No.  Description

                         (27.1)  Financial Data Schedule (For SEC Use Only)

              (b) Reports on Form 8-K

                  None.

                                       17
<PAGE>   19


                                   Signatures

           Pursuant to the requirement of the Securities Exchange Act of 1934,
           the registrant has duly caused this report to be signed on its behalf
           by the undersigned hereunto duly authorized.

                                                 King Pharmaceuticals, Inc.

           Date:  August 14, 1998                 By: /s/ John M. Gregory 
                  ---------------                    ---------------------------
                                                     John M. Gregory
                                                     Chairman and
                                                     Chief Executive Officer

           Date:  August 14, 1998                 By: /s/ Brian G. Shrader
                  ---------------                    ---------------------------
                                                      Brian G. Shrader
                                                      Chief Financial Officer