<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, 1999

                                       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 of          (I.R.S. Employer Identification Number)
 incorporation or organization)

             501 FIFTH STREET                                    37620
                BRISTOL, TN
(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 [X]      No [ ]

<TABLE>
<CAPTION>
                    CLASS                OUTSTANDING SHARES AT JUNE 30, 1999
                    -----                -----------------------------------
                   <S>                   <C>
                   Common                            32,106,282
</TABLE>





<PAGE>   2

                           KING PHARMACEUTICALS, INC.

                                      INDEX

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

Item 1:  Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998....................         2

Condensed Consolidated Statements of Operations for the three months and six months
ended June 30, 1999 and 1998.......................................................................         3

Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 1998.............................................................................         4

Notes to Condensed Consolidated Financial Statements...............................................         5


Item 2:  Management's Discussion and Analysis of Financial Condition and
         Results of Operations ....................................................................        12


PART II - OTHER INFORMATION

Item 1:  Legal Proceedings.........................................................................        20
Item 4:  Submission of Matters to a Vote of Security Holders.......................................        20
Item 6:  Exhibits and Reports on Form 8-K..........................................................        21



SIGNATURES.........................................................................................        22
</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,
                                                                      1999           1998
                                                                    ---------      ---------
ASSETS                                                             (Unaudited)
<S>                                                                 <C>            <C>
Current assets:
   Cash and cash equivalents ..................................     $   4,454      $   1,159
   Accounts receivable, net ...................................        56,015         39,666
   Inventory ..................................................        39,298         26,556
   Deferred income taxes ......................................         5,717          6,675
   Prepaid expenses and other assets ..........................         3,508          1,554
                                                                    ---------      ---------
         Total current assets .................................       108,992         75,610
                                                                    ---------      ---------
Property, plant and equipment, net ............................        94,591         93,981
Intangible assets, net ........................................       470,704        480,583
Other assets ..................................................        20,926         17,997
                                                                    ---------      ---------
         Total assets .........................................     $ 695,213      $ 668,171
                                                                    =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt:
   Term loans .................................................     $  10,402      $  10,250
   Other ......................................................         1,398          3,060
 Accounts payable .............................................         9,139         12,594
 Accrued expenses .............................................        28,794         15,095
 Income taxes payable .........................................         1,375          3,524
                                                                    ---------      ---------
         Total current liabilities ............................        51,108         44,523
                                                                    ---------      ---------

Long-term debt:
   Revolving credit facility ..................................         3,826         19,000
   Term loans .................................................       360,676        414,750
   Senior subordinated notes ..................................       150,000         75,000
   Other ......................................................         5,483          5,736
Deferred income taxes .........................................         6,767          7,726
                                                                    ---------      ---------
         Total liabilities ....................................       577,860        566,735
                                                                    ---------      ---------

Shareholders' equity:
   Common shares, no par value, 150,000,000 shares authorized,
       32,106,282 and 32,104,730 shares issued and outstanding,
       respectively ...........................................        66,606         66,572
   Retained earnings ..........................................        51,343         35,460
   Due from related party .....................................          (596)          (596)
                                                                    ---------      ---------
         Total shareholders' equity ...........................       117,353        101,436
                                                                    ---------      ---------
         Total liabilities and shareholders' equity ...........     $ 695,213      $ 668,171
                                                                    =========      =========
</TABLE>

                             See accompanying notes.




                                        2


<PAGE>   4



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

<TABLE>
<CAPTION>
                                              FOR THE THREE MONTHS    FOR THE SIX MONTHS
                                                  ENDED JUNE 30,         ENDED JUNE 30,
                                              --------------------    --------------------
                                                1999        1998         1999        1998
                                              --------    --------    ---------    --------
                                                  (Unaudited)             (Unaudited)
<S>                                           <C>         <C>         <C>          <C>
REVENUES:
  Net sales ...............................   $ 76,003    $ 37,639    $ 136,005    $ 59,958
  Development revenues ....................         --       2,625           --       5,283
                                              --------    --------    ---------    --------
         Total revenues ...................     76,003      40,264      136,005      65,241
                                              --------    --------    ---------    --------
OPERATING COSTS AND EXPENSES:
  Cost of sales ...........................     23,133      14,048       38,943      21,412
  Selling, general and administrative .....     17,770       8,581       32,052      15,413
  Depreciation and amortization ...........      6,326       2,823       12,577       3,914
                                              --------    --------    ---------    --------
         Total operating costs and expenses     47,229      25,452       83,572      40,739
                                              --------    --------    ---------    --------

OPERATING INCOME ..........................     28,774      14,812       52,433      24,502
OTHER (EXPENSES) INCOME:
  Interest expense ........................    (13,343)     (4,447)     (26,062)     (7,150)
  Interest income .........................         18          40           64          55
  Other income (expense) ..................         53          16          (35)         25
                                              --------    --------    ---------    --------
         Total other expenses .............    (13,272)     (4,391)     (26,033)     (7,070)
                                              --------    --------    ---------    --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM ........................     15,502      10,421       26,400      17,432
  Income tax expense ......................      5,612       4,033        9,812       6,683
                                              --------    --------    ---------    --------
INCOME BEFORE EXTRAORDINARY ITEM ..........      9,890       6,388       16,588      10,749
Extraordinary item, net of income taxes ...         --          --         (705)       (286)
                                              --------    --------    ---------    --------
NET INCOME ................................   $  9,890    $  6,388    $  15,883    $ 10,463
                                              ========    ========    =========    ========

Basic and diluted income per common share:
   Income before extraordinary item .......   $   0.31    $   0.23    $    0.52    $   0.38
   Extraordinary item .....................         --          --        (0.02)      (0.01)
                                              --------    --------    ---------    --------
   Net income .............................   $   0.31    $   0.23    $    0.50    $   0.37
                                              ========    ========    =========    ========
</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,
                                                                 ------------------------
                                                                   1999           1998
                                                                 ---------      ---------
                                                                       (Unaudited)
<S>                                                              <C>            <C>
Net cash provided by (used in) operating activities ........     $   9,386      $    (381)
                                                                 ---------      ---------
Cash flows from investing activities:
  Purchases of property and equipment ......................        (3,389)       (75,502)
  Proceeds from sale of equipment ..........................            19             --
  Purchases of intangible assets ...........................            --        (56,559)
  Other ....................................................            --             13
                                                                 ---------      ---------
     Net cash used in investing activities .................        (3,370)      (132,048)
                                                                 ---------      ---------
Cash flows from financing activities:
  Proceeds from revolving line of credit ...................         7,000         17,139
  Payments on revolving line of credit .....................       (22,174)       (17,291)
  Due from related party ...................................            --         (1,075)
  Payments on short-term debt ..............................            --           (238)
  Proceeds from long-term debt and capital lease obligations            81        175,509
  Payments on long-term debt and capital lease obligations .       (55,918)       (42,066)
  Repayment of senior subordinated seller notes ............       (75,000)            --
  Proceeds from senior subordinated notes ..................       150,000             --
  Debt issuance costs ......................................        (6,746)        (7,335)
  Proceeds from exercise of stock options ..................            36         51,059
                                                                 ---------      ---------
      Net cash (used in) provided by financing activities ..        (2,721)       177,853
                                                                 ---------      ---------
Increase in cash and cash equivalents ......................         3,295         45,424
Cash and cash equivalents, beginning of the period .........         1,159             69
                                                                 ---------      ---------
Cash and cash equivalents, end of the period ...............     $   4,454      $  45,493
                                                                 =========      =========
</TABLE>



                             See accompanying notes.




                                        4


<PAGE>   6



                           KING PHARMACEUTICALS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        (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
us 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 three months and six months ended June
30, 1999 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1999. The interim financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Company's 1998 Annual Report on Form 10-K.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

         In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. 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 Financial Accounting Standards Board delayed the
effective date of SFAS No. 133 for one year, to fiscal years beginning after
June 15, 2000. The delay, published as SFAS No. 137, applies to quarterly and
annual financial statements. Management is evaluating the provisions of SFAS No.
133, but management has not yet determined the impact, if any, of its adoption.

NOTE 3.  INCOME PER SHARE

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

<TABLE>
<CAPTION>
                                              For the Three Months        For the Six Months
                                                  Ended June 30,             Ended June 30,
                                            -------------------------   -------------------------
                                                1999          1998         1999          1998
                                            -----------   -----------   -----------   -----------
                                                   (Unaudited)                  (Unaudited)
<S>                                         <C>           <C>
Net income ..............................   $     9,890   $     6,388     $  15,883   $    10,463
                                            ===========   ===========   ===========   ===========

Weighted average basic shares outstanding    32,105,862    28,220,000    32,105,328    28,110,000
Effect of dilutive stock options ........       148,326            --       134,123            --
                                            -----------   -----------   -----------   -----------

Dilutive shares outstanding .............    32,254,188    28,220,000    32,239,451    28,110,000
                                            ===========   ===========   ===========   ===========
Basic and diluted net income per share ..   $      0.31   $      0.23   $      0.50   $      0.37
                                            ===========   ===========   ===========   ===========
</TABLE>






                                        5


<PAGE>   7



NOTE 4.  INVENTORY

         Inventory consists of the following:

<TABLE>
<CAPTION>
                                              June 30,    December 31,
                                               1999          1998
                                              -------       -------
                                           (Unaudited)

<S>                                           <C>           <C>
Finished goods..............................  $12,573       $13,772
Work-in-process.............................   18,533         5,386
Raw materials...............................    8,192         7,398
                                              -------       -------
                                              $39,298       $26,556
                                              =======       =======
</TABLE>

NOTE 5.  ACQUISITIONS/INTANGIBLE ASSETS

Intangible assets are as follows:

<TABLE>
<CAPTION>
                                                        June 30,        December 31,
                                                          1999              1998
                                                        ---------        ---------
                                                       (Unaudited)
<S>                                                     <C>              <C>
Altace(R), Silvadene(R), AVC(TM) ................       $ 362,950        $ 362,950
Septra(R), Proloprim(R), Mantadil(R), Kemadrin(R)          15,425           15,425
Cortisporin(R) ..................................          23,694           23,694
Sterile Products ................................          54,509           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            5,000
Other ...........................................           3,377            3,377
                                                        ---------        ---------
                                                          487,144          487,144
Less accumulated amortization ...................         (16,440)          (6,561)
                                                        ---------        ---------
                                                        $ 470,704        $ 480,583
                                                        =========        =========
</TABLE>

         The following unaudited pro forma summary presents the financial
information as if certain of the Company's acquisitions had occurred on January
1, 1998. These pro forma results have been prepared for comparative purposes and
do not purport to be indicative of what would have occurred had the acquisitions
been made on January 1, 1998, nor is it indicative of future results.




                                        6


<PAGE>   8



<TABLE>
<CAPTION>
                                                     For the Three            For the Six
                                                     Months Ended            Months Ended
                                                        June 30,               June 30,
                                                          1998                   1998
                                                     ------------            ------------
<S>                                                  <C>                     <C>
Total revenues ..........................               $ 63,947               $119,996
                                                        ========               ========
Net income ..............................               $  7,946               $ 13,802
                                                        ========               ========
Basic and diluted income per common share               $   0.28               $   0.49
                                                        ========               ========
</TABLE>

NOTE 6.  CONTINGENCIES

         Except as described below, the Company has not been a party to
significant 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. We are a
defendant in 64 lawsuits which claim damages for personal injury arising from
the Company's production of the anorexigenic drug, phentermine, under contract
for SmithKline Beecham Corporation ("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 production of
this anorexigenic drug.

         While the Company cannot predict the outcome of these suits, management
believes that the claims against the Company are without merit and intend to
vigorously pursue all defenses available to the Company. The Company is being
indemnified in all of these suits by SKB for which the Company manufactured the
anorexigenic product, provided that neither the lawsuits nor the associated
liabilities are based upon the Company's independent negligence or intentional
acts, and intend to submit a claim for all unreimbursed costs to the Company's
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 the Company or for amounts in excess of the Company's product liability
coverage.

NOTE 7.  LONG-TERM DEBT

         During the second quarter King entered into three interest rate swap
agreements with a notional amount of $110,000 as a partial hedge of its variable
interest rate risk. The interest rate swap agreements fix interest rates on
variable rate debt and reduce certain exposure to interest rate fluctuations.
Under these agreements King pays a weighted average rate of 5.5% and receives
the equivalent of one-month Libor until termination in June 2004. The banks have
a one-time right to cancel the agreements in June 2001.




                                        7


<PAGE>   9



NOTE 8.  SEGMENT INFORMATION

         The Company primarily evaluates its segments based on gross profit.
Reportable segments were separately identified based on revenues, gross profit
and total assets.

         The following represents selected information for the Company's
operating segments for the periods indicated:

<TABLE>
<CAPTION>
                                        For the Three Months              For the Six Months
                                            Ended June 30,                   Ended June 30,
                                       ------------------------        -------------------------
                                         1999            1998             1999           1998
                                       --------        --------        ---------        --------
                                             (Unaudited)                       (Unaudited)
<S>                                    <C>             <C>             <C>              <C>
REVENUES:
Branded pharmaceuticals ........       $ 61,173        $ 28,203        $ 112,112        $ 45,773
Contract manufacturing .........         11,959          11,113           25,624          16,518
All other ......................          5,497           2,808            6,497           5,697
Eliminations ...................         (2,626)         (1,860)          (8,228)         (2,747)
                                       --------        --------        ---------        --------
     Consolidated total revenues       $ 76,003        $ 40,264        $ 136,005        $ 65,241
                                       ========        ========        =========        ========
GROSS PROFIT (LOSS):
Branded pharmaceuticals ........       $ 50,984        $ 23,711        $  93,726        $ 38,915
Contract manufacturing .........         (1,747)            (58)            (953)           (458)
All other ......................          3,633           2,563            4,289           5,372
                                       --------        --------        ---------        --------
     Consolidated gross profit .       $ 52,870        $ 26,216        $  97,062        $ 43,829
                                       ========        ========        =========        ========
</TABLE>



<TABLE>
<CAPTION>
                                        As of June 30,     As of December 31,
                                            1999                   1998
                                          ---------             ---------
                                         (Unaudited)
<S>                                       <C>                   <C>
TOTAL ASSETS:
Branded pharmaceuticals ......            $ 526,312             $ 522,218
Contract manufacturing .......              162,123               144,614
All other ....................                7,239                 1,735
Eliminations .................                 (461)                 (396)
                                          ---------             ---------
     Consolidated total assets            $ 695,213             $ 668,171
                                          =========             =========
</TABLE>

         Capital expenditures were $8,099, $1,671 and $1,860 for the year ended
December 31, 1998 and the three months ended June 30, 1999 and 1998,
respectively. Capital expenditures were $3,389 and $2,458 for the six months
ended June 30, 1999 and 1998, respectively. Capital expenditures are
substantially utilized for contract manufacturing purposes.

NOTE 9.  GUARANTOR FINANCIAL STATEMENTS

         The Company's wholly-owned subsidiaries Monarch Pharmaceuticals, Inc.,
Parkedale Pharmaceuticals, Inc., and King Pharmaceuticals of Nevada, Inc. (the
"Guarantor Subsidiaries") have guaranteed the Company's performance under the
$150,000 of 10 3/4% Senior Subordinated Notes due 2009 on a joint and several
basis. There are no restrictions under the Company's financing arrangements on
the ability of the Guarantor Subsidiaries to distribute funds to the Company in
the form of cash dividends, loans or advances. The following combined financial
data provides information regarding the financial position, results of
operations and cash flows of the Guarantor Subsidiaries (condensed combined
financial data). Separate financial statements and other disclosures concerning
the Guarantor Subsidiaries are not presented because management has determined
that such information would not be material to the holders of the Notes.




                                        8


<PAGE>   10

GUARANTOR SUBSIDIARIES
COMBINED BALANCE SHEETS
As of June 30, 1999 and December 31, 1998

<TABLE>
<CAPTION>
                                                          June 30,       December 31,
                                                             1999           1998
                                                          ---------        --------
                                                         (Unaudited)
<S>                                                       <C>              <C>
ASSETS
CURRENT ASSETS:
Cash ..............................................       $      --        $     --
Accounts receivable ...............................          43,642          30,475
Inventory .........................................          32,874          20,089
Prepaid expenses ..................................           1,690              27
                                                          ---------        --------
          Total current assets ....................          78,206          50,591

Property, plant and equipment, net ................          73,213          72,965
Intangible assets, net ............................         115,016         117,518
                                                          ---------        --------

          Total assets ............................       $ 266,435        $241,074
                                                          =========        ========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable ..................................       $   7,408        $  8,157
Current portion of long-term debt .................              27              --
Accrued expenses ..................................          20,891          10,645
Income taxes payable ..............................          (4,604)             --
                                                          ---------        --------
          Total current liabilities ...............          23,722          18,802

Long-term debt ....................................              54              --
Intercompany payable ..............................         160,137         175,613
                                                          ---------        --------
          Total liabilities .......................         183,915         194,414
                                                          ---------        --------
Shareholders' equity ..............................          82,522          46,659
                                                          ---------        --------
         Total liabilities and shareholders' equity       $ 266,435        $241,074
                                                          =========        ========
</TABLE>






                                        9


<PAGE>   11




GUARANTOR SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
For the three months and six months ended June 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                        For the Three Months            For the Six
                                                           Ended June 30,              Ended June 30,
                                                        --------------------      ------------------------
                                                         1999         1998          1999           1998
                                                        -------     --------      ---------      --------
                                                            (Unaudited)                 (Unaudited)
<S>                                                     <C>         <C>           <C>            <C>
REVENUES:
     Net sales ....................................     $70,565     $ 39,772      $ 132,472      $ 60,629
     Development revenues .........................          --           --             --         2,500
                                                        -------     --------      ---------      --------
          Total revenues ..........................      70,565       39,772        132,472        63,129
                                                        -------     --------      ---------      --------

OPERATING COSTS AND EXPENSES:
     Cost of sales ................................      20,139       13,985         38,422        20,235
     Selling, general and administrative ..........      14,349        5,488         25,179         9,343
     Depreciation and amortization ................       3,478        2,150          9,362         3,367
     Royalty expense (income) .....................         527          332            934           402
                                                        -------     --------      ---------      --------
               Total operating costs and expenses .      38,493       21,955         73,897        33,347
                                                        -------     --------      ---------      --------

OPERATING INCOME ..................................      32,072       17,817         58,575        29,782
OTHER (EXPENSES) INCOME
     Interest expense .............................          (2)          --              1            --
     Gain/loss ....................................          --           --             69            --
     Interest income ..............................          --           --             --             1
     Other income (expense) .......................          --           15             (1)           15
                                                        -------     --------      ---------      --------
     Income before income taxes ...................      32,070       17,832         58,505        29,797
     Income tax expense ...........................      12,411        6,901         22,642        11,531
                                                        -------     --------      ---------      --------
Net income ........................................     $19,659     $ 10,931      $  35,863      $ 18,266
                                                        =======     ========      =========      ========
</TABLE>






                                       10


<PAGE>   12




GUARANTOR SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                          For the Six Months
                                                             Ended June 30,
                                                        -----------------------
                                                          1999           1998
                                                        --------      ---------
                                                             (Unaudited)

<S>                                                     <C>           <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES .........     $ 22,570      $   4,198
                                                        --------      ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of  intangible assets ..............       (4,889)       (59,861)
     Purchases of property and equipment ..........       (2,288)       (73,908)
                                                        --------      ---------
          Net cash used in investing activities ...       (7,177)      (133,769)
                                                        --------      ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Increase (decrease) in inter-company payable .      (14,063)       131,455
     Increase (decrease) in long-term debt ........           81         (1,751)
                                                        --------      ---------
          Net cash provided by financing activities      (13,982)       129,704
                                                        --------      ---------
Change in cash and cash equivalents ...............     $  1,412      $     133
                                                        ========      =========
</TABLE>

NOTE 11.  SUBSEQUENT EVENTS

On August 2, 1999 the Company announced the signing of a definitive agreement to
acquire the antibiotic Lorabid(R) (loracarbef) in the United States and Puerto
Rico from Eli Lilly and Company for $90.5 million plus sales performance
milestones that could bring the total value of the deal to $158.0 million. The
final contingent payment will be made if the Company achieves $140.0 million in
annual net sales. Initially, the Company intends to finance the acquisition
with borrowings under the line of credit.




                                       11


<PAGE>   13



                          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 that
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: our
significant leverage and debt service requirements, dependence on our ability to
continue to acquire branded products, dependence on sales of our products,
management of our growth and integration of our acquisitions. Other important
factors that may cause actual results to differ materially from the
forward-looking statements are discussed in various sections of our Annual
Report on Form 10-K for the year ended December 31, 1998, which is on file with
the Securities and Exchange Commission as part of our Registration Statement on
Form S-1. We do not undertake to publicly update or revise any of our
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 our unaudited consolidated
financial statements and related notes thereto.

OVERVIEW

         We are a vertically integrated pharmaceutical company that
manufactures, markets and sells primarily branded prescription pharmaceutical
products. Through a national sales force of over 200 representatives and
copromotion arrangements, we market our branded pharmaceutical products to
general/family practitioners, internal medicine physicians and hospitals across
the country. Our business strategy is to acquire established branded
pharmaceutical products and to increase their sales by focused marketing and
promotion and through product life cycle management. In pursuing acquisitions,
we seek to capitalize on opportunities in the pharmaceutical industry created by
cost containment initiatives and consolidation among large, global
pharmaceutical companies. We also create value by developing product line
extensions for our branded pharmaceutical products such as new formulations,
dosages or new indications. These product line extensions are attractive to us
because they may have market exclusivity or sales levels that do not attract
significant competition. In addition to branded pharmaceuticals, we also provide
contract manufacturing for a number of the world's leading pharmaceutical and
biotechnology companies, including Amgen, Inc., Warner-Lambert, Mallinckrodt
Chemical, Inc. ("Mallinckrodt"), Genetics Institute, Inc. and Hoffman-La Roche
Inc.

         Our branded pharmaceutical products can be divided into four
therapeutic areas: (i) cardiovascular (including Altace, Thalitone and
Procanbid), (ii) anti-infectives (including Cortisporin, Neosporin and
Coly-Mycin M), (iii) vaccines and biologicals (including Fluogen, Aplisol and
Histoplasmin) and (iv) women's health (including Pitocin and Menest). All of
these products are marketed to general/family practitioners and internal
medicine physicians. Unlike many of our competitors, we have a broad therapeutic
focus that provides us with opportunities to purchase a wide variety of
products, as evidenced by our acquisition of 26 products over the last 21
months. In addition, we have well known products in all of our therapeutic
categories that generate high prescription volumes. Our portfolio of well-
recognized prescription brand names includes, among others, Altace, Neosporin,
Cortisporin, Pitocin, Anusol-HC and Fluogen.

         Since December 1994 we have acquired 34 branded pharmaceutical
products, developed three products internally, divested one product and
introduced eight product line extensions. We acquired from Glaxo Wellcome the
Cortisporin product line in March 1997, the Viroptic product line in May 1997
and six additional branded products, including Septra, and exclusive licenses,
free of royalty obligations, for the prescription formulations of Neosporin and
Polysporin in November 1997 (the "Glaxo Acquisition").

         In February 1998 we acquired from Warner-Lambert 15 branded
pharmaceutical products, the Parkedale Facility located in Rochester, Michigan
and certain manufacturing contracts for third parties for $127.9 million,
including $2.9 million of assumed liabilities (the "Sterile Products
Acquisition").




                                       12


<PAGE>   14



         In June 1998 we acquired the Menest product line from SmithKline
Beecham Corporation for $5.0 million.

         In June 1998 we launched our new Cortisporin-TC Otic line.
Cortisporin-TC Otic is a product line extension for our Cortisporin Otic
Suspension product.

         In August 1998 we received approval by the FDA to reintroduce Fluogen
(influenza virus vaccine, Trivalent, Types A & B), which was acquired as part of
the Sterile Products Acquisition and had been off the market since 1996. Fluogen
is a seasonal product with most of its sales occurring in the third and fourth
quarters.

         In December 1998 we acquired from Hoechst Marion Roussel, Inc. for
$362.5 million the United States rights to Altace, an ACE inhibitor, HMR's
worldwide rights to Silvadene, a burn cream, and HMR's worldwide rights to AVC,
a vaginal anti-infective cream (the "Altace Acquisition").

         In August 1999 we announced the signing of a definitive agreement to
acquire the antibiotic Lorabid(R) (loracarbef) in the United States and Puerto
Rico from Eli Lilly and Company for $90.5 million plus sales performance
milestones that could bring the total value of the deal to $158 million. The
final contingent payment will be made if we achieve $140 million in annual net
sales.
         As part of the agreement, we will acquire all of Lilly's rights in the
United States and Puerto Rico to Lorabid(R) including Lorabid's(R) new drug
applications, investigational new drug applications, and certain patents and
associated U.S. copyright and trademark material. Lilly will manufacture
Lorabid(R) for us. Lorabid(R) has U.S. patent protection through December 31,
2005. The transaction is expected to close before September 30, 1999 and is
subject to review under the Hart-Scott-Rodino Act.

         Lorabid(R) is indicated for the treatment of patients with mild to
moderate infections caused by susceptible strains of bacteria in the upper and
lower respiratory tract, the skin, and the urinary tract. We will begin
promoting Lorabid(R) to physicians immediately after the transaction closes.

         Our strategy is to continue to acquire branded pharmaceutical products
and to create value by leveraging our marketing, manufacturing and product
development capabilities. We expect that our strategy of acquiring branded
pharmaceutical products will increase our revenues as a result of sales of such
products and will increase gross margins. In general, margins are higher on our
branded pharmaceutical products than on our other products, making branded
products attractive to us. As soon as practicable after regulatory requirements
are satisfied and when advantageous, we expect that manufacturing these acquired
pharmaceutical products ourselves will increase our margins because the cost of
producing pharmaceutical products on our own is lower than the cost of having
these products manufactured by third parties. We 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 and to expand or
remodel our manufacturing facilities.

         We manufacture pharmaceutical products for a variety of pharmaceutical
and biotechnology companies under contracts expiring at various times within the
next five years. We intend to enter into additional manufacturing contracts in
cases where we identify contracts that offer significant volumes and attractive
margins. We have not accepted or renewed manufacturing contracts for third
parties where we perceived insignificant volumes or revenues. In accordance with
our focus on branded pharmaceutical products, we expect that, over time, our
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).




                                       13


<PAGE>   15





<TABLE>
<CAPTION>
                           For the Three Months     For the Six Months
                               Ended June 30,          Ended June 30,
                            -------------------     --------------------
                             1999        1998         1999        1998
                            -------     -------     --------     -------
<S>                         <C>         <C>         <C>          <C>
Branded pharmaceuticals     $61,173     $28,203     $112,112     $45,772
Contract manufacturing        9,333       9,253       17,396      13,771
Other .................       5,497       2,808        6,497       5,698
                            -------     -------     --------     -------
         Total ........     $76,003     $40,264     $136,005     $65,241
                            =======     =======     ========     =======
</TABLE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1999 AND 1998

Revenues

         Net revenues for the three months ended June 30, 1999 increased $35.7
million, or 88.6%, to $76.0 million in 1999 from $40.3 million in 1998, due
primarily to the acquisition and growth of branded pharmaceuticals. The increase
in revenues is primarily from the Altace Acquisition in December 1998, and
revenue growth of certain branded pharmaceuticals.

         Net sales from branded pharmaceuticals increased $32.9 million, or
116.7%, to $61.1 million in 1999 from $28.2 million in 1998. The Altace
Acquisition in December 1998, and revenue gains by the Cortisporin and Neosporin
product lines accounted for most of the sales increase.

         Revenues from contract manufacturing were flat during the quarter at
$9.3 million in 1999 compared to $9.3 million in 1998.

         Net sales from generic and other increased $2.7 million, or 95.8%, to
$5.5 million in 1999 from $2.8 million in 1998. The increase in revenues is
primarily attributable to increased sales of a generic product line, offset by a
decrease in development revenue. We recognized no development revenues in the
second quarter of 1999. In 1998, we recognized $2.5 million in development
revenues as a result of the Food and Drug Administration ("FDA") approval and
our validation of the process of one additional ANDA pursuant to an agreement
with Mallinckrodt. Currently, we have no ongoing agreements that would result in
future development revenue recognition.

Gross Profit

         Total gross profit increased $26.7 million, or 101.9%, to $52.9 million
in 1999 from $26.2 million in 1998. The increase in gross profit is primarily
attributable to the increase in gross profit from branded pharmaceutical
products.

         The gross profit from branded pharmaceutical products increased $27.3
million or 115.2% to $51.0 million from $45.8 million. The increase is primarily
attributable to the increase in gross profits from the Altace Acquisition, and
organic growth by the Cortisporin and Neosporin product lines.

         The gross profit from contract manufacturing decreased $1.6 million to
$(1.7) million from $(.1) million. The decrease is primarily attributable to a
shift in product mix to lower gross profit contracts, and unfavorable
manufacturing variances resulting from lower than expected yields associated
with production and costs of material used in unyielded lots.

         Gross profit associated with contract development revenue, generic
pharmaceutical sales, and companion animal health sales increased by $1.1
million or 42% to $3.6 million from $2.6 million. The increase is primarily
attributable to increased sales of a generic product line partially offset
because we had no contract development revenue during the quarter.




                                       14


<PAGE>   16



Operating Costs and Expenses

         Total operating costs and expenses increased $21.7 million, or 85.1%,
to $47.2 million in 1999 from $25.5 million in 1998. The increase was due to
increases in the costs associated with our growth, particularly the Altace
Acquisition.

         Cost of sales increased $9.1 million, or 65.0%, to $23.1 million in
1999 from $14.0 million in 1998. The increase was due primarily to the costs
associated with the newly acquired branded product lines.

         Selling, general and administrative expenses increased $9.2 million, or
107.0%, to $17.8 million in 1999 from $8.6 million in 1998. As a percentage of
net sales, selling, general and administrative expenses increased from 22.8% to
23.4%. This increase was primarily attributable to the hiring of additional
sales representatives during the second half of 1998 and first part of 1999; as
well as other personnel costs, marketing, and sampling costs associated with the
new branded product lines.

         Depreciation and amortization expense increased $3.5 million, or
125.0%, to $6.3 million in 1999 from $2.8 million in 1998. This increase was
primarily attributable to the amortization of the intangibles assets acquired in
the Altace Acquisition.

Operating Income

         Operating income increased $14.0 million, or 94.6%, to $28.8 million in
1999 from $14.8 million in 1998. This increase was primarily due to increased
revenues from the acquisition of branded products offset by increased expenses
described above. As a percentage of net revenues, operating income increased to
37.9% in 1999 from 36.8% in 1998.

Interest Expense

         Interest expense increased $8.9 million, or 202.3%, to $13.3 million in
1999 from $4.4 million in 1998, as a result of additional term loans used to
finance, in part, the Altace Acquisition.

Income Tax Expense

         The effective tax rate in 1999 of 36.2% and 1998 of 38.7% was higher
than the federal statutory rate of 35% primarily due to state income taxes. The
effective tax rate was lower in 1999 as compared to 1998 because of an inventory
donation. Under current tax laws, we typically receive a tax deduction equal to
twice our basis.

Net Income

         Due to the factors set forth above, net income increased $3.5 million,
or 54.7%, to $9.9 million in 1999 from $6.4 million in 1998.

SIX MONTHS ENDED JUNE 30, 1999 AND 1998

Revenues

         Net revenues increased $70.8 million, or 100.8%, to $136.0 million in
1999 from $65.2 million in 1998, due primarily to the acquisition and growth of
branded products. The increase in revenues is primarily attributable to the
Altace Acquisition and sales growth of certain branded pharmaceuticals.

         Net sales from branded pharmaceuticals increased $66.3 million, or
144.9%, to $112.1 million in 1999 from $45.8 million in 1998. The increase in
revenues from branded pharmaceuticals is primarily attributable to the Altace
Acquisition in December 1998, revenue growth of the Cortisporin and Neosporin
product lines, and growth of certain products acquired as part of the Sterile
Products Acquisition.




                                       15


<PAGE>   17




         Revenues from contract manufacturing increased $3.6, or 20.8% to $17.4
in 1999 from $13.8 in 1998. Contract revenue increased primarily because we had
a full six months of contract revenue from the Parkedale Acquisition that closed
in late February 1998.

         Net sales from generic and other increased $.8 million, or 14.0%, to
$6.5 million in 1999 from $5.7 million in 1998. The increase in revenues is
primarily attributable to increased sales of a generic product line, offset by a
decrease in development revenue. We have recognized no development revenues in
1999. In 1998, we recognized $5.0 million in development revenues as a result of
the Food and Drug Administration ("FDA") approval and our validation of the
process of two additional ANDA's pursuant to an agreement with Mallinckrodt.
Currently, we have no ongoing agreements that will result in future development
revenue recognition.

Gross Profit

         Total gross profit increased $53.2 million, or 121.5%, to $97.1 million
in 1999 from $43.8 million in 1998. The increase in gross profit is primarily
attributable to the increase in gross profit from branded pharmaceutical
products.

         The gross profit from branded pharmaceutical products increased $54.8
million or 140.9% to $93.7 million in 1999 from $38.9 million in 1998. The
increase is primarily attributable to the increase in gross profits from the
Altace Acquisition in December 1998 and growth of the Cortisporin product line,
and growth of certain products acquired as part of the Sterile Products
Acquisition.

         The gross profit from contract manufacturing decreased $.5 million to
$(1.0) million from $(.5) million. The decrease is primarily attributable to a
shift in product mix to lower gross profit contracts, and unfavorable
manufacturing variances resulting from lower than expected yields associated
with production and costs of material used in unyielded lots.

         Gross profit associated with contract development revenue, generic
pharmaceutical sales, and companion animal health sales decreased by $1.1
million or 20.4% to $4.3 million from $5.4 million. The decrease is primarily
because we had no contract development revenue during the quarter, partially
offset by increased sales of a generic product line. Currently, we have no
ongoing agreements that will result in future development revenue recognition.

Operating costs and expenses

         Total operating costs and expenses increased $42.9 million, or 105.4%,
to $83.6 million in 1999 from $40.7 million in 1998. The increase was due to
increases in the costs associated with our growth, particularly the Sterile
Products Acquisition and the Altace Acquisition.

         Cost of sales increased $17.5 million, or 81.8%, to $38.9 million in
1999 from $21.4 million in 1998. The increase was due primarily to the costs
associated with the newly acquired branded product lines.

          Selling, general and administrative expenses increased $16.7 million,
or 108.4%, to $32.1 million in 1999 from $15.4 million in 1998. This increase
was primarily attributable to the hiring of additional sales representatives
during the second half of 1998 and first part of 1999; as well as other
personnel costs, marketing, and sampling costs associated with the new branded
product lines. As a percentage of net sales, selling, general and administrative
expenses decreased from 25.7% to 23.6% due to sales increasing at a higher rate
than fixed costs.

         Depreciation and amortization expense increased $8.7 million, or
223.1%, to $12.6 million in 1999 from $3.9 million in 1998. This increase was
primarily attributable to the depreciation and amortization of the fixed assets
and intangibles assets acquired in the Sterile Products Acquisition and the
Altace Acquisition.




                                       16


<PAGE>   18



Operating Income

         Operating income increased $27.9 million, or 113.9%, to $52.4 million
in 1999 from $24.5 million in 1998. This increase was primarily due to increased
revenues from the acquisition of branded products offset by increased expenses
described above. As a percentage of net revenues, operating income increased to
38.6% in 1999 from 37.6% in 1998.

Interest Expense

         Interest expense increased $18.9 million, or 262.5%, to $26.1 million
in 1999 from $7.2 million in 1998, as a result of additional term loans used to
finance, in part, the Sterile Products Acquisition and the Altace Acquisition.

Income Tax Expense

         The effective tax rate in 1999 of 37.2% and 1998 of 38.3% was higher
than the federal statutory rate of 35% primarily due to state income taxes. The
effective tax rate was lower in 1999 as compared to 1998 because of an inventory
donation. Under current tax laws, we typically receive a tax deduction equal to
twice our basis.

Extraordinary item

         During the first quarter of 1999, we repaid $75.0 million of senior
subordinated seller notes prior to maturity. The early repayment of the notes
resulted in an extraordinary loss of $705,000, net of related tax benefits of
$445,000, from the write-off of certain deferred financing costs.

Net Income

         Due to the factors set forth above, net income increased $5.4 million,
or 51.4%, to $15.9 million in 1999 from $10.5 million in 1998.

LIQUIDITY AND CAPITAL RESOURCES

General

         Our liquidity requirements arise from debt service, working capital
requirements and funding of acquisitions of branded products.

         As of June 30, 1999 we have available $96.2 million under a revolving
line of credit, which allows for total borrowing of up to $100.0 million.

         We generated net cash from operations of $9.4 million for the six
months ended June 30, 1999. Our net cash provided from operations was primarily
the result of $15.9 million in net income, adjusted for non-cash depreciation
and amortization of $12.6 million, a non-cash extraordinary charge of $1.2
million before income tax benefit, an increase in accrued expenses of $13.8
million, and a decrease in accounts payable and income taxes payable of $3.6
million and $2.1 million, respectively. Our cash flow from operations was also
impacted by an increase in accounts receivable, inventory and prepaid assets of
$16.3 million, $12.7 million and $2.0 million, respectively.

         Cash flows used in investing activities was $3.4 million due to the
purchases of property and equipment.

         Net cash used in financing activities was $2.7 million. Financing
activities provided $157.0 million comprised of $150.0 million in proceeds from
senior subordinated notes, and $7.0 million in proceeds from the revolving
credit facility. These amounts were offset by repayments of the $75.0 million
senior subordinated seller notes, $55.9 million relating to the term loans, and
$22.2 million on the revolving credit facility.




                                       17


<PAGE>   19



         As of June 30, 1999 we have outstanding approximately $528.0 million of
long-term debt (including current portion), and $3.8 million in borrowings under
our revolving line of credit agreement. Of these amounts, approximately $374.9
million were at variable rates based on LIBOR and the remainder at fixed rates.
We have entered into $235.0 million of interest rate hedging transactions with a
group of commercial banks to exchange our variable LIBOR for a fixed rate of
interest. We do not believe our exposure to changes in interest rates under the
remaining variable rate agreements will have a material effect on our financial
condition or results of operations. Certain financing arrangements require us to
maintain certain minimum net worth, debt to equity, cash flow and current ratio
requirements. As of June 30, 1999 we were in compliance with these covenants.

          We believe that existing credit facilities and cash expected to be
generated from operations are sufficient to finance our current operations and
working capital requirements. However, in the event we make significant future
acquisitions, we may be required to raise funds through additional borrowings or
the issuance of additional debt or equity securities. At present, we are
actively pursuing the acquisition of additional branded pharmaceutical products
that may require the use of substantial capital resources. Except for the
agreement to acquire Lorabid(R), there are, no present agreements or commitments
with respect to any such acquisitions.

         In August 1999 we announced the signing of a definitive agreement to
acquire the antibiotic Lorabid(R) (loracarbef) in the United States and Puerto
Rico from Eli Lilly and Company for $90.5 million plus sales performance
milestones that would bring the total value of the deal to $158 million. The
final contingent payment will be made if we achieve $140 million in annual net
sales. Initially, we intend to finance the acquisition with borrowings under
the line of credit.

Capital Expenditures

         Capital expenditures, including capital lease obligations, were $1.7
million and $1.9 million for the three months ended June 30, 1999 and 1998,
respectively, and $3.4 million and $75.5 million for the six months ended June
30, 1999 and 1998, respectively. The principal capital expenditures included
property and equipment purchases and building improvements. We anticipate total
capital expenditures in 1999 to be approximately $6.0 million primarily to fund
additional equipment purchases and building improvements. In addition, we expect
to increase our capital expenditures over the next few years as a part of our
acquisition and growth strategy.

Year 2000 Compliance

         We have conducted an evaluation of our IT and non-IT computer systems
with respect to the "Year 2000" issue. This issue arises because many electronic
systems use two digits rather than four to determine dates. This could cause
information technology systems such as software applications, hardware, network
systems and embedded systems to misread important dates beginning in the year
2000, which could cause system failures and disruption of operations.

          We have completed a Year 2000 readiness assessment of our business
critical IT and non-IT systems. As a result of the assessment, we have developed
and are implementing corrective action plans designed to address Year 2000
issues. These plans, which include modification, upgrade and replacement of our
critical administrative, production and research and development computer
systems to make them Year 2000 ready. We expect to have our critical systems
Year 2000 ready in the fourth quarter of 1999.

         Because our operations depend on the uninterrupted flow of materials
and services from our suppliers, we have requested and have been receiving and
analyzing informatioin from out suppliers with regard to their progress toward




                                       18


<PAGE>   20



Year 2000 readiness. We intend to continue to monitor the progress of our key
suppliers toward Year 2000 readiness.

         We estimate that we will spend, in total, between $1.0 million and $1.5
million to become Year 2000 ready. The majority of this spending will constitute
replacement costs of non-compliant IT systems and reprogramming existing
systems. It is possible that the actual cost of our Year 2000 readiness effort
could exceed these estimates.

         Although we have a process in place to assess Year 2000 readiness on
the part of our suppliers, we consider the most reasonably likely worst case
scenario is that one or more of our suppliers might encounter a Year 2000
problem and be unable to supply materials. If this occurs and we could not
obtain the same materials from another vendor, production could be interrupted,
which could result in lost sales and profits. In addition, while we are taking
action to correct deficiencies in our own systems, it is possible that one or
more of our facilities or critical business systems might not achieve Year 2000
readiness as anticipated. This could also result in disruption of operations and
lost sales and profits.

         We do not manufacture any products that are subject to Year 2000 risks.
Contingency plans have been or will be developed to avoid or mitigate the risks
that either key suppliers or we might not achieve Year 2000 readiness in time to
avoid disruption of our operations.

Recent Accounting Pronouncements

         In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. 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 Financial Accounting Standards Board delayed the
effective date of SFAS No. 133 for one year, to fiscal years beginning after
June 15, 2000. The delay, published as SFAS No. 137, applies to quarterly and
annual financial statements. Management is evaluating the provisions of SFAS No.
133, but management has not yet determined the impact, if any, of its adoption.




                                       19


<PAGE>   21



ITEM 2A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Certain of our financial instruments are subject to market risks,
including interest rate risk. Our financial instruments are not currently
subject to foreign currency risk or commodity price risk. We have no financial
instruments held for trading purposes.

          The Company is exposed to market risk related to changes in interest
rates on borrowings under its senior credit facility. The senior credit
facility bears interest based on LIBOR. However, we have entered into an
aggregate notional principal amount of $235.0 million in interest rate swap
agreements to manage a portion of our exposure to interest rate changes. The
swaps involve the exchange of fixed and variable interest rate payments based
on contractual principal amount and time period. Payments or receipts on the
agreements are recorded as adjustments to interest expense. At June 30, 1999
our swap agreements are effective through 2004 with the banks having a one-time
right to cancel in 2001. Under these agreements we pay a fixed weighted average
interest rate of 5.5% and receive a floating interest rate based on one-month
LIBOR.

          The fair values of the interest rate swap agreements represent the
estimated payments or receipts that would be made to terminate the agreements.
At June 30, 1999 we would receive approximately $0.1 million to terminate the
agreements. The fair value is based on dealer quotes. The Company has $374.9
million of debt remaining that bears interest at a variable rate. Accordingly,
an increase in interest rates would adversely affect interest expense.


                                       20
<PAGE>   22




                           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. We are a
defendant in 64 lawsuits which claim damages for personal injury arising from
our 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. We expect to be named in additional
lawsuits related to production of this anorexigenic drug.

         While we cannot predict the outcome of these suits, we believe that the
claims against us are without merit and intend to vigorously pursue all defenses
available to us. We are being indemnified in all of these suits by SKB for which
we manufacture the anorexigenic product, provided that neither the lawsuits nor
the associated liabilities are based upon our independent negligence or
intentional acts, and intend 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, we would have to defend
the lawsuit and be responsible for damages, if any, which are awarded against us
or for amounts in excess of our product liability coverage.

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

         At the Annual Meeting on June 25, 1999, the shareholders voted on the
following proposals with the results as indicated:

1. Elected two of its current directors to continue in office for a three-year
term term as follows:

<TABLE>
<CAPTION>
                              FOR                 WITHHOLD AUTHORITY
<S>                           <C>                 <C>
John M. Gregory               30,505,157          59,307
D. Greg Rooker                30,508,740          55,724
</TABLE>



Directors continuing to serve include:

Jefferson J. Gregory                         Lois A. Clarke
Joseph R. Gregory                            Frank W. De Friece, Jr.
Ernest C. Bourne                             Ted G. Wood

2. Approved the King Pharmaceuticals, Inc. 1998 Non-Employee Director Stock
Option Plan as follows:

<TABLE>
<CAPTION>
         FOR               AGAINST          ABSTAIN
<S>                        <C>              <C>
         28,682,178        1,732,954        149,332
</TABLE>





                                       20


<PAGE>   23




3. Ratified the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants and auditors for 1999 as follows:

<TABLE>
<CAPTION>
         FOR               AGAINST          ABSTAIN
<S>                        <C>              <C>
         30,549,066        4,173            15,398
</TABLE>



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.




                                       22


<PAGE>   24


                                   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, 1999                By: /s/ John M. Gregory
        ---------------                    -------------------------------------
                                           John M. Gregory
                                           Chairman and Chief Executive Officer




Date:   August 14, 1999                By: /s/ Brian G. Shrader
        ---------------                    -------------------------------------
                                           Brian G. Shrader
                                           Chief Financial Officer




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