<PAGE>   1

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                                  FORM 10-Q


                             --------------------

(Mark One)

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

      For the quarterly period ended March 31, 1999
                                     --------------

                                      OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934


                       COMMISSION FILE NUMBER  0-23641


                    ALLERGAN SPECIALTY THERAPEUTICS, INC.


    A DELAWARE CORPORATION                     IRS EMPLOYER IDENTIFICATION
                                                       33-0779207

                 2525 DUPONT DRIVE, IRVINE, CALIFORNIA 92612

                        TELEPHONE NUMBER 714/246-4500


Indicate by a 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.

 (1)   X   yes          no
     -----        -----
 (2)   X   yes          no
     -----        -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

As of April 30, 1999, there were 3,272,690 shares of callable Class A common
stock outstanding, and 1,000 shares of Class B common stock outstanding.



<PAGE>   2

                      ALLERGAN SPECIALTY THERAPEUTICS, INC.

                                  FORM 10-Q

                     FOR THE QUARTER ENDED MARCH 31, 1999


                                      INDEX

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

    ITEM 1 - FINANCIAL STATEMENTS

              Condensed Statements of Operations                            3

              Condensed Balance Sheets                                      4

              Condensed Statements of Cash Flows                            5

              Notes to Condensed Financial Statements                    6-11

    ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS                       12-15

    ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
              ABOUT MARKET RISK                                            16

             CERTAIN FACTORS AND TRENDS AFFECTING ALLERGAN
              SPECIALTY THERAPEUTICS, INC. AND ITS BUSINESSES           17-18

PART II - OTHER INFORMATION

    ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                              19

Signature                                                                  20

Exhibits
</TABLE>


                                       2
<PAGE>   3

PART I - FINANCIAL INFORMATION


                      Allergan Specialty Therapeutics, Inc.
                          (a development stage company)

                       Condensed Statements of Operations
                                   (unaudited)

                        (In thousands, except share data)

<TABLE>
<CAPTION>                                                                           Inception     
                                                                                  (November 12,
                                                    Quarter Ended                     1997)
                                                      March 31,                        to
                                           -------------------------------          March 31,
                                              1999                1998                1999
                                           -----------         -----------        ------------
<S>                                        <C>                 <C>                 <C>        
Revenues                                   $     2,150         $       717         $    11,193

Costs and expenses:
       Research and development                 10,689               9,612              46,575
       Technology fees                           1,375               2,395               7,895
       General and administrative
         expenses                                  284                  15               1,217
                                           -----------         -----------         -----------
           Total costs and expenses        $    12,348         $    12,022         $    55,687
                                           -----------         -----------         -----------

Loss before income taxes                       (10,198)            (11,305)            (44,494)
Provision for taxes                                601                  --               3,113
                                           -----------         -----------         -----------

Net loss                                   $   (10,799)        $   (11,305)        $   (47,607)
                                           ===========         ===========         ===========

Basic and diluted loss per share           $     (3.30)        $     (3.45)        $    (14.54)
                                           ===========         ===========         ===========
Basic and diluted shares outstanding         3,273,690           3,273,690           3,273,690
</TABLE>


See accompanying notes to condensed financial statements.


                                       3
<PAGE>   4

                      Allergan Specialty Therapeutics, Inc.
                          (a development stage company)

                            Condensed Balance Sheets
                                   (unaudited)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                             March 31,   December 31, 
                                                               1999         1998      
                                                             ---------   ------------   
<S>                                                          <C>          <C>         
                                     ASSETS                                           
                                                                                      
Cash                                                         $     415    $      --   
Investments                                                    146,850      158,667   
Prepaid technology fees                                          5,023        4,723   
Other assets                                                     1,581        1,747   
                                                             ---------    ---------   
                                                                                      
                                                             $ 153,869    $ 165,137   
                                                             =========    =========   
                                                                                      
                        LIABILITIES AND STOCKHOLDERS' EQUITY                          
                                                                                      
 Liabilities:                                                                         
        Payable to Allergan, Inc.                            $   4,571    $   4,509   
        Accounts payable and accrued liabilities                   306          295   
                                                             ---------    ---------   
                                                                                      
                 Total liabilities                               4,877        4,804   
                                                                                      
 Stockholders' equity:                                                                
        Callable Class A Common stock,                                                
          $.01 par value; 6,000,000 shares                                            
          authorized, 3,272,690 issued                                                
          and outstanding                                           33           33   
        Class B Common stock,                                                         
          $1.00 par value; 1,000 shares                                               
          authorized, issued and outstanding                         1            1   
        Additional paid-in capital                             196,753      196,753   
        Accumulated other comprehensive income (loss)             (188)         354   
        Deficit accumulated during development stage           (47,607)     (36,808)  
                                                             ---------    ---------   
                                                                                      
                 Total stockholders' equity                    148,992      160,333   
                                                             ---------    ---------   
                                                                                      
                                                             $ 153,869    $ 165,137   
                                                             =========    =========   
</TABLE>


See accompanying notes to condensed financial statements.


                                       4
<PAGE>   5

                      Allergan Specialty Therapeutics, Inc.
                          (a development stage company)

                       Condensed Statements of Cash Flows
                                   (unaudited)

                                 (In thousands)

<TABLE>
<CAPTION>                                                                                   Inception  
                                                                                           (November 12,
                                                          Quarter Ended                       1997)
                                                              March 31,                        to
                                                    -----------------------------            March 31,
                                                       1999               1998                1999
                                                    ---------           ---------          ------------
<S>                                                 <C>                 <C>                 <C>       
OPERATING ACTIVITIES:
        Net loss                                    $ (10,799)          $ (11,305)          $ (47,607)
        Noncash item included in net loss:
                 Deferred income tax                       41                  --                (641)
        Changes in operating assets
          and liabilities:
                 Other assets                             270                (354)               (795)
                 Prepaid technology fees                 (300)             (1,960)             (5,023)
                 Payable to Allergan, Inc.                 62               2,682               4,571
                 Accounts payable and
                   accrued liabilities                    283               3,054                 306
                                                    ---------           ---------           ---------

                 Net cash used in
                   operating activities               (10,443)             (7,883)            (49,189)

INVESTING ACTIVITIES:
        Purchases of investments                       (2,333)                 --            (189,742)
        Sales and maturities of
          investments                                  13,191                  --              42,559
                                                    ---------           ---------           ---------

                 Net cash provided by
                   (used in) investing
                   activities                          10,858                  --            (147,183)

FINANCING ACTIVITIES:
        Issuance of common stock                           --             200,000             200,001
        Offering costs                                     --              (3,214)             (3,214)
                                                    ---------           ---------           ---------

                 Net cash provided by
                   financing activities                    --             196,786             196,787
                                                    ---------           ---------           ---------

Net increase in cash                                      415             188,903                 415

Cash - beginning of period                                 --                   1                  --
                                                    ---------           ---------           ---------

Cash - end of period                                $     415           $ 188,904           $     415
                                                    =========           =========           =========

Supplemental disclosure of cash
  paid for taxes                                    $     255           $      --           $   3,501
                                                    =========           =========           =========
</TABLE>


See accompanying notes to condensed financial statements.


                                       5
<PAGE>   6

Allergan Specialty Therapeutics, Inc.

Notes to Condensed Financial Statements

1.       Basis of Presentation and Significant Accounting Policies

         Allergan Specialty Therapeutics, Inc. ("ASTI" or "the Company") was
         incorporated in Delaware on November 12, 1997 and commenced operations
         on March 10, 1998. ASTI was formed for the purpose of conducting
         research and development of potential human pharmaceutical products,
         and to commercialize such products, most likely through licensing to
         Allergan, Inc. (Allergan).

         The Company is subject to risks associated with development stage
         companies. All of the Company's efforts to date have been limited to
         obtaining capital and conducting research and development. The Company
         does not yet generate any revenues from product sales or royalties.
         Research and development is performed by Allergan and the costs
         incurred are reimbursed by ASTI.

         The accompanying financial statements at March 31, 1999, December 31,
         1998, and for the quarters ended March 31, 1999 and 1998 and for the
         period from inception to March 31, 1999 are unaudited, and in the
         opinion of management, include all adjustments (consisting only of
         normal recurring accruals) necessary to present fairly the financial
         information contained therein. These statements do not include all
         disclosures required by generally accepted accounting principles. The
         results of operations for the period ended March 31, 1999 and for the
         period from inception to March 31, 1999 are not necessarily indicative
         of the results to be expected for the year ending December 31, 1999.

         Accounting for revenues and expenses

         ASTI's revenues consist of interest and investment income and
         Pre-Selection Product Payments (see Note 2). In later years ASTI may
         also derive revenues from the sale or license of its products, most
         likely through the sale of licensed products by Allergan. Royalty and
         other product revenue will be recorded as earned.

         ASTI incurs most of its expenses under its agreements with Allergan.
         Research and development costs paid to Allergan under a Research and
         Development Agreement (R&D Agreement) are recorded as research and
         development expenses when incurred. Technology fees paid to Allergan
         under a Technology License Agreement (Technology Agreement) are
         recorded as technology fees on a straight-line basis over the life of
         the Technology Agreement. Amounts paid to Allergan under a Services
         Agreement are recorded as administrative expenses as incurred. See Note
         2 for a description of the agreements between ASTI and Allergan.

         Use of estimates

         The preparation of financial statements in accordance with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the amounts reported in the financial
         statements and accompanying notes. Actual results could differ from 
         those estimates.


                                       6
<PAGE>   7

Allergan Specialty Therapeutics, Inc.

Notes to Condensed Financial Statements

1.       Basis of Presentation and Significant Accounting Policies (continued)

         The Company invests its excess cash in money market funds, equity
         securities and debt instruments of financial institutions and
         corporations with strong credit ratings. The Company has established
         guidelines with respect to diversification and maturities in order to
         maintain safety and liquidity. At March 31, 1999, all excess cash
         amounting to $146,850,000 was invested primarily in debt securities.
         ASTI classifies investments as available-for-sale securities with net
         unrealized gains or losses as a component of other comprehensive
         income. Amounts classified as investments are liquidated and used to
         pay operating expenses as needed.

         Per share information

         Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings
         per Share," (EPS) requires calculations for "basic earnings per share"
         including only actual weighted shares outstanding and "diluted earnings
         per share" including the effect of any common equivalent shares or
         other items that are dilutive. The Company has no common equivalent
         shares or other items that are dilutive. The reconciliations of the
         numerators and denominators of the basic and diluted loss per share
         computations for the quarters ended March 31, 1999 and 1998 and for the
         period from inception (November 12, 1997) to March 31, 1999 are as
         follows:

<TABLE>
<CAPTION>
                                        Quarter Ended March 31,            Inception
                                   -------------------------------    (November 12, 1997)
                                        1999              1998         to March 31, 1999
                                   -------------     -------------    -------------------
<S>                                <C>               <C>               <C>          
          Loss during period       $(10,799,000)     $(11,305,000)     $(47,607,000)

          Basic and diluted
            shares outstanding        3,273,690         3,273,690         3,273,690

          Per share loss
            during period                $(3.30)           $(3.45)          $(14.54)
</TABLE>


         Reclassifications

         Certain reclassifications have been made to prior periods in order to
         conform with current period presentation.

2.       Arrangements with Allergan, Inc.

         On March 10, 1998, 3,272,690 shares of callable Class A Common Stock of
         ASTI, representing all of the issued and outstanding shares of such
         class, were distributed by Allergan to the holders of record of
         Allergan common stock at the close of business on February 17, 1998
         (the "Distribution"). Prior to the Distribution, Allergan contributed
         $200,000,000 in cash to ASTI in exchange for all of the shares of ASTI
         Common Stock.


                                       7
<PAGE>   8

Allergan Specialty Therapeutics, Inc.

Notes to Condensed Financial Statements

2.       Arrangements with Allergan, Inc. (continued)


         On March 10, 1998, 1,000 shares of Class B Common Stock of ASTI,
         representing all of the issued and outstanding shares of such class,
         were issued to Allergan. As sole holder of all of the issued and
         outstanding shares of Class B Common Stock, Allergan has the option to
         repurchase all of the outstanding Class A Common Stock under specified
         conditions.

         In connection with the Distribution, ASTI and Allergan entered into a
         number of agreements, including the R&D Agreement, Technology
         Agreement, Services Agreement and License Option Agreement (License
         Agreement).

         Research and development expenses were $10,689,000 for the quarter
         ended March 31, 1999 which was comprised of $9,814,000 of costs
         incurred pursuant to the R&D Agreement with Allergan and $875,000
         incurred pursuant to two R&D collaborations. Research and development
         expenses were $9,612,000 for the quarter ended March 31, 1998. Research
         and development expenses were $46,575,000 for the period from inception
         through March 31, 1999 which was comprised of $44,225,000 of costs
         incurred pursuant to the R&D Agreement with Allergan and $2,350,000
         incurred pursuant to three R&D collaborations. From time to time in the
         future, Allergan shall propose work plans, subject to ASTI board
         approval, for the continued development of each ASTI Product as well as
         other product candidates. ASTI is required to utilize the cash
         initially contributed to ASTI by Allergan plus interest and investment
         income thereon, less administrative expenses and technology fees to
         conduct activities under the R&D Agreement. The R&D Agreement specifies
         payment of Developed Technology Royalties and Pre-Selection Product
         Payments by Allergan to ASTI under certain conditions. Through March
         31, 1999, no amounts have been earned by ASTI with respect to Developed
         Technology Royalties.

         In July 1998, Allergan entered into a multi-year research and
         development collaboration with Parke-Davis Pharmaceutical Research
         Division of Warner-Lambert Company to identify, develop and
         commercialize up to two RXR subtype selective retinoid compounds for
         the treatment of metabolic diseases, including adult onset diabetes,
         insulin resistant syndromes and dyslipidemias (Collaboration
         Agreement). The technologies involved in the collaboration were
         previously licensed by ASTI from Allergan pursuant to the Technology
         Agreement. In accordance with a letter agreement between Allergan and
         ASTI, ASTI is entitled to receive Pre-Selection Product Payments
         representing ten percent of the potential $104 million in technology
         access fees and development milestones to be received by Allergan
         pursuant to Allergan's agreement with Warner-Lambert. In the third
         quarter of 1998, ASTI earned $500,000 of Pre-Selection Product Payments
         in accordance with the letter agreement. Such amounts are included in
         revenues in the accompanying condensed statement of


                                       8
<PAGE>   9

Allergan Specialty Therapeutics, Inc.

Notes to Condensed Financial Statements


2.       Arrangements with Allergan, Inc. (continued)

         operations for the period from inception to March 31, 1999. In
         addition, ASTI is entitled to royalties on net sales of developed
         products, depending on actual lead compound selection and sales
         results.

         Subject to certain limitations, the Technology Agreement grants ASTI an
         exclusive license to research and develop all of Allergan's proprietary
         and contractual rights with respect to certain retinoid and
         neuroprotective technologies. As consideration for the exclusive
         license, ASTI will pay a technology fee of $10,000,000 in year one;
         $6,700,000 in year two; $3,300,000 in year three; and $2,000,000 in
         year four commencing October 24, 1997. The technology fee is charged to
         operations on a straight-line basis over the life of the Technology
         Agreement. The technology fee is payable monthly in arrears provided,
         however, that ASTI shall no longer be obligated to make such payments
         beginning with any month following the date on which the total number
         of ASTI Products either under development or licensed to Allergan
         pursuant to the License Agreement is less than two. Through March 31,
         1999, ASTI paid $12,918,000 in technology fees, of which $5,023,000 is
         included in prepaid technology fees in the accompanying balance sheet.

         ASTI has granted Allergan an option to acquire a license to each
         product developed under the R&D Agreement, including the Initial
         Products on a country-by-country basis at any time until (a) with
         respect to the United States, 30 days after clearance by the FDA to
         commercially market such ASTI Product and (b) with respect to any other
         country, 90 days after the earlier of (i) clearance by the appropriate
         regulatory agency to commercially market the product and (ii) clearance
         by the FDA to market the product in the United States.

         Upon exercise of the license option, Allergan will make Product
         Payments to ASTI as defined in the R&D Agreement. Through March 31,
         1999, no license option has been exercised. The license option will
         expire to the extent not previously exercised, 30 days after the
         expiration of Allergan's option to purchase all of the outstanding ASTI
         Shares, described below.

         In accordance with ASTI's Restated Certificate of Incorporation,
         Allergan has the right to purchase all (but not less than all) of the
         ASTI Class A Common Stock (the "Purchase Option"). Allergan may
         exercise the Purchase Option by written notice to ASTI at any time
         during the period beginning immediately after the Distribution and
         ending on December 31, 2002; provided that such date will be extended
         for successive six month periods if, as of June 30, 2001, ASTI has not
         paid or accrued expenses for at least 95% of all Available Funds, as
         defined, pursuant to the R&D Agreement. In any event, the Purchase
         Option will expire 90 days after Allergan receives notice that the
         Available Funds (as defined in the R&D Agreement) held by ASTI is less
         than $15 million. Through March 31, 1999, Allergan has not exercised
         the Purchase Option.


                                       9
<PAGE>   10

Allergan Specialty Therapeutics, Inc.

Notes to Condensed Financial Statements

2.       Arrangements with Allergan, Inc. (continued)


         If the Purchase Option is exercised, the exercise price will be the
         greatest of:

         (a) (i) 25 times the aggregate of (1) all worldwide payments with
         respect to all Licensed Products, Developed Technology Products and
         Pre-Selection Products for the four calendar quarters immediately
         preceding the quarter in which the Purchase Option is exercised (Base
         Period) and (2) all payments that would have been made and all payments
         due to be made by Allergan to ASTI during the Base Period if Allergan
         had not previously exercised its payment buy-out option with respect to
         any product; provided, however, that, for the purposes of the foregoing
         calculation, for any product which has not been commercially sold
         during each of the four calendar quarters in the Base Period, Allergan
         will be deemed to have made Product Payments, Developed Technology
         Royalties and Pre-Selection Product Payments to ASTI for each such
         quarter equal to the average of the payments made during each of such
         calendar quarters during which such product was commercially sold, less
         (ii) any amounts previously paid to exercise any payment buy-out option
         for any product;

         (b) the fair market value of 500,000 shares of Allergan Common Stock
         determined as the average of the closing sales price of Allergan Common
         Stock on the New York Stock Exchange for the 20 trading days ending
         with the trading day that is two trading days prior to the date of
         determination;

         (c) $250 million less the aggregate amount of all technology fee
         payments and research and development costs paid or incurred by ASTI as
         of the date the Purchase Option is exercised; or

         (d) $60 million.

         In each case, the amount payable as the Purchase Option Exercise Price
         will be reduced to the extent, if any, that ASTI's liabilities at the
         time of exercise (other than liabilities under the R&D Agreement,
         Services Agreement and the Technology Agreement) exceed ASTI's cash and
         cash equivalents and short-term and long-term investments (excluding
         the amount of Available Funds remaining at such time). Allergan must
         pay the Purchase Option Exercise Price in cash.

         ASTI and Allergan have entered into a Services Agreement pursuant to
         which Allergan has agreed to provide ASTI with administrative services,
         including accounting and legal services on a fully-burdened cost
         reimbursement basis. The Services Agreement expires on December 31,
         1999 and will be renewed automatically for successive one year periods
         during the term of the R&D Agreement. ASTI may terminate the Services
         Agreement at any time upon 60 days written notice.


                                       10
<PAGE>   11

Allergan Specialty Therapeutics, Inc.

Notes to Condensed Financial Statements

3.       Comprehensive Income (Loss)

         SFAS No. 130, "Reporting Comprehensive Income," established standards
         for reporting comprehensive income and its components. Other
         comprehensive loss for the quarters ended March 31, 1999 and 1998 were
         comprised of unrealized loss on investments of $958,000 and $0,
         respectively. Other comprehensive loss for the period from inception
         through March 31, 1999 is comprised of unrealized loss on investments
         of $332,000. Total comprehensive loss, net of tax for the quarters
         ended March 31, 1999 and 1998 and for the period from inception to
         March 31, 1999 was $11,341,000, $11,305,000 and $47,795,000,
         respectively.


                                       11
<PAGE>   12

Allergan Specialty Therapeutics, Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999

This Quarterly Report on Form 10-Q may contain certain projections, estimates
and other forward-looking statements that involve a number of risks and
uncertainties. While this outlook represents management's current judgment on
the future direction of the business, such risks and uncertainties could cause
actual results to differ materially from any future performance suggested below.
The Company undertakes no obligation to release publicly the results of any
revisions to these forward-looking statements to reflect events or circumstances
arising after the date hereof.

The following should be read in conjunction with the section entitled "--Risks
and Uncertainties" included in the Company's annual report on Form 10-K for the
year ended December 31, 1998 and the Company's Financial Statements and notes
thereto in Item 1 above.

RESULTS OF OPERATIONS

Net interest and investment income earned on investments were $2,150,000 and
$717,000 for the quarters ended March 31, 1999 and 1998, respectively, and
$10,693,000 for the period from ASTI's inception, November 12, 1997, through
March 31, 1999. Interest and investment income was earned subsequent to March
10, 1998, the date Allergan contributed $200 million to ASTI. In the future, as
ASTI's funds are used pursuant to the R&D Agreement and to pay the Technology
Fee pursuant to the Technology Agreement, lower cash balances will be available
for investment and therefore interest and investment income is expected to
decrease.

In July 1998, Allergan entered into a multi-year research and development
collaboration with Parke-Davis Pharmaceutical Research Division of
Warner-Lambert Company to identify, develop and commercialize up to two RXR
subtype selective retinoid compounds for the treatment of metabolic diseases,
including adult onset diabetes, insulin resistant syndromes and dyslipidemias
(Collaboration Agreement). The technologies involved in the collaboration were
previously licensed by ASTI from Allergan pursuant to the Technology Agreement.
As a result, ASTI is entitled to receive Pre-Selection Product Payments
representing ten percent of the potential $104 million in technology access fees
and development milestones to be received by Allergan pursuant to Allergan's
agreement with Warner-Lambert. In the third quarter of 1998, $500,000 of
Pre-Selection Payments was earned by ASTI. In addition, ASTI is entitled to
royalties on net sales of developed products, depending on actual lead compound
selection and sales results.

Research and development expenses were $10,689,000 and $9,612,000 for the
quarters ended March 31, 1999 and 1998, respectively. Research and development
expenses were $46,575,000 for the period from inception through March 31, 1999.
ASTI's Board of Directors approved work plans and cost estimates presented by
Allergan in accordance with the R&D Agreement for the remainder of the 1999
calendar year. The approved work plans and cost estimates are similar to the
estimates provided in ASTI's prospectus dated March 6, 1998. ASTI paid
technology fees of $1,675,000 and $4,355,000 to Allergan during the quarters


                                       12
<PAGE>   13

Allergan Specialty Therapeutics, Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 (Continued)

RESULTS OF OPERATIONS (Continued)


ended March 31, 1999 and 1998, respectively. ASTI paid technology fees of
$12,918,000 for the period from inception to March 31, 1999.

General and administrative expenses for the quarters ended March 31, 1999 and
1998 and for the period from inception through March 31, 1999 were $284,000,
$15,000 and $1,217,000, respectively. Expenses are incurred primarily under the
Services Agreement pursuant to which Allergan provides ASTI with administrative
services, including accounting and legal services, on a fully-burdened cost
reimbursement basis. ASTI did not incur significant general and administrative
expenses in the first quarter of 1998 as ASTI operated from March 10 to March 31
in 1998.

The results of operations of ASTI are expected to reflect primarily interest and
investment income on the funds contributed by Allergan, and research and
development expenses related to development of ASTI Products and the Technology
Fee. ASTI's net loss for the quarters ended March 31, 1999 and 1998 were
$10,799,000 or $(3.30) per share and $11,305,000 or $(3.45) per share,
respectively. ASTI's net loss for the period from inception through March 31,
1999 was $47,607,000 or $(14.54) per share. ASTI is expected to continue to
record significant net losses in future periods, as expenses under its
agreements with Allergan are expected to continue to exceed investment income.

Provision for taxes were $601,000 and $0 for the quarters ended March 31, 1999
and 1998, respectively. Provision for taxes for the period from inception
through March 31, 1999 was $3,113,000. ASTI expects to have taxable income as a
result of the requirement to capitalize technology fees and its election to
capitalize research and development expenses for tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

On March 9, 1998, Allergan contributed $200 million in cash to ASTI in exchange
for all of the issued and outstanding shares of callable Class A Common Stock of
ASTI. On March 10, 1998, Allergan distributed the Class A shares to holders of
Allergan common stock and ASTI commenced operations. The funds contributed by
Allergan, plus investment income earned thereon, will be used primarily to fund
the development of ASTI Products and to conduct related activities. Funds not
immediately required for development activities will be invested in investment
grade securities.

At March 31, 1999, ASTI had cash on hand of approximately $415,000. The Company
invests its excess cash in money market funds, equity securities and debt
instruments of financial institutions and corporations with strong credit
ratings. The Company has established guidelines with respect to diversification
and maturities in order to maintain safety and liquidity of its investment
portfolio.


                                       13
<PAGE>   14

Allergan Specialty Therapeutics, Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 (Continued)

LIQUIDITY AND CAPITAL RESOURCES (Continued)


At March 31, 1999, ASTI had $146,850,000 in investments. ASTI classifies all
investments as available-for-sale securities with net unrealized holding gains
or losses as a component of other comprehensive income. ASTI liquidates
investments to pay for operating expenses as needed.

Based on anticipated spending levels for the continued development of all the
current ASTI Products, it is expected that ASTI's funds for product development
will be exhausted during the next few years. At that time, product development
funding by ASTI will cease. However, several factors could impact the level and
timing of ASTI funding, including the addition of any new ASTI Products, the
discontinuation of the development of any ASTI Products, any commercial
arrangements between Allergan and other companies which would cause Allergan to
exercise its License Option with respect to any ASTI Product, any change in the
number of projects advancing to or continuing in later stages of development or
any adjustments in the rate of spending on products currently in development.

When ASTI's Available Funds (as defined in the R&D Agreement) are below $15
million, certain events will be triggered. First, Allergan's Purchase Option
with respect to all of the ASTI Class A Common Stock will terminate on the 90th
day after ASTI provides Allergan with a statement that, as of the end of any
calendar month, there are less than $15 million of Available Funds remaining.
Such statement will be accompanied by a report of ASTI's independent auditors.
In addition, Allergan has the right, for 30 days after expiration of the
Purchase Option, to license any or all ASTI Products which have not yet been
licensed, on a product-by-product and country-by-country basis. Allergan is
under no obligation to exercise the Purchase Option or the License Option with
respect to any ASTI Product. In the event that Allergan does not exercise the
Purchase Option or the License Option for all ASTI Products after ASTI's cash
available for product development is exhausted, ASTI will not have funds to
continue or complete development of any remaining products.

YEAR 2000 COMPLIANCE

Most businesses, including the Company, are faced with a potentially serious
threat to their operations, known as the "year 2000 issue" which has been widely
publicized. The year 2000 issue is a general term used to describe the various
problems arising from the inability of computers to properly identify the year
associated with information. This problem could potentially cause system
interruptions or failures or result in systems providing incorrect data. The
effect of the year 2000 issue could impact the performance of operations within
the Company as well as the Company's relationships with third parties, including
vendors and customers who could also experience year 2000 compliance issues.


                                       14
<PAGE>   15

Allergan Specialty Therapeutics, Inc.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1999 (Continued)

YEAR 2000 COMPLIANCE (Continued)


ASTI understands the importance of identifying and addressing Year 2000
compliance issues and places a high priority on the project. However, inasmuch
as ASTI relies almost entirely upon Allergan's operating and accounting systems,
ASTI relies upon Allergan's efforts to ensure that its systems will be Year 2000
compliant. Allergan has formed a Year 2000 task force (the "Y2K Task Force")
which will include an ASTI officer as a member. The Y2K Task Force is assessing
internal operations and the operations of significant suppliers, vendors, and
other providers of goods and services.

Although the certification process is not yet complete, it has begun and, based
on the findings to date, Allergan has indicated that its Y2K Task Force
currently believes Allergan's operating and accounting systems will be Year 2000
compliant without material impact on the financial position, results of
operations or cash flows of either Allergan or ASTI. However, given that
Allergan cannot control or thoroughly assess the compliance of its third party
suppliers, vendors, providers of goods and services, or governmental agencies
with which it interacts or upon which it relies, no assurance can be made that
Allergan, and in turn, ASTI, will not be affected by the inability of some
computer systems and programs to properly process the year 2000 and beyond.

ASTI has not incurred expenses to date to promote or ensure Year 2000
compliance. ASTI has not yet estimated its future costs to remedy any Year 2000
issues but does not anticipate that any future expenses would be material to
ASTI's financial position, results of operations or cash flows.

In the event that Allergan's operating and accounting systems are not Year 2000
compliant or if any of Allergan's significant suppliers, vendors, other
providers of goods or services, or governmental agencies with which it interacts
or upon which it relies, are not Year 2000 compliant, ASTI's financial condition
and/or results of operations could be materially adversely affected. ASTI has
not yet prepared any contingency plans in the event of a problem relating to the
Year 2000 issue. Once the Y2K Task Force completes its contingency plans, ASTI
will determine whether additional contingencies are necessary.


                                       15
<PAGE>   16

Allergan Specialty Therapeutics, Inc.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASTI does not use derivative financial instruments in its non-trading investment
portfolio. The Company's primary investment objective is preservation of capital
in order to fund research and development of potential pharmaceutical products
incurred pursuant to the Company's agreement with Allergan, Inc. (See note 2 to
Condensed Financial Statements). As such, the Company invests its excess cash in
investment grade securities consisting of money market funds, equity securities
and debt instruments. Interest and investment income earned on the Company's
investment portfolio is most sensitive to fluctuations in the general level of
U.S. interest rates. The Company mitigates interest rate risk by a program of
diversification so that exposure to risks relating to a single security or
investment manager is minimal. Further, the Company invests in money market
funds and debt instruments with varying maturity dates to correspond to
anticipated research and development expenses. These securities typically bear
minimal credit risk and ASTI has not experienced any losses on its investments
to date due to credit risk.

The Company's investments in equity securities, which are subject to price risk,
are generally invested in companies that have a history of paying dividends. The
Company addresses price risk by a program of diversification so that exposure to
risks relating to a single security is minimal.


                                       16
<PAGE>   17

Allergan Specialty Therapeutics, Inc.

CERTAIN FACTORS AND TRENDS AFFECTING ASTI AND ITS BUSINESSES

The Company believes that certain statements made by the Company in this report
and in other reports and statements released by the Company constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, such as comments which express the Company's
opinions about trends and factors which may impact future operating results.
Disclosures which use words such as the Company "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from expectations. Any such
forward-looking statements, whether made in this report or elsewhere, should be
considered in context with the various disclosures made by the Company in its
press releases and publicly filed reports such as the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, which disclosures are
incorporated herein by this reference. In addition to those risks identified
elsewhere in this report on Form 10-Q and those risks described in the Company's
press releases and publicly filed reports, the Company's business and results of
operations are subject to other risks, including the following risk factors:

o    ASTI is a newly formed company and is subject to the risks inherent in the
     establishment of a new business enterprise in the biotechnology industry.
     ASTI will incur substantial losses for several years due to the long-term
     nature of the research and development of pharmaceutical products through
     clinical testing and the regulatory process, which losses may never be
     recovered.

o    There can be no assurance that the ASTI Board of Directors will continue
     the funding of the research and development of all of the current ASTI
     Products or Pre-Selection Work, or that any ASTI Products can be
     successfully researched, developed and/or commercialized within the
     anticipated cost estimates or time frames, if at all. Certain of the ASTI
     Products are at critical stages of research and development, and technical
     and clinical outcomes are impossible to predict. Because of the long-range
     nature of any pharmaceutical product research and development plan,
     research and development of a particular product or project could
     accelerate, slow down or be discontinued, and other unforeseen events could
     occur, all of which would significantly affect the timing and amount of
     ASTI's expenditures on a particular product, or in total. As a result,
     estimates of costs and timing of research and development programs and for
     the use of Available Funds may not be accurate.

o    All ASTI Products, Developed Technology Products and Pre-Selection Products
     will require FDA clearance before such products may be lawfully marketed in
     the United States. Applications for FDA clearance must be based on costly
     and extensive clinical trials designed to demonstrate safety and efficacy.
     Clearance to market such products will also be required from corresponding
     regulatory authorities in foreign countries before such products may be
     marketed in those countries. There can be no assurance that the necessary
     regulatory clearances and approvals will be obtained in a timely fashion
     or, if obtained, that such clearances and approvals will not be revoked or
     withdrawn.


                                       17
<PAGE>   18



Allergan Specialty Therapeutics, Inc.

CERTAIN FACTORS AND TRENDS AFFECTING ASTI AND ITS BUSINESSES (Continued)


o    Allergan has contributed $200 million in cash to ASTI. Allergan has no
     obligation to contribute additional funds to ASTI, and, to the best of
     ASTI's knowledge, has no present intention to do so. For the foreseeable
     future, ASTI's only ongoing source of revenue will be investment income and
     certain milestone payments. There can be no assurance that ASTI will have
     sufficient funds to complete the research and development of any or all of
     the ASTI Products.

o    Allergan is not obligated to exercise the License Option for any ASTI
     Product or to exercise the Purchase Option, and Allergan will exercise any
     such option only if it is in Allergan's best interest to do so. The timing
     of the exercise of the Purchase Option is within Allergan's sole
     discretion. The timing of the exercise of the License Option with respect
     to any Licensed Product is also within Allergan's sole discretion and
     thereafter research, development and funding of any such product will be
     controlled by Allergan.

o    ASTI Products, Developed Technology Products and Pre-Selection Products are
     likely to face competition from other therapies for the same indications.
     Competitors potentially include any of the world's pharmaceutical and
     biotechnology companies. A number of companies have developed and are
     developing competing technologies and products.

o    In February 1999, the Financial Accounting Standards Board released a
     revised Exposure Draft of a Proposed Statement of Financial Accounting
     Standards - Consolidated Financial Statements: Purpose and Policy. If
     adopted as a SFAS, the terms of this Exposure Draft could require Allergan
     to include the financial position and results of operation of ASTI in its
     consolidated results on a retrospective basis. ASTI is currently evaluating
     the effect that implementation of this proposed statement may have on ASTI.


                                       18
<PAGE>   19

Allergan Specialty Therapeutics, Inc.

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

        -  Exhibits

            (numbered in accordance with Item 601 of Regulation S-K)

             27.1   --    Financial Data Schedule

        -  Reports on Form 8-K.

           None.


                                       19
<PAGE>   20

                                    SIGNATURE


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


Date:  May 13, 1999                ALLERGAN SPECIALTY THERAPEUTICS, INC.



                                   By: /s/ Dwight J. Yoder
                                   ---------------------------
                                   Dwight J. Yoder
                                   Chief Financial Officer
                                   and Duly Authorized Officer


                                       20

<PAGE>   21

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                   Description
------                   -----------
<C>            <S>
 27.1          Financial Data Schedule
</TABLE>