SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


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

For the Fiscal Year Ended December 31, 1996

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 number 0-15681


                         WESTMED VENTURE PARTNERS, L.P.
===============================================================================
             (Exact name of registrant as specified in its charter)


Delaware                                                             13-3443230
============================================================ ==================
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

Oppenheimer Tower, World Financial Center
New York, New York                                                     10281
=========================================== ===================================
(Address of principal executive offices)                             (Zip Code)

Registrant's telephone number, including area code:  (212) 667-7000

Securities registered pursuant to Section 12(b) of the Act:

 Title of each class                Name of each exchange on which registered
     None                                             None

Securities registered pursuant to Section 12(g) of the Act:

                      Units of Limited Partnership Interest
===============================================================================
                                (Title of class)


<PAGE>


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


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

At March 21, 1997, 66,919 units of limited  partnership  interest ("Units") were
held by non-affiliates of the registrant. There is no established public trading
market for such Units.



<PAGE>


                                     PART I

Item 1.       Business.

Formation

WestMed Venture  Partners,  L.P. (the  "Partnership"  or the  "Registrant") is a
Delaware  limited  partnership  organized  in February  1987.  In May 1987,  the
Partnership  elected  to operate as a  business  development  company  under the
Investment  Company Act of 1940, as amended (the "1940 Act"). The  Partnership's
investment  objective  is to achieve  long-term  capital  appreciation  from its
portfolio of venture capital investments, consisting of companies engaged in the
health-care industry.  The Partnership considers this activity to constitute the
single industry segment of venture capital investing.

The  general  partners  of  the  Partnership  consist  of two  individuals  (the
"Independent General Partners") and WestMed Venture Management, L.P., a Delaware
limited  partnership (the "Managing  General  Partner"),  the general partner of
which is Medical Venture Holdings,  Inc. ("MVH"), a Delaware  corporation and an
affiliate of Oppenheimer & Co., Inc. ("Opco").

In 1987, the Partnership  publicly offered 100,000 units of limited  partnership
interest (the  "Units") at $500 per Unit.  The Units were  registered  under the
Securities Act of 1933,  pursuant to a Registration  Statement on Form N-2 (File
No.  33-11926),  which was declared  effective on July 2, 1987. The  Partnership
held its initial  closing on  September  1, 1987 and  completed  the offering on
April 1, 1988, at which time it had accepted subscriptions for a total of 66,929
Units.  Gross capital  contributions to the Partnership from the public offering
totaled  $33,802,529;  $33,464,500  from  the  limited  partners  (the  "Limited
Partners" and collectively  with the Managing  General Partner,  the "Partners")
and $338,029 from the Managing General Partner.

The Venture Capital Investments

From its inception through December 31, 1996, the Partnership had invested $28.6
million in 23  portfolio  companies  (including  venture  capital fees and other
acquisition costs totaling $2 million).  At December 31, 1996, the Partnership's
investment portfolio consisted of investments in 12 companies.  Such investments
had an aggregate  cost of $9.2 million and a fair value of $11.5  million.  From
its  inception  through  December 31,  1996,  the  Partnership  had either fully
liquidated or partially  liquidated  portfolio  investments with a cost of $19.4
million.  These liquidated investments returned $11.4 million to the Partnership
for a net realized loss of $8.0 million.  At December 31, 1996, the  Partnership
had a cumulative net realized loss from its venture capital investments totaling
$7.5  million,  including  $504,000 of interest and other income from  portfolio
investments. As discussed below, during 1996 the Partnership sold its investment
in Corvita  Corporation.  Also during 1996, the Partnership invested $212,000 in
Aprogenix, Inc., an existing portfolio company, and recorded a partial write-off
totaling $230,000 on its investment in Argonaut Medical,  Inc.  (formerly Nimbus
Medical,  Inc.).  These  investment  transactions and other events affecting the
Partnership's portfolio security holdings during 1996 are listed below.

In May 1996,  UroCor,  Inc.  completed  its initial  public  offering at $11 per
share.  In connection with the offering,  the Partnership  exchanged its 368,930
preferred shares for 384,982 common shares of the company.

In June 1996, the Partnership made a $212,000 follow-on investment in Aprogenix,
Inc.  (including  venture  capital  fees  totaling  $12,120),  acquiring  a  10%
convertible  note due 5/29/98 and a warrant to purchase  13,000 shares of common
stock at $1.10 per share, expiring on 5/29/99.  Additionally, as a result of the
above mentioned financing,  the Partnership's  warrant to purchase 16,458 shares
of  Aprogenix  common stock for $7.39 per share was  exchanged  for a warrant to
purchase 21,450 shares of Aprogenix common stock for $5.67 per share.

In connection with the sale of Nimbus Medical, Inc., completed in December 1996,
the Partnership  wrote-off  $229,899 of its $380,431  investment in the company.
The surviving entity was renamed Argonaut Medical, Inc.

In February  1996, the  Partnership  received a $30,289 cash  distribution  from
Nimbus Medical, L.P.

         During 1996, Bellara Medical Products, Ltd. merged with Pharmaction Pty
Limited becoming  Pharmaction  Holdings Limited.  As a result of the merger, the
Partnership  exchanged its 442,430 common shares of Bellara for 294,953 ordinary
shares of Pharmaction  Holdings and an option to purchase an additional  147,476
ordinary shares at $.20 per share.

On June 10, 1996,  HBO & Co.  declared a 100% stock  distribution.  As a result,
the  Partnership  received an additional  1,963 shares of HBO & Co.common stock.

During May 1996,  the  Partnership  sold its  investment in Corvita Corporation
for $4.33  million,  realizing a gain of $1.94 million.


Competition


The  Partnership  encounters  competition  from other  entities  having  similar
investment  objectives.  Primary competition for venture capital investments has
been from venture  capital  partnerships,  venture  capital  affiliates of large
industrial  and financial  companies,  small business  investment  companies and
wealthy  individuals.  Competition has also been from foreign investors and from
large industrial and financial  companies investing directly rather than through
venture  capital  affiliates.  The Partnership has frequently been a co-investor
with other professional  venture capital investors and these  relationships have
expanded the Partnership's access to investment opportunities.

Employees

The  Partnership  has no  employees.  The Managing  General  Partner,  under the
supervision  of the  Independent  General  Partners,  manages and  controls  the
Partnership's   venture  capital  investments.   The  Managing  General  Partner
performs,  or arranges for others to perform,  the management and administrative
services  necessary for the operation of the  Partnership and is responsible for
managing the Partnership's short-term investments.

Item 2.       Properties.

The Partnership does not own or lease physical properties.

Item 3.       Legal Proceedings.

The Partnership is not a party to any material pending legal proceedings.

Item 4.       Submission of Matters to a Vote of Security Holders.

A Special Meeting of Limited  Partners was held on June 21, 1996 with respect to
1) a proposal to allow the Managing  General Partner to retain the services of a
Sub-Manager  to assist the Managing  General  Partner in the  performance of its
duties to the Partnership  and 2) a proposal to amend the Partnership  Agreement
to reduce the minimum number of Individual  General  Partners from three to two.
At the meeting, both such proposals were approved.
<TABLE>

                                    Affirmative               Negative
                                       Votes                     Votes                    Abstentions

<S>      <C>                           <C>                        <C>                       <C>  
Proposal 1                             28,056                     3,624                     3,409
Proposal 2                             29,124                     2,864                     3,101
</TABLE>

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

There is no  established  public  trading  market  for the  Units  and it is not
anticipated  that a public  market  for the Units  will  develop.  The number of
individual holders of Units at December 31, 1996 was approximately 6,500.

In November 1996, the General Partners  approved a cash distribution to Partners
totaling $4.5 million.  The distribution was paid on January 30, 1997 to Limited
Partners of record on December 31, 1996.  Limited Partners received  $4,484,243,
or $67 per Unit, and the General Partner  received  $45,295.  There were no cash
distributions  to  Partners  during the years ended  December  31, 1995 or 1994.
Cumulative  cash  distributions  paid or accrued to Partners  from  inception to
December 31, 1996, total  $10,240,307;  $10,137,904 to the Limited Partners,  or
approximately $151 per Unit, and $102,403 to the Managing General Partner.

Pursuant to the Partnership's agreement of limited partnership,  as amended (the
"Partnership  Agreement"),  the  Partnership's net income and net realized gains
from all sources are allocated to all  Partners,  in proportion to their capital
contributions,  until all Partners have been allocated an amount equal to 6% per
annum, simple interest, on their total Adjusted Invested Capital; i.e., original
capital contributions reduced by previous distributions (the "Priority Return").
Thereafter,  net income and net realized gains from venture capital  investments
in excess of the amount used to cover the Priority  Return are  allocated 20% to
the  Managing  General  Partner and 80% to all Partners in  proportion  to their
capital  contributions.  Any net income from non-venture  capital investments in
excess of the  amount  used to cover the  Priority  Return is  allocated  to all
Partners in  proportion  to their  capital  contributions.  Realized  losses are
allocated to all Partners in proportion to their capital contributions. However,
if realized gains had been previously  allocated in the 80-20 ratio, then losses
are allocated in the reverse order in which profits were allocated.


<PAGE>


Item 6.       Selected Financial Data.

($ In Thousands, Except For Per Unit Information)
<TABLE>

                                                                           Years Ended December 31,
                                                           1996           1995            1994           1993           1992
                                                       -----------     -----------    -----------    -----------    --------

<S>                                                    <C>             <C>            <C>            <C>            <C>        
Net assets                                             $    12,998     $    15,855    $    14,533    $    18,394    $    19,402

Net investment loss                                           (341)           (375)          (421)          (540)          (479)

Net realized gain (loss) from investments                    1,706              65         (2,823)        (4,043)         2,313

Net unrealized appreciation (depreciation)
of investments                                               2,286           1,978            345            964         (2,612)

Cost of portfolio investments purchased                        212             292            693            177          1,791

Cumulative cost of portfolio investments                    28,619          28,407         28,115         27,422         27,245

Cash distributions to Partners                               4,530               -              -              -          4,989

Cumulative cash distributions to Partners                   10,240           5,711          5,711          5,711          5,711

PER UNIT OF LIMITED PARTNERSHIP INTEREST:*

Net asset value, including net unrealized
appreciation (depreciation) of investments                  $  192         $   235        $   215         $  272        $   287

Net investment loss                                             (5)             (6)            (6)            (8)            (7)

Net realized gain (loss) on investments                         25               1            (42)           (60)            34

Net unrealized appreciation (depreciation)
of investments                                                  34              29              5             14            (39)

Cash distributions                                              67               -              -              -             74

Cumulative cash distributions                                  151              84             84             84             84
</TABLE>

*   Limited Partners were admitted to the Partnership in eight separate closings
    from  September 1, 1987 to April 1, 1988.  Per Unit amounts  shown above are
    based on average  allocations  to all  Limited  Partners  and do not reflect
    specific Limited Partner  allocations,  which are determined by the original
    closing date associated with the Units held by each Limited Partner.


<PAGE>


Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

Liquidity and Capital Resources

During the year ended  December 31, 1996,  the  Partnership  invested  $212,000,
including  venture  capital fees  totaling  $12,000,  in one existing  portfolio
company.  At December 31,  1996,  the  Partnership  had invested an aggregate of
$28.6 million in 23 portfolio companies, including acquisition costs and venture
capital fees totaling $2 million. The Partnership has invested approximately 95%
of its original $30 million of net proceeds received from the offering of Units.
Although the Partnership  will not make any new portfolio  investments,  it does
expect to make additional follow-on investments in existing portfolio companies.

In May  1996,  the  Partnership  received  $4.3  million  from  the  sale of its
investment in Corvita Corporation.

At December 31, 1996, the  Partnership  held $6.1 million in cash and short-term
investments as follows: $5.7 million in short-term securities with maturities of
less than three months and $460,000 in an interest-bearing cash account. For the
years ended December 31, 1996,  1995 and 1994, the  Partnership  earned interest
from such investments  totaling $229,000,  $129,000 and $105,000,  respectively.
Interest  earned from  short-term  investments  in future  periods is subject to
fluctuations  in short-term  interest  rates and changes in funds  available for
investment.  It is  anticipated  that  funds  needed to cover the  Partnership's
future  follow-on  investments  and  operating  expenses  will be obtained  from
existing cash  reserves,  interest  earned from its  short-term  securities  and
proceeds from the sale of portfolio investments.

On November 12,  1996,  the General  Partners  approved a cash  distribution  to
Partners totaling  $4,529,538.  The distribution was paid on January 30, 1997 to
Limited  Partners of record on December  31,  1996.  Limited  Partners  received
$4,484,243,  or $67 per Unit,  and the General  Partner  received  $45,295.  The
distribution  was paid  January  30,  1997.  Cumulative  cash  distributions  to
Partners total, including the distribution paid in January 1997, $10,240,307.

Results of Operations

For the year ended  December 31, 1996, the  Partnership  had a net realized gain
from operations of $1.4 million. For the years ended December 31, 1995 and 1994,
the  Partnership  had a net realized  loss from  operations of $309,000 and $3.2
million, respectively. Net realized gain or loss from operations is comprised of
(i) net  realized  gains  or  losses  from  portfolio  investments  and (ii) net
investment income or loss (interest and dividends less operating expenses).

Realized  Gains and  Losses  from  Portfolio  Investments  - For the year  ended
December 31,  1996,  the  Partnership  had a net  realized  gain from  portfolio
investments  of $1.7  million.  In May the  Partnership  sold its  investment in
Corvita Corporation for $4.3 million, resulting in a $1.9 million realized gain.
Nimbus Medical,  Inc. was sold during 1996 and the surviving  entity was renamed
Argonaut  Medical,  Inc. As a result of the sale and  transfer of the  company's
assets,  the Partnership  recorded a $230,000 realized loss on its investment in
Argonaut, reflecting a partial write-off of its original investment.

For the year ended  December 31, 1995, the  Partnership  had a net realized gain
from portfolio  investments of $65,000  resulting from the sale of 51,000 common
shares of Aprogenix, Inc. in the public market for $276,000.

For the year ended December 31, 1994, the Partnership had a net realized loss of
$2.8 million from its portfolio  investments.  During March and April 1994,  the
Partnership  sold 20,000  common shares of CliniCom  Incorporated  in the public
market for $422,000, realizing a loss of $944,000.  Additionally at December 31,
1994, the Partnership wrote-off $166,000 of cost relating to its remaining 4,908
shares of common stock of CliniCom due to the continued  depressed public market
price of such shares.  During 1995,  CliniCom was acquired by HBO & Co. Also, in
December  1994,  the  Partnership  wrote-off  its  $323,000  investment  in Vaso
Products Inc.,  $576,000 of its $826,000  investment in Bellara Medical Products
Inc. (Pharmaction Holdings, Ltd.) and $801,000 of its $1.3 million investment in
Ultramed,  Inc. due to continued  business and financial  difficulties  at these
companies.

Investment  Income  and  Expenses  - Net  investment  loss for the  years  ended
December  31,  1996,  1995  and  1994  was  $341,000,   $375,000  and  $421,000,
respectively.  The $34,000  decrease in net investment loss for 1996 compared to
1995 resulted from a $114,000 increase in investment income offset by an $80,000
increase in operating  expenses  for 1996.  The  increase in  investment  income
primarily   resulted  from  an  increase  in  interest  earned  from  short-term
investments for 1996. This increase resulted from an increase in funds available
for investment in such securities during 1996 due to the receipt of $4.3 million
in May  1996  from the  sale of the  Partnership's  investment  in  Corvita,  as
discussed above. The increase in operating  expenses for 1996 primarily resulted
from a $47,000  increase in the management fee, as discussed below and a $40,000
increase  in  professional  fees,  resulting  from  the  preparation  of a proxy
statement in  connection  with the Special  Meeting of Limited  Partners held on
June 21, 1996.

The  decrease  in net  investment  loss for  1995  compared  to 1994,  primarily
resulted from the $41,000 increase in investment  income for 1995. This increase
reflects a $24,000  increase in interest from  short-term  investments  for 1995
compared  to 1994,  due to higher  short-term  interest  rates  during  the 1995
period.  Additionally,   accrued  interest  income  from  portfolio  investments
totaling  $2,400  and  $19,000  was  reversed  in 1995 and  1994,  respectively,
resulting  in an  additional  $17,000  increase  in  investment  income for 1995
compared to 1994.  Operating expenses remained relatively flat,  decreasing only
$5,000 from 1995 compared to 1994.  Management  and custodial  fees decreased by
$96,000, while professional fees and other expenses increased by $91,000 for the
1995 period.

Pursuant to a  management  agreement  between the  Partnership  and the Managing
General Partner, the Managing General Partner is responsible for the management,
administrative  and  certain  investment  advisory  services  necessary  for the
operation of the  Partnership.  For such services,  the Managing General Partner
receives  a  management  fee at the  annual  rate of 2% of the lesser of the net
assets of the  Partnership or the net  contributed  capital of the  Partnership;
i.e., gross capital contributions of the Partnership, net of selling commissions
and  organizational  expenses,  reduced  by  capital  distributed.  Such  fee is
determined and payable quarterly. Additionally, the Managing General Partner has
agreed  to  reduce  the  management  fee  payable  by the  Partnership  for  any
director's  fees  earned  by  the  Managing  General  Partner  from  any  of the
Partnership's  portfolio companies.  For the years ended December 31, 1996, 1995
and 1994, the management fee was $315,000, $268,000 and $361,000,  respectively.
The  increased  management  fee for  1996  compared  to 1995  resulted  from the
Partnership's higher quarterly net asset values during 1996 compared to 1995. To
the extent  possible,  the management fee and other operating  expenses are paid
with funds provided from operations. Funds provided from operations are obtained
from interest received from short-term investments, interest and dividend income
from  portfolio  investments  and proceeds  received  from the sale of portfolio
investments.

Unrealized   Gains  and  Losses  and  Changes  in  Unrealized   Appreciation  or
Depreciation  of Portfolio  Investments - For the year ended  December 31, 1996,
the  Partnership  had a $437,000 net  unrealized  gain,  resulting  from the net
upward  revaluation  of its  portfolio  investments  during 1996.  Additionally,
$129,000 of net unrealized gain was transferred to realized gain relating to the
sale of the Partnership's investment in Corvita and the partial write-off of the
Partnership's   investment  in  Argonaut,   as  discussed  above.  The  $437,000
unrealized  gain offset by the  $129,000 net transfer  from  unrealized  gain to
realized gain resulted in a $308,000 increase in net unrealized  appreciation of
investments for 1996.

For the year  ended  December  31,  1995,  the  Partnership  had a $1.6  million
unrealized gain from the net upward  revaluation of its publicly-held  portfolio
investments, primarily Somatogen, Inc. and Corvita Corporation.

For the year ended  December 31, 1994,  the  Partnership  had a $3.5 million net
unrealized loss from its portfolio investments, primarily resulting from the net
downward revaluation of its publicly-held  portfolio  investments.  Additionally
during 1994, $2.9 million was transferred  from unrealized loss to realized loss
relating to the  write-off of certain  portfolio  investments.  The $3.5 million
unrealized  loss partially  offset by the $2.9 million  transfer from unrealized
loss  to  realized  loss  resulted  in a  $618,000  decrease  in net  unrealized
appreciation of investments for 1994.

Net Assets - Changes to net assets resulting from operations is comprised of (i)
net realized gains and losses from operations and (ii) changes to net unrealized
appreciation or depreciation of portfolio investments.

At December 31, 1996, the Partnership's net assets were $13 million,  reflecting
a decrease  of $2.8  million  from $15.8  million at  December  31,  1995.  This
decrease reflects the $4.5 million cash distribution  exceeding the $1.7 million
net increase in net assets from operations for 1996.

At  December  31,  1995,  the  Partnership's  net  assets  were  $15.8  million,
reflecting  an increase of $1.3 million from $14.5 million at December 31, 1994.
This  increase  resulted  from the $1.3  million  increase  in net  assets  from
operations for 1995.

At  December  31,  1994,  the  Partnership's  net  assets  were  $14.5  million,
reflecting a decrease of $3.9  million from $18.4  million at December 31, 1993.
This  decrease  resulted  from the $3.9  million net decrease in net assets from
operations for 1994.

At  December  31,  1996,  1995 and  1994,  the net asset  value  per $500  Unit,
including an  allocation  of net  unrealized  appreciation  or  depreciation  of
investments,  was $192, $235 and $215,  respectively.  Such per Unit amounts are
based on average allocations to all Limited Partners and do not reflect specific
Limited Partner  allocations,  which are determined by the original closing date
associated with the Units held by each Limited Partner.

Summary of Changes to Net Assets for the Year Ended December 31, 1996

Portfolio  transactions  completed  during 1996,  resulted in a realized gain of
$1,705,622.  As shown  below,  these  transactions  returned  $4,360,607  to the
Partnership  and increased its net asset value for the year by  $1,126,316.  Net
upward revaluations of the Partnership's  remaining portfolio investments during
1996,  further  increased net asset value by $887,266.  The completed  portfolio
transactions and revaluations  increased the  Partnership's net asset value on a
net basis by $2,013,582  for 1996.  This  increase in net assets from  portfolio
transactions  for 1996 was offset by the  $341,253 net  investment  loss for the
year.
<TABLE>

                                                           Fair Value            Return/Fair Value              Effect on
Investment                                                 at 12/31/95              at 12/31/96                Net Assets

Liquidations for the year ended 12/31/96:
<S>                                                       <C>                     <C>                       <C>            
Corvita                                                   $   3,204,002           $    4,330,318            $     1,126,316
Nimbus Medical, Inc.                                             30,289                   30,289                          0
                                                          -------------           --------------            ---------------
Sub-total from liquidations                                   3,234,291                4,360,607                  1,126,316
                                                          -------------           --------------            ---------------

Revaluations for the year ended 12/31/96
Aprogenix, Inc. (1)                                             837,839                  414,734                   (423,105)
Pharmaction Holdings Ltd. (Bellara)                              36,810                        0                    (36,810)
Cortex Pharmaceuticals, Inc.                                    560,535                  546,532                    (14,003)
Exocell, Inc.                                                   767,296                  517,296                   (250,000)
HBO & Co.                                                       149,727                  233,106                     83,379
MNI Group, Inc.                                                  95,854                   78,918                    (16,936)
Argonaut (Nimbus) (2)                                           238,401                  180,054                    (58,347)
Oclassen Pharmaceuticals, Inc.                                2,705,842                3,400,000                    694,158
Somatogen, Inc.                                               2,439,107                1,379,444                 (1,059,663)
Ultramed, Inc.                                                  157,500                  157,500                          0
UroCor, Inc.                                                  1,880,947                3,784,854                  1,903,907
Xenova Group plc                                                776,227                  840,913                     64,686
                                                                                                            ---------------
Sub-total from revaluations                                                                                         887,266
                                                                                                            ---------------

Sub-total from portfolio transactions                                                                             2,013,582

Net investment loss for the year ended 12/31/96                                                                    (341,253)
                                                                                                            ----------------


Net Change to Net Assets for the Year Ended
   December 31, 1996                                                                                        $     1,672,329
                                                                                                            ===============
</TABLE>

(1)  Adjusted for follow-on investments made during 1996.
(2)  Adjusted for cash distribution received during 1996.


<PAGE>


Item 8.       Financial Statements and Supplementary Data.


                         WESTMED VENTURE PARTNERS, L.P.
                                      INDEX


Independent Auditors' Report

Balance Sheets as of December 31, 1996 and 1995

Schedule of Portfolio Investments as of December 31, 1996

Schedule of Portfolio Investments as of December 31, 1995

Statements of Operations for the years ended December 31, 1996, 1995 and 1994

Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994

Statements of Changes in Partners' Capital for the years ended December 31, 
1994, 1995 and 1996

Notes to Financial Statements

NOTE - All other  schedules  are omitted  because of the  absence of  conditions
under which they are required or because the required information is included in
the financial statements or the notes thereto.



<PAGE>


INDEPENDENT AUDITORS' REPORT



WestMed Venture Partners, L.P.:

We have audited the  accompanying  balance sheets of WestMed  Venture  Partners,
L.P. (the "Partnership"),  including the schedules of portfolio investments,  as
of December 31, 1996 and 1995, and the related  statements of  operations,  cash
flows,  and  changes in  partners'  capital  for each of the three  years in the
period  ended   December  31,  1996.   These   financial   statements   are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1996 and 1995 by correspondence
with the custodian;  where  confirmation  was not possible,  we performed  other
audit  procedures.  An audit also includes  assessing the accounting  principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the financial position of WestMed Venture Partners,  L.P. at December
31,  1996 and 1995,  and the results of its  operations,  its cash flows and the
changes in its partners' capital for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

As explained in Note 2, the financial  statements  include  securities valued at
$6,150,162  and  $11,079,422  at  December  31,  1996  and  1995,  respectively,
representing  47% and 70% of net assets,  respectively,  whose  values have been
estimated   by  the  Managing   General   Partner  in  the  absence  of  readily
ascertainable  market  values.  We  have  reviewed  the  procedures  used by the
Managing General Partner in arriving at its estimate of value of such securities
and have  inspected  underlying  documentation,  and, in the  circumstances,  we
believe  the  procedures  are  reasonable  and  the  documentation  appropriate.
However,  because of the inherent  uncertainty  of  valuation,  those  estimated
values may differ  significantly from the values that would have been used had a
ready market for the securities existed, and the differences could be material.


Deloitte & Touche LLP


New York, New York
February 17, 1997, except for note 7 as to which the date is March 14, 1997



<PAGE>


WESTMED VENTURE PARTNERS, L.P.
BALANCE SHEETS
December 31,

<TABLE>

                                                                                                1996                1995
                                                                                          ----------------    ----------

ASSETS

Portfolio investments, at fair value
   (cost $9,247,669 at December 31, 1996 and
<S>                        <C> <C>           <C>   <C>                                    <C>                  <C>             
   $11,690,534 at December 31, 1995) - Notes 2 and 4                                      $     11,533,351     $     13,668,256
Cash and cash equivalents - Note 2                                                               6,135,508            2,310,697
Prepaid Assets                                                                                      39,419               37,588
Accrued interest receivable                                                                         13,659                1,500
                                                                                          ----------------     ----------------

TOTAL ASSETS                                                                              $     17,721,937     $     16,018,041
                                                                                          ================     ================




LIABILITIES AND PARTNERS' CAPITAL

Liabilities:
Cash Distribution Payable - Note 5                                                        $      4,529,538     $              -
Accounts Payable and Accrued Expenses                                                              120,823               64,979
Due to Managing General Partner - Note 4                                                            63,428               82,705
Due to Independent General Partners - Note 4                                                        10,000               15,000
                                                                                          ----------------     ----------------
   Total liabilities                                                                             4,723,789              162,684
                                                                                          ----------------     ----------------

Partners' Capital:
Managing General Partner                                                                           129,985              158,557
Limited Partners (66,929 Units)                                                                 12,868,163           15,696,800
                                                                                          ----------------     ----------------
   Total Partners' capital                                                                      12,998,148           15,855,357
                                                                                          ----------------     ----------------

TOTAL LIABILITIES AND PARTNERS' CAPITAL                                                   $     17,721,937     $     16,018,041
                                                                                          ================     ================
</TABLE>


See notes to financial statements.



<PAGE>


WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1996

Active Portfolio Investments:
<TABLE>

                                                                     Initial Investment
Company / Position                                                          Date                   Cost              Fair Value
Aprogenix, Inc.(A)(B)
<C>                                                                           <C>            <C>                <C>            
476,739 shares of Common Stock                                           Jan. 1989           $     1,471,807    $       202,614
10% convertible promissory note due 5/29/98                              `                           212,120            212,120
Warrant to purchase 21,450 shares of Common Stock
   at $5.67 per share, expiring 10/15/98                                                                   0                  0
Warrant to purchase 13,000 shares of Common Stock
   at $1.10 per share, expiring 5/29/99                                                                    0                  0
                                                                                             ---------------    ---------------
                                                                                                   1,683,927            414,734
-------------------------------------------------------------------------------------------------------------------------------
Cortex Pharmaceuticals, Inc.(A)
140,833 shares of Common Stock                                           May 1988                    504,038            519,392
75,000 shares of Preferred Stock(C)                                                                   53,030             27,140
                                                                                             ---------------    ---------------
                                                                                                     557,068            546,532
-------------------------------------------------------------------------------------------------------------------------------
Exocell, Inc.*
598,083 shares of Preferred Stock                                        Feb. 1988                   714,266            464,266
Convertible note due 3/31/97                                                                          53,030             53,030
                                                                                             ---------------    ---------------
                                                                                                     767,296            517,296
-------------------------------------------------------------------------------------------------------------------------------
HBO & Co.(A)(D)
3,926 shares of Common Stock                                             Dec. 1987                   165,934            233,106
-------------------------------------------------------------------------------------------------------------------------------
MNI Group Inc.(A)
211,973 shares of Common Stock                                           Sept. 1987                  451,457             78,918
-------------------------------------------------------------------------------------------------------------------------------
Argonaut Medical, Inc. (E)
200,709 shares of Common Stock                                           Apr. 1988                   150,532            150,532
   Nimbus Medical, L.P. (F)
   38,340 units of limited partnership interest                                                          635             29,522
                                                                                             ---------------    ---------------
                                                                                                     151,167            180,054
-------------------------------------------------------------------------------------------------------------------------------
Oclassen Pharmaceuticals, Inc.
292,955 shares of Preferred Stock                                        Jan. 1989                 1,351,405          3,400,000
-------------------------------------------------------------------------------------------------------------------------------
Pharmaction Holdings, Ltd.(A) (G)
294,953 Ordinary shares                                                  Sept. 1987                  250,000                  0
Option to purchase 147,476 Ordinary shares
   at $.20 per share, expiring 3/31/99                                                                     0                  0
-------------------------------------------------------------------------------------------------------------------------------
Somatogen, Inc.(A)
125,404 shares of Common Stock                                           Dec. 1988                   657,194          1,379,444
-------------------------------------------------------------------------------------------------------------------------------
Ultramed, Inc. (H)
1,886,704 shares of Common Stock                                         Oct. 1987                   500,000            157,500
Warrant to purchase 7,500 shares of Common Stock
   at $.05 per share, expiring 2/1/97                                                                      0                  0
                                                                                              --------------    ---------------
                                                                                                     500,000            157,500
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1996

<TABLE>
Active Portfolio Investments:
                                                                     Initial Investment
Company / Position                                                          Date                   Cost              Fair Value
UroCor, Inc.(A) (I)
<C>                                                                          <C>              <C>               <C>            
384,982 shares of Common Stock                                           May 1991             $    1,097,258    $     3,638,549
Warrant to purchase 8,000 shares of Common Stock
   at $1.25 per share, expiring 2/13/01                                                                    0             66,504
Warrant to purchase 8,995 shares of Common Stock
   at $4.30 per share, expiring 10/18/98                                                                   0             47,341
Warrant to purchase 9,000 shares of Common Stock
   at $5.00 per share, expiring 6/2/00                                                                     0             32,460
                                                                                             ---------------    ---------------
                                                                                                   1,097,258          3,784,854
-------------------------------------------------------------------------------------------------------------------------------
Xenova Group plc* (A)
304,403 Ordinary shares                                                  Aug. 1988                 1,614,963            840,913
-------------------------------------------------------------------------------------------------------------------------------

Totals From Active Portfolio Investments                                                      $    9,247,669    $    11,533,351
                                                                                              =================================

SUPPLEMENTAL INFORMATION: LIQUIDATED PORTFOLIO INVESTMENTS(J)

                                                                                  Cost          Realized Loss            Return

Totals From Liquidated Portfolio Investments(K)                           $ 19,371,245        $   (7,988,351)   $    11,382,894
                                                                          =====================================================

                                                                                                     Combined          Combined
                                                                                               Unrealized and        Fair Value
                                                                                  Cost      Realized Net Loss        and Return

Totals From Active and Liquidated Portfolio Investments                   $ 28,618,914        $   (5,702,669)   $    22,916,245
                                                                          =====================================================
</TABLE>


(A) Public company
(B) During June 1996, the Partnership  made a $200,000  follow-on  investment in
    Aprogenix,  Inc., acquiring a 10% convertible note due 5/29/98 and a warrant
    to purchase  13,000  shares of common stock at $1.10 per share,  expiring on
    5/29/99.  The  Partnership  paid a venture  capital  fee of  $12,120  to the
    Managing  General  Partner  relating to this  investment.  Additionally,  in
    connection  with this  investment,  the  Partnership's  warrant to  purchase
    16,458  shares of Aprogenix  common stock for $7.39 per share was  exchanged
    for a warrant to purchase 21,450 shares of Aprogenix  common stock for $5.67
    per share.
 (C)The 75,000  preferred  shares of Cortex  Pharmaceuticals,  Inc.  held by the
    Partnership are convertible into 7,359 shares of the company's common stock.
(D) On June 10, 1996, HBO & Co. declared a 100% stock  distribution.  As a 
     result, the Partnership  received an additional 1,963 shares of HBO & Co.
     common stock.


<PAGE>


WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS  - continued
December 31, 1996


(E) In connection with the sale of Nimbus Medical,  Inc.,  completed in December
    1996, the Partnership  wrote-off $229,899 of its $380,431  investment in the
    company. The surviving entity was renamed Argonaut Medical, Inc.
(F) In February 1996, the Partnership  received a $30,289 cash distribution from
     Nimbus Medical, L.P.
(G) During 1996,  Bellara Medical  Products,  Ltd.  merged with  Pharmaction Pty
    Limited becoming  Pharmaction  Holdings Limited.  As a result of the merger,
    the  Partnership  exchanged its 442,430 common shares of Bellara for 294,953
    ordinary  shares of  Pharmaction  Holdings  and an option  to  purchase  and
    additional 147,476 ordinary shares at $.20 per share.
(H) Pursuant to a letter agreement, the Partnership converted its Ultramed, Inc.
    preferred stock and promissory notes into 1,886,704 shares of common stock.
(I) In May 1996,  UroCor,  Inc. completed its initial public offering at $11 per
    share.  In  connection  with the  offering,  the  Partnership  exchanged its
    368,930 preferred shares for 384,982 common shares of the company.
(J) Amounts  provided  for  "Supplemental   Information:   Liquidated  Portfolio
    Investments" are cumulative from inception through December 31, 1996.
(K) During May 1996, the Partnership sold its investment in Corvita Corporation
     for $4.33 million,  realizing a gain of $1.94  million.


* May be deemed  an  affiliated  person of the  Partnership  as  defined  in the
Investment Company Act of 1940.














See notes to financial statements.



<PAGE>


WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1995

Active Portfolio Investments:

<TABLE>

                                                                     Initial Investment
Company / Position                                                          Date                   Cost              Fair Value
Aprogenix, Inc.(A)
<C>                                                                           <C>            <C>                <C>            
476,739 shares of Common Stock                                           Jan. 1989           $     1,471,807    $       625,719
Warrant to purchase 16,458 shares of Common Stock
   at $7.39 per share, expiring 10/15/98                                                                   0                  0
-------------------------------------------------------------------------------------------------------------------------------
Bellara Medical Products Ltd.(A)
442,430 shares of Common Stock                                           Sept. 1987                  250,000             36,810
-------------------------------------------------------------------------------------------------------------------------------
Cortex Pharmaceuticals, Inc.(A)
140,833 shares of Common Stock                                           May 1988                    504,038            532,700
75,000 shares of Preferred Stock                                                                      53,030             27,835
                                                                                             ---------------    ---------------
                                                                                                     557,068            560,535
-------------------------------------------------------------------------------------------------------------------------------
Corvita Corporation*(A)
410,765 shares of Common Stock                                           Aug. 1988                 2,394,797          3,204,002
Warrant to purchase 36,916 shares of Common Stock
   at $7 per share, expiring 11/1/99                                                                       0                  0
-------------------------------------------------------------------------------------------------------------------------------
Exocell, Inc.*
598,083 shares of Preferred Stock                                        Feb. 1988                   714,266            714,266
Convertible note due 3/31/97                                                                          53,030             53,030
                                                                                             ---------------    ---------------
                                                                                                     767,296            767,296
-------------------------------------------------------------------------------------------------------------------------------
HBO & Co.(A)
1,963 shares of Common Stock                                             Dec. 1987                   165,934            149,727
-------------------------------------------------------------------------------------------------------------------------------
MNI Group Inc.(A)
211,973 shares of Common Stock                                           Sept. 1987                  451,457             95,854
-------------------------------------------------------------------------------------------------------------------------------
Nimbus Medical, Inc.
200,709 shares of Common Stock                                           Apr. 1988                   380,431            192,374
   Nimbus Medical, L.P.
   38,340 units of limited partnership interest                                                       30,924             76,316
                                                                                             ---------------    ---------------
                                                                                                     411,355            268,690
-------------------------------------------------------------------------------------------------------------------------------
Oclassen Pharmaceuticals, Inc.
292,955 shares of Preferred Stock                                        Jan. 1989                 1,351,405          2,705,842
-------------------------------------------------------------------------------------------------------------------------------
Somatogen, Inc.(A)
125,404 shares of Common Stock                                           Dec. 1988                   657,194          2,439,107
-------------------------------------------------------------------------------------------------------------------------------
Ultramed, Inc.
954,545 shares of Preferred Stock                                        Oct. 1987                   333,410                  0
18% Convertible Promissory Notes                                                                     159,090            150,000
12% Promissory Note                                                                                    7,500              7,500
Warrant to purchase 7,500 shares of Common Stock
   at $.05 per share, expiring 2/1/97                                                                      0                  0
                                                                                              --------------    ---------------
                                                                                                     500,000            157,500
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


WESTMED VENTURE PARTNERS, L.P.
SCHEDULE OF PORTFOLIO INVESTMENTS - continued
December 31, 1995

Active Portfolio Investments:
<TABLE>

                                                                     Initial Investment
Company / Position                                                          Date                   Cost              Fair Value
UroCor, Inc.
<C>                                                                          <C>             <C>                <C>            
368,930 shares of Preferred Stock                                        May 1991            $     1,097,258    $     1,844,650
Warrant to purchase 8,000 shares of Common Stock
   at $1.25 per share, expiring 2/13/01                                                                    0             30,000
Warrant to purchase 8,995 shares of Common Stock
   at $4.30 per share, expiring 10/18/98                                                                   0              6,297
Warrant to purchase 9,000 shares of Common Stock
   at $5.00 per share, expiring 6/2/00                                                                     0                  0
                                                                                             ---------------    ---------------
                                                                                                   1,097,258          1,880,947
-------------------------------------------------------------------------------------------------------------------------------
Xenova Group plc*(A)
304,403 Ordinary shares                                                  Aug. 1988                 1,614,963            776,227
-------------------------------------------------------------------------------------------------------------------------------

Totals From Active Portfolio Investments                                                      $   11,690,534    $    13,668,256
                                                                                              =================================



SUPPLEMENTAL INFORMATION: LIQUIDATED PORTFOLIO INVESTMENTS(B)


                                                                                    Cost        Realized Loss            Return

Totals From Liquidated Portfolio Investments                              $   16,716,260      $   (9,693,973)   $     7,022,287
                                                                          =====================================================


                                                                                                     Combined          Combined
                                                                                               Unrealized and        Fair Value
                                                                                    Cost        Realized Loss        and Return

Totals From Active and Liquidated Portfolio Investments                   $   28,406,794      $   (7,716,251)   $    20,690,543
                                                                          =====================================================
</TABLE>


(A)  Public company
(B)  Amounts  provided  for  "Supplemental  Information:   Liquidated  Portfolio
     Investments" are cumulative from inception through December 31, 1995.

* May be deemed  an  affiliated  person of the  Partnership  as  defined  in the
Investment Company Act of 1940.



See notes to financial statements.


<PAGE>


WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31,

<TABLE>

                                                                                 1996             1995               1994
                                                                           --------------     --------------    ---------

INVESTMENT INCOME AND EXPENSES

   Income:
<S>                                                                        <C>                <C>               <C>            
   Interest from short-term investments                                    $      229,112     $      128,996    $       104,856
   Interest and dividend income from portfolio
      investments - net                                                            11,741             (2,351)           (19,032)
                                                                           --------------     --------------    ---------------
   Total                                                                          240,853            126,645             85,824
                                                                           --------------     --------------    ---------------

   Expenses:
   Management fee - Note 4                                                        315,201            267,975            361,029
   Professional fees                                                              103,916             63,665             47,170
   Mailing and Printing                                                            49,381             43,526             10,940
   Insurance Expense                                                               74,579             85,240             43,986
   Custodial Fees                                                                   5,280              5,865              9,278
   Independent General Partners' fees - Note 4                                     12,377             15,000             15,000
   Miscellaneous                                                                   21,372             20,239             19,538
                                                                           --------------     --------------    ---------------
   Total                                                                          582,106            501,510            506,941
                                                                           --------------     --------------    ---------------

NET INVESTMENT LOSS                                                              (341,253)          (374,865)          (421,117)

Net realized gain (loss) from investments                                       1,705,622             65,470         (2,822,688)
                                                                           --------------     --------------    ---------------

NET REALIZED GAIN (LOSS) FROM OPERATIONS                                        1,364,369           (309,395)        (3,243,805)

Net change in unrealized appreciation or depreciation
   of investments                                                                 307,960          1,632,227           (618,032)
                                                                           --------------     --------------    ---------------

NET INCREASE (DECREASE) IN NET ASSETS
   RESULTING FROM OPERATIONS
   (allocable to Partners) - Note 3                                        $    1,672,329     $    1,322,832    $    (3,861,837)
                                                                           ==============     ==============    =============== 
</TABLE>


See notes to financial statements.



<PAGE>


WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,

<TABLE>

                                                                                 1996                1995            1994
                                                                            -------------      --------------   ---------

CASH FLOWS USED FOR OPERATING ACTIVITIES

<S>                                                                         <C>                <C>              <C>             
Net investment loss                                                         $     (341,253)    $     (374,865)  $      (421,117)

Adjustments  to  reconcile  net  investment  loss to  cash  used  for  operating
   activities:
(Increase) decrease in prepaid expenses and
   accrued interest receivable                                                     (13,990)             9,928            (6,653)
Increase (decrease) in payables                                                     31,567             24,477           (19,407)
                                                                            --------------     --------------   ---------------
Cash used for operating activities                                                (323,676)          (340,460)         (447,177)
                                                                            --------------     --------------   ---------------

CASH FLOWS PROVIDED FROM (USED FOR)
   INVESTING ACTIVITIES

Cost of portfolio investments purchased                                           (212,120)          (291,665)         (692,965)
Proceeds from the sale of portfolio investments                                  4,330,318            275,850           421,875
Cash distribution from investment in Limited Partnership                            30,289             57,944            62,052
Repayment of notes due from portfolio companies                                          -                  -           201,392
                                                                            --------------     --------------   ---------------
Cash provided from (used for) investing activities                               4,148,487             42,129            (7,646)
                                                                            --------------     --------------   ---------------

Increase (decrease) in cash and cash equivalents                                 3,824,811           (298,331)         (454,823)
Cash and cash equivalents at beginning of period                                 2,310,697          2,609,028         3,063,851
                                                                            --------------     --------------   ---------------

CASH AND CASH EQUIVALENTS AT END
   OF PERIOD                                                                $    6,135,508     $    2,310,697   $     2,609,028
                                                                            ==============     ==============   ===============
</TABLE>


See notes to financial statements.


<PAGE>


WESTMED VENTURE PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Years Ended December 31, 1994, 1995 and 1996

<TABLE>

                                                             Managing
                                                             General                   Limited
                                                             Partner                  Partners                      Total

<S>                 <C> <C>                               <C>                      <C>                        <C>             
Balance at December 31, 1993                              $    183,947             $    18,210,415            $     18,394,362

Net decrease in net assets resulting
from operations                                                (38,618)                 (3,823,219)                 (3,861,837)
                                                          ------------             ---------------            ----------------

Balance at December 31, 1994                                   145,329                  14,387,196(A)               14,532,525

Net increase in net assets resulting
from operations                                                 13,228                   1,309,604                   1,322,832
                                                          ------------             ---------------            ----------------

Balance at December 31, 1995                                   158,557                  15,696,800(A)               15,855,357

Net increase in net assets resulting
from operations                                                 16,723                   1,655,606                   1,672,329

Accrued cash distribution, paid
January 30, 1997                                               (45,295)                 (4,484,243)                 (4,529,538)
                                                          ------------             ---------------            ----------------

Balance at December 31, 1996                              $    129,985             $    12,868,163(A)         $     12,998,148
                                                          ============             ===============            ================
</TABLE>


(A)  The net asset value per unit of limited partnership interest,  including an
     allocation of net unrealized  appreciation  or depreciation of investments,
     was $192, $235, and $215 at December 31, 1996, 1995 and 1994, respectively.
     Such per unit  amounts  are based on  average  allocations  to all  limited
     partners and do not reflect specific limited partner allocations, which are
     determined  by the  original  closing  date  associated  with the  units of
     limited partnership interest held by each limited partner.


See notes to financial statements.


<PAGE>


WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS

1.     Organization and Purpose

WestMed Venture Partners, L.P. (the "Partnership") was formed under Delaware law
on February 5, 1987. The Partnership  operates as a business development company
under the  Investment  Company Act of 1940,  as amended.  The  Partnership  is a
closed-end  investment  fund and  accordingly  its units of limited  partnership
interest  ("Units")  are not  redeemable.  A total of 66,929  Units were sold to
limited partners (the "Limited  Partners" and together with the Managing General
Partner (as hereinafter defined), the "Partners") at $500 per Unit.

The general partners of the Partnership  include two individuals (the  
"Independent  General  Partners") and the managing general partner,  WestMed 
Venture Management,  L.P., a Delaware limited partnership (the "Managing General
Partner" and collectively with the  Independent  General  Partners,  the 
"General  Partners").  The general  partner of the Managing  General Partner is
Medical Venture Holdings,  Inc., a Delaware  corporation  affiliated with 
Oppenheimer & Co., Inc.  ("Opco").  The limited partners of the Managing GeneraL
Partner are Oppenheimer Holdings,  Inc., MVP Holdings,  Inc. and BSW, Inc., a 
Delaware corporation owned by John A. Balkoski,  Philippe L. Sommer and Howard 
S. Wachtler.  Alsacia Venture  Management,  Inc. (the  "Sub-Manager"),  a 
corporation controlled  by Philippe L. Sommer,  is the  sub-manager  of the  
Partnership  pursuant to a  sub-management  agreement  among the Partnership,  
the Managing  General  Partner and the  Sub-Manager.  The  Sub-Manager has been
retained by the Managing  General Partner to assist the Managing General Partner
in the performance of its duties to the Partnership.

Opco, a member firm of the New York Stock Exchange,  the National Association of
Securities Dealers,  Inc., and all principal United States securities exchanges,
is  a  diversified   investment  banking  and  securities  firm  and  registered
investment  advisor,   providing  a  broad  range  of  services  to  individual,
corporate,  and institutional  clients.  Opco operates in the capacity of broker
and  dealer  for its  customers,  as well as  trader  for its own  account.  The
services provided by Opco and its  subsidiaries,  and the activities in which it
is  engaged,  include  securities  brokerage,   securities  research,   customer
financing,  securities  trading,  corporate  finance,  mergers and acquisitions,
underwriting and investment advisory services.

The Partnership's  objective is to achieve  long-term capital  appreciation from
its portfolio of venture capital investments, consisting of companies engaged in
the health care industry.  The Partnership is scheduled to terminate on December
31, 1997, subject to the right of the General Partners to extend the term for up
to two additional  two-year periods,  if they determine that such extensions are
in the best interest of the Partnership.

2.     Summary of Significant Accounting Policies

Valuation of  Investments - Portfolio  investments  are carried at fair value as
determined  quarterly by the Managing  General  Partner under the supervision of
the Independent  General  Partners.  The fair value of  publicly-held  portfolio
securities  is adjusted to the closing  public market price for the last trading
day of the

<PAGE>


WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS


accounting period discounted for sales  restrictions.  Factors considered in the
determination of an appropriate discount include underwriter lock-up or Rule 144
trading  restrictions,  insider  status  where  the  Partnership  either  has  a
representative  serving on the board of directors of the portfolio company under
consideration or is greater than a 5% shareholder  thereof,  and other liquidity
factors  such  as the  size of the  Partnership's  position  in a given  company
compared to the trading history of the public security. Privately-held portfolio
securities  are carried at cost until  significant  developments  affecting  the
portfolio  company  provide a basis for change in  valuation.  The fair value of
private   securities   is  adjusted  (i)  to  reflect   meaningful   third-party
transactions in the private market and (ii) to reflect  significant  progress or
slippage in the  development of the company's  business such that cost no longer
reflects fair value. As a venture  capital  investment  fund, the  Partnership's
portfolio  investments involve a high degree of business and financial risk that
can result in substantial  losses.  The Managing General Partner  considers such
risks in determining the fair value of the Partnership's portfolio investments.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Investment  Transactions - Investment  transactions  are recorded on the accrual
method. For portfolio  investments,  transactions are recorded on the date which
the Partnership obtains an enforceable right to demand the securities or payment
thereof.  Realized  gains  and  losses on  investments  sold are  computed  on a
specific identification basis.

Statements  of  Cash  Flows  - Cash  and  cash  equivalents  include  short-term
interest-bearing   investments  in  commercial  paper  and  other  money  market
investments.  The Partnership  considers its interest-bearing cash account to be
cash equivalents.

Income Taxes - No provision  for income taxes has been made since all income and
losses are  allocable  to the partners for  inclusion  in their  respective  tax
returns.  The Partnership's net assets for financial  reporting  purposes differ
from its net  assets  for tax  purposes.  Net  unrealized  appreciation  of $2.3
million at  December  31,  1996,  which was  recorded  for  financial  statement
purposes, was not recognized for tax purposes.  Additionally,  from inception to
December 31, 1996, other timing differences  totaling $8.2 million,  relating to
net realized losses,  original sales commissions paid and other costs of selling
the Units, have been recorded on the Partnership's financial statements but have
not yet been deducted for tax purposes.

3.     Allocations of Partnership Profits and Losses

Pursuant to the Partnership's agreement of limited partnership,  as amended (the
"Partnership  Agreement"),  the  Partnership's net income and net realized gains
from all sources are allocated to all Partners, in proportion to

<PAGE>


WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS

their capital  contributions,  until all Partners have been  allocated an amount
equal to 6% per  annum,  simple  interest,  on  their  total  Adjusted  Invested
Capital;  i.e., original capital contributions reduced by previous distributions
(the  "Priority  Return").  Thereafter,  net income and net realized  gains from
venture  capital  investments in excess of the amount used to cover the Priority
Return are allocated 20% to the Managing General Partner and 80% to all Partners
in proportion to their capital  contributions.  Any net income from  non-venture
capital investments in excess of the amount used to cover the Priority Return is
allocated to all Partners in proportion to their capital contributions. Realized
losses  are   allocated  to  all  Partners  in   proportion   to  their  capital
contributions.  However, if realized gains had been previously  allocated in the
80-20 ratio,  then losses are  allocated in the reverse  order in which  profits
were  allocated.  From its inception to December 31, 1996, the Partnership had a
$7.5 million net loss from its venture capital  investments  including  interest
and other income from portfolio investments totaling $504,000.

4.     Related Party Transactions

Pursuant to the Partnership Agreement,  the Managing General Partner is entitled
to receive a one-time venture capital fee equal to 5% of the gross proceeds from
the sale of Units. Such fee is incurred as portfolio investments are made in the
proportion of the cost of each portfolio investment to the net proceeds from the
sale of Units. Venture capital fees incurred are recorded as a cost of acquiring
the portfolio investments. For the years ended December 31, 1996, 1995 and 1994,
the Partnership  incurred  venture capital fees of $12,000,  $17,000 and $40,000
respectively.  Cumulative  venture  capital  fees  incurred  from  inception  to
December 31, 1996 totaled $1.6 million.

Pursuant to a  management  agreement  between the  Partnership  and the Managing
General Partner, the Managing General Partner is responsible for the management,
administrative  and  certain  investment  advisory  services  necessary  for the
operation of the  Partnership.  For such services,  the Managing General Partner
receives  a  management  fee at the  annual  rate of 2% of the lesser of the net
assets of the  Partnership or the net  contributed  capital of the  Partnership;
i.e., gross capital contributions to the Partnership (net of selling commissions
and  organizational  expenses)  reduced  by  capital  distributed.  Such  fee is
determined and payable  quarterly.  The  compensation of the Sub-Manager is paid
directly by the Managing General Partner.

For services  rendered to the Partnership,  each of the two Independent  General
Partners  receives a $5,000 annual fee and  reimbursement  for all out-of-pocket
expenses relating to attendance at meetings of the General Partners.

5.     Cash Distributions

In November 1996, the General Partners  approved a cash distribution to Partners
totaling $4.5 million.  The distribution was paid on January 30, 1997 to Limited
Partners of record on December 31, 1996.  Limited Partners received  $4,484,243,
or $67 per Unit, and the General Partner  received  $45,295.  There were no cash
distributions  to  Partners  during the years ended  December  31, 1995 or 1994.
Cumulative  cash  distributions  paid or accrued to Partners  from  inception to
December 31, 1996, total  $10,240,307;  $10,137,904 to the Limited Partners,  or
approximately $151 per Unit, and $102,403 to the Managing General Partner.


WESTMED VENTURE PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS


6.       Classification of Investments

As of December 31, 1996,  the  Partnership's  investments  were  categorized  as
follows:
<TABLE>

                                                                                                          Percentage of
Type of Investments                                        Cost                    Fair Value               of Net Assets*
-------------------                                  ----------------           ---------------             ---------------
<S>                                                  <C>                        <C>                           <C>   
Common Stock                                         $      6,363,183           $     7,189,773               55.31%
Preferred Stock                                             2,452,111                 3,891,406               29.94%
Debt Securities                                               431,740                   422,650                3.25%
Limited Partnerships                                              635                    29,522                 .23%
                                                     ----------------           ---------------              -------
                                                     $      9,247,669           $    11,533,351               88.73%
                                                     ================           ===============               ======

Country/Geographic Region
United States                                        $      7,382,706           $    10,692,438               82.26%
United Kingdom                                              1,614,963                   840,913                6.47%
Australia                                                     250,000                         0                 .00%
                                                     ----------------           ---------------              -------
                                                     $      9,247,669           $    11,533,351               88.73%
                                                     ================           ===============               ======

Industry
Biotechnology                                        $      5,530,448           $     3,698,919               28.46%
Computer Systems                                              165,934                   233,106                1.79%
Medical Devices                                               651,167                   337,554                2.59%
Medical Services                                            1,097,258                 3,784,854               29.12%
Nutritional Products                                          451,457                    78,918                 .61%
Pharmaceuticals                                             1,351,405                 3,400,000               26.16%
                                                     ----------------           ---------------               ------
                                                     $      9,247,669           $    11,533,351               88.73%
                                                     ================           ===============               ======
</TABLE>


* Percentage of net assets is based on fair value.


7.    Subsequent Event

On  February  27,  1997,  Oclassen  Pharmeceuticals,  Inc.  merged  with  Watson
Pharmaceuticals,  Inc. As a result of the merger, the Partnership  exchanged its
292,955  preferred  shares of Oclassen for 108,321  common shares of Watson,  of
which 8,124 shares are to be held in escrow for a period of one year pursuant to
the merger agreement.



<PAGE>


Item 9.       Disagreements on Accounting and Financial Disclosure.

None.

                                    PART III

Item 10.      Directors and Executive Officers.

The Independent General Partners

The Independent  General Partners have full authority over the management of the
Partnership  and provide overall  guidance and  supervision  with respect to the
operations  of the  Partnership  and perform the various  duties  imposed on the
general  partners  of  business  development  companies  under the 1940 Act.  In
addition to general fiduciary duties,  the Independent  General Partners,  among
other things,  supervise the management  arrangements  of the  Partnership,  the
custody  arrangement  with respect to  portfolio  securities,  the  selection of
accountants,  fidelity  bonding  and  the  activities  of the  Managing  General
Partner. As required by the 1940 Act, a majority of the general partners must be
individuals  who are not  "interested  persons" of the Partnership as defined in
the 1940  Act.  In 1987,  the  Securities  and  Exchange  Commission  issued  an
exemptive  order  declaring  that  Messrs.  Elliott and White,  the  Independent
General  Partners  of the  Partnership,  are  not  "interested  persons"  of the
Partnership  as defined in the 1940 Act solely by reason of their being  general
partners of the Partnership.  Such individuals also comprise the Audit Committee
of the Partnership.

Presented below is information  concerning the Independent  General  Partners of
the Partnership as of March 21, 1997:

Thomas E. White, Age 63, Independent General Partner since 1987
485 Madison Avenue
New York, New York 10022
     Mr.  White is an  attorney  in private  practice  in New York City.  He is
     also an  independent  general  partner of WestMed Venture Partners 2, L.P.
    ("WVP2").  From 1974 to 1983, Mr. White was Senior Vice President and 
     Director of Howmedica,  Inc. with responsibility for various health-care 
     operations in the United States, Europe and Latin America.

Robert A. Elliott, Age 57, Independent General Partner since 1987
Elliott Investment Co.
5000 Birch Street, Suite 6200
Newport Beach, California 92660
     Mr. Elliott,  currently a private  investor,  was the Chairman and Chief 
     Executive  Officer of VLI Corporation  from 1983 to 1987. Mr. Elliott is 
     also an independent  general  partner of WVP2, a member of the Board of 
     Trustees of Chapman  University and a member of the Board of  Directors of
     two  privately-held  medical  device  companies.  He is a former Director 
     of the Health  Industries  Manufacturers  Association.  From 1979 until  
     1983,  Mr.  Elliott  was Vice  President  and  Director of Howmedica, Inc.
     with  responsibility  for the Medical Specialty  Products  Division,  
     including  domestic and international manufacturing and distribution.
     The Managing General Partner

The Managing  General  Partner,  subject to the  supervision of the  Independent
General  Partners,  has exclusive  power and authority to manage and control the
Partnership's  venture  capital  investments.  Subject to the supervision of the
Independent General Partners, the Managing General Partner is authorized to make
all decisions regarding the Partnership's  venture capital investment portfolio,
including,  among  other  things,  to find,  evaluate,  structure,  monitor  and
liquidate  such  investments  and to provide,  or arrange for the  provision of,
managerial  assistance  to the  portfolio  companies  in which  the  Partnership
invests.

The  general  partner  of the  Managing  General  Partner  is  MVH,  a  Delaware
corporation  affiliated with Opco. The limited  partners of the Managing General
Partner are (i) Oppenheimer  Holdings,  Inc. ("OHI"), a Delaware corporation and
the parent of Opco, (ii) MVP Holdings,  Inc.,  ("MVP"), a Delaware  corporation,
and (iii) BSW, Inc.,  ("BSW"),  a Delaware  corporation  wholly-owned by John A.
Balkoski,  Philippe L. Sommer and Howard S. Wachtler, the individuals originally
responsible for the Partnership's venture capital investments.

In June 1996, the Managing  General Partner engaged Alsacia Venture  Management,
Inc.  (the  "Sub-Manager")  to  assist  the  Managing  General  Partner  in  the
performance of its duties to the  Partnership.  The Sub-Manager is controlled by
Phillipe L. Sommer.  The compensation of the Sub-Manager is paid directly by the
Managing General Partner. No additional  management fees will be incurred by the
Partnership as a result of the Managing General Partner's  relationship with the
Sub-Manager.

Presented below is information as of March 21, 1997  concerning the directors 
and officers of MVH that are  principally  involved with the  operations of the
Partnership.  Mr. McGrath has been a director  and/or officer of MVH since June
1990. Mr.  Rothstein and Ms.  Fusco have been  officers  of MVH since  April  
1996 and June 1996,  respectively.  The  address of each such  person is
Oppenheimer Tower, World Financial Center, New York, New York 10281.

Stephen M. McGrath, Sr., Age 61, Vice President and Director
     Mr.  McGrath has been  Executive  Vice  President of Opco and director of 
     its  Investment  Banking Group since July 1985. He also served as President
     of  Oppenheimer  Strategic  Investments,  Inc.  between May 1983 and April
     1985.  Mr.  McGrath was Senior  Vice  President  of  Planning  and  
     Development  at  Warner-Lambert  until 1985 and has been a director  of 
     Alliance Pharmaceutical  Corp. since June 1989. He also serves as an 
     executive  officer and director of certain current and/or former
     affiliates of Opco.

Gerald A. Rothstein, Age 54, Vice President
     Mr.  Rothstein  has been a Managing  Director of Opco since 1983.  He is  
     primarily  responsible  for the creation of Opco's international research 
     department  and focuses upon the emerging  markets of Latin  America and 
     India.  Mr.  Rothstein has served on Opco's Management Committee since 
     1983 and is also a member of Opco's Commitment and Due Diligence 
     committees.

Ann O. Fusco, Age 42, Vice President
       Ms. Fusco has been Vice President of Oppenheimer  Properties, Inc. since
      July 1986 and has been employed by Oppenheimer & Co., Inc. since April 
      1984.  In June 1996 Ms. Fusco became Vice  President of MVH. Ms. Fusco is
      a Certified  Public  Accountant in the state of New York.

There are no family  relationships  among any of the  Independent  General  
Partners and the officers and directors of MVH or the Sub-Manager.  MVH is 
owned 100% by OHI. The  Sub-Manager is  wholly-owned  by Phillipe L. Sommer.  
Presented below is information concerning Mr. Sommer as of March 27, 1997.

Philippe L. Sommer, Age 45, Executive Vice President and Managing Director
     Mr.  Sommer  is a  Managing  Director  of BSW and a member  of the Board of
     Directors of BSW and one portfolio company of WVP2. He has been involved in
     health-care  industry  management for the past 15 years.  He was a Managing
     Director  of MVP  from  April  1987  to June  1990.  From  January  1982 to
     September  1986, he was a Director of Business  Development  for HPG and as
     such was responsible for directing HPG's merger and acquisition  activities
     for medium to larger  acquisitions  and for the  financial  evaluation  and
     valuation of all of HPG's acquisition, venture and licensing projects.

Opco,  a  member  firm  of the New  York  Stock  Exchange,  Inc.,  the  National
Association  of  Securities  Dealers,  Inc. and all  principal  U.S.  securities
exchanges,  is a diversified investment banking and securities firm, providing a
broad range of services to individual, corporate and institutional clients. Opco
is registered as a broker-dealer and investment adviser with the Commission, and
also is registered as a broker-dealer  in all of the states of the United States
and with the Securities Association in the United Kingdom and with the Commodity
Futures Trading  Commission as a futures commission  merchant.  Opco operates in
the capacity of broker and dealer for its  customers,  as well as trader for its
own account.

The services provided by Opco and its subsidiaries,  and the activities in which
it is engaged,  include investment  banking,  securities  brokerage,  securities
research,  customer  financing,  securities  trading  and  arbitrage,  corporate
finance,  real  estate  financing  and  investment  advisory  services.   Opco's
investment  banking  activities  include an active engagement in the health-care
area.  Opco  provides  public  equity  and  debt  financing  to  clients  in the
biotechnology,  instrumentation and pharmaceutical products and services sectors
in the health-care  field.  Opco also provides  private  financing,  and merger,
acquisition  and  divestiture  assistance  to  health-care   companies.   Opco's
Health-care  Investment Banking Group is supported by Opco's securities research
team which reports on public companies in the human health-care sector.

Item 11.      Executive Compensation.

Each Independent  General Partner receives an annual fee from the Partnership of
$5,000  together  with all  out-of-pocket  expenses  relating to  attendance  at
meetings of the General  Partners.  During 1996,  Thomas White,  an  Independent
General  Partner  of the  Partnership,  received  an  $11,600  payment  from the
Partnership  relating to legal  services in connection  with the  Sub-Management
Agreement.

The description of the allocation and distribution of the Partnership's  profits
and  losses to the  Managing  General  Partner  set forth in Item 5.  Market for
Registrant's  Common  Equity and  Related  Stockholder  Matters is  incorporated
herein by reference.

For the year ended December 31, 1996, the Managing General Partner was allocated
$16,700 of the Partnership's net increase in net assets from operations. For the
year ended December 31, 1995, the Managing General Partner was allocated $13,200
of the Partnership's net increase in net assets from operations and for the year
ended December 31, 1994, the Managing  General Partner was allocated  $38,600 of
the Partnership's net decrease in net assets from operations.

Pursuant to the Management Agreement,  the Managing General Partner performs, or
arranges  for others to  perform,  the  management,  administrative  and certain
investment advisory services necessary for the operation of the Partnership. For
such services,  the Managing  General  Partner  received a management fee at the
annual rate of 2% of the lesser of the net assets of the  Partnership or the net
contributed capital of the Partnership; i.e., gross capital contributions to the
Partnership (net of selling commissions and organizational  expenses) reduced by
capital distributed. Such fee is determined and payable quarterly. For the years
ended December 31, 1996, 1995 and 1994, the Managing  General  Partner  received
management fees of $315,000, $268,000, and $361,000 respectively.

In June 1996, the Managing  General Partner engaged Alsacia Venture  Management,
Inc.  (the  "Sub-Manager")  to  assist  the  Managing  General  Partner  in  the
performance of its duties to the  Partnership.  The Sub-Manager is controlled by
Phillipe L. Sommer.  The compensation of the Sub-Manager is paid directly by the
Managing General Partner. No additional  management fees will be incurred by the
Partnership as a result of the Managing General Partner's  relationship with the
Sub-Manager.

Pursuant to the Partnership Agreement,  the Managing General Partner is entitled
to receive a one-time venture capital fee equal to 5% of the gross proceeds from
the sale of Units. Such fee is incurred as portfolio investments are made in the
proportion of the cost of each portfolio investment to the net proceeds from the
sale of Units. Venture capital fees incurred are recorded as a cost of acquiring
the portfolio investments. For the years ended December 31, 1996, 1995 and 1994,
the Managing General Partner  received venture capital fees of $12,000,  $17,000
and $40,000, respectively.

Item 12.      Security Ownership of Certain Beneficial Owners and Management.

Security Ownership

As of March 21, 1997, no person or group is known by the  Partnership  to be the
beneficial owner of more than 5% of the Units. The Independent  General Partners
and the directors,  officers and employees of MVH, and the  Sub-Manager own as a
group ten  Units,  or less than  one-tenth  of one  percent  of the total  Units
outstanding.

Item 13.      Certain Relationships and Related Transactions.

The  description of the management fee and the venture  capital fee set forth in
Item 11, Executive Compensation, is incorporated herein by reference.

The description of the allocation and distribution of the Partnership's  profits
and  losses to the  Managing  General  Partner  set forth in Item 5.  Market for
Registrant's  Common  Equity and  Related  Stockholder  Matters is  incorporated
herein by reference.



<PAGE>


                                     PART IV

Item 14.      Exhibits, Financial Statements, Schedules and Reports on Form 8-K.

(a)    1.     Financial Statements.

              Independent Auditors' Report

              Balance Sheets as of December 31, 1996 and 1995

              Schedule of Portfolio Investments as of December 31, 1996

              Schedule of Portfolio Investments as of December 31, 1995

              Statements of Operations for the years ended December 31, 1996, 
              1995 and 1994

              Statements of Cash Flows for the years ended December 31, 1996, 
              1995 and 1994

              Statements of Changes in Partners' Capital for the years ended 
              December 31, 1994, 1995 and 1996

              Notes to Financial Statements

       2.     Exhibits

              3.1   Amended and Restated Certificates of Limited Partnership(3)

              3.2   Amendment to Amended and Restated Certificate of Limited 
                    Partnership(3)

              3.3   Partnership Agreement(1)

              3.4   Amendment No. 1 to the Partnership Agreement(2)

              4     Articles Five through Eleven of the Partnership Agreement(1)

              10.1  Management Agreement between the Partnership and the 
                    Managing General Partner(2)

              [?]   Sub-Management agreement among the Partnership, the Managing
                    General Partner and the Sub-Manager(4)

              27    Financial Data Schedule

              28.1  Custodian Agreement between the Partnership and Investors 
                    Fiduciary Trust Company(1)

(b)        No reports on Form 8-K have been filed during the quarter for which 
           this report is filed.

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

(1)    Filed as an exhibit to the  Partnership's  Registration  Statement  on 
       Form N-2  (33-11926),  and  incorporated  herein by reference.

(2)    Filed as an exhibit to the Partnership's Report on Form 8-K dated July 
       10, 1990 and incorporated herein by reference.

(3)    Filed as an exhibit to the Partnership's Report on Form 10-K for the year
       ended December 31, 1990.

(4)    Filed as an exhibit to the Partnership's proxy statement dated May 17, 
       1996 and incorporated herein by reference.


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized on the 27th day of March 1997.

WESTMED VENTURE PARTNERS, L.P.

By:  WestMed Venture Management, L.P.,
     Managing General Partner

By:  Medical Venture Holdings, Inc.,
     General Partner

By:  /s/   Stephen McGrath
     Stephen McGrath
     Executive Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated on the 27th day of March 1997.
<TABLE>

WESTMED VENTURE
<S>     <C>    <C>    <C>    <C>    <C>    <C>
MANAGEMENT, L.P.                                 Managing General Partner of WestMed Venture Partners, L.P.

By:  Medical Venture Holdings, Inc.              General Partner of WestMed Venture Management, L.P.


By:  /s/ Stephen McGrath                         Executive Vice President (principal executive officer) of Medical
Stephen McGrath                                  Venture Holdings, Inc.


By:  /s/ Ann Oliveri Fusco                       Vice President (principal financial and accounting officer) of Medical    Ann
Oliveri Fusco                                    Venture Holdings, Inc.


By:  /s/ Thomas E. White                         General Partner of WestMed Venture Partners, L.P.
     Thomas E. White


By:  /s/ Robert A. Elliott                       General Partner of WestMed Venture Partners, L.P.
     Robert A. Elliott
</TABLE>