UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K/A
                          AMENDMENT NO. 2 TO FORM 10-K
(Mark One)
   X ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended June 30, 1998
                                                        OR
     TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

Commission file number 0-15609

                          AGOURON PHARMACEUTICALS, INC.
             (Exact name of registrant as specified in its charter)


         California                                     33-0061928
  (State or other jurisdiction of          (I.R.S. Employer Identification No.)
   incorporation or organization)

10350 North Torrey Pines Road, La Jolla, California                92037-1020
   (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code:              (619) 622-3000

Securities registered pursuant to Section 12(b) of the Act:          None

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

                         Common Stock, without par value
                                (Title of class)

     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. [ ]

     On July 28, 1998,  the  aggregate  market value of the common stock held by
nonaffiliates  totaled  approximately  $724,738,000  based on the closing  stock
price as reported by The Nasdaq Stock Market.

     On July 28,  1998,  there were  approximately  31,097,000  shares of common
stock, without par value, of the registrant issued and outstanding.

     This  Amendment  No.  2 to the  Annual  Report  on Form  10-K  for  Agouron
Pharmaceuticals, Inc. (the "Company") for the fiscal year ended June 30, 1998 is
being filed to amend Items 7, 10, 11, 12, 13 and 14 (exhibits  10.22,  10.23 and
10.24).

                                       1
<PAGE>




                                     PART II


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

OVERVIEW

     This discussion contains  forward-looking  statements.  Such statements are
subject to certain risks and  uncertainties  which could cause actual results to
differ  materially  from  those  projected.  See  "Important  Factors  Regarding
Forward-Looking  Statements"  attached as Exhibit 99 to this Form 10-K.  Readers
are cautioned not to place undue  reliance on these  forward-looking  statements
which speak only as of the date hereof.  The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.

     The Company is committed to the discovery,  development,  manufacturing and
marketing of human  pharmaceuticals  targeting  cancer,  AIDS, and other serious
diseases.  Operations  to date have been  principally  funded from the Company's
equity-derived  working capital,  various  collaborative  arrangements and, most
recently,  from the gross margin contribution of its first product,  VIRACEPT(R)
(nelfinavir mesylate). The net income reported in fiscal 1998 is principally due
to the  commercialization  of VIRACEPT  while the Company's  prior net operating
losses reflect primarily the result of its independent  research and substantial
investment in the clinical and  commercial  development  of VIRACEPT and certain
anti-cancer compounds.

     In March 1997, the Company  received  clearance from the United States Food
and Drug Administration ("FDA") to market VIRACEPT in the United States. For the
fiscal year ended June 30,  1998,  due  principally  to the  increasing  product
contribution  from  VIRACEPT  sales,  license  fees and  royalties,  the Company
realized a net income of $13,154,000.

RESULTS OF OPERATIONS

PRODUCT SALES

     Product  sales  for the  fiscal  years  ended  June 30,  1997 and 1998 were
approximately  $57,000,000 and  $409,300,000  which included sales in the United
States of $55,559,000 and $358,321,000,  respectively.  The Company  anticipates
that  VIRACEPT  sales in the United  States  will  approximate  $430,000,000  to
$440,000,000 for fiscal 1999.

CONTRACT REVENUES

     Collaborative  research and development  agreements with Japan Tobacco Inc.
("JT"), Hoffmann-La Roche Inc. and F. Hoffmann-La Roche Ltd (collectively "HLR")
accounted for  substantially  all of the Company's  contract  revenues for 1998,
1997 and 1996. Total contract
                                       2
<PAGE>


revenues  for 1998  decreased  approximately  40% from 1997 due  principally  to
decreased  VIRACEPT program  spending by Agouron,  which was partially funded by
JT.  Additionally,  the  amortization  to revenue over a 24 month period of JT's
$24,000,000 milestone payment,  which was received in August 1995, was completed
in  June  1997.  The  increase  in  contract  revenues  from  1996  to  1997  of
approximately 59% was due principally to increased program activity and spending
on the JT collaborations.

     In December 1997, the Company agreed to end its  collaboration  with HLR in
the field of  cancer.  As a result of the  termination  agreement,  Agouron  has
regained all rights to its anti-cancer  drugs previously within the scope of the
HLR collaboration.

     The  Company  anticipates  that  contract  revenues  for  fiscal  1999 will
approximate $35,000,000 to $40,000,000.

LICENSE FEES AND ROYALTIES

     The Company's license fees and royalties for 1998 and 1997 were principally
derived  from F.  Hoffmann-La  Roche Ltd  ("Roche");  license  fees in 1996 were
earned from HLR. Total revenues for 1998 increased  approximately  83% from 1997
due to European marketing  approval for VIRACEPT.  The 33% decrease from 1996 to
1997 is principally due to $9,000,000 for initial European  marketing rights for
VIRACEPT in 1997 versus  $15,000,000 for initial  world-wide  development rights
for two anti-cancer drugs in 1996.

     In January and March 1998,  VIRACEPT was  approved for  marketing in Europe
and Japan,  respectively.  Upon such approvals,  the Company realized as revenue
license  fees  totaling  $12,000,000.  In July 1997,  the Company and JT granted
Roche certain exclusive rights to VIRACEPT in several Asian countries.  For such
rights, the Company received a license fee of $2,000,000.

     Royalty revenues of  approximately  $3,852,000 have been recognized in 1998
based on estimated and actual Roche sales of VIRACEPT in its licensed territory.
The Company  anticipates  that license fees and  royalties  for fiscal 1999 will
range from $30,000,000 to $35,000,000.

COST OF PRODUCT SALES

     The  aggregate  cost of product  sales as a percentage of product sales was
approximately  43% and 42% for 1997 and 1998,  respectively.  Gross  margins  on
United States  commercial sales were  approximately  57% and 65% during 1997 and
1998, respectively.  The Company anticipates that gross margins on United States
commercial  sales will  improve as product  sales  volumes  increase and certain
manufacturing process and scale efficiencies are realized,  and will approximate
71% in 1999.  Aggregate  gross  margins will also be impacted by the size of the
Company's  patient  assistance  program  (which  provides free goods to indigent
individuals), the Company's manufacturing supply arrangement with Roche (whereby
Roche  has  the  right  to  either  purchase  product  at  Agouron's  cost  plus
contractually  determined  mark-ups or manufacture drug product for its own use,
subject to contractually determined fees to be paid to Agouron) and the level of
sales subject to Medicaid and other discounts or rebates in the United States.

                                       3
<PAGE>


RESEARCH AND DEVELOPMENT

     Research and development  ("R&D") spending  increased by approximately  39%
from 1997 to 1998 due to license fees for three  development stage HIV products,
increasing  average  R&D  staff  levels  (approximately  28%) and  staff-related
spending  (including  occupancy  and the addition of Alanex since late 1997) and
increased  expenditures for human clinical trial activities  associated with the
clinical  development  of certain of the Company's  anti-cancer  compounds.  R&D
spending  increased  by  approximately  52% from 1996 to 1997 due  generally  to
increasing  average  R&D  staff  levels  (approximately  39%) and  staff-related
expenditures  (including occupancy),  increased expenditures in support of human
clinical  trials,  an expanded  access  program  associated  with  VIRACEPT  and
increased  expenditures for clinical trial activities associated with AG3340 and
other anti-cancer compounds.  The Company anticipates that total R&D expenses in
fiscal 1999,  excluding the impact of any license fees or milestone  expenses in
either 1998 or 1999, will exceed fiscal 1998 expenses by approximately 40%.

SELLING, GENERAL AND ADMINISTRATIVE

     Selling,   general  and   administrative   ("SG&A")  expenses   represented
approximately  28% of total  operating  expenses  (excluding the cost of product
sales,  royalties and write-off of in-process technology purchased) in 1998, 23%
in 1997 and 10% in 1996. SG&A increased by  approximately  76% from 1997 to 1998
due  principally to a full year of expenses  associated with the sales force and
other marketing personnel. Spending increases from 1996 to 1997 were due chiefly
to increasing staff levels (approximately 214%) and staff-related  expenditures,
certain  premarketing  and advertising  and promotion costs  associated with the
launch of VIRACEPT in March 1997 and other costs associated with a growing sales
and marketing  infrastructure.  The Company anticipates that total SG&A expenses
will increase by  approximately  40% in fiscal 1999 due to increasing  sales and
marketing activities and the support of VIRACEPT phase IV marketing studies.

ROYALTIES

     The Company's  obligation to share VIRACEPT profits with JT is reflected in
royalty  expense  for 1998 and  represents  approximately  19% of United  States
product sales. Royalties in fiscal 1997 were not significant.  It is anticipated
that  royalty  expense  for fiscal  1999 will  approximate  24% to 25% of United
States product sales.

WRITE-OFF OF IN-PROCESS TECHNOLOGY PURCHASED

     In fiscal 1997,  the Company  acquired  Alanex  Corporation  ("Alanex"),  a
research  company  engaged in the discovery of drug leads through the high-speed
screening of diverse chemical  libraries  designed by computational  methods and
generated  by  combinatorial  chemistry.  Alanex  was  acquired  in  a  purchase
transaction  through the issuance of  approximately  2,000,000 shares of Agouron
common  stock  valued  at  approximately  $61,000,000.  Transaction  costs  were
approximately  $1,300,000.  In fiscal 1997, the Company  recorded a write-off of
$57,500,000  (or  92% of  the  purchase  price,  including  transaction  costs),
representing  the values  determined  by management  to be  attributable  to the
in-process  technology purchased.  Of the amount written off,  approximately 95%
was attributed to and supported by a discounted cash flow analysis of
                                       4
<PAGE>


 three drug discovery  programs which  anticipated  revenues  beginning in 2003.
Approximately  40% of the value was  attributed  to a compound  with obesity and
cardiovascular  indications,  30% for  compounds  with  depression  and  anxiety
indications  and  25% for a  program  to  treat  endometriosis  and  sex-hormone
dependent  tumors.   The  Company  believes  that  the  values  and  allocations
attributable  to these  programs are  reasonable  and  appropriate  based on the
commercial  potential  of these  three drug  discovery  programs.  Further,  the
Company  believes that there is no persuasive  evidence that the aggregate value
attributed to the three programs has been diminished since the acquisition.  The
Company  recorded  $4,800,000 of the purchase  price as an asset,  attributed to
Alanex's technology and chemical compound library, which is being amortized over
the  expected  benefit  periods.  At  June  30,  1998,  the  asset  balance  was
approximately $3,500,000.

INTEREST AND OTHER INCOME

     Interest  income  increased  by 1%  from  1997  to  1998.  Interest  income
increased by  approximately  23% from 1996 to 1997 due  principally  to a higher
average  investment  portfolio  balance  resulting  from  the July  1996  public
offering, receipt of $15,000,000 and $9,000,000,  respectively,  in license fees
from HLR (June 1996) and Roche (January 1997),  significantly increased contract
funding from JT and HLR and the exercise of employee stock options.  The Company
anticipates that, absent additional  revenue sources or a significant  change in
interest  rates,  fiscal 1999  interest  income will be less than that of fiscal
1998.

INTEREST EXPENSE

     Interest expense increased in 1998 from 1997 due to borrowings under a line
of credit  which  was used to  partially  fund  quarterly  royalties  paid to JT
throughout  the  year.   Interest  expense   decreased  in  1997  from  1996  by
approximately  38%  due  to  a  decreasing  level  of  debt  and  capital  lease
obligations from year to year.

INCOME TAX PROVISION (BENEFIT)

     The income tax  provision  in 1998 has been  computed  using an  effective,
combined  federal  and  state  rate of 40%.  The cash  obligation  of such  1998
provision has been mostly offset by the  utilization of its deferred tax assets.
Based on its 1998 pre-tax  profit and its estimates for future  taxable  income,
the Company  believes it is more  likely than not that its  deferred  tax assets
(comprised mostly of net operating loss carryforwards,  deductions  generated by
the exercise of stock options,  and research  credits) will be realized and has,
therefore,  recorded  the full tax  benefit  of its  deferred  tax  assets.  The
Company's accumulated net deferred tax assets totaled approximately  $55,900,000
and  $64,100,000  at June 30, 1997 and 1998.  The Company  anticipates  that its
effective  income  tax rate for fiscal  1999 will  range  from 10% to 15%.  Such
decrease from fiscal 1998 is attributed to greater expected  availability of R&D
tax credits due to the anticipated  increase in R&D spending and the anticipated
reduction in R&D contract revenues.

                                       5
<PAGE>


YEAR 2000

     The Year 2000 issue  results from  computer  programs and systems that were
created  to  accept  only  two  digit  dates.  Such  systems  may not be able to
distinguish  20th century  dates from 21st century  dates.  This could result in
miscalculations  and system  failures.  The Company has  established a Year 2000
project  team  that  is  currently   reviewing  computer  systems  and  computer
controlled  equipment that could be affected by this issue. In this process, the
Company  expects to both  replace and  upgrade  certain  systems and  equipment.
Additionally, the Company is in the process of contacting all of its significant
external  business  partners  to  determine  the extent to which the  Company is
vulnerable to their failure to obtain Year 2000 compliance. While the total cost
of  obtaining  Year 2000  compliance  is not  known at this  time,  the  Company
believes such cost will not have a material  effect on the  Company's  business,
financial position,  or results of operation.  However,  even though the Company
plans  to have  obtained  Year  2000  compliance  prior to the  year  2000,  the
inability of the Company or its  business  partners to  adequately  address year
2000 issues could have a significant impact on the Company's business.

LIQUIDITY AND CAPITAL RESOURCES

     Prior to fiscal 1998, the Company relied  principally on equity  financings
and corporate collaborations to fund its operations and capital expenditures. In
fiscal 1998,  due  primarily to the  successful  commercialization  of VIRACEPT,
operating  activities  have  provided  $827,000  of  cash  compared  with  using
$73,467,000  in fiscal  1997.  Commercial  sales of  VIRACEPT  for 1997 and 1998
resulted in gross margins of approximately $32,370,000 and $236,654,000.

     At June 30,  1998,  the Company had net  working  capital of  approximately
$127,728,000,  an  increase  of  $11,942,000  over  June  30,  1997  levels  due
principally to the Company's pre-tax profit of $21,924,000.  Individual  working
capital components  significantly  impacted by the commercialization of VIRACEPT
include trade accounts receivable (an increase of $18,416,000),  inventories (an
increase of  $44,906,000),  accounts  payable (an increase of  $15,560,000)  and
accrued  liabilities  (an  increase  of  $26,467,000,  primarily  due to accrued
royalties  payable  to  JT).  It  is  anticipated  that  these  working  capital
components and cash and short-term investments will continue to be significantly
impacted as VIRACEPT  sales  increase.  At June 30, 1998,  the Company had cash,
cash equivalents and short-term  investments of approximately  $87,123,000.  The
Company  believes  that its  current  capital  resources,  existing  contractual
commitments and anticipated  VIRACEPT product sales  contribution are sufficient
to maintain its current  operations through fiscal 1999. This belief is based on
current research and clinical  development  plans,  anticipated  working capital
requirements  associated with the expanding  commercialization of VIRACEPT,  the
current  regulatory   environment,   historical   industry   experience  in  the
development of therapeutic drugs and general economic conditions.

     The Company believes that additional  financing may be required to meet the
planned operating needs after fiscal 1999 if significant and increasing positive
cash flows are not  generated  from  commercial  activities.  Such  needs  would
include the expenditure of substantial funds to continue and expand research and
development  activities,  conduct existing and planned  preclinical  studies and
human clinical trials and to support the increasing working capital requirements
of a  growing  commercial  infrastructure  including  manufacturing,  sales  and
marketing  capabilities.  As a result, the Company anticipates  pursuing various
financing alternatives such as collaborative  arrangements and additional public
offerings or private
                                       6
<PAGE>


 placements of securities.  If such alternatives are not available,  the Company
may be required to defer or restrict  certain  commercial  activities,  delay or
eliminate  expenditures for certain of its potential products under development,
cancel licenses from third parties or to license third parties to  commercialize
products or  technologies  that the Company would  otherwise  seek to develop or
commercialize itself.

     During fiscal 1998, capital  expenditures totaled $33,086,000 compared with
$14,727,000 and $3,710,000 during 1997 and 1996, of which $1,579,000, $2,355,000
and $457,000  were financed  through  capital  lease  obligations.  Of the total
capital  expenditures  during 1998,  1997 and 1996,  approximately  $14,331,000,
$4,728,000 and $318,000 represented  leasehold improvement costs associated with
certain  of the  Company's  facilities.  With  the  exception  of the  leasehold
improvement costs,  virtually all of the capital  expenditures during 1998, 1997
and  1996   represented   laboratory   and  office   equipment  and   scientific
instrumentation  necessary to support an expanding  research,  development,  and
commercial  infrastructure.  Capital expenditures during 1999 are expected to be
approximately  $18,000,000  to  support  continued  product   commercialization,
development and research activities.  Of the total expected capital expenditures
during  1999,   approximately   $4,000,000  is  associated  with  the  leasehold
improvement  of existing  and  anticipated  new  administrative  and  laboratory
facilities.  The  Company  may  utilize  lease  or debt  financing  for  certain
expenditures if available on acceptable terms.

                                       7
<PAGE>


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>

 
                  NAME                          AGE                        POSITION
                  ----                          ---                        --------
           <S>                                  <C>           <C>   
           Peter Johnson                         53           President, Chief Executive Officer and Director

           Marvin R. Brown, M.D.                 51           Vice President, and President of Alanex

           Neil J. Clendeninn, M.D., Ph.D.       49           Corporate Vice President, Head of Clinical Affairs

           Steven S. Cowell                      49           Corporate Vice President, Finance and Chief
                                                                Financial Officer

           William C. Denby                      43           Vice President, Head of Marketing and Sales

           Gary E. Friedman                      51           Corporate Vice President, General Counsel,
                                                              Secretary and Director

           Donna C. Nichols                      41           Vice President, Head of Corporate Communications

           Barry D. Quart, Pharm.D.              41           Senior Vice President, Head of Drug Development

           R. Kent Snyder                        44           Senior Vice President, Head of Commercial Affairs

           Michael D. Varney, Ph.D.              40           Vice President, Head of Research

           Stephanie Webber, Ph.D.               50           Vice President, Head of Development Pharmacology

           Glenn R. Zinser                       56           Corporate Vice President, Head of Operations

           John N. Abelson, Ph.D.(1)             59           Director

           Patricia M. Cloherty(2)               56           Director

           A.E. Cohen(1)                         62           Director

           Michael E. Herman(1)                  57           Director

           Irving S. Johnson, Ph.D.              73           Director

           Antonie T. Knoppers, M.D.(2)          83           Director

           Melvin I. Simon, Ph.D.(2)             61           Director


</TABLE>
------------------------------
(1)  Member of Directors Compensation Committee
(2)  Member of Audit Committee

                                       8
<PAGE>


     PETER  JOHNSON,  a founder of the Company,  has served as a director and as
president  and chief  executive  officer of the Company  since its  inception in
1984.  Through  1989,  Mr.  Johnson  held  various  positions  with The  Agouron
Institute,  including executive  director.  Mr. Johnson received a M.A. from the
University of California, San Diego.

     MARVIN R. BROWN joined the Company in 1997 as vice president, and president
of Alanex.  In 1991,  Dr. Brown founded  Alanex and, from 1993 until joining the
Company, served as president,  chief executive officer and chairman of the board
of Alanex.  Prior to joining  Alanex,  Dr. Brown served as professor of medicine
and surgery and director of the peptide biology  laboratory at the University of
California,  San Diego from 1986 through 1991 and was on the faculty of the Salk
Institute for Biological  Studies from 1975 to 1986. Dr. Brown received his M.D.
from the University of Arizona.

     NEIL J. CLENDENINN  joined the Company in 1993 as vice president,  clinical
affairs. In 1997, Dr. Clendeninn was promoted to corporate vice president,  head
of clinical  affairs.  From 1985 until joining the Company,  Dr. Clendeninn held
various   positions  with  Burroughs   Wellcome  Co.,   including  head  of  the
chemotherapy  section from 1988. From 1981 through 1985, Dr.  Clendeninn  worked
with the  clinical  oncology and  clinical  pharmacology  groups at the National
Institutes of Health. Dr. Clendeninn received a M.D. and a Ph.D. in pharmacology
from New York University.

     STEVEN S. COWELL joined the Company in 1991 as vice president,  finance and
chief  financial  officer.  In 1997,  Mr. Cowell was promoted to corporate  vice
president.  From 1982  until  joining  the  Company,  Mr.  Cowell  held  various
positions,  the most recent of which was vice  president and controller at Cetus
Corporation,   a  public   biotechnology   company   primarily  engaged  in  the
development, manufacture and marketing of pharmaceutical products. Mr. Cowell is
a Certified  Public  Accountant  in  California  and received a B.S. in business
administration from the University of California, Berkeley.

     WILLIAM  C.  DENBY  joined  the  Company in 1995 and in 1997 was named vice
president,  head of marketing and sales. Previously,  Mr. Denby served as senior
director of marketing and sales. From 1978 until joining the Company,  Mr. Denby
held  various  positions  at  Marion  Laboratories,  Inc.  (now  Hoechst  Marion
Roussel),  including  strategic  planning  manager  and managed  care  marketing
manager.  Mr. Denby received a B.A. in English from the State  University of New
York, and holds a M.B.A. in Finance from Rockhurst College.

     DONNA C.  NICHOLS  joined  the  Company  in 1987 and in 1997 was named vice
president,  head of  corporate  communications.  Previously,  Ms.  Nichols  held
various  positions  within  the  Company,  most  recently  as  senior  director,
corporate communications. Ms. Nichols attended Kent State University.

     GARY E. FRIEDMAN,  a founder of the Company, has served as a director since
its inception,  as the secretary of the Company since 1986 and as vice president
and general  counsel since 1991. In 1997, Mr. Friedman was promoted to corporate
vice president.  Previously,  from 1982 until joining the Company,  Mr. Friedman
was a  principal  of the law firm of  Friedman,  Jay &  Cramer,  a  Professional
Corporation. Mr. Friedman is a California Certified Specialist in Taxation. Mr.
                                       9
<PAGE>


Friedman  received  a J.D.  and a M.B.A.  from  the  University  of  California,
Berkeley and a L.L.M. in taxation from the University of San Diego.

     BARRY D. QUART  joined the  Company in 1993 as vice  president,  regulatory
affairs.  In 1997,  Mr. Quart was named to senior vice  president,  head of drug
development.  From 1983 until  joining  the  Company,  Dr.  Quart  held  various
positions with  Bristol-Myers  Squibb Company,  including  executive director of
international  regulatory  affairs from 1992. Dr. Quart  received a Pharm.D.  in
clinical pharmacy from the University of California, San Francisco.

     R. KENT  SNYDER  joined  the  Company in 1991 as vice  president,  business
development.  In  1995,  Mr.  Snyder's  title  was  changed  to vice  president,
commercial  affairs and in 1997, he was named senior vice  president,  corporate
affairs.  From 1982 until joining the Company, Mr. Snyder held various positions
with Marion Laboratories,  Inc. (now Hoechst Marion Roussel), including director
of  U.S./European  licensing.  Prior to his  employment at Marion,  from 1978 to
1982, he held various sales and marketing positions with Hoffmann-LaRoche Ltd.
Mr. Snyder received a M.B.A. from Rockhurst College.

     MICHAEL D. VARNEY  joined the  Company in 1987 and in 1997 was  promoted to
vice president,  head of research.  A synthetic organic chemist,  Dr. Varney has
been  involved  in all  aspects  of drug  discovery  at the  Company  since  its
inception.  Dr.  Varney  received his B.S. in Chemistry  from UCLA and Ph.D.  in
Natural Product  Synthesis from the California  Institute of Technology.  Before
joining the Company, he completed  postdoctoral research in Bioorganic Chemistry
at Columbia University.

     STEPHANIE  WEBBER  joined the  Company in 1988 and in 1997 was  promoted to
vice president, head of development pharmacology.  Previously, Dr. Webber served
as senior director,  pharmacology and toxicology.  From 1980 to 1988, Dr. Webber
was a  research  fellow at the  Scripps  Clinic  and  Research  Foundation.  She
received her B.S. in Biology from the University of Sussex, England, and holds a
Ph.D. in Zoology from the University of London.

     GLENN R. ZINSER joined the Company in 1987 and,  since 1995,  has served as
vice president,  operations.  In 1997, Mr. Zinser was promoted to corporate vice
president,  head of operations.  Previously,  from 1987 through 1995, Mr. Zinser
held various management  positions with the Company,  including senior director,
operations  from 1993  through  1995.  Mr.  Zinser  received  a M.B.A.  from the
University of California, Los Angeles.

     JOHN N. ABELSON,  a founder of the Company,  has served as a director since
its inception.  Dr. Abelson, a molecular biologist,  is a member of the National
Academy of Sciences. Since 1982, Dr. Abelson has been a member of the faculty of
the Division of Biology at the California  Institute of Technology  where,  from
1989 until 1995, he served as chairman.  Previously, Dr. Abelson was a member of
the faculty in the Department of Chemistry at the University of California,  San
Diego.  Dr.  Abelson  received  a Ph.D.  in  biophysics  from The Johns  Hopkins
University and was a postdoctoral  fellow at the Laboratory of Molecular Biology
in  Cambridge,  England.  Dr.  Abelson  also serves as a director of The Agouron
Institute.


                                       10
<PAGE>


     PATRICIA M. CLOHERTY joined the Board in 1988. Since 1970, Ms. Cloherty has
been  associated  with Patricof & Co.  Ventures,  Inc.  (formerly  Alan Patricof
Associates, Inc.), a New York venture capital firm ("Patricof"),  and has been a
general partner of its funds since 1973.  From1993 until 1997, she was president
of  Patricof.  From  1997  to the  present,  Ms.  Cloherty  has  been  executive
co-chairman as well as general partner of Patricof.  Ms. Cloherty also served as
deputy  administrator  for the U.S.  Small Business  Administration  in 1977 and
1978.  Ms.  Cloherty  also serves on the board of directors  of several  private
companies.

     A.E. COHEN joined the Board in 1992. Mr. Cohen is an independent management
consultant.  From 1957 until his  retirement  in 1992,  Mr.  Cohen held  various
positions at Merck & Co., Inc., including senior vice president and president of
the Merck Sharp & Dohme  International  Division.  Currently,  Mr.  Cohen is the
chairman of the board of Neurobiological  Technologies,  Inc. and is a member of
the board of directors of Akzo Nobel N.v., Teva Pharmaceutical  Industries Ltd.,
Smith Barney (Mutual Funds), and Pharmaceutical  Product Development,  Inc., all
of which are public  companies.  Mr.  Cohen also serves as a  consultant  to The
Population  Council and Chugai  Pharmaceutical  Co. Ltd., Tokyo ("Chugai"),  and
serves as chairman of the board of Chugai's U.S. subsidiary companies. Mr. Cohen
also is a member of the board of directors of Lung Check, Inc.

     MICHAEL  E.  HERMAN  joined  the  Board in 1992.  Mr.  Herman  is a private
investor,  as well as president and chief  operating  officer of the Kansas City
Royals  Baseball  Team.  From 1974 until his retirement in 1990, Mr. Herman held
various  positions at Marion  Laboratories,  Inc. (now Hoechst Marion  Roussel),
including executive vice president and chief financial officer.  Currently,  Mr.
Herman serves as chairman of the finance  committee of the Ewing Marion Kauffman
Foundation, a private foundation located in Kansas City, where from 1985 through
1990,  he was the president and chief  operating  officer.  Mr. Herman is also a
member of the board of directors of Cerner Corporation, Seafield Capital and SLH
Corporation,  all of which  are  public  companies,  and  serves on the board of
directors of several private companies.

     IRVING S. JOHNSON  joined the Board in 1989.  Dr. Johnson is an independent
consultant in biomedical research working with numerous private companies.  From
1953 until his  retirement in 1988,  Dr.  Johnson held various  positions at Eli
Lilly and Company,  including  vice  president of research from 1973 until 1988.
Dr.  Johnson  also  served on  several  committees  of the  National  Academy of
Sciences,  the Office of Technology  Assessment  and the National  Institutes of
Health.  Currently,  he is a  member  of  the  board  of  directors  of  Allelix
Biopharmaceuticals Inc. and Ligand Pharmaceuticals  Incorporated,  and is on the
scientific  advisory  board  of  ELAN  Corporation,  all  of  which  are  public
companies.  Dr.  Johnson  received a Ph.D.  in  developmental  biology  from the
University of Kansas.

     ANTONIE  T.  KNOPPERS  joined  the  Board  in  1991.  Dr.  Knoppers  is  an
independent management  consultant.  From 1952 until his retirement in 1975, Dr.
Knoppers held various positions at Merck & Co., Inc., including vice chairman of
the board and president and chief operating officer. Dr. Knoppers is a member of
the board of directors of Centocor,  Inc., a public  biotechnology  company.  In
addition,  he is a former  chairman  of the U.S.  Council  of the  International
Chamber  of  Commerce  and  a  member  of  the  advisory  board  of  PaineWebber
Development Corporation, an affiliate of PaineWebber Incorporated.  Dr. Knoppers
received a
                                       11
<PAGE>


M.D. from the University of Amsterdam and a Ph.D. from the University of Leiden,
The Netherlands.

     MELVIN I. SIMON,  a founder of the Company,  has served as a director since
its inception.  Dr. Simon, a molecular  geneticist,  is a member of the National
Academy of Sciences. Currently, Dr. Simon is chairman of the Division of Biology
at the  California  Institute  of  Technology  where he has been a member of the
faculty  since 1982.  Previously,  Dr.  Simon was a member of the faculty in the
Department of Biology at the  University  of  California,  San Diego.  Dr. Simon
received a Ph.D. in biochemistry from Brandeis University. Dr. Simon also serves
as a director of The Agouron Institute.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS

     Section 16(a) of the Exchange Act requires the Company's executive officers
and  directors,  and persons who own more than 10% of a registered  class of the
Company's  equity  securities,  to file  reports  of  ownership  and  changes in
ownership with the Commission and The Nasdaq Stock Market.  Executive  officers,
directors  and  greater  than  10%   shareholders  are  required  by  Commission
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.  Based  solely on review of the  copies  of such  forms  furnished  to the
Company, or written  representations that no Forms 5 were required,  the Company
believes that, during the applicable  reporting period ending June 30, 1998, all
Section  16(a)  filing  requirements   applicable  to  its  executive  officers,
directors and greater than 10% beneficial owners were satisfied.

ITEM 11.      EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

    Non-employee members of the Board receive cash compensation in the amount of
$250 per Board meeting for their services as Board members, and are eligible for
reimbursement  of their  expenses  incurred  to  attend  each  such  meeting  in
accordance   with  Company  policy.   In  addition  to  meeting  fees,   certain
non-employee   directors  received  consulting  fees  during  fiscal  1998.  For
scientific consultation, Dr. Abelson received $30,040; Dr. Knoppers, $6,000; Dr.
Johnson,  $18,750 and Dr. Simon,  $26,900. For special  consultation  concerning
corporate development issues, Mr. Cohen received $18,250 and Mr. Herman received
$750.


                                       12
<PAGE>


COMPENSATION OF EXECUTIVE OFFICERS

     The following table sets forth the aggregate  compensation  paid or accrued
by the Company to the Chief Executive  Officer and to the four other most highly
compensated  executive officers whose annual compensation  exceeded $100,000 for
the  fiscal  year  ended  June  30,  1998  (collectively  the  "named  executive
officers")  for service  during the fiscal years ended June 30,  1998,  1997 and
1996:

                                            SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>

                                                                                    Long-Term
                                                                                  Compensation
                                              Annual Compensation                    Awards(2)
        Name                                  -------------------                    ------
     Principal                                                                        Stock             All Other
     Position                     Year        Salary(1)         Bonus                Options          Compensation(3)
     --------                     ----        ------            -----                -------          ------------

<S>                              <C>        <C>              <C>                      <C>               <C>    
Peter Johnson                    1998       $ 395,000        $ 230,000                40,000            $ 2,998
President and Chief              1997         330,000          165,000               100,000              2,250
Executive Officer                1996         285,000          100,000               180,000              1,647

Marvin R. Brown(4)               1998         230,000           65,000                10,000              2,400
Vice President,                  1997          23,523                0                     0                  0
President of Alanex              1996              --               --                    --                 --                     
Gary E. Friedman                 1998         212,500          100,000                17,000             11,232
Corporate Vice President,        1997         195,000           70,000                26,000              2,250
General Counsel                  1996         175,500           50,000                50,000              1,589

Barry D. Quart(5)                1998         230,000          125,000                21,000              2,713
Senior Vice President,           1997         180,000          115,500(5)             44,000              2,953
Regulatory Affairs               1996         165,000           70,500(5)             72,000             16,587

R. Kent Snyder(5)                1998         230,000          150,000                21,000              3,050
Senior Vice President,           1997         200,000          102,000(5)             44,000              2,250
Commercial Affairs               1996         178,500           62,200(5)             64,000              1,777
</TABLE>

---------------------
(1) Includes  amounts  deferred out of  compensation under the Company's 401(k)
    Plan  otherwise  payable in cash during each fiscal year.
(2) The Company has made no restricted stock awards,  has not granted any stock
    appreciation rights and has no other long-term incentive plans.
(3)  (a) During  1998,  the  Company  made  matching  contributions  to the
         Company's 401(k) Plan in the following  amounts:  Mr. Johnson,  $2,998;
         Dr. Brown,  $2,400; Mr. Friedman,  $3,063;  Dr. Quart,  $2,713; and Mr.
         Snyder $3,050.
     (b) During  1997, the Company made matching contributions to the Company's
         401(k) Plan in the following amounts: Mr. Johnson, $2,250; Mr. Friedman
         $2,250; Dr. Quart, $2,953; and Mr. Snyder, $2,250.
     (c) During 1996, the Company made matching  contributions  to the Company's
         401(k)  Plan  in  the  following  amounts:  Mr.  Johnson,  $1,647;  Mr.
         Friedman, $1,589; Dr. Quart, $1,959; and Mr. Snyder, $1,777.
     (d) During 1996, the Company  reimbursed Dr. Quart for relocation  costs in
         the amount of $14,628.  
     (e) During 1998,  Mr.  Friedman  sold accrued but unused vacation  back to
         the Company in the amount of $8,169.
(4) Dr. Brown joined the Company  in May 1997 with the  acquisition  of Alanex 
    Corporation.  
(5) For Dr. Quart and Mr. Snyder, a portion of the bonus amount was subsequently
    used to partially repay their outstanding relocation loans. These loans were
    paid in full on June 30, 1997.

                                       13
<PAGE>



     The  following  table  sets  forth  certain  information  with  respect  to
individual  grants of stock  options  made during the fiscal year ended June 30,
1998, to each of the named executive officers:

                                           OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>

                                                                                     Potential Realizable Value at
                                                                                       Assumed Annual Rates of
                                                                                       Stock Price Appreciation
                            Individual Grants                                              for Option Term(2)
---------------------------------------------------------------------------------    -----------------------------   
                                            % of Total
                                              Options
                                            Granted to
                                             Employees
                                 Options     in Fiscal     Exercise    Expiration
    Name                        Granted(1)     Year         Price        Date             5%                10% 
------------                   ------------  ----------   ---------  -----------     -----------      -----------

<S>                            <C>             <C>        <C>            <C>             <C>          <C>       
Peter Johnson                  30,145#         2.70%      $30.4375       6/29/08         $577,035     $1,462,320
                                9,855*         0.88        30.4375       6/29/08          188,644        478,061



Marvin R. Brown                   145#         0.01        30.4375       6/29/08            2,776          7,034
                                9,855*         0.88        30.4375       6/29/08          188,644        478,061



Gary E. Friedman                7,145#         0.64        30.4375       6/29/08          136,769        346,601
                                9,855*         0.88        30.4375       6/29/08          188,644        478,061



Barry D. Quart                 11,145#         1.00        30.4375       6/29/08          213,337        540,639
                                9,855*         0.88        30.4375       6/29/08          188,644        478,061


R. Kent Snyder                 11,145#         1.00        30.4375       6/29/08          213,337        540,639
                                9,855*         0.88        30.4375       6/29/08          188,644        478,061
</TABLE>

------------------------
(1)  During  fiscal 1998,  the Agouron  Stock Option Plan ("Plan") for executive
     officers and directors was administered by the Board. The Board, based upon
     the recommendation of the Directors Compensation Committee,  determines the
     number  of  shares  to be  granted  and the  term of  such  grants  to each
     executive  officer and  director.  The options  granted in fiscal 1998 were
     either incentive stock options(*) or non-statutory  stock options(#),  have
     exercise prices equal to the fair market values on the date of grant,  vest
     over a period of three  years and have a term of ten  years.  Upon  certain
     corporate  events  as  defined  in the Plan  which  result  in a change  of
     control,  the exercise date of all  outstanding  options for all employees,
     including executive officers, may be accelerated. The Plan also permits the
     Company to assist an  employee  in using a  so-called  "cashless"  exercise
     procedure to pay the option exercise price.
(2)  Potential  realizable  value is based on an assumption that the stock price
     of the  Common  Stock  appreciates  at the annual  rate  shown  (compounded
     annually) from the date of grant until the end of the ten year option term.
     These numbers are calculated based on the  requirements  promulgated by the
     Securities  and  Exchange  Commission  and do  not  reflect  the  Company's
     estimate of future stock price  growth.  Any such growth would  benefit all
     shareholders.

                                       14
<PAGE>



     The  following  table sets forth certain  information  with respect to each
exercise of stock options during the fiscal year ended June 30, 1998, by each of
the named  executive  officers and the number and value of  unexercised  options
held by such named executive officers as of June 30, 1998:

                                          OPTION EXERCISES IN FISCAL 1998
                                       AND VALUE OF OPTIONS AT JUNE 30, 1998
<TABLE>
<CAPTION>

                                                             Number of Unexercised          Value of Unexercised
                                                                  Options at              In-the-Money Options at
                           Shares                              June 30, 1998(2)              June 30, 1998(1)      
                                                          --------------------------    ---------------------------
                         Acquired on         Value
      Name                 Exercise        Realized       Exercisable  Unexercisable     Exercisable  Unexercisable
    --------               --------        --------       -----------  -------------     -----------  -------------

<S>                       <C>            <C>               <C>           <C>           <C>             <C>        
Peter Johnson             125,000        $5,692,095        596,923       205,767       $ 11,290,804    $ 1,312,900

Marvin R. Brown             2,500            85,744         17,845        17,325            538,428        221,014

Gary E. Friedman            1,000            24,188        241,599        61,001          4,988,364        348,337

Barry D. Quart             32,000         1,233,037        133,266        89,334          1,982,900        513,000

R. Kent Snyder             12,500           406,045        168,932        81,668          2,983,727        392,673

</TABLE>

---------------------
(1)  Value  calculated as market value of Company stock on June 30, 1998,  minus
     exercise  price  multiplied by the number of shares

(2)  Adjusted  to reflect  the  two-for-one  stock  split in the form of a stock
     dividend in August 1997.


                                       15
<PAGE>


COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION(1)

OVERVIEW AND PHILOSOPHY

     The Directors Compensation Committee (the "Committee") is composed entirely
of  outside   directors   and  is   responsible   for   developing   and  making
recommendations   to  the  Board  with  respect  to  the   Company's   executive
compensation  policies and practices,  including the establishment of the annual
total compensation for the chief executive officer (the "CEO") and all executive
officers.  The Committee has available to it an outside compensation  consultant
and  access to  independent  compensation  data.  The Board is  responsible  for
approving and implementing the  compensation  recommendations  of the Committee.
The  recommendations  made by the  Committee  to the Board have  generally  been
approved without any significant modification.

     The  objectives  of the  Company's  executive  compensation  program are to
attract,  retain  and  motivate  highly  qualified  executive  personnel.  These
objectives  are  satisfied  through  the  use of  three  principal  compensation
elements: base salary, cash bonus payments and stock options.

BASE SALARY

     Base salary  levels for the Company's  executive  officers are based on the
concept  of pay  for  performance  and are  competitively  set  relative  to the
compensation of other executives in the biotechnology industry. Extensive salary
survey data is  available on the industry  (notably,  the annual  "Biotechnology
Compensation and Benefits Survey" conducted by Radford  Associates and Alexander
& Alexander  Consulting  Group) and is utilized by the Committee in establishing
annual base salaries. In determining base salaries, the Committee also considers
corporate  performance  and progress in the immediately  preceding  fiscal year,
individual experience and performance, specific issues which are relevant to the
Company  and  general  economic  conditions.  The base salary of the CEO and all
other executive officers is reviewed annually. During fiscal year 1998, the base
salaries paid to the executive officers other than the CEO approximated the 75th
percentile of the above-noted industry survey data.

BONUS PAYMENTS

     Annual cash bonus payments are  discretionary.  Bonus payments,  if any, to
executive  officers,  including  the CEO,  are based on two  principal  factors:
corporate  performance as compared to the Company's  annual goals and objectives
and  individual  performance  relative to corporate  performance  and individual
goals and objectives.

     Bonus payments in 1998 were generally in recognition of the satisfaction of
several  significant   corporate  objectives  during  the  year,  including  the
establishment of the Company's first product,  VIRACEPT(R) (nelfinavir mesylate)
as the market leader among all HIV protease

------------------------
(1) The material in this report is not soliciting material, is not deemed filed
with the SEC, and is not incorporated by reference in any filing of the Company
under the Securities Act of 1933 (the "Securities Act"), as amended, or the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended, whether made
before or after the date of the Proxy Statement and irrespective af any general
incorporation language in such filing.
                                       16
<PAGE>


 inhibitors, the in-licensing of three development stage compounds to supplement
the Company's  internal R&D pipeline,  the  continued  preclinical  and clinical
development of the Company's  cancer and anti-viral  agents and the satisfaction
of all significant financial targets for fiscal 1998.

     Bonus payment recommendations for executive officers other than the CEO are
initiated by the CEO and submitted to the  Committee  for review and  subsequent
submission to the Board. Bonus payment recommendations for the CEO are initiated
by the Committee and submitted to the Board.

     Total  base  salary  and  any  bonus   payments   are  compared  to  "total
compensation" of peers as reported by the previously noted industry survey. Such
total  compensation for the executive officers of the Company is at or above the
averages of such data,  which reflects the Committee's  belief that the relative
levels of corporate performance during the period were also above average.

STOCK OPTIONS

     To conserve its cash  resources,  the Company  places  special  emphasis on
equity-based  incentives to attract,  retain and motivate  executive officers as
well as other  employees.  Under the Company's  stock option  plans,  grants are
generally  priced at the fair  market  value on the date of  grant,  vest over a
period of three or four years and have a term of ten  years.  Grants are made to
all  employees  on their date of hire based on salary  level and  position.  All
employees,   including   executive   officers,   are  eligible  for  subsequent,
discretionary grants which are generally based on either individual or corporate
performance.  It is the  Committee's  intent that the interests of the Company's
shareholders  and the executive  officers be closely  aligned through the use of
stock options.  Option grants  recommended by the Committee are submitted to the
Board for  approval.  Based on recent  peer-company  proxy data  compiled by the
Company,  the level of option grants to each  executive  officer in 1998 remains
competitive,  and the  resultant  total  option  position  as a percent of total
shares outstanding represents  approximately the 70th to 90th percentile of such
positions.

CHIEF EXECUTIVE OFFICER COMPENSATION

     During 1998, Mr.  Johnson's base salary of $395,000 was based on individual
and corporate performance,  and approximated the average of the updated industry
data for base salaries of CEOs.

     During 1998,  Mr. Johnson was awarded a bonus of $230,000 in recognition of
the  satisfaction of several  significant  corporate  objectives,  including the
establishment  of  VIRACEPT(R)  as the number one HIV protease  inhibitor in the
United States with product sales in the United States of $358 million for fiscal
1998.   The  Committee   believes  that  Mr.  Johnson  has  made  a  significant
contribution during 1998 in enhancing shareholder value and establishing a sound
base for the continued  enhancement of shareholder  value through his managerial
and entrepreneurial efforts.

                                       17
<PAGE>



     The stock options awarded to Mr. Johnson during fiscal 1998 are competitive
and consistent  with the purpose of the stock option plans.  The resultant total
option   position  as  a  percent  of  total   shares   outstanding   represents
approximately the 75th percentile for peer CEO positions.

EXECUTIVE COMPENSATION DEDUCTION LIMITATIONS

     In 1993, Section 162(m) of the Internal Revenue Code ("Section 162(m)") was
enacted which  disallows the  deductibility  by the Company of any  compensation
over $1 million  per year paid to each of the chief  executive  officer  and the
four  other  most  highly  compensated   executive   officers,   unless  certain
performance-based   compensation  criteria  are  satisfied.   While  it  is  the
Committee's firm belief and intent that  compensation  from base salary and cash
bonus  payments will not approach the annual  Section  162(m)  limitation in the
foreseeable future, additional "compensation" from the exercise of option grants
pursuant  to the  Company's  stock  option  plans  could  result  in the  annual
limitation being exceeded. Accordingly, the Company's 1990 and 1996 Stock Option
Plans contain certain provisions which exempt  compensation  resulting from such
option exercises from the $1 million limitation.  The Committee will continue to
monitor all forms of compensation  to its executive  officers to ensure that the
Company may maximize the tax benefits of such compensation.

Directors Compensation Committee

     Michael E. Herman, Chairman
     John N. Abelson, Ph.D.
     A. E. Cohen

DIRECTORS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The  Directors  Compensation  Committee  is composed  exclusively  of three
outside  directors:  Mr. Herman,  Mr. Cohen and Dr. Abelson.  The Company is not
aware of any Committee interlocks.


                                       18
<PAGE>


PERFORMANCE MEASUREMENT COMPARISON(1)

The chart set forth below shows the value of an  investment  of $100 on June 30,
1993  in the  Existing  Common  Stock,  The  Nasdaq  Stock  Market  Index  (U.S.
Companies) ("Nasdaq Market (US)") and the Nasdaq  Pharmaceuticals Index ("Nasdaq
Pharmaceuticals").  The total  returns  assume the  reinvestment  of  dividends,
although cash dividends have not been declared on the Existing Common Stock. The
Existing Common Stock is traded on The Nasdaq Stock Market and is a component of
both  the  Nasdaq  Market  (US)  and  the  Nasdaq   Pharmaceuticals  Index.  The
comparisons in the chart are required by the Securities and Exchange  Commission
and  are  not  intended  to  forecast  or be an  indicator  of  possible  future
performance of the Company's Common Stock.

[OBJECT OMITTED]
-------------
                         6/30/93  6/30/94  6/30/95  6/30/96  6/30/97  6/30/98
                         -------  -------  -------  -------  -------  -------

Agouron Common Stock     $100.00  $112.50  $236.26  $390.00  $808.76  $606.20
Nasdaq market (US)        100.00   100.96   134.77   173.03   210.38   277.69
Nasdaq Pharmaceuticals    100.00    83.65   111.03   163.50   166.34   170.68

----------------
(1)  This  section is not  "soliciting  material,"  is not deemed filed with the
     Securities  and  Exchange  Commission  and  is not  to be  incorporated  by
     reference  in any filing of the  Company  under the  Securities  Act or the
     Exchange Act.


                                       19
<PAGE>


ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth  information as of October 19, 1998 relating
to the  beneficial  ownership  of the  Existing  Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the outstanding  shares
of the Company's Common Stock,  (ii) each director,  (iii) each of the executive
officers named in the Summary  Compensation  Table below, and (iv) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
                                                                                  Beneficial Ownership(1)         
                                                                         Number of                 Percentage of
         Beneficial Owner                                                 Shares(9)                    Total    
------------------------------                                        ---------------              -------------
<S>                                                                    <C>                              <C>   
     Wellington Management Co.                                         5,196,000                        16.61%
         75 State Street, Boston, MA 02109
     T. Rowe Price                                                     2,420,000                         7.74%
         100 E. Pratt St., Baltimore, MD 21202
     Peter Johnson(2)                                                    706,533                         2.22%
     Gary E. Friedman(2) Family Trust(8)                                 294,123                         *
     John N. Abelson(2)(3)(6)                                            102,943                         *
     Patricia M. Cloherty(2)                                              27,659                         *
     A. E. Cohen(2)                                                       73,333                         *
     Michael E. Herman(2)(4)                                              83,333                         *
     Irving S. Johnson(2)                                                 41,933                         *
     Antonie T. Knoppers(2)                                               51,533                         *
     Melvin I. Simon(2)(3) and Linda F. Simon Living Trust(5)            122,843                         *
     Marvin R. Brown                                                     194,995                         *
     Barry D. Quart                                                      152,481                         *
     R. Kent Snyder(7)                                                   175,035                         *
All executive officers and directors as a group (19 persons)           2,706,671                         8.14%
</TABLE>
-------------------
*    less than 1%.
(1)  Unless otherwise  indicated,  the persons named in the above table exercise
     sole voting and investment  powers with respect to all shares  beneficially
     owned by them, subject to applicable community property laws. The number of
     shares  beneficially owned includes the following number of shares issuable
     upon  exercise of stock options  exercisable  within 60 days of October 19,
     1998: Mr.  Johnson,  596,923 shares;  Mr.  Friedman,  241,599  shares;  Dr.
     Abelson,  33,333 shares;  Ms. Cloherty,  13,333 shares;  Mr. Cohen,  43,333
     shares;  Mr.  Herman,  39,333  shares;  Dr.  Johnson,  15,833  shares;  Dr.
     Knoppers,  43,333  shares;  Dr. Simon,  33,333  shares;  Dr. Brown,  23,077
     shares;  Dr. Quart,  117,266 shares;  Mr. Snyder,  168,932 shares;  and all
     executive officers and directors as a group, 1,952,280 shares.
(2)  Director.
(3)  Does not include 1,106,000 shares held by The Agouron  Institute,  of which
     Drs. Abelson and Simon are directors.  As directors,  they share voting and
     investment powers as to the shares held by The Agouron Institute.
(4)  Includes 20,000 shares held by the Herman Family Trading Company,  a family
     partnership of which Mr. Herman is the general partner,  10,000 shares held
     by Vail  Fishing  Partners in which Mr.  Herman has a 50%  general  partner
     interest  and  2,000  shares  held by Mrs.  Herman,  of  which  Mr.  Herman
     disclaims any beneficial ownership.
(5)  Shared voting and investment power.
(6)  Includes  2,350  shares  held by Dr.  Abelson  as  custodian  for his minor
     children, of which Dr. Abelson disclaims any beneficial ownership.
(7)  Includes 800 shares held by immediate  family  members, of which Mr. Snyder
     disclaims any beneficial ownership.
(8)  Includes 5,408 shares held by wife as custodian for minor children of which
     Mr. Friedman disclaims any beneficial ownership.
(9)  Adjusted  to reflect  the  two-for-one  stock  split in the form of a stock
     dividend in August 1997.

                                       20
<PAGE>



ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     All transactions with affiliates have been and will continue to be on terms
no less  favorable  to the  Company  than could be  obtained  from  unaffiliated
parties.  Furthermore, all transactions with affiliates and any loans to Company
officers,  affiliates  or  shareholders  must be  approved  by a majority of the
disinterested directors.

     As permitted by California law, the Articles of Incorporation and bylaws of
the Company  currently  provide for the  limitation  of director  liability  for
monetary  damages for breach of duty to the Company and for  indemnification  of
agents (including  officers and directors) to the fullest extent permitted under
the  California   General   Corporation   Law.  The  Company  has  entered  into
Indemnification Agreements with all of its directors and officers. Additionally,
the Company has in effect a directors and officers  liability  insurance  policy
which insures  directors  and officers of the Company  against loss arising from
claims made against them due to wrongful  acts while acting in their  individual
and collective capacities as directors and officers.


                                       21
<PAGE>


                                     PART IV


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

 (A)          LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:

              (1)     Financial Statements and Supplementary Data
                      Reference is made to the Index to Financial Statements and
                      Schedules  under  Item 8 in Part II  hereof,  where  these
                      documents are listed.
              (2)     Exhibits - see (c) below

 (B)          REPORTS ON FORM 8-K

     No reports on Form 8-K were filed during the fourth quarter of fiscal 1998.

(C)           EXHIBITS

         Exhibit
         Number                             Exhibit
         -------      --------------------------------------------------------- 
           2.1(a)     Agreement and Plan of Reorganization dated as of April 28,
                      1997,  between  Agouron  Pharmaceuticals,   Inc.,  Agouron
                      Acquisition Corporation and Alanex Corporation.
           3.1(b)     Restated Articles of Incorporation (December 10, 1992).
           3.2(c)     Amended and Restated Bylaws (Restated June 17, 1991).
           4.1(d)     Rights  Agreement  dated  November 7, 1996,  as amended on
                      November  27,  1996,  between the Company and Chase Mellon
                      Shareholder  Services.  L.L.C., which includes, as Exhibit
                      A,  the  Certificate  of  Determination,  Preferences  and
                      Rights of Series B Participating  Preferred Stock as filed
                      with the  California  Secretary  of State on November  20,
                      1996.
         10.01(h)     1990 Stock Option Plan (Restated November 2, 1995).
         10.02(k)     Form of 1990 Incentive Stock Option Agreement.
         10.03(k)     Form of 1990 Non-Statutory Stock Option Agreement for
                      Employees/Officers/Directors.
         10.04(k)     Form of 1990 Non-Statutory Stock Option Agreement for 
                      Consultants.
         10.05(c)     1985 Stock Option Plan (Last Amended August 14, 1991).
         10.06(e)     Agouron Pharmaceuticals, Inc. 401(k) Plan (Amended August
                      1992).
         10.07(b)     Agouron Pharmaceuticals, Inc. Employee Stock Purchase Plan
                      (October 15, 1992).
         10.08(b)     Agouron Pharmaceuticals, Inc. Flexible Benefits Plan
                      (December 10, 1992).
         10.09(f)     Agreement  Two  dated  February  28,  1994  between  Japan
                      Tobacco  Inc.  and  the  Company.
                      (Portions of the agreement receive confidential  treatment
                      pursuant to an application  filed April 25, 1994; File No.
                      0-15609).

                                       22
<PAGE>


        Exhibit
        Number                             Exhibit                             
        -------       ----------------------------------------------------------
         10.10(g)     Development  and License  Agreement dated December 1, 1994
                      between  Japan  Tobacco Inc. and the Company  (Portions of
                      the agreement receive  confidential  treatment pursuant to
                      an application dated January 31, 1995).
         10.11(h)     First  Amendment  to  Development  and  License  Agreement
                      effective  December 1, 1994 between Japan Tobacco Inc. and
                      the Company.  (Confidential  treatment has been  requested
                      for portions of this agreement  pursuant to an application
                      dated January 31, 1996. The underlying agreement was filed
                      as  Exhibit  10.54  on  Form  10-Q  for the  period  ended
                      December  31,   1994,   and   portions   thereof   receive
                      confidential   treatment  pursuant  to  an  order  of  the
                      Securities and Exchange Commission dated June 28, 1995.)
         10.12(i)     Amendment effective January 1, 1996 to the Agouron 
                      Pharmaceuticals, Inc. 401(k) Plan.
         10.13(j)     1996 Stock Option Plan.
         10.14(j)     Form of 1996 Incentive Stock Option Agreement.
         10.15(j)     Form  of  1996  Non-Statutory Stock Option  Agreement  for
                      Employees/Officers/Directors.
         10.16(j)     Form  of  1996  Stock  Option Agreement for Consultants
         10.17(l)     Second Amendment to Development and License Agreement 
                      effective January 17, 1997 between Japan   Tobacco  Inc.
                      and  the  Company.(Confidential treatment   has  been 
                      requested  for  portions  of  this agreement  pursuant to
                      an  application  dated  August 21, 1997, as separately
                      filed with the Securities and Exchange  Commission.  The
                      underlying agreement was filed as Exhibit 10.54 on 
                      Form 10-Q for the period ended December 31, 1994,
                      and  portions  thereof  receive   confidential   treatment
                      pursuant  to an  order  of  the  Securities  and  Exchange
                      Commission dated June 28, 1995.)
         10.18(l)     Third  Amendment  to  Development  and  License  Agreement
                      effective  December 1, 1996 between Japan Tobacco Inc. and
                      the Company.  (Confidential  treatment has been  requested
                      for portions of this agreement  pursuant to an application
                      dated  August  21,  1997,  as  separately  filed  with the
                      Securities   and  Exchange   Commission.   The  underlying
                      agreement  was filed as Exhibit 10.54 on Form 10-Q for the
                      period  ended  December 31,  1994,  and  portions  thereof
                      receive confidential treatment pursuant to an order of the
                      Securities and Exchange Commission dated June 28, 1995.)
         10.19(l)     VIRACEPT License  Agreement  between the Company and Japan
                      Tobacco Inc. and F.  Hoffmann-La  Roche Ltd dated June 30,
                      1997.  (Confidential  treatment  has  been  requested  for
                      portions  of this  agreement  pursuant  to an  application
                      dated  August  21,  1997,  as  separately  filed  with the
                      Securities and Exchange Commission.)
         10.20(m)     Form of 1998 Employee Stock Option Plan.
         10.21(m)     Form of 1998 Employee Non-Statutory Stock Option 
                      Agreement.


                                       23
<PAGE>


         Exhibit
         Number                             Exhibit
         -------      ----------------------------------------------------------
         10.22        License and Supply Agreement between the Company and Japan
                      Energy   Corporation   effective  as  of  June  30,  1998.
                      (Confidential treatment has been requested for portions of
                      this agreement  pursuant to an application dated August 4,
                      1998, as separately filed with the Securities and Exchange
                      Commission.)
         10.23        Common  Stock  Purchase   Agreement   between  The  Immune
                      Response  Corporation and the Company dated June 11, 1998.
                      (Confidential treatment has been requested for portions of
                      this agreement  pursuant to an application dated August 4,
                      1998, as separately filed with the Securities and Exchange
                      Commission.)
         10.24        Amendment to the VIRACEPT  License  Agreement  between the
                      Company and Japan  Tobacco Inc. and F.  Hoffmann-La  Roche
                      Ltd as of May 1, 1998.  (Confidential  treatment  has been
                      requested  for portions of this  agreement  pursuant to an
                      application dated August 4, 1998, as separately filed with
                      the Securities and Exchange Commission.)
         21*          Subsidiaries of Agouron Pharmaceuticals, Inc.
         23.1*        Consent of Independent Accountants.
         27*          Financial  Data  Schedule.  (Exhibit 27 is  submitted  as
                      an exhibit  only in the  electronic format of this Annual
                      Report  on Form  10-K  submitted  to the  Securities  and
                      Exchange Commission.)
         99*          Important Factors Regarding Forward-Looking Statements.

 ----------------------
(a)  Incorporated by Reference to Form 8-K filed on May 23, 1997.
(b)  Incorporated  by  Reference  to Form 10-Q filed for the quarter  ended
     December 31, 1992.
(c)  Incorporated by Reference to Form 10-K filed for the
     year ended June 30, 1991.  
(d)  Incorporated  by  Reference  for Form 8-K/A
     filed on December  20,  1996.  
(e)  Incorporated  by Reference to Form 10-K
     filed for the year ended June 30, 1992.  
(f)  Incorporated  by Reference to
     Form 10-Q/A filed for the quarter ended March 31, 1994. 
(g)  Incorporated by
     Reference to Form 10-Q filed for the quarter ended  December 31, 1994.  
(h)  Incorporated by Reference to Form 10-Q filed for the quarter ended December
     31, 1995. 
(i)  Incorporated by Reference to Form 10-Q filed for the quarter
     ended March 31, 1996.  
(j)  Incorporated  by Reference to Form S-8 filed on
     November  26,  1996.  
(k)  Incorporated  by  Reference to Form 10-Q for the
     quarter ended December 31, 1996. 
(l)  Incorporated by Reference to Form 10-K
     for the year ended June 30, 1997. 
(m)  Incorporated by Reference to Form S-8
     filed on February 19, 1998.

* - Previously filed.

                                       24
<PAGE>


                                   Signatures

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
                          
                                   AGOURON PHARMACEUTICALS, INC.



October 28, 1998                   By:  /s/ Steven S. Cowell              
                                        ----------------------------
                                   Steven S. Cowell
                                   Corporate Vice President
                                   Chief Financial Officer


                                       25
<PAGE>


                                  Exhibit Index


         Exhibit
         Number                             Exhibit
         -------      ----------------------------------------------------------
         10.22        License and Supply Agreement between the Company and Japan
                      Energy   Corporation   effective  as  of  June  30,  1998.
                      (Confidential treatment has been requested for portions of
                      this agreement  pursuant to an application dated August 4,
                      1998, as separately filed with the Securities and Exchange
                      Commission.)
         10.23        Common  Stock  Purchase   Agreement   between  The  Immune
                      Response  Corporation and the Company dated June 11, 1998.
                      (Confidential treatment has been requested for portions of
                      this agreement  pursuant to an application dated August 4,
                      1998, as separately filed with the Securities and Exchange
                      Commission.)
         10.24        Amendment to the VIRACEPT  License  Agreement  between the
                      Company and Japan  Tobacco Inc. and F.  Hoffmann-La  Roche
                      Ltd as of May 1, 1998.  (Confidential  treatment  has been
                      requested  for portions of this  agreement  pursuant to an
                      application dated August 4, 1998, as separately filed with
                      the Securities and Exchange Commission.)
         21*          Subsidiaries of Agouron Pharmaceuticals, Inc.
         23.1*        Consent of Independent Accountants.
         27*          Financial  Data  Schedule.  (Exhibit 27 is  submitted  as 
                      an exhibit  only in the  electronic format of this  Annual
                      Report  on Form  10-K  submitted  to the  Securities  and
                      Exchange Commission.)
         99*          Important Factors Regarding Forward-Looking Statements.


         * - Previously filed.



                                       26
<PAGE>