<PAGE>   1

                                THERATECH, INC.

                                   ----------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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

For the quarterly period ended SEPTEMBER 30, 1997

                                       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:   0-20063

                                 THERATECH, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            DELAWARE                                              87-0420511
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                   417 WAKARA WAY, SALT LAKE CITY, UTAH 84108
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (801) 588-6200
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


        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.

                                [X] YES    NO [ ]

        Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of October 31,
1997:

    CLASSES OF COMMON STOCK                   NUMBER OF SHARES OUTSTANDING
--------------------------------             ------------------------------
 Common Stock, $0.01 par value                          20,951,755


<PAGE>   2
                                THERATECH, INC.


                               INDEX TO FORM 10-Q



                         PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                               <C>
Item 1. Financial Statements                                                                     

        Condensed Consolidated Statements of Operations  --
        Three months ended September 30, 1997 and 1996, and nine months ended 
        September 30, 1997 and 1996................................................................ 3

        Condensed Consolidated Balance Sheets  --
        September 30, 1997 and December 31, 1996 .................................................. 4

        Condensed Consolidated Statements of Cash Flows  --
        Nine months ended September 30, 1997 and 1996 ............................................. 5

        Notes to Condensed Consolidated Financial Statements ...................................... 6

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations ............................................. 7

Item 3. Quantitative and Qualitative Disclosure about Market Risk
        Not applicable
</TABLE>

                          PART II - OTHER INFORMATION

<TABLE>
<CAPTION>
<S>                                                                                                <C>
Item 2. Changes in Securities and Use of Proceeds ................................................ 13

Item 6. Exhibits and Reports on Form 8-K ......................................................... 13
</TABLE>








                                  Page 2 of 14
<PAGE>   3

                                 THERATECH, INC.
                                -----------------
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED            NINE MONTHS ENDED
                                          SEPTEMBER 30,                SEPTEMBER 30,
                                   --------------------------    --------------------------
                                       1997          1996           1997           1996
                                   -----------    -----------    -----------    -----------
                                   (UNAUDITED)    (UNAUDITED)    (UNAUDITED)    (UNAUDITED)
<S>                                <C>            <C>            <C>            <C>        
Revenues:
    Research and development       $ 5,056,125    $ 4,644,650    $15,422,823    $13,413,503
    Product sales                    4,103,436      2,532,367     10,680,235      7,144,977
    Licensing                        1,500,000      1,075,000      1,845,000      2,060,000
    Interest and other                 393,562        333,797      1,144,406      1,142,186
                                   -----------    -----------    -----------    -----------
       Total revenues               11,053,123      8,585,814     29,092,464     23,760,666
Costs and expenses:
    Research and development         5,008,120      4,051,635     13,073,518     12,269,148
    Cost of products sold            2,749,597      1,639,149      7,559,779      5,740,323
    General and administrative       1,319,738      1,209,068      3,880,957      3,682,739
    Interest and other                 220,938        260,377        715,225        849,299
                                   -----------    -----------    -----------    -----------
       Total costs and expenses      9,298,393      7,160,229     25,229,479     22,541,509
                                   -----------    -----------    -----------    -----------
Net income                         $ 1,754,730    $ 1,425,585    $ 3,862,985    $ 1,219,157
                                   ===========    ===========    ===========    ===========
Net income per share               $      0.08    $      0.07    $      0.18    $      0.06
                                   ===========    ===========    ===========    ===========
Shares used in calculation
    of net income per share         21,720,161     21,593,435     21,620,652     21,688,750
                                   ===========    ===========    ===========    ===========
</TABLE>


                             See accompanying notes.











                                  Page 3 of 14
<PAGE>   4

                                 THERATECH, INC.
                                -----------------
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                      SEPTEMBER 30,    DECEMBER 31,
                                                                          1997           1996 (1)
                                                                      ------------     ------------
                                                                       (UNAUDITED)
<S>                                                                   <C>              <C>         
Current assets:
    Cash, cash equivalents and short-term investments(2)              $ 26,131,714     $ 23,214,410
    Contracts and accounts receivable                                    7,077,414        4,726,112
    Inventories                                                          2,129,213        2,277,021
    Prepaid expenses                                                       238,467           36,127
                                                                      ------------     ------------
       Total current assets                                             35,576,808       30,253,670
Investments in long-term securities(2)                                   1,000,000        2,000,468
Plant and equipment:
    Plant                                                                9,301,171        9,301,171
    Equipment                                                           14,801,571       11,950,618
    Leasehold improvements                                                 972,002          986,703
    Construction in progress                                             1,913,100        2,929,228
                                                                      ------------     ------------
                                                                        26,987,844       25,167,720
    Less accumulated depreciation and amortization                      (7,739,545)      (5,737,034)
                                                                      ------------     ------------
       Net plant and equipment                                          19,248,299       19,430,686
Other assets                                                             1,771,089        2,161,978
                                                                      ------------     ------------
              Total assets                                            $ 57,596,196     $ 53,846,802
                                                                      ============     ============
</TABLE>

                  LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
<S>                                                                   <C>              <C>
Current liabilities:
    Accounts payable and accrued liabilities                          $  3,569,329     $  3,744,210
    Current portion of notes payable and capital lease obligations       1,474,655        1,609,587
    Unearned revenue                                                     2,300,172        2,597,942
                                                                      ------------     ------------
       Total current liabilities                                         7,344,156        7,951,739

Notes payable and capital lease obligations, less current portion        7,560,666        8,660,744
Unearned revenue                                                         1,212,000        1,212,000

Commitments and contingencies

Stockholders' equity:
    Common stock                                                           209,506          205,634
    Additional paid-in capital                                          70,712,540       69,116,551
    Accumulated deficit                                                (29,198,178)     (33,061,163)
    Cumulative translation adjustment                                     (244,494)        (238,703)
                                                                      ------------     ------------
       Total stockholders' equity                                       41,479,374       36,022,319
                                                                      ------------     ------------
              Total liabilities and stockholders' equity              $ 57,596,196     $ 53,846,802
                                                                      ============     ============
</TABLE>


                             See accompanying notes.

----------
(1) Derived from audited financial statements.
(2) TheraTech's total cash position as of September 30, 1997 and December 31,
    1996 was $27,131,714 and $25,214,878, respectively, which includes cash,
    cash equivalents, and short- and long-term investments.



                                  Page 4 of 14
<PAGE>   5

                                 THERATECH, INC.
                                -----------------
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               NINE MONTHS ENDED
                                                                                 SEPTEMBER 30,
                                                                         -----------------------------
                                                                             1997             1996
                                                                         ------------     ------------
                                                                          (UNAUDITED)      (UNAUDITED)
<S>                                                                      <C>              <C>         
OPERATING ACTIVITIES:
Net income                                                               $  3,862,985     $  1,219,157
Adjustments to reconcile net income to net cash and cash equivalents
 provided by (used in) operating activities:
    Depreciation and amortization                                           2,090,350        1,753,281
    Compensation expense related to the grant of stock options                      -              955
    Changes in operating assets and liabilities:
         Contracts and accounts receivable                                 (2,351,302)         899,844
         Inventories                                                          147,808         (356,846)
         Prepaid expenses                                                     111,745          239,874
         Accounts payable and accrued liabilities                            (174,881)      (1,919,455)
         Unearned revenue                                                    (297,770)         682,066
                                                                         ------------     ------------
Net cash provided by operating activities                                   3,388,935        2,518,876
INVESTING ACTIVITIES:
Increase in investments, net                                               (4,898,481)        (384,459)
Purchase of plant and equipment                                            (1,876,233)      (3,766,120)
Other assets                                                                  359,159         (156,606)
                                                                         ------------     ------------
Net cash used in investing activities                                      (6,415,555)      (4,307,185)
FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and capital lease obligations               -          300,000
Proceeds from issuance of common stock, net                                 1,599,861        1,179,219
Payments of notes payable and capital lease obligations                    (1,549,095)      (2,005,240)
                                                                         ------------     ------------
Net cash provided by (used in) financing activities                            50,766         (526,021)
Effect of exchange-rate changes on cash and cash equivalents                   (5,791)         (81,524)
                                                                         ------------     ------------
Net decrease in cash and cash equivalents                                  (2,981,645)      (2,395,854)
Cash and cash equivalents at beginning of period                           19,116,991       14,554,352
                                                                         ------------     ------------
Cash and cash equivalents at end of period                                 16,135,346       12,158,498
Short-term investments                                                      9,996,368        8,914,846
                                                                         ------------     ------------
Cash, cash equivalents and short-term investments at end of period       $ 26,131,714     $ 21,073,344
                                                                         ============     ============
</TABLE>


                             See accompanying notes.


                                  Page 5 of 14
<PAGE>   6


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 1997


FINANCIAL STATEMENTS

In the opinion of management, the accompanying condensed consolidated financial
statements contain all normal recurring adjustments necessary to present fairly
the financial position of TheraTech, Inc. ("TheraTech" or the "Company") as of
September 30, 1997 and the results of its operations and cash flows for the
interim periods ended September 30, 1997 and 1996. The operating results for the
interim periods are not necessarily indicative of the results for a full year.
For further discussion of TheraTech's accounting policies, refer to the
Company's audited financial statements for the year ended December 31, 1996.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of
TheraTech and its wholly-owned subsidiaries Nippon TTI K.K. ("TheraTech Japan")
and Natrapac, Inc. ("Natrapac"). All significant intercompany accounts and
transactions have been eliminated.

NEW ACCOUNTING STANDARD

In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share". This statement replaces the previous standard Accounting
Principles Board ("APB") Opinion No. 15, "Earnings per Share". Effective for
periods ending after December 15, 1997, SFAS No. 128 requires companies to
report both "basic" and "diluted" earnings per share. "Basic" earnings per share
does not include the addition of common stock equivalents to the shares
outstanding. "Diluted" earnings per share requires the addition of common stock
equivalents to the shares outstanding. Average shares outstanding is the
denominator used in "basic" earnings per share calculations. Accordingly,
"basic" earnings per share will be higher than "diluted" earnings per share. For
TheraTech, "diluted" earnings per share under the new standard is approximately
equivalent to "primary" earnings per share under APB No. 15, which has
historically been reported. The impact of SFAS No. 128 on TheraTech's earnings
per share is not expected to be significant.

INVENTORIES

At September 30, 1997, inventories are stated at the lower of cost or market and
consist of the following:

                         Raw materials      $1,979,662
                         Work in process        53,825
                         Finished goods         95,726
                                            ----------
                                            $2,129,213
                                            ==========

REVENUES

The Company has entered into various collaborative research and development,
product licensing and marketing agreements with certain pharmaceutical companies
("Collaborative Partners"). These agreements provide for TheraTech to receive
payments in various forms, including licensing fees and other payments upon
execution of an agreement, milestone payments upon achievement of certain
technical and regulatory goals, and periodic payments in the form of cost
reimbursements for product development and clinical evaluation of a specified
product, including a portion of general and administrative expenses. Research
and development revenues and licensing fees are recognized as earned based on
terms in the specific contracts. Milestone payments are included in revenues in
the period in which the applicable milestone is achieved.

TheraTech has also entered into various product supply agreements to manufacture
products for certain Collaborative Partners. These agreements include provisions
for TheraTech to recognize product sales at the time TheraTech ships product to
the Collaborative Partner and/or at the time the Collaborative Partner ships
product to its customers. Unearned revenue relates to advances on future
revenues.




                                  Page 6 of 14
<PAGE>   7

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 1997
                                   (Continued)


COMMITMENTS AND CONTINGENCIES

TheraTech has entered into a purchase commitment with a commercial supplier for
material used in its manufacturing process. Subsequent to September 30, 1997,
TheraTech renegotiated a significant reduction in its purchase commitment with
this supplier. The terms are as follows: for 1997 $1,200,000; and for 1998
$1,750,000. Additionally, at its option, TheraTech may buy out the 1998
commitment for a one-time cash payment of $800,000.

In the ordinary course of business, various suits and claims are filed by and
against TheraTech. In the past, TheraTech's liability claims have not been
significant. The Company is not a party to any litigation, other than legal and
arbitration proceedings incurred in the ordinary course of business.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Since its inception in January 1985, TheraTech has devoted substantially all of
its resources to drug delivery research and development programs. TheraTech
develops advanced, controlled release drug delivery products which administer
drugs through the skin, by oral delivery to the gastrointestinal tract, through
tissues in the oral cavity, by pulmonary and by other means. TheraTech's product
development activities have been conducted independently or pursuant to
collaborative research and development agreements generally with pharmaceutical
companies ("Collaborative Partners"). For independently developed products,
TheraTech has entered into licensing, marketing and distribution agreements
generally with pharmaceutical companies to market TheraTech manufactured
products, or has transferred the technology to other companies. TheraTech
continues to devote substantial resources to the development of drug delivery
technologies and product development programs.

The Company has entered into various product development, licensing, marketing,
manufacturing and supply agreements with Collaborative Partners. Product
development and licensing agreements generally provide for TheraTech to receive
payments in various forms, including licensing fees and other payments upon the
execution of an agreement, milestone payments upon achievement of certain
technical and regulatory goals, and periodic payments in the form of cost
reimbursements for product development and clinical evaluation of a specified
product, including a portion of general and administrative expenses.

Manufacturing and supply agreements provide for TheraTech to manufacture and
transfer products to Collaborative Partners, which allows TheraTech to earn
product sales revenues in a variety of ways. In general, product sales represent
contract payments or sales to TheraTech's marketing partners for resale
purposes. Accordingly, TheraTech's product sales do not necessarily reflect the
existing or future market demand for such products. Product sales may be
recognized based on one or a combination of the following: (i) TheraTech's fully
burdened manufacturing cost; (ii) a fixed or variable manufacturing profit;
(iii) a royalty on the partners' product sales; and/or (iv) a transfer of
product where the price is based on a percentage of the marketing partners'
sales to their clients.

The Company's results of operations may vary significantly from quarter to
quarter and depend, among other factors, on the signing of new product
development agreements, the timing of fees and milestone payments made by
Collaborative Partners, the progress of clinical trials, product sales levels
and costs associated with the manufacturing processes. The timing of the
Company's research and development revenues may not match the timing of the
associated expenses. The amount of revenues in any given period is not
necessarily indicative of future revenues.



                                  Page 7 of 14
<PAGE>   8

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)


To date, three research and development programs have resulted in approved
products. In late December 1996, TheraTech received marketing clearance from the
United States Food and Drug Administration ("FDA") for the Alora(R) Estradiol
Transdermal System for women, the Company's second commercial product approved
in the United States. TheraTech's first commercial product in the United States
was the Androderm(R) Testosterone Transdermal System for men. Both marketing
clearances were received within one year of their respective initial
submissions. The testosterone transdermal system for men has also been approved
in certain European countries under different trade names. TheraTech also has a
nitroglycerin transdermal product which has been approved in certain European
countries and has been launched by TheraTech's marketing partners in France,
Greece, Holland and Italy.

Worldwide marketing rights (excluding certain Asian countries) have been granted
to Procter & Gamble Pharmaceutical, Inc. ("P&G") for TheraTech's estradiol
transdermal product, and its estradiol/progestin combination product (which is
currently in Phase III clinical trials). TheraTech began commercial production
of Alora in December 1996 and made its initial shipments of this product to P&G
in March 1997. The commercial launch of Alora commenced in the United States in
May 1997.

In September 1997, TheraTech announced that Astra AB ("Astra") had been granted
exclusive distribution and marketing rights to the Androderm transdermal
testosterone system for men in Germany, Austria and Switzerland. Previously,
TheraTech negotiated marketing agreements for its testosterone transdermal
system for men with several partners covering various countries. These partners
and countries include: SmithKline Beecham in the United States, Canada, Ireland
and the United Kingdom; Compania Espanola de la Penicilina y Antibioticos, S.L.
("CEPA") in Spain; Laborterapia - Produtos Farmaceuticos, S.A. ("Laborterapia")
in Portugal; Astra in Scandinavia; Wyeth-Ayerst International, Inc.
("Wyeth-Ayerst") in Mexico, Central and South America, non-French-speaking
Africa and the Middle East; Grelan Pharmaceutical Co., Ltd. ("Grelan") in Japan
and Samyang Corporation ("Samyang") in South Korea. TheraTech intends to assign
marketing rights in the remaining unassigned territories.

In May 1997, TheraTech and SmithKline Beecham announced that the FDA had cleared
the 5 milligram ("mg") Androderm patch for marketing in the United States. The
commercial launch of this 5 mg Androderm patch by SmithKline Beecham occurred in
the United States in June 1997. The original Androderm product was a two-patch
per day, 2.5 mg system. The new 5 mg Androderm patch restores testosterone
levels to a normal range by continuous delivery of testosterone for 24 hours in
a convenient one-patch per day formulation.

The 2.5 mg testosterone transdermal product has received approval and is
currently being marketed under the following trade names: Androderm, by
SmithKline Beecham in the United States and by Samyang in South Korea;
Andropatch(TM), by SmithKline Beecham in Ireland and the United Kingdom; and
Atmos(R), by Astra in Denmark, Finland and Sweden.

TheraTech was responsible for filing with the FDA the Alora New Drug Application
("NDA"), the Androderm 2.5 mg NDA and the Androderm 5 mg Supplemental New Drug
Application in the United States. In all other countries, TheraTech's partners
are responsible for filing and obtaining regulatory approvals to market these
products. The ability to market and the timing of a product launch in the
various countries is dependent, among other things, upon obtaining the necessary
regulatory approvals.



                                  Page 8 of 14
<PAGE>   9

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)


RESULTS OF OPERATIONS

For the three months ended September 30, 1997, TheraTech had net income of
$1,755,000, equal to $0.08 per share. This compares to net income of $1,426,000
or $0.07 per share during the three months ended September 30, 1996. The Company
had total revenues of $11,053,000 for the three months ended September 30, 1997
compared to $8,586,000 for the respective period in 1996.

For the nine months ended September 30, 1997, TheraTech had net income of
$3,863,000, or $0.18 per share. This compares to a net income of $1,219,000 or
$0.06 per share for the corresponding period in 1996. Total revenues
year-to-date were $29,092,000 compared to $23,761,000 for the corresponding
period in 1996.

RESEARCH AND DEVELOPMENT REVENUES were $5,056,000 and $4,645,000 for the three
months ended September 30, 1997 and 1996, respectively. During the 1997 quarter,
TheraTech earned a majority of its revenues from its collaborative development
programs involving the estradiol/progestin combination product, the oral
transmucosal ("OTM") delivery technology, the Androderm 5 mg product, Alora and
other product development programs. With the commercial launches of Alora in May
1997 and the Androderm 5 mg product in June 1997, major development activities
for these products were being completed. As a result, research and development
revenues for these products decreased in the 1997 quarter compared to the 1996
quarter. This decrease was offset by revenues generated from other product
development programs, including revenues recognized upon TheraTech entering into
an option agreement granting a third party rights to evaluate certain new
product opportunities for a limited time.

For the nine months ended September 30, 1997 and 1996, research and development
revenues were $15,423,000 and $13,414,000, respectively. Research and
development revenues in the 1997 period include cost reimbursements and/or
milestone payments for the following: (i) Phase III product development on the
estradiol/progestin combination product for P&G; (ii) technical support for the
Alora market launch, continuing estradiol development activities necessary for
foreign regulatory approval, along with stability studies and clinical trials
associated with the estradiol program; (iii) preclinical research and
development activities on the OTM delivery technology under the multi-product
collaboration with Eli Lilly and Company ("Lilly") signed in January 1997; (iv)
development activities on the 5 mg testosterone product for SmithKline Beecham
and other partners; and (v) other collaborative research and development
activities. Milestone payments received from Lilly and P&G along with revenue
from new and advancing collaborative programs are the principal reasons for the
increase in research and development revenues in the 1997 period over the 1996
period. During the nine months ended September 30, 1996, TheraTech earned
revenues from P&G for estradiol commercialization activities and for Phase II
studies on the estradiol/progestin combination product. TheraTech also earned
revenues from Grelan, SmithKline Beecham and Meiji Milk Products Co. ("Meiji")
during the 1996 period.

PRODUCT SALES for the three months ended September 30, 1997 were $4,103,000
compared to $2,532,000 for the 1996 quarter. Product sales in the 1997 quarter
consisted primarily of the testosterone transdermal system for men along with
revenues from Alora and the nitroglycerin product sold in Europe. During the
1996 quarter, product sales consisted primarily of the testosterone transdermal
system for men along with sales from a Natrapac client contract.

Product sales for the nine months ended September 30, 1997 were $10,680,000
compared to $7,145,000 during the corresponding period in 1996. TheraTech began
shipping initial supplies of Alora to P&G in March 1997, and retail distribution
and promotion to physicians by P&G began in May 1997. Also in May, TheraTech
began shipping initial supplies of the new Androderm 5 mg product to SmithKline
Beecham. Retail distribution and promotion to physicians of this product by
SmithKline Beecham began in June 1997. TheraTech also recorded sales of the
Nitroglycerin product in certain European countries reported by Lavipharm. As a
result, product sales increased in the 1997 year-to-date period. For the nine
months ended September 30, 1996, product sales consisted of the 2.5 mg
testosterone transdermal systems and revenues from the Natrapac client contract.



                                  Page 9 of 14
<PAGE>   10



                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)


LICENSING REVENUES were $1,500,000 and $1,075,000 for the three months ended
September 30, 1997 and 1996, respectively. During the 1997 quarter, TheraTech
granted distribution and marketing rights to Astra for the testosterone
transdermal system for men in Germany, Austria and Switzerland. P&G also
extended its marketing rights for the estradiol and estradiol/progestin
combination products into certain Asian countries. During the 1996 quarter,
TheraTech received payments for the achievement of milestones from SmithKline
Beecham for the approval to market Andropatch in the United Kingdom and from
Astra for the launch of Atmos in Sweden.

For the nine months ended September 30, 1997 and 1996, licensing revenues were
$1,845,000 and $2,060,000, respectively. During the 1997 period, TheraTech
earned licensing revenues from Astra and P&G as described above, from
Wyeth-Ayerst for the achievement of milestones under their testosterone product
licensing agreement, from Samyang under their estradiol product licensing
agreement, and from a Collaborative Partner for the use of a product trade name.
During the 1996 period, TheraTech earned licensing revenues from SmithKline
Beecham and Astra as described above, and by achieving milestones under product
licensing agreements with Wyeth-Ayerst and Samyang.

INTEREST AND OTHER REVENUES were $394,000 and $334,000 for the three months
ended September 30, 1997 and 1996, respectively, and consisted primarily of
interest income of $378,000 and $306,000, respectively. Interest income
increased during the 1997 quarter from the 1996 quarter due to higher average
balances in cash, cash equivalents and investments.

Interest and other revenues for the nine months ended September 30, 1997 and
1996 were $1,144,000 and $1,142,000, respectively, and primarily consisted of
interest income totaling $1,070,000 and $944,000, respectively. Interest income
increased during the 1997 period from the 1996 period due to higher average
balances in cash, cash equivalents and investments. Other revenues in both the
1997 and 1996 periods consisted primarily of intermediate materials sold to
Collaborative Partners.

RESEARCH AND DEVELOPMENT EXPENSES for the three months ended September 30, 1997
and 1996 were $5,008,000 and $4,052,000, respectively. Research and development
expenses for the nine months ended September 30, 1997 and 1996 were $13,074,000
and $12,269,000, respectively. The increase during the 1997 quarter is primarily
the result of contract and milestone payments made to Innovative Devices, LLC
for a patent allowed on a dry powder inhaler, along with other development costs
of the pulmonary delivery technology; preclinical development activities on the
OTM delivery technology; and clinical study and development costs on the
estradiol/progestin combination patch product. This increase was partially
offset by reductions in the Alora and 5 mg Androderm development programs which
have resulted in commercial products.

Research and development programs during the 1997 year-to-date period include
the following: (i) estradiol/progestin combination product development
activities, including certain Phase III clinical costs; (ii) preclinical
research and development on the pulmonary drug delivery technology; (iii)
continuing estradiol development activities necessary for foreign regulatory
approval, along with stability studies and clinical costs associated with the
program; (iv) preclinical research and development activities on the OTM drug
delivery technology; (v) Androderm 5 mg development and commercialization
activities including interactions with the FDA; (vi) Phase II clinical and
development activities for the female testosterone transdermal product; (vii)
Phase I development activities for the Meiji product; (viii) Phase I development
activities for the nicotine oral lozenge product; and (ix) various other
collaboratively and independently developed products and technologies.

COST OF PRODUCTS SOLD for the three months ended September 30, 1997 were
$2,750,000, compared to $1,639,000 for the 1996 quarter. Cost of products sold
for the nine months ended September 30, 1997 were $7,560,000, compared to
$5,740,000 for the 1996 period. These include direct and indirect manufacturing
costs attributable, in the 1997 year-to-date period to production of the
testosterone transdermal products and Alora, and in the 1996 year-to-date period
to the production of Androderm and the Natrapac client contract. Gross margin on
products sold improved to 29.2 percent for the nine months ended September 30,
1997, compared to 19.6 percent for the same period in 1996. This increase
resulted from increased revenues recognized on Collaborative Partners shipments
of products to their customers and improved production efficiencies.




                                 Page 10 of 14
<PAGE>   11

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)


GENERAL AND ADMINISTRATIVE EXPENSES for the three months ended September 30,
1997 and 1996 were $1,320,000 and $1,209,000, respectively. For the nine months
ended September 30, 1997 and 1996, general and administrative expenses were
$3,881,000 and $3,683,000, respectively. The increase in both comparative
periods is primarily due to outside services associated with business
development and the negotiation of several contracts.

INTEREST AND OTHER EXPENSES for the three months ended September 30, 1997 and
1996 were $221,000 and $260,000, respectively, and consisted primarily of
interest expense. The Company incurred interest expense of $217,000 and $260,000
for the three months ended September 30, 1997 and 1996, respectively, which
reflects monthly payments of principal and interest toward notes payable and
capital lease obligations.

Interest and other expenses for the nine months ended September 30, 1997 and
1996 were $715,000 and $849,000, respectively, which consisted primarily of
interest expense totaling $681,000 and $815,000, respectively. Other expenses in
both the 1997 and 1996 periods consisted primarily of intermediate materials
sold to Collaborative Partners.


LIQUIDITY AND CAPITAL RESOURCES

Since its inception, TheraTech has funded its operations primarily through
equity and debt financing, collaborative research and development agreements,
product sales, licensing fees and other revenues. As of September 30, 1997 and
December 31, 1996, TheraTech had cash, cash equivalents and investments totaling
$27,132,000 and $25,215,000, respectively. This increase was the result of cash
provided by operating activities and financing activities, partially offset with
cash used in investing activities (excluding the increase in short-term
investments) as reflected in the Condensed Consolidated Statements of Cash
Flows.

Net cash provided by operating activities for the nine months ended September
30, 1997 was $3,389,000 compared to $2,519,000 for the nine months ended
September 30, 1996. Cash provided in the 1997 period was primarily a result of
net income and adjustments of non-cash expenses for depreciation and
amortization, partially offset by an increase in contracts and accounts
receivable. Cash provided in the 1996 period was primarily a result of net
income and adjustments of non-cash expenses for depreciation and amortization,
partially offset by a decrease in accounts payable and accrued liabilities.

Net cash provided by operating activities in the current period is not
necessarily indicative of future levels. As a result of changing levels of
product sales and production costs, the timing of milestone payments and
licensing fees, and the timing of expenditures for new and existing product
development programs, net income and accordingly the levels of net cash from
operations will vary from period to period.

The Company's investing activities during the nine months ended September 30,
1997 used $6,416,000 compared to $4,307,000 for the 1996 period. Cash used in
the 1997 period was primarily for the purchase of short-term investments and for
the purchase of equipment. TheraTech evaluates its total cash position which
includes all investments. If the effect of net cash used for the purchase of
investments were removed, investing activities would have used $1,517,000. The
use of cash in investing activities was partially offset by the release of
$750,000 previously restricted as part of a financing agreement covenant. In
comparison, cash used in investing activities during the 1996 period was
primarily for the purchase of equipment for the commercial manufacturing
facility, along with additional research and development and office equipment.

Cash used in investing activities is primarily a function of capital
expenditures. The Company's future capital expenditure requirements will depend
upon numerous factors, including the progress of research and development
activities, the resources that the Company devotes to the independent
development of products and technologies, and the need for additional
manufacturing plant and equipment due to the demand for its other products, if
and when approved.



                                 Page 11 of 14
<PAGE>   12

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (Continued)


Net cash provided by financing activities for the nine months ended September
30, 1997 was $51,000 compared to net cash used of $526,000 for the nine months
ended September 30, 1996. Cash provided in the 1997 period was primarily the
proceeds from the issuance of stock in both the employee stock purchase plan and
the employee stock option plan, largely offset by payments on notes payable and
capital lease obligations. Cash used in the 1996 period was primarily for
payments on notes payable and capital lease obligations partially offset by
proceeds from the issuance of stock in both the employee stock purchase plan and
the employee stock option plan. The 1996 period also included a short-term note
with a client company. Based upon current expectations of operations and capital
expenditures for 1997, the Company anticipates that its available cash, cash
equivalents and investments plus anticipated revenues from collaborative
agreements, product licensing and sales, interest income and bank financing
should be sufficient to fund its current capital requirements and operating
activities.


RISK FACTORS AFFECTING EARNINGS AND STOCK PRICE

The statements contained in this Report on SEC Form 10-Q that are not purely
historical are "forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All forward looking statements involve various
risks and uncertainties. Forward looking statements contained in this Report
include statements regarding the assignment of marketing rights to the male
testosterone transdermal product in certain territories, and the Company's
ability to fund capital requirements and operating activities. Such forward
looking statements are included under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations." All forward looking
statements included in this Report are made as of the date hereof, based on
information available to TheraTech as of such date, and TheraTech assumes no
obligation to update any forward looking statement. It is important to note that
such statements may not prove to be accurate, and that the Company's actual
results and future events could differ materially from those anticipated in such
statements. Among the factors that could cause actual results to differ
materially include, without limitation, the following: the need to identify
marketing partners in foreign markets and to establish and maintain acceptable
contractual arrangements with these partners; dependence on third-party
marketing efforts; uncertainty regarding TheraTech's commercialization
opportunities and market acceptance; competitive and technological factors such
as new product or technology introductions by rival manufacturers and price
pressures; FDA and foreign governmental regulation; limited history of
large-scale manufacturing of newly approved products; and exposure to product
liability and infringement suits. Other factors are described under the heading
"Risk Factors Affecting Earnings and Stock Price" and elsewhere in the Company's
Report on Form 10-K, as filed with the Securities and Exchange Commission.



                                 Page 12 of 14
<PAGE>   13
                          PART II - OTHER INFORMATION


Item 2. Changes in Securities and Use of Proceeds

        On July 1, 1997, TheraTech issued 32,685 shares of its Common Stock to
        Innovative Devices, LLC ("IDL") in connection with a milestone event
        involving the allowance of a patent for a dry powder inhaler. The
        issuance was made pursuant to a technology purchase agreement entered
        into between TheraTech and IDL (the "IDL Agreement"). Pursuant to the
        IDL Agreement, the shares were contemporaneously transferred to the
        three owners of IDL. The stock was issued on the basis of $10.19 per
        share, the then applicable fair market value of the Common Stock as
        determined under the IDL Agreement. The sale was exempt from
        registration under the Securities Act of 1933 by virtue of Section 4(2)
        thereof. There was no underwriter involved in the foregoing transaction.

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits:

        11     Statement regarding computation of per share earnings.

        27.1   Financial Data Schedule for the nine months ended September 30,
               1997.

(b)     No reports were filed on Form 8-K during the quarter.




                                 Page 13 of 14




<PAGE>   14
                                THERATECH, INC.

                                  SIGNATURES


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


                                                   THERATECH, INC.
                                                   (Registrant)





Date:  November 7, 1997                     By:    DINESH C. PATEL
                                                   -----------------------------
                                                   Dinesh C. Patel, Ph.D.
                                                   Chairman, President and
                                                   Chief Executive Officer




Date:  November 7, 1997                     By:    ALEXANDER L. SEARL
                                                   -----------------------------
                                                   Alexander L. Searl
                                                   Senior Vice President and
                                                   Chief Financial Officer




                                 Page 14 of 14