SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 1998

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to ________.

                           COPLEY PHARMACEUTICAL, INC.
             (Exact name of registrant as specified in its charter)

                               Delaware 04-2514637
        (State or other jurisdiction of (IRS Employer Identification No.)
                         incorporation or organization)

                               25 John Road 02021
                        Canton, Massachusetts (Zip Code)
                    (Address of principal executive offices)

                         Commission file number: 0-20126

       Registrant's telephone number, including area code: (781) 821-6111


     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_______

The number of shares outstanding of the registrant's only class of common
stock as of August 3, 1998 was 19,176,861 shares.

<PAGE>


                          COPLEY PHARMACEUTICAL, INC.
                                      INDEX
                     For the Six Months Ended June 30, 1998

                         PART I. FINANCIAL INFORMATION          PAGE NO.

Item 1.  Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets as of June 30,
           1998 and December 31, 1997                               3

         Condensed Consolidated Statements of Operations
           and Comprehensive Income  for the three and six          4
           months ended June 30, 1998 and 1997

         Condensed Consolidated Statements of Cash Flows
           for the six months ended June 30, 1998 and 1997          5

         Notes to Condensed Consolidated Financial Statements     6 - 10

Item 2.  Management's Discussion and Analysis of Results of
           Operations and Changes in Financial Condition         11 - 14

PART II.                             OTHER INFORMATION

Item 1.  Legal Proceedings                                          15

Item 4.  Submission of Matters to a Vote of Security Holders        15

Item 6.  Exhibits and Reports on Form 8-K                           15

         Signature                                                  16






















                                       2

<PAGE>


                          PART 1. FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements
<TABLE>
                                                COPLEY PHARMACEUTICAL, INC.
                                           CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                    June 30,        December 31,
  (In thousands, except share data)                                   1998              1997
  -------------------------------------------------------------------------------------------------
                                                                    (Unaudited) 
  <S>                                                          <C>             <C>
  ASSETS
  Current assets:
      Cash and cash equivalents                                $       12,974  $      13,847
      Available-for-sale securities                                    19,465         19,498
      Accounts receivable, trade, net                                  34,185         30,170
      Inventories:
          Raw materials                                                11,965          7,282
          Work in process                                               4,558          5,207
          Finished goods                                               11,983         10,797
                                                                  ------------   ------------
      Total inventories                                                28,506         23,286
      Current deferred tax assets                                       6,593          5,239
      Other current assets                                              6,094          4,189
                                                                  ------------   ------------
          Total current assets                                        107,817         96,229

  Property, plant and equipment, net                                   44,641         46,450
  Other assets                                                          3,015          3,065
                                                                  ------------   ------------
  Total assets                                                 $      155,473  $     145,744
                                                                  ============   ============

  LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities:
      Accounts payable, trade                                  $        5,276  $       2,583
      Accounts payable, related party                                  17,862         13,668
      Current portion of long-term debt                                   300            300
      Accrued compensation and benefits                                 1,679          1,275
      Accrued rebates                                                   7,492          9,071
      Accrued income taxes                                              4,206            374
      Current portion of accrued recall 
      related and litigation expenses                                   7,916          8,048
      Accrued expenses                                                    782            830
                                                                  ------------   ------------
          Total current liabilities                                    45,513         36,149

  Accrued recall related and litigation expenses                          ---          3,645
  Deferred tax liabilities                                              1,021            269
  Long-term debt                                                        4,800          4,800
                                                                  ------------   ------------
  Total liabilities                                                    51,334         44,863

   Shareholders' equity:
       Preferred stock, $.01 par value; authorized 
           3,000,000 shares; none issued                                  ---            ---
       Common stock, $.01 par value; authorized
           60,000,000 shares; issued 25,370,745 shares                    254            254
       Additional paid-in capital                                      78,144         78,063
       Unrealized holding loss on available-for-sale securities            (7)           (16)
       Retained earnings                                               38,292         35,133
       Treasury stock, at cost, 6,217,228 and 6,235,978 shares
           outstanding, respectively                                  (12,544)       (12,553)
                                                                  ------------    -----------
           Total shareholders' equity                                 104,139        100,881
                                                                  ------------    -----------
   Total liabilities and shareholders' equity                  $      155,473  $     145,744
                                                                  ============   ============
</TABLE>

The accompanying notes are an integral part of the Condensed Consolidated
Financial Statements.

                                       3
<PAGE>
<TABLE>

                                                COPLEY PHARMACEUTICAL, INC.
                                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
                                                   COMPREHENSIVE INCOME

                 (Unaudited)                                                                                 (Unaudited)
          For the three months ended                                                                   For the six months ended
                   June 30,                                                                                    June 30,
         1998                   1997              (In thousands, except per share data)           1998                   1997
     --------------         --------------                                                    --------------         --------------
 <C>                      <C>                     <S>                                       <C>                    <C>              
                                                  Net sales:
 $          18,924        $        17,223            Manufactured products                  $        35,118        $        32,757
            15,803                  8,277            Distributed products                            27,817                 18,559
     --------------         --------------                                                    --------------         --------------
            34,727                 25,500                 Net sales                                  62,935                 51,316

                                                  Cost of goods sold:
            13,693                 12,223            Manufactured products                           26,721                 25,193
            12,349                  6,429            Distributed products                            21,788                 14,446
     --------------         --------------                                                    --------------         --------------
            26,042                 18,652                 Cost of goods sold                         48,509                 39,639

             8,685                  6,848                     Gross profit                           14,426                 11,677

                                                  Operating expenses:
             2,228                  3,566            Research and development                         4,850                  6,249
             1,164                  1,051            Selling, marketing and distribution              2,425                  2,319
             1,496                  1,990            General and administrative                       2,779                  3,466
                15                  2,167            Recall related and litigation, net                 194                  2,366
               ---                    310            Restructuring                                      ---                    312
     --------------         --------------                                                    --------------         --------------
             3,782                 (2,236)                Income (loss) from operations               4,178                 (3,035)

               476                    350         Interest and other investment income                  906                    653
              (157)                   (68)        Interest expense                                     (319)                  (130)
                15                 (1,540)        Other income (expense), net                           (76)                (1,500)
     --------------         --------------                                                    --------------         --------------
             4,116                 (3,494)               Income (loss) before income taxes            4,689                 (4,012)

             1,360                 (1,980)        Provision (benefit) for income taxes                1,530                 (2,135)
     --------------         --------------                                                    --------------         --------------
 $           2,756        $        (1,514)        Net income (loss)                         $         3,159        $        (1,877)
     ==============         ==============                                                    ==============         ==============
                                                  Other comprehensive income, net of taxes
                 5                     8               Unrealized gains (loss) on securities             11                    (20)
                                                       Less: reclassification adjustment for
               ---                    ---                    gains included in net income                (2)                   ---
     --------------         --------------                                                    --------------         --------------
 $           2,761        $        (1,506)       Comprehensive income (loss)                $         3,168        $        (1,897)
     ==============         ==============                                                    ==============         ==============

                                                  Weighted average common shares
                                                      outstanding:
            19,154                 19,119               Basic                                        19,153                 19,119
            19,243                 19,119               Diluted                                      19,246                 19,119

                                                  Earnings (loss) per share:
             $0.14                 $(0.08)              Basic                                         $0.16                 $(0.10)
             $0.14                 $(0.08)              Diluted                                       $0.16                 $(0.10)
</TABLE>

The accompanying notes are an integral part of the Condensed Consolidated
Financial Statements.

                                                             4
<PAGE>


<TABLE>
                                                 COPLEY PHARMACEUTICAL, INC.
                                       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                     (Unaudited)
                                                                               For the six months ended
                                                                                       June 30,
  (In thousands)                                                               1998                1997
                                                                           --------------      -------------
  <S>                                                                    <C>                  <C>
  Cash flows from operating activities:
      Net income (loss)                                                  $        3,159       $      (1,877)
      Adjustments to reconcile net income (loss) to net cash provided by
          (used in) operating activities:
          Depreciation and amortization                                           3,521               3,628
          Realized losses (gains) on sales of assets                                  4                (116)
          Change in deferred taxes                                                 (602)                 90
      Changes in operating assets and liabilities:
         Decreases (increases) in assets:
          Accounts receivable                                                    (4,015)              1,920
          Inventories                                                            (5,220)                 67
          Other current assets                                                   (1,905)               (526)
          Other assets, net of amortization                                         (20)              1,324
         Increases (decreases) in liabilities:
          Accounts payable                                                        6,887              (3,756)
          Accrued income taxes                                                    3,832              (2,225)
          Accrued expenses                                                       (5,000)             (2,239)
                                                                            ------------        ------------
           Net cash provided by (used in) operating activities                      641              (3,710)
                                                                            ------------        ------------

  Cash flows from investing activities:
      Capital expenditures                                                       (1,664)               (649)
      Purchases of available-for-sale securities                                 (9,790)             (8,946)
      Proceeds from sales of available-for-sale securities                        2,410                 ---
      Proceeds from maturities of available-for-sale securities                   7,440               6,800
      Proceeds from sales of property, plant and equipment                          ---                 135
                                                                            ------------        ------------
           Net cash provided by (used in) investing activities                   (1,604)             (2,660)
                                                                            ------------        ------------

  Cash flows from financing activities:
      Issuance of common stock to Employee Stock Purchase Plan                       90                 113
                                                                            ------------        ------------
           Net cash provided by (used in) financing activities                       90                 113
                                                                            ------------        ------------

  Net increase (decrease) in cash and cash equivalents                             (873)             (6,257)
  Cash and cash equivalents at beginning of period                               13,847              15,974
                                                                            ------------        ------------
  Cash and cash equivalents at end of period                             $       12,974       $       9,717
                                                                            ============        ============
</TABLE>

The accompanying notes are an integral part of the Condensed Consolidated  
Financial Statements.

                                                             5
<PAGE>
                           COPLEY PHARMACEUTICAL, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                     For the six months ended June 30, 1998



Note A - General

In the opinion of Copley Pharmaceutical,  Inc. ("the Company"), the accompanying
condensed  consolidated  financial  statements  contain all normal and recurring
adjustments necessary to present fairly the financial position of the Company as
of June 30, 1998 and December 31, 1997,  the results of its  operations  for the
three and six months  ended June 30,  1998 and 1997,  and its cash flows for the
six months  ended June 30, 1998 and 1997.  While the Company  believes  that the
disclosures presented are adequate to make the information not misleading, these
consolidated  financial  statements should be read in conjunction with the Notes
included in the Company's  Form 10-K for the year ended  December 31, 1997.  The
results for the  three-month  and  six-month  period ended June 30, 1998 are not
necessarily  indicative  of the  results  that may be  expected  for any  future
period.

The  Company's  quarterly  and annual  operating  results are affected by a wide
variety of factors that could have a material  adverse  effect on the  Company's
business, financial condition, results of operations and stock price. Statements
in  this  Report  on  Form  10-Q  which  are  not  historical  facts,  so-called
"forward-looking statements", are made pursuant to the safe harbor provisions of
the Private  Securities  Litigation Reform Act of 1995.  Investors are cautioned
that all forward-looking  statements involve risks and uncertainties,  including
those  detailed  in the  Company's  filings  with the  Securities  and  Exchange
Commission.  See, for example, "Item 7. Management's  Discussion and Analysis of
Financial  Condition and Results of Operations - Risk Factors and Future Trends"
contained in the Company's Form 10-K for the year ended December 31, 1997.

Note B - Related Party Transactions

On July 18, 1995, Hoechst  Corporation  ("HC"), the Company's indirect 51% fully
diluted shareholder,  completed its purchase of Marion Merrell Dow, Inc. ("MMD")
and  changed  MMD's  name  to  Hoechst  Marion  Roussel,  Inc.  ("HMRI").   This
transaction resulted in a related party relationship between the Company and its
customer  Rugby  Laboratories  ("Rugby"),  which  was a  subsidiary  of MMD  and
subsequently a subsidiary of HMRI.  Effective  February 27, 1998, Rugby was sold
by HMRI to an unrelated third party.

In connection with HC's acquisition of its majority interest in the Company, the
Company is a party to a Product  Agreement with HC pursuant to which the Company
is afforded the opportunity under specified  conditions to distribute and market
the generic version of products sold by  Hoechst-Roussel  Pharmaceuticals,  Inc.
("HRPI"),  which was an indirect  majority-owned  subsidiary of HC. This Product
Agreement has an initial term of five years,  until  November 11, 1998, and will
continue until June 1, 1999. On January 1, 1996, HRPI was merged into HMRI. HMRI
has agreed to be bound by the  Product  Agreement  to the  extent  that HRPI was
bound;  that is, the Product  Agreement  continues  to be in effect for products
manufactured by the former HRPI but not for products  manufactured by HMRI prior
to the merger  with HRPI nor for  products  developed  by HMRI after  January 1,
1996. In furtherance of the Product Agreement, the Company and HMRI entered into
separate  contracts  relating to  specific  products  as these  products  became
available for generic  distribution.  These separate  contracts will continue in
effect  beyond  the  expiration  of the  Product  Agreement.  In order to assure
continuity of supply and to provide other competitive benefits,  the Company, in
1997,   renegotiated  the  distribution  contracts  relating  to  glyburide  and
micronized glyburide; as a result, the profit contribution of these products has
decreased.  In 1997 the Company  entered into an agreement to distribute  HMRI's
pentoxifylline  product.  As a result of these new distribution  contracts,  the
Company has incurred  increased royalty costs. For the six months ended June 30,
1998 and 1997, approximately $21.6 million and $13.7 million,  respectively,  of
generic  versions  of products  were  purchased  from HMRI under  these  Product
Agreements.

                                       6
<PAGE>
                         COPLEY PHARMACEUTICAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     For the six months ended June 30, 1998

The Company obtains its  comprehensive  general  liability,  product  liability,
excess liability and all risks property  insurance coverage through an insurance
and risk-sharing arrangement with HC and its parent, Hoechst  Aktiengesellschaft
("Hoechst AG"), and its various subsidiaries.  Insurance coverage is provided by
HC  through  its  wholly-owned  insurance  subsidiary,  as well  as by  external
parties.  The Company's total insurance expense for these insurance policies was
approximately  $2.3 million and $2.4 million,  respectively,  for the six months
ended June 30, 1998 and 1997.

During the six months  ended June 30, 1998 and 1997 the Company had net sales of
approximately   $0  and   $30,000,   respectively,   to  Wuxi  Chia  Tai  Copley
Pharmaceutical,  a  Chinese  company  whose  majority  owner is Chia Tai  Copley
Pharmaceutical of which the Company is a 49% partner.

In June 1997, the Company  discontinued  its  partnership  participation  in MIR
Pharmaceutical,  a partnership  formed to market and manufacture  pharmaceutical
products  in  Russia,  and  whose  senior  vice  president  was a member  of the
Company's  Board of Directors  until July 27, 1998. The Company will continue to
sell product through the MIR Pharmaceutical partnership.

Note C - Litigation and Contingencies

Albuterol Class Action Lawsuits
In connection  with the Company's  December 1993 and January 1994 product recall
of albuterol sulfate inhalation  solution,  0.5% ("albuterol"),  the Company has
been served with  complaints  in numerous  lawsuits in federal and state  court,
some of which are on behalf of numerous  claimants.  The plaintiffs  principally
seek  compensatory and punitive damages and allege that injuries and deaths were
caused  by  inhalation  of  allegedly   contaminated  product  manufactured  and
distributed by the Company.

     The federal court lawsuits were  consolidated in the United States District
Court for the District of Wyoming as a  multi-district  litigation for pre-trial
purposes  under the  caption  In Re:  Copley  Pharmaceutical,  Inc.  "Albuterol"
Products  Liability  Litigation.  The District  Court  certified a partial class
action for  determination  of liability  only and commenced a jury trial in June
1995. In August 1995,  prior to the  conclusion  of the jury trial,  the Company
entered into a settlement  agreement with the  representative  plaintiffs in the
class action lawsuit.  The settlement calls for the Company to receive a general
release of all non-death  claims in return for  contributions by the Company and
its insurers of a minimum of $65 million and a maximum of $130 million to settle
all non-death claims relating to the Company's  manufacture,  sale and recall of
albuterol.  An  additional  $20  million  is  allocated  under  the terms of the
settlement  as an estimate of the cost of  settling  claims by persons  alleging
wrongful  death,  which  claims are limited by the  settlement  to  compensatory
damages only and are subject to non-binding negotiation and arbitration.  Within
the Company's  minimum and maximum  contributions,  the amount to be paid by the
Company is subject to the number and seriousness of individual claims eventually
filed.  On November 15, 1995,  the District Court entered its Order giving final
approval of the settlement. This Order has become final and nonappealable.


     The settlement  agreement requires the $150 million maximum contribution to
be funded by an initial $50  million  cash  deposit  and  issuance of letters of
credit for the remaining balance,  to be held by the Albuterol  Settlement Trust
Fund  as  security  for  potential  future  payments.   The  Company  negotiated
agreements with its insurers pursuant to which the Company and its insurers have
agreed to pay defined  percentages of required  settlement  payments and related
expenses. During the third quarter of 1995, the Company paid $5.1 million to the
Albuterol  Settlement  Trust Fund and obtained  approximately  $17.1  million in
irrevocable stand-by letters of credit to cover its uninsured obligation to fund
the settlement  agreement.  The settlement  agreement required an additional $15
million cash deposit after the order  approving the settlement  became final and
nonappealable,  which  occurred in late  December  1996.  In January  1997,  the
Company made an additional  $2.25 million cash deposit and its stand-by  letters
of credit were  reduced by a like  amount.  The balance was funded by one of the
Company's insurers.  These cash contributions made by the Company totaling $7.35
million are nonrefundable pursuant to the terms of the settlement agreements.
      
                                 7
<PAGE>
                         COPLEY PHARMACEUTICAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     For the six months ended June 30, 1998

     In August  1997,  the Wyoming  District  Court  ordered the Company to make
additional cash deposits totaling $3.15 million to fund the Company's portion of
payments of settlement amounts for class action cases alleging wrongful death as
well as the settlement of opt-out cases,  legal fees and other related expenses.
The  Company's  stand-by  letters of credit  were  reduced  by a like  amount in
February  1998. In addition,  one of the Company's  insurers paid $17.85 million
and its letter of credit was released.

     Approximately  5,600 proofs of claim (including  approximately 360 alleging
wrongful  death) have been filed with the Special Master  appointed by the Court
to oversee the Albuterol  Settlement Trust Fund. The Special Master has approved
approximately  4,100 class action claims totaling  approximately $59 million. No
awards have been made to  approximately  1,300  non-death  class  action  claims
(including  approximately  700 which have been disallowed by the Special Master)
and the District Court has given these  claimants  additional time to supplement
their  claims.  In  addition,  approximately  840  clients  of  Jacoby & Meyers,
representing  nearly all of that  firm's  clients  who are not  alleging a death
caused by albuterol, have agreed to be treated as if they were class members and
class counsel have agreed that these claimants will be paid out of the Albuterol
Settlement Trust Fund. Based upon the Special Master's  classification  of these
claims,  these  Jacoby  & Meyers  claims  have a value  of  approximately  $11.5
million.

     Recourse to the remaining  letters of credit in the class action settlement
will not occur  until all  claims  are  processed  and  settlement  amounts  are
recommended  by the Special  Master,  and is  contingent on the number of claims
filed  within  certain  categories.  Although  the total  number of claims filed
against the  Albuterol  Settlement  Trust Fund is less than the number of claims
the  settling  parties  anticipated  would be  necessary  to require the maximum
funding of the  Albuterol  Settlement  Trust  Fund,  at this time the Company is
unable to  determine  how many of these  claims  will be awarded  damages by the
Special  Master  and,  if  awarded  damages,  how much will be given to  various
claimants.  In addition,  administrative fees and class action attorney fees and
expenses will be paid out of the Albuterol  Settlement  Trust Fund. On April 30,
1998 the Wyoming  District Court awarded  plaintiffs'  attorney $19.5 million in
attorney's fees and  approximately  $1.6 million in expense  reimbursement to be
paid by  claimants  and the  Company.  The  attorney's  fees and  expenses  were
previously  reserved as part of the Company's recall and litigation  accrual and
will not have a material  impact on the  current  year's  earnings.  The Company
cannot predict the total amount to be paid out of the Albuterol Settlement Trust
Fund.

     The settlement also is subject to certain other  contingencies and does not
cover certain  individuals  who  previously  opted out of the class action.  The
Company  continues  to be a  defendant  in lawsuits  that were  brought by or on
behalf of less than five people who properly opted out of the class action.

Grand Jury Investigation

On May 28, 1997, the Company announced that it had entered into a plea agreement
pursuant to which it agreed to waive  indictment and plead guilty to a one count
Information charging a violation of Title 18, United States Code, Section 371, a
conspiracy to defraud the United  States and one of its  agencies,  the Food and
Drug Administration ("FDA"). The Information alleged that Copley made changes in
the manufacturing processes for four drugs (only two of which,  procainamide 500
mg tablets and potassium  chloride tablets,  currently are being manufactured by
the  Company)  without  proper  notification  to the FDA and signed  false batch
records with respect to two of these drugs. As part of the plea  agreement,  the
Company agreed to pay a fine of $10.65  million plus interest,  $3.55 million of
which was paid in both June of 1997 and June of 1998,  with the remainder due in
June 1999.  The plea was accepted by the United  States  District  Court for the
District of Massachusetts on June 19, 1997.

     The plea agreement  followed a nearly  three-year  investigation  and grand
jury subpoenas from the United States  Attorney's  Office in  Massachusetts  for
documents focusing particularly on albuterol and Brompheril(R)  products,  which
were recalled by the Company in December 1993 and September 1994,  respectively,
but extending beyond these products. The Company complied with the subpoenas and
cooperated  with  federal   authorities   throughout  the   investigation.   The
investigation   continues  with  respect  to  individuals,   some  of  whom  are
indemnified by the Company for legal fees and related expenses.

                                       8
<PAGE> 
                         COPLEY PHARMACEUTICAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     For the six months ended June 30, 1998

    Also on May 28, 1997 the  Company  announced  that it had  entered  into an
agreement  with the FDA  providing  for an  independent  audit of 20 of Copley's
ANDAs. The Company is cooperating  fully with the FDA, and the independent audit
commenced in July,  1997 has been  substantially  completed.  The FDA has agreed
that during this audit it will continue to review the Company's  pending  ANDAs,
accept new ANDAs from the  Company  and,  where  appropriate,  approve  Copley's
ANDAs.
 
    On  November  3, 1997 the Company  received  notification  that the Defense
Logistics  Agency  ("DLA") has  proposed  the Company be debarred  from  federal
government contracting and from directly or indirectly receiving the benefits of
certain federal  assistance  programs.  The reason for the proposed debarment is
the  Company's  guilty  plea  described  above.  The  Company  entered  into  an
administrative agreement with DLA, effective May 1, 1998, in lieu of debarment.

Marion Merrell Dow Inc. Bulk Diltiazem Lawsuit

In November of 1992,  a lawsuit was filed  against the Company by MMD and Tanabe
Seiyaku  Co.,  Ltd.  ("Tanabe")  in the  United  States  District  Court for the
District of  Massachusetts  captioned Marion Merrell Dow Inc. and Tanabe Seiyaku
Co., Ltd. v. Copley Pharmaceutical,  Inc. and Orion Corporation Fermion. MMD and
Tanabe  allege that the Company and Orion  Corporation  Fermion  ("Orion"),  the
manufacturer  of the Company's bulk  diltiazem,  are infringing a process patent
for one method of manufacturing bulk diltiazem. MMD and Tanabe have alleged that
they are the  exclusive  licensee and  patentee,  respectively,  of such process
patent.  The  complaint  seeks a permanent  injunction  and trebled  unspecified
monetary  damages.  The  Company has denied all  liability  in its answer to the
complaint. On May 10, 1993, the Court ordered the case administratively  closed,
staying the case until further  notice.  On June 27, 1995,  the parties  jointly
moved the Court for an Order  further  staying  the  action  until 30 days after
notification  of  completion  of  the  related  International  Trade  Commission
proceeding discussed below.

International Trade Commission Complaint

On February 25, 1993,  the Company,  together with a number of other  off-patent
pharmaceutical manufacturers and certain chemical manufacturers,  was named as a
respondent  in a  complaint  filed by MMD and Tanabe  before  the United  States
International Trade Commission ("the ITC") captioned Complaint of Marion Merrell
Dow Inc. and Tanabe Seiyaku Co., Ltd.  Pursuant to Section 337 of the Tariff Act
of 1930. The complaint  seeks an order (i) prohibiting the importation of, among
other things,  the bulk diltiazem  purchased by the Company from Orion, and (ii)
requiring the Company to immediately stop selling its current diltiazem product,
which  incorporates  bulk  diltiazem  supplied  by Orion,  based on the  alleged
infringement by Orion of a process patent for one method of  manufacturing  bulk
diltiazem.
 
    On June 1,  1995,  the ITC  issued  its Final  Determination  ordering  the
investigation  terminated with the finding of no violation of Section 337, of no
patent  infringement  and taking no position on the issue of patent validity and
enforceability. On July 20, 1995, MMD and Tanabe filed an appeal with the United
States  Court of Appeals for the  Federal  Circuit  seeking  review of the ITC's
Final  Determination.  On March 7, 1997,  the United States Court of Appeals for
the Federal  Circuit  affirmed the ITC's  decision  finding no  infringement.  A
further  appeal by MMD to the United  States  Supreme  Court was filed  and,  in
December 1997, the Supreme Court refused to grant MMD's application to appeal.
 
    Orion has agreed at its  expense to defend the  Company in this  action and
the MMD Bulk Diltiazem Lawsuit discussed previously and to indemnify the Company
for any  damages  that might be assessed  as a result of the  Company's  sale of
diltiazem  obtained  from  Orion.  Although  the  Company  believes  that  these
complaints  are  without  merit,  that the  Company  and Orion have  meritorious
defenses  to these  actions,  and  that  the  Company  should  prevail  in these
lawsuits,  there can be no  assurance  that the Company  will prevail or that an
adverse  outcome  would not have a  material  adverse  effect  on the  Company's
consolidated financial condition or results of operations.

                                       9
<PAGE>
                         COPLEY PHARMACEUTICAL, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
                     For the six months ended June 30, 1998

SmithKline Beecham Lawsuit

In August 1997,  the Company filed an ANDA for nabumetone  which  certified that
SmithKline  Beecham  Corporation's  ("SB")  patent  relating to  nabumetone  was
invalid and  unenforceable  and that the Company was entitled to manufacture and
sell  nabumetone  prior to the December 13, 2002  expiration of SB's  nabumetone
patent.  As a result,  on October 31, 1997 the Company was served with a summons
and  complaint  in a patent  infringement  action  entitled  SmithKline  Beecham
Corporation  and Beecham  Group  p.l.c.  v. Copley  Pharmaceutical,  Inc. in the
United States District Court for the District of Massachusetts. In their action,
plaintiffs  allege that because the Company seeks approval of its ANDA to engage
in the  commercial  manufacture,  use and sale of nabumetone as claimed in their
patent  before  the  patent's  expiration,   the  Company  has  infringed  their
nabumetone patent. Plaintiffs seek damages and an injunction against approval of
the Company's  nabumetone ANDA and its sale of nabumetone  prior to December 13,
2002.  The  manufacturer  and  supplier of the  nabumetone  that the Company has
designated  for use in its ANDA has agreed to defend the  Company in this action
and to indemnify  the Company for any damages that might be assessed as a result
of the Company's sale of nabumetone obtained from the manufacturer. Although the
Company  believes  that this  complaint  is without  merit and the  Company  has
meritorious  defenses  to these  actions,  there  can be no  assurance  that the
Company  will  prevail  or that an  adverse  outcome  would not have a  material
adverse effect on the Company's  consolidated  financial condition or results of
operation.

Other Legal Proceedings

The Company has $7.9 million of estimated  recall related and legal  contingency
reserves  accrued  at June  30,  1998.  These  reserves  reflect  the  Company's
estimates  of its  exposure at June 30, 1998 in its  various  legal  proceedings
described above.  Actual settlements  amounts may differ from amounts estimated.
In addition,  the Company from time to time is subject to claims  arising in the
ordinary course of business. While the outcome of the claims cannot be predicted
with  certainty,  management  does not expect  these  matters to have a material
adverse  effect on the results of  operations  and  financial  condition  of the
Company.

Note D - Debt

At June 30, 1998,  the Company had $11.7  million in stand-by  letters of credit
related to the Albuterol  Settlement  Trust Fund  outstanding  under its working
capital  line of credit  agreement.  Refer to Note C of the  Notes to  Condensed
Consolidated  Financial  Statements  for further  discussion  of the  Settlement
Agreement.






                                       10
<PAGE>


                           COPLEY PHARMACEUTICAL, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                       AND CHANGES IN FINANCIAL CONDITION

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

Results of Operations
<TABLE>

       Net Sales
---------------------------------------------------------------------------------------------------------------------
 For the quarter ended                            (In thousands)             For the six months ended
       June 30,                                                                       June 30,
  1998           1997       Change                 (Unaudited)                  1998           1997        Change
--------------------------------------------------------------------------------------------------------------------
  <C>           <C>            <C>            <S>                            <C>             <C>            <C>    
  $18,924       $17,223         9.9 %         Manufactured products          $35,118         $32,757         7.2%
   15,803         8,277        90.9 %         Distributed products            27,817          18,559        49.9%
----------     ---------                                                   ----------       ---------
  $34,727       $25,500        36.2 %            Net sales                   $62,935         $51,316        22.6%
--------------------------------------------------------------------------------------------------------------------
</TABLE>

Net sales for the second quarter of 1998 were $34.7 million, an increase of $9.2
million,  or 36.2%,  from the same period in 1997.  The Company's net sales were
$62.9 million for the six-month  period ended June 30, 1998 as compared to $51.3
million for the same period in 1997.  The  increase in net sales for the quarter
and six months ended June 30, 1998 resulted from new product introductions, most
notably pentoxifylline, and higher unit sales volumes which was partially offset
by continued price erosion. Additonally for the quarter ended June 30, 1998, the
Company  recognized an approximate $1.0 million benefit for sales allowances and
promotional  expenses  accrued in prior  quarters and whereby actual amount were
favorable to amounts estimated.
<TABLE>
   Gross Profit
-------------------------------------------------------------------------------------------------------------------------
  For the quarter ended                            (In thousands)                For the six months ended
        June 30,                                                                         June 30,
  1998             1997        Change                (Unaudited)                   1998             1997         Change
--------------------------------------------------------------------------------------------------------------------------
   <C>             <C>            <C>        <S>                                    <C>            <C>               <C>
   $5,231          $5,000          4.6%      Manufactured products                 $ 8,397         $ 7,564           11.0%
                                                 As a % of manufactured
     27.6%           29.0%                          products net sales                23.9%           23.1%

   $3,454          $1,848         86.9%      Distributed products                  $ 6,029         $ 4,113           46.6%
                                                 As a % of distributed
     21.9%           22.3%                          products net sales                21.7%           22.1%

   $8,685          $6,848         26.8%      Gross profit                          $14,426         $11,677           23.5%

     25.0%           26.9%                       As a % of net sales                  22.9%           22.8%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

The  Company's  gross profit was $8.7  million,  or 25.0% of net sales,  for the
second quarter of 1998 as compared to $6.8 million,  or 26.9% of net sales,  for
the same period in 1997.

For the six-month  period ended June 30, 1998,  the  Company's  gross profit was
$14.4 million,  or 22.9% of net sales,  as compared to $11.7 million or 22.8% of
net sales a year  earlier.  Increased  volume of both  manufactured  and the new
distributed  product  as  well  as  the  estimate   adjustment   contributed  to
maintaining margins despite falling prices.

                                       11
<PAGE>
                           COPLEY PHARMACEUTICAL, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                 AND CHANGES IN FINANCIAL CONDITION (CONTINUED)


<TABLE>
     Operating Expenses
     -------------------------------------------------------------------------------------------------------------------------
     For the quarter ended                            (In thousands)                  For the six months ended
            June 30,                                                                          June 30,
      1998           1997        Change                  (Unaudited)                    1998             1997         Change
     --------------------------------------------------------------------------------------------------------------------------
      <C>            <C>         <C>         <S>                                         <C>             <C>          <C> 
     $ 2,228         $3,566      (37.5)%     Research and development                    $4,850          $6,249       (22.4)%
        11.8%          20.7%                   As a % of net manufactured sales            13.8%           19.1%

     $ 1,164         $1,051       10.8%      Selling, marketing and distribution         $2,425          $2,319         4.6%
         3.3%           4.1%                   As a % of net sales                          3.9%            4.5%

     $ 1,496         $1,990      (24.8)%     General and administrative                  $2,779          $3,466       (19.8)%
         4.3%           7.8%                   As a % of net sales                          4.4%            6.8%

     $    15         $2,167      (99.3)%     Recall related and litigation, net          $  194          $2,366       (91.8)%
         0.0 %          8.5%                   As a % of net sales                          0.3%            4.6%

     $   ---         $  310       (100)%     Restructuring                                  ---          $  312        (100)%
         ---            1.2 %                   As a % of net sales                         ---             0.6%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Research  and  development  expenses  decreased  to $2.2  million for the second
quarter of 1998 as compared to $3.6 million for the same period of 1997. For the
six-month  period,  research  and  development  expenses  were $4.9  million  as
compared to $6.2 million reported in the prior year.  Significant  reductions in
product validation costs were the primary causes of this decrease.

Selling, marketing and distribution expenses increased 10.8% to $1.2 million for
the second  quarter of 1998 as compared  to $1.1  million for the same period of
1997. For the six-month  period,  selling,  marketing and distribution  expenses
increased 4.6% to $2.4 million compared to $2.3 million reported a year earlier.
The increase in selling, marketing and distribution expenses for the quarter and
six months ended June 30, 1998 resulted from new product introductions.

General and administrative  expenses were $1.5 million for the second quarter of
1998 as compared to $2.0 million for the same period in 1997.  For the six-month
period ended June 30, 1997,  general and  administrative  expenses  totaled $2.8
million  compared  to $3.5  million  a year  earlier.  This  decrease,  for both
periods,  was  primarily  attributable  to overall  cost  reductions,  including
significantly lower directors' and officers' insurance premiums,  and efficiency
improvements.

For the three and six month period ended June 30, 1997,  net recall  related and
litigation expenses consisted of the 1997 adjustment to the Company's reserve to
reflect the plea agreement with the  Massachusetts  U.S.  Attorney and resultant
fine,  and  other  uninsured   legal  expenses   incurred  by  the  Company  for
representation in its various legal proceedings. Refer to Note C of the Notes to
Condensed  Consolidated  Financial Statements for further discussion of the plea
agreement and the Company's other outstanding legal proceedings.

The  restructuring  charges recorded in 1997 primarily reflect a small reduction
in the Company's work force as part of its cost reduction initiatives.

                                       12
<PAGE>
                           COPLEY PHARMACEUTICAL, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                 AND CHANGES IN FINANCIAL CONDITION (CONTINUED)
<TABLE>
   Interest and Other Income (Expense)

--------------------------------------------------------------------------------------------------------------
 For the quarter ended                           (In thousands)      For the six months ended
       June 30,                                                              June 30,
   1998            1997       Change               (Unaudited)           1998           1997          Change
--------------------------------------------------------------------------------------------------------------
  <C>              <C>          <C>        <S>                          <C>             <C>           <C>     
                                           Interest and other
  $   476          $ 350         36.0%        investment income         $   906         $   653         38.7%

     (157)           (68)       130.9%     Interest expense                (319)           (130)       145.4%

       15         (1,540)      (101.0)%    Other income (expense)           (76)         (1,500)       (94.9)%

---------------------------------------------------------------------------------------------------------------
</TABLE>

Interest  and other  investment  income  increased  to  $476,000  for the second
quarter of 1998 as  compared to  $350,000  for the same period of 1997.  For the
six-month period,  interest and other investment income increased to $906,000 as
compared to $653,000 reported a year earlier. In both cases the increase was due
to increased average investment holdings.

Interest  expense  increased  to  $157,000  for the  second  quarter  of 1998 as
compared  to  $68,000  for the same  period of 1997.  For the  six-month  period
interest expense  increased 145.4% to $319,000 as compared to $130,000 for 1997.
The increase for both the quarter and the year were due primarily to the accrual
of interest relating to installments payable under the Company's plea agreement.
Refer to Note C of the Notes to Condensed  Consolidated Financial Statements for
further discussion of the Grand Jury settlement.  Other expenses of $1.5 million
for the six-month  period ended June 30, 1997 consisted  primarily of a one-time
charge  related  to the  Company's  decision  to  discontinue  its  funding of a
collaborative  effort  in the  field of  ophthalmology  and to  discontinue  its
partnership participation in MIR Pharmaceutical, a company formed to manufacture
and sell  pharmaceutical  products  in  Russia,  refer to Note B of the Notes to
Condensed  Consolidated  Financial  Statements  for further  discussion  of this
Related Party Transaction.
<TABLE>
   Taxes and Net Income (Loss)
---------------------------------------------------------------------------------------------------------------------
 For the quarter ended                        (In thousands)               For the six months ended
       June 30,                                                                    June 30,
  1998            1997         Change              (Unaudited)                   1998            1997         Change
----------------------------------------------------------------------------------------------------------------------
  <C>             <C>          <C>         <S>                                   <C>            <C>            <C>  
  $ 1,360         $(1,980)     (168)%      Income tax expense (benefit)          $ 1,530        $ (2,135)      (172)%
 
     33.0 %         (56.7)%                Effective tax rate                       32.6 %         (53.2)%

  $ 2,756         $(1,514)     (282)%      Net income (loss)                     $ 3,159         $(1,877)      (268)%
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Net income for the  second  quarter of 1998 was $2.8  million or $0.14 per share
compared to a net loss of $1.5 million or $0.08 per share for the second quarter
of  1997.  Net  income  for  1997  excluding  litigation  related  expenses  and
previously announced cost reduction initiatives would have been a profit of $0.2
million or $0.01 per share.

For the six-month period ended June 30, 1998, the Company reported net income of
$3.2 million or $0.16 per share as compared to net loss of $1.9 million or $0.10
per share for the same period in 1997.  Excluding  the unusual  items  described
above, 1997 earnings would have been a gain of $0.1 million,  or less than $0.01
per share.  The increase in adjusted  earnings  related  primarily to higher net
sales and lower research and development spending.

                                       13
<PAGE>
                           COPLEY PHARMACEUTICAL, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                 AND CHANGES IN FINANCIAL CONDITION (CONTINUED)

Changes in Financial Condition

Capital Resources and Liquidity
----------------------------------------------------------
                               June 30,      December 31,
In thousands                       1998              1997
----------------------------------------------------------
                            (Unaudited)
Cash and short-term
   investments                  $32,439           $33,345
Working capital                  62,304            60,080
Long-term debt                    4,800             4,800
Shareholders' equity            104,139           100,881
----------------------------------------------------------

Working  capital  increased $2.2 million from December 31, 1997 to $62.3 million
at June 30, 1998 primarily due to working capital generated from operations.

The Company  has a working  capital  line of credit  agreement  that  provides a
maximum borrowing  capacity of $30.0 million.  At June 30, 1998, the Company had
$11.7  million of stand-by  letters of credit  issued under this line of credit.
These  stand-by  letters of credit were obtained by the Company  pursuant to the
requirements  of the  Albuterol  Settlement  Trust  Fund to cover its  uninsured
obligation.  Recourse to the letters of credit are  contingent  on the number of
claims filed within  certain  categories and will not occur until all claims are
processed and settlement amounts are recommended by the Special Master. Refer to
Note C of the Notes to Condensed  Consolidated  Financial Statements for further
discussion of the Albuterol Class Action Lawsuits.

                                       14

<PAGE>

PART II.  OTHER INFORMATION

Item 1.       Legal Proceedings

See  descriptions  of legal  proceedings  in Note C of the  Notes  to  Condensed
Consolidated  Financial Statements in Part I of this Form 10-Q, which are hereby
incorporated by reference herein.

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

     (a) The Annual Meeting of  Shareholders  of the Company was held on May 28,
         1998.

     (b)(1) The following  individuals were elected or re-elected to
            the Board of Directors. The number of votes cast for each of
            the above directors was as follows:

                 Director              For              Withheld

             Robert P. Cook          16,285,301          132,199
             Jane C.I. Hirsh         16,282,996          134,504
             David A. Jenkins        16,286,743          130,757

     (c)(3) The  selection  of the firm of KPMG Peat Marwick LLP as
            auditors  for the fiscal year ending  December 31, 1998 was
            ratified by the following vote:

                                     Number of
                                       Shares

                    For             16,046,610
                    Against            359,694
                    Abstained           11,196


Item 6.  Exhibits and Reports on Form 8-K

         (a) Exhibits
              10.1   Agreement dated May 1, 1998 between The Company and the
                     Defense Logistics Agency ("DLA").

         (b) Reports on Form 8-K
               Form 8-K dated May 28, 1998 - Item 5: Other Events.  The Company
               announced the election results of its annual meeting, various  
               personnel changes and its decision not to renew its previously
               announced retention of CIBC Oppenheimer & Co.

               No other  reports  on Form 8-K were  filed  during the three 
               months ended June 30, 1998.

                                       15
<PAGE>



                                    SIGNATURE

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



         Signature                    Title                           Date

/s/  Daniel M. P. Caron      Vice President-Finance, Chief       August 14, 1998
------------------------    Financial Officer and Treasurer
     Daniel M. P. Caron    (principal financial and principal
                                   accounting officer)
                                  








                                       16