- - --------------------------------------------------------------------------------
               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 December 31, 1998
                
                                          OR

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

                            Commission file number 1-9114

                               MYLAN LABORATORIES INC.
            (Exact Name of registrant as specified in its charter)

                  Pennsylvania                          25-1211621
         (State or other jurisdiction of            (I.R.S. Employer
          incorporation or organization)            Identification No.)

                  130 Seventh Street
             1030 Century Building
            Pittsburgh, Pennsylvania                      15222
   (Address of principal executive offices)             (Zip Code)

                                    412-232-0100
                (Registrant's telephone number, including area code)

                                   Not Applicable
        (Former name, former address and former fiscal year, if changed
          since last report)

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  twelve months (or for such shorter period that the Registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days:

                           YES   X                            NO

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

                                                             Outstanding at
      Class of Common Stock                                 February 11, 1999
      ---------------------                                 -----------------
         $ .50 par value                                       128,990,169
 -------------------------------------------------------------------------------











                       MYLAN LABORATORIES INC. AND SUBSIDIARIES


                                         INDEX


                                                                Page
                                                                Number
                                                               --------
PART I. FINANCIAL INFORMATION

        ITEM 1: Financial Statements
        Consolidated Statements of Earnings - Three and
           Nine Months Ended December 31, 1998 and 1997           2

         Consolidated Balance Sheets - December 31, 1998
           and March 31, 1998                                     3

        Consolidated Statements of Cash Flows - Nine
           Months Ended December 31, 1998 and 1997                4

        Notes to Consolidated Financial Statements -
           Nine Months Ended December 31, 1998                  5 - 8

        ITEM 2:       Management's Discussion and Analysis of
                      Financial Condition and Results of
                      Operations                                9 - 14


PART II. OTHER INFORMATION

        ITEM 1: Legal Proceedings                              14 - 16

        ITEM 6: Exhibits and Reports on Form 8-K                  16


SIGNATURES                                                        16






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                     (In thousands except per share amounts)

                                    UNAUDITED

                                                                            
                                   Three Months Ended  December 31,   Nine Months Ended  December 31,
                                        1998              1997             1998             1997
                                        ----              ----             ----             ----
REVENUES:
  Net Sales                           $186,195          $129,517          530,505         $365,838
  Other Revenues                          -                 -                -              26,822
                                      --------          --------          -------         --------
                                       186,195           129,517           30,505          392,660
COST AND EXPENSES:
  Cost of Sales                         86,479            75,077          253,591          207,657
  Research and Development              12,274             7,891           39,740           31,707
  Acquired In-Process Research
    and Development                     29,000               -             29,000              -
  Selling and Administrative            35,987            21,239           89,431           72,460
                                       --------          --------         --------          --------
                                       163,740           104,207          411,762          311,824
EQUITY IN EARNINGS OF SOMERSET           1,113             1,839            5,605            8,431
OTHER INCOME                             4,275             3,923           12,387           10,186
                                       --------          --------         --------         --------
EARNINGS BEFORE INCOME TAXES            27,843            31,072          136,735           99,453
INCOME TAXES                            19,689             9,089           57,184           30,482
                                       --------          --------         --------         --------
NET EARNINGS                          $  8,154          $ 21,983         $ 79,551         $ 68,971
                                       ========          ========         ========         ========
EARNINGS PER COMMON SHARE:
 Basic                                $    .06          $    .18         $    .64         $    .57
                                       ========          ========         ========         ========
 Diluted                              $    .06          $    .18         $    .63         $    .56
                                       ========          ========         ========         ========
WEIGHTED AVERAGE COMMON SHARES:
 Basic                                 128,644           122,127          124,449          122,074
                                       ========          ========         ========         ========
 Diluted                               130,339           123,413          126,075          123,185
                                       ========          ========         ========         ========

The Company has paid regular  quarterly cash dividends of
$.04 per share since October 1995.

                 See Notes to Consolidated Financial Statements









                                     -2-






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Amounts in thousands)

                                     ASSETS

                                                   December 31,       March 31,
                                                        1998            1998    
                                                     Unaudited         Audited 
                                                   ------------      -----------
Current Assets:                                                           
    Cash and cash equivalents                       $  188,114      $  103,756 
    Marketable securities                               17,061          20,967 
    Accounts receivable - net                          150,760         136,864 
    Inventories:                                                          
        Raw materials                                   62,563          63,308 
        Work in process                                 18,285          27,858 
        Finished goods                                  66,141          54,875 
                                                      ----------      ----------
                                                       146,989         146,041  
    Deferred income tax benefit                         15,636           7,845  
    Prepaid and refundable income tax                      154           7,946  
    Other current assets                                12,612           6,679  
                                                      ---------      ---------- 
           Total Current Assets                        531,326         430,098  
                                                                           
Property, Plant and Equipment - at cost                239,324         226,319  
    Less accumulated depreciation                       86,828          74,907  
                                                     ----------      ---------- 
                                                       152,496         151,412  
Marketable Securities, non-current                      21,270          20,974  
Investment in and Advances to Somerset                  32,192          29,721  
Intangible Assets-net of accumulated                                       
    amortization                                       328,217         128,745  
Other Assets                                            92,812          86,803  
                                                     ----------      ---------- 
Total Assets                                        $1,158,313      $  847,753  
                                                     ==========      ========== 
                                                              
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
    Trade accounts payable                         $   12,086       $   15,957
    Current portion of long-term obligations           19,195            8,477
    Income taxes payable                                3,247            5,377
    Other current liabilities                          50,354           36,635
    Cash dividend payable                               5,205            4,900
                                                     ----------       ----------
           Total Current Liabilities                   90,087           71,346
Long-Term Obligations                                  25,545           26,218
Deferred Income Tax Liability                          18,731            5,724
Shareholders' Equity:
    Preferred stock, par value $.50 per share,
    authorized 5,000,000 shares, issued and 
    outstanding - none Common stock, par value           -                 -
    $.50 per share, authorized 300,000,000 
    shares, issued 129,768,394 shares at
    December 31, 1998 and 123,050,172 
      shares at March 31,1998                          64,884           61,525
    Additional paid-in capital                        308,423           92,405
    Retained earnings                                 659,272          594,847
    Accumulated other comprehensive 
      (expense)income                                   (653)            1,570
                                                      ----------      ----------
                                                    1,031,926          750,347
   Less Treasury stock - at cost, 881,723 
      shares at
   December 31, 1998 and 849,858 
     shares at March 31, 1998                           7,976            5,882
                                                     ----------       ----------
Net Worth                                           1,023,950          744,465
                                                    -----------       ----------
Total Liabilities and Shareholders' Equity         $1,158,313       $  847,753
                                                    ===========       ==========

                 See Notes to Consolidated Financial Statements

                                       -3-






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                             (Amounts in thousands)

                                    UNAUDITED


                                                      1998              1997
                                                      ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES
    Net earnings                                        $ 79,551      $ 68,971
    Adjustments to reconcile net earnings to net
        cash provided from operating activities:
           Depreciation and amortization                  18,995        15,983
           Deferred income tax benefit                   (10,531)       (2,243)
           Equity in the earnings of Somerset             (5,606)       (8,431)
           Cash received from Somerset                     3,135         5,366
      Allowances on accounts receivable                   13,954         2,967
          Acquired in-process research and development    29,000           -
      Other non-cash items                                   154          (401)
        Changes in operating assets and liabilities:
           Accounts receivable                           (27,029)        4,042
           Inventories                                     1,049       (34,567)
           Trade accounts payable                         (4,338)       (3,043)
           Income taxes payable                            9,561       (11,316)
           Other operating assets and liabilities            256        (2,450)
                                                         --------      --------
Net cash provided from operating activities              108,151        34,878
CASH FLOWS FROM INVESTING ACTIVITIES
    Additions to property, plant and equipment           (11,267)      (19,703)
    Increase in intangible and other assets               (3,397)       (6,760)
    Proceeds from investment securities                   22,801        12,086
    Purchase of investment securities                    (20,611)      (12,489)
  Cost of acquisition net of cash acquired                 1,467          -
                                                         --------       ------
Net cash used in investing activities                    (11,007)      (26,866)
CASH FLOWS FROM FINANCING ACTIVITIES
    Payments on long-term obligations                     (6,673)       (4,187)
    Cash dividends paid                                  (14,679)      (14,651)
  Repurchase of common stock                                 -          (2,459)
    Proceeds from exercise of stock options                8,566         2,259
                                                         --------      --------
Net cash used in financing activities                    (12,786)      (19,038)
                                                         --------      --------
Net Increase(Decrease)in Cash and Cash Equivalents        84,358       (11,026)
Cash and Cash Equivalents - Beginning of Period          103,756       126,156
                                                         --------      --------
Cash and Cash Equivalents - End of Period               $188,114      $115,130
                                                         ========      ========
CASH PAID DURING THE PERIOD FOR:
    Interest                                            $    279      $  1,187
    Income Taxes                                        $ 58,157      $ 44,015

                 See Notes to Consolidated Financial Statements

                                -4-






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             NINE MONTH PERIOD ENDED
                                DECEMBER 31, 1998

                                    Unaudited

A.    In  the  opinion  of  management,  the  accompanying  unaudited  financial
      statements  contain all adjustments  (consisting of only normal  recurring
      accruals)  necessary  to present  fairly  the  financial  position  of the
      Company as of  December  31,  1998 and March 31,  1998  together  with the
      results  of  operations  and cash  flows  for the  interim  periods  ended
      December 31, 1998 and 1997. The consolidated results of operations for the
      three and nine months ended December 31, 1998 and 1997 are not necessarily
      indicative of the results to be expected for the full year.

B.    These interim financial  statements should be read in conjunction with the
      consolidated  financial statements and notes thereto in the Company's 1998
      Annual Report and Report on Form 10-K.

C.    Diluted  earnings  per common  share is computed by dividing  net earnings
      available to common  shareholders  by the weighted  average  common shares
      outstanding  adjusted for the dilutive effect of options granted under the
      Company's stock option plans.  The effect of dilutive stock options on the
      weighted  average shares  outstanding  was 1,695,000 and 1,286,000 for the
      three months ended  December 31, 1998 and 1997 and 1,626,000 and 1,111,000
      for the nine months ended December 31, 1998 and 1997.

D.    Total  comprehensive  income for the three and nine months ended  December
      31, 1998 and 1997 is as follows: (in thousands)


                                               Three Months        Nine Months
                                                  Ended              Ended
                                                December 31,      December 31,
                                               ------------       ------------
                                              1998      1997     1998     1997
                                              ----      ----     ----     ----
Net earnings                                $ 8,154   $21,983  $79,551  $68,971
Other comprehensive income, net of tax:
  Unrealized (loss)/gain on marketable
    securities                                  (14)   (1,080)  (2,015)   1,684
  Adjustment for gains included in net
    earnings                                   (169)      (43)    (208)     (91)
                                             -------   -------  -------  -------

Comprehensive income                        $ 7,971   $20,860  $77,328  $70,564
                                             =======  =======   =======  =======


      Accumulated  other  comprehensive  expense/income,  as  reflected  on  the
      balance  sheet,  is  comprised  solely of the  unrealized  loss or gain on
      marketable securities, net of income tax.











                                      -5-






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             NINE MONTH PERIOD ENDED
                                DECEMBER 31, 1998

                                    Unaudited

E.    On October 2, 1998, a wholly owned subsidiary of the Company acquired 100%
      of the outstanding stock of Penederm Inc.("Penederm").  Penederm primarily
      develops and markets  patented  topical  prescription  products.  Penederm
      maintains administrative and research and development facilities in Foster
      City, California.

      The business  combination has been accounted for under the purchase method
      of accounting.  Payment of approximately $207,236,000 was made through the
      issuance  of  5,905,029  shares  of the  Company's  common  stock  and the
      assumption of  approximately  877,000  stock options  granted prior to the
      transaction. Goodwill and various intangibles acquired total approximately
      $192,000,000 and are being amortized on a straight-line basis over periods
      not to exceed 20 years.

      As previously  reported,  the Company expected to record a one-time charge
      estimated at $150,000,000 for acquired in-process research and development
      ("IPR&D")  based on a  preliminary  valuation  by an  independent  expert.
      However,  the Securities and Exchange  Commission  subsequently issued new
      guidance  relating to the  methodology  used in  determining  the value of
      IPR&D.  Based on this new guidance,  the Company  received a substantially
      lower final independent  valuation for Penederm's IPR&D, which was used as
      the basis for the one-time charge of $29,000,000  recorded for the quarter
      ended December 31, 1998.

      The results of Penederm's  operations  have been included in the Company's
      Consolidated Statement of Earnings from the date of acquisition. Unaudited
      pro forma  information  assuming the  acquisition had occurred on April 1,
      1997 is as  follows,  excluding  the  one-time  charge of the  $29,000,000
      relating to acquired IPR&D: (in thousands except per share data)


                                                   Nine Months Ended
                                                      December 31,
                                             1998                     1997
                                             ----                     ----

Total revenue                              $541,022                 $398,764
Net earnings                               $105,089                 $ 56,492
Diluted earnings per common share          $    .81                 $    .44
Diluted weighted average common shares      130,188                  129,032


      The pro forma financial  information is presented for comparative purposes
      only and does not purport to be  indicative  of the  operating  results or
      financial   position   that  would  have  occurred  had  the  merger  been
      consummated  at  the  beginning  of the  periods  presented,  nor is  such
      information  necessarily  indicative  of the future  operating  results or
      financial position of the combined company after the merger.







                                        -6-






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             NINE MONTH PERIOD ENDED
                                DECEMBER 31, 1998

                                    Unaudited

F.    Equity in Earnings of Somerset  includes the  Company's 50% portion of the
      net  earnings  of  Somerset  Pharmaceuticals  Inc.  ("Somerset"),  certain
      management fees and  amortization of intangible  assets resulting from the
      acquisition of Somerset.

      Condensed  unaudited  financial  information of Somerset for the three and
      nine month  periods ended  December 31, 1998 and 1997 are as follows:  (in
      thousands)


                      Three Months Ended          Nine Months Ended
                         December 31,                December 31,
                         ------------                ------------
                       1998         1997          1998         1997
                       ----         ----          ----         ----
Net sales            $ 7,146       $12,301       $32,774     $44,684

Cost and expenses      3,383         6,865        14,282      20,119

Income taxes           1,432         1,910         7,511       8,550
                      -------       -------       -------     -------
Net earnings         $ 2,331       $ 3,526       $10,981     $16,015
                      =======       =======       =======     =======


      The above  information  represents 100% of Somerset's  operations of which
      the Company has a 50% interest.


G.    In August  1997,  Key  Pharmaceuticals  ("Key")  filed  suit in the United
      States District Court for the Western District of Pennsylvania against the
      Company and certain subsidiaries  alleging patent infringement relating to
      the  marketing  of  its  nitroglycerin  transdermal  system.  The  Company
      received  FDA  approval  for  its  nitroglycerin   transdermal  system  in
      September 1996 and  immediately  began  marketing the product.  The relief
      sought  includes a preliminary  and permanent  injunction,  treble damages
      along with interest and  attorney's  fees and  expenses.  On September 25,
      1998,  Key's request for a preliminary  injunction  was denied.  The trial
      stage  of  this   proceeding  is  completed  and  the  judge's  ruling  is
      forthcoming.  The Company  continues to believe the suit is without  merit
      and will vigorously defend its position.




















                                   -7-






                    MYLAN LABORATORIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             NINE MONTH PERIOD ENDED
                                DECEMBER 31, 1998

                                    Unaudited

H.    On December 22, 1998, the Federal Trade  Commission  ("FTC") filed suit in
      federal  district court for the District of Columbia  against the Company.
      The FTC alleges  that the  Company  violated  Section  5(a) of the Federal
      Trade  Commission  Act (the "FTC Act") with  respect to two generic  drugs
      manufactured  and  sold  by  the  Company   (lorazepam  and  clorazepate).
      Specifically, the FTC's complaint alleges the Company engaged in restraint
      of trade,  monopolization,  attempted  monopolization,  and  conspiracy to
      monopolize,  arising out of certain agreements involving the supply of raw
      materials used to manufacture  these drugs.  The FTC also sued in the same
      case the foreign  supplier of the raw  materials,  the  supplier's  parent
      company and its United States  distributor.  The relief sought includes an
      injunction  barring the Company  from  engaging in conduct  that  violates
      Section  5(a)  of the  FTC  Act,  rescission  of  certain  agreements  and
      disgorgement in excess of $120 million.

      In a parallel  case also filed on the same day  Attorney  Generals for ten
      states,  Connecticut,   Florida,  Illinois,  Minnesota,  New  York,  North
      Carolina,  Ohio,  Pennsylvania,  Virginia and  Wisconsin  (the  "States"),
      joined  together to file a single lawsuit  against the Company in the same
      court.  The  complaint  filed by the States  asserts  claims  pursuant  to
      Section 1 and 2 of the federal  Sherman  Act  against the same  parties as
      those  named in the FTC suit and one  other  distributor  not named by the
      FTC.  These claims are  analogous  to the claims  brought by the FTC under
      Section  5(a) of the FTC Act,  and are based on similar  allegations.  The
      States'  complaint  also  alleges  violations  of the  respective  states'
      competition  laws. The States further allege a per se violation of Section
      1 of the Sherman Act with respect to the pricing of raw  material  used in
      the manufacture of lorazepam (an allegation not made by the FTC).  Without
      specifying a dollar amount,  the States seek relief similar to that sought
      by the FTC and up to treble damages. The complaint was amended in February
      1999 to include 22 additional states as plaintiffs.

      The Company is aware of 13 putative class actions filed by private parties
      in various state and federal courts  involving the same conduct alleged in
      the  complaints  brought  by the FTC and the  States,  as well as  alleged
      violations  of  state  consumer  protection  laws.  The  lawsuits  seek an
      unspecified amount of damages.

      In addition, on January 11, 1999, a class action suit was filed in federal
      district  court  for  the  Western   District  of  Pennsylvania   alleging
      violations of federal securities laws by the Company and certain directors
      and officers of the Company.  The suit alleges that the Company  failed to
      disclose  monopolization  of certain  raw  materials  used to  manufacture
      lorazepam  and  clorazepate  pursuant  to  Sections  10(b)  and  20 of the
      Securities  and Exchange Act of 1934 and Rule 10 b-5 of the Securities and
      Exchange Commission. The alleged class period is from February 17, 1998 to
      December  5, 1998.  Without  specifying  a dollar  amount,  the suit seeks
      compensatory damages.

      The Company believes that it has meritorious defenses to the claims in all
      of these suits and intends to vigorously defend them. Although the Company
      believes it has meritorious  defenses to the claims,  an adverse result in
      these  suits  could  have a  material  adverse  effect  on  the  Company's
      financial position and results of operations.
                                  





                                   


                                    -8-








                         PART 1 - FINANCIAL INFORMATION

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

Introduction

      On October 2, 1998, the Company completed its acquisition of Penederm Inc.
("Penederm").  The  acquisition is being accounted for under the purchase method
of accounting. The preceding financial statements reflect 1) the issuance of 5.9
million new shares of the Company's  common stock to facilitate the acquisition,
2) the results of Penederm's operations from the date of acquisition, 3) expense
resulting from the amortization of intangible  assets acquired and 4) a one-time
charge of $29 million relating to acquired  in-process  research and development
("IPR&D").

      Based on a  preliminary  valuation  provided by an  independent  valuation
expert,  the  Company had  anticipated  the  one-time  charge for IPR&D would be
approximately  $150 million.  However,  the Securities  and Exchange  Commission
subsequently issued new guidance relating to the methodology used in determining
the value of IPR&D, which substantially reduced the final independent valuation.

      As a direct result of the new guidance,  the Company recorded goodwill and
various other intangible  assets of approximately  $192 million.  This amount is
significantly higher than the amounts contemplated in the Company's registration
statement  on Form  S-4  dated  August  20,  1998  and  will  result  in  future
amortization  expense being higher than that  contemplated  in the  registration
statement by approximately $0.01 per share per quarter.

      All  references to per share amounts in this  Management's  Discussion and
Analysis of Financial  Condition and Results of Operations  are based on diluted
common shares.

Results of Operations

      Net earnings for the three months ended December 31, 1998 were  $8,154,000
($.06 per share)  representing a 63% decease over the same period a year ago and
for the nine months then ended were $79,551,000 ($.63 per share)  representing a
15% increase over the same period a year ago.  Excluding the one-time charge for
acquired IPR&D,  net earnings for the quarter ended December 31, 1998 were $37.2
million  ($0.29 per share)  representing  a 69% increase over the same quarter a
year ago and the net earnings  for the nine months ended  December 31, 1998 were
$108.6 million ($0.86 per share) representing a 57% increase over the comparable
period a year ago.












                                     -9-






      Net Sales and Gross Profits

      The  improvements  in recurring  net earnings  relate  primarily to higher
revenues and gross  profits.  The following  table  provides total revenues (net
sales and other  revenues) and gross profit dollars (total revenues less cost of
sales) for the Company's primary operating divisions: ($ in millions)


                      Three Months Ended              Nine Months Ended
                         December 31,                    December 31,

                                       Percent                           Percent
                   1998       1997     Change       1998       1997      Change
                   ----       ----     ------       ----       ----      ------
Generic Division
  Revenues        $158.2     $114.6        38%      $472.5    $352.7         34%
  Gross Profit      80.5       45.1        78%       238.7     160.9         48%
  G.P. %             51%        39%                    51%       46%
Branded Division
  Revenues        $ 28.0     $ 14.9        88%      $ 58.0    $ 40.0         45%
  Gross Profit      19.2        9.3       106%        38.2      24.1         59%
  G.P. %             69%        62%                    66%       60%

   The generic division includes Mylan Pharmaceuticals Inc. and UDL Laboratories
Inc. The branded division includes Bertek Pharmaceuticals Inc. and Penederm Inc.

      The Company's  branded division was favorably  impacted by the acquisition
of Penederm as previously discussed.  Penederm had net sales of $10 million with
gross profits of $7.5 million during the quarter ended December 31, 1998. Bertek
Pharmaceuticals  Inc.  achieved  20% revenue  growth and  improvements  in gross
profit margins over the prior year three and nine month periods as newer branded
product sales replaced the declining wound care product sales.

      The growth in the current  three and nine months  periods in the Company's
generic division resulted primarily from the favorable impact of selective price
increases on 14 products,  seven of which were  implemented  in the last half of
fiscal 1998 and seven more which were  implemented in the quarter ended June 30,
1998. Gross profits  resulting from the addition of nine products to the generic
product line after  December 31, 1997 and higher  volume were not  sufficient to
offset the impact of price deterioration for products marketed prior to December
31,  1997.  The  Company  estimates  that such price  deterioration  resulted in
reduced net sales and gross  profits of $17.6 million for the three months ended
December 31, 1998 and $32.5 million for the nine months ended  December 31, 1998
as compared to the same periods in the prior year.

      The  decision  to  increase  prices was made in light of  continued  price
deterioration  and increased  costs involved in bringing new products to market,
primarily  resulting  from legal  challenges  under the  Hatch-Waxman  Act.  The
products  selected for increase and the amounts of the  increases  were based on
numerous factors including, product line contribution, market size, competition,
raw material suppliers and manufacturing capacity. The Company chose to increase
prices and plans to continue to review its  products and pricing  strategies  in
order to ensure that the  Company's  full line of low-cost,  effective,  quality
generic alternatives remain available to the American public.

                                -10-






      In December 1998,  actions were commenced by the Federal Trade  Commission
("FTC") and ten states, in addition to a number of private actions, which allege
violations of federal and state  antitrust laws in connection with certain drugs
manufactured  and  sold  by the  Company  (see  note  H).  At  issue  in the FTC
litigation  are  contracts  executed  in 1997,  between  the Company and its raw
materials  supplier,  Profarmaco S.r.l.,  relating to the active  pharmaceutical
ingredients  used by the Company to manufacture  generic versions of clorazepate
and lorazepam. The FTC claims that the exclusivity provisions of these contracts
violated antitrust laws. The agreements were terminated as of January 1, 1999.

      As  referenced  above,  the  Company  raised  the  prices of  clorazepate,
lorazepam,  methyclothiazide and certain other products during late 1997 through
June 1998. These increases had a substantial favorable impact on earnings in the
nine months ended December 31, 1998.  Since June 30, 1998,  aggregate  prices on
these three products  described above have dropped by approximately  18%. Due to
the highly  competitive  nature of the generic industry,  the Company expects to
see continued  price  deterioration  on these  products,  which could  adversely
affect the Company's future operating results.

      Research and Development

      Expenditures  for  research  and  development  were $12.3  million for the
quarter  ended  December  31,  1998 and $39.7  million  for the nine months then
ended. The Company remains  committed to funding research  projects for branded,
generic and transdermal products in order to grow its various product lines.

      The Company  entered into an agreement with Genpharm Inc. to co-develop 15
branded and generic products. The Company will exclusively market and distribute
the products in the United States.  This transaction was recorded in the quarter
ended December 31, 1998.

      Since  1994,  the  Company  has been  providing  funding  to  VivoRx  Inc.
("VivoRx"),  a California  based  research  and  development  company  which was
pursuing novel diabetes related research. The Company suspended cash funding for
periods  after March 31, 1998,  but continued to accrue $2.5 million per quarter
in  the  June  and  September  1998  quarters,  pending  resolution  of  certain
accounting irregularities on the part of VivoRx.

      Litigation  has  commenced  between the Company,  VivoRx,  certain  VivoRx
officers and  directors,  and certain  companies  owned or  controlled  by those
officers and directors. Based on recent developments in this matter, the Company
has determined that it will not provide  additional  funding to VivoRx under its
current management and corporate structure.  The decision to discontinue funding
of VivoRx may result in the  termination  of a licensing  agreement  whereby the
Company had secured North American marketing rights to VivoRx technology used in
the treatment of diabetes.

      Selling and Administrative Expenses

      Selling  and  administrative  expenses  were $36.0  million  for the three
months ended December 31, 1998 and $89.4 million for the nine months then ended.
These amounts represent 69% and 23% increases over the comparable periods a year
ago.

      Expenses  relating  to Penederm of $5.1  million,  including  amortization
expense, are included in the current quarter.




                                 -11-






      Legal and  professional  expenses  were $6.8  million  for the quarter and
$14.7  million year to date this year  compared to $2.5 million and $5.9 million
for the same periods a year ago. The increase in these costs is primarily due to
legal  expenditures  relating to patent  challenges under the Hatch-Waxman  Act,
legal  actions  between  the  Company  and  VivoRx,  and  the  FTC  and  related
litigation.

      Generic  advertising and  promotions,  including costs related to stocking
allowances  and  similar  programs  associated  with the  launch of new  generic
products  were $3.4 million for the quarter and $10.6  million year to date this
year compared to $1.8 million and $12.9 million last year.

      Excluding  Penederm,  payroll  and  payroll  related  expenses  charged to
selling and administrative  were $11.0 million for the quarter and $32.9 million
year to date compared to $8.9 million and $26.0 million last year.

      Income Tax Expense

      Excluding the one-time charge of $29 million for acquired IPR&D,  which is
not deductible  for income tax purposes,  the effective tax rate for the quarter
and year to date periods ended December 31, 1998 was 35% and 34% compared to 29%
and 31% last year. The primary cause of the increase relates to higher levels of
domestic  generated  income  as  opposed  to  income  attributable  to  products
manufactured in Puerto Rico for which the Company  receives  certain federal tax
credits.

Liquidity, Capital Resources and Financial Condition

      Working  capital   increased  from  $358,752,000  at  March  31,  1998  to
$441,239,000  at  December  31,  1998.  The ratio of  current  assets to current
liabilities  was 5.9 to 1 at December 31, 1998 compared to 6.0 to 1 at March 31,
1998.

      Net cash provided from operating  activities was $108,151,000 for the nine
months ended December 31, 1998 compared to $34,878,000  for the same period last
year. This improvement  resulted  primarily from increased net earnings adjusted
for  non-cash  expenses  including  allowances  on accounts  receivable  and the
write-off  of  acquired  IPR&D and the timing of tax  payments.  The  changes in
accounts  receivable  and  inventory  correspond  to the changes in sales of the
Company's products.

      The  Company's  current  capital  expenditures  are being  funded  through
operating profits.

      During the current year, the Company acquired all of the outstanding stock
of Penederm.  The purchase  price of  approximately  $207,236,000  was satisfied
principally through the issuance of the Company's common stock.

      Although the Company believes it has meritorious defenses to the claims in
all the suits described in note H, an adverse result in these suits could have a
material adverse effect on the Company's business and financial  condition,  due
to the size of the FTC's  disgorgement  claim and the  threat of treble  damages
sought by the  States,  as well as  possible  damages  in the other  suits.  The
Company expects to incur substantial costs in defending itself in these actions.








                                  -12-






Year 2000

      The Company has  completed an initial  review of its critical  information
technology ("IT") and non-IT operating systems for Year 2000 ("Y2K") compliance.
Y2K  compliance  refers  to the  issue of  systems  and  equipment  having  date
sensitive components being able to recognize the year 2000. On the basis of this
review and the processes described below,  management believes that the costs of
remediation  and potential  losses  related to Y2K issues are unlikely to have a
material effect on the Company's  financial  position,  results of operations or
cash flows.

      In  assessing  potential  Y2K  issues,  the  Company  has or is taking the
following steps to address its IT and non-IT operating systems:

      -    Formed a project  team across  functional  departments  to complete a
           review and identify nonconforming systems.
      -    Communicated   to  employees   throughout  the  Company  to  increase
           awareness of issues and activate the identification process.
      -    Identified critical IT and non-IT nonconforming operating systems and
           developed a plan to bring these systems into compliance.
      -    Corresponded with customers, vendors, service suppliers and financial
           institutions to verify their readiness.
      -  stablished a testing program to ensure that such systems are compliant.
      -  Developed contingency plans where practical in the event of system
         failures.

      Because of the continued growth of the Company over the last several years
and prior to the  formation of the project  team,  the Company  initiated  major
system   conversions  to  accommodate  the  physical   expansion  and  increased
transaction  volume  associated  with this growth.  Many factors were considered
during  the  selection  process.  While Y2K  compliance  was one of the  factors
considered, other factors were equally and significantly more important. Any new
systems selected were expected to be and are believed to be Y2K compliant.

      Due to the recent  independent  upgrades and  replacements of its computer
systems to  accommodate  its growth,  the Company has not been required to spend
nor does it  anticipate  spending  significant  incremental  funds to become Y2K
compliant.  The funds for system  conversions will be financed through operating
revenue of the  Company.  Such  conversions  are  currently  on schedule and are
expected to meet the testing  schedule  established  by the  project  team.  The
Company has neither delayed nor anticipates delaying any significant information
system projects prior to the year 2000.

      Management believes that the Company has acted with appropriate  diligence
to address  potential Y2K issues.  The Company is,  however,  dependent on third
parties,  such  as its  customers,  vendors,  raw  material  suppliers,  service
suppliers which includes energy,  water,  communication and  transportation  and
financial  institutions,  to make  their own  systems  Y2K  compliant.  If these
entities fail to remedy their Y2K issues,  the Company could potentially  suffer
interruptions in its business operations.  These interruptions could potentially
delay  the  Company  in its  manufacturing  or  distribution  of some or all its
products for an  undeterminable  amount of time. In addition,  the Company could
experience the corruption of data in its own internal information systems.  Such
corruption could lead to temporary  interruptions  in certain isolated  business
operations.  These interruptions may or may not lead to an adverse impact on the
Company's overall business operations.





                                -13-






      The project team continues to evaluate and update contingency plans. These
plans are developed based on third party correspondence  regarding the status of
their Y2K  readiness  and the  results of  testing  performed  on the  Company's
internal systems. While the project team continues to develop plans for the more
likely scenarios of possible business  interruptions,  there can be no assurance
that the project team will identify and develop successful contingency plans for
all of the business interruptions that could possibly occur.

Forward Looking Statements

      The  statements  set  forth in this  Item 2 under  Results  of  Operations
concerning  the  manner in which the  Company  intends  to  conduct  its  future
operations,  and potential  trends that may impact future results of operations,
are forward-looking  statements.  The Company may be unable to realize its plans
and objectives due to various important factors,  including, but not limited to,
the  factors  described  under  Forward  Looking  Statements  in  Item  7 of the
Company's Annual Report on Form 10-K for the year ended March 31, 1998.

      In addition,  the statements in this Item 2 under -Year 2000 which express
the Company's  belief that Y2K issues will not have a material adverse effect on
the Company may also be  forward-looking  statements.  Factors which could cause
the Company to be unable to avoid any material Y2K issues  include,  but are not
limited  to, the failure of its Y2K  project  team to  identify  latent or other
non-compliant  codes  or  technologies,  the  failure  of any of the  customers,
vendors,  service  suppliers  or financial  institutions  with which the Company
transacts business to address their own Y2K issues or the ineffectiveness of any
contingent  plans  implemented  by  the  Company  to  mitigate  the  effects  of
interruptions in its business due to Y2K issues.



                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

      In November  1996,  Synthecon Inc. filed suit in the Harris County Circuit
Court, Harris County,  Texas against the Company,  VivoRx Inc., et al., alleging
the Company has  conspired  with  VivoRx Inc. to deprive  Synthecon  Inc. of its
rights  to a  product  under a  license  agreement  acquired  from the  National
Aeronautics and Space Administration.  The suit was seeking unspecified damages.
The suit was settled with no payments required by the Company.

      See  footnote  G and H for  information  required  by Item  1.  Additional
information  relating to securities  and  competition  cases is set forth in the
tables below.


Securities cases
                                                                          Date
Name                                                     Jurisdiction     Filed
- - ----                                                                      -----
Frank R. Ieradi, individually and on behalf of all         W.D. Penn     1/11/99
others similarly situated v. Mylan Laboratories, Inc.,
Milan Puskar, Frank A. DeGeorge, Roderick P. Jackson,
and Patricia A Sunseri, CA99-10






                                      -14-








Competition cases
                                                                           Date
Name                                                    Jurisdiction      Filed
                                                        ------------      -----
Natalie O. Eldredge, on behalf of herself and all         C.D. Cal.     12/14/98
others similarly situated in the United States of
America v. Mylan Laboratories, Inc., Mylan
Pharmaceuticals, Profarmca, and Does 1 through 100, No.
98-10048

Elmer and Ellen McLaughlin, on behalf of themselves and    Sup. Ct.,    12/24/98
all others similarly situated v. Mylan Laboratories,      Yavapi Co.,
Inc., CV980863                                              Ariz.

Richard Tumpowsky, individually and on behalf of all       Sup. Ct.,    12/17/98
others similarly situated v. Mylan Laboratories, and         San
Does 1 through 50, No. 999973                             Francisco
                                                           Co., Cal.
Mary Bullock, on behalf of herself and all others          Sup. Ct.,    12/29/98
similarly situated v. Mylan Laboratories, Inc., Cambrex    San Diego
Corp., Profarmaco S.R.L., Gyma Laboratories of America,    Co., Cal.
Inc., SST Corp., No. 726950

Galloway, Inc., dba Galloway Pharmacy, on behalf of        Sup. Ct.,     1/15/99
itself and all others similarly situated v. Mylan          San Diego
Laboratories, Inc., Cambrex Corp., Gyma Laboratories of    Co., Cal.
America, Inc., No. 727358

Shoshana Datlown on behalf of herself and others           Sup. Ct.,     1/14/99
similarly situated v. Mylan Laboratories, Inc., Cambrex      D.C.
Corp., Gyma Laboratories of America, Inc., CA No.
0000266-99

Lawrence Dearman and Sharon Bouerassa, on behalf of       17th Cir.       1/6/99
themselves and all others similarly situated v. Mylan   Ct., Broward
Laboratories, Inc., Cambrex Corp., Profarmaco S.R.L.,     Co., Fla.
Gyma Laboratories of America, Inc., No. 99000123

Jack A. Masin, Steven Aronson, Elliot Siverman, and       11th Jud.     12/14/98
Frances Silverman, on behalf of themselves and all        Cir. Ct.,
others similarly situated v. Mylan Laboratories, Inc.,    Dade Co.,
Cambrex Corp., Gyma Laboratories of America, Inc., as       Fla.
amended, No. 98:28632CA13

Elaine Dunkel and Mona Lesnick, individually and on        6th Jud.     12/28/98
behalf of all others similarly situated v. Mylan           Cir. Ct.,
Laboratories, Inc., Cambrex Corp., Gyma Laboratories of   Oakland Co.,
America, Inc., as amended, No. 98-011503-CZ                 Mich.

Thomas Kieffer, on behalf of himself and all others        Sup. Ct.,     1/15/99
similarly situated v. Mylan Laboratories, Inc., Mylan     Bergen Co.,
Pharmaceuticals, Profarmca SrL, and Gyma Laboratories        N.J.
of America, Inc., BERL-365-99EM




                                    -15-









Nathan Migden, individually and on behalf of all others    Sup. Ct.,      1/8/99
similarly situated v. Mylan Laboratories, Inc., No.        N.Y. Co.,
99600120                                                   N.Y.

Middle Tennessee Teamsters Trust Fund and Arkansas        Chan. Ct.,    12/23/98
Carpenters Health and Welfare Fund, on behalf of          Davidson
themselves and a class of all other similarly situated    Co., Tenn.
third party payors v. Mylan Laboratories, Inc., No. 98-
3833-II

Scenic Bluffs Comm. Health Center, individually and on    Cir. Ct.,     12/22/98
behalf of all others similarly situated v. Mylan          Dane Co.,
Laboratories, Inc., 98CV3286                               Wisc.



Item 6. Exhibits and Reports on Form 8-K

      (a)      Exhibit 27 - Financial Data Schedule

      (b)      Reports  on Form 8-K - There  were no  reports  on Form 8-K filed
               during the three months ended December 31, 1998.



                                   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.

                                  
                                             Mylan Laboratories Inc.
                                                    (Registrant)

DATE    2/16/99                               /s/ Milan Puskar
       --------                              ---------------------------- 
                                              Milan Puskar
                                              Chairman of the Board, Chief
                                              Executive Officer and President
                                             (Principal executive officer)



DATE    2/16/99                                /s/ Donald C. Schilling
       --------                               --------------------------- 
                                               Donald C. Schilling
                                               Vice President of Finance
                                              (Principal financial officer)









                                  -16-