8-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

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


                                    FORM 8-K

                                 CURRENT REPORT


                        PURSUANT TO SECTION 13 OR 15 (d)

                     OF THE SECURITIES EXCHANGE ACT OF 1934

     Date of Report (date of earliest event reported)      MAY 14, 1998

                          ALLIANCE PHARMACEUTICAL CORP.
             (Exact name of registrant as specified in its charter)

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   New York                           0-12900                    14-1644018
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(State or other jurisdiction of   (Commission File Number)   (IRS Employer ID
 incorporation)                                               Number)
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                   3040 SCIENCE PARK ROAD, SAN DIEGO, CA 92121
               (Address of principal executive offices)(Zip Code)


Registrant's Telephone Number,  including area code:         (619)-558-4300

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          (Former name or former address, if changed since last report)





 ITEM 5.  OTHER EVENTS.

     On May 14, 1998, the Registrant and Ortho Biotech, Inc. and the R. W.
Johnson Pharmaceutical Research Institute, both subsidiaries of Johnson &
Johnson, entered into an agreement to restructure their collaboration with
respect to the development of the Registrant's OXYGENT product. The agreement 
is being filed as an exhibit to this Current Report on form 8-K. OXYGENT is the 
Registrant's intravascular oxygen carrier to temporarily augment oxygen 
delivery in surgical and other patients at risk of acute tissue oxygen deficit.

ITEM 7.  FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

  (a)    Financial Statements of Business Acquired.  -  Not applicable.

  (b)    Pro Forma Financial Information.  -  Not applicable.

  (c)    Exhibits.

           10.1     Copy of Agreement dated May 14, 1998 between
                    the Registrant and  Ortho Biotech, Inc. and
                    the R. W. Johnson Pharmaceutical Research
                    Institute, both subsidiaries of Johnson &
                    Johnson, with respect to the restructuring of
                    the relationship between the Registrant and such companies.



                                   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.



                                   ALLIANCE PHARMACEUTICAL CORP.


                                   By: /s/ Theodore D. Roth
                                       Name: Theodore D. Roth
                                       Title:President


                               Dated: June 1, 1998

EX-10.1

                                                               EXHIBIT 10.1

                                                              May 14, 1998


Ortho Biotech, Inc.
The R. W. Johnson Pharmaceutical
  Research Institute, a division of
  Ortho Pharmaceutical Corporation
U.S. Route 202
Raritan, New Jersey 08869

Ladies and Gentlemen:

     This will confirm our agreement with respect to restructuring the
arrangement between your companies (respectively, "Ortho" and "PRI" and,
collectively, the "Companies") as contemplated by the agreement dated August 16,
1994 (the "Agreement") between the Companies and our company ("Alliance"), as
follows:

          1. Terms defined in the Agreement have the same meaning when used in
this letter.

          2. Following the date of this letter, Alliance will be fully
responsible, at its own expense, for the development of the Licensed Product,
except that Alliance will be entitled to payment for expenses (the "Section 13.1
Expenses") incurred during the 90-day period following the date of this letter,
in accordance with Sections 13.1 and 15.1(d) of the Agreement, and to payment
for the expenses incurred prior to the date hereof as to which it is entitled to
be paid pursuant to the Agreement.

          3. The Companies will deliver to Alliance such marketing, pre-clinical
and clinical data (including Know-How) as may be reasonably helpful to Alliance
in continuing its development of the Licensed Product, and, during the next
twelve months, each of the Companies will make its relevant personnel reasonably
available to Alliance to discuss the Know-How and data. The Companies will also
transfer to Alliance the IND for the Licensed Product.

          4. Articles 2 through 6, 7.3, 8 through 14, 15.2, 16 and 26 of the
Agreement inclusive shall terminate; provided, however, that, during the 90-day
period after the date hereof, Alliance may continue to incur development
expenses (as contemplated by the Agreement in the case of a termination thereof)
up to a maximum of $3.5 million, which shall be reasonably documented and
subject to audit in accordance with the Agreement, and which shall be deemed to
be Section 13.1 Expenses.

          5. Before entering into a development or marketing or license
agreement for the "First Licensed Product" (as defined below), Alliance will
give the Companies notice (the "Alliance Notice") containing its offer to the
Companies to enter into a development or marketing or license agreement for the
First Licensed Product which offer shall include exclusive rights in the First
Licensed Product for all injectable indications in humans and for at least the
United States, France, Germany, Italy and the United Kingdom. "First Licensed
Product" means the Licensed Product now under development by Alliance or a
Licensed Product containing the same perfluorocarbon components. The Alliance
Notice will include the financial and other material terms which Alliance is
prepared to accept, and, if requested by the Companies, Alliance will also make
available to them clinical or other data reasonably necessary to permit the
Companies to evaluate the technical and marketing potential of the First
Licensed Product. If requested by either of the Companies before the expiration
of a 60-day period (the "Initial Period") after receipt of the Alliance Notice,
each of the parties will negotiate in good faith in order to reach an agreement
(a "Definitive Agreement") with respect to the terms set forth in the Alliance
Notice; provided, however, that, if not so requested, or if a Definitive
Agreement shall not be executed before the expiration of a 120-day period (the
"Second Period") following receipt of an Alliance Notice, Alliance may negotiate
and execute a Definitive Agreement with one or more third parties; and provided,
further, that (i) if the Companies shall pay to Alliance one million dollars
(the "premium"), determined by the Companies as set forth below, before the
expiration of the Initial Period (regardless of whether the Companies have
requested that Alliance negotiate a Definitive Agreement with them), the
Companies shall have a right of first refusal (on customary terms) with respect
to a Definitive Agreement acceptable to Alliance and one or more third parties
if the financial and other material terms thereof are less favorable to Alliance
than the financial and other material terms which Alliance was prepared to
accept as set forth in the Alliance Notice and (ii) Alliance shall have the
right (the "Alliance Termination Right") to terminate such right of first
refusal upon payment to the Companies of an amount equal to 200% of the premium.
During the Initial Period and during the Second Period, in case either or both
of the Companies request that Alliance negotiate a Definitive Agreement with
them prior to the end of the Initial Period, Alliance will not enter into or
continue negotiations for a Definitive Agreement with any third party. In the
event of any dispute as to the value of the financial and other material terms
included in the Alliance Notice, any of the parties may refer such dispute to
any mutually acceptable third party, whose decision shall be final, conclusive
and binding upon the parties hereto and whose fees and expenses shall be borne
one-half by the Companies, on the one hand, and one-half by Alliance on the
other. In the event that the parties cannot agree on a mutually acceptable third
party, such third party shall be chosen by the American Arbitration Association
in accordance with its rules then obtaining. Notwithstanding the foregoing: (i)
any Definitive Agreement with one or both of the Companies shall provide for a
credit against amounts due thereunder from either of them in an amount equal to
the amount of the Section 13.1 Expenses; and (ii) Alliance will not deliver an
Alliance Notice to the Companies prior to the expiration of nine months from the
date hereof, and Alliance will not exercise the Alliance Termination Right prior
to the expiration of three months after the last day of the Initial Period,
unless, in either case, Alliance (a) shall have first received a bona fide offer
to enter into a development and marketing agreement for the First Licensed
Product which Alliance is prepared to accept, and (b) it shall deliver a copy of
such bona fide offer to the Companies, together with the Alliance Notice, the
terms of which shall be no more favorable to Alliance than those set forth in
the bona fide offer, except to the extent necessary to conform to the
requirements of the first sentence of this paragraph 5.

          6. It is understood that (i) so long as the Companies shall have
rights under paragraph 5, none of the parties hereto shall institute any action
or proceeding against the others with respect to any matter arising under or
relating to the Agreement that has accrued prior to the date hereof, and (ii) in
the event of any Definitive Agreement, whether with one or both of the Companies
or with a third party, or in the event that the Alliance Termination Right shall
have been exercised, in accordance with paragraph 5, Alliance and the Companies
will exchange mutual releases of all obligations and liabilities accruing on or
before the date hereof arising under or relating to the Agreement.

          7. Prior to provision of the Alliance Notice, Alliance will keep the
Companies reasonably informed as to its Development progress, and, to that end,
will have its appropriate personnel meet at least once every three months with
representatives of the Companies to discuss such Development.

          If the foregoing is acceptable to you, please execute the duplicate of
this letter in the place indicated and return it to us, at which point it will
become a binding agreement between us.

                                  Very truly yours,

                                  ALLIANCE PHARMACEUTICAL CORP.

                                  By: /s/ Theodore D. Roth
                                      ---------------------

ACCEPTED AND AGREED:

ORTHO BIOTECH, INC.

By: /s/ Jules Musing
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R.W. JOHNSON PHARMACEUTICAL
  RESEARCH INSTITUTE, A DIVISION
  OF ORTHO PHARMACEUTICAL
  CORPORATION

By: /s/ Robert Wills                  
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