<PAGE>

                                   UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC  20549

                                     FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the quarterly period ended March 31, 1998

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

                           Commission File Number 0-20954


                                   COCENSYS, INC.
                (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           DELAWARE                                          33-0538836
     (STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                   IDENTIFICATION NO.)

                      201 TECHNOLOGY DRIVE, IRVINE, CA  92618
            (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
                                          
                                   (949) 753-6100
                (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days.

                         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.

          $.001 PAR VALUE                               22,972,700
       (CLASS OF COMMON STOCK)                 (OUTSTANDING AT MAY 8, 1998)


<PAGE>

                                   COCENSYS, INC.
                                          
                                 TABLE OF CONTENTS
                                          
                                                               PAGE NUMBER

PART I.   FINANCIAL INFORMATION
     
     ITEM 1.   FINANCIAL STATEMENTS.
     
               Condensed Balance Sheets as of March 31, 1998
               and December 31, 1997                                   3
     
               Condensed Statements of Operations for the 
               three-month periods ended March 31, 1998 and 1997 
               and the period from inception (February 15, 1989) 
               through March 31, 1998                                  4
     
               Condensed Statements of Cash Flows for the 
               three-month periods ended  March 31, 1998 and 1997 
               and the period from inception (February 15, 1989) 
               through March 31, 1998                                  5
     
               Notes to Condensed Financial Statements                 6
     
     
     ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS.                   11
     
     
PART II.  OTHER INFORMATION
     
     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.                      16
 
 
SIGNATURES                                                            17


                                       2

<PAGE>

                                   COCENSYS, INC.
                           (A development stage company)
                                          
                              CONDENSED BALANCE SHEETS
                 (In thousands, except share and par value amounts)
                                          

<TABLE>
<CAPTION>
                                                     MARCH 31,                DECEMBER 31,
                                                       1998                       1997
                                                     --------                 -----------
                                                    (Unaudited)
<S>                                                 <C>                       <C>
ASSETS
Current assets:
  Cash and cash equivalents                          $  1,208                  $  3,410
  Short-term investments                               12,724                     9,050
  Receivables from corporate partners                      65                       414
  Other current assets                                    549                       484
                                                     --------                  --------
TOTAL CURRENT ASSETS                                   14,546                    13,358

Property and equipment, net                             2,822                     2,823
Investments                                               500                       500
Other assets, net                                         217                       235
                                                     --------                  --------
                                                   $   18,085                 $  16,916
                                                     --------                  --------
                                                     --------                  --------

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                 $      407                 $     866
  Other accrued liabilities                               966                     1,911
  Accrued compensation and benefits                       558                     1,107
  Deferred revenue                                      1,725                         -
  Due to corporate partners                             1,699                       747
  Capital lease obligation -- current portion             411                       353
                                                     --------                  --------
TOTAL CURRENT LIABILITIES                               5,766                     4,984

Capital lease obligation, less current portion            493                       567
Other liabilities                                         532                       534

Commitments and contingencies

Stockholders' equity:
  Preferred stock -- $.001 par value,
    5,000,000 shares authorized; 300,000 shares
    issued and outstanding at March 31, 1998
    and 214,286 at December 31, 1997                   16,566                    13,000
  Common stock -- $.001 par value,
    75,000,000 shares authorized; 22,934,825 shares 
    issued and outstanding at March 31, 1998 and 
    22,857,506 at December 31, 1997                    97,441                    97,230
Deficit accumulated during the development stage     (102,310)                  (98,983)
Deferred compensation                                    (386)                     (430)
Accumulated comprehensive income                          (17)                       14
                                                     --------                  --------
TOTAL STOCKHOLDERS' EQUITY                             11,294                    10,831
                                                     --------                  --------
                                                  $    18,085                 $  16,916
                                                     --------                  --------
                                                     --------                  --------
</TABLE>

                           See accompanying notes.

                                       3

<PAGE>

                                         
                                   COCENSYS, INC.
                           (A development stage company)
                                          
                         CONDENSED STATEMENTS OF OPERATIONS
                      (In thousands, except per share amounts)
                                    (Unaudited)

                                          
<TABLE>
<CAPTION>

                                                                                        PERIOD FROM
                                                                                         INCEPTION
                                                                                        (FEBRUARY 15,
                                                          THREE MONTHS ENDED               1989) TO
                                                             MARCH 31,                   MARCH 31,
                                                    1998                 1997               1998
                                                  -------              --------         -------------
<S>                                               <C>                  <C>              <C>
REVENUES
  
 Co-promotion revenues from corporate partners     $  540              $  1,123           $ 30,705
 Co-development revenues from corporate partners      596                   702             17,289
                                                  -------              --------         ----------
Total revenues                                      1,136                 1,825             47,994
                                                  -------              --------         ----------

OPERATING EXPENSES
  
 Research and development                           3,359                 5,432             94,288
  
 Marketing, general and administrative              1,148                 2,679             49,304
 Acquired research and development and
   advances to Acea                                     -                     -             14,879
                                                  -------              --------         ----------
Total operating expenses                            4,507                 8,111            158,471
                                                  -------              --------         ----------

OPERATING LOSS                                     (3,371)               (6,286)          (110,477)

Gain on disposition of sales division                   -                     -              4,728
Interest income                                       202                   219              4,655
Interest expense                                      (24)                  (14)            (1,082)
                                                  -------              --------         ----------

NET LOSS                                           (3,193)               (6,081)          (102,176)

Dividends on preferred stock                          134                     -                134
                                                  -------              --------         ----------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS    $  (3,327)            $  (6,081)        $ (102,310)
                                                  -------              --------         ----------
                                                  -------              --------         ----------

Basic and fully-diluted loss per common share   $   (0.15)            $   (0.27)
                                                  -------              --------
                                                  -------              --------
Shares used in computing net loss per share        22,891                22,251
                                                  -------              --------
                                                  -------              --------
</TABLE>

                                  See accompanying notes.


                                       4

<PAGE>


                                   COCENSYS, INC.
                           (A development stage company)
                                          
                         CONDENSED STATEMENTS OF CASH FLOWS
                                   (In thousands)
                                    (Unaudited)

<TABLE>
<CAPTION>

                                                                                   PERIOD FROM
                                                                                     INCEPTION
                                                                                   (FEBRUARY 15,
                                                  THREE MONTHS ENDED                 1989) TO
                                                      MARCH 31,                     MARCH 31,
                                                1998          1997                    1998
                                               ------        -----                --------------
<S>                                            <C>           <C>                  <C>
OPERATING ACTIVITIES
Net loss                                       $  (3,193)    $  (6,081)           $  (102,176)
Adjustments to reconcile net loss
 to net cash used in operating activities:
  Depreciation and amortization                      212           267                  7,037
  Amortization of deferred compensation               42            74                  3,649
  Issuance of stock and warrants for services        185             -                  2,521
  Loss on sale of fixed assets                         -             -                    100
  Gain on disposition of sales force                   -             -                 (4,728)
  Acquired research and development                    -             -                 12,279
  Decrease (increase) in other current assets        (60)          114                   (616)
  Decrease (increase) in receivable
    from corporate partner                           349            27                    (65)
  Increase (decrease) in advances
    from corporate partners                          952          (347)                 1,699
  Increase (decrease) in accounts payable
    and other accrued liabilities                   (284)         (665)                 2,482
                                                 -------        ------             ----------
NET CASH USED IN OPERATING ACTIVITIES             (1,797)       (6,611)               (77,818)
                                                 -------        ------             ----------

INVESTING ACTIVITIES
Decrease (increase) in short-term investments     (3,700)        5,830                (12,736)
Purchase of property and equipment                  (211)         (238)                (7,311)
Increase in other assets and notes receivable
    from officers                                     18           (77)                (1,373)
Cash received on sale of fixed assets                  -             -                     20
Cash received on disposition of sales division         -             -                  8,000 
Purchase of investments                                -             -                   (500)
Increase in deferred costs                             -             -                 (2,475)
Acquisition of Acea Pharmaceuticals,
    net of cash acquired                               -             -                    (62)
                                                 -------        ------             ----------
NET PROVIDED BY (CASH USED) IN INVESTING
   ACTIVITIES                                     (3,893)        5,515                (16,437)
                                                 -------        ------             ----------

FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock       25         2,115                 61,270
Net cash proceeds from issuance of
   preferred stock                                 3,429             -                 32,810
Proceeds from sale/leaseback of fixed
   assets and notes payable                          106           334                  5,341
Payments on capital lease obligations
   and notes payable                                 (72)         (208)                (3,958)
                                                 -------        ------             ----------

NET CASH PROVIDED BY FINANCING ACTIVITIES          3,488         2,241                 95,463
                                                 -------        ------             ----------
NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                               (2,202)        1,145                  1,208
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   3,410         1,050                      -
                                                 -------        ------             ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD     $   1,208     $   2,195             $    1,208
                                                 -------        ------             ----------
                                                 -------        ------             ----------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest                         $      24     $      14             $      844
                                                 -------        ------             ----------
                                                 -------        ------             ----------

</TABLE>

                              See accompanying notes.


                                       5


<PAGE>

                                   COCENSYS, INC.
                             (A development stage company)
                                    MARCH 31, 1998
                                      (UNAUDITED)
                                          
                                          
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     The interim financial information for the three-month periods ended 
     March 31, 1998 and 1997 is unaudited but includes all adjustments 
     (consisting only of normal recurring entries) which the Company's 
     management believes to be necessary for the fair presentation of the 
     financial position, results of operations and cash flows for the periods 
     presented.  The accompanying interim financial statements should be read 
     in conjunction with the financial statements and related notes included 
     in the Company's 1997 Annual Report on Form 10-K for the year ended 
     December 31, 1997. Certain information and footnote disclosures normally 
     included in financial statements prepared in accordance with generally 
     accepted accounting principles have been condensed or omitted pursuant 
     to Securities and Exchange Commission rules and regulations.  Interim 
     results of operations for the three-month period ended March 31, 1998, 
     are not necessarily indicative of operating results to be expected for 
     the full year.

     REVENUE AND EXPENSE RECOGNITION
     
     See Notes 2, 3, 4, 5 and 6 for revenue recognition policies related to
     co-promotion and co-development revenues from corporate partners. 

     NET LOSS PER SHARE

     In 1997, Statement of Financial Accounting Standards No. 128, "Earnings per
     Share" ("SFAS 128"), replaced the calculation of primary and fully diluted
     earnings per share with basic and diluted earnings per share.  Unlike
     primary earnings per share, basic earnings per share excludes any dilutive
     effect of options, warrants and convertible securities.  All per share
     amounts for all prior periods have been presented and, where appropriate,
     restated to conform to the SFAS 128 requirements.

     Both basic and diluted loss per share are computed using the weighted
     average number of shares of common stock outstanding.  Common equivalent
     shares from stock options, warrants and convertible securities are excluded
     from the computation of diluted earnings per share, as their effect would
     be antidilutive.
     
     COMPREHENSIVE INCOME
     
     As of January 1, 1998, the Company adopted Statement of Financial
     Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).
     SFAS 130 establishes new rules for the reporting and display of
     comprehensive income and its components; however, the adoption of this
     Statement had no impact on the Company's net income or stockholders'
     equity.  SFAS 130 requires unrealized

                                       6


<PAGE>

                                     COCENSYS, INC.
                             (A development stage company)

                        NOTES TO CONDENSED FINANCIAL STATEMENTS

     gains and losses on available-for-sale securities, which prior to
     adoption were reported separately on shareholders' equity, to be
     included in other comprehensive income.  Prior financial statements
     have been restated to conform to the requirements of SFAS 130.
     
     The components of comprehensive loss are as follows (in thousands):


<TABLE>
<CAPTION>

                                                                           PERIOD FROM
                                                                            INCEPTION
                                                                          (FEBRUARY 15,
                                                THREE MONTHS ENDED           1989) TO
                                                      MARCH 31,              MARCH 31,
                                                1998           1997            1998
                                               ------         ------       -------------
<S>                                            <C>            <C>          <C>
     Net loss                                  $ (3,193)      $ (6,081)    $  (102,176)
     Unrealized gain (loss) on investments          (31)           (40)            (17)
                                               --------       --------     -----------
     Comprehensive loss                        $ (3,224)   $    (6,121)   $  (102,193)
                                               --------       --------     -----------
                                               --------       --------     -----------
</TABLE>
     
     The components of accumulated comprehensive gain (loss) are as follows (in 
thousands):
     

<TABLE>
<CAPTION>
     
                                                MARCH 31,              DECEMBER 31,
                                                  1998                     1997
                                                --------               -------------
<S>                                             <C>                    <C>
     Unrealized gain (loss) on investments          (17)                      14
                                               --------                ---------
     Accumulated comprehensive gain (loss)      $   (17)               $      14
                                               --------                ---------
                                               --------                ---------
</TABLE>


PENDING ADOPTION OF FINANCIAL ACCOUNTING STANDARDS NO. 131

     In June 1998, the Financial Accounting Standards Board will issue Financial
     Accounting Standards No. 131, "Disclosures about Segments of and Enterprise
     and Related Information" (SFAS 131).  SFAS 131 establishes standards for
     the way that public business enterprises report information about segments
     in annual financial statements and requires that those enterprises report
     selected information about operating segments in interim financial reports.
     SFAS 131 also establishes standards for related disclosures about products
     and services, geographic areas and major customers.  SFAS 131 is effective
     for financial statements for fiscal years beginning after December 15,
     1997, and therefore the Company will adopt the new requirements effective
     with filing of the Annual Report on Form 10-K for the year ended December
     31, 1998.  Management has not completed its review of SFAS 131, but does
     not expect that it will have an impact on the Company's results of
     operations, financial position or cash flows.
     
     
2.   DISPOSITION OF SALES AND MARKETING DIVISION
     
     On October 8, 1997, the Company entered into an Asset Purchase Agreement
     (the "Agreement") to sell its sales and marketing division (the "Division")
     to Watson Laboratories, Inc. ("Watson"), a wholly owned subsidiary of
     Watson Pharmaceuticals, Inc.  Under the terms of the Agreement,


                                       7

<PAGE>

                                   COCENSYS, INC.
                             (A development stage company)

                        NOTES TO CONDENSED FINANCIAL STATEMENTS


     Watson assumed the Division's co-promotion agreements, acquired certain 
     of its operating assets and obtained the right to hire approximately 70 
     employees of the Division.  As consideration for these assets, the 
     Company received $8.0 million from Watson in October 1997 with up to 
     $1.0 million more due to the Company if Watson retains, as of specified 
     future dates, certain percentages of the employees from the Division.  
     Pursuant to this contingency arrangement, in April 1998, Watson paid 
     CoCensys $750,000.  An additional $250,000 is due to CoCensys in October 
     1998 if certain retention percentages are met at that time.
     
     In order to satisfy certain provisions of the Agreement, the Company
     entered into, and transferred to Watson, agreements with two pharmaceutical
     companies for marketing rights and NDAs for two drugs with an aggregate
     cost of $2.0 million, of which the Company paid $1.0 million in October
     1997.  An additional $1.0 million is payable by the Company in future
     installments.  Pursuant to the Agreement, $1.0 million of the $8.0 million
     in proceeds from the sale of the Division was deposited into an escrow
     account to satisfy the Company's future obligations related to the
     acquisition of these marketing rights and NDAs.


3.   DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH WYETH-AYERST LABORATORIES
     
     In May 1997, the Company entered into a development and 
     commercialization agreement for Co 2-6749, its lead anxiolytic compound, 
     with the Wyeth-Ayerst Laboratories Division ("Wyeth-Ayerst") of American 
     Home Products Corporation ("AHP").  Under the terms of the agreement, 
     Wyeth-Ayerst paid CoCensys a non-refundable  $5.0 million licensing fee 
     and AHP paid $5.0 million to purchase 100,000 shares of the Company's 
     Series C Convertible Preferred Stock.  Additionally, CoCensys will 
     receive specified milestone payments dependent upon the achievement of 
     key development events and $750,000 per quarter for up to three years to 
     identify back-up compounds. However, if Co 2-6749 fails to meet certain 
     criteria, and the back-up program fails to produce a back-up compound 
     that meets other certain criteria, Wyeth-Ayerst has the right to 
     terminate the back-up program and require CoCensys to reimburse them for 
     a portion of the back-up funding. Accordingly, a portion of the back-up 
     program funding has been recorded as deferred revenue and will be 
     recognized as revenue when Co 2-6749 or a back-up compound meets 
     applicable criteria for acceptance by Wyeth-Ayerst.
     
     Wyeth-Ayerst is responsible for the costs associated with developing Co 
     2-6749.  The Company and Wyeth-Ayerst will co-promote any resulting 
     product in certain market segments in the United States, while 
     Wyeth-Ayerst will have rights to develop, register and market any drugs 
     derived from the collaboration in the rest of the world, subject to 
     royalty obligations to CoCensys.  The preferred stock is convertible 
     into common stock after May 12, 1999, at a conversion price based on the 
     market price of the common stock at that time (subject to certain 
     minimum and maximum limits).
     



                                       8
<PAGE>

                              COCENSYS, INC.
                       (A DEVELOPMENT STAGE COMPANY)
 
                  NOTES TO CONDENSED FINANCIAL STATEMENTS




4.   MARKETING AND DEVELOPMENT COLLABORATION WITH WARNER-LAMBERT COMPANY
     
     In October 1995, the Company entered into collaboration with Warner-Lambert
     Company ("Warner-Lambert") and its Parke-Davis division to develop and
     market therapeutic drugs for the treatment of certain central nervous
     system disorders.  This arrangement consists of the Research, Development
     and Marketing Collaboration Agreement (the "1995 Warner Collaboration
     Agreement"), for the worldwide development and commercialization of a new
     class of neurological and psychiatric drugs, termed subtype selective NMDA
     receptor antagonists ("SSNRAs"), and the Parke-Davis Promotion Agreement. 
     Pursuant to the Parke-Davis Promotion Agreement, the Company co-promoted
     Parke-Davis' central nervous system drug, Cognex-Registered Trademark-,
     until June 1997 when Parke-Davis terminated the co-promotion agreement.  In
     addition, in October 1997, the 1995 Warner Collaboration Agreement was
     mended and extended until at least October 1999 (the "amended Warner
     Collaboration Agreement").
          
     Under the amended Warner Collaboration Agreement, both companies share
     technology and resources to develop SSNRA candidates. Warner is obligated
     to pay for all costs to develop any development candidates arising from the
     Agreement, subject to CoCensys' right to re-engage in the development by
     funding a percentage of the development costs.  Warner is also obligated to
     pay for all costs to promote any product developed under the Warner
     Collaboration Agreement, subject to CoCensys' right to co-promote in the
     United States (including sharing of costs to promote) any product for which
     CoCensys re-engaged development rights.  CoCensys will receive royalties on
     sales of any products developed under the Warner Collaboration Agreement,
     at rates based in part upon whether CoCensys co-developed and co-promoted
     such product.  In addition, upon achievement of certain clinical
     development and regulatory milestones, Warner will make nonrefundable
     milestone payments to CoCensys.  Payments received under the amended Warner
     Collaboration Agreement are recognized as co-development revenues and
     payments made are recognized as expenses.
          
     Pursuant to the 1995 Warner Collaboration Agreement, Warner-Lambert
     purchased $2.0 million of CoCensys Common Stock in October 1995 and an
     additional $2.0 million of CoCensys Common Stock in March 1997.  
     
     In October 1997, in connection with the amended Warner Collaboration
     Agreement, Warner-Lambert purchased convertible preferred stock form the
     Company with a face value of $7.0 million. Warner-Lambert paid the Company
     $1.0 million of the $7.0 million total in October 1997 and $6.0 million in
     January 1998.  The Company allocated $1.6 million to be recognized as 
     co-development revenue during fiscal 1998, $4.4 million as preferred stock
     and $1.0 million as a liability (payable in common stock) due to Warner 
     Lambert in January 1999.  The preferred stock accrues a non-cash dividend
     at twelve percent per annum until its mandatory conversion date in October
     2001 and is convertible at the price of the common stock at the time of 
     conversion (subject to a limit on the maximum number of shares that may be 
      issued). The Company may elect to force conversion at an earlier date at
      a price equal to the greater of the then current price or the price when
      issued.

                                        9

<PAGE>

                              COCENSYS, INC.
                       (A DEVELOPMENT STAGE COMPANY)
 
                  NOTES TO CONDENSED FINANCIAL STATEMENTS



          
5.   DEVELOPMENT AND COMMERCIALIZATION AGREEMENT WITH G.D. SEARLE & CO.
          
     In May 1996, the Company entered into an agreement with G.D. Searle & Co.
     ("Searle") to co-develop and co-promote CCD 3693, the Company's lead
     compound for the treatment of insomnia along with its back-up compounds. 
     Pursuant to the agreement, Searle paid a $3.0 million license fee and
     purchased 100,000 shares of the Company's Series B Convertible Preferred
     Stock for $7.0 million.  The license fee was recognized as co-development
     revenue in 1996.  The preferred stock is convertible into common stock on
     May 17, 1998, at a conversion price of not less than $4.375 per share. 
          
     Under the agreement, both companies are obligated to pay a portion of the
     development costs of the compound and its back-up compounds.  In addition,
     the Company will receive nonrefundable milestone payments upon the
     occurrence of certain events in the development of the compound.  The
     parties will co-promote any products derived from the collaboration in the
     United States and share any profits proportionally, while Searle will have
     the right to develop, register and market the products in the rest of the
     world, subject to specified royalty payments.  
     
     
6.   PROMOTION AGREEMENT WITH SOMERSET PHARMACEUTICALS, INC.
     
     In January 1996, the Company and Somerset Pharmaceuticals, Inc.
     ("Somerset") entered into the Somerset Promotion Agreement, pursuant to
     which the Company, through its Sales Division, promoted Somerset's drug
     Eldepryl-Registered Trademark- to neurologists in the United States for the
     treatment of Parkinson's disease.  Effective January 1, 1997, the initial
     agreement was superseded by the 1997 Somerset Promotion Agreement.  Under
     the 1997 Somerset Promotion Agreement, CoCensys had the exclusive right to
     detail Eldepryl to certain neurologists and other physicians in the United
     States and was compensated based upon the number of details undertaken and
     gross sales of Eldepryl.  In October 1997 the Company sold its sales and
     marketing division, and all related co-promotion agreements, to Watson.  In
     March 1998, the Company received and recognized a $540,000 bonus for 1997
     sales of Eldepryl.  The Company does not expect to receive any more
     payments pursuant to the Somerset agreement.
     
     
7.   CYTOVIA LICENSING AGREEMENT
          
     In January 1998, the Company licensed certain non-core technology to
     Cytovia, Inc., a new company that will focus on the commercialization of
     patented drug screening technology, using living cells, in the area of
     apoptosis or programmed cell death.  In exchange, CoCensys received
     approximately 55% of the initial outstanding common stock of Cytovia, will
     be entitled to receive certain royalties and will retain certain rights
     relating to the development of future therapeutic agents for central
     nervous system disorders.  During the first quarter, CoCensys advanced
     funds and provided certain administrative services to Cytovia during
     Cytovia's initial start-up period.  Cytovia received venture funding in
     March 1998 and is now refunding to CoCensys the advanced funds.  CoCensys'
     interest in Cytovia is less than 20 percent and is accounted for on a cost
     basis.

                                   10

<PAGE>


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

     EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
     DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
     UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY. 
     FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
     NOT LIMITED TO, THOSE DISCUSSED BELOW AND IN THE COMPANY'S 1997 ANNUAL
     REPORT ON FORM 10-K.

     OVERVIEW
          
     CoCensys, Inc. is a biopharmaceutical company dedicated to the discovery,
     development, marketing and sales of small molecule drugs to treat
     neurological and psychiatric disorders.  The Company's product discovery
     and development programs are focused on the exploration of novel receptors
     and enzymes and their ligands and inhibitors through three technology
     platforms: GABAA receptor modulators named Epalons; glutamate receptor
     antagonists; and sodium channel blockers.

     Since its inception in February 1989, the Company has devoted 
     substantially all of its resources to the discovery and development of 
     neuropharmaceutical products for the treatment of disorders affecting 
     the central nervous system.  The Company has incurred losses since 
     inception and expects losses to continue for the foreseeable future, 
     primarily due to the expansion of programs for research and development. 
     Operating results are expected to fluctuate as a result of uncertainty 
     in the timing and amount of revenues to be earned from achievement of 
     research and development milestones, and uncertainty in the timing and 
     amount of expenses for product development, including clinical trials.  
     As of March 31, 1998, the Company's accumulated deficit was 
     approximately $102.3 million.

     RESULTS OF OPERATIONS

     The Company recognized $540,000 in co-promotion revenues for the 
     three-month period ended March 31, 1998, compared to $1.1 million during 
     the same period in fiscal 1997. The 1998 co-promotion revenue is 
     attributable to a bonus for fiscal 1997 activity that was received and 
     recognized in March 1998. In October 1997, the Company sold its sales and
     marketing division to Watson Pharmaceuticals, Inc. ("Watson") and is no 
     longer involved in co-promotional activities. 

     The Company recognized $596,000 in co-development revenues for the 
     three-month period ended March 31, 1998 compared to  $702,000 for the 
     same period of 1997.  In the first quarter of 1998, co-development revenues
     were associated with the SSNRA (subtype-selective NMDA receptor 
     antagonists) program with Warner-Lambert.  In 1997, co-development 
     revenues related to the ongoing CCD 3693 program for insomnia with 
     G.D. Searle and the licostinel (ACEA 1021) program for stroke and traumatic
     brain injury with Novartis, which was terminated in April 1997.

     Research and development expenses decreased to $3.4 million for the 
     three-month period ended March 31, 1998, from $5.4 million in the first 
     quarter of the prior year.  Of this $2.0 million decrease, approximately
     $700,000 relates to cost savings from internal restructuring during the 
     prior year and $1.3 million reflects a lower level of external clinical 
     activity in the current period.  In the first quarter of 1997, the Company
     had ongoing clinical trials of licostinel (ACEA 1021) in the 


                                        11

<PAGE>


     treatment of stroke and of ganaxolone (CCD 1042) in the treatment of 
     migraine and epilepsy.  While there were no large clinical trials underway
     during the first quarter of 1998, the Company expects to commence a major
     Phase IIb clinical trial of ganaxolone in the treatment of migraine during
     the second quarter of 1998.

     Marketing, general and administrative expense decreased to  $1.1 million in
     the first quarter of 1998 from $2.7 million in the first quarter of 1997,
     primarily as a result of selling the sales and marketing division.  
     Results for the first quarter of 1998 exclude the cost of the sales and
     marketing division.

     Interest income was $202,000 for the three-month period ended March 31,
     1998 compared to $219,000 for the same quarter in 1997.  The decrease was
     due to lower cash and short-term investment balances in the first quarter
     of the current year when compared to the same quarter a year earlier. 


     LIQUIDITY AND CAPITAL RESOURCES
     
     From its inception in February 1989 through March 31, 1998, the Company has
     financed its operations primarily through private and public offerings of
     its equity securities, raising net proceeds of approximately $94.1 million
     through sales of securities.  At March 31, 1998, the Company's balances of
     cash, cash equivalents and investments totaled $14.4 million, compared to
     $13.0 million at December 31, 1997. 
     
     As of March 31, 1998, the Company had invested $7.3 million in leasehold
     improvements, laboratory and computer equipment and office furnishings and
     equipment.  The Company has financed $3.5 million of these capital
     additions through capital lease lines.  In addition, the Company leases its
     laboratory and office facilities under operating leases.  While additional
     equipment will be needed as the Company increases its research and
     development activities, the Company has no material commitments for the
     acquisition of property and equipment.
     
     Pursuant to an agreement with Watson, in October 1997, the Company sold it
     sales and marketing division, related co-promotion agreements and certain
     other assets to Watson for $8.0 million in cash with an additional $1.0
     million due to CoCensys contingent upon the occurrence of specified events.
     Of this contingent amount, Watson paid the Company $750,000 was in April
     1998 with the balance due in October 1998 subject to the occurrence of
     specified events.  
     
     Pursuant to the 1995 collaboration agreement with Warner-Lambert Company,
     as amended and extended in October 1997, Warner-Lambert is obligated to
     make certain milestone payments for each compound selected for development,
     as well as pay for its share of development costs.  Under the terms of the
     1995 agreement, Warner-Lambert purchased $2.0 million of CoCensys Common
     Stock in October 1995 and an additional $2.0 million of CoCensys Common
     Stock in March 1997.  Under the terms of the 1997 amendment, Warner-Lambert
     purchased preferred stock with a face value of $7.0 million, of which
     Warner-Lambert paid the Company $1.0 million in October 1997 and $6.0
     million in January 1998.  Of this $7.0 million in total proceeds, the
     Company has allocated $1.6 million to be recognized as co-development
     revenue during fiscal 1998, $4.4 million as preferred stock and $1.0
     million as a liability (payable in common stock) due to Warner Lambert in
     January 


                                         12

<PAGE>

     1999.  The preferred stock accrues a non-cash dividend at 12 percent per 
     annum until its mandatory conversion date in October 2001. Pursuant to 
     the May 1997 Development and Commercialization Agreement with 
     Wyeth-Ayerst, Wyeth-Ayerst paid the Company a $5.0 million license fee 
     and purchased 100,000 shares of the Company's Series C Convertible 
     Preferred stock for $5.0 million.  Furthermore, Wyeth-Ayerst is 
     obligated to pay all development costs associated with Co 2-6749, as 
     well as make milestone payments upon the occurrence of certain agreed 
     upon events and pay the Company $3.0 million per year for up to three 
     years to identify back-up compounds.  However, if Co 2-6749 fails to 
     meet certain criteria, and the back-up program fails to produce a 
     back-up compound that meets other certain criteria, Wyeth-Ayerst has the 
     right to terminate the back-up program and require CoCensys to reimburse 
     them for a portion of the back-up funding.
     
     Pursuant to the Development and Commercialization Agreement G.D. Searle &
     Co., both companies are obligated to pay a portion of the development costs
     of CCD 3693 and its back-up compounds for the U.S. market.  The Company
     will receive nonrefundable milestone payments upon the occurrence of
     certain events in the development of the compound.  In addition, Searle
     purchased 100,000 shares of the Company's Series B Convertible Preferred
     Stock for $7.0 million during 1996.  This preferred stock will convert to
     common stock on May 15, 1998.
     
     CoCensys' operations to date have consumed substantial amounts of cash. 
     The negative cash flow from operations is expected to continue and will
     likely increase over the foreseeable future, subject to the Company's
     ability to mitigate such negative cash flows with revenues, if any, derived
     from the sale of products from current and potential future marketing
     collaborations.  The Company anticipates that its existing capital
     resources, including funding expected to be available through current
     partner collaborations, will be adequate to satisfy its capital needs for
     at least the next 12 months.
     
     The Company will need to obtain substantial additional funds to conduct the
     costly and time-consuming research, preclinical development and clinical
     trials necessary to bring its products to market.  The Company intends to
     seek additional funding through additional research and development
     collaborations with suitable corporate partners and/or through public or
     private financing.  There can be no assurance that additional financings or
     suitable collaborations will be available on favorable terms, if at all. 
     Insufficient funds may require the Company to delay, scale back or
     eliminate some or all of its research and product development programs or
     to license third parties to commercialize products or technologies that the
     Company would otherwise seek to develop itself. 
     
     The Company's future capital requirements will depend on many factors,
     including the progress of the Company's research and development programs,
     the scope and results of preclinical testing and clinical trials, the time
     and costs involved in obtaining regulatory approvals, the rate of
     technological advances, determinations as to the commercial potential of
     the Company's products under development, the status of competitive
     products, the establishment of third-party manufacturing arrangements and
     the establishment of additional collaborative relationships. 
     
     
                                           13

<PAGE>

     IMPACT OF YEAR 2000
     
     Some of the Company's older computer programs were written using two digits
     rather than four to define the applicable year.  As a result, those
     computer programs recognize a date using "00" as the year 1900 rather than
     the year 2000.  This could cause a system failure or miscalculations
     causing disruptions of operations, including a temporary inability to
     process transactions or engage in normal business activities.
     
     The Company has completed a preliminary assessment and will have to modify
     or replace portions of its software and hardware so that its computer
     systems will function properly with respect to dates in the year 2000 and
     thereafter.  However, the majority of software and hardware used by the
     Company consists of commercially available, off-the-shelf programs and
     equipment that have already been modified, or are soon to be modified, by
     their manufacturers to handle the year 2000 correctly.  As such, management
     believes that the year 2000 issue does not pose a significant problem for
     the Company and it is expected that this project will be completed not
     later than December 31, 1998 at a total cost of less than $50,000.  The
     Company has incurred minimal costs to date.  However, if such modifications
     and conversions are not made, or are not completed timely, the year 2000
     issue could have a material impact on the operations of the Company.  
     
     
     ADDITIONAL RISKS
     
     In addition to those discussed above, the Company is subject to the
     following risks:
     
     The Company's products are in an early stage of development and face a high
     degree of technological, regulatory and competitive risks.  Drug discovery
     and development are capital intensive activities, and there can be no
     assurance the Company will be able to raise the additional capital
     necessary to develop and commercialize products.  The Company's strategy
     for the development, clinical testing and commercialization of its products
     includes entering into various collaborations with corporate partners,
     licensors, licensees and others.  There can be no assurance that the
     Company will be able to negotiate further collaborative arrangements on
     acceptable terms, if at all, or that the current collaborative efforts will
     be successful.  Human clinical trials require considerable time and
     funding, and results from any stage of testing may not predict results of
     later stages.  In addition, if results of any clinical trial fail to meet
     the Company's requirements, the study plan for such compound may be
     adjusted or another compound may be substituted, either of which may result
     in delays in future clinical studies.  Unfavorable clinical trials could
     result in cancellation of future clinical studies.  Inherent in the fact
     that CoCensys is an early stage biopharmaceutical company are a range of
     additional risks, including those associated with obtaining and enforcing
     patents and protecting proprietary technology and the risk of regulatory
     change, among others.
     
     The securities markets have from time to time experienced significant price
     and volume fluctuations that may be unrelated to the operating performance
     of particular companies.  The market prices of the common stock of many
     publicly traded biopharmaceutical companies have in the past been, and can
     in the future be expected to be, especially volatile due to various
     external factors, including but not limited to, announcements of
     technological innovations or new products by the Company or its
     competitors, developments or disputes concerning patents or proprietary
     rights, publicity regarding actual or 


                                      14
<PAGE>

     potential results relating to  products under development, regulatory 
     developments in both the United States and foreign countries and public 
     concern as to the safety of  biotechnology products.
     

                                       15

<PAGE>


                                   COCENSYS, INC.


PART II.  OTHER INFORMATION

     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

               (a)   Exhibits
                     10.1 *    CoCensys, Inc. Executive Officers' Severance 
                               Benefit Plan
                     10.2 **   Agreement dated January 8, 1998, between 
                               CoCensys, Inc. and Warner-Lambert Company
                     10.3 *    CoCensys, Inc. Executive Officers' Change of 
                               Control Severance Plan
                     27        Financial Data Schedule

                     *         Compensatory Plan.
                     **        Confidential treatment requested with the SEC 
                               over portions of this Exhibit.


               (b)   No reports on Form 8-K were filed during the quarter
                     ended March 31, 1998.

     
                                         16

<PAGE>
     
                                
                                   COCENSYS, INC.
                                          
                                          
                                     SIGNATURES
                                          
                                          
                                          

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




                                                      CoCensys, Inc.



   Date:  May 12, 1998                     By:  /s/ F. Richard Nichol, Ph.D.
          -------------                         ------------------------------
                                                     F. Richard Nichol, Ph.D.
                                           President and Chief Executive Officer
                                                (PRINCIPAL EXECUTIVE OFFICER)

   Date:  May 12, 1998                     By:  /s/  Peter E. Jansen
         --------------                        -------------------------------- 
                                                        Peter E. Jansen
                                                    Chief Financial Officer
                                                    (PRINCIPAL FINANCIAL AND
                                                      ACCOUNTING OFFICER)