<PAGE>   1
                                  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 quarter ended June 30, 1997

[   ]  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 00-22383

                          TRANSCEND THERAPEUTICS, INC.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                              04-3174575
   (State or jurisdiction of                                   (IRS Employer
 incorporation or organization)                              Identification No.)
               

                     640 MEMORIAL DRIVE, CAMBRIDGE, MA 02319
                    (Address of principal executive offices)

                                 (617) 374-1200
              (Registrant's telephone number, including area code)

Indicate by check [x] 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 [   ]  No [ X ]


The number of shares outstanding of each of the issuer's classes of common
stock, as of July 25, 1997 was 5,610,078 shares of Common Stock, par value $0.01
outstanding.

This quarterly report on Form 10-Q contains 14 pages, of which this is page one.



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                          TRANSCEND THERAPEUTICS, INC.
                               REPORT ON FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 1997

TABLE OF CONTENTS

                                                                     PAGE
PART I     FINANCIAL INFORMATION

ITEM 1:    FINANCIAL STATEMENTS

             - Balance Sheets -- June 30, 1997 and                   3
           December 31, 1996

             - Statement of Operations -- Six months                 5
           ended June 30, 1997 and 1996, three months
           ended June 30, 1997 and 1996 and the period
           from January 1, 1993 (Commencement of
           Operations) to June 30, 1997

             - Statement of Cash Flows -- Six months                 6
           ended June 30, 1997 and 1996 and the period
           from January 1, 1993 (Commencement of
           Operations) to June 30, 1997

             - Notes to Financial Statements                         8

ITEM 2:    MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL           8
           CONDITION AND RESULTS OF OPERATIONS

PART II    OTHER INFORMATION                                        12

                                      2
<PAGE>   3

ITEM 1: FINANCIAL STATEMENTS


                          Transcend Therapeutics, Inc.
                          (A Development Stage Company)

                            Condensed Balance Sheets


<TABLE>
<CAPTION>
                                               JUNE 30, 1997   DECEMBER 31, 1996
                                                (Unaudited)                        
                                   
<S>                                             <C>               <C>         
ASSETS
Current Assets:
   Restricted cash                              $  3,263,928
   Unrestricted cash and cash equivalents            723,826      $    639,626
      
   Prepaid expenses and other
      current assets                                  56,573            39,579
   Other assets                                       25,000            41,328
                                          -------------------------------------
Total Current Assets                               4,069,327           720,533
   Property and equipment, net                        62,996            46,108
Other Assets:
   Deferred offering costs                         1,000,000           409,548
   Patents and licenses, net                         362,467           389,576
                                          -------------------------------------
          Total Assets                          $  5,494,790      $  1,565,765
                                          =====================================

Current Liabilities:
   Accounts payable and accrued                                  
     expenses                                   $  1,928,737      $    624,535

Redeemable Preferred Stock:
   Series A Redeemable 
     Convertible Preferred Stock                   9,140,187         9,140,187
   Series B Redeemable          
     Convertible Preferred Stock                   1,036,163         1,036,163
   Series C Redeemable                            
     Convertible Preferred Stock                  10,000,000        10,000,000
   Redeemable Non-Convertible                        
     Preferred Stock                                 979,667

Stockholder's deficit:
   Common Stock                                        7,995             7,793
   Accretion of Liquidation    
     Preference on Non-Convertible                  
     Preferred Stock                                (118,667) 
</TABLE>

                                       3
<PAGE>   4
<TABLE>
          
<S>                                             <C>               <C>         
   Additional paid-in capital                      1,645,385         1,453,848
   Deferred compensation                            (844,246)         (977,802)
   Deficit accumulated during the 
     development stage                           (18,280,430)      (19,718,959)
                                          -------------------------------------

       Total stockholder's deficit               (17,573,078)      (19,235,120)

                                          -------------------------------------
       Total liabilities and                    
          stockholder's deficit                 $  5,494,790      $  1,565,765
                                          =====================================
</TABLE>

                             See accompanying notes.
 
                                      4
<PAGE>   5



                          Transcend Therapeutics, Inc.
                          (A development stage company)

                        Condensed Statement of Operations
                                   (Unaudited)
                     (in thousands except per share amounts)

<TABLE>
<CAPTION>
                                    Three Months Ended    Six Months Ended     Period Jan. 1, 1993
                                       June 30,            June 30,           (Commencement of
                             -----------------------------------------------   operations to
                                 1997        1996      1997        1996        June 30, 1997
                             --------------------------------------------------------------

<S>                                 <C>          <C>     <C>            <C>         <C>    
Research and                        
  development contract                    
  revenues and license                                                                       
  fees                                                   5,000                  $   11,095

Operating Expenses:                                                                        
   Research and                                                                            
     development                    1,255        462     1,756          941         14,077 
   General and                                                                             
     Administrative                   944        586     1,915          981          9,102 
                             --------------------------------------------------------------
Total Operating
  expenses                          2,199      1,048     3,671        1,922         23,179
Interest income                        85          1       110           13            390
Interest expense                                (176)                  (325)          (532)
                             --------------------------------------------------------------
Net Income (loss)                  (2,114)    (1,223)    1,439       (2,234)       (11,942)
                                                                            ===============
Accretion of dividends
  and liquidation
  preference on
  Redeemable
  Non-convertible
  Preferred Stock                     (89)      (370)     (119)        (741)
                             ===============================================
Net income (loss) to 
  common stockholders              (2,203)    (1,593)     1,320      (2,975)
                             ===============================================
Proforma net income            
  (loss) per common share         $ (0.55)               $ 0.33
                             =============           ==========
Proforma weighted      
average common shares
outstanding                         3,981                 3,981
                             =============           ==========
</TABLE>

                             See accompanying notes.

                                       5
<PAGE>   6


                          Transcend Therapeutics, Inc.
                          (A development stage company)

                        Condensed Statement of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                             Six months ended June 30,   Jan. 1, 1993
                                             -------------------------   to June 30,
                                                1997          1996          1997
                                             ----------------------------------------

OPERATING ACTIVITIES:
<S>                                               <C>         <C>        <C>     
Net Income (loss)                                 $ 1,439     (2,234)    (10,769)

Adjustments to reconcile net loss to cash
  provided by (used in) operating
  activities:
   Depreciation and amortization                       42         33         228
   Loss on sale of property and
     equipment                                                                 5
   Expenses incurred with related
     party settled with the issuance of
     Common Stock                                                            304
   Amortization of deferred
     compensation expense                             142                    256
   Issuance of Preferred Stock in
     lieu of interest                                                        533
   Change in operating assets and liabilities:
      Restricted Cash                              (3,264)                (3,264)
      Prepaid expenses and other
        current assets                                (17)        (4)        (57)
      Other Assets                                     16                    (22)
      Accounts payable, Deferred
        offering costs and accrued
        expenses                                      901        391       1,451
      Interest Payable to related
        party                                                    (43)
                                            ------------------------------------
Net cash provided (used in)
  operating activities                               (741)    (1,857)    (11,335)

INVESTING ACTIVITIES:
Purchase of equipment and
  improvements                                        (31)        (6)       (118)
Proceeds from sale of equipment                                                2
                                            ------------------------------------
Net cash used in investing activities                 (31)        (6)       (116)

</TABLE>

                                       6
<PAGE>   7

<TABLE>
<S>                                               <C>         <C>        <C>     
FINANCING ACTIVITIES:
Issuance of Common Stock Warrants                   178                      178
Proceeds from issuance of debt                                 1,000       3,170
Payment on note payable to related
  party                                                                     (170)
Deferred offering costs                            (189)                    (524)
Issuance of Series A Preferred Stock
  Warrants                                                                    16
Issuance of Series A Redeemable     
  Convertible Preferred Stock                                    130       6,630
Issuance of Series C Redeemable
  Convertible Preferred Stock                                              2,000
Issuance of Redeemable
  Non-Convertible Preferred Stock                   861                      861
Proceeds from exercise of stock
  options                                             6            3          16
Purchase of Treasury Stock                                                    (2)
                                             ------------------------------------
Net cash provided by (used in)  
  financing activities                              856        1,133      12,175
                                             ------------------------------------
Increase (decrease) in cash and cash   
  equivalents                                        84         (730)        724
Cash and cash equivalents at
  beginning of period                               640        1,276
                                             ====================================
Cash and cash equivalents 
  at end of period                                $ 724       $  546     $   724
                                             ====================================
</TABLE>


                             See accompanying notes.

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                          Transcend Therapeutics, Inc.
                          (A development stage company)

                          Notes to Financial Statements
                                  June 30, 1997
                                   (unaudited)


(1) BASIS OF PRESENTATION


     The accompanying unaudited financial information as of June 30, 1997 and
for the three and six month periods ended June 30, 1997 and 1996 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. In the opinion of
management, such financial information includes all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair presentation of
the financial position at such date and the operating results and cash flows for
such periods. Operating results for the three- and six-month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the entire year. These financial statements and the related notes should be read
in conjunction with the Company's audited annual financial statements for the
year ended December 31, 1996 included in the Company's registration statement on
Form S-1, as amended, (file No. 333-22817), initially filed with the Securities
and Exchange Commission on March 5, 1997.

OVERVIEW

     Transcend Therapeutics, Inc. (the "Company") develops novel pharmaceuticals
for the critical care market, with its initial compounds focusing on the
treatment of diseases associated with oxidative stress and resultant tissue
damage. In the second quarter of 1997, the Company began a Phase III clinical
trial to determine the safety and efficacy of the Company's lead product
candidate, Procysteine(R), in the treatment of acute respiratory distress
syndrome ("ARDS").


INITIAL PUBLIC OFFERING

     In July 1997, the Company received approximately $15.7 million in proceeds
from the sale of Common Stock in its initial public offering (net of $1.0
million of offering costs), including an equity investment of $5.0 million by
the Company's corporate collaborator, Boehringer Ingelheim International GmbH
("BI"). The June 30, 1997 statements do not reflect any adjustments for the
closing of the Company's initial public offering which occurred in July 1997.


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


      THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES.
THE FOLLOWING DISCUSSION CONSTITUTES FORWARD LOOKING STATEMENTS INSOFAR AS IT
RELATES TO PROGRESS IN THE COMPANY'S RESEARCH AND DEVELOPMENT PROGRAMS AND
CLINICAL TRIALS, PRODUCT EXPECTATIONS, IN-LICENSING PLANS, EXPECTED CASH
EXPENDITURES AND EXPENSE LEVELS, AND THE ADEQUACY OF THE COMPANY'S AVAILABLE
RESOURCES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW AND IN THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1, AS
AMENDED. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS FORM 10-Q.
THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT

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<PAGE>   9

EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS FORM 10-Q OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1997 AND 1996


     The Company earned no revenues in the three-month periods ended June 30,
1997 and 1996.


     The Company's total operating expenses for the three months ended June 30,
1997 and 1996 were $2.2 million and $1.0 million, respectively. Research and
Development expenses increased to approximately $1.3 million for the three
months ended June 30, 1997 from approximately $0.5 million for the three months
ended June 30, 1996. The increase was due primarily to the initiation of the
Company's Phase III ARDS trial, including clinical investigator grants, clinical
site monitoring and data management expenses. The Company expects that research
and development expenses will increase significantly as the Phase III ARDS
clinical trial progresses and the Company undertakes additional clinical and
preclinical programs.

     General and administrative expenses increased to approximately $0.9 million
for the three months ended June 30, 1997 from approximately $0.5 million for the
three months ended June 30, 1996. The increase was due primarily to the
operating expenses associated with supporting the Company's increased clinical
activities related to the Phase III ARDS trial as well as increased legal,
accounting and other professional fees associated with the Company's initial
public offering. General and administrative expenses are expected to increase to
support the Company's expected increase in research, development and clinical
trial activities.

     Other income (expense) for the three-month periods ended June 30, 1997 and
1996 consists of interest income and interest expense. Interest income for the
three-month periods ended June 30, 1997 and 1996 was $85,000 and $1,000,
respectively. The increase in interest income was due to higher average cash
balances. The Company incurred interest expense of $176,000 in the three-month
period ended June 30, 1996 on then outstanding senior secured convertible term
notes, payable in shares of Series A and Series B Convertible Preferred Stock.
There were no senior secured convertible notes outstanding in the three months
ended June 30, 1997.

        For the three-month periods ended June 30, 1997 and 1996, the Company
had a net loss of $2.1 million and $1.2 million, respectively.

SIX MONTHS ENDED JUNE 30, 1997 AND 1996.

     The Company earned revenues of $5.0 million consisting of a non-refundable,
non-creditable licensing fee received in March 1997 in connection with the
signing of a Development and License Agreement with Boehringer Ingelheim, GmbH
("BI") during the six-month period ended June 30, 1997. There were no revenues
earned in the six-month period ended June 30, 1996.

     The Company's total operating expenses for the six months ended June 30,
1997 and 1996 were $3.7 million and $1.9 million, respectively. Research and
Development expenses increased to approximately $1.8 million for the six months
ended June 30, 1997 from approximately $0.9 million for the six months ended
June 30, 1996. The increase was 
                                       9

<PAGE>   10

due primarily to the initiation of the Company's Phase III ARDS trial, which
began in the second quarter of 1997.

     General and administrative expenses increased to approximately $1.9 million
for the six months ended June 30, 1997 from approximately $1.0 million for the
six months ended June 30, 1996. The increase was due primarily to higher
compensation expenses and recruiting costs, increased costs associated with the
Company's initial public offering, professional fees related to the BI
Agreement, as well as increased operating expenses associated with the Phase III
ARDS trial.

     Other income (expense) for the six month periods ended June 30, 1997 and
1996 consists of interest income and interest expense. Interest income for the
six month periods ended June 30, 1997 and 1996 was $110,000 and $13,000,
respectively. The increase in interest income was due to higher average cash
balances. The Company incurred interest expense of $325,000 in the six month
period ended June 30, 1996 on then outstanding senior secured convertible term
notes, payable in shares of Series A and Series B Convertible Preferred Stock.
There were no senior secured convertible notes outstanding in the six months
ended June 30, 1997.

        For the six-month periods ended June 30, 1997 and 1996, the Company had
a net profit of $1.4 million and a net loss of $2.2 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     The Company had restricted cash and unrestricted cash and cash equivalents
of approximately $4.0 million at June 30, 1997, compared to $640,000 at December
31, 1996. These balances included cash restricted for ARDS development expenses
of $3.3 million and zero, respectively. Pursuant to the BI Agreement entered in
February 1997, the Company must use the BI license fee of $5.0 million and an
equity investment by BI of $5.0 million (received in the Company's initial
public offering which was completed in July 1997) exclusively for ARDS
development expenses. Since March 1997, the Company has incurred $2.2 million of
ARDS Development Expenses under the BI Agreement, including $1.6 million of ARDS
development expenses incurred in the three-month period ended June 30, 1997.

     Since its inception through June 30, 1997, the Company has financed its
operations primarily with $13.6 million from the private sale of equity
securities, $6.1 million in contract research payments, $5 million from the BI
license fee, and $390,000 in interest income. In July 1997, the Company received
approximately $15.7 million in proceeds from the sale of shares of Common Stock
in its initial public offering (net of $1.0 million of offering costs),
including a $5.0 million equity investment by BI. Upon the close of the initial
public offering, all of the outstanding shares of Series A, B and C Convertible
Preferred Stock were automatically converted to shares of Common Stock. The June
30, 1997 statements do not reflect any adjustments for the closing of the
Company's initial public offering which occurred in July 1997.

     The Company intends to use up to $8.0 million of the net proceeds of the
initial public offering, in addition to the $5.0 million BI license fee, to fund
additional costs associated with the Phase III ARDS trial which is expected to
enroll 350 patients by the end of 1998. As of July 25, 1997, the Company has
initiated 50 clinical sites and enrolled 28 patients in the Phase III ARDS
trial.

     The Company expects negative cash flows from operations to continue and to
increase for the foreseeable future. The Company anticipates that the net
proceeds from its initial public offering, including interest thereon, together
with the Company's existing cash and cash equivalents available at June 30, 1997
will be sufficient to maintain operations through June 1999. The Company's
actual working capital needs and funding requirements will depend upon numerous
factors, some of which are beyond the Company's control, including the progress
of the external research and development 

                                       10
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programs, the magnitude and scope of these activities, the timing, costs and
results of preclinical and clinical testing, including the Phase III ARDS trial,
the timing and costs of obtaining regulatory approvals, the level of resources
that the Company commits to the development of manufacturing, marketing and
sales capabilities, the ability of the Company to establish new and maintain
existing collaborative arrangements with BI and other companies, the costs of
any acquisitions and/or licensing of technology rights, the technological
advances and activities of competitors, the costs involved in preparing, filing,
prosecuting, maintaining, enforcing and defending patent claims and other
intellectual property rights, and other factors.

     The Company intends to seek additional funding through public or private
financing, research and development financing, collaborative relationships or
otherwise. If additional funds are raised by issuing equity securities, further
dilution to stockholders will result. Debt financing, if available, may involve
restrictive covenants. If adequate funds are not available, the Company may be
required to delay, scale back or eliminate certain of its product development
programs, to license to others rights to commercialize products or technologies
that the Company would otherwise seek to develop and commercialize itself or
cease operations.

                                       11
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PART II:  OTHER INFORMATION

ITEM 2  Changes in Securities

        In May 1997, the Company agreed to issue warrants to purchase an
aggregate of 17,320 shares of Common Stock, exercisable at $10.00 per share, to
current investors in the Company. Concurrently, such investors agreed to
exchange their shares of Redeemable Non-Convertible Preferred Stock for Common
Stock upon the closing of the Company's initial public offering, at one share
of Common Stock for every 10 shares of Redeemable Non-Convertible Preferred
Stock.

ITEM 4 Submission of Matters to a Vote of Security Holders

     In June 1997, the stockholders of the Company, by written consent in lieu
of a meeting, approved the Company's Second Amended and Restated Certificate of
Incorporation and the Company's Amended and Restated By-Laws. Written consents
to such matters were received from the holders of 3,752,823 shares of the
Company's outstanding Common Stock (giving effect to the conversion of all
outstanding shares of Convertible Preferred Stock). The holders of 57,262 shares
of Common Stock did not submit written consents.

ITEM 5 Other Information
        
        On July 24, 1997, the Company was informed that Zambon Group S.p.A. of
Italy ("Zambon") had filed a Notice of Opposition in the European Patent Office
against the Company's issued European patent No. EP 0494405 for the use of
Procysteine in treating pulmonary disease, including ARDS. The Company has only
had a short time to examine the assertions made by Zambon in its Notice of
Opposition. However, based on such examination, the Company intends to respond
vigorously to the opposition, by the presentation of additional arguments and
facts in support of its position that the patent contains patentable subject
matter. An adverse decision by the European Patent Office in the opposition may
result in revocation of the Company's European patent, and patents in
individual European countries issued therefrom, or a narrowing of the claims of
such patents, which could have a material adverse effect on the Company's
business. No final decision would be expected from the European Patent Office
for several years.

ITEM 6 Exhibits and Reports on Form 8-K

     (a)  See Exhibit Index.

     (b)  There were no reports on Form 8-K filed by the Company for the three
          months ended June 30, 1997.

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                                   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.


Date  July 28, 1997                        /s/ Hector J. Gomez
    ------------------------               -------------------------------------
                                           Hector J. Gomez, M.D., Ph. D.
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)


Date  July 28, 1997                        /s/ B. Nicholas Harvey
    ------------------------               -------------------------------------
                                           B. Nicholas Harvey
                                           Chief Financial Officer
                                           (Principal Financial and Accounting 
                                           Officer)
                                       13
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                                  EXHIBIT INDEX


Item             Description
----             -----------


11               Computation of Earnings per Share.

27               Financial Data Schedule.



                                       14