UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 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 0-19612

                          IMCLONE SYSTEMS INCORPORATED
             (Exact name of registrant as specified in its charter)

            DELAWARE                                       04-2834797
  (State or other jurisdiction                 (IRS Employer Identification No.)
of incorporation or organization)             

    180 VARICK STREET, NEW YORK, NY                            10014
(Address of principal executive offices)                    (Zip Code)

                                 (212) 645-1405
               Registrant's telephone number, including area code

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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_____

Applicable only to corporate issuers:

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

          Class                                Outstanding as of August 12, 1997
          -----                                ---------------------------------
Common Stock, par value $.001                           24,105,055 Shares

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                                      INDEX

                                                                        Page No.
                                                                        --------
PART I - FINANCIAL INFORMATION

      Item 1.    Financial Statements                                 

                 Balance Sheets - June 30, 1997 (unaudited)
                 and December 31, 1996                                      1
                                                                           
                 Unaudited Statements of Operations - Three and six        
                 months ended June 30, 1997 and 1996                        2
                                                                           
                 Unaudited Statements of Cash Flows - Six                  
                 months ended June 30, 1997 and 1996                        3
                                                                           
                 Notes to Financial Statements                              4
                                                                           
      Item 2.    Management's Discussion and Analysis of                   
                 Financial Condition and Results of Operations              5
                                                                           
PART II - OTHER INFORMATION                                                
                                                                           
      Item 4.    Submission of Matters to a Vote of Security Holders       11
                                                                           
      Item 6.    Exhibits and Reports on Form 8-K                          12
                                                                          
<PAGE>

Part 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements

                          IMCLONE SYSTEMS INCORPORATED
                                 Balance Sheets
                        (in thousands, except share data)


                                                         June 30,   December 31,
                      Assets                               1997         1996 
                                                        ----------  ------------
                                                        (unaudited)
Current assets:
  Cash and cash equivalents ........................   $   2,559      $   2,734
  Securities available for sale ....................      28,532         10,780
  Prepaid expenses .................................         450            122
  Other current assets .............................       1,294            479
                                                       ---------      ---------
         Total current assets ......................      32,835         14,115
                                                       ---------      ---------
Property and equipment:
   Land ............................................         340            340
   Building and building improvements ..............       8,969          8,969
   Leasehold improvements ..........................       4,832          4,832
   Machinery and equipment .........................       5,576          5,159
   Furniture and fixtures ..........................         536            536
   Construction in progress ........................         627            320
                                                       ---------      ---------
         Total cost ................................      20,880         20,156
    Less accumulated depreciation and amortization .     (10,418)        (9,606)
                                                       ---------      ---------
         Property and equipment, net ...............      10,462         10,550
                                                       ---------      ---------
Patent costs, net ..................................       1,048            977
Deferred financing costs, net ......................          60             65
Amount due from officer and stockholder ............          90            101
Other assets .......................................          85             77
                                                       ---------      ---------
                                                       $  44,580      $  25,885
                                                       =========      =========
         Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable .................................   $   1,384      $   1,059
  Accrued expenses and other .......................         731          1,366
  Interest payable .................................         191            238
  Deferred revenue .................................         208           --
  Current portion of long-term liabilities .........       3,380          3,858
                                                       ---------      ---------
         Total current liabilities .................       5,894          6,521
                                                       ---------      ---------
Long-term debt .....................................       2,200          2,200
Other long-term liabilities, less current portion ..         435            575
                                                       ---------      ---------
         Total liabilities .........................       8,529          9,296
                                                       ---------      ---------
Commitments and contingencies

Stockholders' equity:
  Preferred stock, $1.00 par value;
    authorized 4,000,000 shares;
    none issued and outstanding ....................        --             --
Common stock, $.001 par value;
    authorized 45,000,000 shares;
    issued 24,138,872 and 20,248,122 at
    June 30, 1997 and December 31, 1996,
    respectively; outstanding 24,088,055 and
    20,233,699 at June 30, 1997 and
    December 31, 1996, respectively ................          24             20
Additional paid-in capital .........................     145,912        118,760
Accumulated deficit ................................    (109,364)      (101,973)
Treasury stock, at cost; 50,817 and 14,423 shares
    at June 30, 1997 and December 31, 1996,
    respectively ...................................        (492)          (169)
Unrealized loss on securities available for sale ...         (29)           (49)
                                                       ---------      ---------
         Total stockholders' equity ................      36,051         16,589
                                                       ---------      ---------
                                                       $  44,580      $  25,885
                                                       =========      =========

                 See accompanying notes to financial statements.


                                     Page 1

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED
                            Statements of Operations
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                          Three Months Ended       Six Months Ended
                                                               June 30,                June 30,
                                                         --------------------    --------------------
                                                            1997        1996        1997        1996
                                                         --------    --------    --------    --------
<S>                                                      <C>         <C>         <C>         <C>   
Revenues:
   Product development milestone revenues ............   $  2,500    $   --      $  2,500    $   --
   Research and development funding from third
        parties and other ............................        696          75         771         150
                                                         --------    --------    --------    --------
                 Total revenues ......................      3,196          75       3,271         150
                                                         --------    --------    --------    --------
Operating expenses:
   Research and development ..........................      3,257       2,593       8,652       4,918
   General and administrative ........................      1,272         845       2,355       1,587
                                                         --------    --------    --------    --------
                Total operating expenses .............      4,529       3,438      11,007       6,505
                                                         --------    --------    --------    --------
Operating loss .......................................     (1,333)     (3,363)     (7,736)     (6,355)
                                                         --------    --------    --------    --------
Other (income) expense:
   Interest and other income .........................       (440)       (261)       (685)       (454)
   Interest and other expense ........................        145         200         340         547
                                                         --------    --------    --------    --------
               Net interest and other (income) expense       (295)        (61)       (345)         93
                                                         --------    --------    --------    --------

Net loss before extraordinary item ...................     (1,038)     (3,302)     (7,391)     (6,448)

Extraordinary loss on extinguishment of debt .........       --         1,267        --         1,267
                                                         --------    --------    --------    --------
Net loss .............................................   $ (1,038)   $ (4,569)   $ (7,391)   $ (7,715)
                                                         ========    ========    ========    ========
Net loss per common share:
     Loss before extraordinary loss on
       extinguishment of debt ........................   $  (0.04)   $  (0.17)   $  (0.33)   $  (0.34)

     Extraordinary loss on extinguishment of debt ....       --         (0.06)       --         (0.07)

                                                         --------    --------    --------    --------
               Net loss per common share .............   $  (0.04)   $  (0.23)   $  (0.33)   $  (0.41)
                                                         ========    ========    ========    ========

Weighted average shares outstanding ..................     24,033      19,595      22,702      18,730
                                                         ========    ========    ========    ========
</TABLE>


                 See accompanying notes to financial statements.


                                     Page 2

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED
                            Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                 Six Months Ended
                                                                                     June 30,
                                                                               --------------------
                                                                                 1997        1996
                                                                               --------    --------
<S>                                                                            <C>         <C>      
Cash flows from operating activities:
 Net loss ..................................................................   $ (7,391)   $ (7,715)
 Adjustments to reconcile net loss to net cash used in operating activities:
   Extraordinary loss on extinguishment of debt ............................       --         1,267
   Depreciation and amortization ...........................................        866         910
   Discounted interest amortization ........................................       --           156
   Expense associated with issuance
       of options and warrants .............................................      2,634        --
   Loss on sale of investments .............................................          3        --
   Changes in:
      Prepaid expenses .....................................................       (328)       (145)
      Other current assets .................................................       (815)       (285)
      Due from officer .....................................................         11          13
      Other assets .........................................................         (8)       --
      Interest payable .....................................................        (47)       (111)
      Accounts payable .....................................................        325         (75)
      Accrued expenses and other ...........................................       (635)       (251)
      Deferred revenue .....................................................        208        --
                                                                               --------    -------- 
             Net cash used in operating activities .........................     (5,177)     (6,236)
                                                                               --------    -------- 

Cash flows from investing activities:
   Acquisitions of property and equipment ..................................       (436)       (294)
   Purchases of securities available for sale ..............................    (54,777)    (25,635)
   Sales of securities available for sale ..................................     37,042       7,047
   Additions to patents ....................................................       (120)        (44)
                                                                               --------    -------- 
             Net cash used in investing activities .........................    (18,291)    (18,926)
                                                                               ========    ========

Cash flows from financing activities:
   Net proceeds from issuance of common stock ..............................     23,162      13,560
   Proceeds from exercise of stock options and warrants ....................      1,360       1,831
   Purchase of treasury stock ..............................................       (323)        (19)
   Payments of other liabilities ...........................................       (906)        (29)
                                                                               --------    --------
             Net cash provided by financing activities .....................     23,293      15,343
                                                                               --------    --------


Net decrease in cash and cash equivalents ..................................       (175)     (9,819)

Cash and cash equivalents at beginning of period ...........................      2,734      10,207
                                                                               --------    --------
Cash and cash equivalents at end of period .................................   $  2,559    $    388
                                                                               ========    ========
</TABLE>

                 See accompanying notes to financial statements.


                                     Page 3
<PAGE>

                          IMCLONE SYSTEMS INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                                   (unaudited)

(1) Basis of Presentation

     The financial statements of ImClone Systems Incorporated (the "Company") as
of June 30,  1997 and for the three and six months  ended June 30, 1997 and 1996
are  unaudited.  In  the  opinion  of  management,   these  unaudited  financial
statements  include  all  adjustments,   consisting  only  of  normal  recurring
adjustments,  necessary  for a fair  presentation.  These  financial  statements
should be read in  conjunction  with the financial  statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31,  1996,  as  filed  with  the   Securities  and  Exchange   Commission   (the
"Commission").

     Results for the interim periods are not  necessarily  indicative of results
for the full years.

(2) Related Party Transactions

     As of June 30, 1997, a promissory note (the "new  promissory  note") in the
original  principal amount of $110,000 given to the Company by its President and
CEO totaled  $90,000.  The new promissory  note replaces an original  promissory
note (the  "original  promissory  note")  which was due upon the  earlier  of on
demand  by the  Company  or April  30,  1997,  bore  interest  at the rate of 8%
compounded  quarterly  and  covered  miscellaneous  cash  advances  made  to the
President  and CEO  through  the date of its  issuance  in March  1995.  The new
promissory  note was  payable as to $15,000 no later than May 15, 1997 and as to
the remainder  upon the earlier of on demand by the Company or December 31, 1997
and bears  interest at the rate of 5% compounded  quarterly.  The new promissory
note covers the  remaining  balance of the original  promissory  note,  interest
thereon and  additional  miscellaneous  cash advances made since the date of the
original note totaling  $15,000.  As of August 12, 1997 the aggregate  amount of
the new promissory note, including interest totaled approximately $88,000.

(3) Net Loss Per Share

     Net loss per share is  computed  based on the  weighted  average  number of
shares outstanding. Common stock equivalents are not included in the computation
of average shares outstanding because they are anti-dilutive.

(4) Reclassification

     Certain amounts  previously  reported have been  reclassified to conform to
current year presentation.


                                     Page 4
<PAGE>

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations

     The following discussion and analysis by management is provided to identify
certain  significant factors which affected the Company's financial position and
operating  results  during the period  included  in the  accompanying  financial
statements.

Results of Operations

Six Months Ended June 30, 1997 and 1996

Revenues

     Revenues for the  six-month  periods  ended June 30, 1997 and June 30, 1996
were $3,271,000 and $150,000,  respectively.  Revenues in both periods  included
research and development  support fees of $150,000 from the Company's  corporate
partnership  with the  Wyeth/Lederle  Vaccine division of American Home Products
Corporation  ("American Home") in infectious disease vaccines.  Revenues for the
six-month  period  ended  June 30,  1997  also  included  milestone  revenue  of
$1,500,000 and contract research support of $417,000 from the Company's research
and  license   agreement   with  Merck  KGaA   ("Merck")  in  cancer   vaccines.
Additionally,  the  six-month  period  ended June 30,  1997  included  milestone
revenue of $1,000,000 and royalty fees of $204,000 from the Company's  strategic
alliance with Abbott Laboratories ("Abbott") in diagnostics.

Operating: Research and Development

     Total operating  expenses for the six-month periods ended June 30, 1997 and
June 30,  1996 were  $11,007,000  and  $6,505,000,  respectively.  Research  and
development  expenses for the six-month periods ended June 30, 1997 and June 30,
1996  were  $8,652,000  and  $4,918,000,  respectively.  Such  amounts  for  the
six-month periods ended June 30, 1997 and June 30, 1996 represented 79% and 76%,
respectively,  of total operating expenses.  The $3,734,000 increase in research
and  development  expenses  for the  six-month  period  ended June 30,  1997 was
primarily  attributable to a one-time $2,233,000 non-cash  compensation  expense
recorded in connection with the extension of the term of an officer's warrant to
purchase  397,000  shares of the Company's  common  stock,  $.001 par value (the
"Common  Stock").  The increase is also  attributable  to costs  associated with
additional staffing, contract manufacturing and testing, and expenditures in the
functional  areas  of  product  development,   manufacturing  and  clinical  and
regulatory  affairs to support the manufacture of C225 for human clinical trials
as well as  travel-related  expenses to pursue  strategic  partnerships for C225
(and other product  candidates).  The remaining  increase reflects growth in the
area of discovery research for future product candidates.

General and Administrative

     General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing  arrangements with corporate partners
and  technology  licensors,  and expenses  associated  with  applying for patent
protection  for the Company's  technology  and  products.  Such expenses for the
six-month  periods  ended June 30,  1997 and June 30, 1996 were  $2,355,000  and
$1,587,000,  respectively,  an  increase of  $768,000  or 48%.  The  increase in
general and administrative  expenses primarily reflects (i) $279,000 in non-cash
compensation  expense  recorded in connection with an option grant to an officer
and (ii)  additional  staffing  to support  the  expanding  research,  clinical,
development and manufacturing efforts of the Company, particularly with its lead
therapeutic   product   candidate,   C225.  The  Company   expects  general  and
administrative  expenses  to  increase  in future  periods  to  support  planned
increases in research and development.


                                     Page 5

<PAGE>

Interest and Other Income/Expense

     Interest and other income was $685,000 for the six-month  period ended June
30, 1997 compared to $454,000 for the  six-month  period ended June 30, 1996, an
increase of $231,000 or 51%.  The  increase was  primarily  attributable  to the
increased  interest  income  earned from higher cash  balances in the  Company's
investment  portfolio  resulting from the proceeds  received from a public stock
offering  completed in March 1997.  Interest and other  expense was $340,000 and
$547,000  for the  six-month  periods  ended  June 30,  1997 and June 30,  1996,
respectively, a decrease of $207,000 or 38%. Interest and other expense for both
periods primarily  included interest on two outstanding  Industrial  Development
Revenue  Bonds with an aggregate  principal  amount of  $4,313,000  and interest
recorded on the  liability to Pharmacia and UpJohn Inc.  ("Pharmacia"),  for the
reacquisition  of the worldwide  rights to  Interleukin - 6 mutein  ("IL-6m") as
well as clinical material manufactured and supplied by Pharmacia to the Company.
The decrease was  primarily  attributable  to the May 1996  exchange of debt for
Company Common Stock with the Oracle Group and a Company Director.

Net Losses

     The  Company  had net  losses  of  $7,391,000  or $0.33  per  share for the
six-month  period ended June 30, 1997,  compared  with  $7,715,000  or $0.41 per
share for the six-month period ended June 30, 1996. The decrease in the net loss
for the six-month  period ended June 30, 1997 was primarily due to the fact that
the net loss for the six-month  period ended June 30, 1996 included a $1,267,000
or $0.07 per share  extraordinary  loss on early  extinguishment  of debt.  This
extraordinary loss resulted from the issuance of Company Common Stock in lieu of
cash  repayment  of a  $2,500,000  loan  due the  Oracle  Group  and a  $180,000
long-term note owed to a Company Director.

Three Months Ended June 30, 1997 and 1996

Revenues

     Revenues for the three-month  periods ended June 30, 1997 and June 30, 1996
were  $3,196,000 and $75,000,  respectively.  Revenues in both periods  included
research and  development  support fees of $75,000 from the Company's  corporate
partnership with American Home in infectious disease vaccines.  Revenues for the
three-month  period  ended  June 30,  1997 also  included  milestone  revenue of
$1,500,000 and contract research support of $417,000 from the Company's research
and  license  agreement  with  Merck  in  cancer  vaccines.   Additionally,  the
three-month  period ended June 30, 1997 included milestone revenue of $1,000,000
and royalty fees of $204,000 from the Company's  strategic  alliance with Abbott
in diagnostics.

Operating: Research and Development

     Total operating  expenses for the  three-month  periods ended June 30, 1997
and June 30, 1996 were  $4,529,000 and  $3,438,000,  respectively.  Research and
development  expenses for the  three-month  periods ended June 30, 1997 and June
30, 1996 were  $3,257,000  and  $2,593,000,  respectively.  Such amounts for the
three-month  periods ended June 30, 1997 and June 30, 1996  represented  72% and
75%,  respectively,  of total  operating  expenses.  The  $664,000  increase  in
research and development  expenses for the six-month  period ended June 30, 1997
was  primarily  attributable  to  costs  associated  with  additional  staffing,
contract  manufacturing and testing, and expenditures in the functional areas of
product  development,  manufacturing  and  clinical  and  regulatory  affairs to
support  the   manufacture  of  C225  for  human  clinical  trials  as  well  as
travel-related  expenses to pursue  strategic  partnerships  for C225 (and other
product  candidates).  The  remaining  increase  reflects  growth in the area of
discovery research for future product candidates.


                                     Page 6

<PAGE>

General and Administrative

     General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing  arrangements with corporate partners
and  technology  licensors,  and expenses  associated  with  applying for patent
protection  for the Company's  technology  and  products.  Such expenses for the
three-month  periods ended June 30, 1997 and June 30, 1996 were  $1,272,000  and
$845,000,  respectively, an increase of $427,000 or 51%. The increase in general
and  administrative   expenses  primarily  reflects  (i)  $150,000  in  non-cash
compensation  expense  recorded in connection with an option grant to an officer
and (ii)  additional  staffing  to support  the  expanding  research,  clinical,
development and manufacturing efforts of the Company, particularly with its lead
therapeutic   product   candidate,   C225.  The  Company   expects  general  and
administrative  expenses  to  increase  in future  periods  to  support  planned
increases in research and development.

Interest and Other Income/Expense

     Interest and other income was  $440,000  for the  three-month  period ended
June 30, 1997  compared to $261,000  for the  three-month  period ended June 30,
1996, an increase of $179,000 or 69%. The increase was primarily attributable to
the increased  interest income earned from higher cash balances in the Company's
investment  portfolio  resulting from the proceeds  received from a public stock
offering  completed in March 1997.  Interest and other  expense was $145,000 and
$200,000  for the  three-month  periods  ended June 30, 1997 and June 30,  1996,
respectively,  a decrease of $55,000 or 28%. Interest and other expense for both
periods primarily  included interest on two outstanding  Industrial  Development
Revenue  Bonds with an aggregate  principal  amount of  $4,313,000  and interest
recorded on the liability to Pharmacia,  for the  reacquisition of the worldwide
rights  to IL-6m as well as  clinical  material  manufactured  and  supplied  by
Pharmacia to the Company.  The decrease was  primarily  attributable  to the May
1996  exchange  of debt for  Company  Common  Stock with the Oracle  Group and a
Company Director.

Net Losses

     The  Company  had net  losses  of  $1,038,000  or $0.04  per  share for the
three-month  period ended June 30, 1997,  compared with  $4,569,000 or $0.23 per
share for the  three-month  period ended June 30, 1996.  The decrease in the net
loss for the  three-month  period ended June 30, 1997 was  primarily  due to the
fact that the net loss for the three-month period ended June 30, 1996 included a
$1,267,000  or $0.06 per share  extraordinary  loss on early  extinguishment  of
debt. This extraordinary loss resulted from the issuance of Company Common Stock
in lieu of cash  repayment  of a  $2,500,000  loan due the  Oracle  Group  and a
$180,000 long-term note owed to a Company Director.


                                     Page 7

<PAGE>

Liquidity and Capital Resources

     The Company's cash and cash  equivalents and securities  available for sale
totaled  $28,950,000 at August 12, 1997; on June 30, 1997 such balances  totaled
$31,091,000. The current balances in the Company's cash and cash equivalents and
securities  available for sale primarily reflects the proceeds received from the
March 1997 public offering of 3,000,000 shares of Common Stock .

     In May 1996,  the Company  extended  its  collaboration  with Merck for the
development  of a  therapeutic  cancer  vaccine,  BEC-2,  for use in  small-cell
carcinoma and in malignant melanoma. The collaboration  continues a research and
license  agreement  between the two companies signed in December 1990. Under the
terms of the modified agreement,  the Company could receive up to $11,700,000 in
license  fees,  research  and  development  support  and  milestone  payments in
addition to moneys  previously  received under the original  agreement.  Of such
$11,700,000,  as of June 30, 1997,  the Company  earned  $1,500,000 in milestone
payments,  and research and support  payments of $417,000  which is the first of
eight quarterly research and support payments totalling  $4,700,000.  In return,
Merck will receive  marketing  rights to BEC-2 for all  therapeutic  indications
outside  North  America.  Formerly the rights of Merck were  confined to Europe,
Australia and New Zealand.  Merck will also share in the  development  costs for
the  United  States  and  Europe  and  will pay all  development  costs in other
territories.  The Company will be entitled to royalties based upon product sales
outside of North America, if any.

     In December 1996,  the Company  signed an agreement with Finova  Technology
Finance, Inc. to finance the lease of laboratory and computer-related  equipment
and make certain  building and leasehold  improvements  to facilities  involving
payments aggregating approximately $2,500,000. At July 31, 1997, the Company had
$1,799,000 available under this agreement.

     In December  1996, the Company and Abbott  modified  their 1992  diagnostic
strategic  alliance  to provide for an  exclusive  sublicensing  agreement  with
Chiron   Diagnostics   ("Chiron")   for  the   Company's   patented  DNA  signal
amplification  technology,  AMPLIPROBE.  Under the terms of the  agreement,  all
sales of Chiron branched DNA diagnostic probe technology in countries covered by
Company  patents will be subject to a royalty to Abbott to be passed  through to
the Company. Royalties on all Chiron sales of AMPLIPROBE are paid on a quarterly
basis by Abbott and recognized upon receipt by the Company.

     In May 1997,  a European  patent was issued for the  Company's  proprietary
Repair Chain Reaction  ("RCR") DNA probe technology which was licensed to Abbott
under the 1992  strategic  alliance  discussed in the preceding  paragraph.  The
issuance of the patent  entitled the Company to receive two  milestone  payments
totaling  $1,000,000 and royalty payments on sales in covered European countries
for products  using the  Company's  RCR  technology.  Abbott will be entitled to
deduct from  royalties  otherwise  due, 25% of such royalties due for a two-year
period and 50%  thereafter  until a total of  $500,000  has been  deducted.  The
$1,000,000 in milestone  payments and $75,000 in royalty payments  covering 1995
and 1996 were received in June 1997.

     The  Company  has  expended  and will  continue  to  expend  in the  future
substantial  funds to continue  the research and  development  of its  products,
conduct   pre-clinical  and  clinical  trials,   establish   clinical-scale  and
commercial-scale  manufacturing  in its own  facilities or in the  facilities of
others,  and  market its  products.  In  addition,  $2,113,000  and  $2,200,000,
respectively,  in  Industrial  Development  Revenue Bonds issued by the New York
Industrial  Development  Agency  ("NYIDA")  on behalf of the Company in 1986 and
1990 become due in  December  1997 and May 2004,  respectively.  The Company has
granted a security interest in substantially  all facility  equipment located in
its New York City facility to secure the obligations of the Company to the NYIDA
relating to the 1986 and 1990 Industrial Development Revenue Bonds.


                                     Page 8

<PAGE>

     In July  1993,  the  Company  entered  into a  termination  agreement  with
Erbamont,  Inc., now a subsidiary of Pharmacia,  to acquire the worldwide rights
to IL-6m,  a blood cell growth  factor,  which had been  licensed  to  Pharmacia
pursuant to a  development  and licensing  agreement.  In  consideration  of the
return of rights and the  transfer  of certain  material  and  information,  the
Company has paid  $1,928,000  and has further  obligations  to  Pharmacia.  Such
obligations, including those to pay for IL-6m material manufactured and supplied
by Pharmacia,  totaled $2,400,000 at March 31, 1996. In addition, the Company is
required to pay Pharmacia $2,700,000 in royalties on eventual sales of IL-6m, if
any.  In March,  1996,  the Company  entered  into a  Repayment  Agreement  with
Pharmacia  (the  "Repayment  Agreement")  pursuant to which it agreed to pay the
$2,400,000  over 24 months  commencing in March 1996, with interest only payable
during  the first six  months.  At August 1, 1997 the  remaining  obligation  to
Pharmacia  totaled  $835,000.  In connection with the Repayment  Agreement,  the
Company signed a Confession of Judgment, which can be filed by Pharmacia with an
appropriate court in the case of default by the Company.  Pursuant to a Security
Agreement  entered into with  Pharmacia,  the Company  pledged its  interests in
patents related to IL-6m and to heparanase to secure its  obligations  under the
Repayment Agreement.

     The Company's future working capital and capital  requirements  will depend
upon numerous  factors,  including  the progress of the  Company's  research and
development  programs,  pre-clinical  testing and clinical trials, the Company's
corporate partners  fulfilling their obligations to the Company,  the timing and
cost of seeking  regulatory  approvals,  the level of resources that the Company
devotes to the development of manufacturing,  marketing and sales  capabilities,
technological advances, the status of competitors and the ability of the Company
to maintain  existing and establish new  collaborative  arrangements  with other
companies to provide funding to the Company to support these activities.

     The  Company  expects to incur  substantial  funding  requirements  for the
expansion of operations,  including (i) the expansion of the clinical  trials of
C225 and the related  manufacturing  program to support these trials and (ii) in
an effort to develop new  product  candidates  the  expansion  of  research  and
development  activities  including among other things,  increased staffing,  the
acquisition  of  equipment,   and  the  consummation  of  new  outside  research
agreements. In addition, the entire $835,000 of outstanding debt to Pharmacia is
payable ratably throughout the period ending February 1998 and $2,113,000 of the
Industrial Development Revenue Bonds issued by the NYIDA becomes due in December
1997.  The Company  expects that its capital  resources,  including  the ongoing
research  support  of its  corporate  partners  will be  sufficient  to fund its
operations for approximately the next two years. However, the receipt of certain
of  such  ongoing  research  support  is  subject  to  attaining   research  and
development  milestones,  certain  of which  have not yet been  achieved.  These
milestones include, but are not limited to, receiving regulatory  permission for
the filing of an Investigational New Drug ("IND") application for the initiation
of a small cell lung carcinoma  clinical trial and reaching  certain  enrollment
levels for such trial relating to the BEC-2 cancer vaccine.  No assurance can be
given that  there will be no change in  projected  research  support  (including
research  and  development  milestones)  or  expenses  that  would  lead  to the
Company's  capital being consumed at a faster rate than currently  expected.  In
order to fund its capital  needs beyond  approximately  the next two years,  the
Company will require  significant  levels of  additional  capital and intends to
raise the necessary  capital  through  additional  arrangements  with  corporate
partners, equity or debt financings or from other sources. There is no assurance
that the Company will be successful in consummating any such  arrangements  with
corporate partners, financings or securing other sources.

         The Company has entered into preliminary discussions with several major
pharmaceutical  companies concerning the funding of research and development for
certain of its products in research.  No assurance can be given that the Company
will be successful in pursuing any such alternatives.  In addition,  the Company
may seek to enter into a significant strategic partnership with a pharmaceutical
company  for  the  development  of its  lead  product  candidate,  C225.  Such a
strategic  alliance could include an up-front  equity  investment and technology
access fees plus milestone fees and revenue  sharing.  There can be no assurance
that the Company will be successful in achieving  such an alliance,  nor can the
Company predict the amount of funds which might be available to it if it entered
into such an alliance or the time at which such funds would be made available.


                                     Page 9

<PAGE>

     The Company has outfitted and purchased equipment for a certain property to
create a  clinical-scale  production  facility  that  complies with current Good
Manufacturing  Practices regulations.  To be successful,  the Company's products
must be  manufactured  in commercial  quantities in compliance  with  regulatory
requirements  and at  acceptable  costs.  Although  the  Company  has  developed
products in the laboratory and in some cases has produced sufficient  quantities
of materials for  pre-clinical  animal trials and early stage  clinical  trials,
production in late stage clinical or commercial  quantities may create technical
challenges for the Company.  If it commercializes its products,  the Company may
adapt this  facility  for use as its  commercial-scale  manufacturing  facility.
However, the Company has limited experience in clinical-scale  manufacturing and
no experience in commercial-scale  manufacturing,  and no assurance can be given
that the Company will be able to make the  transition to late stage  clinical or
commercial  production.  The timing and any  additional  costs of  adapting  the
facility for commercial manufacturing will depend on several factors,  including
the progress of products through clinical trials, and are not yet determinable.

     Total capital  expenditures  made during the six months ended June 30, 1997
were $724,000 of which $567,000  related to the  refurbishment  and equipping of
the  Company's  manufacturing  facility  in New  Jersey and  $157,000  reflected
equipment and  computer-related  purchases for the corporate office and research
laboratories in New York.

Certain Factors Affecting Forward-Looking Statements--Safe Harbor Statement

     Except for the historical  information  contained herein, this Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations  and
other portions of this report contain  forward-looking  statements  that involve
certain risks and uncertainties.  The Company's actual  operations,  performance
and results could differ  materially from those reflected in, or anticipated by,
these forward-looking  statements. In evaluating the Company and its operations,
performance and results,  investors  should  consider,  among other things,  the
scientific and business risks and  uncertainties  of new product  development in
the biotechnology field, the risk of rapid and significant technological change,
the risk of  development  by one or more  competitors  of products which compete
with the Company's  proposed products and the risks and uncertainties  discussed
in the Company's  public  filings with the  Commission,  including the Company's
most  recent  Annual  Report on Form  10-K  under the  captions  "Business"  and
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

Recently Issued Accounting Standards

     In February 1997, the Financial Accounting Standards Board issued Statement
of  Financial  Standards  No. 128 (SFAS 128),  "Earnings  Per  Share".  SFAS 128
establishes  standards  for  computing  and  presenting  earnings per share.  In
accordance  with the effective date of SFAS 128, the Company will adopt SFAS 128
as of December  31,  1997.  This  statement  is not  expected to have a material
impact on the Company's financial statements.


                                    Page 10

<PAGE>

PART II - OTHER INFORMATION

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

     (a) An annual meeting of stockholders was held on June 3, 1997 (the "Annual
Meeting").

     (b) The directors  elected at the Annual Meeting were Richard  Barth,  Jean
Carvais,  Vincent T. DeVita,  Jr., Robert F. Goldhammer,  David M. Kies, Paul B.
Kopperl,  William R. Miller, Harlan W. Waksal and Samuel D. Waksal. Such persons
are all of the  directors  of the  Company  whose  term of office as a  director
continued after the Annual Meeting.

     (c) The  matters  voted upon at the Annual  Meeting  and the results of the
voting, including broker non-votes where applicable, are set forth below.

     (i) Election of directors


Name                                In Favor       Withheld     Broker Non-Votes
----                                --------       --------     ----------------
Richard Barth                     20,671,171        778,505           N/A
Jean Carvais                      20,671,671        778,005           N/A
Vincent T. DeVita, Jr             20,671,671        778,005           N/A
Robert F. Goldhammer              20,671,671        778,005           N/A
David M. Kies                     20,761,371        778,305           N/A
Paul B. Kopperl                   20,671,571        778,105           N/A
William R. Miller                 20,671,671        778,005           N/A
Harlan W. Waksal                  20,671,571        778,105           N/A
Samuel D. Waksal                  20,671,271        778,405           N/A
                                                                
     (ii) The  stockholders  approved a  proposal  to amend the  Company's  1996
Incentive Stock Option Plan (the "1996 ISO Plan"), generally to (i) increase the
total number of shares of Common  Stock which may be issued  pursuant to options
which may be granted under the 1996 ISO Plan from 1,500,000 to 3,000,000,  which
number  shall be reduced by the number of shares of Common Stock which have been
or  may  be  issued  pursuant  to  options  granted  under  the  Company's  1996
Non-Qualified Stock Option Plan (the "1996 Non-Qualified Plan"); and (ii) change
certain  administration  provisions of the 1996 ISO Plan. The stockholders voted
8,737,903  shares in favor,  4,057,048  shares against,  45,245 shares abstained
from voting and there were 8,609,480 broker non-votes.

     (iii) The  stockholders  approved a proposal  to amend the  Company's  1996
Non-Qualified  Stock Option Plan,  generally to (i) increase the total number of
shares of Common  Stock  which may be issued  pursuant  to options  which may be
granted under the 1996  Non-Qualified  Plan from  1,500,000 to 3,000,000,  which
number  shall be reduced by the number of shares of Common Stock which have been
or may be issued  pursuant  to  options  granted  under the 1996 ISO Plan;  (ii)
change  certain  administration  provisions of the 1996  Non-Qualified  Plan and
(iii) clarify those persons  eligible to participate  in the 1996  Non-Qualified
Plan.  The  stockholders  voted  8,975,273  shares  in favor,  3,819,798  shares
against,  45,125 shares  abstained from voting and there were  8,609,480  broker
non-votes.

     (iv)  The   stockholders   approved  a  proposal  to  amend  the  Company's
Certificate  of  Incorporation  to increase the total number of shares of Common
Stock the Company is  authorized to issue from  30,000,000  shares to 45,000,000
shares.  The  stockholders  voted  19,145,871  shares in favor,  915,585  shares
against,  33,875 shares  abstained from voting and there were  1,354,345  broker
non-votes.

     (v) The stockholders  ratified the appointment by the Board of Directors of
KPMG Peat Marwick LLP as the Company's  independent certified public accountants
for the fiscal year ending December 31, 1997. The stockholders  voted 21,310,356
shares in favor,  112,160  shares  against,  and 27,160  shares  abstained  from
voting. Broker non-votes were not applicable.


                                    Page 11

<PAGE>

Item 6 - Exhibits and Reports on Form 8-K

     (a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)

        Exhibit No.                        Description
        -----------                        -----------
            3.1         Certificate of Incorporation and all amendments thereto
           27.1         Financial Data Schedule
           99.1         1996 Incentive Stock Option Plan, as amended
           99.3         1996 Non-Qualified Stock Option Plan, as amended
               
     (b) Reports on Form 8-K:

        Date of Report                     Items Reported
        --------------                     --------------
         April 14, 1997                        Item 5
         June 3, 1997                          Item 5


                                    Page 12

<PAGE>

                                   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.



                                                    IMCLONE SYSTEMS INCORPORATED
                                                    (Registrant)

Date:  August 13, 1997                           By  /s/ Samuel D. Waksal
                                                     ---------------------------
                                                     Samuel D. Waksal
                                                     President and Chief 
                                                     Executive Officer
                                         
Date: August 13, 1997                            By  /s/ Carl S. Goldfischer
                                                     ---------------------------
                                                     Carl S. Goldfischer
                                                     Vice President , Finance 
                                                     and Chief Financial Officer
                                     

                                     Page 13