UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

               For  the quarterly period ended September 30, 1996

          [ ]  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 of           (I.R.S. Employer Identification No.)
 incorporation or organization)

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

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


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 12 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 November 13,1996
 Common Stock, par value $.001                     20,048,176 Shares

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                                      INDEX
                                      -----

                                                                        Page No.
                                                                        --------

PART I - FINANCIAL INFORMATION

    Item 1.    Financial Statements

               Balance Sheets - September 30, 1996
               and December 31, 1995                                         1

               Statements of Operations - Three and nine
               months ended September 30, 1996 and 1995                      2

               Statements of Cash Flows - Nine months
               ended September 30, 1996 and 1995                             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           10

   Item 5.    Other Information                                             10

   Item 6.    Exhibits and Reports on Form 8-K                              10



SIGNATURES                                                                  11
 

<PAGE>

Part I - FINANCIAL INFORMATION
Item 1.  Financial Statements

                          IMCLONE SYSTEMS INCORPORATED

                                 BALANCE SHEETS
                        (in thousands, except share data)
<TABLE>
<CAPTION>

                                                                                          SEPTEMBER 30,       DECEMBER 31,
                                                  ASSETS                                      1996               1995
                                                                                          -------------       ------------
                                                                                          (unaudited)

<S>                                                                                        <C>                 <C>        
Current assets:
     Cash and cash equivalents.......................................................      $   1,800           $  10,207  
     Securities available for sale...................................................         13,544                  -
     Prepaid expenses................................................................            169                 115
     Amount due from officer and stockholder ........................................            115                 132
     Other current assets............................................................            299                  26
                                                                                           ---------           ---------  
                            Total current assets.....................................         15,927              10,480
                                                                                           ---------           ---------  
Property and equipment:                                                                                     
     Land............................................................................            340                 340
     Building and building improvements..............................................          8,969               8,969
     Leasehold improvements..........................................................          4,832               4,832
     Machinery and equipment.........................................................          5,111               4,796
     Furniture and fixtures..........................................................            536                 526
     Construction in progress........................................................            125                  -
                                                                                           ---------           ---------  
                            Total cost...............................................         19,913              19,463
       Less accumulated depreciation and amortization................................         (9,265)             (7,984)
                                                                                           ---------           ---------  
                            Property and equipment, net..............................         10,648              11,479
                                                                                           ---------           ---------  
                                                                                                            
Patent costs, net ...................................................................            751                 707
Deferred financing costs, net........................................................             67                  74
Other assets.........................................................................             63                  63
                                                                                           ---------           ---------  
                                                                                           $  27,456           $  22,803
                                                                                           =========           =========  
                                   LIABILITIES AND STOCKHOLDERS' EQUITY                                     
                                                                                                            
Current liabilities:                                                                                        
    Accounts payable.................................................................      $     397           $     992
    Accrued expenses and other ......................................................            665                 826
    Interest payable.................................................................            360                 343
    Current portion of long-term liabilities ........................................          1,649               4,584
                                                                                           ---------           ---------  
                            Total current liabilities................................          3,071               6,745
                                                                                           ---------           ---------  
                                                                                                            
Long-term debt ......................................................................          4,313               2,200
Long-term notes payable, net ........................................................           --                 1,928
Other long-term liabilities, less current portion ...................................            810                 107
                                                                                           ---------           ---------  
                            Total liabilities........................................          8,194              10,980
                                                                                           ---------           ---------  
                                                                                                            
Stockholders' equity :                                                                                      
    Preferred stock, $1.00 par value; authorized 4,000,000 shares;                                          
         none issued and outstanding.................................................           --                  --
    Common stock, $.001 par value; authorized 30,000,000 shares;                                            
         issued 20,039,599 and 16,819,622 at  September 30, 1996 and                                        
         December 31, 1995, respectively; outstanding 20,025,176 and                                        
         16,806,919 at September 30, 1996 and December 31, 1995, respectively........             20                  17
    Additional paid-in capital.......................................................        117,384              97,914
    Accumulated deficit..............................................................        (97,215)            (85,958)
    Treasury stock, at cost; 14,423 and 12,703 shares at September 30, 1996                                 
         and December 31, 1995, respectively.........................................           (169)               (150)
    Common stock subscriptions receivable............................................           (661)               --
    Unrealized loss on securities available for sale.................................            (97)               --
                                                                                           ---------           ---------  
                            Total stockholders' equity...............................         19,262              11,823
                                                                                           ---------           ---------  
                                                                                           $  27,456           $  22,803
                                                                                           =========           =========  
</TABLE>

                 See accompanying notes to financial statements.

                                  Page 1 of 11
<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                            STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
<TABLE>
<CAPTION>

                                                                       THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                          SEPTEMBER 30,             SEPTEMBER 30,
                                                                       ------------------        -------------------
                                                                        1996      1995           1996         1995
                                                                        ----      ----           ----         ----
Revenues:
<S>                                                                   <C>        <C>          <C>           <C>   
     License fees from third parties.............................     $    --    $   --       $    --       $   --
     Research and development funding from third parties.........           75        575           225          725
                                                                      --------   --------     ----------    -------- 
                   Total revenues................................           75        575           225          725
                                                                      --------   --------     ----------    -------- 

Operating expenses:
     Research and development....................................        2,683      2,071         7,601        6,098
     General and administrative..................................        1,031        752         2,618        2,340
                                                                      --------   --------     ----------    -------- 
                  Total operating expenses ......................        3,714      2,823        10,219        8,438
                                                                      --------   --------     ----------    -------- 

Operating loss ..................................................       (3,639)    (2,248)       (9,994)      (7,713)
                                                                      --------   --------     ----------    -------- 
Other (income) expense:
     Interest and other income...................................         (241)       (30)         (695)      (3,050)
     Interest and other expense..................................          144        297           691          698
                                                                      --------   --------     ----------    -------- 
                 Net interest and other (income) expense  .......          (97)       267            (4)      (2,352)
                                                                      --------   --------     ----------    -------- 

Net loss before extraordinary item ..............................       (3,542)    (2,515)       (9,990)      (5,361)

Extraordinary loss on extinguishment of debt,  net
    of income taxes..............................................        --          --           1,267         --
                                                                      --------   --------     ----------    -------- 

Net loss.........................................................     $ (3,542)  $ (2,515)    $ (11,257)    $ (5,361)
                                                                      ========   ========     ==========    ======== 

Net loss per common share:
       Loss before extraordinary loss on
          extinguishment of debt.................................     $  (0.18)  $  (0.19)    $   (0.52)    $  (0.42)

      Extraordinary loss on extinguishment of debt...............         --         --            0.07         --
                                                                      --------   --------     ----------    -------- 
      Net loss per common share..................................     $  (0.18)  $  (0.19)    $   (0.59)    $  (0.42)
                                                                      ========   ========     ==========    ======== 

Weighted average shares outstanding .............................       19,925     13,233         19,131      12,804
                                                                      ========   ========     ==========    ======== 
</TABLE>


                 See accompanying notes to financial statements.

                                  Page 2 of 11
<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                                            NINE MONTHS ENDED              
                                                                                              SEPTEMBER 30,                
                                                                                          ---------------------              
                                                                                          1996             1995
                                                                                          ----             ----
<S>                                                                                   <C>               <C>       
Cash flows from operating activities:                                                 
   Net loss ....................................................................      $ (11,257)        $ (5,361) 
   Adjustments to reconcile net loss to net                                                           
          cash used by operating activities:                                                          
      Depreciation and amortization ............................................          1,348            1,372
      Write-off of fixed assets ................................................           --                  2
      Extraordinary loss on early extinguishment of debt........................          1,267             -- 
      Discounted interest amortization..........................................            156               89
      Changes in:                                                                                     
         Prepaid expenses ......................................................            (54)             (37)
         Other current assets ..................................................           (273)              16
         Due from officer.......................................................             17               16
         Other assets ..........................................................           --                 (3)
         Interest payable ......................................................             17              347
         Accounts payable ......................................................           (595)          (1,015)
         Accrued expenses and other ............................................           (161)               2
                                                                                      ---------         --------  
                        Net cash used in operating activities ..................         (9,535)          (4,572)
                                                                                      ---------         --------  
                                                                                                      
Cash flows from investing activities:                                                                 
      Acquisitions of property and equipment ...................................           (450)             (16)
      Purchases of securities available for sale................................        (27,628)            -- 
      Sales of securities available for sale....................................         13,987             -- 
      Additions to patents .....................................................           (104)            (161)
                                                                                      ---------         --------  
                        Net cash used in investing activities ..................        (14,195)            (177)
                                                                                      ---------         --------  
                                                                                                      
Cash flows from financing activities:                                                                 
      Issuance of common stock .................................................         13,560            1,465
      Proceeds from exercise of stock options and warrants .....................          1,991              128
      Purchase of treasury stock................................................            (19)            -- 
      Repayment of notes payable ...............................................           --               (320)
      Proceeds from long-term notes payable.....................................           --              2,680
      Proceeds from short-term notes payable....................................           --                100
      Payments of other liabilities ............................................           (209)             (39)
                                                                                      ---------         --------  
                        Net cash provided by financing activities ..............         15,323            4,014
                                                                                      ---------         --------  
                                                                                                      
Net decrease in cash and cash equivalents ......................................         (8,407)            (735)
                                                                                                      
Cash and cash equivalents at beginning of period ...............................         10,207            3,032
                                                                                      ---------         --------  
Cash and cash equivalents at end of period .....................................      $   1,800         $  2,297
                                                                                      =========         ========
</TABLE>

                 See accompanying notes to financial statements.

                                  Page 3 of 11
<PAGE>

                          IMCLONE SYSTEMS INCORPORATED
                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (unaudited)

(1)  Basis of Presentation

     The  financial  statements  as of September  30, 1996 and for the three and
nine months ended  September 30, 1996 and 1995 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, 1995, as filed with the Securities
and Exchange Commission.

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

(2)  Related Party Transactions

     During the year ended  December  31, 1995,  the Company made  miscellaneous
non-interest-bearing  cash advances to the President and CEO totaling $7,000. In
addition, the officer repaid $31,000 of a demand promissory note during the year
ended  December  31,  1995.  This  brought  the  outstanding  balance  of  total
miscellaneous  non-interest-bearing  cash advances to the officer to $132,000 at
December  31,  1995.  The  balance  due from the officer at October 31, 1996 was
$112,000.  The officer has provided the Company  with a demand  promissory  note
pursuant to which the officer is obligated to repay the debt over a  twenty-four
month period ending April 30, 1997.

(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.

(5)  Subsequent Events

     During  October  1996,  the  Company  signed  a  commitment  letter  with a
financing  company to lease laboratory and  computer-related  equipment and make
certain  building and leasehold  improvements  to existing  facilities for up to
$2,500,000. Several leases may be signed with an aggregate cost of not less than
$75,000 per lease.  Each lease has a fair market  value  purchase  option at the
expiration of a 42 month term. Upon the closing of the first lease commencement,
the Company is  required  to issue to the finance  company a warrant to purchase
approximately  25,000 shares of its common stock at the market price at the time
of the commitment.

                                  Page 4 of 11

<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 periods  included in the  accompanying  financial
statements.

Results of Operations

Nine Months Ended September 30, 1996 and 1995

     Revenues for the nine-month  periods ended September 30, 1996 and 1995 were
$225,000 and $725,000, respectively. Revenues for both periods included research
and  development  support  fees from its  corporate  partnership  with  American
Cyanamid Company in infectious disease vaccines.  In addition,  revenues for the
nine months ended September 30, 1995 included contract research fees of $500,000
from the Company's strategic alliance with Abbott Laboratories in diagnostics.

     Total  operating  expenses for the nine-month  periods ended  September 30,
1996 and  September  30, 1995 were  $10,219,000  and  $8,438,000,  respectively.
Research and development expenses for the nine-month periods ended September 30,
1996 and September 30, 1995 were $7,601,000 and $6,098,000,  respectively.  Such
amounts for the  nine-month  periods ended  September 30, 1996 and September 30,
1995 represented 74% and 72%,  respectively,  of total operating  expenses.  The
increase in research  and  development  expenses  is  attributable  to the costs
incurred to manufacture the Company's lead product  candidate,  C225, as well as
increased research and development activities on other product candidates.

     General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing  arrangements with corporate partners
and expenses  associated  with applying for patent  protection for the Company's
technology  and  products.  Such  expenses  for  the  nine-month  periods  ended
September  30, 1996 and  September  30,  1995 were  $2,618,000  and  $2,340,000,
respectively.   The   increase  in  general  and   administrative   expenses  is
attributable  to the costs  associated  with the  expanded  efforts in  pursuing
strategic alliances.

     Interest  and other income was  $695,000  for the  nine-month  period ended
September  30, 1996  compared to  $3,050,000  for the  nine-month  period  ended
September 30, 1995.  The decrease was primarily  attributable  to the April 1995
sale of a portion of the Company's  preferred and common stock holdings in Cadus
Pharmaceutical  Corporation to an unrelated party for $3,000,000.  Such decrease
was  partially  mitigated by increased  interest  income earned from higher cash
balances in the  Company's  investment  portfolio  resulting  from the  proceeds
received from public stock  offerings  which were completed in November 1995 and
February  1996.  Interest  and other  expense was  $691,000 and $698,000 for the
nine-month   periods   ended   September   30,  1996  and  September  30,  1995,
respectively.  Interest and other  expense for both periods  primarily  includes
interest  on two  outstanding  Industrial  Development  Revenue  Bonds  with  an
aggregate principal amount of $4,313,000,  interest recorded on the liability to
Pharmacia and UpJohn,  Inc. for the  reacquisition  of the  worldwide  rights to
IL-6m and the contract  manufacture of clinical  material,  and interest accrued
and the  amortization of the non-cash debt discount  recorded in connection with
the Company's  August 1995 financing  with the Oracle Group.  See "Liquidity and
Capital Resources".

     The  Company  had net  losses  of  $11,257,000  or  $0.59  per  share,  and
$5,361,000 or $0.42 per share,  for the nine-month  periods ended  September 30,
1996 and  September  30,  1995,  respectively.  The net loss for the  nine-month
period  ended  September  30,  1996  included  a  $1,267,000  or $0.07 per share
extraordinary  loss on early  extinguishment of debt through the issuance during
the second  quarter  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.  See "Liquidity and Capital  Resources" for further discussion
of these transactions.

                                  Page 5 of 11
<PAGE>

Three Months Ended September 30, 1996 and 1995

     Revenues for the three-month periods ended September 30, 1996 and 1995 were
$75,000 and $575,000  respectively.  Revenues for both periods included research
and  development  support  fees from its  corporate  partnership  with  American
Cyanamid Company in infectious disease vaccines.  In addition,  revenues for the
three  months  ended  September  30, 1995  included  contract  research  fees of
$500,000  from the Company's  strategic  alliance  with Abbott  Laboratories  in
diagnostics.

     Total operating  expenses for the  three-month  periods ended September 30,
1996 and  September  30,  1995 were  $3,714,000  and  $2,823,000,  respectively.
Research and development  expenses for the  three-month  periods ended September
30, 1996 and September 30, 1995 were  $2,683,000 and  $2,071,000,  respectively.
Such amounts for the three-month  periods ended September 30, 1996 and September
30, 1995 represented 72% and 73%, respectively, of total operating expenses. The
increase in research  and  development  expenses  is  attributable  to the costs
incurred to manufacture the Company's lead product  candidate,  C225, as well as
increased research and development activities on other product candidates.

     General and administrative expenses include administrative personnel costs,
costs incurred in connection with pursuing  arrangements with corporate partners
and expenses  associated  with applying for patent  protection for the Company's
technology  and  products.  Such  expenses  for the  three-month  periods  ended
September  30,  1996 and  September  30,  1995  were  $1,031,000  and  $752,000,
respectively.   The   increase  in  general  and   administrative   expenses  is
attributable  to the costs  associated  with the  expanded  efforts in  pursuing
corporate partnerships.

     Interest and other income was  $241,000  for the  three-month  period ended
September  30,  1996  compared  to  $30,000  for the  three-month  period  ended
September 30, 1995. The increase is due to higher cash balances in the Company's
investment  portfolio  resulting  from the proceeds  received  from public stock
offerings which were completed in November 1995 and February 1996.  Interest and
other  expense was  $144,000  and $297,000  for the  three-month  periods  ended
September  30, 1996 and  September  30, 1995,  respectively.  Interest and other
expense  for  both  periods  primarily  includes  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.
for the  reacquisition  of the  worldwide  rights  to  IL-6m  and  the  contract
manufacture of clinical material.  The decrease in interest and other expense is
primarily attributable to the exchange of debt for Company Common Stock with the
Oracle Group.  See "Liquidity and Capital  Resources" for further  discussion of
this transaction.

     The  Company  had a net loss of  $3,542,000  or  $0.18  per  share  for the
three-month  period  ended  September  30,  1996  compared  with a net  loss  of
$2,515,000  or $0.19 per share for the three-month  period ended  September  30,
1995.

                                  Page 6 of 11
<PAGE>

Liquidity and Capital Resources

     The Company's cash and cash  equivalents and securities  available for sale
totaled  $14,353,000  at November 13, 1996;  on September 30, 1996 such balances
totaled $15,344,000.

     The  Company  owned 28% of the common and  preferred  stock of Cadus  until
December 1994 when it completed the sale of 50% of its holdings in Cadus to High
River Limited  Partnership  ("High River") for $3,000,000.  In April,  1995, the
Company  completed the sale of the  remaining  one-half of its shares of capital
stock of Cadus for  $3,000,000  to the same party.  The Company had the right to
repurchase all 3,238,184  shares of Cadus any time prior to October 27, 1996 for
$1.75 per share, subject to adjustment under certain circumstances.  The Company
did not exercise the repurchase  right. In exchange for such right,  the Company
granted to High River two options to purchase shares of Common Stock. One option
is to purchase  150,000 shares at an exercise price of $2.00 per share,  subject
to adjustment under certain  circumstances,  and the other option is to purchase
300,000  shares at an  exercise  price per share of $0.69 per share,  subject to
adjustment  under certain  circumstances.  Both options will expire on April 26,
2000.

     In August 1995, the Oracle Group purchased 1,000,000 shares of Common Stock
for a purchase  price of  $1,500,000  and made a two-year loan to the Company in
the amount of  $2,500,000  at an annual  interest rate of 8%. Part or all of the
loan was subject to mandatory  prepayment at the request of the investors,  upon
the occurrence of certain  events,  including the raising of certain  additional
funds.  The  obligations of the Company in connection with the loan were secured
by a lien on the Company's Branchburg,  New Jersey manufacturing  facility.  The
Company  recorded  a non-cash  debt  discount  of  approximately  $1,062,500  in
connection with this financing. The Oracle Group includes Oracle Partners, L.P.,
Quasar  International  Partners C.V.,  Oracle  Institutional  Partners L.P., Sam
Oracle Fund, Inc. and Warren B. Kanders. The Oracle Group also received warrants
exercisable at any time until August 10, 2000  entitling the holders  thereof to
purchase an aggregate of 500,000  shares of Common Stock at a price of $1.50 per
share and  500,000  shares of Common  Stock at a price of $3.00 per share.  As a
result of the Company's offerings of shares of its Common Stock in November 1995
and February 1996, the Oracle Group was entitled to require the Company to apply
20 percent of the gross  proceeds of the sale of the shares of Common Stock from
the offerings to repay the loan.

     In May 1996 the Company and the Oracle Group exchanged the notes evidencing
the loan for 333,333 shares of Common Stock based on a stock price of $7.50. The
market price of the  Company's  stock on April 15,  1996,  the date on which the
Company  reached  agreement in principle with the Oracle Group for the exchange,
was $9.13 and the Company paid the accrued and unpaid interest through April 15,
1996 on the notes in the amount of  $143,000 in cash.  The  Company  recorded an
extraordinary  loss of $1,228,000 on the  extinguishment  of debt. In July 1996,
the Company  registered such shares of Common Stock with the Commission  under a
registration statement in accordance with provisions of the 1933 Act.

     In July 1995,  a director  loaned the Company  $180,000  in exchange  for a
long-term note due two years from issuance at an annual  interest rate of 8%. As
part of the  transaction,  the director was granted 36,000  warrants to purchase
Company  common stock at $1.50 per share and an  additional  36,000  warrants to
purchase  Company common stock at $3.00 per share.  In May 1996, the Company and
the  director  exchanged  the note for 24,000  shares of Common Stock based on a
stock price of $7.50. The market price of the Company's stock on April 15, 1996,
the date on which the Company  reached  agreement in principle with the director
for the exchange, was $9.13 and the Company paid the accrued and unpaid interest
on the  note  in the  amount  of  $10,000  in  cash.  The  Company  recorded  an
extraordinary  loss of $39,000 on the  extinguishment  of the debt. In July 1996
the Company  registered such shares of Common Stock with the Commission  under a
registration statement in accordance with the provisions of the 1933 Act.

     In February 1996, the Company  completed a public sale of 2,200,000  shares
of Common Stock at a per share price to the public of $6.63. Net proceeds to the
Company  from  this  sale  totaled  approximately  $13,600,000  after  deducting
expenses  payable  by the  Company  in  connection  with  the  offering  and the
commission paid by the Company.

                                  Page 7 of 11
<PAGE>

     In May 1996,  the  Company  extended  its  collaboration  with  Merck  KGaA
("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 monies previously received in the original agreement. In
return,  Merck has  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.

     During the current and next  several  years,  the Company  expects to incur
substantial  additional research and development costs,  including costs related
to  pre-clinical  and  clinical  trials,  increased  administrative  expenses to
support  its  research  and   development   operations  and  increased   capital
expenditures  for  manufacturing  capacity and various  equipment needs. In June
1996, the Company and the New York  Industrial  Development  Agency extended the
maturity of the Company's  $2,113,000  repayment obligation to the NYIDA for the
1986  Industrial  Revenue Bond,  which was due on June 18, 1996, to December 15,
1997. In addition,  the $2,200,000 Industrial Development Revenue Bond issued on
behalf of the Company in 1990 becomes due in 2004.

     In July  1993,  the  Company  entered  into an  agreement  to  acquire  the
worldwide  rights to IL-6m,  a blood cell growth factor,  from  Erbamont,  now a
subsidiary of Pharmacia and UpJohn, Inc. ("Pharmacia"),  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 $900,000 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 the end of 1994. 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 by which it has agreed to pay the  $2,400,000,  including  interest at
8.75%,  over 24 months  commencing  in March 1996,  with  interest  only payable
during the first six months.  In connection  with the Repayment  Agreement,  the
Company has signed a Confession  of Judgment,  which can be filed in the case of
default.  Pursuant to a Security  Agreement  entered  into with  Pharmacia,  the
Company  has  pledged  its  interests  in  patents  related  to its 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's budgeted cash expenditures for the twelve month period ending
September 30, 1997 total approximately $17,400,000, which includes $1,713,000 of
the outstanding  obligation to Pharmacia.  The Company expects that its existing
capital  resources  and revenue  stream will be  sufficient  to fund its capital
needs through  mid-December  1997. In order to fund its capital needs after that
time,  the Company will require  significant  levels of  additional  capital and
intends  to raise  the  necessary  capital  through  additional  equity  or debt
financing, arrangements with corporate partners or from 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 license 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 8 of 11
<PAGE>

     The Company has a clinical-grade  manufacturing facility in Branchburg, New
Jersey.  If  clinical  trials of its  products  continue to be  successful,  the
Company also intends to use the facility for manufacturing clinical material for
late-stage  trials and, if products are approved for  marketing,  for commercial
material.  The timing and costs of further  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 nine months ended September 30,
1996 were $450,000.  $305,000 related to the  refurbishment and equipping of the
Company's   manufacturing  facility  in  New  Jersey  while  $145,000  reflected
scientific  and  computer-related  equipment  purchases  for  the  research  and
development laboratories at the Company's New York facility.

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

     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  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
SEC,  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."

                                  Page 9 of 11
<PAGE>

PART II - OTHER INFORMATION

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

             None.

Item 5.      Other Information

             None.

Item 6.      Exhibits and Reports on Form 8-K

             (a)      Exhibits:

                      None.

             (b)      Reports on Form 8-K:

                      Date Filed_______________       Items Reported___________ 

                                 Page 10 of 11
<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:  November 13, 1996         By       /s/ Samuel D. Waksal
                                          -------------------------------------
                                          Samuel D. Waksal
                                          President and Chief Executive Officer



Date: November 13, 1996          By       /s/ Carl S. Goldfischer
                                          -------------------------------
                                          Carl S. Goldfischer
                                          Vice President of Financial and 
                                          Strategic Planning and
                                          Chief Financial Officer



                                  Page 11 of 11