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, 1998

           [X] 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                           (IRS Employer
 incorporation or organization)                         Identification No.)

                      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, 1998
Common Stock, par value $.001                        24,420,025 Shares

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                                      INDEX


                                                                        Page No.
                                                                        --------

PART I - FINANCIAL INFORMATION

      Item 1. Financial Statements

              Balance Sheets - June 30, 1998 (unaudited)
              and December 31, 1997                                          1

              Unaudited Statements of Operations and
              Comprehensive Loss - Three and Six
              months ended June 30, 1998 and 1997                            2

              Unaudited Statements of Cash Flows - Six
              months ended June 30, 1998 and 1997                            3

              Notes to Financial Statements                                  4



      Item 2. Management's Discussion and Analysis of
              Financial Condition and Results of Operations                  5

      Item 3. Quantitative and Qualitative Disclosures About
              Market Risk                                                   10


PART II - OTHER INFORMATION


      Item 4. Submission of Matters to a Vote of Security Holders           11

      Item 5. Other Information                                             12

      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                              1998         1997
                                                      ---------    ---------
                                                     (unaudited)
Current assets:
   Cash and cash equivalents                          $   3,874    $   2,558
   Securities available for sale                         47,852       57,052
   Prepaid expenses                                         576          596
   Other current assets                                     638          589
                                                      ---------    ---------
          Total current assets                           52,940       60,795
                                                      ---------    ---------
Property and equipment:
   Land                                                     340          340
   Building and building improvements                    10,471        8,969
   Leasehold improvements                                 4,832        4,832
   Machinery and equipment                                7,608        6,315
   Furniture and fixtures                                   623          550
   Construction in progress                                --          2,159
                                                      ---------    ---------
          Total cost                                     23,874       23,165

     Less accumulated depreciation and amortization     (12,120)     (11,294)
                                                      ---------    ---------
          Property and equipment, net                    11,754       11,871
                                                      ---------    ---------

Patent costs, net                                           972          944
Deferred financing costs, net                                51           55
Other assets                                              2,318        2,115
                                                      ---------    ---------
                                                      $  68,035    $  75,780
                                                      =========    =========
          Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                    $   1,580    $   1,731
  Accrued expenses and other                                696        1,440
  Interest payable                                           43           68
  Deferred revenue                                          283          208
  Current portion of long-term liabilities                  583          677
                                                      ---------    ---------
          Total current liabilities                       3,185        4,124
                                                      ---------    ---------

Long-term debt                                            2,200        2,200
Other long-term liabilities, less current portion         1,429        1,118
Preferred stock dividends payable                         1,302          112
                                                      ---------    ---------
          Total liabilities                               8,116        7,554
                                                      ---------    ---------

Commitments and contingencies

Stockholders' equity :
  Preferred stock, $1.00 par value; authorized
    4,000,000 shares; issued and outstanding
    Series A Convertible: 400,000 at June 30,
    1998 and December 31, 1997 (preference in
    liquidation $41,302 and $40,112, respectively)          400          400
  Common stock, $.001 par value; authorized
    45,000,000 shares; issued 24,439,142 and
    24,265,072 at  June 30, 1998 and December 31,
    1997, respectively; outstanding 24,388,325, and
    24,214,255 at June 30, 1998 and December 31,
    1997, respectively                                       24           24
  Additional paid-in capital                            185,112      185,706
  Accumulated deficit                                  (125,245)    (117,464)
  Treasury stock, at cost; 50,817 shares at
    June 30, 1998 and December 31, 1997                    (492)        (492)
  Note receivable from officer and stockholder             (136)        --
  Accumulated other comprehensive income:
    Unrealized gain on securities available for sale        256           52
                                                      ---------    ---------
          Total stockholders' equity                     59,919       68,226
                                                      ---------    ---------
                                                      $  68,035    $  75,780
                                                      =========    =========


                 See accompanying notes to financial statements.
                                     Page 1

<PAGE>

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

<TABLE>
<CAPTION>
                                                            Three Months Ended       Six Months Ended
                                                                 June 30,                 June 30,
                                                           --------------------    --------------------
                                                             1998        1997        1998        1997
                                                           --------    --------    --------    --------
<S>                                                        <C>         <C>         <C>         <C>     
Revenues:
   Product development milestone revenues                  $   --      $  2,500    $  1,000    $  2,500
   Research and development funding from third
        parties and other                                       765         696       1,615         771
                                                           --------    --------    --------    --------
             Total revenues                                     765       3,196       2,615       3,271
                                                           --------    --------    --------    --------
Operating expenses:
   Research and development                                   4,675       3,257       8,846       8,652
   General and administrative                                 1,546       1,272       2,959       2,355
                                                           --------    --------    --------    --------
             Total operating expenses                         6,221       4,529      11,805      11,007
                                                           --------    --------    --------    --------

Operating loss                                               (5,456)     (1,333)     (9,190)     (7,736)
                                                           --------    --------    --------    --------
Other:
   Interest and other income                                   (778)       (440)     (1,609)       (685)
   Interest expense                                             110         145         200         340
                                                           --------    --------    --------    --------
             Net interest  and other income                    (668)       (295)     (1,409)       (345)
                                                           --------    --------    --------    --------

Net loss                                                     (4,788)     (1,038)     (7,781)     (7,391)

Preferred dividends (including assumed incremental yield
  of $317 for the three-months ended June 30, 1998 and
  $635 the six-months ended June 30, 1998)                      967        --         1,825        --
                                                           --------    --------    --------    --------

Net loss to common stockholders                            $ (5,755)   $ (1,038)   $ (9,606)   $ (7,391)
                                                           ========    ========    ========    ========

Net loss                                                   $ (4,788)   $ (1,038)   $ (7,781)   $ (7,391)

Other comprehensive income:
  Unrealized gain on securities available for sale:
    Unrealized holding gain arising during the period           135          43         204          20
    Less: Reclassification adjustment for realized gain
          (loss) included in net income                        --          --             2          (3)
                                                           --------    --------    --------    --------
             Total other comprehensive income                   135          43         202          23
                                                           --------    --------    --------    --------
Comprehensive loss                                         $ (4,653)   $   (995)   $ (7,579)   $ (7,368)
                                                           ========    ========    ========    ========

Basic and diluted net loss per common share                $  (0.24)   $  (0.04)   $  (0.40)   $  (0.33)
                                                           ========    ========    ========    ========

Weighted average shares outstanding                          24,273      24,033      24,251      22,702
                                                           ========    ========    ========    ========
</TABLE>


                 See accompanying notes to financial statements.
                                     Page 2

<PAGE>

                          IMCLONE SYSTEMS INCORPORATED

                            Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)

                                                             Six Months Ended
                                                                 June 30,
                                                           --------------------
                                                             1998        1997
                                                           --------    --------

Cash flows from operating activities:
 Net loss                                                  $ (7,781)   $ (7,391)
 Adjustments to reconcile net loss to net
      cash used in operating activities:
    Depreciation and amortization                               883         866
    Expense associated with issuance
      of options and warrants                                   310       2,634
    (Gain) loss on sale of investments                           (2)          3
    Changes in:
       Prepaid expenses                                          20        (328)
       Other current assets                                     (49)       (815)
       Due from officer                                        --            11
       Other assets                                             (35)         (8)
       Interest payable                                         (25)        (47)
       Accounts payable                                        (151)        325
       Accrued expenses and other                              (744)       (635)
       Deferred revenue                                          75         208
                                                           --------    --------
         Net cash used in operating activities               (7,499)     (5,177)
                                                           --------    --------
Cash flows from investing activities:
    Acquisitions of property and equipment                     (570)       (436)
    Purchases of securities available for sale              (28,760)    (54,777)
    Sales of securities available for sale                   37,997      37,042
    Additions to patents                                        (81)       (120)
                                                           --------    --------
         Net cash provided by (used in) investing
            activities                                        8,586     (18,291)
                                                           --------    --------
Cash flows from financing activities:
    Net proceeds from issuance of common stock                 --        23,162
    Proceeds from exercise of stock options and warrants        150       1,360
    Purchase of treasury stock                                 --          (323)
    Proceeds from equipment and building improvement
      financings                                                593        --
    Payments of other liabilities                              (514)       (906)
                                                           --------    --------
         Net cash provided by financing activities              229      23,293
                                                           --------    --------
Net increase (decrease) in cash and cash equivalents          1,316        (175)

Cash and cash equivalents at beginning of period              2,558       2,734
                                                           --------    --------
Cash and cash equivalents at end of period                 $  3,874    $  2,559
                                                           ========    ========


                 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 ("ImClone" or the
"Company")  as of June 30, 1998 and for the three and six months  ended June 30,
1998 and 1997 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 audited  financial  statements
and notes thereto  included in the Company's  Annual Report on Form 10-K for the
year  ended  December  31,  1997,  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

      In  January  1998,  the  Company   accepted  a  promissory  note  totaling
approximately  $131,000  from  its  President  and CEO in  connection  with  the
exercise of a warrant to purchase  87,305 shares of the Company's  common stock,
$.001 par value (the  "Common  Stock").  The note is due no later than two years
from issuance and is full recourse. Interest is payable on the first anniversary
date of the  promissory  note  and on the  stated  maturity  or any  accelerated
maturity at the annual rate of 8.5%. At June 30, 1998,  the total amount due the
Company,  including interest, is approximately $136,000 and is classified in the
stockholders'  equity  section of the balance  sheet as a note  receivable  from
officer and stockholder.

(3) Earnings Per Share

      Basic and diluted  Earnings Per Share  ("EPS") are  computed  based on the
weighted average number of shares outstanding.  Potentially dilutive securities,
including  convertible  preferred  stock,  options and  warrants,  have not been
included in the diluted EPS computation because they are anti-dilutive.

(4) Comprehensive Income

      On January 1, 1998, the Company adopted Statement of Financial  Accounting
Standards  No.  130,  "Reporting   Comprehensive  Income"  ("SFAS  130"),  which
establishes  standards for reporting and display of comprehensive income and its
components.  In  accordance  with  SFAS  130,  the  Company  has  displayed  the
components  of "Other  comprehensive  income"  and  "Comprehensive  loss" in the
accompanying  Financial Statements.  All prior-period data has been reclassified
to conform with the provisions of SFAS 130.

(5) 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 periods  included in the accompanying
financial statements.

RESULTS OF OPERATIONS

Six Months Ended June 30, 1998 and 1997

Revenues

      Revenues for the six-months  ended June 30, 1998 and 1997 were  $2,615,000
and  $3,271,000  respectively,  a decrease of $656,000,  or 20%. The decrease in
revenues for the six-months ended June 30, 1998 was primarily  attributable to a
decrease  in  milestone  revenue  which can vary  widely  from  period to period
depending upon the timing of the achievement of various research and development
milestones for products  under  development.  Revenues for the six-months  ended
June 30, 1998  consisted of (i) $150,000 in research  support from the Company's
partnership with the Wyeth/Lederle  Vaccine and Pediatrics  Division of American
Home  Products  Corporation  ("American  Home")  in  infectious  diseases,  (ii)
$1,000,000 in milestone  revenue and $1,250,000 in research and support payments
from the Company's research and license agreement with Merck KGaA ("Merck") with
respect to the  Company's  BEC2  product  candidate,  (iii)  $117,000 in royalty
revenue  from  the  Company's   strategic  alliance  with  Abbott   Laboratories
("Abbott")  in  diagnostics  and  (iv)  $98,000  from a Phase  I Small  Business
Innovation  Research grant from the National  Cancer  Institute for a program in
cancer-related  angiogenesis.  Revenues for the  six-months  ended June 30, 1997
consisted of (i) $150,000 in research  support  from the  Company's  partnership
with  American  Home,  (ii)  $1,500,000  in  milestone  revenue and  $417,000 in
research and support payments from the Company's  research and license agreement
with Merck and (iii)  $1,000,000  in  milestone  revenue and $204,000 in royalty
revenue from the Company's strategic alliance with Abbott.

Operating: Research and Development Expenses

      Total operating  expenses for the six-months  ended June 30, 1998 and 1997
were $11,805,000 and $11,007,000,  respectively, an increase of $798,000, or 7%.
Research and  development  expenses for the  six-months  ended June 30, 1998 and
1997 were  $8,846,000 and $8,652,000,  respectively,  an increase of $194,000 or
2%. Such amounts for the six-months ended June 30, 1998 and 1997 represented 75%
and 79%, respectively, of total operating expenses. The increase in research and
development  expenses for the six-months ended June 30, 1998 was attributable to
increased  expenditures  associated  with  additional  staffing  in the  area of
discovery  research,  the  initiation  of new supported  research  programs with
academic institutions, the establishment of corporate in-licensing arrangements,
and expenditures in the functional areas of product  development,  manufacturing
and clinical and regulatory  affairs to support the Company's  lead  therapeutic
product candidate,  C225, for human clinical trials. This increase was partially
offset by the one-time $2,233,000 non-cash compensation expense recorded for the
six-months  ended June 30, 1997 in connection  with the extension of the term of
an officer's warrant to purchase 397,000 shares of Common Stock.

General and Administrative Expenses

      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-months  ended June 30, 1998 and 1997 were  $2,959,000  and  $2,355,000,
respectively,  an  increase of  $604,000,  or 26%.  The  increase in general and
administrative  expenses primarily reflected (i) additional support staffing for
the expanding research,  clinical,  development and manufacturing efforts of the
Company, particularly with respect to C225 and (ii) expenses associated with the
pursuit  of  strategic  corporate  alliances  and  other  corporate  development
expenses. The Company expects general and administrative expenses to increase in
future periods to support planned increases in research,  clinical,  development
and manufacturing efforts of the Company.


                                     Page 5
<PAGE>

Interest and Other Income and Interest Expense

      Interest and other income was $1,609,000 for the six-months ended June 30,
1998 compared to $685,000 for the six-months ended June 30, 1997, an increase of
$924,000,  or 135%.  The increase was  primarily  attributable  to the increased
interest  income earned from higher cash  balances in the  Company's  investment
portfolio  resulting from a private placement of Series A Convertible  Preferred
Stock (the "Series A Preferred  Shares" or "Series A Preferred Stock") completed
in December 1997.  Interest expense was $200,000 and $340,000 for the six-months
ended June 30,  1998 and 1997,  respectively,  a decrease  of  $140,000  or 41%.
Interest expense for both periods primarily  included interest on an outstanding
Industrial  Development Revenue Bond issued in 1990 (the "1990 IDA Bond") with a
principal amount of $2,200,000,  interest recorded on capital lease obligations,
and interest recorded on a liability to Pharmacia and UpJohn Inc. ("Pharmacia"),
for the  reacquisition of the worldwide  rights to a recombinant  mutein form of
Interleukin-6  as  well  as  clinical  material  manufactured  and  supplied  by
Pharmacia  to the  Company.  The  decrease  was  primarily  attributable  to the
December 1997 repayment of an IDA Bond issued in 1986 (the "1986 IDA Bond") with
a  principal  amount  of  $2,113,000  and the  February  1998  repayment  of the
remaining liability to Pharmacia.

Net Losses

      The Company had net losses to common  stockholders  of $9,606,000 or $0.40
per share for the  six-months  ended June 30, 1998 compared  with  $7,391,000 or
$0.33 per share for the six-months  ended June 30, 1997. The increase in the net
losses and per share net loss to common  stockholders  was due  primarily to the
accrued dividends to preferred  stockholders and to the factors mentioned in the
preceding paragraphs.

Three Months Ended June 30, 1998 and 1997

Revenues

      Revenues for the  three-months  ended June 30, 1998 and June 30, 1997 were
$765,000 and  $3,196,000,  respectively,  a decrease of $2,431,000,  or 76%. The
decrease  in revenues  for the  three-months  ended June 30, 1998 was  primarily
attributable  to a decrease  in  milestone  revenue  which can vary  widely from
period  to  period  depending  upon the  timing of the  achievement  of  various
research and development milestones for products under development. Revenues for
the  three-months  ended June 30,  1998  consisted  of (i)  $75,000 in  research
support from the  Company's  partnership  with American  Home,  (ii) $625,000 in
research and support payments from the Company's  research and license agreement
with Merck,  and (iii) $65,000 in royalty  revenue from the Company's  strategic
alliance  with  Abbott.  Revenues  for the  three-months  ended  June  30,  1997
consisted of (i) $75,000 in research support from the Company's partnership with
American Home, (ii) $1,500,000 in milestone revenue and $417,000 in research and
support payments from the Company's  research and license  agreement with Merck,
and (iii)  $1,000,000 in milestone  revenue and $204,000 in royalty revenue from
the Company's strategic alliance with Abbott.

Operating: Research and Development

      Total operating expenses for the three-months ended June 30, 1998 and 1997
were $6,221,000 and $4,529,000,  respectively, an increase of $1,692,000 or 37%.
Research and development  expenses for the three-months  ended June 30, 1998 and
1997 were $4,675,000 and $3,257,000,  respectively, an increase of $1,418,000 or
44%. Such amounts for the three-months  ended June 30, 1998 and 1997 represented
75% and 72%, respectively, of total operating expenses. The increase in research
and development expenses for the six-months ended June 30, 1998 was attributable
to increased  expenditures  associated with  additional  staffing in the area of
discovery  research,  the  initiation  of new supported  research  programs with
academic institutions, the establishment of corporate in-licensing arrangements,
and expenditures in the functional areas of product  development,  manufacturing
and clinical and regulatory  affairs to support the Company's  lead  therapeutic
product candidate, C225, for human clinical trials.


                                     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-months  ended June 30, 1998 and 1997 were  $1,546,000 and $1,272,000,
respectively,  an  increase  of  $274,000  or 22%.  The  increase in general and
administrative  expenses primarily reflected (i) additional support staffing for
the expanding research,  clinical,  development and manufacturing efforts of the
Company, particularly with respect to C225 and (ii) expenses associated with the
pursuit  of  strategic  corporate  alliances  and  other  corporate  development
expenses. The Company expects general and administrative expenses to increase in
future periods to support planned increases in research,  clinical,  development
and manufacturing efforts of the Company.

Interest and Other Income/Expense

      Interest and other income was $778,000 for the three-months ended June 30,
1998 compared to $440,000 for the three-months  ended June 30, 1997, an increase
of $338,000,  or 77%. The increase was primarily  attributable  to the increased
interest  income earned from higher cash  balances in the  Company's  investment
portfolio  resulting  from a  private  placement  of  Series A  Preferred  Stock
completed in December 1997.  Interest  expense was $110,000 and $145,000 for the
three-months ended June 30, 1998 and June 30, 1997, respectively,  a decrease of
$35,000 or 24%. Interest and other expense for both periods  primarily  included
interest on the 1990 IDA Bond with an aggregate  principal  amount of $2,200,000
and interest recorded on capital lease  obligations.  The decrease was primarily
attributable  to the  December  1997  repayment  of the  1986  IDA  Bond  with a
principal amount of $2,113,000.

Net Losses

      The Company had net losses to common  stockholders  of $5,755,000 or $0.24
per share for the  three-months  ended June 30, 1998 compared with $1,038,000 or
$0.04 per share for the  three-months  ended June 30, 1997.  The increase in the
net losses and per share net loss to common  stockholders  was due  primarily to
the accrued dividends to preferred  stockholders and to the factors mentioned in
the preceding paragraphs.

LIQUIDITY AND CAPITAL RESOURCES

      At June 30, 1998, the Company's  principal sources of liquidity  consisted
of cash and cash equivalents and securities  available for sale of approximately
$51,726,000.  The Company has financed its operations since inception  primarily
through the public and  private  sales of equity  securities,  the sale of three
issues of IDA bonds  (collectively,  the "IDA Bonds")  through the New York City
Industrial Development Agency (the "NYIDA"),  license fees and contract research
and development fees and royalties  received under agreements with collaborative
partners and interest earned on these funds. Since inception, public and private
sales of equity securities in financing  transactions have raised  approximately
$163,799,000  in net proceeds.  The sale of the IDA Bonds in each of 1985,  1986
and 1990 raised an aggregate of $6,313,000, the proceeds of which have been used
for the acquisition, construction and installation of the Company's research and
development  facility in New York City,  and of which  $2,200,000  is  currently
outstanding.  Since inception, the Company has earned approximately  $31,277,000
from license fees,  contract  research and  development  fees and royalties from
collaborative  partners,  including  approximately  $2,615,000 earned during the
six-months  ended  June  30,  1998.  Since  inception  the  Company  has  earned
approximately  $7,054,000 in interest income, including approximately $1,607,000
earned during the six-months ended June 30, 1998.


                                     Page 7
<PAGE>

      The Company  has  obligations  under  various  capital  leases for certain
laboratory, office and computer equipment and also certain building improvements
primarily  under a  December  1996  financing  agreement  (the  "1996  Financing
Agreement")  and  an  April  1998  financing   agreement  (the  "1998  Financing
Agreement") with Finova Technology Finance, Inc. ("Finova").  The 1996 Financing
Agreement allowed the Company to finance the lease of equipment and make certain
building and leasehold  improvements to existing  facilities  involving  amounts
aggregating  approximately  $2,500,000.  Each  lease  has a  fair  market  value
purchase  option at the  expiration  of a 42-month  term.  Pursuant  to the 1996
Financing  Agreement,  the Company issued to Finova a warrant expiring  December
31, 1999 to purchase 23,220 shares of Common Stock at an exercise price of $9.69
per share.  The  Company  recorded a non-cash  debt  discount  of  approximately
$125,000 in connection  with this  financing,  which discount is being amortized
over the 42-month term of the first lease.  The 1996  Financing  Agreement  with
Finova  expired  in  December  1997 and the  Company  did not  utilize  the full
$2,500,000 under the agreement. In April 1998, the Company entered into the 1998
Financing Agreement with Finova aggregating approximately $2,000,000.  The terms
of the 1998  Financing  Agreement are  substantially  similar to the now expired
1996 Financing  Agreement except that each lease has a 48-month term. As of June
30, 1998,  the Company had entered into eight  individual  leases under both the
1996 Financing  Agreement and the 1998 Financing  Agreement  aggregating a total
cost of  $2,478,000  and had  $1,267,000  available  under  the  1998  Financing
Agreement.

      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.  The  Company has  entered  into  preliminary
discussions  with  several  major  pharmaceutical  companies  regarding  various
alternatives  concerning the funding of research and  development for certain of
its  products.  No assurance can be given that the Company will be successful in
consummating any such  alternatives.  These discussions have included  potential
significant strategic alliances for the development and commercialization of the
Company's lead product candidate,  C225. Such strategic  alliances could include
up-front license fees plus milestone fees and revenue  sharing.  There can be no
assurance that the Company will be successful in achieving such  alliances,  nor
can the Company predict the amount of funds which might be available to it if it
entered  into  such  alliances  or the time at which  such  funds  would be made
available or the other terms of any such alliances.

      In January 1998, the Company  completed the construction and commissioning
of a new 1,750 square foot process  development  center at its  Somerville,  New
Jersey  facility  at a cost of  approximately  $1,650,000.  The Company has also
taken steps to complete a formal design concept for large scale manufacturing at
this facility. If the Company adapts this facility to large-scale  manufacturing
or does so at another location, it will incur substantial  additional costs. The
lease on the Company's New York City facility expires in March 1999. The Company
expects to extend the lease and retrofit the facility to fit its needs.

      The  1990 IDA  Bond in the  outstanding  principal  amount  of  $2,200,000
becomes due in 2004.  If the lease on the  Company's  New York City  facility is
terminated,  the 1990 IDA Bond provides that it will become due 60 days prior to
such  termination.  The  Company  will  incur  interest  on the  1990  IDA  Bond
aggregating  approximately  $250,000  during  1998.  The Company has granted the
NYIDA a security interest in substantially all facility equipment located in the
New York  facility to secure the  obligations  of the Company to the NYIDA under
the 1990 IDA Bond.

      The  holders of the Series A  Preferred  Shares  are  entitled  to receive
cumulative  dividends at an annual rate of $6.00 per share.  Dividends accrue as
of the  issuance  date of the Series A  Preferred  Shares and are payable on the
outstanding  Series A  Preferred  Shares  in cash on  December  31 of each  year
beginning  December 31, 1999 or at the time of  conversion  or redemption of the
Series A  Preferred  Shares on which the  dividend is to be paid,  whichever  is
sooner. Accrued dividends were $1,302,000 at June 30, 1998.


                                     Page 8
<PAGE>

      Total capital  expenditures made during the six-months ended June 30, 1998
were $709,000. Of such expenditures, $139,000 have been reimbursed in accordance
with the terms of the 1998 Financing Agreement with Finova. Of the total capital
expenditures made during the six-months ended June 30, 1998, $537,000 related to
improving and equipping the Company's  manufacturing facility in New Jersey. The
balance of capital  additions was for equipment and  computer-related  purchases
for the corporate office and research laboratories in New York.

      The Company anticipates that its existing capital resources, including the
on-going  research  support  of its  corporate  partners,  should  enable  it to
maintain  its current and planned  operations  through the end of the year 2000.
However,  the receipt of such ongoing  research  support is subject to attaining
research  and  development  milestones,  certain  of  which  have  not yet  been
achieved.  There  can be no  assurance  that  the  Company  will  achieve  these
milestones.  The Company's future working capital and capital  requirements will
depend upon numerous factors, including, but not limited to, 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 cost of
manufacturing   scale-up  and   effective   commercialization   activities   and
arrangements, the level of resources that the Company devotes to the development
of marketing and sales capabilities,  the costs involved in filing,  prosecuting
and enforcing patent claims,  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.  In order to fund its capital needs after
the end of the year  2000,  the  Company  will  require  significant  levels  of
additional   capital  and  intends  to  raise  the  capital  through  additional
arrangements  with corporate  partners,  equity or debt financings or from other
sources.  There is no assurance the Company will be  successful in  consummating
any such arrangements.  If adequate funds are not available,  the Company may be
required to significantly curtail its planned operations.

      Uncertainties  associated with the length and expense of pre-clinical  and
clinical  testing  of any of the  Company's  product  candidates  could  greatly
increase the cost of  development  of such products and affect the timing of any
anticipated  revenues from product  sales,  and failure by the Company to obtain
regulatory  approval for any product will  preclude  its  commercialization.  In
addition,  the  failure  by the  Company  to obtain  patent  protection  for its
products may make certain of its products commercially unattractive.

      At December 31, 1997, the Company had net operating loss carryforwards for
federal  income tax  purposes  of  approximately  $115,000,000  which  expire at
various  dates from 2000  through  2012.  At  December  31, 1997 the Company had
research  credit  carryforwards  of  approximately  $2,303,000  which  expire at
various  dates  between  years 2001 and 2012.  Pursuant  to  Section  382 of the
Internal Revenue Code of 1986, as amended, the annual utilization of a company's
net  operating  loss and  research  credit  carryforwards  may be limited if the
company  experiences  a change in  ownership of more than 50  percentage  points
within a three-year  period.  Since 1986, the Company  experienced two ownership
changes.  Accordingly,  the Company's net operating loss carryforwards available
to offset future federal  taxable  income arising before such ownership  changes
are limited to  $5,159,000  annually.  Similarly,  the Company is  restricted in
using its research credit carryforwards arising before such ownership changes to
offset future federal income tax expense.

Other Items

      The Company is  evaluating  the risks and costs  associated  with the year
2000 conversion.  The Company is  communicating  with those  organizations  with
which it does  business to ensure that year 2000 issues are being  resolved in a
timely manner.  If necessary,  modifications and conversions by those with which
the Company does business are not  completed  timely,  the year 2000  conversion
issue may have a material adverse effect on the Company's consolidated financial
position and results of operations.  Based on the Company's ongoing  evaluation,
management  does not  currently  believe  that the  costs to  achieve  year 2000
compliance  will be material to the Company's  financial  position or results of
operations.


                                     Page 9
<PAGE>

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

      Those  statements  contained  herein  that  do not  relate  to  historical
information are forward-looking  statements.  There can be no assurance that the
future  results  covered by such  forward-looking  statements  will be achieved.
Actual results may differ materially due to the risks and uncertainties inherent
in  the  Company's  business,   including  without  limitation,  the  risks  and
uncertainties associated with completing pre-clinical and clinical trials of the
Company's  compounds that demonstrate such compounds' safety and  effectiveness;
obtaining  additional financing to support the Company's  operations;  obtaining
and maintaining  regulatory approval for such compounds and complying with other
governmental regulations applicable to the Company's business; obtaining the raw
materials   necessary  in  the  development  of  such  compounds;   consummating
collaborative  arrangements  with  corporate  partners for product  development;
achieving  milestones under collaborative  arrangements with corporate partners;
developing the capacity to manufacture,  market and sell the Company's products,
either directly or with collaborative partners; developing market demand for and
acceptance of such products; competing effectively with other pharmaceutical and
biotechnological  products;  obtaining  adequate  reimbursement from third party
payors;  attracting and retaining key personnel;  protecting proprietary rights;
and those other factors set forth in  "Management's  Discussion  and Analysis of
Financial  Condition and Results of  Operations--Overview  and Risk Factors," in
the Company's most recent Annual Report on Form 10-K.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

      Not applicable.


                                    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 May 27,  1998  (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,  John  Mendelsohn,  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, are set forth below. Broker non-votes were not applicable.

      (I) Election of directors


             Name                                In Favor           Withheld
             ----                                --------           --------
             
             Richard Barth                      20,225,747          159,159
             Jean Carvais                       20,225,947          158,959
             Vincent T. DeVita, Jr.             20,228,708          156,198
             Robert F. Goldhammer               20,105,567          279,339
             David M. Kies                      20,231,947          152,959
             Paul B. Kopperl                    20,231,947          152,959
             John Mendelsohn                    20,232,147          152,759
             William R. Miller                  20,226,147          158,759
             Harlan W. Waksal                   20,232,207          152,669
             Samuel D. Waksal                   20,108,767          276,139

      (ii) The stockholders  approved the Company's 1998 Employee Stock Purchase
Plan. The stockholders voted 19,790,050 shares in favor,  388,426 shares against
and 206,430 shares abstained from voting.

      (iii) 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
20,161,112  shares in favor,  211,739 shares against and 57,055 shares abstained
from voting.


                                    Page 11
<PAGE>

Item 5 - Other Information

      None.

Item 6 - Exhibits and Reports on Form 8-K

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

            Exhibit No.        Description
            -----------        -----------

            10.67              Equipment leasing commitment from
                               Finova Technology Finance, Inc.

            10.68              1998 Employee Stock Purchase Plan

            10.69              1998 Non-Qualified Stock Option Plan,
                               as amended

            27.1               Financial Data Schedule


      (b)   Reports on Form 8-K

            None.


                                    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, 1998                By   /s/ Samuel D. Waksal
                                           -------------------------------------
                                           Samuel D. Waksal
                                           President and Chief Executive Officer

Date: August 13, 1998                 By   /s/ Carl S. Goldfischer
                                           -------------------------------------
                                           Carl S. Goldfischer
                                           Vice President, Finance and Chief 
                                           Financial Officer


                                    Page 13