<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                         For Quarter Ended July 31, 1999

                          Commission File Number 1-9579


                                   Ecogen Inc.
             (Exact name of registrant as specified in its charter)



          Delaware                                              22-2487948
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)


2000 W. Cabot Boulevard, #170, Langhorne, Pennsylvania          19047-1811
        (Address of principal executive offices)                (Zip Code)



Registrant's telephone number,
including area code                      (2l5) 757-l590


     Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5 (d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes  X  No    .
                                              ---    ---

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

            Class                               Outstanding at September 1, l999

Common Stock, $.01 par value                                9,977,526
<PAGE>   2
                                   ECOGEN INC.


                                      INDEX


                                                                            Page
                                                                            ----

PART I - FINANCIAL INFORMATION

  Item 1 - Financial Statements:

    Unaudited Consolidated Condensed Balance Sheets as of
        July 31, l999 and October 31, 1998....................................1

    Unaudited Consolidated Condensed Statements of Operations for the
        three months and nine months ended July 31, 1999
        and 1998 .............................................................2

    Unaudited Consolidated Condensed Statement of Stockholders'
        Equity for the nine months ended July 31, 1999........................3

    Unaudited Consolidated Condensed Statements of Cash Flows
        for the nine months ended July 31, 1999 and 1998......................4

    Notes to Unaudited Consolidated Condensed Financial
        Statements............................................................6

  Item 2 - Management's Discussion and Analysis of Results
            of Operations and Financial Condition............................11


PART II - OTHER INFORMATION

  Item 6(a) - Exhibits.......................................................16

  Item 6(b) - Reports on Form 8-K............................................16
<PAGE>   3
PART I - FINANCIAL INFORMATION

                          ECOGEN INC. AND SUBSIDIARIES

                UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
ASSETS                                              JULY 31,        OCTOBER 31,
                                                      1999             1998
                                                 -------------    -------------
<S>                                              <C>              <C>
Current  assets:
   Cash and cash  equivalents                    $   1,185,701    $   2,009,437
   Temporary investments                                  --            813,150
   Trade receivables, net                            2,938,480        3,338,897
   Inventory, net                                    5,648,010        4,298,374
   Prepaid expenses and other current assets           521,379          624,072
                                                 -------------    -------------
      Total  current  assets                        10,293,570       11,083,930

Plant and equipment, net                             2,602,695        2,771,255
Other assets, net                                      763,092          821,316
                                                 -------------    -------------
                                                 $  13,659,357    $  14,676,501
                                                 =============    =============

Liabilities and Stockholders' Equity

Current liabilities:
   Line of credit due within one year                1,409,478           26,019
   Accounts  payable  and  accrued  expenses         3,696,413        3,076,300
   Deferred contract revenue                              --            485,853
                                                 -------------    -------------
        Total  current  liabilities                  5,105,891        3,588,172

Long-term debt                                       1,567,436        1,327,875
Long-term deferred revenue                           1,388,009        1,301,333
Minority interest in subsidiary                      1,533,854        1,533,854
                                                 -------------    -------------
         Total liabilities                           9,595,190        7,751,234
                                                 -------------    -------------
Stockholders'  equity:
   Preferred stock:
       Series 1999 A                                       150             --
       Series 1998 A                                      --                195
       Series 1998 C                                       324              324
   Common  stock                                        99,775           82,426
   Additional  paid-in  capital                    124,529,960      122,162,964
   Accumulated  deficit                           (120,566,042)    (114,665,164)
   Other                                                  --           (655,478)
                                                 -------------    -------------
        Total  stockholders'  equity                 4,064,167        6,925,072
                                                 -------------    -------------
                                                 $  13,659,357    $  14,676,501
                                                 =============    =============
</TABLE>


           See Accompanying Notes To Unaudited Consolidated Condensed
                              Financial Statements.


                                       1
<PAGE>   4
                          ECOGEN INC. AND SUBSIDIARIES

            UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS


<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED              NINE MONTHS ENDED
                                                               JULY 31,                       JULY 31,
                                                         1999            1998            1999            1998
                                                    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>
Revenues:

  Product  sales,  net                              $  2,118,111    $  1,617,813    $  5,640,613    $  6,673,566
  Contract research revenue                               30,000         506,471         626,277       4,748,059
                                                    ------------    ------------    ------------    ------------
     Total revenues                                    2,148,111       2,124,284       6,266,890      11,421,625
                                                    ------------    ------------    ------------    ------------

Costs and expenses:

  Cost of products sold                                1,756,213       1,558,979       4,549,621       5,416,981
  Research and development:
    Funded by third parties                               22,429         196,018         295,007         544,860
    Self funded                                          621,655         637,471       1,686,498       2,176,496
  Selling, general and administrative                  1,869,690       1,642,890       5,056,915       5,250,949
                                                    ------------    ------------    ------------    ------------
     Total  costs and expenses                         4,269,987       4,035,358      11,588,041      13,389,286
                                                    ------------    ------------    ------------    ------------
Operating loss                                        (2,121,876)     (1,911,074)     (5,321,151)     (1,967,661)

Other income (expense):
  Interest expense, net                                 (124,010)        (18,467)       (369,358)       (290,377)
  Other income                                            36,141          84,723          52,387         649,454
                                                    ------------    ------------    ------------    ------------
      Total other income (expense), net                  (87,869)         66,256        (316,971)        359,077
                                                    ------------    ------------    ------------    ------------

Net loss                                              (2,209,745)     (1,844,818)     (5,638,122)     (1,608,584)

Dividends on preferred stock including assumed
  incremental yield of $403,337 for the three and
  nine-month period ended July 31, 1999                  491,053            --           666,094            --
                                                    ------------    ------------    ------------    ------------

Net loss allocable to common stockholders           $ (2,700,798)   $ (1,844,818)   $ (6,304,216)   $ (1,608,584)
                                                    ============    ============    ============    ============

Basic and diluted net loss  per  common  share      $      (0.29)   $      (0.23)   $      (0.70)   $      (0.20)
                                                    ============    ============    ============    ============

Basic and diluted weighted average number of
   common shares outstanding                           9,473,000       8,054,000       9,001,000       8,041,000
                                                    ============    ============    ============    ============
</TABLE>

           See Accompanying Notes To Unaudited Consolidated Condensed
                             Financial Statements.


                                       2
<PAGE>   5
                          ECOGEN INC. AND SUBSIDIARIES

       UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
                        NINE MONTHS ENDED JULY 31, 1999


<TABLE>
<CAPTION>
                                             Convertible              Additional                          Other
                                              Preferred    Common       Paid-in       Accumulated     Stockholders'
                                                Stock       Stock       Capital         Deficit           Equity         Total
                                             ----------   --------   ------------    -------------    ------------    -----------
<S>                                          <C>          <C>        <C>             <C>              <C>             <C>
Balance November 1, 1998                     $      519   $ 82,426   $122,162,964    $(114,665,164)   $   (655,478)   $ 6,925,267

Private placement of 500,000 shares of
  common stock, net of issuance costs              --        5,000      1,530,208             --              --        1,535,208

Private placement of 15,000 shares of
  convertible preferred stock, net of
  issuance costs (including 20,000 shares
  of common stock paid as a placement fee)          150        200      1,356,650             --              --        1,357,000

Issuance of 1,738 shares of common stock
  and transfer of 5,037 shares of treasury
  stock for employee benefits                      --           17        (52,527)            --            65,783         13,273

Dividends on preferred stock                       --          635        108,662         (262,756)           --         (153,459)

Conversion of 19,500 shares of Series A
  convertible preferred stock to 1,155,975
  shares of common stock                           (195)    11,408       (600,908)            --           589,695           --

Issuance of 8,887 shares of common stock
  in connection with consulting agreement          --           89         24,911             --              --           25,000

Net loss                                           --         --             --         (5,638,122)           --       (5,638,122)
                                             ----------   --------   ------------    -------------    ------------    -----------
Balance July 31, 1999                        $      474   $ 99,775   $124,529,960    $(120,566,042)   $       --      $ 4,064,167
                                             ==========   ========   ============    =============    ============    ===========
</TABLE>


           See Accompanying Notes To Unaudited Consolidated Condensed
                              Financial Statements.

                                       3
<PAGE>   6
                          ECOGEN INC. AND SUBSIDIARIES

            UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                        Nine months ended
                                                                                            July 31,
                                                                                       1999           1998
                                                                                   -----------    -----------
<S>                                                                                <C>            <C>
Cash  flows  from  operating  activities:
   Net  loss                                                                       $(5,638,122)   $(1,608,584)
   Adjustments  to  reconcile  net  loss  to  net
      cash provided  by ( used  in ) operating  activities:
         Gain on sale of assets                                                           --         (562,268)
         Depreciation  and  amortization  expense                                      524,026        580,245
         Noncash interest and compensation expense                                     250,846        286,573
         Other                                                                          76,015         (2,740)
    Changes  in  assets  and  liabilities, net of effects of disposition in 1998      (981,807)       (71,723)

                                                                                   -----------    -----------
Net  cash used in operating  activities                                             (5,769,042)    (1,378,497)
                                                                                   -----------    -----------

Cash  flows  from  investing  activities:
   Proceeds from maturity of temporary investments                                     813,150           --
   Purchase  of  plant and  equipment                                                  (50,656)       (64,461)
   Net proceeds from sale of pheromone product line                                       --        1,659,410
   Purchase of temporary investment                                                       --         (799,424)

                                                                                   -----------    -----------
Net  cash provided by  investing  activities                                           762,494        795,525
                                                                                   -----------    -----------

Cash  flows  from  financing  activities:
   Proceeds from sale of equity securities, net of issuance costs                    2,892,208      1,822,300

   Proceeds from line of credit, net                                                 1,583,459           --
   Net proceeds from issuance of common shares under stock option plan                   4,449         10,565
   Repayment of capital lease obligation                                              (297,304)      (436,562)

                                                                                   -----------    -----------
Net cash provided by financing activities                                            4,182,812      1,396,303
                                                                                   -----------    -----------

Net (decrease) increase  in  cash  and  cash  equivalents                             (823,736)       813,331

Cash  and  cash  equivalents,  beginning  of  period                                 2,009,437      2,373,945

                                                                                   -----------    -----------
Cash  and  cash  equivalents,  end  of  period                                     $ 1,185,701    $ 3,187,276
                                                                                   ===========    ===========
</TABLE>

                                                                     (Continued)


                                            4
<PAGE>   7
                          ECOGEN INC. AND SUBSIDIARIES

      UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED


<TABLE>
<CAPTION>
                                                                                    Nine months ended
                                                                                        July 31,
                                                                                   1999           1998
                                                                               -----------    -----------
<S>                                                                            <C>            <C>
Changes  in  assets  and  liabilities, net of effects of disposition:
    Decrease (increase) in  trade receivables                                  $   400,417    $   (20,715)
    (Increase) decrease in  inventory                                           (1,349,636)        22,892
    Decrease (increase) in  prepaid  expenses  and
       other  current  assets                                                      102,692       (426,940)
    (Increase) decrease in  other  assets                                          (11,441)       289,416
    Increase (decrease) in  accounts  payable
       and  accrued  expenses                                                      362,014       (218,316)
    (Decrease) increase in  deferred  contract  revenue                           (485,853)        13,951
    Decrease in other long-term liabilities                                           --          267,989



                                                                               -----------    -----------
       Changes  in  assets  and  liabilities,  net of effects of disposition   $  (981,807)   $   (71,723)
                                                                               ===========    ===========
                                                                               -----------    -----------
Interest paid                                                                  $   144,422    $   105,633
                                                                               ===========    ===========
</TABLE>

Noncash investing and financing activities:

   In the first nine months of fiscal 1999, the Company issued 1,155,975 shares
   of its common stock upon conversion of the Company's Series 1998-A
   convertible preferred stock of which 46,924 shares were transferred from
   treasury stock.

   In the first nine months of fiscal 1999, the Company issued 63,506 shares of
   common stock, as dividends on the Company's Series 1998-A convertible
   preferred stock.

   In the first nine months of fiscal 1999, the Company transferred 5,037 shares
   of treasury stock to outstanding shares and issued 1,738 shares of common
   stock pursuant to certain employee benefit plans.

   In the first nine months of fiscal 1998, the Company transferred 5,582 shares
   of treasury stock to outstanding shares pursuant to certain employee benefit
   plans.

   In the first nine months of fiscal 1999, the Company purchased $304,810 of
   plant and equipment under capital leases.


           See Accompanying Notes to Unaudited Consolidated Condensed
                              Financial Statements.


                                        5
<PAGE>   8
                          ECOGEN INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                             JULY 31, 1999 AND 1998


(1)    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       ORGANIZATION AND BASIS OF PRESENTATION:

       The consolidated condensed financial statements include the accounts of
       Ecogen Inc. ("Ecogen" or the "Company") and its wholly-owned and
       majority-owned subsidiaries. All intercompany accounts and transactions
       have been eliminated in consolidation.

       The accompanying consolidated condensed financial statements include all
       adjustments (consisting of normal recurring accruals) which are, in the
       opinion of management, necessary for a fair presentation of the
       consolidated results of operations and financial position for the interim
       periods presented. The consolidated condensed financial statements have
       been prepared in accordance with the requirements for Form 10-Q and,
       therefore, do not include all disclosures of financial information
       required by generally accepted accounting principles. These consolidated
       condensed financial statements should be read in conjunction with the
       Company's October 31, 1998 consolidated financial statements and notes
       thereto included in the Company's Annual Report on Form 10-K.

       The results of operations for the interim periods ended July 31, 1999 are
       not necessarily indicative of the operating results for the full year.

       Effective November 1, 1998, the Company adopted Statement of Financial
       Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive
       Income. SFAS 130 establishes new rules for the reporting and display of
       comprehensive income and its components. The adoption of SFAS 130 had no
       impact on the Company's results of operations for the three and nine
       months ended July 31, 1999 and an immaterial impact for the three and
       nine months ended July 31, 1998. The net loss is substantially equal to
       the comprehensive loss for the periods.

       OPERATIONS:

       The Company is a biotechnology company specializing in the development
       and marketing of environmentally compatible products for the control of
       pests in agricultural and related markets. The Company has not yet
       achieved profitable operations for any of its fiscal years and there is
       no assurance that profitable operations, if achieved, could be sustained
       on a continuing basis. Further, the Company's future operations are
       dependent, among other things, on the success of the Company's
       commercialization efforts and market acceptance of the Company's
       products.


                                                                     (Continued)


                                       6
<PAGE>   9
                          ECOGEN INC. AND SUBSIDIARIES

    NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CONTINUED


(1)    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
       CONT.

       NET LOSS PER COMMON SHARE:

       Basic net loss per share is based on net loss allocable to common
       stockholders for the relevant period, divided by the weighted average
       number of common shares outstanding during the period. Diluted loss per
       share is based on net loss allocable to common stockholders for the
       relevant period divided by common shares outstanding and other potential
       common shares if they are dilutive.

       The assumed conversion of the convertible preferred stock in fiscal 1999
       and the convertible note in fiscal 1998 into common shares and adding
       back the dividends and interest expense incurred during the three-month
       and nine-month periods ended July 31, 1999 and 1998, was not included in
       the net loss per share calculation since the effect was anti-dilutive.
       Stock options and warrants were not considered because they were
       anti-dilutive.

       RECLASSIFICATIONS:

       Certain reclassifications have been made to the reported amounts in the
       1998 financial statements to conform to the 1999 classifications.

(2)    INVENTORY

       At July 31, l999, inventory consisted of raw materials of $.6 million,
       work-in-progress of $.7 million and finished products of $4.3 million.

(3)    MONSANTO TRANSACTION

       In January 1996, the Company entered into agreements with Monsanto
       Company ("Monsanto") for an equity investment, purchase of technology and
       joint research and development arrangement relating to the Company's
       proprietary Bacillus thuringiensis ("Bt") technology for in-plant
       applications (collectively, the "Monsanto Transaction"). In January 1998,
       the Company amended its research and development agreement with Monsanto.
       In connection therewith, the Company received approximately $4.8 million
       in cash payments during the first nine months of fiscal 1998; of which an
       aggregate of $3.0 million was earned and recorded as research contract
       revenue during the first nine months of fiscal 1998, since the Company
       had no continuing obligations with respect to such amounts. Total
       research contract revenue from Monsanto was $.5 million and $4.7 million
       during the nine months ended July 31, 1999 and 1998, respectively. The
       amended research contract ended in January 1999.


                                                                     (Continued)


                                       7
<PAGE>   10
                          ECOGEN INC. AND SUBSIDIARIES

   NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, (CONTINUED)



(4)    LOAN AGREEMENT

       In August 1998, the Company obtained a secured, revolving working capital
       line of credit for up to $5.0 million with a financial institution. Up to
       $1.0 million of the line may be used for letters of credit. The working
       capital line of credit is for a minimum of two years (subject to
       termination on certain events of default), bears interest at prime plus
       1.25% and is fully collateralized by the Company's assets, other than its
       intellectual property rights. The lending formula is based on eligible
       receivables and finished goods inventory. At July 31, 1999, the balance
       outstanding under the line was $2.7 million. Further, at July 31, 1999 a
       $.5 million letter of credit was outstanding under the line (see note 7
       of notes to the consolidated financial statements.) The loan agreement
       contains certain financial covenants, with which the Company is in
       compliance as of July 31, 1999.

(5)    SALE OF PHEROMONE PRODUCT LINE

       In April 1998, the Company sold substantially all of the assets
       (excluding trade accounts receivable) associated with the pheromone
       product line to Scentry Biologicals, Inc. ("Scentry") for total
       consideration of approximately $2.4 million. The consideration included
       cash of $1.7 million and the assumption of $.7 million of liabilities.
       The Company recognized a gain of $.5 million on the sale which is
       included in license and other income in the accompanying consolidated
       statements of operations. As part of the transaction, the Company entered
       into a distribution agreement with Scentry for three pheromone products,
       BeeScent(R) Attractant, NoMate(R) LRX MEC and NoMate BHF MEC in the
       United States through December 2000. Scentry is a newly formed company,
       the principals of which are the former manager of the Company's pheromone
       production facility and a principal of one of the Company's distributors
       in Central and South America. Unaudited pro forma consolidated results of
       operations as if the product line was sold on November 1, 1997, are as
       follows, excluding the non-recurring gain on the sale of $.5 million:

<TABLE>
<CAPTION>
                                                            Nine Months Ended July 31, 1998
                                                         $(in thousands except per share data)
<S>                                                      <C>
Total revenues                                                          $ 9,376
Net loss allocable to common
  stockholders                                                           (2,375)
Basic and diluted net
  loss per share                                                           (.30)
                                                                        =======
</TABLE>

       The unaudited pro forma information is not necessarily indicative of the
       results that would have been obtained had the disposition of the
       pheromone product line actually occurred on the date indicated nor is it
       necessarily indicative of the Company's future consolidated results of
       operations.


                                                                     (Continued)


                                       8
<PAGE>   11
                          ECOGEN INC. AND SUBSIDIARIES

   NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, (CONTINUED)


(6)    STOCKHOLDERS' EQUITY

       During the first nine months of fiscal 1999, the Company issued 1,155,975
       shares of its common stock in exchange for 19,500 shares of the Company's
       Series 1998-A 8% convertible preferred stock issued in June 1998. The
       Company also issued 63,506 shares of its common stock in payment of
       cumulative dividends at the time of conversion.

       In fiscal 1999 the vesting schedule on 100,000 shares of common stock
       granted to an officer in fiscal 1998 was accelerated, to become
       immediately vested. As a result, the remaining deferred compensation was
       recorded as expense during the second quarter of fiscal 1999.

       In April 1999 the Company's stockholders approved the 1999 stock option
       plan ("1999 Option Plan") under which 1,500,000 shares of common stock
       may be issued. The Option Plan permits the granting of both incentive
       stock options and non-statutory stock options. The option price of the
       shares for incentive stock options may not be less than the fair market
       value of such stock at the grant date as determined under the 1999 Option
       Plan. Options are exercisable over a period determined by the Board of
       Directors, but not longer than ten years after grant date. Upon the
       approval of the 1999 Option Plan, 825,000 options available for grant
       under the 1998 stock option plan were cancelled. During fiscal 1999, the
       Board of Directors, under the 1999 Option Plan, approved the granting to
       employees of stock options to acquire 860,000 shares of the Company's
       common stock at $2.50 per share, the market value on the day of the
       grant. The Board of Directors also approved the granting of stock options
       to acquire 100,000 shares of the Company's stock at $2.50 per share, the
       market value on the day of the grant, to a consultant to the Company. The
       resulting compensation expense will be recorded ratably over the
       three-year vesting period.

       In May 1999, the Company sold 15,000 shares of Series 1999-A 7%
       convertible preferred stock, stated value $100 per share, to an
       institutional investor for net proceeds of $1.4 million. The holder of
       the preferred stock was issued five-year warrants to purchase 120,000
       shares of common stock at $3.98 per share. Dividends are payable
       semi-annually in cash or stock at the option of the Company. The
       preferred stock has no voting rights except with respect to certain
       matters affecting the Company's preferred stock. At the election of the
       holder, the preferred stock may be converted at various dates to shares
       of the Company's common stock at the lesser of $3.69 per share or 95% of
       the average market price, as defined in the agreement, over a twenty-day
       period at the time of conversion. The Company, at its option, may redeem
       the preferred stock at 125% of the stated value. If the Company is unable
       to issue sufficient shares of common stock within a specified period of
       time after the holder has requested conversion, the dividend rate may
       increase and the Company may be required to issue additional warrants.
       Further, in certain circumstances, all of which are in the control of the
       Company, the Company may be required to redeem the shares at various
       premiums over stated value. The holder of the preferred stock has certain
       registration rights with respect to the shares of.


                                                                     (Continued)


                                       9
<PAGE>   12
                          ECOGEN INC. AND SUBSIDIARIES

   NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, (CONTINUED)


(6)    STOCKHOLDERS' EQUITY, CONT.

       common stock underlying the warrants and the convertible preferred stock
       Included in the fee paid to the placement agent in connection with the
       transaction were 20,000 shares of the Company's common stock. In
       accordance with the terms of the Series 1999-A Preferred Stock the
       Company is required to recognize an assumed incremental yield of $.8
       million, of which $.4 million was recognized in the third quarter of
       fiscal 1999 (calculated at the date of issuance based on the conversion
       formula in the agreement). Such amounts are being amortized as preferred
       stock dividends over a seven-month period beginning with the date of
       issuance.

       In July 1999, the Company sold 500,000 shares of common stock to an
       institutional investor in a private placement for $3.09 per share for net
       proceeds of $1.5 million.

(7)    COMMITMENTS AND CONTINGENCIES

       At July 31, 1999, the Company had outstanding a $.5 million letter of
       credit, to secure a contract manufacturing agreement, under the Company's
       line of credit as described in note 4 above.


                                       10
<PAGE>   13
                          ECOGEN INC. AND SUBSIDIARIES

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

            THREE MONTHS AND NINE MONTHS ENDED JULY 31, 1999 AND 1998


OVERVIEW

For the first nine months of fiscal 1999, total revenues decreased 45% from
$11.4 million in fiscal 1998 to $6.3 million in fiscal 1999. Contract research
revenue decreased $4.1 million to $.6 million in the first nine months of fiscal
1999 compared to $4.7 million in the first nine months of fiscal 1998. The
decrease was primarily the result of the expiration in January 1999 of the
research and development agreement with Monsanto Company (Monsanto) that had
contributed more than $10 million in research contract revenue to the Company
over its three-year term. Product sales decreased $1.0 million or 15% from $6.7
million to $5.6 million for the nine months ended July 31, 1998 and 1999,
respectively. The first nine months of fiscal 1998 included approximately $2.0
million in net product sales of pheromone products, a product line that was sold
in the second quarter of fiscal 1998. On a pro forma basis, assuming the
pheromone product line had been sold at the beginning of fiscal 1998, continuing
product sales increased 22% from $4.6 million to $5.6 million for the nine
months ended July 31, 1998 and 1999, respectively.

During the first nine months of fiscal 1999, the Company realized a reduction in
operating expenses of $.9 million or 12% from $8.0 million in the year-ago
period to $7.0 million in fiscal 1999. Operating loss was $3.4 million higher in
fiscal 1999 due substantially to the lower contract research revenue in fiscal
1999. The Company reported a net loss allocable to common stockholders of $(6.3)
million or $(0.70) per basic and diluted share in the first nine months of
fiscal 1999 compared to a net loss allocable to common stockholders of $(1.6)
million or $(0.20) per share in the comparable period in fiscal 1998. Weighted
average shares outstanding were 9.0 million and 8.0 million in the first nine
months of fiscal 1999 and 1998, respectively.

NINE MONTHS ENDED JULY 31, 1999 AND 1998

REVENUES

On a pro forma basis, assuming the sale of the pheromone product line had taken
place at the beginning of the 1998 fiscal year, net product sales increased 22%
during the nine months ended July 31, 1999, principally due to volume increases.
Sales of the Company's Bt product line, representing 90% of total sales,
increased 30% due principally to an increase in sales of Lepinox WDG, a new Bt
bioinsecticide for control of caterpillars in sweet corn, turf and other row
crops and bollworm and budworm in cotton and non-agricultural markets.
Biofungicide sales, representing 5% of total sales, decreased 34% due to a
decrease in volume of sales of AQ10 in the first nine months of fiscal 1999.
Newly introduced soil amendments represented 4% of total sales in the first nine
months of fiscal 1999.

Contract research revenues decreased $4.1 million in the current nine-month
period, due primarily to higher payments in fiscal 1998 from Monsanto under a
research and development contract which expired in January 1999. As a result of


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<PAGE>   14
the expiration of the Monsanto research and development contract, it is
anticipated that research contract revenue will be substantially lower in fiscal
2000.

COSTS AND EXPENSES

Cost of continuing products sold increased 14% in the first nine months of
fiscal 1999 compared to the same period in fiscal 1998 due primarily to
increased sales. Gross margins on continuing product sales increased to 19% in
the first nine months of fiscal 1999 compared to 14% in fiscal 1998. This
increase in gross margins on product sales was due to improved margins on the
Company's Bt product line.

Total operating expenses were $7.0 million in the first nine months of fiscal
1999 compared to $8.0 million in 1998, a decrease of $.9 million or 12%.
Research and development costs decreased $.7 million or 27% due principally to
lower personnel costs. The Company's commitment to provide research services to
Monsanto has expired and the Company's technology continues to approach
commercialization, therefore requiring less activity in basic research and
process development. Research and development costs are expected to continue to
decline for the remainder of fiscal 1999 when compared to the same period of
fiscal 1998. Selling, general and administrative expenses were $5.1 million in
the first nine months of fiscal 1999 compared to $5.3 million in 1998,
representing a decrease of $.2 million or 4%. Selling and marketing costs were
consistent from fiscal 1998 to fiscal 1999. A decrease of $.3 million as a
result of the sale of the pheromone product line was offset by higher
advertising costs resulting from higher continuing product sales. The Company
expects higher selling and marketing expenses during the remainder of fiscal
1999 due to staff increases and special promotional programs to support its
distributors' efforts in introducing the Company's biopesticides. General and
administrative expenses decreased 10% due to cost containment efforts
implemented for fiscal 1999 including salaries and related costs and outside
services. Pro forma operating expenses, assuming the sale of the pheromone
product line had taken place at the beginning of fiscal 1998, decreased 7% for
the nine months ended July 31, 1999.

OTHER INCOME (EXPENSE)

In April 1998, the Company sold its pheromone product line to a newly-formed
company for aggregate net proceeds of $2.4 million and recognized a gain on sale
of $.5 million which was recorded as other income (expense), net in the
accompanying consolidated financial statements during the second quarter of
fiscal 1998.

NET LOSS

Net loss allocable to common stockholders for the nine months ended July 31,
1999 was $(6.3) million, compared to a net loss of $(1.6) million for the same
period in fiscal 1998. Basic and diluted net loss per share for the nine months
ended July 31, 1999 was $(.70), compared to a net loss per share of $(.20) on
weighted average shares outstanding of 9.0 million and 8.0 million in the first
nine months of 1999 and 1998, respectively. Fiscal 1999 net loss allocable to
common stockholders included preferred stock dividends of $263,000 and an
assumed incremental yield of $403,000.

Pro forma net loss and net loss per share in fiscal 1998, adjusted for the sale
of the pheromone product line, was $(2.4) million and $(.30) per share,
respectively.


                                       12
<PAGE>   15
THREE MONTHS ENDED JULY 31, 1999 AND 1998

REVENUES

Net product sales increased 31% during the three months ended July 31, 1999 to
$2.1 million compared with $1.6 million in the third quarter of 1998 principally
due to increased volume. Sales of the Company's Bt product line, representing
94% of total sales, increased $.7 million due principally to an increase in
sales of Lepinox which was newly introduced in the fourth quarter of fiscal
1998. Biofungicide sales, representing 1% of total sales, decreased $.3 million
due to lower sales of AQ10. Newly introduced soil amendments represented 4% of
total sales in the third quarter of fiscal 1999.

Contract research revenues decreased $.5 million in the three-month period ended
July 31, 1999, due to the expiration of the research and development contract
with Monsanto in January 1999.

COSTS AND EXPENSES

Cost of products sold increased 13% in the third quarter of fiscal 1999 compared
to fiscal 1998 due to the increase in product sales. Gross margins on product
sales increased to 17% in the third quarter of fiscal 1999 compared to 4% in the
same period in fiscal 1998. This increase was due to higher unit volume, which
increased overhead absorption, and improved margins on the Company's Bt product
line.

Total operating expenses were $2.5 million in the third quarter of fiscal 1999
and fiscal 1998. Research and development costs decreased $.2 million or 23% as
a result of lower personnel and related costs. Selling and marketing expenses
increased 30%, principally as a result of recent staff increases and special
promotional programs. General and administrative expenses decreased 4% due to
personnel reductions and lower outside services.

OTHER INCOME (EXPENSE)

Net interest expense was $.1 million during the three months ended July 31, 1999
compared to $18 thousand in the third quarter of fiscal 1998 due primarily to an
increase in long-term debt.

NET LOSS

Net loss allocable to common stockholders for the three months ended July 31,
1999 was $(2.7) million, compared to a net loss of $(1.8) million for the same
period in fiscal 1998. Basic and diluted net loss per share for the three months
ended July 31, 1999 was $(.29), compared to net loss per share of $(.23) on
weighted average shares outstanding of 9.5 million and 8.1 million in the third
quarter of fiscal 1999 and 1998, respectively. The fiscal 1999 period included
preferred stock dividends of $88,000 and an assumed incremental yield of
$403,000.

SEASONALITY OF BUSINESS

The bulk of the Company's current products are presently marketed for
agricultural applications in the northern hemisphere, where the growing season
generally runs from spring through fall. Because of the seasonal nature of its
business, the Company's product revenues are likely to be concentrated in the
fiscal quarters prior to and during a particular growing season which may result
in substantial variations in quarter-to-quarter financial results. Product sales
from year-to-year are also affected by unusual weather conditions, such as
droughts or floods, and the


                                       13
<PAGE>   16
level of insect pressure in grower areas. In addition, commercial introduction
of the Company's new products is contingent on, among other factors, completion
of field testing and receipt of required regulatory approvals. Unusual weather
conditions during field tests or failure to receive regulatory approvals prior
to the growing season may require additional field tests in subsequent growing
seasons, with resulting delays in product development and commercialization.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 1999, cash and liquid investments decreased $1.6 million from
October 31, 1998 and net borrowing under long-term debt facilities increased
$1.3 million. Further, $2.9 million was raised in net proceeds from the sale of
equity securities in fiscal 1999. The $5.8 million in cash was used to fund
operations.

In August 1998, the Company obtained a secured working capital line of credit
for up to $5.0 million from a financial institution, of which $2.7 million is
outstanding at July 31, 1999. Also outstanding under the line of credit was a
$.5 million letter of credit. In May 1999, the Company raised net proceeds of
$1.4 million pursuant to a private placement of convertible preferred stock to
an institutional investor, of which $.6 million was used to pay down amounts
outstanding under the working capital line of credit. In accordance with the
terms of the preferred stock, the Company is required to recognize a non-cash,
assumed incremental yield of approximately $.8 million, of which $.4 million was
recognized in the third quarter of fiscal 1999, calculated at the date of
issuance based on 95% of the average conversion feature, as defined in the
agreement. In July 1999 the Company raised net proceeds of $1.5 million pursuant
to a private placement of common stock.

To date, the Company has not generated positive cash flow from operations. The
Company believes that its existing working capital and amounts available under
its working capital line of credit should be sufficient to meet its capital and
liquidity requirements through fiscal year 1999 based on reduced spending
levels, if necessary. However, the Company's working capital and working capital
requirements are affected by numerous factors and there is no assurance that
such factors will not have a negative impact on the Company's liquidity.
Principal among these are the success of its product commercialization and
marketing efforts and the efforts of its strategic partners in commercializing
and selling products based on the Company's technology, the technological
advantages and pricing of the Company's products, economic and environmental
considerations which impact agricultural crop production and the agricultural
sector generally, competitive conditions in the agricultural pest control
market, and access to capital markets that can provide the Company with the
resources when necessary to fund its strategic priorities. There is no assurance
that access to capital markets will be available on terms acceptable to the
Company or at all. Over the long term, the Company's liquidity is dependent on
market acceptance of its products and technology.

YEAR 2000

The Company may be impacted by the inability of computer software and other
business systems to properly identify the Year 2000 due to programming
conventions. The Company has undertaken initiatives to ensure that its systems
are Year 2000 compliant. The Company has completed its Year 2000 assessment of
internal hardware and software including testing such systems and believes that
it is Year 2000 compliant. The cost of Year 2000 modifications has not been
significant. The Company has contacted major customers and vendors to assess
their status as to Year 2000 compliance. Although this process has been
completed,


                                       14
<PAGE>   17
there is no assurance that service interruptions will not occur from vendors,
suppliers or service providers, including financial institutions or governments
which could have a material adverse effect on consolidated results of
operations, financial conditions, and cash flows. Although a formal contingency
plan has not been developed, the Company believes that alternative suppliers
exist if service from our current suppliers is interrupted.

ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts receivable decreased $.4 million when compared to October 31, 1998, the
end of the Company's fiscal year, due to timing of collection of receivables.
Inventory increased $1.3 million at July 31, 1999 when compared to October 31,
1998 as the Company built inventory for the agricultural growing season in North
America. Accounts payable and accrued expenses increased $.6 million due
principally to the timing of payments to vendors. Deferred contract revenue
decreased $.5 million at July 31, 1999 when compared to October 31, 1998 due to
the expiration of the Monsanto research and development agreement in the first
quarter of fiscal 1999.

FORWARD LOOKING STATEMENTS

The discussion set forth by the Company in this document contains
forward-looking statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements which are other than historical
facts. Although the Company believes that its expectations are based on
reasonable assumptions, the Company operates in a high technology, emerging
market environment that involves a number of risks and uncertainties that could
cause actual results to differ materially from expected results. The Company
intends to market and sell a number of new and recently introduced products.
Some of these products utilize new formulations which have not to date been
produced on a commercial scale or produced on a commercial scale that has been
replicated. Certain of the manufacturing processes for such products include
newly developed equipment and techniques which are being incorporated into
commercial scale manufacturing processes. Risks and uncertainties associated
with the successful commercialization of the products include: (i) the
successful scale-up of the Company's manufacturing process in time to meet
targeted sales opportunities; (ii) the market acceptance of the Company's
current and newly introduced products; (iii) the efficacy, pricing, ease of use
and performance of the Company's products; (iv) the successful development,
registration, commercialization and marketing of technologically advanced new
products; (v) the continued and uninterrupted supply of the Company's products
from third-party toll manufacturers and the continued financial viability of
such manufacturers; (vi) economic and environmental considerations which impact
agricultural crop production and agricultural crop protection, including the
number of acres of target crops planted, the cost and efficacy of competitive
products, weather conditions and the level of insect and disease infestation on
target crops, and (vii) the ability of the Company to fund its strategic
priorities through operations or access to capital markets, and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. The Company does not undertake to update the results
discussed herein as a result of changes in risks or operating results.


                                       15
<PAGE>   18
PART II - OTHER INFORMATION


Item 6(a)     Exhibits

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

3.1           Restated Certificate of Incorporation of Ecogen Inc. (Form 10-Q
              for fiscal quarter ended January 31, 1996)*

3.2           By-laws of Ecogen Inc., as amended (Form S-1 Registration
              Statement, File No. 33-14119)*

3.3           Certificate of Designations, Preferences and Rights of Series
              1998-A Convertible Preferred Stock (Form 10-Q for fiscal quarter
              ended April 30, 1998)*

3.4           Certificate of Designations, Preferences and Rights of Series
              1998-C Convertible Preferred Stock (Form 8-K, dated September 2,
              1998)*

3.5           Corrected Certificate of Designation, preferences and Rights of
              Series 1999-A Convertible Preferred Stock (Form 10-Q for fiscal
              quarter ended April 30, 1999)*

27            Financial Data Schedule



Item 6(b)     Reports on Form 8-K

Rider 1       A Current Report on Form 8-K was filed on August 11, 1999, with
              respect to the sale of 500,000 shares of its Common Stock to an
              accredited investor at purchase price of $3.09 per share.


*  These items are hereby incorporated by reference from the exhibits of the
   filing or report indicated and are made part of this report.


                                       16
<PAGE>   19
                                   Signatures


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


Date:    September 14, 1999


                               ECOGEN INC.



                               By: /s/ JAMES P. REILLY, JR.
                                   ------------------------------------------
                                   James P. Reilly, Jr.
                                   Chairman and Chief Executive
                                   Officer



                               By: /s/ MARY E. PAETZOLD
                                   ------------------------------------------
                                   Mary E. Paetzold
                                   Vice President and Chief Financial Officer


                                       17