<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, 1997

                          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)



2005 Cabot Boulevard West, Langhorne, Pennsylvania                      19047
     (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, l997

Common Stock, $.01 par value                              8,026,646
<PAGE>   2
                                   ECOGEN INC.


                                      INDEX


<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>    
PART I - FINANCIAL INFORMATION

  Item 1 - Financial Statements:

     Unaudited Consolidated Condensed Balance Sheets as of
         July 31, l997 and October 3l, l996..................................................................1

     Unaudited Consolidated Condensed Statements of Operations for the three
         months and nine months ended July 31, 1997
         and 1996 ...........................................................................................2

     Unaudited Consolidated Condensed Statement of Stockholders'
         Equity for the nine months ended July 31, l997......................................................3

     Unaudited Consolidated Condensed Statements of Cash Flows
         for the nine months ended July 31, l997 and l996....................................................4

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

     Item 2 - Management's Discussion and Analysis of Results
         of Operations and Financial Condition..............................................................10


PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings.............................................................................15

     Item 2 - Changes in Securities ........................................................................15

     Item 6(a) - Exhibits...................................................................................15
</TABLE>


<PAGE>   3
PART I -- FINANCIAL INFORMATION


                          ECOGEN INC. AND SUBSIDIARIES

                UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

Assets                                                                             JULY 31,                   OCTOBER 31,
                                                                                     1997                        1996
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                        <C>
Current assets:
 Cash, cash equivalents and temporary investments.............................    $   3,385,364              $   9,611,111
 Contract and trade receivables, net..........................................        2,570,398                  1,783,605
 Inventory....................................................................        7,980,641                  6,854,472
 Prepaid expenses and other current assets....................................          412,343                    493,519
------------------------------------------------------------------------------------------------------------------------------------
    Total current assets                                                             14,348,746                 18,742,707
------------------------------------------------------------------------------------------------------------------------------------

 Plant and equipment, net.....................................................        4,444,591                  4,569,327
 Intangible and other assets, net.............................................          768,528                    549,210
------------------------------------------------------------------------------------------------------------------------------------
                                                                                  $  19,561,865              $  23,861,244
====================================================================================================================================

Liabilities and Stockholders' Equity

------------------------------------------------------------------------------------------------------------------------------------

Current liabilities:
 Accounts payable and accrued expenses........................................    $   4,475,142              $   5,172,090
 Deferred contract revenue....................................................        1,765,057                  1,101,367
------------------------------------------------------------------------------------------------------------------------------------
    Total current liabilities                                                         6,240,199                  6,273,457
------------------------------------------------------------------------------------------------------------------------------------

Long-term debt................................................................          987,121                  1,297,469
Other long-term obligations...................................................        1,768,300                  1,887,078
8% senior subordinated convertible note.......................................        1,500,000                         --
Stockholders' equity:
 Preferred stock, par value $.01 per share: authorized 7,500,000 shares       
  Series B convertible preferred stock - 350,000 shares authorized;
    none and 5,834 shares issued and outstanding in 1997 and 1996,
    respectively (liquidation value $20 per share)............................               --                         58
 Common stock, par value $.01 per share; authorized 42,000,000 shares;
    issued 8,118,610 and 7,928,171 shares in 1997 and 1996, respectively......           81,186                     79,282
 Additional paid-in capital...................................................      117,913,818                117,548,065
 Accumulated deficit..........................................................     (107,315,836)              (101,741,946)
 Other........................................................................       (1,612,923)                (1,482,219)
------------------------------------------------------------------------------------------------------------------------------------
    Total stockholders' equity                                                        9,066,245                 14,403,240
------------------------------------------------------------------------------------------------------------------------------------
                                                                                  $  19,561,865              $  23,861,244   
====================================================================================================================================
</TABLE>

See Accompanying Notes To Unaudited Consolidated Condensed Financial Statements.



                                       1
<PAGE>   4

                          ECOGEN INC. AND SUBSIDIARIES

           UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                              JULY 31,                       JULY 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                         1997        1996                1997        1996 
                                                                     ---------------------------------------------------------------
<S>                                                                   <C>            <C>              <C>            <C>    
Revenues:

 Product sales, net................................................    $4,110,311     $4,592,207      $ 7,684,326    $ 8,512,271
 Contract revenue..................................................       719,877        772,163        2,143,940      1,464,134
 License and other income..........................................            --             --               --      5,013,049
 Interest income, net..............................................        56,989        179,684          174,653        458,494
------------------------------------------------------------------------------------------------------------------------------------
   Total revenues                                                       4,887,177      5,544,054       10,002,919     15,447,948
------------------------------------------------------------------------------------------------------------------------------------

Costs and expenses:

 Cost of products sold.............................................     2,642,256      2,816,150        5,105,780      5,131,772
 Research and development:
  Funded by third parties..........................................       291,163        251,311          878,692        631,037
  Self funded......................................................       863,980        878,485        3,101,110      2,781,824
 Selling, general and administrative...............................     2,390,001      2,308,436        6,491,227      5,990,018
------------------------------------------------------------------------------------------------------------------------------------
   Total costs and expenses                                             6,187,400      6,254,382       15,576,809     14,534,651
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                                     $(1,300,233)     $(710,328)     $(5,573,890)   $   913,297
====================================================================================================================================

Net income (loss) per common share
 available to common stockholders                                          $(0.16)        $(0.09)          $(0.70)         $0.11
====================================================================================================================================

Weighted average number of common
 shares outstanding                                                     8,025,000      7,627,000        7,934,000      6,941,000
====================================================================================================================================

</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, 1997

<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, 1996                    $58        $79,282     $117,548,065    $(101,741,946)    $(1,482,219)    $14,403,240

Conversion of 5,834 shares of Series B
  convertible stock to 44,030 shares
  of common stock.......................    (58)           440             (382)          --              --              --

Dividends on preferred stock............    --              46           12,088           --              --              12,134

Issuance of 5,028 shares of common stock
  for employee benefits.................    --              58          (32,193)          --              61,173          29,038

Issuance of 136,000 shares of common stock
  in settlement of a royalty obligation...  --           1,360          386,240           --               --            387,600

Foreign currency translation..............  --             --             --              --            (183,681)       (183,681)

Net reduction in unrealized gain on
  securities..............................  --             --             --              --              (8,196)         (8,196)

Net loss..................................  --             --             --          (5,573,890)          --         (5,573,890)

-----------------------------------------------------------------------------------------------------------------------------------
BALANCE JULY 31, 1997                       --         $81,186     $117,913,818    $(107,315,836)      $(1,612,923)   $9,066,245
===================================================================================================================================
</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,
                                                            1997         1996
-------------------------------------------------------------------------------
<S>                                                   <C>           <C>
Cash flows from operating activities:
  Net (loss) income.................................. ($5,573,890)  $  913,297
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
      Depreciation and amortization expense..........     305,673      323,736
      Other..........................................      67,201       (2,635)
  Changes in assets and liabilities net..............  (2,068,009)  (2,647,139)

-------------------------------------------------------------------------------
Net cash used in operating activities                  (7,303,875)  (1,412,741)
-------------------------------------------------------------------------------

Cash flows from investing activities:
  Purchase of plant and equipment....................    (138,932)    (510,232)

-------------------------------------------------------------------------------
Net cash used in investing activities                    (138,932)    (510,232)
-------------------------------------------------------------------------------
Cash flows from financing activities:
  Net proceeds from issuance of Series C preferred
    stock............................................          --    2,793,943
  Net proceeds from issuance of common stock.........          --    9,335,266
  Net proceeds from issuance of common shares under
    stock option plan................................       9,752           --
  Net proceeds from issuance of Senior Subordinated
    Convertible Note.................................   1,500,000           --
  Purchase of treasury stock.........................          --     (234,438)
  Repayment of capital lease obligation..............    (291,477)    (166,214)

-------------------------------------------------------------------------------
Net cash provided by financing activities               1,218,275   11,728,557
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash            (1,215)      (1,457)
-------------------------------------------------------------------------------

Net (decrease) increase in cash and cash equivalents.. (6,225,747)   9,804,127

Cash and cash equivalents, beginning of period........  9,611,111    1,775,213

-------------------------------------------------------------------------------
Cash and cash equivalents, end of period               $3,385,364  $11,579,340
===============================================================================
</TABLE>
                                                                    (Continued)


                                       4





<PAGE>   7
                          ECOGEN INC. AND SUBSIDIARIES

      UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS, CONTINUED


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                                NINE MONTHS ENDED
                                                                                     JULY 31,
                                                                      1997                   1996
-------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                    <C>
Changes in assets and liabilities:
   (Increase) decrease in prepaid expenses and
      other current assets.....................................  $    81,176             $   (27,985)
   (Increase) decrease in inventory............................   (1,126,169)                 67,109
   Increase in receivables.....................................     (889,694)             (2,951,404)
   Decrease in other assets....................................      133,432                  22,151
   Decrease in accounts payable................................                                  --
      and accrued expenses.....................................     (781,057)             (1,469,099)
   Increase in deferred contract revenue.......................      663,690               1,770,145
   Decrease in other long-term liabilities.....................     (184,237)                (57,756)

-------------------------------------------------------------------------------------------------------------
   Changes in assets and liabilities, net                        $(2,068,009)            $(2,647,139)
=============================================================================================================
</TABLE>
-------------------------------------------------------------------------------
Noncash investing and financing activities:
-------------------------------------------------------------------------------

In the first nine months of fiscal 1996, debt totalling approximately $1,075,000
was incurred by the Company for the acquisition of equipment.           

In the first nine months of fiscal 1997 and 1996, the Company issued 44,030 and
756,184 shares of its common stock upon conversion of the Company's convertible
preferred stock.

In the first nine months of fiscal 1997 and 1996, the Company issued 13,572 and
20,552 shares of common stock, respectively, as dividends on the Company's
preferred stock.

In the first nine months of fiscal 1997, the Company transferred 4,684 shares of
treasury stock to outstanding shares pursuant to certain employee benefit plans.

In the first nine months of fiscal 1997, the Company issued 136,000 shares of
common stock in satisfaction of future royalty obligations.
===============================================================================

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, 1997 AND 1996



(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 l0-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, l996 consolidated financial
         statements and notes thereto included in the Company's Annual Report on
         Form 10-K.

         The results of operations for the interim period ended July 31, 1997
         are not necessarily indicative of the operating results for the full
         year.

         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 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


         NET INCOME (LOSS) PER COMMON SHARE:

         Net income (loss) per common share adjusted for preferred stock
         dividends of $1,815 and none, respectively, in the nine months and
         three months ended July 31, 1997, and $116,700 and $13,572,
         respectively, in the nine months and three months ended July 31, 1996,
         is computed using the weighted average number of shares outstanding
         during the period. Common stock equivalents are not included in the
         computation of weighted average shares outstanding using the modified
         treasury stock method since the effect would be anti-dilutive for both
         primary and fully diluted earnings per share.

(2)      INVENTORY

         At July 31, l997, inventory consisted of raw materials of $2,313,981,
         work-in-progress of $1,774,993 and finished products of $3,891,667.

(3)      MONSANTO TRANSACTION

         In January 1996, the Company entered into an agreement 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"). The
         transaction included (i) the acquisition by Monsanto of certain rights
         in the Company's Bt technology for an aggregate purchase price of $5.0
         million in cash which was recorded as license and other income in the
         first quarter of 1996; (ii) the sale by the Company to Monsanto of
         943,397 shares of Common Stock at $10.60 per share for an aggregate
         purchase price of $10.0 million in cash during the first quarter; and
         (iii) a four-year research and development ("R&D") collaboration
         arrangement with Monsanto for the further development of the Company's
         Bt gene library for a minimum of $10.0 million, of which $2.9 million
         and $3.0 million was received in the first nine months of 1997 and
         1996, respectively and recorded as deferred contract revenue. Such
         contract revenue is recorded as earned under the terms of the
         agreement. Under this agreement, the Company recognized as contract
         revenue approximately $2.1 million and $1.5 million in the nine months
         ended July 31, 1997 and 1996, respectively. In the third quarter of
         fiscal 1997, Monsanto prepaid the remainder of its fiscal 1997
         obligation under the R&D contract representing the funding of expected
         research costs under the contract through the first quarter of fiscal
         1998. Subsequent to July 31, 1997, Monsanto advanced $1.0 million

                                                                     (Continued)

                                       7
<PAGE>   10
                          ECOGEN INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
                                  (CONTINUED)


(3)      MONSANTO TRANSACTION (CONTINUED)

         of commercialization success fees which, under the agreement, were
         payable at such time as Monsanto commercializes a product with Ecogen's
         technology.

         As part of the agreement, Monsanto has agreed to maintain its ownership
         position during the term of the research and development agreement and
         Monsanto is prohibited, during the first three years following the
         closing, from acquiring more than 25% of the Company's voting stock
         without the Company's consent, except in certain circumstances
         primarily related to a change of control of the Company. Monsanto was
         granted certain demand and piggyback registration rights with respect
         to its shares. In addition, Monsanto has a right of first refusal to
         purchase securities of the Company so as to maintain its ownership
         percentage in the Company except in certain circumstances defined in
         the applicable agreement. Further, Monsanto has the right to terminate
         the R&D contract upon the occurrence of certain events involving a
         change in control of the Company or a sale of substantially all of the
         assets of the Company as defined in the agreement.

(4)      LONG-TERM DEBT

         In July 1997, the Company sold, in a private placement, a $1.5 million
         8% senior subordinated convertible note (the "Note") to an
         institutional shareholder of the Company. Assuming the conversion of
         the Note, such shareholder would have a beneficial interest of 11%. The
         Note is due in July 2002 and is convertible by the holder, at any time,
         into shares of the Company's common stock at $3.00 per share. At the
         Company's option, interest on the Note may be payable in cash or common
         stock. The Company may redeem the Note, at its option, at any time
         after July 2000 provided that the Company's common stock has traded for
         a specified period for at least 150% of the conversion price. The
         conversion price under certain circumstances is subject to adjustment.
         The holder of the Note has certain demand and piggyback registration
         rights and a right of first refusal under certain circumstances for
         certain equity offerings.

         In July 1996, the Company established a two year revolving working
         capital line of credit with a commercial bank for up to $5,000,000.
         Borrowings under this line are required to be fully collateralized by
         certain of the Company's investments. As of July 31, 1997 there have
         been no borrowings under this line of credit. 


                                                                     (Continued)

                                       8
<PAGE>   11
                          ECOGEN INC. AND SUBSIDIARIES

         NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS,
                                  (CONTINUED)


(5)      STOCKHOLDERS' EQUITY

         PREFERRED STOCK


         In November 1995, the Company raised $2.8 million, net of expenses,
         from institutional investors from the private placement of 122,000
         shares of 8% Series C Convertible Preferred Stock (the "Series C
         Preferred Stock"). All of the Series C Preferred Stock has been
         converted into shares of the Company's Common stock in accordance with
         its terms.



         During the first nine months of fiscal 1997 and 1996, the Company
         issued 44,030 and 756,184 shares, respectively, of its common stock
         upon conversion of the Company's Series B Convertible Preferred Stock
         and Series C Convertible Preferred Stock. Further, in the first nine
         months of fiscal 1997 and 1996, the Company issued 4,579 and 20,552
         shares, respectively, of its common stock in payment of dividends on
         its preferred stock.

         COMMON STOCK

         In December 1996, the Board of Directors granted the Company's U.S.
         employees, excluding officers, the right to exchange 224,360 options at
         exercise prices from $2.75 to $15.63 for new options at an exercise
         price of $2.56, the fair market value at the new grant date. The new
         options generally vest over a three year period.

         In April 1997, the Company issued 136,000 unregistered shares of its
         common stock in satisfaction of a royalty obligation. In exchange for
         the common stock the Company also was assigned certain patents and
         patent applications. In connection therewith, the Company recorded a
         prepaid royalty of $387,600 during the second quarter of 1997. The
         holder of the shares has certain demand and piggyback registration
         rights with respect to the shares of common stock.


                                       9
<PAGE>   12
                          ECOGEN INC. AND SUBSIDIARIES

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

            THREE MONTHS AND NINE MONTHS ENDED JULY 31, 1997 AND 1996


OVERVIEW

For the first nine months of fiscal 1997, total revenues decreased $5.4 million
from $15.4 million in fiscal 1996 to $10.0 million in fiscal 1997, due
principally to a nonrecurring upfront fee of $4.8 million from the Monsanto
Company recorded in the first quarter of fiscal 1996. Product sales decreased
10% from $8.5 million for the nine months ended July 31, 1996 to $7.7 million
for the nine months ended July 31, 1997. For the nine months ended July 31,
1997, the Company reported a net loss of ($5.6) million or ($.70) per share
compared to net income of $0.9 million or $.11 per share in the comparable
period in fiscal 1996 on weighted average shares of 7.9 million and 6.9 million,
respectively. The difference between the net loss of ($5.6) million for the nine
month period ended July 31, 1997 and the net income of $0.9 million for the same
period in fiscal 1996 is principally the $4.8 million in other revenue
recognized in January 1996 from the Company's strategic alliance with Monsanto
Company ("Monsanto") and $1.1 million of increased operating costs of which $.6
million relates to unexpected process development costs associated with
since-resolved manufacturing problems.

NINE MONTHS ENDED JULY 31, 1997 AND 1996

REVENUES

Net product sales decreased $.8 million or 10% to $7.7 million in the first nine
months of fiscal 1997 compared with $8.5 million in the comparable period in
fiscal 1996 due to a decrease of $2.9 million of product sales into the cotton
market replaced in part by sales of new products into the fruits and vegetables
market consistent with the Company's shift in strategic direction. Sales of the
Company's Bt product line, representing 42% of total sales, decreased $1.3
million or 29% due to decreased volume in the first nine months of fiscal 1997
from the comparable period in 1996 principally as a result of expected lower
sales of Condor, a Bt bioinsecticide, in the cotton market as a result of this
market adopting a greater use of transgenic Bt cotton seeds offset partially by
sales of Crymax, a new Bt bioinsecticide for the fruits and vegetables market.
Pheromone product sales, representing 35% of total sales, decreased $.9 million
or 25% principally due to decreased sales of NoMate PBW for control of pink
bollworm also in the cotton market, partially offset by sales of the Company's
new NoMate OLR product for control of the omnivorous leafroller in vine and tree
fruits. Biofungicide product sales, representing 23% of total sales increased
$1.4


                                       10
<PAGE>   13
REVENUES (CONTINUED)


million or 350% due to increased volume of Ecogen's two new biofungicide
products, Aspire and AQ10. The Company expects that the shortfall in product
sales during the first nine months of fiscal 1997 over 1996 will be reversed in
the fourth quarter of 1997 where the Company expects to see growth in product
sales.

Other revenues decreased $4.6 million in the current period, due primarily to
$4.8 million in nonrecurring upfront fees recognized in the first nine months of
fiscal 1996 pursuant to the Company's strategic alliance with Monsanto. Research
contract revenue increased from $1.5 million to $2.1 million in the first nine
months of fiscal 1997 when compared to the same period in 1996, reflecting the
fact that fiscal 1997 represents the first full year of the Monsanto research
and development contract. Other income, exclusive of the non-recurring Monsanto
revenue, decreased $.4 million primarily as a result of decreased interest
income as a result of lower funds available for investments.

COSTS AND EXPENSES

Gross margins on product sales decreased to 34% in 1997 compared to 40% in 1996.
This decrease was due primarily to higher costs on initial production of new
products and lower sales of high margin pheromone NoMate products.

Total operating costs were $10.5 million in the first nine months of fiscal 1997
compared to $9.4 million in 1996 representing an increase of $1.1 million or
12%. Research and development costs increased $.6 million or 17% principally as
a result of increased process development costs for CRYMAX and Aspire, two of
the Company's new products. After the announcement of manufacturing problems
associated with equipment design failures, the Company began working on
developing alternative processes for the manufacturing of its new water
dispersible granule products. An alternative process is now in full scale
commercial production for both products. Selling, general and administration
expenses increased $.5 million or 8% primarily as a result of planned higher
marketing and promotional expenses including costs associated with significant
expansion to the Company's field sales force at the end of fiscal 1996, as the
Company aggressively launches several new products into the fruits and
vegetables market.

Net loss for the nine months ended July 31, 1997 was ($5.6) million, compared to
net income of $.9 million for the same period in 1996. Net loss per share was
($.70), compared to net income per share of $.11 on weighted average shares
outstanding of 7.9 million and 6.9 million, respectively, in the first nine
months of fiscal 1997 and 1996. Excluding the Monsanto nonrecurring upfront
payment in fiscal 1996, the net loss for the first nine months increased from
($3.9) million in fiscal 1996, compared to ($5.6) million in fiscal 1997
principally due to increased costs, lower margins and lower sales as discussed
above.


                                       11
<PAGE>   14
THREE MONTHS ENDED JULY 31, 1997 AND 1996

REVENUES

Net product sales decreased $.5 million or 10% to $4.1 million compared with
$4.6 million in the third quarter of 1996. Sales of the Company's Bt product
line, representing 39% of total sales, decreased $.6 million or 27% due
primarily to decreased volume in the third quarter of fiscal 1997 from the
comparable period in 1996. Pheromone product sales, representing 36% of total
sales in the third quarter of fiscal 1997, decreased $.8 million or 35% due
primarily to decreased volume. The biofungicide product line, representing 25%
of product sales in the third quarter of fiscal 1997, increased $.9 million or
804% for the third quarter of 1996. The decrease in both the Bt product line and
the pheromone product lines is the result of lower sales into the cotton market
as discussed previously, partially offset by sales of new products into the
fruits and vegetables market. Biofungicide sales increased as a result of
increased volume as the Company continues commercial development of its two new
biofungicide products, Aspire and AQ10.

COSTS AND EXPENSES

Gross margins on product sales decreased to 36% in the third fiscal quarter of
1997 when compared to 39% gross margins in the same period in fiscal 1996.
Although gross margins for fiscal 1997 have decreased principally due to
production start-up costs, gross margins in the third quarter of 1997 improved
to 36% from 33% and 25%, respectively, in the previous two quarters in fiscal
1997. The third quarter margins were also negatively impacted by product mix, as
a result of lower sales of pheromone NoMate products that carry high margins.

Total operating costs were $3.5 million in the third quarter of 1997 consistent
with the $3.4 million in operating costs in fiscal 1996. Operating costs had run
higher than 1996 in the first two quarters of 1997 as a result of process
development costs due to since-resolved manufacturing problems associated with
the Company's new products that was announced in the fourth quarter of fiscal
1996 and higher selling and marketing costs as a result of expansion of the
Company's field staff in the second half of 1996.

Net loss for the three months ended July 31, 1997 was ($1.3) million, compared
to net loss of ($.7) million for the same period in 1996. Net loss per share for
the three months ended July 31, 1997 was ($.16), compared to net loss per share
of ($.09) on weighted average shares outstanding of 8.0 million and 7.6 million,
respectively, in the third quarter of fiscal 1997 and 1996. The increase in the
net loss is principally attributable to lower product sales and lower gross
margins.


                                       12
<PAGE>   15
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. 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. In
addition, 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 and
quarter-to-quarter are also affected by unusual weather conditions, such as
droughts or floods, and the level of insect pressure in grower areas.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 1997, the Company had cash and liquid investments of $3.4 million,
representing a net decrease of $6.2 million from October 31, 1996. The decrease
was due to $7.3 million of cash used in operations and $.1 million used for
capital expenditures, offset by $1.2 million provided by financing activities.
Cash used in operations during the nine months ended July 31, 1997 principally
funded the net loss of $5.6 million, an increase in receivables of $.9 million
and an increase in inventory of $1.1 million cash provided by financing
activities in fiscal 1997 represents proceeds from the issuance of a Senior
Subordinated Convertible Note of $1.5 million partially offset by repayment of
capital lease obligations of $.3 million.

To date, the Company has not generated positive cash flow from operations. The
Company has financed its working capital needs primarily through private and
public offerings of equity securities, research contract revenues, license and
other fees and product sales. The Company believes that its existing working
capital and anticipated cash flows in fiscal 1997 should be sufficient to meet
its capital and liquidity requirements for fiscal 1997. The Company will need
additional financing to support current levels of product development and
commercialization in fiscal 1998. There is no assurance that such financing will
be available on terms acceptable to the Company or at all. 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 


                                       13
<PAGE>   16
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED

generally, competitive conditions in the agricultural pest control market, and
access to capital markets that can provide the Company with the resources
necessary to fund its strategic priorities. Over the long term, the Company's
liquidity is dependent on market acceptance of its products and technology.

ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY

Inventory increased $1.1 million from October 31, 1996 as a result of building
inventories of new products for the fall fruits and vegetables market. Trade
receivables increased $.9 million from the end of fiscal 1996 due to the
seasonality of sales. Accounts payable and accrued expenses decreased $.8
million from October 31, 1996 due to timing of payments to vendors and refunds
paid to distributors in the first quarter of fiscal 1997 for product returns in
the fourth quarter of fiscal 1996. Deferred contract revenue increased $.7
million during the nine months ended July 31, 1997 due to advanced payments from
Monsanto under the research and development agreement relating to certain Bt
technology for use in plants, net of earned contract revenue in fiscal 1997.

In late February 1997, the Financial Accounting Standards Board issued FASB
Statement No. 128 "Earnings per Share". The Company is beginning to assess the
effect of this statement but does not believe the statement will have
significant impact because the Company's common stock equivalents are presently
anti-dilutive and therefore are excluded from earnings per share calculations.

The discussion set forth in this document contains forward looking statements
that involve 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 newly introduced products over the next several weeks and
months. These products, some of which utilize new formulations, 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 may not be successfully
incorporated into the manufacturing process in time to meet targeted sales
opportunities. Additional risks and uncertainties include: (i) the market
acceptance of the Company's current and newly introduced products; (ii) the
efficacy, pricing, ease of use and performance of the Company's products; (iii)
the successful development, registration, commercialization and marketing of
technologically advanced new products; (iv) the continued and uninterrupted
supply of the Company's products from third party toll manufacturers and the
continued financial viability of such manufacturers; (v) economic and
environmental considerations which impact agricultural crop production and
agricultural crop protection including the amount 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 (vi) the
ability of the Company 


                                       14
<PAGE>   17
to fund its strategic priorities through operations or access to capital
markets.


PART II - OTHER INFORMATION

Item 1:           Legal Proceedings

         In June, 1997 the United States Patent and Trademark Office declared an
interference between an Ecogen patent application and a patent of Mycogen
Corporation regarding Bt gene Cry1F. The interference was declared as a result
of action taken by the Company to have the Patent Office declare that Ecogen,
not Mycogen, should be recognized as the first to invent the Cry1F gene and that
the Company should be awarded the patent with respect to Cry1F. An interference
is a proceeding in the Patent Office in which the Patent Office determines which
party was first to invent an invention. The Company is a defendant in a patent
infringement lawsuit brought by Mycogen Corporation in which Mycogen alleges
that Ecogen's Lepinox(TM) bioinsecticide infringes two Mycogen patents, one of
which is the subject of the interference. The lawsuit was filed by Mycogen in
the United States District Court for the Southern District of California and
seeks damages and injunctive relief. The Company has denied the allegations made
by Mycogen in the lawsuit and is vigorously defending the action and does not
expect that the outcome of the litigation will have a material adverse effect on
the Company's consolidated financial statements.

Item 2:           Changes in Securities

         On July 10, 1997, the Company and United Equities (Commodities) Company
("United Equities") entered into a Convertible Senior Subordinated Note Purchase
Agreement pursuant to which United Equities purchased $1.5 million aggregate
principal amount of the Company's 8% Convertible Senior Subordinated Note due
July 10, 2002 (the "Note"). The terms of the Note include interest of 8% per
annum payable in cash or common stock at the Company's option, conversion to
common stock at a conversion price of $3.00 per share which price may be
adjusted upon the occurrence of certain events, certain demand and piggyback
registration rights and a right of first refusal under certain circumstances for
certain equity offerings by the Company. The Company may redeem the Note, at its
option after July, 2000 provided that the Company's common stock has traded for
a specified period for at least 150% of the conversion price. The Note was
issued to United Equities in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D under the Securities Act
1933, as amended.


                                       15
<PAGE>   18
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.)*

3.8               By-Laws of Ecogen Inc., as amended.  (Form S-1 Registration
                  Statement.)*

27                Financial Data Schedule

----------

*        These items are hereby incorporated by reference from the exhibits of
         the filing or report indicated (except where noted, Commission File No.
         1-9579, and File No. 33-40319 in the case of the Form S-1 Registration
         Statement).


                                       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 18, 1997


                                       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