United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    Form 10-Q

             (X) Quarterly Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934.
                For the quarterly period ended September 30, 1999
                                       Or
          ( ) Transition Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934.
                 For the transition period from ______ to ______

                         Commission File Number 33-14582
                        PAINEWEBBER R&D PARTNERS II, L.P.
             (Exact name of registrant as specified in its charter)

           Delaware                                        13-3437420
(State or other jurisdiction of                         (I.R.S. Employer
Incorporation or organization)                         Identification No.)

1285 Avenue of the Americas, New York, New York                       10019
   (Address of principal executive offices)                        (Zip code)

       Registrant's telephone number, including area code: (212) 713-2000

                                   ----------

      Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

                                   ----------
<PAGE>

                             SPECIAL NOTE REGARDING
                           FORWARD LOOKING STATEMENTS

      The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Except for the historical information
contained herein, the matters discussed herein are forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of PaineWebber R&D Partners II, L.P. or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; fluctuations in the
value of securities for which only a limited, or no, public market exists;
dependence on the development of new technologies; dependence on timely
development and introduction of new and competitively priced products; the need
for regulatory approvals; the Sponsor Companies (hereinafter defined) having
insufficient funds to commercialize products to their maximum potential; the
restructuring of Sponsor Companies; the dependence of PaineWebber R&D Partners
II, L.P. on the skills of certain scientific personnel; and the dependence of
PaineWebber R&D Partners II, L.P. on the General Partner (hereinafter defined).
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                                    Form 10-Q
                               September 30, 1999

                                Table of Contents

PART I.           FINANCIAL INFORMATION                                     Page

Item 1.           Financial Statements

                  Statements of Financial Condition (unaudited) at           2
                  September 30, 1999 and December 31, 1998

                  Statements of Operations
                  (unaudited) for the three months and nine months
                  ended September 30 1999 and 1998                           3

                  Statement of Changes in Partners' Capital
                  (unaudited) for the nine months
                  ended September 30, 1999                                   4

                  Statements of Cash Flows
                  (unaudited) for the nine months
                  ended September 30, 1999 and 1998                          5

                  Notes to Financial Statements
                  (unaudited)                                               6-11

Item 2.           Management's Discussion and Analysis of                  12-13
                  Financial Condition and Results of Operations

PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings                                          14

Item 6.           Exhibits and Reports on Form 8-K                           14

                  Signatures                                                 15

All schedules are omitted either because they are not applicable or the
information required to be submitted has been included in the financial
statements or notes thereto.
<PAGE>

                          PART I FINANCIAL INFORMATION

Item 1. Financial Statements

PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)

Statements of Financial Condition
(unaudited)

                                                   September 30,    December 31,
                                                       1999             1998
--------------------------------------------------------------------------------
Assets:

      Cash                                          $    6,998        $    6,998

      Marketable securities, at market value           110,697         1,433,536

      Royalty income receivable                      1,752,565         1,425,514
                                                    ----------        ----------
Total assets                                        $1,870,260        $2,866,048
                                                    ==========        ==========


Liabilities and partners' capital:

      Accrued liabilities                           $  116,078        $   78,994

      Partners' capital                              1,754,182         2,787,054
                                                    ----------        ----------
Total liabilities and partners' capital             $1,870,260        $2,866,048
                                                    ==========        ==========

--------------------------------------------------------------------------------
See notes to financial statements.


                                       2
<PAGE>

PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)

Statements of Operations
(unaudited)

<TABLE>
<CAPTION>
For the three months ended September 30,                                  1999                1998
--------------------------------------------------------------------------------------------------
<S>                                                                <C>                 <C>
Revenues:
      Interest income                                              $     5,064         $     3,758
      Income from product development projects                       1,774,066           1,485,934
      Unrealized depreciation of marketable securities                      --          (1,665,000)
      Realized loss on sale of marketable securities                  (315,148)                 --
                                                                   -----------         -----------
                                                                     1,463,982            (175,308)
                                                                   -----------         -----------
Expenses:
      General and administrative costs                                  91,189              42,731
                                                                   -----------         -----------
Net income (loss)                                                  $ 1,372,793         $  (218,039)
                                                                   ===========         ===========
Net income (loss) per partnership unit:
      Limited partners (based on 8,257 units)                      $    164.60         $    (26.14)
      General partner                                              $ 13,727.93         $ (2,180.39)
</TABLE>

================================================================================

<TABLE>
<CAPTION>
For the nine months ended September 30,                                   1999                1998
--------------------------------------------------------------------------------------------------
<S>                                                                <C>                 <C>
Revenues:
      Interest income                                              $    12,524         $    26,485
      Income from product development projects                       5,036,978           5,151,173
      Unrealized depreciation of marketable securities                      --          (3,930,000)
      Realized gain (loss) on sale of marketable securities          1,634,850              (1,939)
                                                                   -----------         -----------
                                                                     6,684,352           1,245,719
                                                                   -----------         -----------
Expenses:
      General and administrative costs                                 219,200             135,195
                                                                   -----------         -----------
Net income                                                         $ 6,465,152         $ 1,110,524
                                                                   ===========         ===========
Net income per partnership unit:
      Limited partners (based on 8,257 units)                      $    775.16         $    133.15
      General partner                                              $ 64,651.52         $ 11,105.24
</TABLE>

--------------------------------------------------------------------------------
See notes to financial statements.


                                       3
<PAGE>

PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)

Statement of Changes in Partners' Capital
(unaudited)

<TABLE>
<CAPTION>
                                                   Limited      General
For the nine months ended September 30, 1999       Partners     Partner       Total
--------------------------------------------------------------------------------------
<S>                                              <C>           <C>        <C>
Balance at January 1, 1999                       $ 2,755,101   $ 31,953   $ 2,787,054

Net income                                         6,400,500     64,652     6,465,152
Cash distributions                                (7,423,044)   (74,980)   (7,498,024)
                                                 -----------   --------   -----------
Balance at September 30, 1999                    $ 1,732,557   $ 21,625   $ 1,754,182
                                                 ===========   ========   ===========

--------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>


                                       4
<PAGE>

PAINEWEBBER R&D PARTNERS II, L.P.
(a Delaware Limited Partnership)

Statements of Cash Flows
(unaudited)

<TABLE>
<CAPTION>
For the nine months ended September 30,                          1999                1998
-----------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>
Cash flows from operating activities:
Net income                                                $ 6,465,152         $ 1,110,524
Adjustments to reconcile net income to cash
  provided by operating activities:
  Unrealized depreciation of marketable securities                 --           3,930,000

Decrease (increase) in operating assets:
  Marketable securities                                     1,322,839          (1,129,166)
  Royalty income receivable                                  (327,051)           (356,278)
  Other assets                                                     --               5,000

Increase (decrease) in operating liabilities:
  Accrued liabilities                                          37,084             (15,409)
                                                          -----------         -----------
Cash provided by operating activities                       7,498,024           3,544,671
                                                          -----------         -----------
Cash flows from financing activities:
  Distributions to partners                                (7,498,024)         (3,544,671)
                                                          -----------         -----------
Increase in cash                                                   --                  --

Cash at beginning of period                                     6,998               6,998
                                                          -----------         -----------
Cash at end of period                                     $     6,998         $     6,998
                                                          ===========         ===========
</TABLE>

--------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
The Partnership paid no cash for interest or taxes during the nine months ended
September 30, 1999 and 1998.
--------------------------------------------------------------------------------
See notes to financial statements.


                                       5
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. Organization and Business

      The financial information as of and for the periods ended September 30,
1999 and 1998 is unaudited. However, in the opinion of management of PaineWebber
R&D Partners II, L.P. (the "Partnership"), such information includes all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation. The results of operations reported for the interim periods ended
September 30, 1999, are not necessarily indicative of results to be expected for
the year ended December 31, 1999. These financial statements should be read in
conjunction with the most recent annual reports of the Partnership on Forms 10-K
for the year ended December 31, 1998 and the previously issued quarterly reports
on Forms 10-Q for the quarters ended March 31, 1999 and June 30, 1999.

      The Partnership is a Delaware limited partnership that commenced
operations on September 30, 1987 with a total of $72.0 million available for
investment. PWDC Holding Company (the "Manager") is the general partner of
PaineWebber Technologies II, L.P. (the "General Partner"), which is the general
partner of the Partnership. PWDC Holding Company is a wholly-owned subsidiary of
Paine Webber Development Corporation ("PWDC"), an indirect, wholly-owned
subsidiary of Paine Webber Group Inc. ("PWG"). The Partnership will terminate on
December 31, 2012, unless its term is extended or reduced by the General
Partner.

      The principal objective of the Partnership has been to provide long-term
capital appreciation to investors through investing in the development and
commercialization of new products with technology companies ("Sponsor
Companies"), which have been expected to address significant market
opportunities. The Partnership has been engaged in diverse product development
projects (the "Projects") including product development contracts, participation
in other partnerships and investments in securities of the Sponsor Companies.
Once the product development phase has been completed, the Sponsor Companies
have had the option to license and commercialize the products resulting from the
product development project, and the Partnership has had the right to receive
payments based upon the sale of such products.


                                       6
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(Note 1 Continued)

      All distributions to the limited partners of the Partnership (the "Limited
Partners") and the General Partner (collectively, the "Partners") from the
Partnership have been made pro rata in accordance with their respective capital
contributions. The following table sets forth the proportion of each
distribution to be received by the Limited Partners and the General Partner,
respectively:

<TABLE>
<CAPTION>
                                                                                     Limited   General
                                                                                     Partners  Partner
                                                                                     --------  -------
<S>                                                                                     <C>       <C>
  I. Until the value of the aggregate distributions for each limited
     partnership unit ("Unit") equals $10,000 plus simple interest on such
     amount accrued at 7% per annum for each Unit sold at the Initial Closing
     (6% per annum for each subsequent Unit sold up to the 5,000th Unit and
     5% per annum for each Unit sold thereafter) ("Contribution Payout"). At
     September 30, 1999, Contribution Payout ranged from $15,125 per Unit to
     $18,400 per Unit......................................                             99%       1%

 II. After Contribution Payout and until the value of the aggregate
     distributions for each Unit equals $50,000 ("Final Payout")..............          80%      20%

III. After Final Payout.......................................................          75%      25%
</TABLE>

      For the three months ended September 30, 1999, the Partnership made cash
distributions totaling $4,520,499 ($542 per Unit; $45,205 to the General
Partner). For the nine months ended September 30, 1999 cash distributions to the
Partners aggregated $7,498,024 ($899 per Unit; $74,980 to the General Partner).
At September 30, 1999, the Partnership has made cash and security distributions,
as valued on the dates of distribution, since inception of $4,231 and $7,206 per
Unit, respectively.

      Profits and losses of the Partnership are allocated as follows: (i) until
cumulative profits and losses for each Unit equals Contribution Payout, 99% to
Limited Partners and 1% to the General Partner, (ii) after Contribution Payout
and until cumulative profits and losses for each Unit equals Final Payout, 80%
to Limited Partners and 20% to the General Partner, and (iii) after Final
Payout, 75% to Limited Partners and 25% to the General Partner. As of September
30, 1999, the cumulative losses for the Partnership were $798 per Unit.

2. Summary of Significant Accounting Policies

      The financial statements are prepared in conformity with generally
accepted accounting principles which require management to make certain
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

      Marketable securities consist of a money market fund which is recorded at
market value. Marketable securities are not considered cash equivalents for the
Statements of Cash Flows.


                                       7
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(Note 2 Continued)

      Realized and unrealized gains or losses are determined on a specific
identification method and are reflected in the Statements of Operations during
the period in which the change in value occurs.

      The Partnership has invested in product development contracts with Sponsor
Companies either directly or through product development limited partnerships.
The Partnership expenses product development costs when incurred by the Sponsor
Companies and such costs are reflected as expenditures under product development
projects in the accompanying Statements of Operations. Income received and/or
accrued from investments in Projects is reflected in the Statements of
Operations for the period in which the income is earned.

3. Marketable Securities

      The Partnership held the following marketable securities:

                               September 30, 1999          December 31, 1998
                               ------------------        ----------------------
                                Market     Cost            Market       Cost

Money market fund              $110,697  $110,697        $  263,534  $  263,534
Cygnus, Inc.
    (240,000 common shares)          --        --         1,170,002   2,376,000
                               --------  --------        ----------  ----------

                               $110,697  $110,697        $1,433,536  $2,639,534
                               ========  ========        ==========  ==========

         During the quarter ended September 30, 1999 the Partnership sold its
investment in Cygnus, Inc. ("Cygnus") for net proceeds of $2,804,852 ($11.6875
per share). The carrying value of the shares at June 30, 1999 and December 31,
1998 was $3,120,000 ($13.00 per share) and $1,170,002 ($4.875 per share),
respectively. Accordingly, the Partnership recognized a gain (loss) upon the
sale for the three months and nine months ended September 30, 1999 of $(315,148)
and $1,634,850, respectively. At September 30, 1998 the Cygnus shares had a
market value of $3.50 per share as compared to a market value of $10.4375 and
$19.875 per share as of June 30, 1998 and December 31, 1997, respectively.
Accordingly, the Partnership recognized unrealized depreciation of $1,665,000
and $3,930,000 for the three months and nine months ended September 30, 1998.

4. Related Party Transactions

      The Manager is entitled to receive a management fee for services rendered
to the Partnership. Commencing July 1, 1996, the Manager elected to discontinue
the management fee charged to the Partnership.

      The money market fund invested in by the Partnership is managed by an
affiliate of PaineWebber Incorporated ("PWI").


                                       8
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(Note 4 Continued)

      PWDC and PWI, and its affiliates, have acted in an investment banking
capacity for several of the Sponsor Companies. In addition, PWDC and its
affiliates have direct limited partnership interests in some of the same
Projects as the Partnership.

5. Product Development Projects

      In January 1998, the class action against the general partner of Synergen
Clinical Partners, L.P. ("SCP") and others alleging that the defendants caused
or permitted the release of misleading statements regarding the potential market
for Interleukin-Receptor Antagonist ("IL-1ra") (a potential treatment of
inflammatory diseases), preclinical and clinical trial results, and the
possibility of IL-1ra becoming licensed for sale either in the United States or
Europe reached a settlement which was approved by the court. On March 3, 1998,
the Partnership received and recorded as income the amount of $1,248,624
representing its share of the initial settlement payment as a Class A limited
partner of SCP.

      On January 31, 1997, pursuant to the provisions of the Partnership
Purchase Option Agreement between Centocor, Inc. ("Centocor") and the
Partnership, Centocor exercised its option to purchase the limited partnership
interests of Centocor Partners III, L.P. ("CP III"), including those owned by
the Partnership. The Partnership is entitled to receive future quarterly
payments based on sales of ReoPro, a drug developed by CP III. The Partnership
accrued income from CP III of $1,750,000 and $1,460,000 for the three months
ended September 30, 1999 and 1998, respectively. For the nine months ended
September 30, 1999 and 1998, the Partnership received and/or accrued income from
CP III in the amount of $5,028,109 and $3,889,319 respectively.

      If the Projects produce any product for commercial sale, the Sponsor
Companies have had the option to enter into joint ventures or royalty agreements
with the Partnership to manufacture and market the products developed. In
addition, the Sponsor Companies have had the option to purchase the
Partnership's interest in the technology.

6. Income Taxes

      The Partnership is not subject to federal, state or local income taxes.
Accordingly, the individual Partners are required to report their distributive
shares of realized income and loss on their individual federal and state income
tax returns.

7. Legal Proceeding

      On July 12, 1995, the Partnership commenced a derivative action against
Centocor and Centocor Development Corporation III ("CDC III") in the Chancery
Court of Delaware (the "Court") arising from certain agreements entered into by
Centocor and Eli Lilly & Company ("Lilly") in July 1992. The Partnership's
complaint alleges, among other things that: at least $25 million of the $100
million paid by


                                       9
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(Note 7 Continued)

Lilly to Centocor represented profits from the sale of ReoPro, a Centocor drug,
that Centocor is required to share with CP III; and because of the Lilly
transaction, Centocor was required to increase the percentages of profits and
revenues from ReoPro that it pays to CP III investors. Centocor had taken the
position that only $500,000 of the $100 million had to be shared with CP III and
that Centocor had no obligation to increase the percentages of ReoPro profits
and revenues that it pays to CP III investors. The Partnership sought to proceed
on behalf of CP III. The complaint sought to require Centocor and CDC III to pay
damages to CP III and to increase the percentages of future ReoPro profits and
revenues that Centocor must pay to CP III and its investors.

      Centocor answered the Partnership's complaint, as well as a similar
complaint filed by John E. Abdo, another limited partner of CP III, denying the
material allegations of those complaints and asserting purported affirmative
defenses and third-party claims against PWG, PWDC and PWI.

      In April and July 1996, Mr. Abdo moved to amend his complaint to assert
claims on behalf of CP III against two of PWDC's nominees to the CDC III Board
of Directors. On July 12, 1996, counsel chosen by Centocor to represent CP III
moved to disqualify the Partnership from serving as a plaintiff in this action,
alleging that Mr. Abdo should be the sole plaintiff because the Partnership has
conflicts of interest with CP III and its other limited partners, including
conflicts arising out of the alleged claims against the PWDC nominees. Mr. Abdo
and Centocor also moved to disqualify the Partnership. In January 1997, the
Court granted, in part, Mr. Abdo's motion to amend his complaint to assert
claims against the PWDC nominees.

      In June 1997, the parties to the Partnership's action entered into an
agreement to settle the action. The agreement provides, among other things, for
Centocor to pay to CP III investors (including the Partnership, a former limited
partner in CP III) in the aggregate: $10.8 million, net of attorneys' fees and
expenses as may be awarded by the Court; an additional $5.0 million, if and when
cumulative world-wide sales of ReoPro exceed $600 million; and possible
additional payments totaling $2.2 million, depending upon regulatory
developments in Japan. The Partnership will only receive its allocable share of
these latter amounts if, and when, payments under the agreement are remitted by
Centocor.

     The agreement further provides for revisions to the ReoPro royalties
payable by Centocor to CP III investors through 2007. Under the agreement, those
royalties would be paid based on revenues from end-sales by Lilly and other
distributors, as opposed to Centocor's revenues on its sales to distributors.
For 1997 and 1998, Centocor would pay an aggregate of 6.5% of the first $175
million of United States end-sale revenues, 3.25% of such revenues above $175
million, and 3.25% of foreign end-sales revenues. For 1999 through 2007,
Centocor would pay an aggregate of 6.5% of the first $250 million of United
States end-sale revenues, 4% of such revenues above $250 million, and 3.25% of
foreign end-sales revenues. The agreement provides that investors will not
receive less than Centocor would otherwise have paid based on Centocor's sales
of ReoPro. As of September 30, 1999, the Partnership has not accrued income
related to the settlement.


                                       10
<PAGE>

                        PAINEWEBBER R&D PARTNERS II, L.P.
                        (a Delaware Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(Note 7 Continued)

     On June 27, 1997, the Court entered an order: preliminarily approving the
settlement; providing for notice to a class consisting of all holders of CP III
Class A and C limited partnership interests as of the close of business on
January 31, 1997, and all holders of CP III Class B limited partnership
interests as of the close of business on May 31, 1997, and their transferees,
successors, and assigns, other than defendants; and designating the
Partnership's counsel as counsel for the class.

     Mr. Abdo and Pharmaceutical Partners, L.P., another former limited partner
of CP III, objected to the proposed settlement. They asserted, among other
things, that the consideration is inadequate and that the proposed allocations
of the consideration among the classes of former limited partners of CP III
improperly favors the Partnership. On September 4, 1997, the Court held a
hearing on the objections and reserved decision. On March 15, 1999, the Court
issued a memorandum opinion and order overruling the objections and approving
the settlement as fair and reasonable.

     PWDC has been advancing the funds necessary to pay the Partnership's legal
fees and expenses relating to this litigation. On April 8, 1999, counsel for the
Partnership applied to the Court for an award of fees and expenses in the amount
of $1.5 million. On July 19, 1999, counsel for the objectors reduced their May
21, 1999 application for fees and expenses from $1.5 million to $0.9 million and
the parties agreed not to oppose the application. It is anticipated that: the
net proceeds of any recovery will be distributed to the limited partners of CP
III, including the Partnership, on a pro rata basis; the Partnership and/or its
counsel will reimburse PWDC; and any remaining Partnership proceeds will be
distributed to the Partners of the Partnership in accordance with the
distribution criteria outlined in Note 1.


                                       11
<PAGE>

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

Liquidity and Capital Resources

         Partners' capital decreased from $2.8 million at December 31, 1998, to
$1.8 million at September 30, 1999, resulting from the recognition of net income
of $6.5 million (as more fully explained in Results of Operations below) offset
by a cash distribution to the Partners of $7.5 million for the nine months ended
September 30, 1999.

         The Partnership's funds are invested in a money market fund until cash
is needed to pay for the ongoing management and administrative expenses of the
Partnership or upon the remittance of cash distributions to the Partners. Liquid
assets decreased from $1.4 million at December 31, 1998 to $0.1 million at
September 30, 1999 resulting from the sale of marketable securities held as of
December 31, 1998 and the distribution of the proceeds to the Partners.

Results of Operations

Three months ended September 30, 1999 compared to the three months ended
September 30, 1998:

         Net income (loss) for the quarters ended September 30, 1999 and 1998
was $1.4 million and $(0.2) million, respectively. The favorable change of $1.6
million resulted primarily from of an increase in revenues.

         Revenues for the three months ended September 30, 1999 and 1998 were
$1.5 million and $(0.2) million, respectively. The increase of $1.7 million was
due primarily to an increase of $0.3 million in income from product development
projects and a favorable change in unrealized depreciation of marketable
securities of $1.7 million offset by the recognition in 1999 of a loss from the
sale of marketable securities of $0.3 million. Income from product development
projects for the three months ended September 30, 1999 and 1998 was $1.8 million
and $1.5 million, respectively, resulting primarily from the Partnership's
accrual of income due as a former limited partner of CP III. Unrealized
depreciation of marketable securities for the three months ended September 30,
1998 was $1.7 million resulting from the Partnership's investment of 0.24
million shares of Cygnus. The market value of the shares decreased from $10.4375
per share as of June 30, 1998 to $3.50 per share at September 30, 1998. During
the quarter ended September 30, 1999, the Partnership sold its investment in
Cygnus (with a carrying value at June 30, 1999 of $3.1 million) for proceeds of
$2.8 million and recognized a loss of $0.3 million upon the sale.

         There were no material variances in expenses for the three months ended
September 30, 1999 as compared to the same period in 1998.


                                       12
<PAGE>

(Item 2 Continued)

Nine months ended September 30, 1999 compared to the nine months ended September
30, 1998:

         Net income for the nine months ended September 30, 1999 and 1998 was
$6.5 million and $1.1 million, respectively. The favorable variance of $5.4
million resulted primarily from an increase in revenues.

         Revenues for the nine months ended September 30, 1999 and 1998 were
$6.7 million and $1.2 million, respectively. The increase of $5.5 million
resulted from a favorable change in unrealized depreciation of marketable
securities of $3.9 million and the recognition in 1999 of a gain on sale of
marketable securities of $1.6 million. Unrealized depreciation of marketable
securities for the nine months ended September 30, 1998 was $3.9 million. The
market value of the Partnership's investment in 0.24 million shares of Cygnus
decreased from $19.875 per share as of December 31, 1997 to $3.50 per share as
September 30, 1998. In 1999 the Partnership sold its investment in Cygnus for
proceeds of $2.8 million. The carrying value as of December 31, 1998 was $1.2
million and, accordingly, the Partnership recognized a gain of $1.6 million.

         There were no material variances in expenses for the nine months ended
September 30, 1999 as compared to the same period in 1998.

Year 2000

         The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Calculations
performed with these abbreviated date fields may misinterpret the Year 2000 as
1900 resulting in erroneous calculations or program failures. Currently, the
Partnership utilizes computer programs, through services provided by a
third-party servicing agent, that can adversely affect the Partnership's
operations if they are not Year 2000 compliant. The servicing agent has informed
the Partnership that it has been executing a plan to modify or replace
significant applications as necessary to ensure Year 2000 compliance.
Programming changes and final testing were completed by June 30, 1999.
Conversion of databases was also completed by June 30, 1999. Incremental costs
associated with the development and implementation of the above plan have been,
and will continue to be, borne by the servicing agent. The status of the
Partnership's investments in Sponsor Companies could be adversely affected if
the computer systems of the Sponsor Companies are not Year 2000 compliant. Based
on the recent public disclosures of those Sponsor Companies in which the
Partnership has investments of value, the Sponsor Companies have stated that
they have undertaken programs to insure Year 2000 compliance. As of the dates of
disclosure, these Sponsor Companies have stated that they do not expect the Year
2000 Issue will adversely affect their future financial condition. However, they
cannot provide assurances that unanticipated problems and costs will not arise.


                                       13
<PAGE>

                            PART II OTHER INFORMATION

Item 1.  Legal Proceedings.

         Action Against Centocor, Inc. and Centocor Development Corporation III.

                  Information regarding this action was disclosed on the
         Partnership's Form 10-K for the year ended December 31, 1998 and Forms
         10-Q for the quarters ended March 31, 1999 and June 30, 1999. On July
         19, 1999, counsel for the objectors reduced their application for fees
         and expenses from $1,500,000 to $900,000 and the parties agreed not to
         oppose the application.

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

         a)    Exhibits:

               None

         b)    Reports on Form 8-K:

               None


                                       14
<PAGE>

                                   SIGNATURES


      Pursuant to the requirements of Section 13 or 15(d) 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, on this 15th day of
November 1999.

                  PAINEWEBBER R&D PARTNERS II, L.P.


                  By: PaineWebber Technologies II, L.P.
                      (General Partner)


                  By: PWDC Holding Company
                      (general partner of the General Partner)


                  By: /s/ Dhananjay M. Pai
                      ----------------------------------------
                      Dhananjay M. Pai
                      President*


                  By: /s/ Anthony M. DiIorio
                      ----------------------------------------
                      Anthony M. DiIorio
                      Principal Financial and Accounting Officer*

*  The capacities listed are with respect to PWDC Holding Company, the Manager,
   as well as PWDC, the parent company of the Manager.


                                       16