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 March 31, 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
                                 March 31, 1999


                                Table of Contents

PART I.      FINANCIAL INFORMATION                                       Page

Item 1.      Financial Statements

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

             Statements of Operations
             (unaudited) for the three months
             ended March 31, 1999 and 1998                                  3

             Statement of Changes in Partners' Capital
             (unaudited) for the three months
             ended March 31, 1999                                           3

             Statements of Cash Flows
             (unaudited) for the three months
             ended March 31, 1999 and 1998                                  4 

             Notes to Financial Statements
             (unaudited)                                                 5-10

Item 2.      Management's Discussion and Analysis of Financial          11-12
             Condition and Results of Operations

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings                                             13

Item 5.      Other Information                                             13

Item 6.      Exhibits and Reports on Form 8-K                              13

             Signatures                                                    14

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)

<TABLE>
<CAPTION>

                                                                       March 31,           December 31,
                                                                            1999                   1998
-------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>
Assets:

      Cash                                                    $            6,998    $             6,998

      Marketable securities, at market value                           2,061,482              1,433,536

      Royalty income receivable                                        1,487,679              1,425,514

                                                              ------------------    -------------------
Total assets                                                  $        3,556,159    $         2,866,048
                                                              ==================    ===================

Liabilities and partners' capital:

      Accrued liabilities                                     $          141,890    $            78,994

      Partners' capital                                                3,414,269              2,787,054

                                                              ------------------    -------------------
Total liabilities and partners' capital                       $        3,556,159    $         2,866,048
                                                              ==================    ===================

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

                                        2
<PAGE>

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

Statements of Operations
(unaudited)

<TABLE>
<CAPTION>

For the three months ended March 31,                                        1999                   1998
-------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>                
Revenues:
      Interest income                                         $            3,700    $             7,539
      Income from product development projects                         1,522,910              2,426,795
      Unrealized appreciation (depreciation) of            
        marketable securities                                            629,998               (810,000)
      Gain (loss) on sale of investments and marketable
        securities                                                                               (1,939)
                                                              ------------------    -------------------
                                                                       2,156,608              1,622,395
                                                              ------------------    -------------------
Expenses:
      General and administrative costs                                    69,823                 47,448
                                                              ------------------    -------------------

Net income                                                    $        2,086,785    $         1,574,947
                                                              ==================    ===================

Net income per partnership unit:

      Limited partners (based on 8,257 units)                 $           250.20    $            188.83
      General partner                                         $        20,867.85    $         15,749.47
-------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>

Statement of Changes in Partners' Capital
(unaudited)

<TABLE>
<CAPTION>
                                                                    Limited                General
For the three months ended March 31, 1999                           Partners               Partner                Total
----------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>                    <C>              
Balance at December 31, 1998                                  $        2,755,101    $            31,953    $       2,787,054

Net income                                                             2,065,917                 20,868            2,086,785
Cash distribution to partners                                         (1,444,975)               (14,595)          (1,459,570)
                                                              ------------------    -------------------    -----------------

Balance at March 31, 1999                                     $        3,376,043    $            38,226    $       3,414,269
                                                              ==================    ===================    =================
----------------------------------------------------------------------------------------------------------------------------
See notes to financial statements.
</TABLE>

                                        3
<PAGE>

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

Statements of Cash Flows
(unaudited)

<TABLE>
<CAPTION>

For the three months ended March 31,                                        1999                   1998
-------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>                

Cash flows from operating activities:
Net income                                                    $        2,086,785    $         1,574,947
Adjustments to reconcile net income to cash
  provided by operating activities:
Unrealized (apprectiation) depreciation of
  marketable securities                                                 (629,998)               810,000

Decrease (increase) in operating assets:
  Marketable securities                                                    2,052             (2,431,540)
  Royalty income receivable                                              (62,165)               (73,546)
  Other assets                                                                                   (8,067)

Increase (decrease) in operating liabilities:
  Due to product development project                                                            138,736
  Accrued liabilities                                                     62,896                (10,530)
                                                              ------------------    -------------------
Cash provided by operating activities                                  1,459,570                      -
                                                              ------------------    -------------------

Cash flows from financing activities:
  Distributions to partners                                           (1,459,570)                     -
                                                              ------------------    -------------------

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 three months ended
March 31, 1999 and 1998.
--------------------------------------------------------------------------------
See notes to financial statements.

                                        4
<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 March 31, 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 period ended
March 31, 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 report of the Partnership on Form 10-K
for the year ended December 31, 1998.

      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. The Partnership obtained warrants
to purchase the common stock of Sponsor Companies to provide additional capital
appreciation to the Partnership which was not directly dependent upon the
outcome of the Projects (see Note 5).

                                        5
<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 net
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
        March 31, 1999, Contribution Payout ranged from $14,875 per Unit to
        $18,050 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 March 31, 1999, the Partnership made cash
distributions totaling $1,459,570 ($175 per Unit; $14,595 to the General
Partner). At March 31, 1999, the Partnership has made cash and security
distributions, as valued on the dates of distribution, since inception of $3,507
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 March 31,
1999, the cumulative losses for the Partnership were $1,323 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 and common stock
which are recorded at market value. Marketable securities are not considered
cash equivalents for the Statements of Cash Flows.

                                        6
<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 invests 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:

<TABLE>
<CAPTION>
                                                      March 31, 1999                     December 31, 1998
                                            --------------------------------       -----------------------------
                                                Market                Cost             Market             Cost
                                                ------                ----             ------             ----
<S>                                         <C>                 <C>                <C>              <C>         
Money market fund                           $    261,482        $    261,482       $    263,534     $    263,534
Cygnus, Inc.
    (240,000 common shares)                    1,800,000           2,376,000          1,170,002        2,376,000
                                               ---------           ---------          ---------        ---------
                                            $  2,061,482        $  2,637,482       $  1,433,536     $  2,639,534
                                               =========           =========          =========        =========
</TABLE>

      The market value of Cygnus stock as of March 31, 1999, was $7.50 per share
as compared to a market value of $4.875 per share as of December 31, 1998.
Accordingly, the Partnership recognized unrealized appreciation on its Cygnus
shares of $629,998 for the three months ended March 31, 1999. The carrying value
of the shares as of December 31, 1997 was $19.875 per share. At March 31, 1998,
the market price per share was $16.50 and, accordingly, the Partnership
recognized unrealized depreciation for the three months ended March 31, 1998, of
$810,000.

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.

                                        7
<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

(Note 4 Continued)

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

      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

      Of the Partnership's ten original Projects, three are ongoing or have had
current activity: Centocor Partners III, L.P. ("CP III"); Genzyme Development
Partners, L.P.; and Synergen Clinical Partners, L.P. ("SCP").

      In January 1998, the class action against the general partner of 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 CP III, including those owned by the Partnership. The Partnership
received an initial payment and is entitled to receive future quarterly payments
based on sales of ReoPro, a drug developed by CP III. For the quarters ended
March 31, 1999 and 1998, the Partnership received and/or accrued income from CP
III in the amount of $1,487,679 and $1,170,000 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. In consideration for such purchase
options, the Partnership received warrants to purchase shares of common stock of
the Sponsor Companies. As of March 31, 1999, the Partnership held no warrants.

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.

                                        8
<PAGE>

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

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

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 Lilly to Centocor represents 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 seeks 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. The Court has not ruled on the motions to
disqualify.

      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 March 31, 1999, the Partnership has not accrued income
related to the settlement.

                                        9
<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, and may continue to advance, the funds necessary
to pay the Partnership's legal fees and expenses relating to this litigation. In
the event of a recovery on behalf of CP III, the Court may award legal fees and
expenses to the Partnership's counsel to be paid out of the CP III recovery.
Counsel for the Partnership has applied to the Court for an award of fees and
expenses in the amount of $1.5 million. Counsel for the objectors has stated
that they intend to object to that application, and to apply themselves for an
award of fees and expenses. 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.

                                       10
<PAGE>

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

Liquidity and Capital Resources

      Partners' capital increased from $2.8 million at December 31, 1998, to
$3.4 million at March 31, 1999, resulting from the recognition of net income of
$2.1 million offset by a cash distribution to the Partners of $1.5 million for
the three months ended March 31, 1999.

      The Partnership's funds are invested in a money market fund and marketable
securities 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 increased from $1.4 million at
December 31, 1998 to $2.1 million at March 31, 1999 resulting from an increase
in the market value of securities held as of these dates.

Results of Operations

      Three months ended March 31, 1999 compared to the three months ended March
31, 1998:

      Net income for the quarters ended March 31, 1999 and 1998 was $2.1 million
and $1.6 million, respectively. The favorable change of $0.5 million was a
result of an increase in revenues of this amount.

      Revenues for the three months ended March 31, 1999 and 1998 were $2.1
million and $1.6 million, respectively. The increase of $0.5 million was due
primarily to a decrease of $0.9 million in income from product development
projects offset by a favorable change in unrealized appreciation (depreciation)
of marketable securities of $1.4 million. Income from product development
projects for the three months ended March 31, 1999 and 1998 was $1.5 million and
$2.4 million, respectively. On January 31, 1997, Centocor exercised its option
to purchase the limited partnership interests of CP III (including those owned
by the Partnership) for an initial payment and the right to receive quarterly
future payments based upon sales of certain products developed by CP III. The
Partnership received and/or accrued income due from CP III of $1.2 million for
the three months ended March 31, 1998. Also during this period, the Partnership
recognized income from its former investment in SCP in the amount of $1.2
million representing its share of the initial settlement payment received as a
Class A limited partner of SCP. For the three months ended March 31, 1999, the
Partnership received and/or accrued income due in connection with its former
investment in CP III of $1.5 million. Unrealized appreciation (depreciation) of
marketable securities for the three months ended March 31, 1999 and 1998 was
$0.6 million and $(0.8) million, respectively, resulting from the Partnership's
investment of 0.24 million shares of Cygnus. The market value of the shares
increased from $4.875 per share as of December 31, 1998 to $7.50 per share at
March 31, 1999. At March 31, 1998, the market value of the shares was $16.50 per
share as compared to $19.875 per share at December 31, 1997.

      There were no material variances in expenses for the three months ended
March 31, 1999 as compared to the same period in 1998.

                                       11
<PAGE>

(Item 2 Continued)

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 is executing a plan to modify or replace significant
applications as necessary to ensure Year 2000 compliance. Programming changes
and initial testing are in progress and expected to be completed by year-end.
Final testing is expected to be completed by June 1999. Conversion of client
databases will commence in May 1999. The servicing agent has not quantified the
extent to which their plan has been completed to date. 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 most recent available 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 effect their future financial
condition. However, they cannot provide assurances that unanticipated problems
and costs will not arise. To date, the Partnership has no contingency plan in
place but intends to evaluate the status of the Year 2000 Issue with third
parties in June 1999 to determine whether such a plan is necessary.

                                       12
<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. On 
           March 15, 1999, the Court issued a memorandum opinion and order
           overruling the objections and approving the proposed settlement in
           the derivative action against Centocor and CDC III as fair and
           reasonable.

Item 5.         On February 8, 1999, SkyRise Investors LLC commenced an offer to
           purchase (the "Offer") up to 4.9% of the total Units (404 Units) of
           the Partnership at a cash price of $2,200 per Unit subject to
           reduction for certain distributions and expenses. The Offer expired
           on March 5, 1999 with approximately 0.4% of the total Units being
           tendered. On March 3, 1999, PharmaInvest, L.L.C., on behalf of
           Pharmaceutical Royalties, L.L.C. and Pharmaceutical Royalty
           Investments Ltd. (collectively, the "Purchasers") commenced a tender
           offer to purchase (the "Tender Offer") up to 3,000 Units of the
           Partnership at a cash price per Unit of $6,000 subject to reduction
           for certain distributions. The Tender Offer expired on March 31,
           1999. Prior to the Tender Offer the Purchasers and their affiliates
           owned 18.2% of the Units. Pursuant to information currently available
           to the Partnership it has been determined that following the Tender
           Offer the Purchasers and their affiliates will own less than 50% of
           the total Units.

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

           a)    Exhibits:

                 None

           b)    Reports on Form 8-K:

                 None

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<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 17th day of
May 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.

                                       14