UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(MARK ONE)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                                       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 1-10451

                          NORTH AMERICAN VACCINE, INC.
             (Exact name of registrant as specified in its charter)

   CANADA                                       98-0121241
   (State or other jurisdiction of              (IRS Employer
   incorporation or organization)               Identification No.)

12103 INDIAN CREEK COURT, BELTSVILLE, MARYLAND                     20705
----------------------------------------------                     -----
  (Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:  (301) 419-8400


(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

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

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

COMMON  STOCK,  NO PAR VALUE,  OUTSTANDING  AS OF NOVEMBER 5, 1997 -- 31,714,212
SHARES



<PAGE>



                                TABLE OF CONTENTS



                                                                    PAGE NUMBER
PART I.  FINANCIAL INFORMATION

Item 1.    Financial Statements........................................   3

           Consolidated Balance Sheets.................................   4

           Consolidated Statements of Operations.......................   5

           Consolidated Statement of Shareholders' Equity..............   6

           Consolidated Statements of Cash Flows.......................   7

           Notes to Condensed Consolidated Financial Statements........   9

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

Item 3.    Quantitative and Qualitative Disclosures About 
           Market Risk.................................................  21

PART II.   OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K............................  22


SIGNATURES ............................................................  23


                                        2

<PAGE>



                          PART I. FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

The following unaudited,  condensed  consolidated  financial statements of North
American  Vaccine,  Inc. and Subsidiaries  (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and,  therefore,  omit or condense
certain  footnotes  and  other   information   normally  included  in  financial
statements prepared in accordance with generally accepted accounting principles.
This report should be read in  conjunction  with the Company's  Annual Report on
Form 10-K  filed  for the year  ended  December  31,  1996.  In the  opinion  of
management,  all adjustments  (consisting only of normal recurring  adjustments)
necessary for a fair  presentation of the financial  information for the interim
periods  reported have been made.  Results of operations  for the three and nine
months ended  September  30, 1997,  will not  necessarily  be  indicative of the
results for the entire fiscal year ending December 31, 1997.























                                        3

<PAGE>



NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>

                                                        SEPTEMBER 30,    DECEMBER 31,
                                                            1997             1996
                                                        -------------  --------------
                                                         (UNAUDITED)
<S>                                                       <C>             <C>       
ASSETS                                                  
------
CURRENT ASSETS:
  Cash and cash equivalents                               $   55,917      $   70,881
  Accounts receivable                                            468           4,166
  Inventory                                                    2,423           1,782
  Prepaid expenses and other current assets                      806             533
                                                          ----------      ----------
          Total current assets                                59,614          77,362

Property, plant and equipment, net                            34,254          40,629
Investment in affiliate, at market                             1,492           1,281
Deferred financing costs, net                                  2,807           3,184
Other assets                                                     516             506
                                                          ----------      ----------
     TOTAL ASSETS                                         $   98,683      $  122,962
                                                          ==========      ==========

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
----------------------------------------------
CURRENT LIABILITIES:
  Accounts payable                                        $    1,990      $    1,912
  Deferred revenue                                             4,290           3,000
  Obligation under capital lease, current portion              1,608           1,496
  Other current liabilities                                    6,714           4,540
                                                          ----------      ----------
         Total current liabilities                            14,602          10,948
                                                              

6.50% Convertible subordinated notes, due May 1, 2003         86,250          86,250
                                                             
Obligation under capital lease, net of current portion         4,651           5,871
Deferred rent credit, net of current portion                      38             114
                                                          ----------      ----------
     Total liabilities                                       105,541         103,183
                                                             

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' (DEFICIT) EQUITY:
  Preferred stock, no par value; unlimited shares
     authorized-
       Series A, convertible; issued and outstanding
       2,000,000 shares; entitled to Can $2.50 per 
       share in liquidation                                    6,538           6,538
  Common stock, no par value; unlimited shares
   authorized; issued 31,635,780 shares at 
   September 30, 1997 and 31,406,999 shares at
   December 31, 1996                                           75,264         71,357
  Unrealized investment holding gain                              864            653
  Accumulated deficit                                         (89,524)       (58,769)
                                                          -----------     ----------
         Total shareholders' (deficit) equity                  (6,858)        19,779
                                                          -----------     ----------                  
                                                        
     TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)        $    98,683     $  122,962
     EQUITY                                               ===========     ==========    
</TABLE>


The accompanying notes are an integral part of these condensed consolidated 
financial statements.

                                       4
<PAGE>


NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
                                                   THREE MONTHS              NINE MONTHS
                                                     ENDED                      ENDED
                                                   SEPTEMBER 30,              SEPTEMBER 30,
                                              1997          1996          1997         1996
                                           -----------  -------------  -----------  -----------
<S>                                         <C>           <C>          <C>          <C>
 REVENUES:
      Product sales                          $    465    $     -      $     1,378   $      727
      Marketing, research and development
        agreements                              6,485          -            7,710           -
                                             --------    --------     -----------   ----------
           Total revenues                       6,950          -            9,088          727
                                             --------    --------     -----------   ----------

 OPERATING EXPENSES:
     Production                                 5,234       4,058          13,868       10,754
     Research and development                   4,931       2,560          14,446        8,126
     General and administrative                 3,239       1,599           8,941        4,826
                                             --------    --------     -----------   ----------
           Total  operating expenses           13,404       8,217          37,255       23,706
                                             --------    --------     -----------   ----------

 OPERATING LOSS                                (6,454)     (8,217)        (28,167)     (22,979)

 OTHER INCOME (EXPENSES):
     Gain on sale of investment in
     affiliate                                      -          -              -          4,228
     Interest and dividend income                 739       1,075           2,489        1,917
     Interest expense                          (1,685)     (1,531)         (5,077)      (2,456)
                                            ----------   --------     -----------    ---------

 NET LOSS                                   $  (7,400)   $ (8,673)    $   (30,755)  $  (19,290)
                                            ==========   ========     ===========   ==========

 NET LOSS PER SHARE                         $   (0.23)   $  (0.28)    $     (0.97)  $    (0.63)
                                                                    

 WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
      OUTSTANDING                              31,627      30,769          31,604       30,600

</TABLE>


The accompanying notes are are integral part of these condensed consolidated
financial statements.


                                       5

<PAGE>



NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIT) EQUITY
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                               
                                       SERIES A                            UNREALIZED             TOTAL        
                                      CONVERTIBLE                            INVEST-              SHARE        
                                    PREFERRED STOCK      COMMON STOCK         MENT     ACCUMU-   HOLDERS'      
                                   ------------------ --------------------  HOLDING     LATED    EQUITY        
                                   SHARES    AMOUNT    SHARES    AMOUNT      GAINS     DEFICIT  (DEFICIT)      
                                   --------  -------- --------  ---------- ---------- --------  ----------     
<S>                                <C>     <C>       <C>        <C>        <C>        <C>        <C>          
Balance, December 31, 1996         2,000   $ 6,538     31,407   $ 71,357   $  653     $(58,769)  $ 19,779     
                                                                                                               
Exercises of stock options             -         -        221      2,421        -            -      2,421     
Shares issued under                                                                                            
 401(k) plan                           -         -          8        173        -            -        173     
Stock option compensation              -         -          -      1,313        -            -      1,313     
Increase in market value                                                                                                          
  of investment                        -         -          -          -      211            -        211     
Net loss                               -         -          -          -        -      (30,755)   (30,755)     
                                  ------   -------    -------   --------   ------     --------   --------    
Balance, September 30, 1997        2,000   $ 6,538     31,636   $ 75,264   $  864     $(89,524)  $ (6,858)     
                                  ======   =======    =======   ========   ======     ========   ========    
                                   
</TABLE>

The accompanying notes are an integral part of these condensed financial 
statements.

                                       6
<PAGE>


NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
                                                               NINE MONTHS
                                                                  ENDED
                                                              SEPTEMBER 30,
                                                           1997           1996
                                                        ------------ -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                             $ (30,755)   $ (19,290)
                                                         
    Adjustments to reconcile net loss 
    to net cash used in operating activities:
          Gain on sale of investment in affiliate                -       (4,228)
          Loss on disposal of equipment                          -          (15)
          Depreciation and amortization                      8,211        3,697
          Amortization of deferred financing costs             377          210
          Contribution of common stock to 401(k) plan          173          131
          Stock option compensation                          1,313            -
          (Increase) Decrease  in other assets                 (10)          24
          Decrease in deferred rent                            (67)         (60)
          Cash flows provided by other working capital       6,317        1,735
                                                         ---------    ---------
              Net cash  used in operating activities       (14,441)     (17,796)
                                                         ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                    (1,836)      (3,345)
    Proceeds from sale of investment in affiliate                -        5,199 
    Proceeds from sale of equipment                              -           15 
                                                         ---------    ---------
       Net cash (used in) provided by investing 
       activities                                           (1,836)       1,869
                                                         ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from issuance of convertible notes                  -       86,250
    Deferred financing costs of convertible notes                -       (3,519)
    Proceeds from exercises of stock options                 2,421        4,634
    Principal payments on capital lease obligation          (1,108)           -
                                                         ---------    ---------
            Net cash provided by financing                   1,313       87,365
                                                         ---------    ---------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS       (14,964)      71,438
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD              70,881       10,443
                                                         ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                 $  55,917    $  81,881
                                                         =========    =========

The accompanying notes are an integral part of these condensed financial 
statements.


                                       7
<PAGE>


NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
                                                              NINE MONTHS
                                                                 ENDED
                                                             SEPTEMBER 30,
                                                         1997           1996
                                                     ------------  -------------

CASH FLOWS PROVIDED BY OTHER WORKING CAPITAL ITEMS:

    Decrease (increase) in :
          Accounts receivable                         $   3,698      $   2,000
          Inventory                                        (641)          (915)
          Prepaid expenses and other current assets        (273)           (28)

    Increase (decrease) in:                                 
          Accounts payable                                   78         (1,816)
          Other current liabilities                       3,455          2,494
                                                      ---------      ---------
    Net cash provided by other working capital items  $   6,317      $   1,735
                                                      =========      =========



 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 Cash paid for interest                               $   3,308      $       9
                                                      =========      =========



The accompanying notes are an integral part of these condensed financial 
statements.



                                       8

<PAGE>




                  NORTH AMERICAN VACCINE, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.  BUSINESS

The Company is engaged in the  research,  development,  production,  and sale of
vaccines for the  prevention of infectious  diseases in children and adults.  In
1996,   regulatory   approval  of  the  Company's  acellular  pertussis  vaccine
formulated  as a DTaP  vaccine for the  prevention  of  diphtheria,  tetanus and
pertussis  (whooping cough) was granted in Sweden, and regulatory  approval of a
combined  DTaP-IPV  (polio)  vaccine was granted in Denmark.  In April 1997, the
Medical Products Agency of Sweden granted regulatory  approval for the Company's
monovalent  acellular  pertussis  (aP)  vaccine to vaccinate  children,  thereby
expanding the market for the Company's aP vaccine.  The Company has not received
approval  from  the  U.S.  Food and Drug  Administration  ("FDA")  or any  other
regulatory  authority  to  market  its DTaP  vaccine  or any  other  product  in
development.

2.  SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF  ACCOUNTING  AND  CURRENCY.  The Company is a Canadian  corporation
incorporated under the Canadian Business Corporations Act ("CBCA") on August 31,
1989. The accompanying  consolidated  financial statements have been prepared in
accordance with generally accepted accounting  principles ("GAAP") in the United
States and are  denominated in U.S.  dollars,  because the Company  conducts the
majority of its transactions in this currency.  The application of Canadian GAAP
would  not  result  in  material  adjustments  to  the  accompanying   financial
statements  except for the impact of the  adoption  of  Statement  of  Financial
Accounting   Standards   ("SFAS")  No.  115.  The  effect  of  foreign  currency
translation has been immaterial.

(B)  PERVASIVENESS  OF ESTIMATES.  The  preparation  of financial  statements in
conformity with GAAP requires  management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from estimates.

(C) REVENUE RECOGNITION.  Nonrefundable fees or milestone payments in connection
with research and  development or  collaborative  agreements are recognized when
they are earned in accordance with the applicable  performance  requirements and
contract  terms.  Revenue from product sales is recognized  when all significant
risks of ownership  have been  transferred,  the amount of the selling  price is
fixed and  determinable,  all significant  related acts of performance have been
completed,  and no other significant  uncertainties  exist. In most cases, these
criteria are met when the goods are shipped.


                                        9

<PAGE>



(d) NET LOSS PER SHARE.  Net loss per share is computed on the  weighted-average
number of common shares outstanding for the respective periods. All common stock
equivalents are excluded as they are antidilutive.  Fully diluted loss per share
is not presented as it would not materially differ from primary loss per share.

In 1997,  the  Financial  Accounting  Standards  Board  released  SFAS No.  128,
"Earnings  Per Share."  SFAS No. 128  requires  dual  presentation  of basic and
diluted  earnings per share on the face of the income  statement for all periods
presented.  Basic  earnings  per share  excludes  dilution  and is  computed  by
dividing income available to common stockholders by the weighted-average  number
of common shares  outstanding  for the period.  Basic earnings per share differs
from primary earnings per share pursuant to Accounting  Principles  Bulletin No.
15 ("APB 15"), which may include  dilution related to common stock  equivalents.
Diluted  earnings per share reflects the potential  dilution that could occur if
securities or other  contracts to issue common stock were exercised or converted
into common  stock or resulted in the  issuance of common stock that then shared
in the earnings of the entity.  Diluted earnings per share is computed similarly
to fully  diluted  earnings  per  share  pursuant  to APB 15.  SFAS  No.  128 is
effective  for  reporting  periods  ending after  December  15,  1997,  and when
adopted,  it will require  restatement  of prior periods  earnings per share for
those reported periods preceding December 15, 1997.

Since the effect of outstanding options,  convertible notes, and preferred stock
is antidilutive,  they have been excluded from the Company's  computation of net
loss per share. Accordingly,  management does not believe that SFAS No. 128 will
have an impact upon historical net loss per share as reported.

3.  INVENTORIES

Inventories  are stated at the lower of cost  (first-in,  first-out)  or market.
Components  of  inventory  cost  include  materials,  labor,  and  manufacturing
overhead.  Production  costs  attributable  to  a  product  are  expensed  until
regulatory  approval is obtained for such  product.  Inventories  consist of the
following:

                                       September 30,      December 31,
                                          1997               1996
                                          ----               ----
                                               (in thousands)
   Raw materials                        $ 2,282             $1,518
   Work-in-process                          -                  162
   Finished goods                           141                102
                                        -------             ------
        Total                           $ 2,423             $1,782
                                        =======             ======








                                       10

<PAGE>



4.  OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following components:

                                                 September 30,    December 31,
                                                      1997            1996
                                                      ----            ----
                                                         (in thousands)
Payroll and fringe benefits                       $  1,868          $ 1,114
Accrued interest payable                             2,391              999
Reserve for contract loss                              720              720
Accrued taxes                                          608              608
Accrued costs of clinical trials                       276              421
Accrued construction costs                             180              192
Accrued consulting and professional fees               216              144
Deferred rent credit                                   104               95
Other accrued liabilities                              351              247
                                                  --------          -------
     Total other current liabilities              $  6,714          $ 4,540
                                                  ========          =======


5.  SHAREHOLDERS' EQUITY

In March  1997,  the  Company  extended  the  expiration  date for an  option to
purchase  150,000  shares of common  stock at an exercise  price of $11.13.  The
Company recognized as compensation  expense in the quarter ended March 31, 1997,
the excess of the fair market value of the Company's common stock as of the date
of the option extension over the exercise price of $11.13 per share.



                                       11

<PAGE>



ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

              THE FOLLOWING PARAGRAPHS IN THIS FORM 10-Q CONTAIN CERTAIN FORWARD
LOOKING  STATEMENTS,  WHICH ARE WITHIN THE  MEANING OF AND MADE  PURSUANT TO THE
SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES  LITIGATION REFORM ACT OF 1995.
THESE FORWARD LOOKING STATEMENTS INCLUDE,  WITHOUT  LIMITATION,  THOSE REGARDING
THE  PROSPECTS  FOR  REGULATORY  APPROVAL,   THE  PROSPECTS  FOR  MARKETING  AND
DISTRIBUTION OF VACCINE PRODUCTS, THE PROSPECTS FOR AND FACTORS AFFECTING FUTURE
REVENUES AND PROFITABILITY,  FUTURE COMPLIANCE WITH FINANCIAL  COVENANTS UNDER A
DEBT  OBLIGATION,  LIKELIHOOD OF ADDITIONAL  FUNDING UNDER  LICENSE,  MARKETING,
DISTRIBUTION  AND/OR  DEVELOPMENT  AGREEMENTS,   CASH  REQUIREMENTS  FOR  FUTURE
OPERATIONS,  AND PROJECTED  CAPITAL  EXPENDITURES.  READERS ARE  CAUTIONED  THAT
FORWARD LOOKING  STATEMENTS INVOLVE RISKS,  UNCERTAINTIES,  AND FACTORS THAT MAY
AFFECT THE COMPANY'S BUSINESS AND PROSPECTS,  INCLUDING WITHOUT LIMITATION THOSE
DESCRIBED  BELOW AS WELL AS THE  RISKS  ASSOCIATED  WITH:  OBTAINING  REGULATORY
APPROVAL OF PRODUCTS BY REGULATORY AGENCIES INCLUDING THE FDA; THE PRODUCTION OF
VACCINES; THE NATURE OF COMPETITION; NEED FOR EFFECTIVE MARKETING; DEPENDENCE ON
SUPPLIERS,  INCLUDING  STATENS  SERUMINSTITUT;  AND  UNCERTAINTIES  RELATING  TO
CLINICAL  TRIALS,  ALL AS  DISCUSSED  IN THE  COMPANY'S  FILINGS  WITH  THE U.S.
SECURITIES AND EXCHANGE COMMISSION ("SEC"),  INCLUDING THE 1996 ANNUAL REPORT ON
FORM 10-K, TO WHICH THE READER'S ATTENTION IS DIRECTED.

BACKGROUND

              The Company is engaged in the research,  development,  production,
and sale of vaccines for the  prevention of infectious  diseases in children and
adults.

              In  February  1996,   the  Swedish   Ministry  of  Health  granted
regulatory   approval  to  market  the  Company's  acellular  pertussis  vaccine
formulated as a combined DTaP vaccine for the prevention of diphtheria, tetanus,
and pertussis  (whooping  cough).  This  marketing  authorization  was the first
regulatory  approval  for any of the  Company's  products.  In April  1997,  the
Swedish  Ministry  of  Health  granted  regulatory  approval  for the  Company's
monovalent  acellular  pertussis  (aP)  vaccine to vaccinate  children,  thereby
expanding  the market for the  Company's  aP vaccine.  In  addition,  the Danish
National  Board of Health  granted  regulatory  approval in September  1996 of a
combined  DTaP-IPV (polio) vaccine for all primary and booster doses for infants
and  children in Denmark.  This  combination  vaccine,  which  combines the DTaP
vaccine with an enhanced,  inactivated  polio  vaccine  ("IPV"),  was  developed
jointly by Statens Seruminstitut ("SSI") and the Company.

              Under supply  agreements,  the Company  manufactures the acellular
pertussis  component,  and SSI  manufactures  the  diphtheria,  tetanus  and IPV
components  for the DTaP  and  DTaP-IPV  vaccines.  SSI is  responsible  for the
marketing  and   distribution  of  the  DTaP  and  DTaP-  IPV  products  in  the
Scandinavian,  Baltic  and other  countries  comprising  its  territory  ("SSI's
Territory").  Accordingly,  the Company has been selling its acellular pertussis
toxoid to SSI for  formulation  into DTaP and  DTaP-IPV  for sale in Sweden  and


                                       12

<PAGE>



Denmark,  respectively.  In  addition,  during the fourth  quarter of 1996,  the
Company  executed  a supply  and  distribution  agreement  with  Chiron  Behring
("Chiron  Behring") covering the Company's DTaP and DTaP-IPV vaccines in Germany
and Austria ("Chiron Behring's Territory").

              In 1995,  1996 and 1997,  the Company has  recognized  development
revenues  pursuant to  agreements  with  Pasteur-Merieux  Serums et  Vaccins,  a
wholly-owned  subsidiary  of  Rhone-Poulenc,  which  operates  in North  America
through its subsidiary  Connaught  Laboratories  ("Pasteur Merieux  Connaught"),
under which the Company and Pasteur  Merieux  Connaught will jointly develop the
Company's  meningococcus  B vaccine.  Additional  funding may be provided to the
Company by Pasteur Merieux Connaught under the terms of the license and clinical
development agreements. See "Outlook," below.

              In the fourth quarter of 1996, the Company and Abbott Laboratories
("Abbott") signed an agreement under which Abbott would market CERTIVA(TM),  the
Company's DTaP vaccine,  when approved by the FDA. The marketing  agreement also
will allow Abbott to market the Company's DTaP-HIB  (Haemophilus  influenza type
b), DTaP-IPV and DTaP-IPV-HIB combination vaccines, which are under development.
Abbott  will  market  CERTIVA(TM)  and  the  combination   vaccines  to  private
physicians  and managed care markets in the United  States for  immunization  of
infants and children.  The Company will market  CERTIVA(TM)  and the combination
vaccines to government  purchasers,  including state governments and the Centers
for Disease Control and Prevention ("CDC").

              The  Company  and  Abbott  will   collaborate   in  the   clinical
development of the combination vaccines and Abbott is providing the Company with
clinical  development  funding.  In addition,  the Company will receive payments
upon achievement of prescribed  milestones.  The first milestone  relates to FDA
approval of CERTIVA(TM)  provided  certain other  conditions  are satisfied.  In
September 1995, the Company filed a product license application with the FDA for
approval  to market  CERTIVA(TM)  and FDA  approval  for the vaccine is pending.
Following  FDA  approval,  the Company will receive  revenues  from Abbott as it
purchases  CERTIVA(TM)  and the combination  vaccine  products for resale to the
private pediatric market. See "Outlook," below.

              In  November  1996,  the  Company  acquired a 35,000  square  foot
manufacturing  facility in Beltsville,  Maryland.  That acquisition included the
purchase and lease of equipment and leasehold improvements and the assumption of
real estate leases.  The total  acquisition cost for the equipment and leasehold
improvements was approximately  $24.9 million,  which included a cash payment of
$17.2 million.  The balance of $7.7 million is represented by an equipment lease
obligation  accounted for as a capital lease,  which expires in 2000.  Under the
equipment  lease  agreement  there are  financial  covenants  that  obligate the
Company to maintain  certain  minimum cash and  investment  balances,  a minimum
tangible net worth (defined to include amounts under the outstanding convertible
subordinated  notes) and certain other  financial  ratios.  The Company would be
required to post an irrevocable  letter of credit for  predetermined  amounts at
such  time as the  Company  is not in  compliance  with any of  these  financial
covenants.  The Company  believes  that it can  maintain  compliance  with these


                                       13

<PAGE>



financial  covenants  through  the  first  half of 1998,  although  there are no
assurances in this regard.  This is a forward looking  statement and the factors
that affect the Company's  ability to maintain  compliance  with these financial
covenants  include,  among other things, the Company's ability to control costs,
manage its cash  resources  and the  magnitude  and timing of product  sales and
payments from license,  marketing,  distribution and development agreements.  In
addition,  the  Company  has  assumed  the real  estate  leases  underlying  the
facility,  which are scheduled to expire in February  2001,  but may be extended
through 2011.

              The Company had 259 and 196  full-time  employees  as of September
30, 1997 and 1996, respectively.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

              In 1997, the Company  recognized  $465,000 in revenue from product
sales to SSI and $6.5  million  under  collaborative  agreements.  Revenue  from
collaboration  agreements  consists of $6 million milestone payment from Pasteur
Merieux  Connaught  under the license and  development  agreements  covering the
Company's  meningococcal  B  vaccine,  with  the  balance  representing  revenue
attributable to development funding under the Company's agreement with Abbott.

              Production  expenses  were $5.2  million in 1997  compared to $4.1
million in 1996.  The increase in these  expenses in 1997 is due to increases in
labor,  materials,  and facilities  operating costs as the Company  prepares for
regulatory  approval of CERTIVA(TM) in the United States.  The increase in labor
cost is  attributable  primarily  to an  increase  in the  number of  employees.
Production  costs  attributable  to a  product  are  expensed  until  regulatory
approval is obtained for such product.

              Research  and  development  expenses  increased to $4.9 million in
1997 from $2.6 million in 1996. The increase is attributable primarily to higher
depreciation  and operating costs of the Company's newly acquired  facility and,
to a lesser extent, labor as a result of an increase in the number of employees.
These  increases  were  offset in part by lower  clinical  testing  and  related
expenses.

              General and  administrative  expenses were $3.2 million in 1997 as
compared to $1.6 million in 1996.  The increase is primarily due to a technology
license fee payment and to a lesser extent professional service costs and higher
labor as a result of an increase in the number of employees.

              Interest  and dividend  income  decreased to $739,000 in 1997 from
$1.1 million in 1996. This reduction is due primarily to a change in the average
cash balance.

              Interest  expense  increased  to $1.7  million  in 1997  from $1.5
million in 1996. The increase is due primarily to an equipment  lease  accounted
for as a capital lease.


                                       14

<PAGE>



              The factors cited above  resulted in a net loss of $7.4 million or
$0.23 per share in 1997 as compared  to a net loss of $8.7  million or $0.28 per
share in 1996. The weighted-average number of common shares outstanding was 31.6
million for 1997  compared to 30.8 million for 1996.  The increase in the number
of  weighted-average  shares  outstanding  for  1997  as  compared  to  1996  is
attributable  primarily to the exercise of stock options and the sale of 350,000
shares of the Company's Common Stock to Abbott in the fourth quarter of 1996.

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

              In 1997,  the  Company  recognized  $1.4  million in revenue  from
product sales to SSI and $7.7 million under  collaborative  agreements.  Revenue
from  collaboration  agreements  consists of $6 million  milestone  payment from
Pasteur Merieux Connaught under the license and development  agreements covering
the Company's  meningococcal B vaccine,  with the balance  representing  revenue
attributable to development  funding under the Company's  agreement with Abbott.
Revenue in 1996 is from product sales to SSI.

              Production  expenses  were $13.9 million in 1997 compared to $10.8
million in 1996.  The increase in these  expenses in 1997 is due to increases in
materials,  labor,  and facilities  operating costs as the Company  prepares for
regulatory  approval of CERTIVA(TM) in the United States.  The increase in labor
cost is  attributable  primarily  to an  increase  in the  number of  employees.
Production  costs  attributable  to a  product  are  expensed  until  regulatory
approval is obtained for such product.

              Research and  development  expenses  increased to $14.4 million in
1997 from $8.1 million in 1996. The increase is attributable primarily to higher
depreciation  and operating costs of the Company's newly acquired  facility and,
to a lesser extent, labor and supplies, as a result of an increase in the number
of employees.  These increases were offset in part by lower clinical testing and
related expenses.

              General and  administrative  expenses were $8.9 million in 1997 as
compared to $4.8 million in 1996.  Approximately half of this increase is due to
the combined effect of the recognition of non-cash  compensation  expense in the
amount of  approximately  $1.3 million,  related to the extension of the term of
one expiring stock option and to a one-time technology license fee payment.  The
remaining  increase  is  attributable  to higher  labor  costs as a result of an
increase in the number of employees and professional service costs.

              In the first quarter of 1996,  the Company sold 193,084  shares of
its investment in common stock of IVAX  Corporation  ("IVAX"),  which  generated
proceeds of approximately $5.2 million, and a realized gain of $4.2 million.

              Interest  and  dividend  income  increased to $2.5 million in 1997
from  $1.9 in 1996.  This  increase  is due  primarily  to higher  average  cash


                                       15

<PAGE>



balances as a result of the placement of $86.25 million convertible subordinated
notes in May 1996. See "Liquidity and Capital Resources," below.

              Interest  expense  increased  to $5.1  million  in 1997  from $2.5
million in 1996 due to the Company's interest  obligations under the convertible
subordinated notes and an equipment lease accounted for as a capital lease.

              The factors cited above resulted in a net loss of $30.8 million or
$0.97 per share in 1997 as compared to a net loss of $19.3  million or $0.63 per
share in 1996.  Without  the  effect  of the  non-cash  expense  related  to the
extension  of an  expiring  stock  option,  the net loss in 1997 would have been
$29.4  million or $0.93 per share.  Without the $4.2 million gain on the sale of
investment  securities,  the net loss per share for 1996 would have been  $0.77.
The  weighted-average  number of common shares  outstanding was 31.6 million for
1997  compared  to  30.6  million  for  1996.  The  increase  in the  number  of
weighted-average shares outstanding for 1997 as compared to 1996 is attributable
primarily to the exercise of stock options and the sale of 350,000 shares of the
Company's Common Stock to Abbott in the fourth quarter of 1996.

LIQUIDITY AND CAPITAL RESOURCES

              In  May  1996,   the  Company   completed  an  offering  of  6.50%
convertible subordinated notes in the principal amount of $86.25 million due May
1, 2003. The net proceeds from this offering were  approximately  $82.7 million.
Interest on the notes is payable semiannually on May 1 and November 1 each year.
The notes are  convertible  into shares of the Company's  Common  Stock,  at the
initial  conversion price of approximately  $24.86 per share. The notes also are
subordinated  to present and future senior  indebtedness of the Company and will
not  restrict  the  incurrence  of future  senior or other  indebtedness  by the
Company.  The notes are  redeemable,  in whole or in part,  at the option of the
Company on or after May 1, 1999 at certain  pre-established  redemption  prices,
plus  accrued  interest.  Upon a change in  control,  the Company is required to
offer to purchase all or part of the notes then  outstanding at a purchase price
equal to 100% of the principal  amount  thereof,  plus interest.  The repurchase
price is  payable  in cash or, at the  option of the  Company,  in shares of the
Company's Common Stock. The Company has filed a registration  statement with the
U.S.  Securities  and Exchange  Commission,  which has been declared  effective,
registering resales of the notes and the underlying shares of Common Stock.

              The Company's cash  requirement for operations was $9.8 million in
the third quarter of 1997 as compared to $11.3 million in the second  quarter of
1997.  The Company's  cash  requirement  for  operations is the net cash used in
operating  activities for the period being reported less amounts  received under
marketing,  research  and  development  agreements  and further  adjusted by the
timing of proceeds from the sale of investments  in affiliates.  The decrease in
cash  requirements  from the  second  quarter  is  attributable  primarily  to a
semi-annual  interest  payment of $2.8 million on the  convertible  subordinated
notes made during the second quarter of 1997. At September 30, 1997, the Company
had cash and cash  equivalents  of  approximately  $55.9 million and  investment


                                       16

<PAGE>



securities in an affiliate  with a market value of $1.5 million.  The investment
consisted of 125,000  shares of IVAX common  stock.  The fair market value as of
November 6, 1997 was approximately $1.0 million. This investment is volatile and
therefore subject to significant fluctuations in value.

              The Company  anticipates that cash  requirements for operations in
the fourth quarter of 1997 will be between  approximately $12 and $13 million as
the Company:  produces its acellular  pertussis  vaccine for commercial  sale in
Europe; produces CERTIVA(TM) in anticipation of or following regulatory approval
in the United States and other territories; produces investigational combination
vaccines and conjugate vaccines; and conducts clinical trials. Thereafter, it is
presently  anticipated  that quarterly  cash  requirements  for operations  will
depend  principally  upon  the  level of  vaccine  production,  costs to  market
CERTIVA(TM) upon approval,  the level of expenditures for the Company's  ongoing
research and development program, and the timing of interest payments due on the
convertible  subordinated  notes  described  above.  The  foregoing  are forward
looking  statements.  There are no  assurances  that the  Company  will meet the
projections for cash  requirements for operations,  that any further  regulatory
approvals  will be received as projected,  that the  milestones  under  existing
marketing and research and development  agreements will be achieved, or that, if
such milestones are obtained,  they will contribute  materially to the quarterly
cash  requirements.  Failure  or  significant  delays  in  receiving  additional
regulatory  approvals and meeting  milestones  would have a significant  adverse
effect on the Company's future financial position.

              Total capital  expenditures for the first nine months of 1997 were
$1.8 million.  Total projected capital expenditures for the last quarter of 1997
are expected to be less than $1.0 million. The Company is in the planning stages
of  expanding  its  manufacturing  capacity  for its vaccine  products  for both
clinical trials and for commercial  sale. Total projected  capital  expenditures
for 1998 for  facilities'  modifications,  equipment,  systems and other capital
additions  could  range  between $4 million to $8  million,  depending  upon the
ultimate extent of the expansions, which has not yet been determined. The amount
of and timing for capital  expenditures  could  fluctuate based upon a number of
factors  including:  the magnitude of the changes in the facilities  required to
meet demand for the Company's acellular  pertussis  products;  the equipment and
leasehold  improvements  required  in order to expand the  Company's  production
capacity  for  investigational  products;  the  anticipated  timing for  further
regulatory approvals of existing products; the anticipated timing for regulatory
approval  of future  products;  and  unanticipated  costs to  replace  or repair
existing   equipment  and  systems  in  order  to  keep  the  manufacturing  and
development   facilities   operational   or  in   compliance   with   regulatory
requirements.

              The capital  expenditures  described  above are  exclusive  of any
future real estate  acquisition  or build-out  plans.  The Company  continues to
evaluate  its  need  to  build-out,   lease  or  acquire  additional   research,
development, and other facilities to accommodate the Company's expanding vaccine
development  program.  The Company's  sublease for its research and  development
facilities  is  scheduled  to  expire  in 1998,  and the  Company  is  presently
evaluating several options for those operations  including renewing its sublease
at  existing  rates.  The  Company  has no present  agreements,  commitments  or


                                       17

<PAGE>



understandings  in respect of any additional  facilities and any related capital
expenditures  will  vary  substantially  depending  upon  a  number  of  factors
including,  among other things,  the size of such facilities,  the equipment and
systems requirements for the facilities,  location,  zoning and other government
restrictions and the magnitude of available financing.

              Cash requirements for operations and capital  expenditures for the
last  quarter of 1997 and the first  quarter of 1998 will be financed  through a
combination of: cash and cash equivalents; revenues from product sales; fees and
payments  from  existing  and/or new  license,  marketing,  distribution  and/or
development  agreements;  the exercise of stock options; the sale of debt and/or
equity  securities;  mortgage  financing;  and  equipment  leases.  The  Company
believes that it has adequate  cash  resources to meet its 1997 and 1998 funding
requirements  although there are no assurances in this regard.  While failure or
significant delays in receiving  additional  regulatory approvals and satisfying
milestones  would have a  significant  adverse  effect on the  Company's  future
operating  results and future financial  position,  the Company believes that in
such event it could manage and reduce cash requirements for operations, although
there are no assurances in this regard.  This paragraph contains forward looking
statements  and the  factors  affecting  the  ability of the Company to meet its
funding requirements and manage its cash resources include,  among other things,
the magnitude and timing of product sales;  the magnitude and timing of any fees
and  payments  from  license,   marketing,   distribution   and/or   development
agreements; and the magnitude of fixed costs.

OUTLOOK

              The Company  recognized an operating  loss of $30.8 million in the
first nine months of 1997 based on revenues of $1.4 million from product  sales,
$6.0 million from collaborative milestone and license payments, and $1.7 million
under a development  agreement.  The Company  anticipates  that the next several
quarters  operating results may fluctuate  significantly  based upon a number of
factors  including,  among other  things:  the  magnitude  of product  sales for
distribution in Europe;  the timing of FDA marketing  clearance;  the timing for
the commercial  introduction of CERTIVA(TM);  the ability of the Company and its
distributors to compete against competitive products, several of which have been
approved,  and to  effectively  market  and sell  products  in their  respective
territories;  the sales prices  established  for products by the Company and its
distributors;  the efficiency of the Company's production operations; the timing
of the  payments  under  license,  marketing,  distribution  and/or  development
agreements  with third parties;  the ability of the Company to  manufacture  and
deliver  products  in  accordance  with  customer  orders;  the timing and costs
associated  with  clinical  trials and  post-licensure  testing of the Company's
products;  the  timing  and amount of  funding  that may be  received  under any
additional license,  marketing,  distribution and/or development agreements with
third  parties;  and the  timing  of and  amount  of  proceeds  from the sale of
additional investment  securities.  The foregoing are forward looking statements
and the factors  affecting  its outcome are  described  herein as well as in the
first  paragraph  of this  Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations, and in the Company's other filings with the
SEC,  including  the 1996  annual  report on Form  10-K,  to which the  reader's
attention is directed.

                                       18

<PAGE>



              There are no  assurances  that the Company will meet the operating
results projected,  that any further regulatory approvals will be received, that
any milestones will be achieved,  or if achieved,  that milestone  payments will
contribute materially to the quarterly operating results of the Company.

              PRODUCT SALES. The Company  anticipates  additional  revenues from
product sales during the fourth  quarter of 1997 to SSI for its sale of the DTaP
and the DTaP-IPV  vaccines in SSI's Territory and from the sale of its acellular
pertussis  vaccine for distribution in Sweden for immunization of older children
and adolescents.  Any additional  product approvals granted to SSI could lead to
increased revenues from the sale of the Company's  acellular  pertussis vaccine.
Additional  revenues may be  forthcoming  from sale of the DTaP and/or  DTaP-IPV
vaccines to Chiron Behring in anticipation of or following  regulatory  approval
for one or both of these products in Chiron  Behring's  Territory.  There are no
assurances that further product  approvals will be obtained in these territories
during  1997 or at all,  or that once  obtained  SSI or Chiron  Behring  will be
effective in the marketing and distributing  the products.  The Company does not
control the marketing and distribution efforts of SSI or Chiron Behring in their
respective territories and, therefore,  the Company's revenues for product sales
in those  territories  are dependent  upon the  effectiveness  of these parties'
sales, marketing and distribution efforts.

              As described above,  during 1996, the Company and Abbott signed an
agreement under which Abbott would market  CERTIVA(TM)  and certain  combination
vaccines to private physicians and managed care markets in the United States for
immunization of infants and children.  The Company will market these products to
government purchasers,  including state governments and the CDC. FDA approval of
the Company's product license application for CERTIVA(TM) is pending.

              The  Company,  therefore,  anticipates  revenues  from the sale of
CERTIVA(TM) in the United States to Abbott for resale to private  physicians and
the  managed  care  market  beginning  in  1997  or  early  1998,  and to  state
governments  and the CDC  beginning  in early  1998.  If the product is launched
successfully  in the United  States by the  Company and  Abbott,  revenues  from
operations and the prospects for profitability would increase. The foregoing are
forward  looking  statements  and there are no assurances  that the Company will
achieve  profitability  based solely on revenues  from its  acellular  pertussis
vaccine or any future vaccines under development. There can be no assurance that
the FDA's approval will be obtained or that,  once obtained,  the Company and/or
Abbott  will be  effective  in  marketing  and  distributing  the  product.  The
principal  factors  affecting  the  approval of  CERTIVA(TM)  and its timing are
believed to be the sufficiency of the clinical  trials'  design,  the quality of
the  clinical  data  submitted  to the FDA,  and the  adequacy  of the  systems,
procedures,  operations  and  facilities  relating to the  product,  among other
things. The factors affecting successful commercial launch of CERTIVA(TM) in the
United States include, among others:  successfully  participating in established
purchasing  programs of Federal and state governments;  establishing an identity
and  reputation  for the Company and its products;  creating an awareness  among



                                       19

<PAGE>


pediatricians  of the safety and  efficacy of the  vaccine;  distinguishing  the
Company's  product from that of its competitors;  establishing the Company as an
effective and reliable supplier of vaccines; production of sufficient quantities
of vaccine and establishing effective distribution channels.

              The foregoing paragraphs contain only a partial description of the
factors  affecting the Company's  business  prospects and risk factors affecting
future  operations.  Reference  is made to the  Company's  filings with the SEC,
including the 1996 annual report on Form 10-K,  for a more complete  description
of the risks and uncertainties affecting the Company and its business.

              MARKETING,  RESEARCH & DEVELOPMENT  AGREEMENTS.  In December 1995,
the Company signed a clinical  development  agreement and license agreement with
Pasteur Merieux  Connaught under which the parties agreed to jointly develop its
new  conjugate  vaccine  against  meningococcus  B infection for both adults and
pediatric  indications.  In 1996,  the Company  recognized  revenue from Pasteur
Merieux Connaught under these agreements,  and in the third quarter of 1997, the
Company received a $6 million milestone payment under this collaboration. Future
fees and funding would be made upon  achievement  of  development,  clinical and
regulatory  milestones.  Total  remaining  fees and payments to the Company upon
achievement of all clinical and regulatory milestones amount to $39 million. The
time it may take to achieve future  milestones  cannot be predicted  accurately,
and there are no  assurances  that any  additional  milestones  will be met.  In
addition,  Pasteur Merieux  Connaught may terminate these agreements in its sole
discretion at any time.

              Under the marketing and  distribution  agreement with Abbott,  the
Company will receive clinical  development  payments and milestone payments upon
achievement of prescribed  clinical and regulatory  events.  The first milestone
relates to FDA approval of  CERTIVA(TM)  provided  certain other  conditions are
satisfied.  Total  remaining  payments  by  Abbott  to  the  Company  under  the
agreement, inclusive of payments expected during 1997, amount to $26 million. In
addition,  the  Company  will  receive  revenues  from  Abbott  as it  purchases
CERTIVA(TM)  and the  combination  vaccine  products  for resale to the  private
pediatric market.  There are no assurances that the milestones will be met, that
the quantities of Abbott's purchases of CERTIVA(TM) will be significant or as to
the timing of such  purchases,  or that  Abbott will not  exercise  its right to
terminate this arrangement at any time with advance notice.

              For the last quarter of 1997, the Company  anticipates  that total
receipts of license fees,  clinical  development  funding and milestone payments
under its existing marketing, research and development agreements could be up to
approximately  $3 million  with no  assurance  that any further  amounts will be
received during 1997.  This is a forward looking  statement and the factors that
affect the timing of the license fee and milestone payments are in large measure
outside of the control of the  Company.  In the first nine  months of 1997,  the
Company  recognized  $7.7  million  of revenue  under  marketing,  research  and
development  agreements,  which  includes  the $6  million  received  under  the
agreements with Pasteur Merieux Connaught. The revenue recognized by the Company
from clinical development payments received from Abbott are and will be equal to
the Company's  expenditures in the clinical  development program for CERTIVA(TM)
and  the  combination  vaccines  up to a  specified  amount.  Accordingly,  such


                                       20

<PAGE>



revenues  are likely to  fluctuate  from  quarter  to quarter  and would have no
effect on net  operating  results.  The factors  that affect the timing of these
expenditures,  and  therefore,  the  revenues to be  recognized  therefrom,  are
subject to uncertainties related to the planning, commencement and completion of
clinical  trials and the regulatory  approval  process.  There are no assurances
that the clinical development funding from Abbott will be sufficient to fund all
of  the  Company's   expenditures  in  the  clinical   development  program  for
CERTIVA(TM) and the combination vaccines.

              The Company is considering the  advisability of executing  further
distribution  agreements for certain markets  throughout the world.  The Company
also intends to collaborate in the development of selected  vaccine products and
may enter into additional collaborative development agreements similar in nature
to that which was signed with Pasteur Merieux Connaught,  as described above. In
addition,  the Company is in various  stages of  discussions  with third parties
regarding  various business  arrangements  including  licensing,  joint venture,
acquisition,  and  other  business  agreements,  some of which  possibly  may be
concluded  in the near  term.  There are no  assurances  that the  Company  will
successfully  negotiate and sign any such  agreements or that, if executed,  the
financial terms for any such agreement will be significant.

TAX AND OTHER MATTERS

              At December 31, 1996, the Company and its  subsidiaries had income
tax loss carryforwards of approximately  $11.8 million to offset future Canadian
source  income and  approximately  $56.0  million to offset future United States
taxable  income  subject  to the  alternative  minimum  tax rules in the  United
States.

              If more  than a  certain  percentage  of the  Company's  assets or
income becomes passive,  the Company will be classified for U.S. tax purposes as
a passive  foreign  investment  company  ("PFIC"),  and a U.S.  taxpayer  may be
subject to an additional  Federal income tax on receiving certain dividends from
the  Company or selling the  Company's  Common  Stock.  The Company has not been
classified  as a PFIC to date,  and during  1997,  the  Company  intends to, and
believes that it can, generate sufficient other income to avoid being classified
as a PFIC.  This is a forward looking  statement and the factors  affecting this
classification  include,  among other  things,  the timing and amount of revenue
from product sales;  the timing and amount of license fees,  milestone  payments
and development funding under license,  marketing,  distribution and development
agreements;  the classification of payments received by the Company as active or
passive; and the classification of the Company's assets as active or passive.

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES 
                  ABOUT MARKET RISK

              Not applicable.


                                       21

<PAGE>



                           PART II. OTHER INFORMATION



ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  EXHIBIT NO.       DESCRIPTION

                  27                Financial Data Schedule


         (b)      Reports on Form 8-K

                  None.


                                       22

<PAGE>



                                   SIGNATURES


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


                                         NORTH AMERICAN VACCINE, INC.
                                             (Registrant)


                                         By:    /s/ SHARON MATES
                                                --------------------------
                                                Sharon Mates, Ph.D.
                                                President


                                         By:    /s/ LAWRENCE J. HINELINE
                                                ---------------------------
                                                Lawrence J. Hineline
                                                Vice President - Finance














Date: November 7, 1997




                                       23