<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549



                                   FORM 10-Q



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


                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

                         Commission File Number 0-18044

                               PROCYTE CORPORATION
           (Exact name of the registrant as specified in its charter)

   Washington                                          91-1307460
   ----------                                          ----------
  (State of incorporation)                (I.R.S. Employer Identification No.)

   12040 115th Avenue N.E., Suite 210, Kirkland, WA    98034-6900
   ------------------------------------------------    ----------
   (Address of principal executive offices)            (Zip code)

Registrant's telephone number, including area code:  (485)820-4548
                                                     -------------

Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----


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 
the filing requirements for 90 days.

                            Yes {X}       No   { }

As of May 5, 1997, there were issued and outstanding 13,364,958 shares of 
common stock, par value $.01 per share.
<PAGE>
                               PROCYTE CORPORATION

                                      INDEX



PART I    FINANCIAL INFORMATION                                        PAGE NO.

          Item 1.   Financial Statements (unaudited)
                         Balance Sheet-                                       3
                         Three months ended March 31, 1997 and 1996

                         Statements of Operations -                           4
                         Three months ended March 31, 1997 and 1996

                         Statements of Cash Flows                             5
                         Three months ended March 31, 1997 and 1996

                         Statements of Stockholders' Equity                   6

                         Notes to Financial Statements                        7

          Item 2.   Management's Discussion and                               9
                    Analysis of Financial Condition and 
                    Results of Operations

PART II   OTHER INFORMATION                                                  18
          Item 1.   Legal Proceedings
          Item 4.   Submission of Matters to a Vote of Security Holders
          Item 5.   Other Information
          Item 6.   Exhibits and Reports on Form 8-K


INDEX TO EXHIBITS                                                            18

SIGNATURES                                                                   19


                                       2
<PAGE>

PART I  -  FINANCIAL INFORMATION 
ITEM 1. FINANCIAL STATEMENTS 

                              PROCYTE CORPORATION 
                          (a development stage company)
                                 BALANCE SHEETS 
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                March 31,         December 31,
                                                                              ------------       --------------
                                                                                  1997                1996
                                                                              ------------       --------------
<S>                                                                         <C>                <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . .        $  1,690,434        $  1,804,875 
Securities available for sale. . . . . . . . . . . . . . . . . . . . .          16,868,039          19,041,961 
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             737,006             596,740 
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             723,911             318,580
                                                                              ------------       --------------
  Total current assets . . . . . . . . . . . . . . . . . . . . . . . .          20,019,390          21,762,156

PROPERTY AND EQUIPMENT, at cost
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           3,850,822           3,604,764
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . .           6,344,640           5,097,833
Improvements in progress . . . . . . . . . . . . . . . . . . . . . . .              43,646           1,463,940
Less accumulated depreciation and amortization . . . . . . . . . . . .          (4,472,701)         (4,306,094)
                                                                              ------------       --------------
  Property and equipment, net. . . . . . . . . . . . . . . . . . . . .           5,766,407           5,860,443

PATENTS, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . .             290,930             290,930
Less accumulated amortization. . . . . . . . . . . . . . . . . . . . .            (113,269)           (109,270)
                                                                              ------------       --------------
  Patents, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .             177,661             181,660

OTHER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             384,399             159,399
                                                                              ------------       --------------

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $  26,347,857       $  27,963,658 
                                                                              ------------       --------------
                                                                              ------------       --------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .       $     309,786       $     334,843 
Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .           1,056,677             779,890 
Payable to stockholders for settlement of litigation . . . . . . . . .                   0                   0
                                                                              ------------       --------------
  Total current liabilities. . . . . . . . . . . . . . . . . . . . . .           1,366,463           1,114,733

DEFERRED LEASE PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . .               5,142              10,148
DEFERRED STATE SALES TAXES . . . . . . . . . . . . . . . . . . . . . .                   0                   0
     
COMMITMENTS
     
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value:  2,000,000 shares
  authorized; no shares issued or outstanding. . . . . . . . . . . . .
Common stock $.01 par value: 30,000,000 shares
  authorized; shares issued and outstanding 13,364,958
  - March 31, 1997 and 13,364,958 -  December 31, 1996 . . . . . . . .             133,026             132,776
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . .          82,640,840          82,576,340
Deficit accumulated during the development stage . . . . . . . . . . .         (57,797,614)        (55,870,339)
Unearned compensation. . . . . . . . . . . . . . . . . . . . . . . . .                   0                   0
                                                                              ------------       --------------
  Total stockholders' equity . . . . . . . . . . . . . . . . . . . . .          24,976,252          26,838,777
                                                                              ------------       --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . .       $  26,347,857       $  27,963,658 
                                                                              ------------       --------------
                                                                              ------------       --------------
</TABLE>
                       SEE NOTES TO FINANCIAL STATEMENTS 

                                       3
<PAGE>

                               PROCYTE CORPORATION
                          (a development stage company)
                            STATEMENTS OF OPERATIONS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                             January 1,
                                                                                                                1985
                                                                                                           (predecessor
                                                                      Three months ended March 31,         inception) to
                                                                    --------------------------------          March 31,
                                                                        1997                1996                1997
                                                                    ------------        ------------       -------------
<S>                                                                <C>                 <C>               <C>
REVENUES
Product revenues . . . . . . . . . . . . . . . . . . . . . .        $     29,554        $          0       $      60,117
Research and development
  revenues under collaborative
  agreements . . . . . . . . . . . . . . . . . . . . . . . .                   0                   0           7,754,711
Contract manufacturing . . . . . . . . . . . . . . . . . . .             379,541             244,903           1,239,481
License fees . . . . . . . . . . . . . . . . . . . . . . . .                   0             900,000           1,500,000
Interest income. . . . . . . . . . . . . . . . . . . . . . .             263,582             544,581           8,922,327
Other  . . . . . . . . . . . . . . . . . . . . . . . . . . .                   0                   0             712,110
                                                                    ------------        ------------       -------------

Total revenues . . . . . . . . . . . . . . . . . . . . . . .             672,677           1,689,484          20,188,746
                                                                    ------------        ------------       -------------


COSTS AND EXPENSES
Cost of product sales. . . . . . . . . . . . . . . . . . . .              11,765                   0              25,675
Research and
  development. . . . . . . . . . . . . . . . . . . . . . . .           1,265,106           1,747,339          51,144,375
Litigation settlement. . . . . . . . . . . . . . . . . . . .                   0                   0           5,750,000
General and administrative . . . . . . . . . . . . . . . . .           1,323,081           1,364,086          21,069,098
                                                                    ------------        ------------       -------------

Total costs and  expenses. . . . . . . . . . . . . . . . . .           2,599,952           3,111,425          77,989,148
                                                                    ------------        ------------       -------------

NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . .        $ (1,927,275)       $ (1,421,941)      $ (57,800,402)
                                                                    ------------        ------------       -------------
                                                                    ------------        ------------       -------------

NET LOSS PER
COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . . .        $      (0.15)       $      (0.11)      $       (7.40)
                                                                    ------------        ------------       -------------
                                                                    ------------        ------------       -------------


Weighted average number of
  common shares used in computing
  net loss per common share. . . . . . . . . . . . . . . . .          13,290,058          13,153,553           7,805,975
                                                                    ------------        ------------       -------------
                                                                    ------------        ------------       -------------
</TABLE>

                        SEE NOTES TO FINANCIAL STATEMENTS

                                       4
<PAGE>

                               PROCYTE CORPORATION
                          (a development stage company)
                            STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                                                     January 1,
                                                                                                                        1985
                                                                                                                    (predecessor
                                                                                 Three months ended March 31        inception) to
                                                                                -----------------------------          March 31,
                                                                                    1997              1996               1997 
                                                                                -----------       -----------       ------------
<S>                                                                            <C>               <C>               <C>
OPERATING ACTIVITIES
Net Loss                                                                        ($1,927,275)      ($1,421,941)      $(57,800,402)
  Adjustments to reconcile net loss
    to net cash used in operating activities:
    Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         166,607           156,770          4,723,370
    Patent expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .           3,999             4,000            790,928
    Amortization of discount on marketable securities . . . . . . . . . . .                                              (15,625)
    (Gain) loss on sale of securities available for sale. . . . . . . . . .              92           (42,312)          (137,496)
    Stock grants and Restricted Stock grants. . . . . . . . . . . . . . . .          64,750            64,750            397,471
    Compensation expense on stock options . . . . . . . . . . . . . . . . .               0            14,381            597,638
    Changes in assets and liabilities:
      (Increase) decrease in inventories. . . . . . . . . . . . . . . . . .        (140,266)                0           (737,006)
      (Increase) decrease in other current assets . . . . . . . . . . . . .        (405,331)          (64,677)          (723,914)
      Increase in other assets. . . . . . . . . . . . . . . . . . . . . . .               0                 0             (9,399)
      Increase (decrease) in accounts payable . . . . . . . . . . . . . . .         (25,057)         (221,193)           224,667
      Increase (decrease) in accrued liabilities. . . . . . . . . . . . . .         276,789           119,083          1,001,771
      Increase (decrease) in deferred lease payments. . . . . . . . . . . .          (5,006)           (4,939)             5,142
      Decrease in deferred use tax. . . . . . . . . . . . . . . . . . . . .               0                 0            (94,713)
                                                                                -----------       -----------       ------------
  Net cash used in operating activities . . . . . . . . . . . . . . . . . .      (1,990,698)       (1,396,078)       (51,777,568)
                                                                                -----------       -----------       ------------

FINANCING ACTIVITIES
  Proceeds from issuance of stock - net . . . . . . . . . . . . . . . . . .               0            50,503         81,405,340
  Proceeds from borrowings. . . . . . . . . . . . . . . . . . . . . . . . .                                              500,000
                                                                                -----------       -----------       ------------
Net cash provided by financing activities . . . . . . . . . . . . . . . . .               0            50,503         81,905,340
                                                                                -----------       -----------       ------------

INVESTING ACTIVITIES
  Purchase of property and equipment. . . . . . . . . . . . . . . . . . . .         (72,572)          (28,211)       (10,393,848)
  Purchase of securities available-for-sale . . . . . . . . . . . . . . . .     (15,656,243)      (51,853,404)      (395,336,672)
  Proceeds from sale or maturity of securities available for sale . . . . .      17,830,071        59,622,145        378,621,752
  Patents:
    Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               0                 0         (1,018,117)
    Reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . . . . .               0                 0             64,546
    Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (225,000)                            (375,000)
                                                                                -----------       -----------       ------------
  Net cash used in investing activities . . . . . . . . . . . . . . . . . .       1,876,257         7,740,530        (28,437,338)
                                                                                -----------       -----------       ------------

NET INCREASE  IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . .        (114,441)        6,394,955          1,690,434

CASH AND CASH EQUIVALENTS
  AT BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . .       1,804,875         6,019,740
                                                                                -----------       -----------       ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD. . . . . . . . . . . . . . . . .      $1,690,434       $12,414,695         $1,690,434
                                                                                -----------       -----------       ------------
                                                                                -----------       -----------       ------------

SUPPLEMENTAL SCHEDULE OF NON-CASH
  FINANCING AND INVESTING ACTIVITIES
  Conversion of debt to common stock. . . . . . . . . . . . . . . . . . . .                                           $  500,000
                                                                                                                    ------------
                                                                                                                    ------------
  Issuance of stock for patents . . . . . . . . . . . . . . . . . . . . . .                                           $   27,790
                                                                                                                    ------------
                                                                                                                    ------------
</TABLE>
                        SEE NOTES TO FINANCIAL STATEMENTS

                                       5
<PAGE>

                               PROCYTE CORPORATION
                          (a development stage company)
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (unaudited)

<TABLE>
<S>                                 <C>           <C>         <C>            <C>             <C>              <C>
                                     ----------    --------    -----------    ------------    ------------     -----------
Balance, December 31, 1996 . . . .   13,277,558    $132,776    $82,576,340    ($55,870,339)            $0      $26,838,777
                                     ----------    --------    -----------    ------------    ------------     -----------
Hymedix Restricted Stock:
  ($2.59 per share) March 31 . . .       25,000         250         64,500                                          64,750
Net loss . . . . . . . . . . . . .                                              (1,927,275)                     (1,927,275)
                                     ----------    --------    -----------    ------------    ------------     -----------
Balance, March 31, 1997. . . . . .   13,302,558    $133,026    $82,640,840    ($57,797,614)            $0      $24,976,252
                                     ----------    --------    -----------    ------------    ------------     -----------
                                     ----------    --------    -----------    ------------    ------------     -----------
</TABLE>
                        SEE NOTES TO FINANCIAL STATEMENTS

                                       6
<PAGE>

                               PROCYTE CORPORATION
                          (a development stage company)
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)


1.   BASIS OF PRESENTATION

     The accompanying unaudited Financial Statements of ProCyte Corporation 
(the "Company") for the three-month periods ended March 31, 1997 and 1996, 
have been prepared by the Company in accordance with generally accepted 
accounting principles for interim financial information and with the 
instructions to Form 10-Q and Article 10 of Regulation S-X.  Pursuant to such 
rules and regulations, the Financial Statements do not include all of the 
information and footnotes required by generally accepted accounting 
principles for complete financial statements.  Accordingly, this financial 
information should be read in conjunction with the complete Financial 
Statements, including the notes thereto and the auditors' opinion, which are 
included in the Company's Annual Report, incorporated by reference on Form 
10-K, for the year ended December 31, 1996. In the opinion of management, all 
material adjustments (consisting of normal recurring accruals) considered 
necessary for a fair presentation have been included.  Interim results are 
not necessarily indicative of the results that may be expected for the year 
ending December 31, 1997.

2.   INVESTMENTS

     At March 31, 1997, the Company's investments consist entirely of U.S. 
Treasury bills and notes and classified as "available for sale."  The 
amortized cost and estimated market value for investments maturing in one 
year or less is $1,690,434, and those maturing in one through five years is 
$16,868,039.  There were no gross unrealized gains or losses at March 31, 
1997, and realized losses from sales of investments in the three-month period 
ended March 31, 1997 were $92.00.

3.   EXISTING CORPORATE LICENSE AGREEMENTS

HYMEDIX INTERNATIONAL, INC.

     In November 1995, ProCyte entered into a license agreement with Hymedix 
International  Inc.  ("Hymedix") in which the Company acquired the exclusive 
worldwide rights, outside of Asia, to five FDA-cleared wound care products 
developed by Hymedix, as well as exclusive rights to the use of the 
underlying technology in the territory for future wound care products.  
Additionally, the Company acquired, on a non-exclusive basis, the rights to a 
sixth FDA-cleared wound care product in the same territory.  The Company 
shares marketing rights to the sixth product with B. Braun Medical, Inc.  The 
Company also acquired exclusive worldwide rights to the drug delivery 
application of Hymedix's polymer-based technology for wound healing 
applications.

                                       7
<PAGE>

     Under the terms of the agreement with Hymedix, the Company is obligated 
to pay certain upfront, milestone and royalty payments.  The Company's 
upfront payment included 200,000 shares of the Company's common stock, 
releasable over a two-year period in four equal assignments of 50,000 shares 
each, unless Hymedix has materially breached the license agreement or the 
Company has terminated the license agreement.  The stock is subject to SEC 
Rule 144 restrictions and has piggyback registration rights for a limited 
period of time.  The Company may terminate the agreement at any time upon 
sixty days' written notice.

4.   INVENTORIES

     Inventories consist of raw materials, work in process and finished 
goods, and are accounted for at the lower of cost or market.

5.   STOCKHOLDERS' EQUITY

     Information relating to stock options granted, exercised, canceled and 
currently exercisable is as follows:

                                         Shares subject     Weighted average
                                           to option         exercise price
                                         --------------     ----------------
        Balance, January 1, 1996           1,536,957              $4.44
          Granted                             89,500               3.08
          Exercised                           20,470               2.47
          Canceled                           213,835               9.24
                                           ---------              -----
        Balance, March 31, 1996            1,392,152              $3.65

        Balance, January 1, 1997           1,442,193              $3.50
          Granted                            140,500               2.31
          Exercised                                0                  0
          Canceled                            79,833               2.73
                                           ---------              -----
        Balance, March 31, 1997            1,450,361              $3.44

        Currently exercisable                782,384              $4.04

     During the three month period ended March 31, 1997, the Compensation 
Committee of the Board of Directors approved grants of incentive stock 
options to purchase 140,500 shares of common stock to employees of the 
Company, including a grant of an incentive stock option to purchase 100,000 
shares of common stock to an officer of the Company.  All options are subject 
to vesting schedules.

                                       9
<PAGE>

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

PRODUCT UPDATE

     As of the end of the first quarter, March 31, 1997, ProCyte had 
introduced or received clearance to market several new wound care products.  
These are in addition to the Company's copper-peptide product, 
Iamin-Registered Trademark- Hydrating Gel, and the polymer-based 
OsmoCyte-Registered Trademark-Pillow Wound Dressings which were introduced 
in 1996.

     For the three-month period ended March 31, 1997, ProCyte announced that 
it had received clearance under the United States Food and Drug 
Administration's ("FDA") 510(k) medical device regulations to market a second 
copper-peptide containing wound care dressing, GraftCyte-TM- Moist Dressings. 
 These gauze pads are impregnated with the company's copper-peptide 
technology for use in hair transplant surgical procedures.  An estimated 
200,000 such procedures are performed annually in the United States.  The 
dressings are designed to contribute moisture to the transplant suture area, 
and to provide essential micronutrients that are important to natural wound 
healing.  U.S. product launch is expected in May 1997, together with 
GraftCyte-TM- Mist for continued moisturizing of the scalp following hair 
restoration surgery

     Other new products for which U.S. market launch is pending include 
ProCyte Transparent Film Dressing - a thin film dressing which provides a 
barrier against infection while allowing wounds to breath, and 
Iamin-Registered Trademark- Wound Cleanser - a copper-peptide containing 
wound cleanser.  Iamin-Registered Trademark--Vet Skin Care Gel and the 
OsmoCyte-Registered Trademark- Pillows for exudating wounds have been 
introduced to the veterinary market for treatment of wounds in both large and 
small animals.  The Company has submitted several other pre-market clearance 
applications to the FDA for other copper-peptide containing or polymer-based 
wound care products. 

     Some of the Company's human wound care products may be eligible for 
Medicare reimbursement - an important factor in the acceptance and use of 
these products for chronic wound care, particularly with regard to hospital, 
nursing home and extended care usage.  The Company recently was advised by 
the government's administrative body for Medicare pricing policy that it has 
decided to use a different reimbursement code for Iamin-Registered Trademark- 
Hydrating Gel than the code sought by the Company.  The Company is preparing 
new information to submit to appeal this decision which it believes would 
have a material adverse effect on the acceptance and use of Iamin-Registered 
Trademark- Hydrating Gel in certain of the core markets for which the product 
is intended and is in current use.  There can be no assurance that the 
Company will be successful in reversing the code decision or that the product 
would be used in such chronic wound care if a different reimbursement code is 
not obtained. The Company believes that failure to obtain a suitable 
reimbursement code could have a material adverse effect on the Company.

     During the quarter ended March 31, 1997, the Company expanded its sales 
force and added distributors and manufacturers' representatives to augment 
its product promotion in the chronic wound care and related markets.  The 
Company's products are promoted to veterinarians by specialty distributors.

                                       9
<PAGE>

     On April 4, 1997, the Company announced the results of its initial Phase 
II, single center, dose-ranging, placebo-controlled study of PC1358, 
tradenamed Tricomin-Registered Trademark- solution, for treatment of 
androgenetic alopecia. This early-stage study enrolled 36 men with early to 
mid-stage male pattern hair loss.  Thirty-three of the participants were 
evaluable in the study, in which they were randomly assigned to either one of 
two dose groups or the vehicle formulation.  Participants in the study 
applied the study treatment twice a day for up to 24 weeks.

     Results from the study's prospectively designed endpoints showed 
statistical significance in the increase in total hair count of men treated 
with the high dose, 2.5% compound, versus those treated with placebo.  
Appreciable increases in total hair weight were not found over the treatment 
phase of the study, but the participants who applied the high dose compound 
reported in their general cosmetic assessment that they were either growing 
more hair or staying the same.  Over half of the participant's in the placebo 
group reported that they believed they lost more hair over the course of the 
study.

LIQUIDITY AND CAPITAL RESOURCES

     The Company relies primarily on equity financings and corporate 
partnerships to fund its operations and capital expenditures.  At March 31, 
1997, the Company had approximately $18.5 million in cash, cash equivalents 
and securities available for sale.

     Through March 31, 1997, the Company has invested a total of 
approximately $4.0 million in laboratory and computer equipment, furniture 
and leasehold improvements.  In addition, the Company has invested 
approximately $6.2 million in leasehold improvements and equipment for its 
manufacturing plant.  The Company anticipates that its operating expenses 
will increase in 1997 and subsequent years as the Company expands its 
manufacturing plant and purchases equipment to process its planned wound care 
products and advances potential product candidates in development.  
Foreseeable incremental costs may include, but are not limited to, those 
associated with the Company's planned manufacture of copper-peptide and/or 
polymer-based products, product development and post-product launch studies, 
patent filings, legal fees, and administrative activities.

     The Company expects to continue to try to negotiate strategic 
collaborations or other suitable partnerships for certain applications of its 
technology, such as inflammatory bowel disease and hair loss, and to seek 
product acquisition and/or distribution agreements with other parties whose 
products, capabilities or interests complement the Company's goals and 
abilities internationally.  Certain of these relationships may involve 
commitments from ProCyte to fund some or all of certain research and 
development projects or to make royalty payments based on products sold 
during a defined period.  

     Although strategic partnerships have provided revenue to the Company in 
the past, there can be no assurance that similar sources of funds will be 
available to the Company in the future.  Additionally, though the Company 
makes every effort to extensively review products it may

                                      10
<PAGE>

seek to acquire, distribute or in-license, there can be no assurance that 
products so obtained will be commercialized successfully, if at all.

     In the first three months of 1997, the Company commenced construction of 
its corporate headquarters in Redmond, Washington, which, when completed, 
will consolidate the Company's administrative offices and labs and 
manufacturing facilities into one.  Further expenditures will be required for 
manufacturing, including but not limited to, adding equipment for the 
manufacture of the polymer-based wound care products; building a sales 
organization and marketing program for the Company's products in North 
America and elsewhere; and for office and related space and equipment to 
accommodate the activities and personnel associated with bringing potential 
products into development or the marketplace.  All these activities, and 
others that may not have been anticipated at this time, will require 
substantial financial resources.  There can be no assurance that the Company 
will have sufficient resources to fund the cost of such activities, or that 
it will be able to obtain any additional financial resources on acceptable 
terms or in time to fund any necessary or desirable expenditures.

     The Company anticipates that its existing capital resources should be 
sufficient to fund its cash requirements for approximately two years.  
However, the amounts and timing of expenditures will depend on such things as 
the progress and results of ongoing clinical development programs, the rate 
at which operating losses are incurred, the execution of in-licensing or 
product distribution agreements with others, the establishment of 
out-licensing agreements or strategic alliances for certain of the Company's 
products or technology, the FDA regulatory process and similar processes 
among similar agencies in other countries, and other factors, many of which 
are beyond the Company's control, such as changes in healthcare product 
reimbursement schedules.

IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

     The discussion in this report, including but not limited to such things 
as pending product launches, regulatory submissions and reimbursement 
pricing, strategic partnering, and availability of cash to fund operations 
contains forward-looking statements.  Any and all statements of goals, 
beliefs, intent, plans, anticipation or expectations set forth in the 
Company's SEC reports and other communications may be forward-looking 
statements.  Readers are cautioned not to place undue reliance on these 
forward-looking statements which reflect the Company's views and beliefs only 
as of the date hereof.  The Company undertakes no obligation to publicly 
release the result of any revisions to these forward-looking statements which 
revisions may be made to reflect events or circumstances after the date 
hereof or to reflect the occurrence of unanticipated events.

     The following factors, among others, could affect the Company's actual 
results with regard to such forward-looking statements, and could cause such 
results to differ materially from those expressed in the Company's 
forward-looking statements.

GENERAL FINANCIAL POSITION OF THE COMPANY

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<PAGE>

     At March 31, 1997, the Company had approximately $18.5 million in cash, 
cash equivalents and securities available for sale.  The Company expects to 
spend approximately $2 million per quarter in 1997 as it continues to develop 
and test product candidates, provide marketing and sales support of current 
or future products, and incur ongoing general overhead expenses.  The Company 
may be required to raise additional capital through equity offerings, 
strategic alliances or other sources.  There can be no assurance that such 
funds will be available to the Company on acceptable terms, if at all.

     There can be no assurance that the Company will be successful in 
attracting or retaining corporate alliances on terms favorable to the 
Company, whether for the Company's hair technology or otherwise, or that the 
interests and motivations of any corporate partner or licensee would be or 
remain consistent with those of the Company, or that such partners or 
licensees would successfully perform the technology transfer, clinical 
development, regulatory compliance, manufacturing, marketing or other 
obligations.  Suspension or termination of agreements with the Company's 
current or future partners or licensees could have a material adverse effect 
on the development of the Company's proposed products and could materially 
adversely effect the Company's financial position.

CLINICAL AND COMMERCIAL DEVELOPMENT OF NOVEL COMPOUNDS AND PRODUCTS

     There can be no assurance that the Company will commence, continue or 
successfully complete preclinical or clinical testing or commercial 
development, including commercial-scale manufacturing and market launch of 
any of the products or product candidates identified elsewhere in this 
report, or that, if successfully developed, such product candidates would be 
cleared by the FDA for sale in the United States or by comparable regulatory 
authorities for sale in other countries.  Approval of a product for marketing 
in one country does not ensure approval for marketing in other countries.  
Launch of a product does not ensure market acceptance.  The results of Phase 
I, Phase II or Phase III studies are not necessarily indicative of efficacy 
or safety of a commercial product for human use.

CONTRACT MANUFACTURING

     ProCyte's manufacturing plant was commissioned in 1994, and allows the 
Company to provide select contract manufacturing services to industry 
clientele in addition to serving its own product manufacture requirements.  
By quarter end March 31, 1997, ProCyte had provided or was still performing 
contract manufacturing services on behalf of several clients, including two 
multinational pharmaceutical companies and several biotechnology companies.  

     The Company expects to utilize approximately 75% of the plant's current 
capacity for these endeavors in 1997, though for reasons such as but not 
limited to unexpected or unsuccessful plant audits or regulatory inspections, 
changes in local, state or federal facility operation requirements for such 
things as water and chemical usage, storage or disposal, the potential impact 
of adverse weather conditions on plant operations, the decision of a client 
to manufacture its own products or have them manufactured elsewhere, market 
acceptance of the

                                      12
<PAGE>

Company's or clients' products, and competition, there can be no assurance 
that the Company will be successful.

     ProCyte expects to continue to provide select contract manufacturing 
services in the future, and to produce clinical and commercial quantities of 
certain of its peptide-copper compounds for its use.  

     Given the risks and uncertain timelines associated with device, 
pharmaceutical and biotechnology products being developed, tested, reviewed 
or sold by clients of the manufacturing facility, and the Company's own 
products, the Company will be required to strive to maintain sufficient 
clientele to counter the effect that regulatory delays, product failures, 
product recalls, and other such circumstances may have on its contract 
manufacturing capabilities and revenues.  Also, such factors as unexpected or 
unsuccessful plant audits or regulatory inspections, the potential impact of 
adverse weather conditions on plant operations, the decision of a client to 
manufacture its own products or have them manufactured elsewhere, inability 
or failure to manufacture a product to established product specifications, 
market acceptance of clients' products, and competition, mean there can be no 
assurance that the Company will be successful in its contract manufacturing 
endeavors.

WOUND CARE PRODUCT DEVELOPMENT, MANUFACTURE AND DISTRIBUTION

     Factors beyond the Company's control, such as delays in obtaining 
regulatory clearance to market new products, delays in product launch, the 
promotion and introduction of competitive products by others with larger and 
more established sales and marketing organizations, lack of product 
acceptance by the marketplace, changes in Medicare reimbursement and the 
impact this would have on product pricing, acceptance and use, unexpected 
difficulties in scaling-up the full scale commercial manufacturing processes, 
obtaining suitable raw materials, and staffing the production operation, mean 
that there can be no assurance that the Company will be able to commercialize 
any of its planned wound care products in a cost-effective, timely manner, if 
at all.

PATENTS AND PROPRIETARY RIGHTS

     ProCyte's success depends in part upon its ability to protect its 
products and technology under intellectual property laws in the Unites States 
and abroad. As of March 31, 1997, the Company had 18 issued United States 
patents expiring between 2005 and 2010, and 123 issued foreign patents and 
patent registrations. The patents relate to use of the Company's copper-based 
technology for a variety of healthcare applications, and to the composition 
of certain biologically active, synthesized compounds.  The Company's 
strategy has been to apply for patent protection for certain compounds and 
their discovered uses that are believed to have potential commercial value in 
countries which offer significant market potential.

     The Company currently holds several registered trademarks for its 
product candidates.  There can be no assurance as to the breadth or degree of 
protection that the Company's existing trademarks or patents, or any 
additional trademarks or patents that may be granted in the future,

                                      13
<PAGE>

will afford the Company, or that any additional trademarks or patents will be 
issued to the Company.  In addition, there can be no assurance that others 
will not independently develop substantially equivalent proprietary 
technology that is not covered by the Company's patents or that others will 
not be issued patents that may prevent the Company's manufacture, sale or use 
of the Company's proposed products or require licensing and the payment of 
significant fees or royalties by the Company for the pursuit of its business. 
 Litigation, which could result in substantial cost to the Company, may be 
necessary to enforce the Company's patents or to determine the scope and 
validity of other parties' proprietary rights.  If the outcome of any such 
litigation were adverse, the Company's business could be materially affected. 
 The Company is unable to predict how courts would resolve any future issues 
relating to the validity and scope of the Company's patents or trademarks 
should they be challenged.

     The Company also relies on its unpatented proprietary know-how, and 
there can be no assurance that others will not develop or acquire equivalent 
proprietary information.  To the extent that corporate partners or 
consultants apply Company technological information independently developed 
by them or by others to Company projects or apply Company technology or 
know-how to other projects, disputes may arise as to the ownership of 
proprietary rights to such information.

COMPETITION

     Competition in the Company's initial area of sales and distribution - 
wound care and related applications - is particularly intense, involving a 
number of well-established, major pharmaceutical and healthcare companies, 
such as Bristol Myers Squibb's Convatec division, Kendall Healthcare Company, 
and Johnson and Johnson.  A significant number of smaller companies as well 
are developing or marketing competitive wound care products, some of which 
may have an entirely different approach than products being developed by the 
Company.

     Wound care is an evolving field as far as technology, regulations, 
pricing, reimbursement, and products are concerned.  The Company believes 
that its most substantial competition with respect to its planned wound care 
product line will come from established pharmaceutical and healthcare 
companies, which are significantly larger than the Company and have 
substantially greater financial resources, marketing and sales staffs, and 
experience in obtaining regulatory approvals, as well as in manufacturing and 
marketing wound care products, and where they have considerable years of 
experience, and established reputations, promoting to healthcare providers.

     Competition also is based on scientific and technological advances, the 
availability of patent protection, access to adequate capital, the 
requirement for and ability to obtain government approval for new products or 
testing, timing and scope of regulatory approvals, product pricing, 
manufacturing and marketing capability.  There can be no assurance that the 
Company's competitors will not succeed in bringing to market technologies 
and/or products that may make the proposed or current products being 
developed or marketed by the Company obsolete or noncompetitive.  Some of the 
Company's competitors may achieve product commercialization earlier than the 
Company, which may adversely affect market introductions

                                      14
<PAGE>

and sales of the Company's proposed products.  Competition for highly 
qualified scientific, technical, and managerial personnel, consultants and 
advisors on whose services the Company depends is also intense.

     The contract manufacturing service business also is highly competitive. 
Competitors include major chemical and pharmaceutical companies, as well as 
specialized biotechnology firms, smaller contract chemical manufacturers and 
some universities.  Many of these companies or institutions have greater 
financial, technical and marketing resources than the Company.

     The chemical, commodity-products and pharmaceutical industries have 
undergone and are expected to continue to undergo significant technological 
and strategic change, and the Company expects the competition to intensify as 
technical advances or business alliances are made by others in fields of 
interest to the Company.  The Company believes that its success in competing 
with others will depend on such things as its ability to retain scientific 
expertise and capable, experienced management, and identifying and pursuing 
scientifically feasible, medically relevant, and commercially viable 
opportunities.

GOVERNMENT REGULATION

     The manufacture and marketing of ProCyte's products, whether internally 
developed and licensed-in, and its research and development activities in 
general, are subject to extensive regulation in the United States by the 
federal government, principally by the FDA, and in other countries by similar 
health and regulatory authorities.  The Federal Food, Drug and Cosmetic Act 
and the regulations promulgated thereunder, and other federal and state 
statutes govern, among other things, the testing, manufacture, safety, 
labeling, storage, recordkeeping, advertising and promotion of pharmaceutical 
products and medical devices.  Product development and approval or clearance 
within the regulatory framework requires a number of years and involves the 
expenditure of substantial resources. 

     In order to obtain FDA clearance to market a new drug or device in the 
United States for use in humans, it is necessary to proceed through several 
stages of product testing, including research and development, clinical 
evaluations, the filing of a product registration dossier such as a new drug 
application or 510(k) application with the FDA to obtain authorization to 
market a product.  The Company's product candidates may be regulated by any 
of a number of divisions of the FDA.

     Before human testing of a therapeutic product candidate may commence, 
the FDA, and like agencies in other countries, generally require certain 
preclinical testing, such as toxicology studies in animals, to begin to 
establish product safety.  Results of such studies are submitted as part of 
the application to the regulatory agency.  Preclinical testing is not 
necessarily indicative of the safety or effectiveness of a product candidate 
for human use.

     Human clinical trials of an investigational therapeutic compound in the 
United States typically involve a three-phase process.  Following the IND 
submission period, Phase I trials may be conducted with a small group of 
healthy volunteers or, in some instances, patients, to

                                      15
<PAGE>

determine the early safety profile and the pattern of drug absorption, 
distribution and metabolism.  Phase II trials are conducted with groups of 
patients afflicted with a specific disease or specific element of a disease 
to determine preliminary effectiveness, optimal dosage and treatment regimens 
and expanded evidence of safety.  Phase III comparative trials are conducted 
with a larger number of patients at multiple test sites to gather information 
about safety and effectiveness that is needed to evaluate the overall 
benefit-risk relationship of the compound and to provide an adequate basis 
for proposed product labeling.

     The results of clinical trials are submitted to the FDA, and to similar 
agencies in other countries, in the form of an of NDA or like submission, for 
approval to commence commercial distribution of the product.  The regulatory 
agencies may take one to two years or more to act on an NDA or like 
submission, if they elect to act at all.  The final decision rests with the 
regulatory agency as to whether or not approval will be granted.  The 
regulatory agencies, at their discretion, may request further testing, 
additional data,  or may deny approval if the agency determines that 
regulatory approval criteria are not sufficiently satisfied.  As such, there 
can be no assurance that any approvals of the Company's product candidates, 
if and when the Company has drug candidates in development, would be granted 
on a timely basis, if at all, following completion of clinical testing.

     In the United States, products that do not seek to make effectiveness 
claims based on human clinical evaluation, may be subject to review and 
regulation under the FDA's 510(k) medical device guidelines.  Similar 
guidelines exist for such products in other countries.  Such products, which 
include wound care dressings, ointments and gels, must show safety and 
substantial equivalency with predicate products already cleared to be 
marketed by the FDA.  There can be no assurance that such product pre-market 
notification applications submitted to the FDA or similar agencies in other 
countries will receive clearance to be marketed, or that the labeling claims 
sought will be approved, or that, if cleared, such products will be 
commercially successful.  

     In addition to obtaining FDA or other countries' approval or clearance 
to market a product, the prospective manufacturer's quality control and 
manufacturing procedures must conform to current good manufacturing practices 
("cGMPs") guidelines, or ISO 9000 standards, when appropriate.  In complying 
with standards set forth in these regulations, which are subject to change at 
any time without notice to the Company, manufacturers must continue to expend 
time, monies and effort in production and quality control.  Manufacturing 
establishments, such as ProCyte's manufacturing plant, also are subject to 
regulations from and inspections by other foreign, federal, state or local 
agencies, such as the Drug Enforcement Agency, the city water and waste 
treatment agencies, and state and federal safety and health regulations.  
There can be no assurance that the Company's manufacturing facility or its 
operations for the manufacture of its own product candidates or the bulk 
products manufactured and processes followed by the Company on behalf of its 
clients will be able to meet all appropriate guidelines or to pass 
inspections by any government agency.  If the Company's manufacturing 
operations should fail to pass an inspection, for any reason, the possible 
resultant outcome on the plant's continuing operations, and the financial 
impact on the Company's overall reputation and operations could be severely 
adversely affected.

                                      16
<PAGE>

     The Company also is or may become subject to various other foreign, 
U.S., state and local laws, regulations and policies relating to, among other 
things, product pricing and reimbursement, safe working conditions, good 
laboratory practices, animal welfare, and the use and disposal of hazardous 
or potentially hazardous substances used in connection with research, 
development and/or manufacturing.

OPERATING LOSSES

     The Company is engaged in the development of healthcare products 
utilizing copper-peptide containing and polymer-based compounds.  Such 
research and development has historically been funded from the Company's 
equity-derived working capital and through corporate partnerships.  The 
Company has incurred operating losses since its inception due to financial 
and regulatory requirements required to support research, development and 
clinical studies of its proprietary technology.  In particular, the Company 
has supported and continues to finance development of investigational 
Iamin-Registered Trademark -gel for potential treatment of chronic dermal 
wounds, and other wound care studies or pharamacoeconomic analyses involving 
its product candidates or commercial products.

     The Company expects to incur additional operating losses for a number of 
years until its product lines has been expanded and successfully distributed. 
At March 31, 1997, the Company's accumulated deficit was approximately $57.8 
million.

REVENUE

     For the three-month period ended March 31, 1997, ProCyte earned revenue 
from contract manufacturing of $379,541, introductory product sales of its 
first two US wound care products - Iamin-Registered Trademark- Hydrating Gel 
and the OsmoCyte-Registered Trademark- Pillow Wound Dressings - of $29,554, 
and interest income of $263,582.  This compares to contract manufacturing 
revenue of $244,903, product sales of $0, license fees of $900,000 and 
interest income of $544,581 earned in the first three months of 1996.  The 
increase in contract manufacturing and product sales revenue is primarily due 
to the continuing work being done by the Company on behalf of clients of its 
manufacturing facility and initial wound care products sold in the US for 
human and veterinary wound care applications.  The expected decrease in 
interest income and license fees is a result of less cash available for 
investment and corporate partners satisfying their payment obligations.

EXPENSES

     Research and development expenses for the three-month period ended March 
31, 1997, were $1,265,106, compared to $1,747,339 for the like period in 
1996. Expenditures during the period conform with the Company's planned 
decrease in expenses, primarily as a result of cost-saving measures 
implemented by management.  The Company anticipates that expenditures will 
remain at or near current levels as a result of the stage of current product 
development and cessation of further drug research studies.

                                      17
<PAGE>

     General and administrative expenses for the three-month period ended 
March 31, 1997, were $1,323,081, compared to $1,364,086 for the same 
three-month period in 1996.  The decrease was primarily related to 
cost-saving programs implemented by management.  The Company anticipates that 
expenditures may increase during the year as a result of the Company's 
planned corporate relocation and other administrative charges.

                           PART II - OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS

     The Company is in settlement discussions with one of its insurance 
carriers with respect to $1 million of Director and Officer insurance 
coverage that was related to the now-settled class action lawsuit brought 
against the Company and certain of its officers and directors in 1994.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to the shareholders for vote during first 
quarter 1997.  The Company plans to hold the annual meeting of its 
shareholders on  May 15, 1997.  The Company may use a proxy solicitation firm 
to solicit proxies for the meeting of its shareholders.  Use of such a firm 
should not exceed $3,000.

ITEM 5.   OTHER INFORMATION

     Mr. John Young, who served as the Company's vice president of 
manufacturing operations, ceased to be an employee of the Company during the 
quarter.

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.

                                        PROCYTE CORPORATION
                                            (REGISTRANT)

Date:     May 5, 1997                   By /s/John F. Clifford
                                          --------------------------------
                                           John F. Clifford
                                           President and CEO

Date:     May 5, 1997                   By:/s/ Robert MacDonald
                                          --------------------------------
                                           Robert MacDonald
                                           Director of Finance




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