<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 MARCH 31, 1997

                                       OR

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

                         Commission file number: 0-19910

                           CREATIVE BIOMOLECULES, INC.
             (Exact name of registrant as specified in its charter)


            DELAWARE                                      94-2786743
  (State or other jurisdiction              (I.R.S. Employer Identification No.)
of incorporation or organization)

     45 SOUTH STREET, HOPKINTON, MA                          01748
(Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (508) 435-9001

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.
                                          [X] Yes    [ ] No

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

As of May 7, 1997, the registrant had 33,028,588 shares of common stock
outstanding.
<PAGE>   2
                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                       <C>
PART I.    FINANCIAL INFORMATION

           Item 1.    Financial Statements

                      Consolidated Balance Sheets - March 31, 1997 and December 31, 1996                   3
                                                                                                           
                      Consolidated Statements of Operations for the three months ended                     
                          March 31, 1997 and 1996                                                          4
                                                                                                           
                      Consolidated Statements of Cash Flows for the three months ended                     
                          March 31, 1997 and 1996                                                          5
                                                                                                           
                      Notes to Consolidated Financial Statements                                           6
                                                                                                           
                                                                                                           
           Item 2.    Management's Discussion and Analysis                                                 
                          of Financial Condition and Results of Operations                                 7


PART II. OTHER INFORMATION

           Item 1.    Legal Proceedings                                                                   11

           Item 2.    Changes in Securities                                                               11

           Item 3.    Defaults Upon Senior Securities                                                     11

           Item 4.    Submission of Matters to a Vote of Security Holders                                 11

           Item 5.    Other Information                                                                   11

           Item 6.    Exhibits and Reports on Form 8-K                                                    11


SIGNATURES
</TABLE>

                                        2

<PAGE>   3

                   CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                        March 31,        December 31,
                                                                                          1997              1996
                                                                                      -----------         -----------    
                                                                                      (unaudited)
ASSETS
CURRENT ASSETS:
<S>                                                                                <C>                  <C>          
  Cash and cash equivalents                                                        $  22,085,881        $  38,248,988
  Marketable securities                                                               24,061,228           11,826,266
  Accounts receivable                                                                  1,624,571            1,454,696
  Inventory                                                                            1,395,385            1,341,914
  Prepaid expenses and other                                                             443,013              208,886
                                                                                   -------------        -------------
    Total current assets                                                              49,610,078           53,080,750
                                                                                   -------------        -------------
PROPERTY, PLANT AND EQUIPMENT - net                                                   16,236,770           16,224,376
                                                                                   -------------        -------------
OTHER ASSETS:                                                                                                        
  Note receivable - officer                                                              350,000              350,000
  Patents and licensed technology - net                                                  393,855              401,629
  Deferred patent application costs - net                                              3,678,080            3,471,169
  Deposits and other                                                                     191,166              290,950
                                                                                   -------------        -------------
    Total other assets                                                                 4,613,101            4,513,748
                                                                                   -------------        -------------
TOTAL                                                                              $  70,459,949        $  73,818,874
LIABILITIES AND STOCKHOLDERS' EQUITY                                               =============        =============
CURRENT LIABILITIES:
  Lease obligations - current portion                                              $      55,279        $      53,532
  Accounts payable                                                                     1,946,439            2,830,356
  Accrued liabilities                                                                    498,159              561,562
  Accrued compensation                                                                 1,177,115            1,460,856
  Deferred contract revenue                                                            1,079,765
                                                                                   -------------        -------------
    Total current liabilities                                                          4,756,757            4,906,306
                                                                                   -------------        -------------
LEASE OBLIGATIONS                                                                      1,637,002            1,651,493
                                                                                   -------------        -------------
STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued
  Common stock, $.01 par value, 50,000,000 shares authorized,
    32,972,893 shares and 32,769,553 shares issued and outstanding
    at March 31, 1997 and December 31, 1996, respectively                                329,729              327,696
  Additional paid-in capital                                                         138,923,426          138,371,802
  Accumulated deficit                                                                (75,186,965)         (71,438,423)
                                                                                   -------------        -------------
    Total stockholders' equity                                                        64,066,190           67,261,075
                                                                                   -------------        -------------
TOTAL                                                                              $  70,459,949        $  73,818,874
                                                                                   =============        =============
</TABLE>











SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        3

<PAGE>   4




                   CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                  Three Months Ended
                                                      March 31,
                                            --------------------------------
                                                1997               1996
                                                ----               ----
                                                      (unaudited)
REVENUE:
<S>                                         <C>                 <C>         
  Research and development contracts        $  2,751,473        $  1,055,704
  Manufacturing contracts                        232,239             612,065
  License fees and royalties                                         101,584
  Interest and other                             663,225             270,441
                                            ------------        ------------
    Total revenues                             3,646,937           2,039,794
                                            ------------        ------------
COSTS AND EXPENSES:
  Research and development                     5,579,053           3,832,752
  Manufacturing contracts                        161,038             477,533
  General and administrative                   1,602,916           1,115,563
  Interest                                        52,472              54,802
                                            ------------        ------------
    Total costs and expenses                   7,395,479           5,480,650
                                            ------------        ------------
NET LOSS                                    $ (3,748,542)       $ (3,440,856)
                                            ============        ============
NET LOSS PER COMMON SHARE                          $(.11)              $(.12)
                                            ============        ============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING          32,853,617          29,027,234
                                            ============        ============
</TABLE>


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        4

<PAGE>   5
                   CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 Three Months Ended
                                                                      March 31,
                                                           --------------------------------
                                                               1997                1996
                                                               ----                ----
                                                                     (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                        <C>                 <C>          
  Net loss                                                 $ (3,748,542)       $ (3,440,856)
                                                           ------------        ------------
  Adjustments to reconcile net loss to net cash
   provided by (used for) operating activities:
    Depreciation and amortization                               490,639             607,405
    Compensation expense                                                             29,750
    Increase (decrease) in cash from:
      Accounts receivable                                      (169,875)            (77,554)
      Inventory and prepaid expenses                           (287,598)           (197,441)
      Accounts payable and accrued liabilities               (1,231,061)          1,043,348
      Deferred contract revenue                               1,079,765
                                                           ------------        ------------
        Total adjustments                                      (118,130)          1,405,508
                                                           ------------        ------------

  Net cash used for operating activities                     (3,866,672)         (2,035,348)
                                                           ------------        ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of marketable securities                        (12,552,675)           (540,313)
  Sales of marketable securities                                317,712           5,430,790
  Expenditures for property, plant and equipment               (420,497)           (435,190)
  Expenditures for patents                                     (281,672)           (212,550)
  Decrease (increase) in deposits and other                      99,784            (200,000)
                                                           ------------        ------------

  Net cash provided by (used for) investing activities      (12,837,348)          4,042,737
                                                           ------------        ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from sale of equity:
    Common stock - other                                        553,657             409,133
  Repayments of obligations under capital leases                (12,744)            (11,892)
                                                           ------------        ------------

  Net cash provided by financing activities                     540,913             397,241
                                                           ------------        ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS        (16,163,107)          2,404,630
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               38,248,988          11,917,779
                                                           ------------        ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                   $ 22,085,881        $ 14,322,409
                                                           ============        ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        5

<PAGE>   6

                   CREATIVE BIOMOLECULES, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


1. Opinion of Management - The accompanying consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
applicable to interim periods. These statements are condensed and do not include
all disclosures as required by generally accepted accounting principles. In the
opinion of management, the unaudited financial statements contain all
adjustments (all of which were considered normal and recurring) necessary to
present fairly the Company's financial position at March 31, 1997 and the
results of operations and cash flows for the three month periods ended March 31,
1997 and 1996. The financial statements should be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for the
year ended December 31, 1996.

Interim results are not necessarily indicative of results for a full year and
such results are subject to year-end adjustments and independent audit.

2. Earnings Per Share - In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards Number 128 "Earnings
per Share" ("SFAS 128") which changes the method of calculating earnings per
share ("EPS"). SFAS 128 requires the presentation of "basic" EPS and "diluted" 
EPS on the face of the income statement. Basic EPS is computed by dividing the 
net income available to common stockholders by the weighted average shares of
common stock. The calculation of diluted EPS is similar to basic EPS except
that the denominator includes dilutive common stock equivalents such as stock
options and warrants. The statement is effective for financial statements in
the fourth quarter of 1997. The Company will adopt SFAS 128 in the fourth
quarter of 1997, as early adoption is not permitted, and will restate at that
time EPS data for prior periods. If SFAS 128 had been in effect during the
current and prior period, basic EPS and diluted EPS would not have been
significantly different than primary EPS reported.



                                        6

<PAGE>   7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


GENERAL

           To date, most of the Company's revenues have been derived from
research and development payments and license fees under agreements with
collaborative partners. Beginning in January 1995, a significant portion of the
Company's revenues also were derived from contract manufacturing. The Company
anticipates that over the next several years its revenues will be derived
primarily from such collaborative agreements. The Company has been unprofitable
since its inception and expects to incur additional operating losses over the
next several years.

           The Company's research agreements with collaborative partners have
typically provided for the partial or complete funding of research and
development for specified projects and royalties payable to the Company in
exchange for licenses to market the resulting products. The Company is presently
a party to major research collaborations with Stryker Corporation ("Stryker") to
develop products for orthopedic reconstruction and with Biogen, Inc. ("Biogen")
to develop products for the treatment of renal disorders. Under the research
portion of the collaboration with Stryker, the Company supplies an OP-1 product
to Stryker for clinical trials and other uses, provides clinical support and
performs research work pursuant to work plans established periodically by the
two companies. The current work plan establishes research objectives and funding
through April 1998. In December 1996, the Company signed a Research
Collaboration and License Agreement with Biogen (the "Biogen Research
Agreement"). Under the research collaboration, the Company performs research
work pursuant to work plans established periodically by the two companies and
supplies OP-1 to Biogen for preclinical and clinical uses. Although the Company
is seeking and in the future may seek to enter into collaborative arrangements
with respect to certain other projects, there can be no assurance that the
Company will be able to obtain such agreements on acceptable terms or that the
costs required to complete the projects will not exceed the funding available
for such projects from the collaborative partners.

           The Company's manufacturing contracts provide for technical
collaboration and manufacturing for third parties at the Company's manufacturing
facility in Lebanon, New Hampshire and at the Company's research facility in
Hopkinton, Massachusetts. The Company is presently a party to a manufacturing
contract with Biogen (the "Manufacturing Contract") to produce several of
Biogen's protein-based therapeutic candidates through December 1997 for use in
Biogen's clinical trials. The Company agreed to provide Biogen with all
available cell culture and bacterial fermentation capacity within the
manufacturing facility, and Biogen agreed to pay the Company's costs associated
with such capacity, for approximately six months in each of the three years
beginning in January 1995. The companies have agreed that the supply of OP-1 to
Biogen pursuant to the Biogen Research Agreement during 1997 will satisfy
Biogen's 1997 obligations under the Manufacturing Contract. The companies also
agreed to extend the Manufacturing Contract for two years through 1999, with
Biogen having the option, but not the obligation, to use the manufacturing
facility for a mutually agreeable number of months in one of the two years.
Although the Company is seeking additional manufacturing contracts for available
cell culture and bacterial fermentation capacity, there can be no assurance that
the Company will be able to obtain such contracts on acceptable terms.

           Revenue is earned and recognized based upon work performed, upon the
sale or licensing of product rights, upon shipment of product for use in
preclinical and clinical testing or upon attainment of benchmarks specified in
collaborative agreements. The Company's results of operations vary significantly
from year to year and quarter to quarter and depend on, among other factors, the
timing of contract manufacturing activities and the timing of payments made by
collaborative partners. The timing of the Company's contract revenues may not
match the timing of the Company's associated product development expenses. As a
result, research and development expenses may exceed contract revenues in any
particular period. Furthermore, aggregate research and development contract
revenues for any product may not offset all of the Company's development
expenses for such product.

RESULTS OF OPERATIONS

           THREE MONTHS ENDED MARCH 31, 1997 AND 1996. The Company's total
revenues for the three month periods ended March 31, 1997 and 1996 were
$3,647,000 and $2,040,000, respectively. Research and

                                        7

<PAGE>   8
development contract revenues increased 161% to $2,751,000 for the three month
period ended March 31, 1997 from $1,056,000 for the three month period ended
March 31, 1996. This increase is primarily a result of the research activity
under the research collaboration with Biogen. The Company anticipates that
research and development contract revenues for each of the remaining quarters of
1997 will continue at amounts higher than the prior year primarily as a result
of the research activity under the research collaboration with Biogen.

            Manufacturing contract revenues for the three month period ended
March 31, 1997 reflect manufacturing for Biogen, on a pilot scale, conducted at
the Company's research facility in Hopkinton, Massachusetts. The Company
anticipates completing current pilot manufacturing for Biogen in the second     
quarter of 1997. Manufacturing contract revenues for the three month period
ended March 31, 1996 reflect manufacturing for Biogen conducted at the
Company's manufacturing facility in Lebanon, New Hampshire. The Company
anticipates using the manufacturing facility for the production of OP-1 for
Stryker, Biogen and the Company's own uses for a substantial portion of 1997.
Therefore, the Company does not anticipate significant contract manufacturing
revenues for each of the remaining quarters of 1997.

           License fees and royalties revenues of $102,000 for the three month
period ended March 31, 1996 resulted from licensing patent rights and know-how
associated with certain protein technology which is not central to the Company's
business.

           Interest revenues increased 146% to $663,000 for the three month
period ended March 31, 1997 from $270,000 for the three month period ended March
31, 1996. The increase is due to an increase in average funds available for
investment. In December 1996, under the Biogen Research Agreement and a
Restricted Stock Purchase Agreement, more fully discussed below, Biogen paid to
the Company a $10,000,000 license fee and made an $18,000,000 equity investment
in common stock.

           The Company's total costs and expenses, consisting primarily of
research and development expenses, increased 35% to $7,395,000 for the three
month period ended March 31, 1997 from $5,481,000 for the three month period
ended March 31, 1996. Research and development expenses increased 46% to
$5,579,000 for the three month period ended March 31, 1997 from $3,833,000 for
the three month period ended March 31, 1996. The Company used the manufacturing
facility in Lebanon, New Hampshire for the three month period ended March 31,
1997 for the production of OP-1 for Stryker, Biogen and the Company's own uses.
Costs associated with the production of OP-1 for Stryker, Biogen and the
Company's own uses are reported as research and development expenses. Also
contributing to the increase were staff increases and a corresponding increase
in purchases of laboratory supplies, services, recruiting and relocation
expenses. The Company anticipates that research and development expenses for
each of the remaining quarters of 1997 will continue at amounts higher than the
prior year primarily as a result of the research activity under the research
collaboration with Biogen.

           Cost of manufacturing contracts for the three month period ended
March 31, 1997 includes the costs associated with the manufacturing for Biogen,
on a pilot scale, conducted at the Company's research facility in Hopkinton,
Massachusetts. The Company anticipates completing current pilot manufacturing
for Biogen in the second quarter of 1997. Cost of manufacturing contracts
for the three month period ended March 31, 1996 includes the costs associated
with the manufacturing for Biogen conducted at the Company's manufacturing
facility in Lebanon, New Hampshire. The Company anticipates using the
manufacturing facility for the production of OP-1 for Stryker, Biogen and the
Company's own uses for a substantial portion of 1997. Costs associated with the
production of OP-1 for Stryker, Biogen and the Company's own uses will be
reported as research and development expenses.

           General and administrative expenses increased 44% to $1,603,000 for
the three month period ended March 31, 1997 from $1,116,000 for the three month
period ended March 31, 1996. The increase was due to increases in executive
staff and recruiting and relocation costs. The Company anticipates that general
and administrative expenses for each of the remaining quarters of 1997 will
continue at amounts higher than the prior year.

           Interest expense decreased 5% to $52,000 for the three month period
ended March 31, 1997 from $55,000 for the three month period ended March 31,
1996. The decrease was due to the repayment of obligations under capital leases.


                                        8

<PAGE>   9



           As a result of the foregoing, the Company incurred a net loss of
$3,749,000 for the three month period ended March 31, 1997 compared to a net
loss of $3,441,000 for the three month period ended March 31, 1996.

LIQUIDITY AND CAPITAL RESOURCES

           At March 31, 1997, the Company's principal sources of liquidity
consisted of cash and cash equivalents of $22,086,000, marketable securities of
$24,061,000 and a $15,000,000 unsecured line of credit from Biogen, as discussed
further below.

           The Company increased its investment in property, plant and equipment
to $28,879,000 at March 31, 1997 from $28,458,000 at December 31, 1996. The
Company currently plans to spend approximately $4,500,000 in the year ended
December 31, 1997 in leasehold improvements, equipment purchases and validation
expenses required to obtain FDA approval of the manufacturing facility and to
expand the Company's research, development and manufacturing capabilities. In
addition, as part of the Manufacturing Contract, Biogen financed the
construction of leasehold improvements to the Company's manufacturing facility
at an estimated total cost of $2,900,000 and is installing and financing certain
equipment with an estimated total cost of $2,400,000 for the Company, as
discussed further below.

           The Company's collaborative agreements with Stryker provide for
research payments to the Company and royalty payments to the nonseller from
sales of any OP-1 products. The Company also has the exclusive right to supply
Stryker's worldwide commercial requirements for OP-1 products for use in
orthopedic reconstruction. Under the research portion of the collaboration, the
Company supplies OP-1 products to Stryker for clinical trials and other uses and
provides clinical support and performs research work pursuant to work plans
established periodically by the two companies. In May 1996, the Company and
Stryker agreed to extend the research portion of the collaboration for two years
through April 1998. The Company estimates that the contract extension will
provide approximately $12,000,000 of revenue to the Company over the two year
period.

           In December 1996, the Company signed the Biogen Research Agreement to
collaborate on the development of the Company's morphogenic protein, OP-1, for
the treatment of renal disorders. Under the agreement, the Company granted to
Biogen exclusive worldwide rights to manufacture, market and sell OP-1 for the
treatment of renal disease. Biogen paid a $10,000,000 license fee in 1996 and
made an $18,000,000 equity investment in common stock at a premium over the
then-current market price per share. Biogen has guaranteed $10,500,000 in
research funding over the next three years, will pay up to an additional
$69,000,000 upon the attainment of certain milestones and make available a
$15,000,000 line of credit. The Biogen Research Agreement further provides for
the payment of royalties to the Company based on product sales. The Company may
draw upon the $15,000,000 line of credit over the next three years to fund the
research and development of small molecule products based on OP-1. Advances are
limited to $5,000,000 per year. Biogen received an exclusive option to obtain an
exclusive, worldwide license to OP-1 based small molecule products for the
treatment of renal disorders. In the event Biogen exercises its option, Biogen
will forgive the lesser of $10,000,000 or the principal amount outstanding under
the line of credit. The remaining principal, together with all accrued and
unpaid interest is due and payable five years from the date of the first advance
and may be repaid, at the Company's option, in either cash, common stock or
reduction of royalties due the Company from Biogen.

           In September 1994, the Company signed the three-year Manufacturing
Contract with Biogen to produce in the Company's manufacturing facility in
Lebanon, New Hampshire several of Biogen's protein-based therapeutic candidates
for use in Biogen's clinical trials. The contract covers the period from January
1995 through December 1997. As part of the research collaboration, the two
companies agreed to extend the Manufacturing Contract for two years through
December 31, 1999, with Biogen having the option, but not the obligation, to use
the manufacturing facility for a mutually agreeable number of months in one of
the two extension years. To enable the Company to meet its obligations under the
Manufacturing Contract, Biogen financed the construction of a 7,000 square foot
addition to the present facility for cGMP production using bacterial
fermentation at an estimated total cost of $2,900,000. The Company agreed to
reimburse Biogen for the construction costs and leasehold improvements at the
end of the contract term, including the extension, at an amount equal to
Biogen's construction costs less $300,000 and less all accumulated depreciation.
The reimbursement to Biogen is estimated to be no more than $2,100,000. Biogen
also agreed to lease equipment

                                        9

<PAGE>   10



to the Company for the operation of such portion of the facility and for cGMP
production using bacterial fermentation by the Company at an estimated total
cost of $2,400,000, as provided in an equipment lease agreement. The Company has
the option to purchase the equipment at the end of the extended lease term for
an amount equal to its then fair market value or for such other amount as is
negotiated by the two parties. Biogen currently plans to complete the
installation of the equipment and prepare the bacterial facility for operation
in 1997.

           The Company anticipates that its existing capital resources should
enable it to maintain its current and planned operations through 1999. The
Company expects to incur substantial additional research and development and
other costs, including costs related to preclinical studies and clinical
trials. The Company's ability to continue funding its planned operations beyond
1999 is dependent upon its ability to generate sufficient cash flow from
collaborative arrangements and manufacturing contracts, and in the future,
royalties on sales of the Company's products by the Company's collaborative
partners, and to obtain additional funds through equity or debt financings, or
from other sources of financing, as may be required. The Company is seeking
additional collaborative arrangements and also expects to raise funds through
one or more financing transactions, as conditions permit. In addition, the
Company is investigating the feasibility of raising capital through the
sale/leaseback or debt financing of some of its capital assets. Over the longer
term, because of the Company's significant long-term capital requirements, the
Company intends to raise funds when conditions are favorable, even if it does
not have an immediate need for additional capital at such time. If substantial
additional funding is not available, the Company's business will be materially
and adversely affected.

CAUTIONARY FACTORS WITH RESPECT TO FORWARD-LOOKING STATEMENTS

           This Form 10-Q contains forward-looking statements which are based on
management's current expectations and which involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed in
the forward-looking statements. The Company cautions investors that there can be
no assurance that the actual results or business conditions will not differ
materially from those projected or suggested in such forward-looking statements
as a result of various factors, including, but not limited to the following:
uncertainty as to timing of and the Company's ability to commercialize its
products; the Company's reliance on its lead product candidate and the Company's
lack of control over the clinical progress of several applications of its
products, which are controlled by the Company's collaborative partners; the
Company's reliance on current and prospective collaborative partners to supply
funds for research and development and to commercialize its products; intense
competition related to the research and development of morphogenic and other
proteins for various applications and therapies and the possibility that others
may discover or develop, and the Company may not be able to gain rights with
respect to, the technology necessary to commercialize its products; the
Company's lack of experience in commercial manufacturing and unproven ability to
manufacture products on a large scale; the Company's lack of marketing and sales
experience and the risk that any products that the Company develops may not be
able to be marketed at acceptable prices or receive commercial acceptance in the
markets that the Company expects to target; uncertainty as to whether there will
exist adequate reimbursement for the Company's products from government, private
health insurers and other organizations; and uncertainties as to the extent of
future government regulation of the Company's business. As a result, the
Company's future development efforts involve a high degree of risk.

                                       10

<PAGE>   11



PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           Not Applicable.


ITEM 2.    CHANGES IN SECURITIES

           In December 1994 and January 1995, the Company isssued warrants to
           purchase 1,130,000 shares of the Company's common stock. In February
           and March 1997, the Company issued a total of 159,611 shares of
           common stock, pursuant to the exercise of such warrants at an
           exercise price of $2.385 per share, with an aggregate purchase price
           for such warrant shares of $380,672. The Company issued these 
           securities without registration in reliance upon the exemption 
           provided by Section 4(2) of the Securities Act of 1933, since no 
           public offering was involved. No underwriters were involved in the 
           offer and sale of the securities.
        

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES.

           Not Applicable.


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

           Not Applicable.


ITEM 5.    OTHER INFORMATION

           Not Applicable.


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.

(a)        Exhibits

         Exhibit
         Number     Description
         ------     -----------

         10.50    Employment Agreement, dated January 13, 1997, between Cheryl
                  K. Lawton and the Registrant.

         10.51    Employment Agreement, dated February 18, 1997, between Steven
                  L. Basta and the Registrant

         27       Financial Data Schedule

(b)        Reports on Form 8-K.

           No reports on Form 8-K were filed during the three month period ended
March 31, 1997.

                                       11

<PAGE>   12
                                   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, in Hopkinton, Massachusetts, on May 14,
1997.

                               CREATIVE BIOMOLECULES, INC.



                               By: /s/Wayne E. Mayhew III
                                   ---------------------------------------------
                                      Wayne E. Mayhew III
                                      Vice President and Chief Financial Officer



                               By: /s/Susan B. Blanton
                                   ---------------------------------------------
                                      Susan B. Blanton
                                      Controller


<PAGE>   13



                                  EXHIBIT INDEX


Exhibit
Number   Description
------   -----------

10.50    Employment Agreement, dated January 13, 1997, between Cheryl K. Lawton
         and the Registrant.

10.51    Employment Agreement, dated February 18, 1997, between Steven L. Basta
         and the Registrant

27       Financial Data Schedule