<PAGE>

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                                 UNITED STATES

                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                  FORM 10-QSB

 (Mark One)

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

               For the quarterly period ended September 30, 2000

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

  For the transition period from ___________________ to ____________________

                        Commission file number 0-19724

                      PROTEIN POLYMER TECHNOLOGIES, INC.
       (Exact name of small business issuer as specified in its charter)


                Delaware                              33-0311631
     (State or other jurisdiction of       (IRS Employer Identification No.)
     incorporation or organization)


                10655 Sorrento Valley Road, San Diego, CA 92121
                   (Address of principal executive offices)

                                (858) 558-6064
                          (Issuer's telephone number)


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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 13, 2000, 18,528,750
shares of common stock were outstanding.

Transitional Small Business Disclosure Format (check one):  Yes___  No X
                                                                      ---

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                                       1
<PAGE>

                      PROTEIN POLYMER TECHNOLOGIES, INC.

                                  FORM 10-QSB

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                      Page No.
                                                                                                      --------
     <S>                                                                                              <C>
     PART I.        FINANCIAL INFORMATION

     Item 1.       Financial Statements (unaudited)

           Condensed Balance Sheets -
              September 30, 2000 and December 31, 1999..............................................      3

           Condensed Statements of Operations -
              For the Three Months and Nine Months ended September 30, 2000 and 1999
                and the period July 6, 1988 (inception) to September 30, 2000.......................      4

           Condensed Statements of Cash Flows - For the Nine Months ended
              September 30, 2000 and 1999
                and the period July 6, 1988 (inception) to September 30, 2000.......................      5

           Notes to Condensed Financial Statements..................................................      7

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


     PART II.       OTHER INFORMATION

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

                   Signature........................................................................     15
</TABLE>

                                       2
<PAGE>

                      PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                           Condensed Balance Sheets

<TABLE>
<CAPTION>
                                                                               September 30,        December 31,
                                                                                   2000                 1999
                                                                           -------------------------------------------
Assets                                                                          (unaudited)
<S>                                                                        <C>                    <C>
Current assets:
   Cash and cash equivalents                                                 $       958,676      $       155,692
   Other current assets                                                               57,030               49,266
                                                                           -------------------------------------------
Total current assets                                                               1,015,706              204,958

   Deposits                                                                           56,977               36,177
   Notes receivable from officers                                                    140,000              140,000
   Equipment and leasehold improvements, net                                         276,449              360,005
                                                                           -------------------------------------------
                                                                             $     1,489,132      $       741,140
                                                                           ===========================================
Liabilities and stockholders' equity Current liabilities:

   Accounts payable                                                          $       195,183      $       385,932
   Accrued employee benefits                                                          60,656               84,335
   Other accrued expenses                                                             43,989               17,118
   Current portion capital lease obligations                                          45,484               79,593
   Deferred revenue                                                                  333,333                    -
   Deferred rent                                                                     111,002               95,973
                                                                           -------------------------------------------
Total current liabilities                                                            789,647              662,951

Long-term portion deferred revenue                                                   416,667                    -
Long-term portion capital lease obligations                                                -               25,088

Stockholders' equity:
Convertible Preferred Stock, $.01 par value, 5,000,000 shares authorized,
   84,077 and 91,065 shares issued and outstanding at September 30, 2000
   and December 31, 1999, respectively; liquidation preference -
   $8,407,700 at September 30, 2000                                                8,062,272            8,761,072
Common stock, $.01 par value, 40,000,000 shares authorized, 18,528,750
   and 13,443,510 shares issued and outstanding at September 30, 2000
   and December 31, 1999, respectively                                               185,299              134,447
Additional paid-in capital                                                        31,405,057           28,403,077
Deficit accumulated during development stage                                     (39,369,810)         (37,245,495)
                                                                           -------------------------------------------
Total stockholders' equity                                                           282,818               53,101
                                                                           -------------------------------------------
                                                                             $     1,489,132      $       741,140
                                                                           ===========================================
</TABLE>

See accompanying notes.

                                       3
<PAGE>

                      PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                      Condensed Statements of Operations
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                                   For the period
                                                                                                                    July 6, 1988
                                                                                                                   (inception) to
                                            Three months ended                      Nine months ended                Sept. 30,
                                              September 30,                           September 30,
                                         2000               1999                  2000              1999                2000
                                  --------------------------------------------------------------------------------------------------
<S>                               <C>                <C>                  <C>                 <C>                <C>
Revenues:
   Contract revenue               $         103,333  $           2,320    $         593,240   $           2,320  $       4,950,525
   Interest income                           22,543             10,017               68,194              29,575          1,188,466
   Product and other income                       -             14,111                3,011              50,627            687,328
                                  --------------------------------------- -------------------------------------- -------------------
Total revenues                              125,876             26,448              664,445              82,522          6,826,319

Expenses:
   Research and development                 579,041            498,614            1,775,779           1,946,693         26,529,860
   Selling, general and
      administrative                        273,537            285,309            1,012,981           1,170,726         15,717,884
                                  --------------------------------------- -------------------------------------- -------------------
Total expenses                              852,578            783,923            2,788,760           3,117,419         42,247,744
                                  --------------------------------------- -------------------------------------- -------------------

Net loss                                   (726,702)          (757,475)          (2,124,315)         (3,034,897)       (35,421,425)
Undeclared, imputed and/or paid
   dividends on preferred stock              69,220             69,220              207,659             207,659          5,447,313
                                  --------------------------------------- -------------------------------------- -------------------

Net loss applicable to common
   shareholders                   $        (795,922) $        (826,695)   $      (2,331,974)  $      (3,242,556)    $  (40,868,738)
                                  ======================================= ====================================== ===================

Basic and diluted net loss per
   common share                   $           (0.04) $           (0.06)   $           (0.13)  $           (0.26)
                                  ======================================= ======================================

Shares used in computing basic
   and diluted net loss per
   common share                          18,503,655         13,367,249           17,404,729          12,280,147
                                  ==============================================================================
</TABLE>

See accompanying notes.

                                       4
<PAGE>

                      PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                      Condensed Statements of Cash Flows
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                   For the period
                                                                                                    July 6, 1988
                                                                     Nine months ended             (inception) to
                                                                        September 30,                 Sept. 30,
                                                                  2000               1999                2000
                                                          ------------------------------------------------------------
<S>                                                       <C>                  <C>                 <C>
Operating activities
Net loss                                                    $    (2,124,315)   $    (3,034,897)    $   (35,427,344)
Adjustments to reconcile net loss to net cash used for
   operating activities:
     Stock issued for compensation and interest                           -             18,000             128,815
     Interest expense associated with issuance of warrant                 -              2,700               2,700
     Depreciation and amortization                                  119,709            214,736           2,012,547
     Write-off of purchased technology                                    -                  -             503,500
     Deferred revenue                                               750,000                  -             750,000
     Deferred rent                                                   15,029                  -             111,002
     Changes in assets and liabilities:
       Deposits                                                     (20,800)              (800)            (56,977)
       Notes receivable from officers                                     -              1,000            (140,000)
       Other current assets                                          (7,763)            17,254             (57,029)
       Accounts payable                                            (190,749)          (407,051)            195,183
       Accrued employee benefits                                    (23,679)          (138,209)             60,656
       Other accrued expenses                                        26,871             16,233              43,989
                                                          ------------------------------------------------------------
 Net cash used for operating activities                          (1,455,697)        (3,311,034)        (31,872,958)

Investing activities
Purchase of technology                                                    -                  -            (570,000)
Purchase of equipment and improvements                              (36,154)           (26,100)         (1,846,968)
Purchases of short-term investments                                       -                  -         (16,161,667)
Sales of short-term investments                                           -                  -          16,161,667
                                                          ------------------------------------------------------------
Net cash provided by (used for) investing activities        $       (36,154)   $       (26,100)    $    (2,416,968)
</TABLE>

See accompanying notes.

                                       5
<PAGE>

                      PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                 Condensed Statements of Cash Flows, continued
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                              For the period
                                                                                               July 6, 1988
                                                                Nine months ended             (inception) to
                                                                   September 30,                 Sept. 30,
                                                             2000               1999                2000
                                                     ------------------------------------------------------------
<S>                                                  <C>                   <C>                <C>
Financing activities
Net proceeds from exercise of options and warrants,
   and sale of common stock                          $       2,354,032     $       939,754     $    19,891,698
Net proceeds from issuance and conversion of
   preferred stock                                                   -           2,074,595          14,290,160
Net proceeds from convertible notes and detachable
   warrants                                                          -                   -           1,068,457
Payment on capital lease obligations                           (59,197)            (62,443)           (243,286)
Payment on note payable                                              -            (150,000)           (242,750)
Proceeds from note payable                                           -             150,000             484,323
                                                     -------------------------------------------------------------
Net cash provided by financing activities                    2,294,835           2,951,906          35,248,602
                                                     -------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents           802,984            (385,228)            958,676

Cash and cash equivalents at beginning of period               155,692           1,383,148                   -
                                                     -------------------------------------------------------------
Cash and cash equivalents at end of period           $         958,676     $       997,920     $       958,676
                                                     =============================================================

Supplemental disclosures of cash flow information
Equipment purchased by capital leases                $               -     $             -     $       288,772
Interest paid                                                    6,124              16,592             111,787
Imputed dividend on Series E stock                                   -                   -           3,266,250
Conversion of Series D preferred stock to common
   stock                                                             -                   -           2,142,332
Conversion of Series E preferred stock to common
   stock                                                       698,800             913,750             514,950
Series D stock issued for Series C stock                                                             2,073,925
Series C dividends paid with Series D stock                          -                   -             253,875
Series D dividends paid with common stock            $               -     $             -     $       422,341
</TABLE>

See accompanying notes.

                                       6
<PAGE>

                      PROTEIN POLYMER TECHNOLOGIES, INC.
                         (A Development Stage Company)

                    Notes to Condensed Financial Statements
                                  (unaudited)

                              September 30, 2000


     1.  Basis of Presentation

     The condensed financial statements of Protein Polymer Technologies, Inc.
     (the "Company") for the three months and for the nine months ended
     September 30, 2000 and 1999 are unaudited. These financial statements
     reflect all adjustments, consisting of only normal recurring adjustments
     which, in the opinion of management, are necessary to state fairly the
     financial position at September 30, 2000 and the results of operations for
     the three months and the nine months ended September 30, 2000 and 1999. The
     results of operations for the nine months ended September 30, 2000 are not
     necessarily indicative of the results to be expected for the year ended
     December 31, 2000. For more complete financial information, these financial
     statements and the notes thereto should be read in conjunction with the
     audited financial statements included in the Company's Annual Report on
     Form 10-KSB for the year ended December 31, 1999, filed with the Securities
     and Exchange Commission.

     2.  Net Loss Per Share

     Net loss per share is computed using the weighted average number of common
     shares outstanding during the period. The loss figures used for this
     calculation recognize accumulated dividends on the Company's Series D and
     Series F Preferred Stock. Such dividends are payable when declared by the
     Board of Directors in cash or common stock.

     3.  Basic and Diluted Loss Per Share

     In accordance with FAS No. 128, the Company is required to present basic
     and diluted earnings per share if applicable. Basic and diluted earnings
     per share are determined based on the weighted average number of shares
     outstanding during the period. Diluted earnings per share also include
     potentially dilutive securities such as options and warrants outstanding
     and securities convertible into common stock.

     Both the basic and diluted loss per share for the three months and the nine
     months ended September 30, 2000 and 1999 are based on the weighted average
     number of shares of common stock outstanding during the periods. Since
     potentially dilutive securities have not been included in the calculation
     of the diluted loss per share for both periods as their affect is
     antidilutive, there is no difference between the basic and diluted loss per
     share calculations.

     4.  Revenue and Expense Recognition

     License fees and research and development contract revenues are recorded as
     earned based on the performance requirements of the contracts. If the
     research and development activities are not successful, the Company is not
     obligated to refund payments previously received. Milestone payments are
     recorded as revenue when received as they have not been refundable and the
     Company has no future performance obligations. Payments received in advance
     of amounts earned are recorded as deferred revenue. Research and
     development costs are expensed as incurred.

                                       7
<PAGE>

     5.  Note Receivable with Officer

     A loan for $140,000, secured by a pledge of stock, was made to an officer
     of the Company on April 16, 1997, solely to meet tax obligations arising
     from the exercise of a stock option. Interest accrues at the annual rate of
     8% on the unpaid principal balance. In July 1999, the loan term was
     extended until April 2005.

     6.  Exercise and Exchange of Series G Warrants

     During February 2000, holders of warrants issued in connection with the
     sale of Series G Preferred Stock exercised their warrants to purchase
     common stock which were due to expire in September, 2000. The exercise
     price was $0.50 per share. As an inducement to exercise the warrant early,
     the Company offered each holder a new one year warrant for a similar number
     of shares at an exercise price of $1.50 per share. As a result the Company
     raised $2.1 million (less expenses). The newly issued warrants will expire
     on the last day of February 2001.

     7.  Femcare Agreements

     On January 26, 2000, PPTI and Femcare Ltd. ("Femcare"), headquartered in
     Nottingham, Great Britain, executed three related agreements involving the
     grant of a license to Femcare to register and market PPTI's urethral
     bulking agent for the treatment of female stress urinary incontinence in
     Europe and Australia. In addition to the License and Development Agreement,
     PPTI agreed in a separate Supply Agreement to provide final product to
     Femcare, and if unable to do so, agreed to make the manufacturing methods
     and materials available to Femcare as specified in a separate Escrow
     agreement.

     In addition to agreeing to purchase the final product from PPTI for a
     defined percentage of the revenues received by Femcare from the sale of the
     incontinence product, Femcare paid PPTI an up front license fee of $1
     million in two installments and agreed to pay PPTI a royalty on revenues
     received from the sale of the incontinence product. The agreements specify
     the performance benchmarks and timelines for each party, the definition of
     yearly minimum royalties and minimum product purchases, and the methods and
     procedures for determining product manufacturing requirements. The license
     grant from PPTI to Femcare is for the greater of 20 years or the date upon
     which the last patent included within the license grant for the territories
     covered expires, subject to meeting various sales requirements, and is
     exclusive in the territories covered, subject to certain conditions being
     maintained. The parties agreed to cooperate extensively in the clinical
     testing and the registration of the product with the appropriate
     governmental authorities. These activities are scheduled to take place over
     a period of approximately three years. Accordingly, the Company has
     recorded the $1 million up front payment as deferred revenue, and is
     recognizing it as license revenue ratably over a period of three years. In
     the nine months ended September 30, 2000, the Company recognized
     approximately $250,000 of revenue related to this agreement.
                   --------

     8.  Sale of In Vitro Cell Culture Business to Sanyo Chemical Industries,
         Ltd.

     On February 18, 2000, PPTI and Sanyo Chemical Industries, Ltd. ("Sanyo") of
     Kyoto, Japan, executed an agreement involving the grant of a royalty-free
     license to Sanyo for exclusive worldwide rights to make and sell
     ProNectin(R) F and ProNectin(R) L and derivative products for in vitro cell
     culture and related applications. PPTI received net proceeds of $284,000
     from Sanyo for the issuance of the license, including assignment of the
     ProNectin(R) and SmartPlastic(R) trademarks and transfer of remaining
     product inventory. The agreement remains in effect until the last patent
     included within the license grant expires.

                                       8
<PAGE>

     9.  Liquidity

     The Company believes its existing available cash and cash equivalents as of
     September 30, 2000, plus contractual amounts receivable, is sufficient to
     meet its anticipated capital requirements until January 2001. Substantial
     additional capital resources will be required to fund continuing
     expenditures related to the Company's research, development, clinical
     trials, and product marketing activities. If adequate funds are not
     available, the Company will be required to significantly curtail its
     operating plans and may have to sell or license out significant portions of
     the Company's technology or potential products.

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

     Forward Looking Statements

     Certain statements contained or incorporated by reference in this Quarterly
     Report on Form 10-QSB constitute "forward-looking statements" within the
     meaning of the Private Securities Litigation Reform Act of 1995. Such
     forward-looking statements involve known and unknown risks, uncertainties
     and other factors which may cause actual results, performance or
     achievements of the company, or industry results, to be materially
     different from any future results, performance or achievements expressed or
     implied by forward-looking statements. Such risks and uncertainties
     include, among others, history of operating losses, raising adequate
     capital for continuing operations, early stage of product development,
     scientific and technical uncertainties, competitive products and
     approaches, reliance upon collaborative partnership agreements and funding,
     regulatory testing and approvals, patent protection uncertainties and
     manufacturing scale-up and required qualifications. While these statements
     represent management's current judgment and expectations for the company,
     such risks and uncertainties could cause actual results to differ
     materially from any future results suggested herein. The company undertakes
     no obligation to release publicly the results of any revisions to these
     forward-looking statements to reflect events or circumstances arising after
     the date hereof.

     General Overview

     Incorporated in 1988, Protein Polymer Technologies, Inc. has concentrated
     its research and development efforts on establishing a scientific and
     technical leadership position in the production and development of unique
     protein-based materials. The Company has identified biomedical market and
     product opportunities for further research and development that management
     believes will exploit the unique properties of the Company's technology to
     competitive advantage. The Company has been unprofitable to date, and as of
     September 30, 2000 has an accumulated deficit of $39,370,000.

     The Company's product candidates for surgical repair, augmentation and
     regeneration of human tissues are in various stages of research and
     development. Its more advanced programs are in the areas of bulking agents
     for soft tissue augmentation, particularly for use in urethral tissue for
     the treatment of female stress incontinence and in dermal tissue for
     cosmetic and reconstructive procedures. The Company currently is devoting
     the majority of its resources to the development and registration of these
     products, with the greatest emphasis on the incontinence product.

     In December 1999, the Company initiated human clinical testing of its
     urethral bulking agent for the treatment of female stress urinary
     incontinence. The August 1999 approval by the U.S. Food and Drug
     Administration ("FDA") of the Company's Investigational Device Exemption
     ("IDE")

                                       9
<PAGE>

     allows PPTI to test the safety and effectiveness of the incontinence
     product in women over the age of 40 who have become incontinent due to the
     shifting of their bladder or the weakening of the muscle at its base that
     controls the flow of urine, or both problems combined. The Company
     estimates that more than 2.5 million women begin to experience stress
     urinary incontinence in the United States each year. In most untreated
     cases, the problem becomes progressively more pronounced. Due to limited
     efficacy or invasiveness of current treatments, only a small proportion of
     the women experiencing stress urinary incontinence are clinically treated,
     relying instead on pads and plugs and the like that only address the
     symptoms. In contrast, PPTI's product is injected, typically in an
     outpatient procedure, into urethral tissue at the base of the bladder
     forming a solid implant that provides support to the muscles controlling
     the flow of urine. The Company believes that its product will prove to be
     easy for the physician to use, offer enduring effectiveness, and avoid most
     of the other limitations of urethral bulking products on the market or in
     development.

     In January 2000, PPTI established a strategic alliance with Femcare, Ltd.
     for the commercialization of the incontinence product in Europe and
     Australia. In the agreement, Femcare is responsible for clinical testing,
     regulatory approval, and product sales and marketing within these
     territories, and PPTI is responsible for product manufacturing. Contingent
     on successful clinical trials commercialization of the product in Europe is
     expected to begin more than a year before approval for marketing the
     product in the United States can be obtained. See also "Femcare Agreements"
     in the Notes to the Financial Statements. PPTI also is in discussions with
     several companies regarding the establishment of strategic alliances for
     commercializing the incontinence product in the United States and other
     markets outside the Femcare territories.

     In October, the Company submitted an IDE to the FDA to obtain approval to
     begin human clinical testing of its dermal bulking agent for use in
     cosmetic and reconstructive surgery applications for the correction of
     dermal contour deficiencies (facial lines, wrinkles, scars, etc.). In 1998,
     there were 2.8 million cosmetic facial procedures performed in the U.S.
     according to the American Academy of Cosmetic Surgery. The apparent reason
     most people, both male and female, have such procedures done is to improve
     their self-image. A popular procedures in the last decade has been the
     injection of bovine collagen, used to correct dermal "contour deficiencies"
     (frown lines, worry lines, wrinkles, crow's feet, facial scars, marionette
     lines, etc.). Today, several other materials are used in a similar manner.
     The procedure appeals to people because it provides a noticeable benefit
     with little recovery time and minimal risk of adverse effects. All that is
     required is a relatively short visit to the physician's office, usually
     with little delay in the resumption of normal activities. However, the
     acceptance of these products has been less than expected, probably due
     primarily to the reported short term durability of the cosmetic effect.

     PPTI is developing an injectable dermal augmentation product for the
     treatment of contour deficiencies due to aging and environmental exposure,
     disease such as acne and cancer, and surgery. Similar to its urinary
     incontinence product, the dermal product is based on one of the Company's
     patented silk-elastin polymers. Once injected into the skin and following
     physician manipulation for cosmetic effect, the solution irreversibly
     transforms into a pliable hydrogel, which the Company believes will yield a
     more pleasing and longer lasting cosmetic effect.

     PPTI's dermal augmentation product has completed preclinical testing and an
     Investigational Device Exemption (IDE) has been submitted to the FDA for
     approval to begin human clinical testing. Prior feasibility studies in
     animals have shown the product to be effective for contour correction, easy
     to use, biocompatible, non-immunogenic, resistant to migration, and more
     durable than products currently available.

     In addition, the tissue augmentation materials and technology underlying
     the incontinence and the dermal products have the potential to be effective
     and desirable in a number of other clinical applications. PPTI began
     studies to identify its most promising biomaterial formulations for use in
     these soft tissue augmentation products in 1996, devoted increasing
     resources through 1997, 1998

                                       10
<PAGE>

     and 1999, and at present is focused primarily on completing human clinical
     testing of the incontinence product and initiating clinical testing of its
     dermal product.

     The Company's first commercial products, ProNectin F and SmartPlastic, are
     used by biologists and cell culture laboratories, principally to grow
     mammalian cells for biomedical research purposes. In February 2000, the
     Company licensed the rights for the manufacture and sale of these products
     for use in in vitro cell culture, including the transfer of all existing
     inventory, to a third party. See also "Sale of In Vitro Cell Culture
     Business to Sanyo Chemical Industries, Ltd." in the Notes to the Financial
     Statements.

     The Company's other advanced product technology is in the area of tissue
     adhesives and sealants. Currently the Company's research and development in
     this area is focused on the repair of spinal discs for the treatment of
     lower back pain. The Company's strategy with most of its programs is to
     enter into collaborative development agreements with major medical product
     marketing and distribution companies. Although these relationships, to the
     extent any are consummated, may provide significant near-term revenues
     through up-front licensing fees, research and development reimbursements
     and milestone payments, the Company expects to continue incurring operating
     losses for the next several years.

     As of September 30, 2000, the Company had cash and cash equivalents
     totaling $959,000. The Company believes its available cash and cash
     equivalents and future contractual R&D payments would be sufficient to meet
     its anticipated capital requirements through January 2001. The Company will
     continue to attempt to raise additional funds for continuing operations
     through private or public offerings and collaborative agreements. See
     "Liquidity and Capital Resources" below for additional information and a
     description of the associated risks.

     To the extent sufficient resources are available, the Company continues to
     research the use of its protein polymers for other tissue repair and
     medical device applications, principally for use in tissue engineering
     matrices and drug delivery devices.

     PPTI is aggressively pursuing domestic and international patent protection
     for its technology, making claim to an extensive range of recombinantly
     prepared structural and functional proteins, methods for preparing
     synthetic repetitive DNA, methods for the production and purification of
     protein polymers, end-use products incorporating such materials and methods
     for their use. To date, the United States Patent and Trademark Office
     ("USPTO") has issued 19 patents to the Company, four of which have been
     issued in 2000. In addition, PPTI has filed corresponding patent
     applications in other relevant commercial jurisdictions.

     Results of Operations

     The Company received $103,000 in contract and licensing revenue for the
     three months ended September 30, 2000 and $593,000 for the nine months
     ended September 30, 2000 as compared to $2,000 contract and licensing
     revenue for the three months and nine months ended September 30, 2000. The
     increase in contract and licensing revenue primarily represents the
     amortized portion of an up front license payment of $1 million (being
     recognized ratably over a period of three years) from Femcare Ltd. for the
     commercial rights to PPTI's incontinence product in Europe and Australia,
     payments from Sanyo Chemical Industries Ltd. for the comprehensive license
     to PPTI's in vitro cell culture business and existing product inventory,
     and R&D payments from Perkin-Elmer for a development project. The lack of
     revenue in 1999 reflects primarily the termination of research and
     development reimbursements from various operating entities of the Johnson &
     Johnson Company, including Ethicon, Inc.

     Interest income was $23,000 for the three months and $68,000 for the nine
     months ended September 30, 2000 versus $10,000 and $30,000 for the same
     periods in 1999.

                                       11
<PAGE>

     The Company received no sales and licensing revenues from the Company's
     ProNectin(R) and SmartPlastic(R) products for the three months and $3,000
     for the nine months ended September 30, 2000 as compared to $14,000 and
     $51,000 respectively for the same periods in 1999. The Company incurred no
     cost of sales nor royalty payments for the three months or the nine months
     ended September 30, 2000, compared to no royalty expenses for the three
     month period and $12,000 for the nine month period ended September 30,
     1999. The decline in all of these items was due to the sale of this
     business to Sanyo Chemical Industries, Ltd. in February 2000.

     Research and development expenses for the three months ended September 30,
     2000 were $579,000 and $1,776,000 for the nine months ended September 30,
     2000, compared to $499,000 and $1,947,000 respectively for the same periods
     in 1999. The decrease for the nine month period was primarily attributable
     to downsizing reductions in personnel and expenditures implemented in June
     1999, and completion of external contracts and consulting services related
     to the Company's soft tissue augmentation program, including preclinical
     testing and preparation of the Investigational Device Exemption approved by
     the Food and Drug Administration ("FDA") in 1999 granting permission to
     begin human clinical testing. The increase in the three month period
     reflects increased costs incurred in clinical testing. The Company expects,
     in general, that its research and development, human clinical testing, and
     manufacturing expenses will increase over time if its incontinence product
     and other products in development successfully progress and additional
     capital is obtained.

     Selling, general and administrative expenses for the three months ended
     September 30, 2000 were $274,000, as compared to $285,000 for the same
     period in 1999, and were $1,013,000 for the nine months ended September 30,
     2000 as compared to $1,171,000 for the same period in 1999. These decreases
     were due primarily to the downsizing in 1999, and to a one year sublease of
     a portion of the Company's laboratory to a third party. The Company expects
     its selling, general and administrative expenses remain largely unchanged
     in the near term, but will increase in the future as support for its
     research and development and manufacturing efforts may require and to the
     extent additional capital is obtained.

     For the three months ended September 30, 2000, the Company recorded a net
     loss applicable to common shareholders of $796,000 or $0.04 per share
     compared to a loss of $827,000 or $0.06 per share for the same period in
     1999. For the nine months ended September 30, 2000, the Company recorded a
     net loss applicable to common shareholders of $2,332,000, or $0.13 per
     share compared to a loss of $3,243,000, or $0.26 per share for the same
     period in 1999. Also included in each of the three month periods of 2000
     and 1999 was $69,000, respectively, for undeclared dividends related to the
     Company's preferred stock, and for the nine month periods, the undeclared
     dividends were $208,000 for each 1999 and 2000.

     In general, there can be significant fluctuation in revenue from quarter to
     quarter due to variability in outside contract and licensing payments. In
     general, the Company expects to incur increasing operating losses in the
     future (to the extent additional capital is obtained), due primarily to
     increases in the Company's soft tissue augmentation program's development,
     manufacturing and business development activities. The Company's results
     depend on its ability to establish strategic alliances and generate
     contract revenues, increased research, development and manufacturing
     efforts, preclinical and clinical product testing and commercialization
     expenditures, expenses incurred for regulatory compliance and patent
     prosecution, and other factors.

     To date the Company believes that inflation and changing prices have not
     had a material effect on its continuing operations, although increasing
     utility costs may have some impact in future periods.

     Liquidity and Capital Resources

     As of September 30, 2000, the Company had cash and cash equivalents of
     $959,000 as compared to $156,000 at December 31, 1999. As of September 30,
     2000, the Company had working capital

                                       12
<PAGE>

     of $226,000 as compared to ($458,000) at December 31, 1999. The differences
     are due primarily to the completion in January 2000 of the strategic
     alliance with Femcare, Ltd., and in February 2000 from the sale of the in
     vitro cell culture business to Sanyo Chemical Industries, Ltd., and the
     receipt of $2,100,000 from the exercise of common stock warrants granted in
     association with the Series G Convertible Preferred Stock. The substantial
     difference between cash and working capital as of September 30, 2000 is
     partially due to $333,000 of deferred revenue remaining to be recognized in
     the remainder of 2000.

     The Company had no long-term debt obligations as of September 30, 2000,
     versus $25,000 of capital lease obligations as of December 31, 1999. For
     the nine months ending September 30, 2000, the Company's expenditures for
     capital equipment and leasehold improvements totaled $36,154 compared with
     $26,100 for the same period last year. The Company is expecting to increase
     its capital expenditures in the next few quarters (to the extent additional
     capital is obtained), as the Company improves existing space to expand
     capacity to meet materials manufacturing requirements for clinical testing.
     The Company may enter into additional capital lease arrangements if
     available at appropriate rates and terms.

     The Company believes its existing available cash and cash equivalents, in
     combination with anticipated contract research payments and revenues
     received from the transfer of clinical testing materials, will be
     sufficient to meet its anticipated capital requirements until January 2001.
     Substantial additional capital resources will be required to fund
     continuing expenditures related to the Company's research, development,
     manufacturing and business development activities. The Company believes
     there may be a number of alternatives to meeting the continuing capital
     requirements of its operations, including additional collaborative
     agreements and public or private financings. The Company is currently in
     discussions at various stages with several potential collaborative partners
     that, based on the results of various in vitro and in vivo product
     performance evaluations, could result in generating revenues in the form of
     license fees, milestone payments or research and development
     reimbursements. However, there can be no assurance that any of these
     fundings will be consummated in the necessary time frames needed for
     continuing operations or on terms favorable to the Company. If adequate
     funds are not available, the Company will be required to significantly
     curtail its operating plans and may have to sell or license out significant
     portions of the Company's technology or potential products.

                                       13
<PAGE>

                          PART II. OTHER INFORMATION



     Item 6.      EXHIBITS AND REPORTS ON FORM 8-K


     a.  Exhibits:

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

           27       Financial Data Schedule.


     b.  Reports on Form 8-K

         None.

                                       14
<PAGE>

                                   SIGNATURE

     In accordance with the requirements of the Exchange Act, the registrant
     caused this report to be signed on its behalf by the undersigned, thereunto
     duly authorized.

                                       PROTEIN POLYMER TECHNOLOGIES, INC.



     Date  November 13, 2000             By  /s/ J. Thomas Parmeter
           -----------------                 -----------------------
                                             J. Thomas Parmeter
                                             Chairman of the Board, Chief
                                             Executive Officer, President

     Date  November 13, 2000             By  /s/ Janis Y. Neves
           -----------------                 -------------------
                                             Janis Y. Neves
                                             Director of Finance, Controller
                                             and Assistant Secretary

                                       15
<PAGE>

                                 EXHIBIT INDEX

     Exhibit                                                     Sequentially
     Number      Description                                    Numbered Page
     ------      -----------                                    -------------

       27        Financial Data Schedule.

                                       16