<PAGE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                                   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
               JUNE 30, 1998 OR

               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---------      SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
               _____________________ TO _________________.


                            COMMISSION FILE NUMBER 0-20726


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

<TABLE>
<S>                                                   <C>
           DELAWARE                                             84-0894091
 (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                           Identification No.)

      6850 N. BROADWAY, SUITE G                                    80221
           DENVER, COLORADO                                      (Zip Code)
(Address of principal executive offices)
</TABLE>

                                    (303) 650-1200
                 (Registrant's telephone number, including area code)


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

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

<TABLE>
<S>                                           <C>
     COMMON STOCK $0.002 PAR VALUE                      18,523,918 
               (Class)                        (Outstanding at July 31, 1998)
</TABLE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>


                                   CORTECH, INC.

                                       INDEX

<TABLE>
<CAPTION>
PART I.   FINANCIAL INFORMATION                                            PAGE NO.
                                                                           --------
<S>                                                                        <C>
Item  1.       Financial Statements and Notes

               Balance Sheets -- 
                    June 30, 1998 and 
                    December 31, 1997....................................     3 

               Statements of Operations --
                    for the three and six months ended
                    June 30, 1998 and 1997...............................     4 

               Statements of Cash Flows --
                    for the six months ended 
                    June 30, 1998 and 1997...............................     5 

               Notes to Financial Statements.............................     6 

Item  2.       Management's Discussion and Analysis of 
               Financial Condition and Results of Operations.............     8 

Item  3.       Qualitative and Quantitative Disclosure about Market 
                    Risk.................................................    12 

PART II.  OTHER INFORMATION

Item  1.       Legal Proceedings.........................................    13 

Item  5.       Other Information.........................................    13 

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


SIGNATURE................................................................    15 
</TABLE>

                                       2
<PAGE>

                                     PART I

ITEM 1.  FINANCIAL STATEMENTS AND NOTES.

                                 CORTECH, INC.

                                 BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                  ASSETS

                                                                         JUNE 30, 1998    DECEMBER 31, 1997
                                                                         -------------    -----------------
                                                                          (Unaudited)
<S>                                                                      <C>               <C>
CURRENT ASSETS
    Cash and cash equivalents........................................      $   12,635         $   11,562
    Short-term investments (Note 3)..................................             --               3,841
    Prepaid expenses and other.......................................             169                308
                                                                           ----------         -----------
         Total current assets........................................          12,804             15,711
                                                                           ----------         -----------

PROPERTY AND EQUIPMENT, at cost
    Leasehold improvements...........................................           5,118              8,026
    Office furniture and equipment...................................           2,299              2,300
                                                                           ----------         -----------
                                                                                7,417             10,326
    Less -- Accumulated depreciation and amortization................          (7,194)            (9,592)
                                                                           ----------         -----------
                                                                                  223                734
                                                                           ----------         -----------
         Total assets................................................      $   13,027         $   16,445
                                                                           ----------         -----------
                                                                           ----------         -----------

                  LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable.................................................      $      286         $      600
    Accrued liabilities..............................................              87                162
    Accrued vacation and other compensation..........................             100                264
    Advances from corporate partners.................................             --                  36
                                                                           ----------         -----------
         Total current liabilities...................................             473              1,062
                                                                           ----------         -----------

STOCKHOLDERS' EQUITY
    Preferred stock, $.002 par value, 
      2,000,000 shares authorized, none issued.......................             --                 -- 
    Common stock, $.002 par value, 50,000,000 shares authorized 
      18,523,918 shares issued and outstanding.......................              37                 37
    Warrants.........................................................           1,077              1,077
    Additional paid-in capital.......................................          98,909             98,909
    Deferred compensation............................................             --                  (1)
    Accumulated deficit..............................................         (87,469)           (84,639)
                                                                           ----------         -----------
         Total stockholders' equity..................................          12,554             15,383
                                                                           ----------         -----------
           Total liabilities and stockholders' equity................      $   13,027         $   16,445
                                                                           ----------         -----------
                                                                           ----------         -----------
</TABLE>


               The accompanying notes to financial statements are an
                       integral part of these balance sheets.

                                       3
<PAGE>

                                 CORTECH, INC.


                            STATEMENTS OF OPERATIONS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                        FOR THE THREE MONTHS ENDED             FOR THE SIX MONTHS ENDED
                                                    ---------------------------------       ---------------------------------
                                                    JUNE 30, 1998       JUNE 30, 1997       JUNE 30, 1998       JUNE 30, 1997
                                                    -------------       -------------       -------------       -------------
                                                     (Unaudited)         (Unaudited)         (Unaudited)         (Unaudited)
<S>                                                 <C>                 <C>                 <C>                 <C> 
REVENUES
  Sponsored research and development (Note 4)
    Ono ......................................      $          --       $         738       $          --       $       2,183
    SB.........................................                22                 125                  22                 560
                                                    -------------       -------------       -------------       -------------
       Total revenues.........................                 22                 863                  22               2,743
                                                    -------------       -------------       -------------       -------------



EXPENSES
  Research and development.....................               150               1,705                 436               4,039
  General and administrative..................              1,498                 655               3,023               1,412
  Restructuring charge.........................               --                  665                 --                  665
                                                    -------------       -------------       -------------       -------------
       Total expenses .........................             1,648               3,025               3,459               6,116
                                                    -------------       -------------       -------------       -------------
         Operating loss........................            (1,626)             (2,162)             (3,437)             (3,373)
                                                    -------------       -------------       -------------       -------------
Interest income................................               183                 194                 379                 508
Gain on disposition of property and equipment.                 12                  --                 228                  --
                                                    -------------       -------------       -------------       -------------
NET LOSS......................................      $      (1,431)      $      (1,968)      $      (2,830)      $      (2,865)
                                                    -------------       -------------       -------------       -------------
                                                    -------------       -------------       -------------       -------------

  Basic net loss per share.....................     $       (0.08)      $       (0.11)      $       (0.15)      $       (0.15)
                                                    -------------       -------------       -------------       -------------
                                                    -------------       -------------       -------------       -------------

  Weighted average common shares
    outstanding................................        18,523,918          18,521,031          18,523,918          18,519,563
                                                    -------------       -------------       -------------       -------------
                                                    -------------       -------------       -------------       -------------
</TABLE>

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

                                       4
<PAGE>

                                 CORTECH, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    FOR THE SIX MONTHS ENDED
                                                               ---------------------------------
                                                               JUNE 30, 1998       JUNE 30, 1997
                                                               -------------       -------------
                                                                (Unaudited)         (Unaudited)
<S>                                                            <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss...................................................   $  (2,830)          $  (2,865)
  Adjustments to reconcile net loss 
   to net cash used in operating activities --
    Depreciation and amortization............................         429                 878
    Gain on disposition of equipment.........................        (102)                 -- 
    Research and compensation expense related to grant 
     of options, including amortization of deferred 
     compensation............................................           1                  22
    Decrease in prepaid expenses and other...................         139                 618
    Decrease in accounts payable.............................        (314)               (251)
    Decrease in advances from corporate partners.............         (36)               (764)
    (Decrease) increase in accrued liabilities, 
     accrued vacation and other compensation.................        (239)                261
    Decrease in unearned income..............................          --                (708)
                                                                 ---------          ----------
      Net cash used in operating activities..................      (2,952)             (2,809)
                                                                 ---------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment........................          --                 (40)
  Proceeds from sales of property and equipment..............         184                  21
  Purchases of short-term investments........................          (9)            (14,460)
  Sales of short-term investments............................       3,850              13,350
                                                                 ---------          ----------
      Net cash provided by (used in) investing activities....       4,025              (1,129)
                                                                 ---------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from issuance of common stock.....................          --                   4
                                                                 ---------          ----------
      Net cash provided by financing activities..............          --                   4
                                                                 ---------          ----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.........       1,073              (3,934)
CASH AND CASH EQUIVALENTS, beginning of period...............      11,562               7,792
                                                                 ---------          ----------
CASH AND CASH EQUIVALENTS, end of period.....................   $  12,635            $  3,858
                                                                 ---------          ----------
                                                                 ---------          ----------

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
  Note receivable from sale of property and equipment........   $     125            $     -- 
                                                                 ---------          ----------
                                                                 ---------          ----------
</TABLE>

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

                                       5
<PAGE>

                                 CORTECH, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                 JUNE 30, 1998

(1)   ORGANIZATION

     In December of 1997 Cortech announced that it had signed a definitive 
merger agreement with Biostar, Inc., a privately held diagnostics company 
based in Boulder, Colorado ("BioStar"). However, the merger agreement was 
mutually terminated by BioStar and Cortech on May 7, 1998, in order to allow 
both Cortech and BioStar to consider other alternatives.

(2)   SIGNIFICANT ACCOUNTING POLICIES

    The balance sheet at June 30, 1998 and the related statements of 
operations and cash flows for the three and six month periods ended June 30, 
1998 and 1997 are unaudited, but in management's opinion include all 
adjustments, consisting only of normal recurring adjustments, necessary for a 
fair presentation of such financial statements.  Interim results are not 
necessarily indicative of results for a full year.  The accompanying financial 
statements should be read in conjunction with the financial statements as of 
and for the year ended December 31, 1997 (included in the Company's 1997 
Annual Report on Form 10-K filed with the Securities and Exchange Commission).

    Certain items in the prior period have been reclassified to conform to 
the current presentation.

NEW ACCOUNTING PRONOUNCEMENTS

    In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per 
Share," which the Company adopted beginning with the year ended December 31, 
1997. SFAS No. 128 requires restatement of amounts previously reported as net 
loss per share. Application of SFAS No. 128 did not have an impact on 
previously reported net loss per share amounts.

    In March 1998, the Company adopted SFAS No. 130, "Reporting of 
Comprehensive Income".  SFAS No. 130 requires disclosure of comprehensive 
income which includes all changes in stockholders' equity except those 
resulting from transactions with owners. There were no significant differences 
between comprehensive and net loss for the three and six month periods ended 
June 30, 1998 and 1997.

(3)   SHORT-TERM INVESTMENTS 

    Under SFAS No. 115, "Accounting for Certain Investments in Debt and 
Equity Securities," the Company's short-term investments held as of December 
31, 1997, which consisted entirely of government securities, were classified 
as available-for-sale.  These securities matured on various dates through 
August 1997.

(4)   RESEARCH AND DEVELOPMENT AGREEMENTS

    During the first quarter of 1997, the Company received $1.5 million from 
Ono Pharmaceutical Co., Ltd. ("Ono") for work to be performed over the next six 
months (under an agreement signed in March of 1995 and amended in April 1997) 
to develop an oral elastase  inhibitor.  Of this amount, $1.4 million was 
recorded as unearned income in March 1997 and was recognized as revenue over 
the following six months (including $738,000 in the second quarter of 1997).  
Under the terms of the amended agreement, Ono assumed all responsibilities 
for research activities during the final six-month period of the 
collaborative project (which terminated on March 14, 1998).  As a result of 
this reallocation of responsibilities, Ono was not required to pay the 
Company $1.5 million in research funding to offset the cost that the Company 
would otherwise have incurred under the agreement during such final six month 
period.

                                       6
<PAGE>

(5)   LEGAL PROCEEDINGS

    BIOSTAR LITIGATION.  On February 27, 1998, a complaint was filed in the 
New Castle County, Delaware Court of Chancery naming the Company, the 
Company's directors and BioStar as defendants.  The complaint, filed by a 
stockholder of the Company, claims to be on behalf of a class of all the 
Company's stockholders and contends that the directors of the Company 
breached their fiduciary duties to the Company's stockholders when they 
unanimously approved the proposed combination with BioStar.  The complaint 
originally sought to enjoin the proposed combination with BioStar as well as 
the operation of the Company's stockholder rights plan and sought an order 
rescinding the proposed combination with BioStar upon its consummation as 
well as compensatory damages and costs.  The complaint was amended following 
termination of the proposed BioStar merger to seek to force an auction of the 
Company's assets and other relief. The Company believes that the claims are 
without merit and intends to vigorously defend against this suit.  Although 
there can be no assurances in this regard, the Company believes that the suit 
will have no material adverse effect on the Company's financial position or 
results of operations because the Company (i) believes that the claimant will 
not prevail on the merits and (ii) has insurance which it believes will cover 
the cost of defending this claim (except for a $75,000 deductible amount). 

    ASSET VALUE FUND LITIGATION.  Because the proposed combination with 
BioStar was terminated on May 7, 1998, the annual meeting of the Company 
scheduled to be held in conjunction with the stockholder vote on the BioStar 
transaction was not held.  Under Delaware law, any stockholder can seek a 
court action to require an annual meeting if a company has not held an annual 
meeting for a period of 13 months.  This period expired on June 28, 1998, and, 
on the following day, Asset Value Fund Limited Partnership, a Delaware limited 
partnership ("AVF"), filed an action in the Court of Chancery of the State of 
Delaware to compel the Company to hold an annual meeting of stockholders 
immediately.  Pursuant to a stipulation order entered into by the Company and 
AVF, and approved by the Court on July 16, 1998, the Company and AVF agreed 
and stipulated that the Company's annual meeting would be held on September 4, 
1998 with the record date set for July 10, 1998.

                                       7
<PAGE>

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

    THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH 
THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K AS WELL AS THE COMPANY'S 
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS QUARTERLY 
REPORT ON FORM 10-Q.  WHEN USED IN THIS DISCUSSION, THE WORD "EXPECTS" AND 
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH 
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL 
RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. SUCH RISKS AND 
UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS DISCUSSED BELOW AS 
WELL AS THE RISKS DISCUSSED IN THE SECTIONS ENTITLED "RISK FACTORS" AND 
"BUSINESS" IN THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K.  THE FORWARD 
LOOKING STATEMENTS CONTAINED HEREIN SPEAK ONLY AS OF THE DATE HEREOF. THE 
COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO RELEASE PUBLICLY 
ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN 
TO REFLECT ANY CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR 
ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT 
IS BASED.

GENERAL

     Cortech Inc. ("Cortech" or the "Company") is a biopharmaceutical company 
whose research and development efforts have focused primarily on bradykinin 
antagonists and protease inhibitors. These efforts have produced a technology 
portfolio which may have potential therapeutic application across a broad 
range of medical conditions. Cortech's strategy is to seek collaborative 
partners to conduct and fund future research and development on the components 
of its portfolio, although there can be no assurance that any particular 
agreement will be completed. Cortech's technology portfolio is comprised of 
the following:

BRADYKININ ANTAGONISTS

     Cortech believes that Bradycor-TM-, its lead bradykinin atagonist, and 
CP-0597, its lead second generation compound, have potential as 
novel therapies for the treatment of traumatic brain injury and stroke. 
Results from the Bradycor Phase II, placebo-controlled, 133-patient study 
conducted in North America by SmithKline Beecham ("SB"), under the terms of a 
collaboration announced in November of 1995, suggest that the compound may 
improve the outcome of patients with severe traumatic brain injury. 
That collaboration was terminated in March of 1997 when results from the 
acute phase of the study failed to demonstrate a statistically significant 
effect on intracranial pressure, the study's primary endpoint. When Cortech 
announced those results in 1997, the analysis of long-term functional outcome 
was still pending. That analysis was completed in collaboration with the 
American Brain Injury Consortium (ABIC) in August of 1997 and showed positive 
trends in functional outcome for patients treated with Bradycor which were 
statistically significant in the most severely injured patients. In addition, 
patients treated with Bradycor showed modest (but not statistically 
significant) positive trends in intracranial pressure and the requirement for 
other interventions to control intracranial pressure.

     Two manuscripts describing the positive effects of Bradycor in traumatic 
brain injury have been prepared for publication in peer-reviewed journals. 
One has been accepted for publication and the other will be submitted shortly.

     CP-0597 has shown significant neuroprotective effects in animal models 
of stroke. Results from preclinical experiments demonstrating the 
neuroprotective effects of CP-0597 were reported in the July 1997 issue of 
the journal STROKE.

PROTEASE INHIBITORS

     ELASTASE INHIBITORS

     Neutrophil elastase and related serine elastases have been implicated in 
a number of chronic diseases of the respiratory tract including chronic 
obstructive pulmonary disease and emphysema as well as certain skin diseases 
such as psoriasis and atopic dermatitis. 

     In March 1995, Cortech signed a three year agreement with Ono 
Pharmaceutical Co., Ltd. ("Ono") to develop an orally bioavailable neutrophil 
elastase inhibitor using Cortech's protease inhibitor research capabilities. 
Following the conclusion of the collaborative project on March 14, 1998, Ono 
notified Cortech that Ono had selected a compound for further evaluation 
(also indicating that Ono would further study the compound prior to 
considering it for advancment to full development in the Ono Territory of 
Japan, Korea, Taiwan and China).

                                       8
<PAGE>

Cortech retains rights outside of Ono's Territory to any compounds developed 
pursuant to the agreement with Ono.

     Cortech also has in its portfolio CE-1037, a parenterally-administered 
elastase inhibitor. The product was developed in collaboration with Hoechst 
Marion Roussel, Inc. ("HMRI") until December 1996 when HMRI terminated its 
agreement with Cortech and returned the rights to CE-1037 to Cortech. The 
compound had been advanced into Phase II development.

     Cortech has synthesized combined serine elastase inhibitors which have 
activity against neutrophil elastase as well as other elastases which are 
believed by the Company to be important in the pathophysiology of vascular 
diseases including restenosis following angioplasty and atherosclerosis. A 
lead compound for the combined serine elastase program has not yet been 
identified.

     OTHER PROTEASE TARGETS

     Cortech has also developed a proprietary technology that has the 
potential to be applied to the discovery and synthesis of inhibitors of a 
broader range of therapeutically interesting serine and cysteine proteases 
which are thought to play an important role in the pathophysiology of many 
conditions including viral diseases, vascular diseases and cancer.

     In an effort to conserve cash while still retaining its ability to 
realize value from its technology portfolio, the Company has undertaken a 
series of restructurings over the past four years. These restructurings have 
decreased the number of employees from more than 200 to fewer than 10. 
Throughout these restructurings, the Company has retained a core group of 
employees with expertise in drug discovery, research and development who are 
actively involved in seeking corporate partners for Cortech's technology.

     Alongside the restructuring of its workforce, the Company has also 
decommissioned its laboratories and sold most of its leasehold improvements 
and scientific and technical equipment. Although the Company has discontinued 
on-site research and development, it has continued focused research 
activities through collaborative arrangements with academic and medical 
institutions.

     In December 1997, Cortech announced that it had signed a definitive 
merger agreement with Biostar.

                                       9

<PAGE>

However, the merger agreement was mutually terminated by BioStar and Cortech 
on May 7, 1998, in order to allow both Cortech and BioStar to consider other 
alternatives.

RESULTS OF OPERATIONS

  REVENUES

    Revenues from research and development decreased from $863,000 in the 
second quarter of 1997 to $22,000 in the second quarter of 1998 and decreased 
from $2.7 million to $22,000 in the six month periods ended June 30, 1997 and 
1998, respectively. The decrease in revenues resulted primarily from an April 
1997 amendment to the Ono 

                                       10
<PAGE>

Agreement (defined below) with Ono, which terminated the obligation of Ono to 
make further research payments to the Company, and the discontinuation, as of 
March 1997, of the Company's collaboration with SB. The Company expects no 
further payments from Ono or SB.

    In the second quarter of 1997, the Company recognized as revenue $125,000 
received from SB for work performed in connection with Bradycor clinical 
trials and $738,000 from Ono for work performed in 1997 under a contract to 
develop an oral elastase inhibitor (the "Ono Agreement"). Under the terms of 
the Ono Agreement, as amended in April 1997, Ono assumed all responsibilities 
for research activities which were conducted during the final six months of 
the collaborative project (which terminated on March 14, 1998). As a result, 
Ono was not required to pay the Company the last scheduled $1.5 million in 
research funding to offset certain costs that the Company would otherwise 
have incurred.

  RESEARCH AND DEVELOPMENT 

    Expenses for research and development decreased from $1.7 million in the 
second quarter of 1997 to $150,000 in the second quarter of 1998 and 
decreased from $4.0 million in the six months ended June 30, 1997 to $436,000 
in the six months ended June 30, 1998. This decrease was due primarily to the 
cessation of on-site research and development activities by the Company in 
late 1997.

  GENERAL AND ADMINISTRATIVE

    General and administrative expenses increased from $655,000 in the second 
quarter of 1997 to $1.5 million in the second quarter of 1998 and increased 
from $1.4 million in the six months ended June 30, 1997 to $3.0 million in 
the six months ended June 30, 1998. The increase was due substantially to 
certain severance payments made to former employees, including the Company's 
former chief executive officer ($606,000), certain costs related to the 
proposed combination with BioStar that was terminated on May 7, 1998 
($328,000), and costs related to stockholder litigation ($185,000) with the 
remainder of the increase attributable to certain overhead costs that would 
otherwise have been allocated to research and development expenses had the 
Company's on-site research and development efforts not been ceased in late 
1997.

  NET LOSS

    The net loss for the second quarter ended June 30, 1998 decreased to $1.4 
million from $2.0 million for the quarter ended June 30, 1997 and decreased 
from $2.9 million in the six months ended June 30, 1997 to $2.8 million in the 
period ended June 30, 1998. The decrease was due principally to a decrease in 
research and development expenses offset in part by decreased revenues and 
increased general and administrative expenses. Cortech expects to continue to 
report losses in the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

    At June 30, 1998, the Company had cash, cash equivalents and short-term 
investments totaling $12.6 million, compared to $15.4 million at December 31, 
1997. The Company's net cash used in operating activities totaled $1.7 million 
and $3.0 million for the second quarter and six month period ended June 30, 
1998, respectively. Operating activities used $2.4 million and $2.8 million 
for the second quarter and six month period ended June 30, 1997, respectively. 
The Company's expenditures, net of depreciation and non-cash charges, 
decreased from $2.6 million in the second quarter of 1997 to $1.8 million in 
the second quarter of 1998 and decreased from $5.2 million in the six months 
ended June 30, 1997 to $3.1 million in the first half of 1998. This decrease 
reflects the cessation of on-site research and development activities by the 
Company in late 1997 and the effects of restructurings implemented by the 
Company in May and November 1997.

    In January 1998, the Company sold certain leasehold improvements for 
$150,000 in cash and a note receivable of $125,000 payable in July 1998 which 
resulted in a gain of $215,000. The note receivable was collected in July 
1998. There can be no assurances that any of the Company's remaining assets 
can be sold for book value, if at all.

                                       11

<PAGE>

    From its inception through June 30, 1998, the Company raised cash 
totaling $97.1 million from the sale of equity securities, including $33.6 
million in net proceeds from its November 1992 initial public offering and 
$37.7 million in net proceeds from its October 1993 follow-on public offering.

    The Company has experienced net losses and negative cash flows from 
operations each year since inception and has incurred an accumulated deficit 
of $87.5 million through June 30, 1998.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK.

    No information is presented for this Item (the Company is not presently 
required to prepare or provide this information pursuant to Instructions to 
Item 305 of Regulation S-K).

                                       12
<PAGE>

                                    PART II

ITEM 1.  LEGAL PROCEEDINGS.

    BIOSTAR LITIGATION.  On February 27, 1998, a complaint was filed in the 
New Castle County, Delaware Court of Chancery naming the Company, the 
Company's directors and BioStar as defendants.  The complaint, filed by a 
stockholder of the Company, claims to be on behalf of a class of all the 
Company's stockholders and contends that the directors of the Company breached 
their fiduciary duties to the Company's stockholders when they unanimously 
approved the proposed combination with BioStar.  The complaint originally 
sought to enjoin the proposed combination with BioStar as well as the 
operation of the Company's stockholder rights plan and sought an order 
rescinding the proposed combination with BioStar upon its consummation as well 
as compensatory damages and costs.  The complaint was amended following 
termination of the proposed BioStar merger to seek to force an auction of the 
Company's assets and other relief. The Company believes that the claims are 
without merit and intends to vigorously defend against this suit.  Although 
there can be no assurances in this regard, the Company believes that the suit 
will have no material adverse effect on the Company's financial position or 
results of operations because the Company (i) believes that the claimant will 
not prevail on the merits and (ii) has insurance which it believes will cover 
the cost of defending this claim (except for a $75,000 deductible amount). 

    AVF LITIGATION.  Because the proposed combination with BioStar was 
terminated on May 7, 1998, the annual meeting of the Company scheduled to be 
held in conjunction with the stockholder vote on the BioStar transaction was 
not held.  Under Delaware law, any stockholder can seek a court action to 
require an annual meeting if a company has not held an annual meeting for a 
period of 13 months.  This period expired on June 28, 1998, and, on the 
following day, AVF filed an action in the Court of Chancery of the State of 
Delaware to compel the Company to hold an annual meeting of stockholders 
immediately.  Pursuant to a stipulation order entered into by the Company and 
AVF, and approved by the Court on July 16, 1998, the Company and AVF agreed 
and stipulated that the Company's annual meeting would be held on September 
4, 1998 with the record date set for July 10, 1998.

ITEM 5.  OTHER INFORMATION.

    On July 13, 1998, the Nasdaq Stock Market, Inc. ("Nasdaq") Listing 
Qualifications Panel (the "Panel") notified the Company that, as of the close 
of business on such date, the Company's Common Stock ("Common Stock") would be 
delisted from the Nasdaq National Market.  Nasdaq's maintenance standard 
requires that the common stock of companies listed on the Nasdaq National 
Market must have a bid price of at least $1.00 per share, and the basis for 
the Panel's decision was that the bid price of the Common Stock was less than 
$1.00 per share.  As a result of the delisting, the Common Stock currently 
trades on Nasdaq's OTC Bulletin Board.

    With respect to the minimum bid price of $1.00 per share of the Company's 
Common Stock, the Company has proposed for consideration a reverse split of 
1-for-10 of the Company's Common Stock at the Company's 1998 Annual 
Stockholder Meeting (the "Annual Meeting") on September 4, 1998.

    Nasdaq's delisting of the Common Stock will have a number of adverse 
effects on the Company's stockholders.  Availability of current market price 
information for the Common Stock and news coverage of the Company will be 
limited.  Delisting may have the effect of restricting investors' interest in 
the Common Stock and may have a material adverse effect on the trading market 
and prices for the Common Stock as well as the Company's ability to issue 
additional securities or to secure additional financing.  Because of the 
adverse impact on the trading market of the Common Stock and the potential 
loss of effective trading markets, the volatility of the Common Stock may be 
increased.

    On July 23, 1998, the Company appealed Nasdaq's decision to delist the 
Common Stock to the Nasdaq Listing and Hearing Review Council (the "Review 
Council").  The basis for the Company's appeal is that the Company believes 
that the failure of the Common Stock to comply with Nasdaq's minimum $1.00 
per share bid price requirement will be 

                                       13
<PAGE>

cured by stockholder approval of the reverse split at the Annual Meeting.  
However, even if the reverse split is approved, there can be no assurance 
that the Company's appeal to the Review Council will be successful.  In 
addition, while the Company believes it currently meets the continued listing 
criteria for the Nasdaq National Market (other than with respect to the 
minimum bid price), even if the decision of the Review Council is favorable, 
there can be no assurance that the Company will meet Nasdaq's continued 
listing criteria in the future (whether as a result of failure to meet the 
minimum bid price requirement or other requirements imposed by Nasdaq).

     On July 24, 1998 Cortech announced that Joachim von Roy, John E. Repine, 
M.D., and Edward Finkelstein had been appointed to the Company's Board of 
Directors. The appointments filled the vacancies created by the resignations 
of three Directors, Charles Cohen, Ph.D., Donald Kennedy, Ph.D., and Allen 
Misher, Ph.D., who had planned to leave the Board upon consummation of the 
merger agreement with BioStar. In August of 1998 Larry Gold, Ph.D. was also 
appointed to Cortech's Board of Directors.

    On July 29, 1998, Nasdaq informed the Company that the Company would be 
permitted to submit information to the Review Council in connection with the 
Company's appeal until the close of business on September 23, 1998.  Nasdaq 
further indicated in its July 29, 1998 letter that the Review Council would 
issue a decision after the National Association of Securities Dealers Board of 
Governors had an opportunity to consider the delisting decision pursuant to 
NASD Rule 4880, an opportunity the Nasdaq indicated would likely occur at the 
December NASD Board of Governors meeting.

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

    a.  Exhibits

<TABLE>
<CAPTION>
      ITEM                DESCRIPTION
      ----                -----------
<S>                       <C>

      27.1                Financial Data Schedule

</TABLE>


     b.  Reports on Form 8-K

     On May 19, 1998 the Company filed a report on Form 8-K which discussed 
the departure of Kenneth R. Lynn from all positions with the Company and 
included as Exhibit 99.1 a press release dated May 18, 1998, announcing 
changes in the management of Cortech and Exhibit 99.2 the Amended Severance 
Arrangements between Cortech and Mr. Lynn.

     On May 29, 1998, the Company filed a report on Form 8-K which included 
as Exhibit 99.1 a letter dated May 28, 1998 from Bert Fingerhut, Chairman of 
the Board and Acting Chief Executive Officer of Cortech, to Paul O. Koether of 
Asset Value Fund Limited Partnership responding to certain demands made by 
Mr. Koether.

     On June 16, 1998 the Company filed a report on Form 8-K which included 
as Exhibit 99.1 a letter dated June 16, 1998 from Bert Fingerhut, Chairman of 
the Board and Acting Chief Executive Officer of the Company to Paul O. 
Koether of Asset Value Fund Limited Partnership discussing proposals to be 
voted on at the 1998 Annual Stockholder Meeting.

     The Company filed no other reports on Form 8-K during the quarter ended 
June 30, 1998.

                                       14
<PAGE>

                                   SIGNATURES


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

                                                      CORTECH, INC.

                                                      (Registrant)



Date:     August 14, 1998               By:       /s/ DIARMUID F. BORAN
      ----------------------                -----------------------------------
                                                     Diarmuid F. Boran
                                                  CHIEF OPERATING OFFICER
                                               ACTING CHIEF FINANCIAL OFFICER
                                            (PRINCIPAL ACCOUNTING AND FINANCIAL 
                                                         OFFICER)




                                       15