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: September 30, 1998
                                               ------------------

                                       OR

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

                          Commission File No.: 0-20726


                                  Cortech, Inc.
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Delaware                                             84-0894091
--------------------------------------                       -------------------
  (State or other jurisdiction of                             (I.R.S. Employer
   incorporation or organization)                            Identification No.)

                6850 N. Broadway, Suite G, Denver, Colorado 80221
               ---------------------------------------------------
                    (Address of principal executive offices)

                                 (303) 657-7102
                        ----------------------------------
                           (Issuer's telephone number)

                                       N/A
                 --------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

     Indicate  by check  mark  whether  the  registrant  (1) filed  all  reports
required to be filed by Section 13 or 15(d) of the  Exchange  Act of 1934 during
the past 12 months (or for such  shorter  period that the issuer 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 October 31, 1998, the issuer had 1,852,209  shares of its
common stock, par value $.002 per share, outstanding.



                                        
<PAGE>
PART I.   FINANCIAL INFORMATION

ITEM 1.   Financial Statements

<TABLE>
                                  CORTECH, INC.
                                 BALANCE SHEETS
                                 ($000 Omitted)


<CAPTION>

                                             September 30,         December 31,
                                                1998                  1997
                                           ----------------      ---------------
                                             (Unaudited)
<S>                                          <C>                   <C>
ASSETS
------

Current assets:
     Cash and cash equivalents                $ 11,632              $ 11,562
     Short-term investments                          -                 3,841
     Prepaid expenses and other                    132                   308
                                              --------              --------

          Total current assets                  11,764                15,711
                                              --------              --------

Property and equipment, at cost
     Leasehold improvements                      5,046                 8,026
     Office furniture and equipment              2,296                 2,300
                                              --------              --------
                                                 7,342                10,326
Less-Accumulated depreciation
  and amortization                           (   7,246)            (   9,592)
                                              --------              --------

      Net property and equipment                    96                   734
                                              --------              --------

          Total assets                        $ 11,860              $ 16,445
                                              ========              ========


LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
     Accounts payable                         $    145              $    600
     Accrued liabilities                           632                   426
     Advances from corporate partners                -                    36
                                              --------              --------

          Total current liabilities                777                 1,062
                                              --------              --------

Stockholders' equity:
     Preferred stock, $ .002 par value
       2,000,000 shares authorized,
       none issued                                   -                     -
     Common stock $.002 par value, 5,000,000
       shares authorized, 1,852,209 shares
       issued and outstanding                        4                    37
     Warrants                                    1,077                 1,077
     Additional paid-in capital                 98,752                98,909
     Deferred compensation                           -             (       1)
     Accumulated deficit                     (  88,750)            (  84,639)
                                              --------              --------

          Total stockholders' equity            11,083                15,383
                                              --------              --------

          Total liabilities and
            stockholders' equity              $ 11,860              $ 16,445
                                              ========              ========


                 See accompanying notes to financial statements.
                                                         
</TABLE>
<PAGE>


<TABLE>

                                  CORTECH, INC.

                            STATEMENTS OF OPERATIONS

                                   (UNAUDITED)
                      ($000 Omitted, except per share data)


<CAPTION>

                                                          Three Months Ended
                                                             September 30,    
                                                         ----------------------
                                                         1998             1997 
                                                        ------           ------
<S>                                                    <C>              <C>
Revenues:
   Sponsored research and development                   $    -           $  614
   Interest income                                         171              224
                                                        ------           ------
       Total revenues                                      171              838
                                                        ------           ------

Expenses:
   Research and development                                  -            1,381
   General and administrative                            1,452              629
   Restructuring charge                                      -              696
                                                        ------           ------
       Total expenses                                    1,452            2,706
                                                        ------           ------

Net loss                                               ($1,281)         ($1,868)
                                                        ======           ======

Basic net loss per share                               ($  .69)         ($ 1.01)
                                                        ======           ======

Weighted average shares outstanding                      1,852            1,852
                                                        ======           ======



                 See accompanying notes to financial statements.

</TABLE>
                                                        

<PAGE>


<TABLE>

                                  CORTECH, INC.

                            STATEMENTS OF OPERATIONS

                                   (UNAUDITED)
                      ($000 Omitted, except per share data)

<CAPTION>


                                                          Nine Months Ended
                                                            September 30,    
                                                        ----------------------
                                                        1998             1997 
                                                       ------           ------

<S>                                                   <C>              <C>
Revenues:
   Sponsored research and development                  $   22           $3,358
   Interest income                                        550              732
   Gain on disposition of property
     and equipment                                        228                -
                                                       ------           ------
       Total revenues                                     800            4,090
                                                       ------           ------

Expenses:
   Research and development                               436            5,421
   General and administrative                           4,475            2,041
   Restructuring charge                                     -            1,361
                                                       ------           ------
       Total expenses                                   4,911            8,823
                                                       ------           ------

Net loss                                              ($4,111)         ($4,733)
                                                       ======           ======

Basic net loss per share                              ($ 2.22)         ($ 2.56)
                                                       ======           ======

Weighted average shares outstanding                     1,852            1,852
                                                       ======           ======




                 See accompanying notes to financial statements.


</TABLE>
                                   

<PAGE>


<TABLE>

                                  CORTECH, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 ($000 Omitted)

<CAPTION>


                                                              Nine Months Ended
                                                                September 30,
                                                         --------------------------
                                                         1998                1997
                                                        -------             -------
  
<S>                                                    <C>                 <C>
Cash flows from operating activities:
   Net loss                                            ($ 4,111)           ($ 4,733)
   Adjustments:
     Depreciation and amortization                          527               1,312
     Gains on disposition of equipment                 (    228)                  -
     Research and compensation expense
       related to grant of options,
       including amortization of deferred
       compensation                                           1                  34
     Impairment of property and equipment                     -                 580
     Change in prepaid expenses and other assets            176                 440
     Change in accounts payable                        (    455)           (    436)
     Change in unearned income                                -            (  1,323)
     Change in advances from corporate partner         (     36)           (    843)
     Change in accrued liabilities and other                 16                  94
                                                        -------             -------
              Net cash used in operating
                activities                             (  4,110)           (  4,875)
                                                        -------             -------


Cash flows from investing activities:
   Purchases of property and equipment                        -            (     39)
   Sales of property and equipment                          339                  65
   Purchases of short-term investments                 (      9)           ( 15,922)
   Sales and maturities of short-term investments         3,850              20,847
                                                        -------             -------
              Net cash provided by investing
                activities                                4,180               4,951
                                                        -------             -------

Net increase in cash and cash equivalents                    70                  76

Cash and cash equivalents at beginning of period         11,562               7,792
                                                        -------             -------

Cash and cash equivalents at end of period              $11,632             $ 7,868
                                                        =======             =======



                    See accompanying notes to financial statements.

</TABLE>
                                                              
<PAGE>

                                 CORTECH, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           SEPTEMBER 30, 1998 and 1997
                                   (Unaudited)


1.   General
     -------

     The accompanying unaudited financial statements of Cortech, Inc. ("Cortech"
or the  "Company")  as of  September  30,  1998 and for the three and nine month
periods  ended  September  30, 1998 and 1997  reflect all  material  adjustments
consisting  of only  normal  recurring  adjustments,  which,  in the  opinion of
management,  are  necessary for a fair  presentation  of results for the interim
periods.  Certain information and footnote  disclosures required under generally
accepted  accounting  principles have been condensed or omitted  pursuant to the
rules and  regulations of the Securities and Exchange  Commission,  although the
Company  believes  that the  disclosures  are  adequate to make the  information
presented  not  misleading.   These  financial  statements  should  be  read  in
conjunction with the year-end financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997 as
filed with the Securities and Exchange Commission.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     Prior years' financial  statements have been reclassified to conform to the
current year's presentation.

     The  results  of  operations  for the three and nine  month  periods  ended
September 30, 1998 and 1997 are not necessarily  indicative of the results to be
expected for the entire year or for any other period.

2.   Organization
     ------------

     In December 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.  Following its Annual  Meeting
on September  4, 1998,  the Company  announced  on September  18, 1998 that four
nominees  of  Asset  Value  Fund  Limited   Partnership,   a  Delaware   limited
partnership,  ("AVF") had been elected to the Company's board of directors. Then
on September 21, 1998, the Company  announced  three of AVF's elected  nominees,
Paul O. Koether,  Mark W. Jaindl and John W. Galuchie,  Jr., had been elected to
the positions of chairman, vice chairman and president, respectively.

3.   Significant Accounting Policies
     -------------------------------

     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 ending December 31, 1998. 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.  However, all share amounts and per share data have been
restated to reflect a one-for-ten reverse stock split, effective as of the close
of business on September 22, 1998.

                                                         

<PAGE>



     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  income  and net loss for the three and nine month  periods  ended
September 30, 1998 and 1997.

4.   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
1998.

5.   Stockholders' Equity
     --------------------

     In the third quarter of 1998, the  stockholders  of the Company  approved a
one-for-ten  reverse stock split which was effective as of the close of business
on September  22, 1998.  As a result of this  reverse  stock split,  there was a
reclassification   from  common   stock  to   additional   paid-in   capital  of
approximately $33,000.

     Also in the third quarter of 1998,  the Board of Directors  authorized  the
redemption of all outstanding preferred share purchase rights issued pursuant to
the Rights Agreement. This redemption resulted in a charge to additional paid-in
capital of approximately $189,000,  which was accrued at September 30, 1998. The
redemption was paid in October, 1998.

     For  more  information  about  these  transactions  see  Part  II  -  OTHER
INFORMATION - Item 5. Other Information.


6.   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 during the second
and third quarters of 1997 (under an agreement  signed in March 1995 and amended
in April  1997) to  develop an oral  elastase  inhibitor.  Of the $1.5  million,
Cortech recognized  $886,000 as revenue in the first and second quarters of 1997
and  $614,000  in the third  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.

7.   Legal Proceedings
     -----------------

     BIOSTAR  LITIGATION.  On February 27,  1998,  a complaint  was filed in the
Court of Chancery of the State of Delaware,  naming the Company,  the  Company's
then current  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 then  current  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

<PAGE>



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. Prior management of the Company believed that
the  claims  are  without  merit.  Recently  elected  members  of the  Board  of
Directors,  who comprise a majority of the Board, have not determined the merits
of the claims nor  whether  they  would  have a material  adverse  effect on the
Company's financial position or results of operations.

     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, 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
stipulated  order entered into by the Company and AVF, and approved by the Court
on July  16,1998,  the  Company  and AVF agreed and the Court  ordered  that the
Company's annual meeting would be held on September 4, 1998 with the record date
set for July 10, 1998. This stipulated order ended this litigation. (See Part II
- OTHER  INFORMATION  Item 4. -  Submission  of  Matters  to a Vote of  Security
Holders.)


8.   Subsequent Event
     ----------------

     On November 4, 1998 the Company  and United  Therapeutics  Corp.,  ("UT") a
privately held pharmaceutical  company based in North Carolina,  entered into an
exclusive, worldwide product development and license agreement for the Company's
elastase inhibitor,  CE-1037, for the potential treatment of emphysema and other
diseases.  Under  the  exclusive  agreement,  UT will make an  up-front  license
payment of $250,000 to the Company and pay the future  costs of  developing  the
compound.   The  up-front  license  payment  was  received  by  the  Company  on
November 13,  1998.  The  agreement  also  provides  for the  Company to receive
milestone payments if the compound is successfully advanced in development and a
royalty on product sales should the compound be successfully commercialized.  It
is not expected that the agreement will result in significant revenues in either
the current or next fiscal year.

                                                     
<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.  At the same time,  the Company is seeking to redeploy its assets
into an operating business.

Results of Operations
---------------------

     Revenues
     --------
           
     Revenues from research and development decreased from $614,000 in the third
quarter  of 1997 to zero in the third  quarter of 1998 and  decreased  from $3.4
million  in the nine  months  ended  September  30,  1997 to $22,000 in the nine
months ended  September 30, 1998.  The decrease in revenues  resulted  primarily
from an  April  1997  amendment  to the Ono  Agreement  (defined  below),  which
terminated the obligation of Ono  Pharmaceutical  Company,  LTD. ("Ono") to make
further research payments to the Company, and the  discontinuation,  as of March
1997, of the Company's collaboration with SmithKline Beecham ("SB"). The Company
expects no further payments from Ono or SB.

     In the third quarter of 1997,  the Company  recognized as revenue  $614,000
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.



<PAGE>



     Interest income was $171,000 and $224,000 for the  quarters ended September
30, 1998 and 1997,  respectively  and  $550,000 and $732,000 for the nine months
ended September 30,1998 and 1997, respectively. Lower invested balances combined
with lower yields on investments accounted for the decreases.

     Gains on  disposition  of property  and  equipment  relating to the sale of
certain  leasehold  improvements were $228,000 and zero in the nine months ended
September 30, 1998 and 1997,  respectively.  No gains on disposition of property
and  equipment  were  realized in the three months ended  September 30, 1998 and
1997.


Research and Development
------------------------

     Expenses for research and  development  decreased  from $1.4 million in the
third quarter of 1997 to zero in the third  quarter of 1998 and  decreased  from
$5.4 million in the nine months ended September 30, 1997 to $436,000 in the nine
months  ended  September  30,  1998.  The  decreases  were 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 $629,000 in the third
quarter of 1997 to $1.5 million in the third  quarter of 1998.  This increase of
approximately  $823,000 was primarily due to the following  expenses incurred in
the three months ended  September  30, 1998:  Directors  and Officers  Liability
Run-Off Policy, approved by the prior board of directors,  $198,000; legal fees,
$60,000;  expenses,   including  additional  legal  fees  of  $100,000  for  the
solicitation of proxies in connection  with the Annual Meeting of  Stockholders,
$228,000;  expenses  relating  to  decomposition  activities  in  the  Company's
laboratories,  $96,000;  and  consulting  fees  and  expenses  paid to a  former
director (see Part II - OTHER INFORMATION Item 5. - Other Information), $45,000.
For the nine  months  ended  September  30,  1998,  general  and  administrative
expenses  increased  to $4.5  million from $2.0 million in the nine months ended
September  30,  1997.  This  increase  of  approximately  $2.4  million  was due
primarily to the expenses  described above, as well as the following:  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 quarter  ended  September  30, 1998  decreased to $1.3
million from $1.9 million for the quarter ended September 30, 1997 and decreased
from $4.7 million in the nine months ended September 30, 1997 to $4.1 million in
the nine months ended  September 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.


<PAGE>


Liquidity and Capital Resources
-------------------------------

     At September 30, 1998 and December 31, 1997,  the Company had cash and cash
equivalents of $11.6 million.  Cash equivalents consist of debt instruments with
an  original  maturity  of  less  than  three  months  and  include   government
obligations  or  investments   collateralized  by  government  obligations.   At
September  30, 1998 the Company had no short-term  investments  compared to $3.9
million at December 31, 1997.  Net cash used in  operating  activities  was $4.1
million and $4.9 million in the nine months ended  September  30, 1998 and 1997,
respectively. In 1998, the net use of cash was attributable primarily to the net
loss and change in accounts payable, offset by depreciation and amortization. In
1997,  the net use of cash resulted  primarily  from the net loss and changes in
unearned income and advances from the corporate partner,  offset by depreciation
and amortization. The Company's expenditures are decreasing due to the cessation
of on-site  research and development  activities by the Company in late 1997 and
the effects of restructurings implemented in May and November of 1997.

     Cash provided by investing activities was $4.2 million and $5.0 million for
the nine months  ended  September  30, 1998 and 1997,  respectively.  In January
1998, the Company sold certain leasehold improvements for $150,000 in cash and a
note receivable of $125,000 payable and collected in July 1998 which resulted in
a gain of  $215,000.  In  addition,  various  other assets were sold in the nine
months ended September 30, 1998. Total cash received from the sale of all assets
in this  period was  $339,000  and these sales  resulted  in gains of  $228,000.
Although  the  Company  is seeking to sell  additional  assets,  there can be no
assurances  that  any of the  Company's  remaining  assets  can be sold for book
value, if at all.

     From its  inception  through  September 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
$88.8 million through  September 30, 1998.  These  expenditures  have produced a
technology portfolio which may have potential  therapeutic  application across a
broad  range of medical  conditions.  Cortech  continues  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.  At the same  time,  the  Company  is  seeking to
redeploy its assets into an operating business.


Item 3.   Quantitative and Qualitative 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).

                                                      
<PAGE>



PART II - OTHER INFORMATION


Item 1.   Legal Proceedings
          -----------------


     BIOSTAR  LITIGATION.  On February 27,  1998,  a complaint  was filed in the
Court of Chancery of the State of Delaware,  naming the Company,  the  Company's
then current  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 then  current  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. Prior management of the Company believed that
the  claims  are  without  merit.  Recently  elected  members  of the  Board  of
Directors,  who comprise a majority of the board, have not determined the merits
of the claims nor  whether  they  would  have a material  adverse  effect on the
Company's financial position or results of operations.

     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, 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 stipulated
order entered into by the Company and AVF, and approved by the Court on July 16,
1998, the Company and AVF agreed and the Court ordered that the Company's annual
meeting would be held on September 4, 1998 with the record date set for July 10,
1998. This stipulated order ended this litigation. (See Item 4 below.)

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

     The Company held its Annual Meeting of  Stockholders  on September 4, 1998.
The following is a tabulation of the voting  results for each item  submitted to
the stockholders:

     1.   Votes cast for the election of four Directors:


<TABLE>
<CAPTION>

                                         In Favor                 Withheld
                                        ----------               ----------
        <S>                             <C>                       <C>
        Paul O. Koether                 7,086,990                  40,174
        Mark W. Jaindl                  7,086,990                  40,174
        James L. Bicksler               7,085,990                  41,174
        John W. Galuchie, Jr.           7,086,990                  40,174

        Lawrence M. Gold                7,025,146                 702,025
        Joachim von Roy                 7,028,894                 698,277
        John P. Papp                    7,008,894                 718,277
        John C. Cheronis                7,028,471                 698,700

</TABLE>

<PAGE>

     2.   To approve an  amendment to the Company's Certificate of Incorporation
          to provide for a one-for-ten reverse stock split:

              FOR                       AGAINST                    ABSTAIN
              ---                       -------                    -------
              14,172,905                608,610                    72,820


     3.   To  amend  Article  IX,  Section  1  of  the  Company's Certificate of
          Incorporation  to  provide  that  the  number of  directors  shall  be
          set by the Board of Directors:

              FOR                       AGAINST                    ABSTAIN
              ---                       -------                    -------
              7,047,681                 7,755,714                  50,940


     4.   To  ratify  the  appointment  of  Arthur Andersen  LLP  as independent
          auditors for the year ended December 31, 1998:

              FOR                       AGAINST                    ABSTAIN
              ---                       -------                    -------
              14,630,719                176,666                    46,950


     5.   To  amend  Article 3,  Section 3.1  of the Company's Bylaws to set the
          number of  directors to serve on the Board of Directors at seven:
          

              FOR                       AGAINST                    ABSTAIN
              ---                       -------                    -------
              9,008,512                 5,823,981                  21,842


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  standards
require,  among other things,  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 the Over-the-Counter Bulletin Board.

     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 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.

     With  respect to the minimum bid price of $1.00 per share of the  Company's
Common Stock, the Company's stockholders approved a one-for-ten reverse split of
the Company's Common Stock at the 1998 Annual  Stockholder  Meeting (the "Annual
Meeting") on September 4, 1998.





<PAGE>



     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 was that the Company believed that
the failure of the Common Stock to comply with Nasdaq's  minimum $1.00 per share
bid price  requirement  would be cured by  stockholder  approval  of the reverse
split at the  Annual  Meeting.  However,  even  though  the  reverse  split  was
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 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 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.  Nasdaq indicated this review would likely occur at the December NASD
Board of Governors  meeting.  The Company submitted the required  information to
the Review Council in a timely fashion.

     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 September 2, 1998, the Company  announced  retaining  Joachim von Roy, a
director of the Company at that time, and the former president of  Bristol-Myers
Squibb,  Europe,  to establish a new company in Germany,  based on the Company's
protease inhibitor  technology.  The Company has paid $45,000 in connection with
this  arrangement.  On  November  11,  1998,  all  activities  relating  to this
agreement were suspended.

     On  September  20,  1998,  the Company  announced  the  election of Paul O.
Koether, Mark W. Jaindl and John W. Galuchie, Jr. as chairman, vice chairman and
president,  respectively.  The Company also announced that it would  implement a
one-for-ten  reverse stock split  previously  approved by the stockholders as of
the close of business on September 22, 1998 and that the  Company's  shareholder
rights plan would be eliminated effective immediately.

     On September 29, 1998, the Board of Directors  authorized the redemption of
all  outstanding  preferred  share purchase rights issued pursuant to the Rights
Agreement,  dated  as of  June  13,  1995,  between  the  Company  and  American
Securities  Transfer,  Inc.,  as  Rights  Agent,  effective  as of the  close of
business on October 13, 1998, with the redemption price of $.01 ($.10 on a split
adjusted  basis) per right to be paid in cash on October 14, 1998 to the holders
of record of Common  Stock of the Company as of the close of business on October
13, 1998.



<PAGE>



ITEM 6.   Exhibits and Reports on Form 8-K.
          ---------------------------------

     a.  Exhibits

          27.     Financial Data Schedule for the nine months ended September
                  30, 1998.


     b.  Reports on Form 8-K

     On July 15,  1998,  the Company  filed a report on Form 8-K stating that on
July 13, 1998, the Company received a letter from The Nasdaq Stock Market,  Inc.
("Nasdaq") stating that, effective as of the close of business on July 13, 1998,
Cortech Common Stock had been delisted from the Nasdaq National  Market.  A copy
of the Company's press release  announcing the delisting of Cortech Common Stock
from the Nasdaq National Market was attached as Exhibit 99.1.

     On  September  2,  1998,  the  Company  filed a report  on Form  8-K  which
announced  retaining  Joachim  von Roy, a director of the Company and the former
president  of  Bristol-Myers  Squibb,  Europe,  to  establish  a new  company in
Germany,  based on the Company's protease  inhibitor  technology and included as
Exhibit 99.1, was a copy of the press release discussing the arrangement.

     On  September  18,  1998,  the  Company  filed a report  on Form 8-K  which
announced  that four nominees of Asset Value Fund Limited  Partnership  had been
elected to the Company's board of directors.  In addition, the Company announced
that a proposal to effect a one-for-ten reverse stock split had been approved by
the stockholders and that implementation of the split would be considered by the
new Board of Directors.  Stockholders  also  approved a stockholder  proposal to
increase  the size of the Board of  Directors  from five to  seven,  defeated  a
proposal to empower  the Board of  Directors  to set the size of the Board,  and
approved  the  appointment  of Arthur  Andersen LLP as the  Company's  auditors.
Attached as Exhibit 99.1 was the Company's  press  release  dated  September 17,
1998.

     On  September  21,  1998,  the  Company  filed a report  on Form 8-K  which
announced the election of Paul O. Koether,  Mark W. Jaindl and John W. Galuchie,
Jr. as chairman,  vice chairman and  president,  respectively.  The Company also
announced that it would implement a one-for-ten  reverse stock split  previously
approved by  stockholders  as of the close of business on September 22, 1998 and
that  the  Company's  shareholder  rights  plan  would be  eliminated  effective
immediately,  resulting in a payment of $.01 ($.10 on a split adjusted basis) to
stockholders.  Attached as Exhibit 99.1 was the  Company's  press  release dated
September 20, 1998.

     On October 5, 1998,  the Company filed a report on Form 8-K stating that on
September  29,  1998,  the Board of  Directors  of the  Company  authorized  the
redemption of all outstanding preferred share purchase rights issued pursuant to
the  Rights  Agreement,  dated as of June 13,  1995,  between  the  Company  and
American Securities Transfer,  Inc., as Rights Agent,  effective as of the close
of business on October 13, 1998,  with the  redemption  price of $.01 ($.10 on a
split  adjusted  basis) per right to be paid in cash on October  14, 1998 to the
holders of record of Common  Stock of the Company as of the close of business on
October  13,  1998.  A copy of the letter  that was to be sent to  Stockholders,
dated October 14, 1998,  relating to the redemption of preferred  share purchase
rights was attached as an exhibit.



                                                    
                                  
<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.




Date:      November 16, 1998                           /s/ Paul O. Koether   
      -------------------------                      -------------------------
                                                     Paul O. Koether
                                                     Chairman of the Board
                                                     and Chief Executive Officer



Date:      November 16, 1998                           /s/ Sue Ann Itzel   
      -------------------------                      -------------------------
                                                     Sue Ann Itzel
                                                     Treasurer
                                                     (Principal Accounting and
                                                      Financial Officer)