SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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,
2000, 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 0-12081

           AQUILA BIOPHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware                                 04-3307818
(State or other Jurisdiction of       (I.R.S. Employer
Incorporation or Organization)     Identification No.)

175 Crossing Boulevard, Framingham, MA       01702
(Address of Principal Executive Offices)   (Zip Code)

(508) 628 - 0100
(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 ____.

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Indicate by check mark whether the registrant
has filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Securities
exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes _X__ No ___

APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of
each of the issuer's classes of common stock, as of
the latest practicable date.

As of November 10, 2000
Common Stock Outstanding 8,626,482

AQUILA BIOPHARMACEUTICALS, INC.
Form 10-Q, September 30, 2000

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements     Page Number

Consolidated Balance Sheets as of September
30, 2000 and December 31,1999  ......................3

Consolidated Statements of Operations and
Comprehensive
Income for three and nine month periods ended
September 30, 2000 and 1999     .....................4

Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 2000
and
1999      ...........................................5

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

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

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings ........................ 11

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


SIGNATURES..........................................14




Item 1 - Financial Statements
Aquila Biopharmaceuticals, Inc.
Consolidated Balance Sheets
(unaudited)
(in thousands)

Assets                       	      9/30/00	            12/31/99

Current Assets:
 Cash and cash equivalents        	$  1,972           	$     524
 Marketable securities      	         4,486           	    6,493
 Receivables			                         930           	      637
 Inventories                      	     666                		498
 Prepaid expenses & other
 current assets 	                       175	                 280
       Total current assets  	        8,229           	    8,432

Investments                     			     244                		244
Property, Plant, and Equipment,
 Net   				                           5,656           	    6,191
Patents and Purchased Technology,
 Net   				                              19	                	 47
Other Assets     			                    844	                 828
       Total Assets               	$ 14,992           	$  15,742

Liabilities & Shareholders' Equity
Current Liabilities:
  Accounts payable                	$    366                $	554
  Accrued professional fees  	          103	                	165
  Other accrued expenses  	           1,393           	      884
  Current maturities of long-
  term debt         		                1,360           	    1,577
     Total Current Liabilities        3,222	               3,180
Deferred Revenue   		                   150                		150
Long Term Debt 			                    1,728           	    2,607
       Total Liabilities    	         5,100	               5,937

Shareholders' Equity:
  Preferred stock, authorized:
   5,000,000 shares, none issued          0                    0
  Common stock, par value: $.01 per
   share, authorized: 30,500,000
   shares, issued: 8,607,748 at
   September 30, 2000 and 7,888,446
   at December 31, 1999			                86               		 79
  Treasury Stock       		                (34)	              	(34)
  Additional paid in capital 	        145,716	            141,802
  Accumulated other comprehensive
  income				                               27          	      426
  Accumulated Deficit                (135,903)         	 (132,468)
   Total Shareholders' Equity           9,892	              9,805

Total Liabilities and Shareholders' Equity
                                     $ 14,992	           $  15,742

The accompanying notes are an integral part of these
unaudited statements


Aquila Biopharmaceuticals, Inc.
Consolidated Statements of Operations and
Comprehensive Income
(unaudited)
(in thousands, except per share amounts)

                        Three Months Ended      Nine Months Ended
                          September 30,           September 30,
                         2000 		  1999	          	2000 	  	1999
Revenue:
  Product
  sales                 $ 626	   	$105         	$1,207    $ 378
  Research
  and
  development             221	   	 789         	 2,316	    1,078
                      		  847	   	 894           3,523    	1,456
Cost and
expenses:
  Cost of
  sales                   663      120           1,040    	  712
  Research
  and
development             1,050    1,677           4,526    	4,862
  General &
  admini-
  strative                631		    741           2,045    	2,330
Total costs
and expenses            2,344   	2,538           7,611     7,904

Other income,
net	                   	   51      155             653       240
Net Loss              $(1,446) $(1,489)        $(3,435)  $ (6,208)
  Unrealized holding
  gains on available
  -for-sale
  securities               28	      12              76	        20
  Less: re-
classification
for gain included
in net income              --	    (151)	          (475)	      (151)

     Total other comprehensive
     income/(loss)
                           28  	  (139)           (399)     	 (131)

Comprehensive loss
                 	    $(1,418)  $(1,628)       $(3,834)    $ (6,339)


Basic and diluted loss
  per weighted average share:

Net loss
                       $(0.17)  $ (0.19)         $(0.41)     $ (0.86)

Weighted average number of
  common shares outstanding:
	Basic and diluted
                         8,533    	7,690            8,341	      7,229

The accompanying notes are an integral part of these
unaudited statements.




Aquila Biopharmaceuticals, Inc.
Consolidated Statements of Cash Flows
              (unaudited),(in thousands)

                              		        For the nine months
                                  					 ended September 30,
                                          2000       1999

Cash Flows From Operating Activities:
Net Loss
                                       $ (3,435)  $ (6,208)
Adjustments to reconcile net loss to net cash
 (used) by operating activities:
  Depreciation and amortization
                                             587	      624
Issuance of non-employee options
                                              50	       --
  Realized gains on sale of marketable securities
                                              --	     (151)
  Changes in assets and liabilities:
  Receivables
      		                                    (293)    	  647
  Inventories
                   	                        (168)	       42

Prepaid expenses and other current assets
                           	                  105	       166
  Accounts payable and other accrued expenses
                                              259     (1,261)

Net cash used by operating activities
                                           (2,895)    (6,141)

Cash Flows From Investing Activities:
  Purchases of marketable securities
                                           (3,996)    (8,000)

Proceeds from maturities
    of marketable securities
                                             5,571      9,955
  Other noncurrent assets and liabilities
                                    			         17 	        5
  Purchases of property, plant, and equipment
                                      	        (24)    	 (527)
    Net cash provided by investing activities
                                     		 				  1,568      1,433

Cash Flows From Financing Activities:
  Payment of long-term obligations
                                            	(1,096)    	 (976)
  Issuance of common stock
                                        						 3,871	     1,510
    Net cash provided by financing activities
                                               2,775	       534
Net increase/(decrease) in cash and cash
      Equivalents
                                        						 1,448     (4,174)

Cash and cash equivalents at the beginning
     of the year
                                             	   524      	5,270
Cash and cash equivalents at the end
     of the period
                                             	$1,972     $ 1,096


The accompanying notes are an integral part of these
unaudited statements.


AQUILA BIOPHARMACEUTICALS, INC.

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

1.   Basis of Presentation:

The accompanying interim financial statements are
unaudited and have been prepared on a basis
substantially consistent with the audited financial
statements.  Certain information and footnote
disclosures normally included in the Company's annual
financial statements have been condensed or omitted
pursuant to the Securities and Exchange Commission's
rules and regulations.  The interim financial
statements, in the opinion of management, reflect all
adjustments (including normal recurring accruals)
necessary for a fair statement of the results for the
interim periods.

The results of operations for the interim periods are
not necessarily indicative of the results of
operations to be expected for the fiscal year.  These
interim financial statements should be read in
conjunction with the audited financial statements for
the year ended December 31, 1999, which are contained
in the Companys Annual Report on Form 10-K for the
year ended December 31, 1999, filed with the
Securities and Exchange Commission.

The year-end balance sheet data was derived from
audited financial statements, but does not include all
disclosures required by generally accepted accounting
principles.

2. Segment information:

The Company has determined that its reportable
segments are development and manufacturing.  All
research programs are aggregated in the development
segment.  Revenues from the sale of the feline
leukemia vaccine, the QS-21 material supplied to
research partners, and QS-21 license fees are reported
in the manufacturing segment.  Financial results of
segments are presented on the same accounting basis as
the Companys consolidated results.  There are no
inter-segment activities. The Companys business is
conducted entirely within the United States.

                                           Nine Months
                                              Ended
                                           September 30,

				                                 		 2000         1999
Development
		Revenue		                          $   131    $    343

		Net Loss		                         (5,390)      (5,807)
	Manufacturing
		Revenue			                          3,392        1,113
		Net income/(loss)		                 1,356         (554)
	Reconciling items
		Net income(1)		                       599	         153
	Consolidated totals
		Revenue			                          3,523     		 1,456
		Net loss		                        $(3,435)     (6,208)

  (1) 2000 includes a gain of $475,000 on the
sale of an investment, $126,000 of royalty income,
$85,000 of rental income and $32,000 refund of
insurance premium offset by net interest expense of
$64,000 and an unabsorbed overhead charge of $54,000.
1999 includes $62,000 of royalty income, a gain of
$14,000 on disposal of an asset, $35,000 refund of
insurance premium, $41,000 of net interest expense,
income tax expense of $10,000, income from the sale of
available-for-sale securities of $151,000, rental
income of $10,000 and a charge for excess facilities
of $44,000.


3.   Inventories:

Inventories consist of the following:

                                     (000'S)

                              9/30/00        12/31/99
                              -------    	   --------
     Finished goods   	       	$  397     	   $  157
     Work-in-process              131	           236
     Raw materials & suppliea     138            105
                               $  666	        $  498


4.	Earnings Per Share:

The common stock equivalents of the Company consist of
stock options and warrants.  The Company was in a net
loss position at September 30, 2000 and September 30,
1999; therefore, common stock equivalents were not
used to compute diluted loss per share since the
effect would have been anti-dilutive.  Options to
purchase 910,520 and 1,300,780 shares of common stock
at weighted-average prices of $3.45 and $3.47,
respectively, were outstanding at September 30, 2000
and 1999, respectively.  Warrants to purchase 68,680
shares of common stock at an exercise price of $4.12
were outstanding at September 30, 2000.

5.	Contingencies:

The Company received a letter from Cambridge Biotech
corporation (CBC) in February 1999 alleging that the
Company must indemnify CBC under a Master Acquisition
Agreement among the Company, CBC, and bioMerieux, Inc.
for potential losses from the termination of CBCs rights
under a license agreement.  The Company has not received any
further communication from CBC and upon review does
not feel that adverse settlement of this matter would
have a material effect on its financial position or
results of operations.

6.	Accounting Pronouncement:

In December 1999, the United States Securities and
Exchange Commission (SEC) issued Staff Accounting
Bulletin 101, Revenue Recognition in Financial
Statements (SAB 101).  SAB 101 provides the staffs
views in applying generally accepted accounting
principles to selected revenue recognition issues, as
well as examples of how the staff applies revenue
recognition guidance to specific circumstances.  In
June 2000, the SEC issued Staff Accounting Bulletin
101B delaying the implementation of SAB 101 for six
months.  Accordingly, in the fourth quarter of 2000
Aquila will change its accounting for initial license
fees.  Through the first nine months of 2000 revenue
was recognized when the agreement was reached and no
contingent factors were present.  Under the new
guidance of SAB 101, revenue will be deferred and
recognized ratably over the appropriate life or as
effort is incurred.  In the fourth quarter of 2000, a
cumulative adjustment will be recorded retroactive to
January 1, 2000 to create deferred revenue that will be
recognized over future years.

The Company has adopted FASB Interpretation No. 44
(FIN 44), Accounting for Certain Transactions
Involving Stock Compensation: an interpretation of APB
Opinion No. 25.  FIN 44 clarifies the application of
certain aspects of APB Opinion No. 25 (APB 25),
including the following: the definition of an employee
for purposes of applying APB 25, the criteria for
determining whether a plan qualifies as a non-
compensatory plan; the accounting consequences of
various modifications to the terms of previously fixed
stock options or awards; and the accounting for an
exchange of stock compensation awards in a business
combination.

Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

Three months ended September 30, 2000 compared to
three months ended September 30, 1999:

Revenue

Total revenues were $847,000 for the three months
ended September 30, 2000 compared to $894,000 in the
same period in 1999.

Third quarter 2000 product sales were $626,000
compared to $105,000 the same period one year ago.
Research and development revenues were $221,000
compared to $789,000 for the same period in 1999. The
primary reason for the quarter-to-quarter decrease in
research and development revenues was the non-
refundable license fees of $638,000 recognized in Q3
1999 from corporate partners pursuant to a license
agreement that allows the partners to use the
Companys QS-21 adjuvant in their product development
programs and a $111,000 decrease in funded research
pursuant to an NIH grant as the funds from the first
years grant were depleted.  This decrease in research
and development revenues was partially offset by
$181,000 of increased QS-21 shipments in Q3 2000.

Costs and Expenses

For the third quarter of 2000, cost of sales was 106%
of product sales compared to 114% for the same period
one year ago.  The primary reason cost of sales was
higher than product sales in 2000 was decreased
production levels which did not fully absorb the
period spending levels.  Third quarter research and
development spending was $1,050,000 compared to
$1,677,000 in Q3 1999.  The decrease was due to lower
spending on clinical trials, decreased spending on
outside services and lower QS-21 spending levels due
to decreased production levels. Spending for clinical
trials is expected to increase for the remainder of
the year as the Company has initiated further clinical
trials for the Quilimmune P product designed to
prevent pneumococcal infections in the elderly.  In
the third quarter of 2000, spending on the
tuberculosis program acquired from VacTex was $96,000
compared to $253,000 in the third quarter of 1999.
The Companys future spending on this program may
fluctuate based on the progress of the research and
the availability of funding and resources.  General
and administrative expenses were $631,000 compared to
$741,000 the same period one year ago due to lower
staffing levels and lower legal fees.

Other Income, Net

Other income net for the third quarter of 2000 was
$51,000 compared to $155,000 for the same period in
1999. The primary reason for the decrease was $151,000
received from the sale of available-for-sale
securities in Q3 1999 partially offset by a $19,000
increase in rental income received pursuant to a
sublease agreement entered into in Q3 1999 and $19,000
decrease in net interest expense.

Nine months ended September 30, 2000 compared to nine
months ended September 30, 1999:

Revenue

Total revenues were $3,523,000 for the nine months
ended September 30, 2000 compared to $1,456,000 in the
same period in 1999.

Product sales for the first nine months of 2000 were
$1,207,000 compared to $378,000 the same period one
year ago.  The reasons for the higher revenues were
increased product shipments in Q3 2000 as compared
with the first six months of 2000 and the resumption
of regular product shipments in the first quarter of
2000 compared with the low shipments in the first
quarter of 1999 during which the Companys new
facility was prepared for operation.

The first nine months of research and development
revenues were $2,316,000 compared to $1,078,000 for
the same period in 1999. The primary reason for the
increase was non-refundable license fees of $1,300,000
recognized from a corporate partner in 2000 as
compared with $638,000 for the same period in 1999.
The remaining balance of the change resulted from
$788,000 of increased shipments of QS-21 to research
partners partially offset by the $232,000 decline in
funded research received from a corporate partner.

Costs and Expenses

For the first nine months of 2000, cost of sales was
86% of product sales compared to the first nine months
of 1999 when cost of sales exceeded product sales.
The primary reasons for the decrease were the
reduction in validation costs associated with
preparing the Companys new manufacturing facilities
in 1999 and increased production levels leading to
lower unabsorbed expenses.  Research and development
spending was $4,526,000 for the first nine months of
2000 compared with $4,862,000 for the same period one
year ago.  The decrease was due to slightly lower
clinical trial spending in 2000 and lower unabsorbed
spending on QS-21 due to increased production.
Spending for the first nine months of 2000 on the
tuberculosis program acquired from VacTex was $613,000
compared to $680,000 in the first nine months of 1999.
The Companys future spending on this program may
fluctuate based on the progress of the research and
the availability of funding and resources.  General
and administrative expenses were reduced by 12% from
one year ago due to lower staffing levels and lower
legal fees.

Other Income, Net

Other income for the first nine months of 2000 was
$653,000 compared to $240,000 for the same period in
1999. The primary reasons for the increase were a gain
of $475,000 on the sale of an investment compared to a
gain of $151,000 on the sale of an investment in 1999,
$63,000 increase in royalty income in 2000 and an
increase of $76,000 of rental income received pursuant
to a sublease agreement entered into in the third
quarter of 1999.

Liquidity, Capital Resources and Business Outlook

Total cash, cash equivalents and marketable securities
were $6,458,000 at September 30, 2000 compared to
$7,017,000 at December 31, 1999.

During the first nine months of 2000, operating
activities used cash of $2,895,000 primarily due to
the net loss of $3,435,000.  Investing activities
provided cash of $1,568,000 primarily due to the net
sales of marketable securities.  Financing activities
provided cash of $2,775,000 due to $3,871,000 of
proceeds received from the sale of shares of common
stock offset by $1,096,000 payment of obligations.  As
of September 30, 2000, the Company had a balance of
$2,883,000 million under its loan agreement with
Transamerica Business Credit Corporation and owed
$205,000 for the 7% debentures issued in connection
with the acquisition of VacTex, Inc.

Aquila expects that its available cash and marketable
securities, and its cash flows from research
contracts, product sales, and borrowings will be
sufficient to finance its planned operations and
capital requirements for the next twelve months. The
management of the Company is taking all reasonable
steps at its disposal to assure continuation of the
Companys programs. The Company's ability to fund its
long term operations is dependent on several factors,
including the Company's ability to attract funding
through additional public and private financing or by
establishing corporate partnerships and collaborative
agreements.  There can be no assurance that such
additional funding can be obtained on acceptable
terms.

Aquilas revenues and expenses vary from quarter to
quarter and will continue to vary in the future.
Future revenues depend primarily upon the success of
Aquilas efforts to license its proprietary technology
and enter into cost sharing programs, and its ability
to market its products currently undergoing
development or clinical trials.  Aquilas expenses
fluctuate primarily due to clinical trials, which take
from six months to two years, and require varying
degrees of financial support.  Revenues or operating
results in any period will not necessarily be
indicative of results in subsequent period.

Aquila's discussions as to management's plans and
objectives for Aquila's business after the date hereof
are forward looking statements that involve a number
of risks and uncertainties.  Actual results may differ
materially from those projected by Aquila.  The
following factors, among others, could effect the
Company's actual results: general economic conditions;
risks in product and technology development; delays
and difficulties in the regulatory approval process;
difficulties in obtaining raw materials and supplies
for the Company's products; failure of corporate
partners to commercialize successfully products using
the Company's technology; competition from other
companies; the cost of acquiring additional
technology; failure to obtain the funding necessary
for the company's planned activities; and other risks
identified in this Form 10Q and in Aquila's other
Securities and Exchange Commission filings and the
exhibits thereto.


Accounting Pronouncement

In December 1999, the United States Securities and
Exchange Commission (SEC) issued Staff Accounting
Bulletin 101, Revenue Recognition in Financial
Statements (SAB 101).  SAB 101 provides the staffs
views in applying generally accepted accounting
principles to selected revenue recognition issues, as
well as examples of how the staff applies revenue
recognition guidance to specific circumstances.  In
June 2000, the SEC issued Staff Accounting Bulletin
101B delaying the implementation of SAB 101 for six
months.  Accordingly, in the fourth quarter of 2000
Aquila will change its accounting for initial license
fees.  Through the first nine months of 2000 revenue
was recognized when the agreement was reached and no
contingent factors were present.  Under the new
guidance of SAB 101, revenue will be deferred and
recognized ratably over the appropriate life or as
effort is incurred.  In the fourth quarter of 2000,
a cumulative adjustment will be recorded retroactive
to January 1, 2000 to create deferred revenue that
will be recognized over future years.

The Company has adopted FASB Interpretation No. 44
(FIN 44), Accounting for Certain Transactions
Involving Stock Compensation: an interpretation of APB
Opinion No. 25.  FIN 44 clarifies the application of
certain aspects of APB Opinion No. 25 (APB 25),
including the following: the definition of an employee
for purposes of applying APB 25, the criteria for
determining whether a plan qualifies as a non-
compensatory plan; the accounting consequences of
various modifications to the terms of previously fixed
stock options or awards; and the accounting for an
exchange of stock compensation awards in a business
combination.


PART II - OTHER INFORMATION

Item 1: Legal Proceedings

The Company received a letter from CBC in February
1999 alleging that the Company must indemnify CBC
under a Master Acquisition Agreement among the
Company, CBC, and bioMerieux, Inc. for potential
losses from the termination of CBCs rights under a
license agreement.  The Company has not received any
further communication from CBC and upon review does
not feel that adverse settlement of this matter would
have a material effect on its financial position or
results of operations.




Item 6.  Exhibits and Reports of Form 8-K

		Exhibits
			27. Financial Data Schedule
		Reports on Form 8-K
			1. Form 8-K filed July 14, 2000.
			2. Form 8-K filed August 22, 2000.

Item 6(a)  Financial Data Schedule

                       Aquila Biopharmaceuticals, Inc.
                  For the Nine Months Ended September
                                  30, 2000
                               (In thousands)


September 30, 2000
Cash and cash items                             1,972
Marketable securities                           4,486
Notes and accounts receivable                     930
Allowance for doubtful accounts                     0
Inventory                                         666
Total current assets                            8,229
Property, plant and equipment                   8,974
Accumulated depreciation                        3,318
Total assets                                   14,992
Total current liabilities                       3,222
Bond, mortgages and similar debt                3,089
Preferred stock, mandatory redemption               0
Preferred stock, no mandatory redemption            0
Common stock                                       86
Other stockholders equity                       9,806
Total liabilities and stockholders
equity                                         14,992


Net sales of tangible products                  1,207
Total revenues                                  3,523
Costs of tangible goods sold                    1,040
Total costs and expenses applicable to
sales and Revenues                              5,566
Other costs and expenses                        2,045
Provision for doubtful accounts and notes           0
Interest and amortization of debt
discount                                          350
Income/(loss) before taxes and other
items                                         (3,435)
Income tax expense                                  0
Income/(loss) from continuing operations      (3,435)
Discontinued operations                             0
Extraordinary items                                 0
Cumulative effect-changes in accounting
principles                                          0
Net income/(loss)                              (3,435)
Earnings per share  basic                       (0.41)
Earnings per share  diluted                     (0.41)



						SIGNATURES

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

                       AQUILA BIOPHARMACEUTICALS, INC.


     Date: November 13, 2000


                         _____________________________
                         Alison Taunton-Rigby
                         President and Chief Executive
                         Officer


                          _____________________________
                         Melissa J. Packard
                         Controller,Principal
                         Accounting Officer and
                         Treasurer


SIGNATURES

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

                       AQUILA BIOPHARMACEUTICALS, INC.


     Date: November 13, 2000
                              /s/ Alison Taunton-Rigby
                              Alison Taunton-Rigby
                              President and Chief
                              Executive Officer


               			            /s/ Melissa J. Packard
                              Melissa J. Packard
                              Controller,
                              Principal Accounting
                              Officer and Treasurer