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 March 31, 1997, 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.)
  
                   365 Plantation Street, Worcester, MA 01605
             (Address of Principal Executive Offices)   (Zip Code)

                                (508) 797-5777
             (Registrant's Telephone Number, Including Area Code)
     -----------------------------------------------------------------
     (Former Name, Former Address and Former Fiscal Year, If Changed
     Since Last Report)

          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 Acto 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 May 13, 1997
     Common Stock Outstanding 4,996,418





                           AQUILA BIOPHARMACEUTICALS, INC.
                              Form 10-Q, March 31, 1997

     INDEX

     PART I - FINANCIAL INFORMATION

     Item 1. Unaudited Financial Statements            Page Number

          Balance Sheets as of March 31, 1997
          and December 31,1996..............................2

          Statements of Operations for three month
          periods ended March 31, 1997 and 1996.............3

          Statements of Cash Flows for three month
          periods ended March 31, 1997 and 1996.............4

          Notes to Interim Financial Statements ............5         

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

     PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings

     Item 6.  Exhibits and Reports on Form 8-K

     SIGNATURES



























                                       
     Item 1 - Financial Statements
                          Aquila Biopharmaceuticals, Inc.
                                 Balance Sheet
                                (in thousands)
                                               (unaudited)
     Assets                                      3/31/97     12/31/96
                                                 -------     --------
     Current Assets: 
      Cash and cash equivalents                 $  8,029     $  9,112 
      Marketable securities                       11,498        8,563
      Accounts receivable - trade (less 
       allowance for doubtful accounts)              940        1,546 
      Other receivables                              337          820
      Inventories                                    274          451
      Prepaid expenses & other current assets        709          779
                                                 -------      -------
            Total current assets                  21,787       21,271
                                                 -------      -------
     Investments                                     394          394
     Property, Plant, and Equipment,Net            4,222        4,308
     Patents and Purchased Technology,Net            271          296
     Other Assets                                     43           43
                                                 -------      -------
            Total Assets                        $ 26,717     $ 26,312 
                                                 -------      -------
     Liabilities & Shareholders' Equity

     Current Liabilities:
       Accounts payable                         $    316     $    944
       Accrued royalties                             521          643
       Accrued professional fees                     247          383
       Other accrued expenses                      1,423        2,097
       Deferred revenue - current                  3,368          918
       Current maturities of long-term debt          127          129
                                                 -------      -------
            Total Current Liabilities              6,002        5,114
                                                 -------      -------
     Deferred Revenue                                225          225
     Long Term Debt                                4,023        4,056 
                                                 -------      -------
            Total Liabilities                     10,250        9,395
                                                 -------      -------
     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: 5,000,000 shares              50           50
     Treasury Stock                                  (47)         (47)
     Additional paid in capital                  127,514      127,514
     Accumulated Deficit                        (111,050)    (110,600)
                                                 -------      -------
            Total Shareholders' Equity            16,467       16,917
                                                 -------      -------
     Total Liabilities and Shareholders' Equity $ 26,717     $ 26,312 

     The accompanying notes are an integral part of these unaudited 
     statements.
                                       
                                       2
                         Aquila Biopharmaceuticals, Inc.
                             Statement of Operations
                                  (unaudited)
                     (in thousands, except per share amounts)
                                                   
                                          Three Months Ended March 31, 
     
                                                1997          1996
     Revenue:                                   ----          ----
       Product sales                        $    307       $   347    
       Research and development                1,222         1,410  
                                              ------         -----
                                               1,529         1,757    
  
     Cost and expenses:
       Cost of sales                             252           373
       Research and development                1,343         1,275 
       General & administrative                1,121         1,182
                                              ------        ------
                                               2,716         2,830

     Other income, net                           546           474

     Loss from Operations before
       reorganization items                   ------        ------
                                                (641)         (599)

     Reorganization items:
       Professional fees                           0          (256)
       Interest earned on accumulated 
       cash resulting from Chapter 11
       proceedings                                 0           114
                                              ------        ------
          Total reorganization items               0          (142) 
                                              ------        ------
     Loss from continuing operations            (641)         (741)
  
     Discontinued operations:
       Income from operations                      0           882
       Gain on disposal                          191             0
                                              ------        ------            
     Net Income/(Loss)                      $   (450)      $   141  
                                              ======        ======
     Net income/(Loss) per weighted average
       number of common shares:             $  (0.09)      $  0.04

     Weighted average number of
       common shares outstanding           4,989,474     3,551,000    

     Financial results for the first quarter of 1996 have been restated 
     to reflect the disposal of Aquila's diagnostics businesses as 
     discontinued operations, and Weighted Average Shares Outstanding
     has been adjusted to reflect a 7.6 to 1 stock exchange on
     October 21, 1996.

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

                     
                                       3
                          Aquila Biopharmaceuticals, Inc.
                             Statement of Cash Flows
                                   (unaudited)
                                 (in thousands)
                  
                                         For the three months ended March 31,
                                                       1997      1996
                                                       ----      ----
     Cash Flows From Operating Activities:    
       Net Income/(Loss)                              $(450)   $  141 
     Adjustments to reconcile Net Income/(Loss)      
       to net cash provided by operating
       activities:
          Depreciation and amortization                 136     1,043
          Provision for doubtful accounts                 0        15 
     Loss on disposition and write down of  
       investments                                        0        11
     Minority Interest                                    0         1
     Changes in assets and liabilities:
       Accounts and other receivables                 1,089    (1,037)
       Inventories                                      177      (124)
       Deferred revenue                               2,451     2,292
       Prepaid and other current assets                  70        22
       Accounts payable and other accrued expenses   (1,561)     (440)
       Accrued restructuring charges                      0       (40)
          Net cash provided by                       ------    ------
               operating activities                   1,912     1,884
                                                     ------    ------
     Cash Flows From Investing Activities:
       Purchases of marketable securities            (6,963)        0
       Proceeds from sale of marketable securities    4,028       205 
       Purchases of property, plant, and equipment      (25)      (62)
       Patents & purchased technology                     0       (85)
          Net cash provided/(used) by                ------    ------
               investing activities                  (2,960)       58
                                                     ------    ------
     Cash Flows From Financing Activities:                            
       Payment of long-term obligations                 (35)       (1)
                                                     ------    ------
          Net cash used by financing activities         (35)       (1)

     Net increase/(decrease)in cash and                              
         cash equivalents                            (1,083)    1,941

     Cash and cash equivalents at the beginning                       
          of the year                                 9,112     6,856

     Cash and cash equivalents at the end            ------    ------          
          of the period                              $8,029    $8,797 
                                                     ======    ======
     Supplemental disclosures:    
     Income taxes paid                                    0         7
     Interest paid                                      104         0
 
     The accompanying notes are an integral part of these unaudited 
     financial statements.

                       
                       
                                       4
                            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 presentation 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, 1996, which are contained in the 
     Company's Annual Report on Form 10-K for the year ended December 
     31, 1996, 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.   Inventories:
          
          Inventories consist of the following:   (000'S)

                                             3/31/97        12/31/96
                                             -------        --------
          Finished goods                      35,256         260,124
          Work in process                    186,275         149,839
          Raw materials & supplies            52,830          41,111
                                             -------        --------
                                             274,361         451,074
                                             -------        --------
     3.   Discontinued Operations:

     In June, 1996, the Company sold the assets of its enterics diagnostic 
     business to Meridian Diagnostics, Inc.  Income from discontinued 
     enterics operations for the three months ended March 31, 1996, 
     was $357,000.

     In October, 1996, the Company sold all of the issued and outstanding 
     common stock of Cambridge Biotech Corporation ("CBC"), which was 
     principally involved in retroviral diagnostic operations, to 
     bioMerieux Vitek, Inc.  Gain from discontinued retroviral operations 
     for the three months ended March 31, 1997 was $191,000, and income 
     from discontinued retroviral operations was $525,000 in the same 
     period of 1996.




     
                                        5
     Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL   
              CONDITION AND RESULTS OF OPERATIONS

     Revenue

     Total revenues were $1,529,000 in the three months ended March
     31, 1997 compared to $1,757,000 in the same period in 1996, a
     decrease of 13%. Product sales decreased to $307,000 in the first
     quarter of 1997 from $347,000 for the same period in 1996, or
     12%, due to lower unit sales of certain animal health products, 
     offset partially by higher prices. 

     Research and development revenue also decreased in the first
     quarter of 1997, to $1,222,000 from $1,410,000 in the same period
     of 1996. This 13% decrease is due primarily to the completion
     of two government grants during 1996 and reduced activity
     on research projects funded by various third parties, including
     other non-profit and commercial entities.

     Costs and Expenses

     Cost of product sales for the three months ended March 31, 1997
     was $252,000, or 82% of product sales, compared to $373,000, or
     107% of product sales, for the three months ended March 31, 1996.
     The change in cost as a percent of product sales is due primarily
     to revised pricing on certain animal health products that took
     effect in 1997.

     Research and development expenses increased in the first quarter
     of 1997 to $1,343,000 from $1,275,000 in the first quarter of
     1996, an increase of 5%. This increase is due primarily to higher
     costs associated with providing clinical trial materials to
     corporate partners and to higher personnel-related costs.

     General and administrative expenses decreased to $1,121,000 in
     the three months ended March 31, 1997 from $1,182,000 in the same
     period of 1996, a decrease of 5%. This decrease is primarily due
     to lower personnel-related costs associated with reduced staff. 

     Other Income, Net

     Other income net of expenses was $546,000 for the three months
     ended March 31, 1997, compared to $474,000 for the same period in
     1996, an increase of 15%. This increase is attributable to
     greater interest income due to the Company's larger balance of
     cash, cash equivalents and marketable securities, and to greater
     rental income resulting from the lease of certain of the
     Company's real estate in Rockville, Maryland to CBC.

     Reorganization Items

     Chapter 11 related professional fees and interest earned on
     accumulated cash were $256,000 and $114,000, respectively, for
     the three months ended March 31, 1996. There were no material
     reorganization items during the three months ended March 31, 1997.

     
     
     
                                         6
     Net Income/(Loss)

     The Company incurred a net loss for the quarter ended March 31,
     1997 of $450,000, or $0.09 per share, compared to net income of
     $141,000, or $0.04 per share, for the same period of 1996. 

     Liquidity and Capital Resources

     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.

     Operating activities provided cash of $1,912,000 during the three
     months ended March 31, 1997, compared to cash provided by
     operating activities of $1,884,000 during the same period of
     1996. The net loss of $450,000 for the first quarter of 1997
     includes non-cash depreciation and amortization of $136,000. In
     the first quarter of 1996, the net income of $141,000 included
     $1,043,000 of non-cash depreciation and amortization.

     In the three months ended March 31,1997, the Company reduced
     inventories and accounts receivable by $177,000 and $1,089,000,
     respectively, due to the cessation of diagnostic operations and
     the receipt of certain royalty payments. By comparison, 
     inventories and accounts receivable increased by $124,000 and 
     $1,037,000 in the same period of 1996, as a result of increased 
     product sales. In the first quarter of 1997, accounts payable 
     and other accrued expenses decreased by $1,561,000, primarily 
     due to reductions in trade payables attributable to the 
     cessation of diagnostic manufacturing operations and to the 
     payment of severance and bonus amounts accrued at 
     December 31, 1996. 

     Investing activities used cash of $2,960,000 in the first quarter 
     of 1997, due primarily to the net purchase of marketable securities.

     In the same period of 1996, $58,000 of cash was provided by
     investing activities, due to the sale of the common stock of an
     insurance company that the Company received when the insurer was
     demutualized.  

     Cash and cash equivalents were $8,029,000 at March 31, 1997,
     compared to $9,112,000 at December 31, 1996 and $8,797,000 at
     March 31, 1996.  Total cash, cash equivalents and marketable 
     securities were $19,527,000 at March 31, 1997 compared to 
     $17,675,000 at December 31, 1996.  The increase is due primarily
     to the receipt of an annual license payment from a corporate
     partner, offset by general cash disbursements during the quarter.

     The Company currently occupies an office, research and
     manufacturing facility in Worcester, MA under a lease which
     expires on December 31, 1997. The Company expects that relocation
     to another facility will be necessary. Given the nature of
     Aquila's research and manufacturing activities and the
     specialized space required to support those activities, it is
     
                                    7
     expected that the Company will be required to make capital
     expenditures to improve the new facility and to acquire new
     systems and equipment related to the new facility. While an
     accurate estimate cannot be made at this time, it is possible
     that these expenditures could be substantial.

     Aquila's discussions as to management's plans and objectives for
     Aquila's business after the date hereof are forward looking
     statements which 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 Securities and
     Exchange Commission filings and the exhibits thereto.
                        
                        
                        
                        
                        
                        
                        
                        
                        
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      8
                        
                             PART II - OTHER INFORMATION

     Item 1 - Legal Proceedings

     On April 17, 1997, Institut Pasteur and Pasteur Sanofi Diagnostics
     (collevtively, "Pasteur") filed a Petition for a Writ of Certiorari 
     with the United States Supreme Court asking the Supreme Court to 
     hear its appeal of the order of the United States District Court 
     for the District of Massachusetts affirming the confirmation of
     of the reorganization plan of Cambridge Biotech Corporation.
     Although the Company is not a party to this litigation, if the
     Supreme Court were to grant the petition and Pasteur were to be
     succesful in its appeal an adverse effect on the Company's                
     continuing operations could occur if the result of the appeal was         
     to disrupt transactions which took place pursuant to the                   
     reorganization plan.                   
                        
     The United States District Court for the District of Massachusetts        
     has allowed the Joint Motion for Dismissal in the case of                  
     Cambridge Biotech Corporation v. Hugh V. Cottingham, Civil                
     Action No. 96-40219-NMG.                   
                        
     On April 14, 1997, the United States Bankruptcy Court for the             
     District of Massachusetts, Western Division dismissed the adversary       
     proceeding (No. 97-4011) filed by the Company on January 14, 1997         
     against the State of Maryland, Louis Goldstein as Comptroller of          
     the Treasury of the State of Maryland, Montgomery County, Maryland        
     and Molly Q. Ruhl, the Clerk of the Circuit Court of Montgomery           
     County.                   
                        




























                                        9

     Item 6.  Exhibits and Reports on Form 8-K

               (a)  Financial Data Schedule
               (b)  Reports on Form 8-K - NONE
     -----------------------------------------------------------------

                                     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:     May 14, 1997 /s/ Alison Taunton-Rigby
                           _____________________________
                           Alison Taunton-Rigby
                           President and Chief Executive Officer


                            /s/ Stephen J. DiPalma
                           _____________________________
                           Stephen J. DiPalma
                           Vice President Finance,
                           Chief Financial Officer and Treasurer