<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q



[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

[ ]  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 0-19267


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


            PENNSYLVANIA                                          23-2472830    
----------------------------------------                     ------------------
   (State or other jurisdiction of                            (I.R.S. Employer
    incorporation or organization)                           Identification No.)


   64 Sidney Street, Cambridge, MA                               02139-4136    
----------------------------------------                     ------------------
(Address of principal executive offices)                         (Zip Code)


Registrant's telephone number including area code: (617) 494-0171
                                                   ----------------------------

 
                                 Not Applicable
--------------------------------------------------------------------------------
         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 Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]


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

           Class                      Shares Outstanding as of November 4, 1998
           -----                      -----------------------------------------

Common Stock, par value $.01                         21,163,935





<PAGE>   2

                         ALKERMES, INC. AND SUBSIDIARIES


                                      INDEX


                                                                        Page No.
                                                                        --------

PART I - FINANCIAL INFORMATION

    Item 1. Consolidated Financial Statements

            Consolidated Balance Sheets                                     3
            - September 30, 1998 and March 31, 1998

            Consolidated Statements of Operations                           4
            - Three months ended September 30, 1998 and 1997
            - Six months ended September 30, 1998 and 1997

            Consolidated Statement of Shareholders' Equity                  5
            - Six months ended September 30, 1998                   

            Consolidated Statements of Cash Flows                           6 
            - Six months ended September 30, 1998 and 1997                  

            Notes to Consolidated Financial Statements                      7

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

PART II - OTHER INFORMATION

    Item 5. Other Information                                              13

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

SIGNATURES                                                                 17

EXHIBIT INDEX                                                              18





                                      (2)
<PAGE>   3
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:

                        ALKERMES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                   September 30,            March 31,
                                                                       1998                   1998
                                                                   -------------            ---------
<S>                                                               <C>                    <C> 
                                     ASSETS


Current Assets:                   

  Cash and cash equivalents                                       $   1,441,199          $   3,495,265
  Short-term investments                                            165,396,020            190,556,898
  Prepaid expenses and other current assets                          12,512,862              8,555,368
                                                                  -------------          -------------
    Total current assets                                            179,350,081            202,607,531
                                                                  -------------          -------------
Property, Plant and Equipment:
  Land                                                                  235,000                235,000
  Building                                                            3,443,024              1,275,000
  Furniture, fixtures and equipment                                  19,613,084             14,782,341
  Leasehold improvements                                              2,627,577              2,507,973
  Construction in progress                                           15,354,565              4,275,985
                                                                  -------------          -------------
                                                                     41,273,250             23,076,299
   Less accumulated depreciation and amortization                   (11,756,448)            (9,578,571)
                                                                  -------------          -------------
                                                                     29,516,802             13,497,728
                                                                  -------------          -------------
Investments                                                          11,468,185              3,422,726
                                                                  -------------          -------------
Other Assets                                                            963,043                466,712
                                                                  -------------          -------------
Other Investments                                                       197,850                263,400
                                                                  -------------          -------------
                                                                  $ 221,495,961          $ 220,258,097            
                                                                  =============          =============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses                           $   6,770,114          $   7,067,972
  Deferred revenue                                                    6,483,436              7,415,980
  Long-term obligations -- current portion                            5,361,791              4,104,533
                                                                  -------------          -------------
    Total current liabilities                                        18,615,341             18,588,485
                                                                  -------------          -------------
Long-Term Obligations                                                24,967,932             12,933,333
                                                                  -------------          -------------
Other Long-Term Liabilities                                           2,378,481              2,072,212
                                                                  -------------          -------------
Deferred Revenue                                                      5,000,000              5,000,000
                                                                  -------------          -------------
Shareholders' Equity:
  Capital stock, par value $.01 per share:
   authorized 2,700,000 shares; none issued
  Convertible exchangeable preferred stock, par value per share:
   authorized and issued, 2,300,000 shares at September 30, 1998
   and March 31, 1998 (liquidation preference of $115,000,000)           23,000                 23,000
  Common stock, par value $.01 per share:
   authorized, 40,000,000 shares; issued 21,126,170 shares
   at September 30, 1998 and 21,072,282 shares at March 31, 1998        211,262                210,723
  Additional paid-in capital                                        311,489,631            311,213,755
  Deferred compensation                                                 (55,937)              (119,719)
  Cumulative foreign currency translation adjustments                     4,182                (10,638)
  Unrealized loss on marketable securities                             (103,050)               (37,500)
  Accumulated deficit                                              (141,034,881)          (129,615,554)
                                                                  -------------          -------------
    Total shareholders' equity                                      170,534,207            181,664,067
                                                                  -------------          -------------
                                                                  $ 221,495,961          $ 220,258,097
                                                                  =============          ============= 
   
</TABLE>

See notes to consolidated financial statements.


                                      (3)
<PAGE>   4



                         ALKERMES, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)




<TABLE>
<CAPTION>
                                                    Three Months     Three Months      Six Months      Six Months
                                                        Ended           Ended            Ended           Ended
                                                    September 30,    September 30,    September 30,   September 30,
                                                        1998             1997             1998            1997
                                                    ------------     ------------     ------------    ------------
<S>                                                 <C>              <C>              <C>             <C>         

Revenues:
    Research and development revenue under
       collaborative arrangements                   $  9,532,901     $  7,330,623     $ 17,200,535    $ 12,112,466
    Interest income                                    2,630,872        1,102,563        5,222,419       2,252,117
                                                    ------------     ------------     ------------    ------------
                                                      12,163,773        8,433,186       22,422,954      14,364,583
                                                    ------------     ------------     ------------    ------------
Expenses:
    Research and development                          11,437,814        7,094,597       20,448,916      14,702,524
    General and administrative                         2,910,574        1,885,643        5,576,771       3,799,663
    Interest expense                                     441,354          412,500          878,541         849,682
    Acquisition of in-process research
       and development                                        --               --        3,221,253              --
                                                    ------------     ------------     ------------    ------------
                                                      14,789,742        9,392,740       30,125,481      19,351,869
                                                    ------------     ------------     ------------    ------------

Net loss                                              (2,625,969)        (959,554)      (7,702,527)     (4,987,286)

Preferred stock dividends                             (1,868,750)              --       (3,716,800)             --
                                                    ------------     ------------     ------------    ------------
Net loss attributable to common shareholders        $ (4,494,719)    $   (959,554)    $(11,419,327)   $ (4,987,286)
                                                    ============     ============     ============    ============

Basic and diluted loss per common share             $      (0.21)    $      (0.05)    $      (0.54)   $      (0.24)
                                                    ============     ============     ============    ============

Weighted average number of common shares
  outstanding                                         21,115,909       20,792,074       21,102,026      20,772,568
                                                    ============     ============     ============    ============

</TABLE>



See notes to consolidated financial statements.




                                      (4)
<PAGE>   5
                        ALKERMES, INC. AND SUBSIDIARIES
                                        
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY




<TABLE>
<CAPTION>
                                                                                                                    
                                                     Convertible Exchangeable                                     Additional   
                                                          Preferred Stock                 Common Stock             Paid-in     
                                                       Shares        Amount         Shares             Amount      Capital     
                                                     ------------------------------------------------------------------------
<S>                                                  <C>             <C>          <C>                 <C>        <C>           

Balance, April 1, 1998                               2,300,000       $23,000      21,072,282          $210,723   $311,213,755  

Issuance of common stock 4/98 through 6/98                  --            --          23,594               236        134,495  
                                                                                                                               
Compensation relating to options granted                    --            --              --                --        217,500  
                                                                                                                               
Amortization of compensation relating to                                                                                       
  stock options granted and awards made                     --            --              --                --             --  
                                                                                                                               
Unrealized gain on marketable securities                    --            --              --                --             --  
                                                                                                                               
Cumulative foreign currency translation                                                                                        
  adjustments                                               --            --              --                --             --  
                                                                                                                               
Net loss for period                                         --            --              --                --             --  
                                                                                                                               
Preferred stock dividends                                   --            --              --                --             --  
                                                     ------------------------------------------------------------------------  
                                                                                                                               
Balance, June 30, 1998                               2,300,000        23,000      21,095,876           210,959    311,565,750  
                                                                                                                               
Issuance of common stock 7/98 through 9/98                  --            --          30,294               303        141,381  
                                                                                                                               
Compensation relating to options canceled                   --            --              --                --       (217,500) 
                                                                                                                               
Amortization of compensation relating to                                                                                       
  stock options granted and awards made                     --            --              --                --             --  
                                                                                                                               
Unrealized loss on marketable securities                    --            --              --                --             --  
                                                                                                                               
Cumulative foreign currency translation                                                                                        
  adjustments                                               --            --              --                --             --  
                                                                                                                               
Net loss for period                                         --            --              --                --             --  
                                                                                                                               
Preferred stock dividends                                   --            --              --                --             --  
                                                     ------------------------------------------------------------------------
                                                                                                                               
Balance, September 30, 1998                          2,300,000       $23,000      21,126,170          $211,262   $311,489,631  
                                                     ========================================================================  
                                                                                                                    
                                                                   
<CAPTION>
                                                                    Cumulative      Unrealized                   
                                                                 Foreign Currency  (Loss) Gain                   
                                                      Deferred      Translation   on Marketable   Accumulated    
                                                    Compensation    Adjustments     Securities      Deficit          Total
                                                  ---------------------------------------------------------------------------
<S>                                                  <C>             <C>          <C>                 <C>        <C> 

Balance, April 1, 1998                               $(119,719)     $(10,638)      $ (37,500)    $(129,615,554)  $181,664,067  

                                                                                                                               
Issuance of common stock 4/98 through 6/98                  --            --              --                --        134,731  
                                                                                                                               
Compensation relating to options granted              (217,500)           --              --                --             --  
                                                                                                                               
Amortization of compensation relating to                                                                                       
  stock options granted and awards made                 40,954            --              --                --         40,954  
                                                                                                                               
Unrealized gain on marketable securities                    --            --          18,750                --         18,750  
                                                                                                                               
Cumulative foreign currency translation                                                                                        
  adjustments                                               --         1,908              --                --          1,908  
                                                                                                                               
Net loss for period                                         --            --              --        (5,076,558)    (5,076,558) 
                                                                                                                               
Preferred stock dividends                                   --            --              --        (1,848,050)    (1,848,050) 
                                                     ------------------------------------------------------------------------
                                                                                                                               
Balance, June 30, 1998                                (296,265)       (8,730)        (18,750)     (136,540,162)   174,935,802  
                                                                                                                               
Issuance of common stock 7/98 through 9/98                  --            --              --                --        141,684  
                                                                                                                               
Compensation relating to options canceled              217,500            --              --                --             --  
                                                                                                                               
Amortization of compensation relating to                                                                                       
  stock options granted and awards made                 22,828            --              --                --         22,828  
                                                                                                                               
Unrealized loss on marketable securities                    --            --         (84,300)               --        (84,300) 
                                                                                                                               
Cumulative foreign currency translation                                                                                        
  adjustments                                               --        12,912              --                --         12,912  
                                                                                                                               
Net loss for period                                         --            --              --        (2,625,969)    (2,625,969) 
                                                                                                                               
Preferred stock dividends                                   --            --              --        (1,868,750)    (1,868,750) 
                                                     ------------------------------------------------------------------------
                                                                                                                               
Balance, September 30, 1998                          $ (55,937)     $  4,182       $(103,050)    $(141,034,881)  $170,534,207  
                                                     ======================================================================== 
                                                                                                                               
</TABLE>


See notes to consolidated financial statements.



                                      (5)
<PAGE>   6

                         ALKERMES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                  Six Months           Six Months
                                                                     Ended               Ended
                                                                 September 30,        September 30,
                                                                     1998                 1997
                                                                 ------------         ------------
<S>                                                              <C>                  <C>          

Cash flows from operating activities:
    Net loss                                                     $ (7,702,527)        $ (4,987,286)
    Adjustments to reconcile net loss to net cash used by
         operating activities:
         Depreciation and amortization                              2,249,690            1,525,040
         Amortization of compensation relating to stock
              options granted and awards made                          63,782               31,228
         Loss on sale of equipment                                         --                8,527
         Adjustments to other investments                                  --                   26
         Changes in assets and liabilities:
              Prepaid expenses and other current assets            (3,959,476)         (11,337,237)
              Accounts payable and accrued expenses                  (289,848)          (1,603,797)
              Deferred revenue                                       (932,544)           8,157,500
              Other long-term liabilities                             306,269              341,461
                                                                 ------------         ------------
                   Net cash used by operating activities          (10,264,654)          (7,864,538)
                                                                 ------------         ------------

Cash flows from investing activities:
    Additions to property, plant and equipment, net               (18,208,202)          (2,485,574)
    Maturities of short-term investments, net                      25,160,878            8,727,864
    Purchases of long-term investments, net                        (8,045,459)             (67,866)
    Increase in other assets                                         (563,000)              (2,320)
                                                                 ------------         ------------
                   Net cash (used by) provided by
                      investing activities                         (1,655,783)           6,172,104
                                                                 ------------         ------------

Cash flows from financing activities:
    Proceeds from issuance of common stock, net                       276,415              373,906
    Proceeds from issuance of long-term debt                       15,146,390            2,500,000
    Payment of preferred stock dividends                           (3,716,800)                  --
    Payment of long-term obligations                               (1,854,426)          (2,083,496)
                                                                 ------------         ------------
                   Net cash provided by financing
                      activities                                    9,851,579              790,410
                                                                 ------------         ------------

Effect of exchange rate changes on cash                                14,792               (9,727)
                                                                 ------------         ------------

Net decrease in cash and cash equivalents                          (2,054,066)            (911,751)
Cash and cash equivalents, beginning of period                      3,495,265            2,799,012
                                                                 ------------         ------------
Cash and cash equivalents, end of period                         $  1,441,199         $  1,887,261
                                                                 ============         ============

Supplementary information:
    Interest paid                                                $    520,257         $    471,634
                                                                 ============         ============
</TABLE>





See notes to consolidated financial statements.




                                      (6)
<PAGE>   7

                         ALKERMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   BASIS OF PRESENTATION

The consolidated financial statements for the three and six month periods ended
September 30, 1998 and 1997, are unaudited and include all adjustments which, in
the opinion of management, are necessary to present fairly the results of
operations for the periods then ended. All such adjustments are of a normal
recurring nature. These financial statements should be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended March 31, 1998,
which includes consolidated financial statements and notes thereto for the years
ended March 31, 1998, 1997 and 1996. In addition, the financial statements
include the accounts of Alkermes Controlled Therapeutics, Inc., Alkermes
Controlled Therapeutics Inc. II, Alkermes Investments, Inc., Alkermes Europe,
Ltd. and Alkermes Development Corporation II ("ADC II"), wholly owned
subsidiaries of the Company.

The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for any other
interim period or for a full fiscal year.

The preparation of the Company's financial statements in conformity with
generally accepted accounting principles necessarily 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.

2.   NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," which the Company adopted on April 1, 1998. SFAS No. 130
requires companies to display comprehensive income and its components as part of
the Company's full set of consolidated financial statements. Comprehensive
income is comprised of net income and other comprehensive income. The
measurement and presentation of net loss will not change. Other comprehensive
income includes certain changes in equity of the Company that are excluded from
the net loss. Specifically, SFAS No. 130 requires unrealized holding gains and
losses on the Company's available-for-sale securities and cumulative foreign
currency translation adjustments, which are currently reported separately in
shareholders' equity, to be included in other comprehensive income.

Comprehensive income (loss) for the three and six months ended September 30,
1998 and 1997 is as follows:

<TABLE>
<CAPTION>
                                                              Three Months          Three Months
                                                                 Ended                 Ended
                                                           September 30, 1998    September 30, 1997
                                                           ------------------    ------------------
<S>                                                           <C>                   <C>         

Net loss                                                      $(2,625,969)          $  (959,554)
Cumulative foreign currency translation adjustments                12,912               (17,565)
Unrealized loss on marketable securities                          (84,300)              (23,437)
                                                              -----------           -----------
Comprehensive loss                                            $(2,697,357)          $(1,000,556)
                                                              ===========           ===========

</TABLE>




                                      (7)
<PAGE>   8

<TABLE>
<CAPTION>
                                                                        Six Months           Six Months
                                                                          Ended                 Ended
                                                                    September 30, 1998     September 30, 1997
                                                                    ------------------     ------------------
<S>                                                                    <C>                     <C>         

Net loss                                                               $(7,702,527)            $(4,987,286)
Cumulative foreign currency translation adjustments                         14,820                  (8,512)
Unrealized (loss) gain on marketable securities                            (65,550)                 14,063
                                                                       -----------             -----------
Comprehensive loss                                                     $(7,753,257)            $(4,981,735)
                                                                       ===========             ===========

The accumulated other comprehensive income (loss) is as follows:

Balance March 31, 1998                                                 $   (48,138)
Change for the three months ended June 30, 1998                             20,658
                                                                       -----------
Balance June 30, 1998                                                      (27,480)
Change for the three months ended September 30, 1998                       (71,388)
                                                                       -----------
Balance September 30, 1998                                             $   (98,868)
                                                                       ===========

</TABLE>


SFAS No. 131 requires that the Company report financial and descriptive
information about its reportable operating segments. The Company is evaluating
the impact on its disclosures, if any.

3.   ACQUISITION OF CERTAIN ASSETS AND TECHNOLOGY

During the quarter ended June 30, 1998, Alkermes entered into an exclusive
license agreement with ALZA Corporation ("ALZA"), a pharmaceutical and drug
delivery company, for two of ALZA's oral drug delivery technologies: RingCap(TM)
and Dose Sipping Technology ("DST"). The assets acquired included equipment to
be used in the development of the technologies. A nonrecurring charge of
approximately $3.2 million for technology licensed but not yet commercially
viable was recorded by the Company at the acquisition date. This charge
represents that portion of the acquisition price of the acquired technology that
was allocated to research and development in-process.

4.   LONG-TERM DEBT

In September 1998, the Company amended its loan agreement with a bank to
increase the principal amount available thereunder up to a total of $20,000,000
and to grant a security interest in certain building, equipment and leasehold
improvements as security for the entire principal of, and interest on, the loan.
The additional principal amount of $9,000,000 made available under the first
tranche ("Tranche A") of the loan is payable over five years in equal quarterly
installments of $500,000, which will commence June 30, 1999. The additional
principal amount of $11,000,000 made available under the second tranche
("Tranche B") of the loan is payable over five years in equal quarterly
installments of $275,000 and a balloon payment of $6,325,000 due on September
30, 2003. The principal payments of Tranche B will commence June 30, 1999. The
loans bear interest at the one month LIBOR plus 1.25% (6.84375% at September 30,
1998).

In September 1998, the Company drew down approximately $6.9 million under
Tranche A and approximately $8.2 million under Tranche B. The Company can make
monthly drawdowns through March 31, 1999.






                                      (8)
<PAGE>   9

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


INTRODUCTION

Alkermes is developing innovative pharmaceutical products based on several
proprietary drug delivery systems: ProLease(R), Cereport(TM) (formerly known as
RMP-7(TM)), Medisorb(R), RingCap(TM) and Dose Sipping Technology ("DST"). Since
its inception in 1987, the Company has devoted substantially all of its
resources to its research and development programs. Alkermes has not received
any revenue from the sale of products. The Company has been unprofitable since
its inception and expects to incur substantial additional operating losses over
the next few years. At September 30, 1998, the Company had an accumulated
deficit of approximately $141.0 million.

The Company has funded its operations primarily through public offerings and
private placements of equity securities, bank loans and payments under research
and development agreements with collaborators, including Alkermes Clinical
Partners, L.P. ("Clinical Partners"), a research and development limited
partnership whose operations commenced in April 1992. The Company intends to
develop its product candidates in collaboration with others on whom the Company
will rely for funding, development, manufacturing and/or marketing.

FORWARD-LOOKING STATEMENTS

Any statements set forth below or otherwise made in writing or orally by the
Company with regard to its expectations as to financial results and other
aspects of its business may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Although the
Company believes that its expectations are based on reasonable assumptions
within the bounds of its knowledge of its business and operations, the Company's
business is subject to significant risks and there can be no assurance that
actual results of the Company's development activities and its results of
operations will not differ materially from its expectations. Factors which could
cause actual results to differ from expectations include, among others: (i) the
Company and its collaborators could not be permitted by regulatory authorities
to undertake clinical trials for RingCap or DST or to undertake additional
clinical trials for ProLease, Cereport, or Medisorb product candidates or
clinical trials could be delayed; (ii) product candidates could be ineffective
or unsafe during clinical trials; (iii) the Company's collaborators could elect
to terminate or delay development programs; (iv) the Company could incur
difficulties or set-backs in obtaining the substantial additional funding
required to continue research and development programs and clinical trials; (v)
even if product candidates appear promising at an early stage of development,
product candidates could fail to receive necessary regulatory approvals, be
difficult to manufacture on a large scale, be uneconomical, fail to achieve
market acceptance, be precluded from commercialization by proprietary rights of
third parties or experience substantial competition in the marketplace; (vi)
technological change in the biotechnology or pharmaceutical industries could
render the Company's product candidates obsolete or noncompetitive; (vii)
disputes with collaborators, termination of collaborations or failure to
negotiate acceptable new collaborative arrangements for ProLease, Medisorb,
RingCap and DST technologies, which are not independently commercializable, or
for Cereport, could occur; (viii) disputes with Clinical Partners over rights to
Cereport and related technology could occur, or the Company could fail to
purchase this technology from Clinical Partners pursuant to the purchase option
(the "Purchase Option"), or, if the Company did purchase RMP(TM) technology from
Clinical Partners (a) in shares of the Company's common stock, the Company's
shareholders would be substantially diluted or (b) in cash, the Company's
capital resources would be significantly depleted; and (ix) difficulties or
set-backs in obtaining and enforcing Alkermes' patents and difficulties with the
patent rights of others could occur.




                                      (9)
<PAGE>   10


RESULTS OF OPERATIONS

The Company's research and development revenue under collaborative arrangements
for the three and six months ended September 30, 1998 was $9,532,901 and
$17,200,535 compared to $7,330,623 and $12,112,466 for the corresponding periods
of the prior year. The increase in such revenue for the three and six months
ended September 30, 1998 as compared to the corresponding periods of the prior
year was mainly a result of the increased funding and milestones earned under
collaborative agreements related to the Company's ProLease, Medisorb and
Cereport technologies.

Interest income for the three and six months ended September 30, 1998 was
$2,630,872 and $5,222,419 compared to $1,102,563 and $2,252,117 for the
corresponding periods of the prior year. The increase in such income for the
three and six months ended September 30, 1998 as compared to the corresponding
periods of the prior year was primarily a result of the interest income earned
on the net proceeds of $110.5 million from the sale of 2,300,000 shares of the
Company's $3.25 convertible exchangeable preferred stock (the "Preferred Stock")
in March 1998.

The Company's total operating expenses were $14,789,742 and $26,904,228 for the
three and six months ended September 30, 1998 as compared to $9,392,740 and
$19,351,869 for the three and six months ended September 30, 1997. The Company
separately recorded a $3,221,253 nonrecurring charge in the three months ended
June 30, 1998 for DST and RingCap technologies licensed from ALZA Corporation
("ALZA") which are not yet commercially viable. Research and development
expenses for the three and six months ended September 30, 1998 were $11,437,814
and $20,448,916 compared to $7,094,597 and $14,702,524 for the corresponding
periods of the prior year. The increase in research and development expenses for
the three and six months ended September 30, 1998 as compared to the three and
six months ended September 30, 1997 was mainly the result of an increase in
salary and related benefits and other costs associated with an increase in
personnel as the Company advances its product candidates through development and
clinical trials and prepares for commercial scale manufacturing.

General and administrative expenses for the three and six months ended September
30, 1998 were $2,910,574 and $5,576,771 compared to $1,885,643 and $3,799,663
for the corresponding periods of the prior year. The increase in the three and
six months ended September 30, 1998 as compared to the three and six months
ended September 30, 1997 was mainly the result of an increase in salary and
related benefits and other costs relating to an increase in personnel, as well
as an increase in consulting costs.

The Company does not believe that inflation and changing prices have had a
material impact on its results of operations.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and short-term investments were approximately $166.8
million at September 30, 1998 as compared to $194.1 million at March 31, 1998.
The primary uses of cash and investments were to finance the Company's
operations, capital expenditures, the payment for the license from ALZA for the
RingCap and DST technologies and the payment of the dividends on the Company's
Preferred Stock. In addition, the Company has $8 million included in Investments
which have maturities ranging from 13 to 16 months. The Company invests in cash
equivalents, U.S. Government obligations, high grade corporate notes and
commercial paper. The Company's short-term investment objectives are, first, to
assure conservation of principal, and second, to obtain investment income.





                                      (10)
<PAGE>   11


The Company's research and development costs to date have been financed
primarily by sales of equity securities and payments under research and
development collaborative arrangements. The Company expects to incur significant
research and development and other costs, including costs related to preclinical
studies, clinical trials and facilities expansion. Therefore, the Company
expects that its costs, including research and development costs for all of its
product candidates, will exceed revenues significantly for the next few years,
which will result in continuing losses from operations.

Since the research and development revenue from Clinical Partners ended during
the quarter ended June 30, 1996, Alkermes has been using its own resources to
continue to develop Cereport. The Company is required to fund the development of
Cereport to maintain its option to purchase the limited partnership interests in
Clinical Partners. Effective September 30, 1997, the Company entered into an
agreement with ALZA relating to the development and commercialization of
Cereport. ALZA made a $10 million upfront payment to Alkermes to fund clinical
development of Cereport, of which $6.5 million has been recorded as deferred
revenue at September 30, 1998. In return, ALZA will have the option to acquire
exclusive worldwide commercialization rights to Cereport. If ALZA exercises its
option, ALZA will make additional payments to cover costs associated with
advanced clinical development. If Cereport is commercialized successfully by
ALZA, ALZA will make certain milestone payments to the Company. Alkermes would
be responsible for the manufacturing of Cereport, and the two companies would
share approximately equally in profits from sales of products.

Capital expenditures were approximately $18.2 million for the six months ended
September 30, 1998, principally reflecting equipment purchases and construction
in progress for the expansion of the Wilmington, Ohio facility and for
construction costs relating to the new commercial scale ProLease manufacturing
facility in Cambridge, Massachusetts. The Company completed the expansion of its
Medisorb manufacturing facility in Wilmington during the quarter ended June 30,
1998. The Company began construction of the new commercial scale ProLease
manufacturing facility in Cambridge in February 1998 and anticipates completing
construction in the fall of 1998. The cost for both facilities is expected to
aggregate approximately $20 million. The Company's capital expenditures for
equipment, facilities and building improvements have been financed to date
primarily with proceeds from bank loans and the sales of equity securities.

The Company will continue to pursue opportunities to obtain additional financing
in the future. Such financing may be sought through various sources, including
equity offerings, bank borrowings, lease arrangements relating to fixed assets
or other financing methods. The source, timing and availability of any
financings will depend on market conditions, interest rates and other factors.
The Company's future capital requirements will depend on many factors, including
continued scientific progress in its research and development programs, the
magnitude of these programs, progress with preclinical testing and clinical
trials, the time and costs involved in obtaining regulatory approvals, the costs
involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the establishment of additional
collaborative arrangements, the cost of manufacturing facilities and of
commercialization activities and arrangements and the cost of product
in-licensing and any possible acquisitions.

The Company may need to raise substantial additional funds for longer-term
product development, regulatory approvals and manufacturing or marketing
activities that it might undertake in the future. There can be no assurance that
additional funds will be available on favorable terms, if at all. If adequate
funds are not available, the Company may be required to curtail significantly
one or more of its research and development programs and/or obtain funds through
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its technologies, product candidates or
future products.

The Company and the companies with which it does business use software systems
and embedded technology in the conduct of their operations. Many software
systems and much technology in use today are unable to distinguish between the
year 2000 and the year 1900 because they use a two-digit 





                                      (11)
<PAGE>   12


shorthand for calendar dates. If the Company does not identify and correct any
such shorthand prior to January 1, 2000, its operations could be disrupted. The
Company's operations could also be disrupted if the companies with which the
Company does business similarly are not year 2000 compliant, and such failure
adversely affects their ability to do business with the Company.

To address these issues, the Company has undertaken a three-step comprehensive
project. The first step is to identify all of the Company's software and
embedded technology. The second step is to determine whether any of the
Company's software and technology use the two-digit shorthand and to determine
whether the companies with which it does significant business will be year 2000
compliant. The third step is to correct or replace all such software and
technology of the Company and then to test the corrected or replacement software
and technology. The Company has completed the first step of the project, expects
to complete the second step by the end of calendar year 1998 and will commence
the third step promptly upon completion of the second step. This project is
being conducted by the Company primarily using internal resources. The Company
cannot estimate the cost of completion of the project or establish any
contingency plan until the Company completes the second step, and there can be
no assurance that the cost of completion of the project will not be material,
that the project will be completed on a timely basis, that any contingency plans
could be promptly developed and implemented or that the use of the Company's
internal resources to complete the project will not adversely affect other
aspects of the Company's business. In the event that any of the companies with
which the Company does significant business do not successfully achieve year
2000 compliance on a timely basis, the Company's business could be adversely
affected.






                                      (12)
<PAGE>   13

PART II.  OTHER INFORMATION

ITEM 5.   OTHER INFORMATION

1.  ProLease Erythropoietin

Alkermes has announced that R.W. Johnson Pharmaceutical Research Institute
(PRI), a Johnson & Johnson company, has successfully completed a first probative
human study of ProLease Erythropoietin.

According to the agreement between Alkermes and PRI, Alkermes will receive a
milestone payment of $2.0 million. Following this probative study in human
volunteers, both parties also agreed to proceed with the development of an
appropriate ProLease Erythropoietin formulation.

Alkermes and PRI announced their collaboration for the development of ProLease
injectable sustained release formulations of Erythropoietin in January 1998.

2.  Undisclosed Compound

Relating to a separate agreement with PRI, Alkermes has announced the mutual
termination of a collaboration with PRI for the development of a sustained
release formulation of a PRI product candidate for the treatment of
hormone-mediated disorders.

The identity of the product candidate has never been disclosed by the parties.
With the termination of the collaboration, Alkermes regains rights licensed to
PRI for the development and marketing of sustained release formulations of this
class of compounds. Alkermes first announced the collaboration in December 1996.

The objective of the collaboration was to apply the ProLease drug delivery
system to a PRI proprietary compound being developed for the treatment of
hormone-mediated disorders. A ProLease formulation of the proprietary compound
completed a human clinical trial in 1997 and demonstrated sustained release for
the intended duration of time. PRI has discontinued further development of this
compound.

3.  ProLease Intron A

Alkermes has announced the mutual termination of a collaboration with
Schering-Plough Corporation for the development of a sustained release
formulation of Schering-Plough's Intron(R) A (interferon alfa-2b) product. With
the termination of the collaboration, Alkermes regains rights licensed to
Schering-Plough for the development and marketing of sustained release
formulations of alpha interferon. The collaboration began in 1992 and was
extended in 1995.



                                      (13)
<PAGE>   14

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits: 

                  Number                     Exhibit
                  ------                     -------

                  3.1(a)    Second Amended and Restated Articles of
                            Incorporation of Alkermes, Inc., effective July 23,
                            1991. (Incorporated by reference to Exhibit 4.1(a)
                            to the Company's Report on Form 10-Q for the quarter
                            ended June 30, 1991).

                  3.1(b)    Statement of Change of Registered Office of
                            Alkermes, Inc. effective July 23, 1991.
                            (Incorporated by reference to Exhibit 4.1(b) to the
                            Company's Report on Form 10-Q for the quarter ended
                            June 30, 1991).

                  3.1(c)    Amendment to the Second Amended and Restated
                            Articles of Incorporation, as filed with the
                            Pennsylvania Secretary of State on November 1, 1991.
                            (Incorporated by reference to Exhibit 4.1(c) to the
                            Company's Report on Form 10-Q for the quarter ended
                            September 30, 1991).

                  3.1(d)    Amendment to the Second Amended and Restated
                            Articles of Incorporation, as amended, as filed with
                            the Pennsylvania Secretary of State on February 12,
                            1993. (Incorporated by reference to Exhibit 4.1(d)
                            to the Company's Report on Form 10-Q for the quarter
                            ended December 31, 1992).

                  3.1(e)    Amendment to the Second Amended and Restated
                            Articles of Incorporation, as filed with the
                            Pennsylvania Secretary of State on February 26,
                            1998. (Incorporated by reference to Exhibit 4.6 to
                            the Company's Registration Statement on Form S-3, as
                            amended (File No. 333-50157)).

                  3.2       Amended and Restated By-Laws of Alkermes, Inc.,
                            effective as of July 1, 1994. (Incorporated by
                            reference to Exhibit 4.2 to the Company's Report on
                            Form 10-Q for the quarter ended June 30, 1994).

                  4.1       Specimen of Common Stock Certificate of Alkermes,
                            Inc. (Incorporated by reference to Exhibit 4 to the
                            Company's Registration Statement on Form S-1, as
                            amended (File No. 33-40250)).

                  4.2       Specimen of Preferred Stock Certificate of Alkermes,
                            Inc. (Incorporated by reference to Exhibit 4.1 to
                            the Company's Registration Statement on Form S-3, as
                            amended (File No. 333-50157)).

                  4.3       Form of 1992 Warrant to purchase 2,800 shares of the
                            Company's Common Stock. (Incorporated by reference
                            to Exhibit 4.2 to the Company's Report on Form 10-K
                            for the fiscal year ended March 31, 1992).

                  4.4       Form of 1995 Warrant to purchase 300 shares of the
                            Company's Common Stock. (Incorporated by reference
                            to 





                                      (14)
<PAGE>   15

                            Exhibit 4.3 to the Company's Report on Form 10-K for
                            the fiscal year ended March 31, 1992).

                  4.5       Form of Global Warrant Certificate for 1994 Class A
                            Warrants. (Incorporated by reference to Exhibit 4.6
                            to the Company's Report on Form 10-Q for the quarter
                            ended December 31, 1994).

                  4.6       Form of Global Warrant Certificate for 1994 Class B
                            Warrants. (Incorporated by reference to Exhibit 4.7
                            to the Company's Report on Form 10-Q for the quarter
                            ended December 31, 1994).

                  4.7       Form of Global Warrant Certificate for 1994
                            Affiliate Warrants. (Incorporated by reference to
                            Exhibit 4.8 to the Company's Report on Form 10-Q for
                            the quarter ended December 31, 1994).

                  4.8       Form of Global Warrant Certificate for 1994
                            Incentive Warrants. (Incorporated by reference to
                            Exhibit 4.9 to the Company's Report on Form 10-Q for
                            the quarter ended December 31, 1994).

                  4.9       Warrant Agreement, dated as of November 18, 1994, by
                            and between the Company and The First National Bank
                            of Boston. (Incorporated by reference to Exhibit
                            4.10 to the Company's Report on Form 10-Q for the
                            quarter ended December 31, 1994).

                  4.10      Stock Purchase Agreement, dated as of February 13,
                            1997, between the Company and ALZA Corporation.
                            (Incorporated by reference to Exhibit 4.5 to the
                            Company's Registration Statement on Form S-3, as
                            amended (File No. 333-19955)).

                  4.11      Indenture, dated as of March 1, 1998, between
                            Alkermes, Inc. and State Street Bank and Trust
                            Company, as Trustee. (Incorporated by reference to
                            Exhibit 4.7 to the Company's Registration Statement
                            on Form S-3, as amended (File No. 333-50157)).

                  4.12      Registration Rights Agreement, dated as of March 4,
                            1998, among the Company and the Initial Purchasers.
                            (Incorporated by reference to Exhibit 4.12 to the
                            Company's Report on Form 10-K for the fiscal year
                            ended March 31, 1998).

                  10.1      Third Loan Supplement and Modification Agreement,
                            dated as of September 24, 1998, by and among Fleet
                            National Bank, Alkermes Controlled Therapeutics,
                            Inc., Alkermes Controlled Therapeutics Inc. II and
                            the Company.

                  10.2      $11,000,000 Promissory Note, dated September 24,
                            1998, from the Company, Alkermes Controlled
                            Therapeutics, Inc. 






                                      (15)
<PAGE>   16
                            and Alkermes Controlled Therapeutics Inc. II
                            to Fleet National Bank.

                  10.3      $9,000,000 Promissory Note, dated September 24,
                            1998, from the Company, Alkermes Controlled
                            Therapeutics, Inc. and Alkermes Controlled
                            Therapeutics Inc. II to Fleet National Bank.

                  27        Financial Data Schedule.



(b)    The Registrant has filed no Reports on Form 8-K during the quarter ended
       September 30, 1998.






                                      (16)
<PAGE>   17


                                   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.



                                             ALKERMES, INC.
                                             (Registrant)



Date: November 16, 1998                      By: /s/ Richard F. Pops           
                                                 -------------------------------
                                                 Richard F. Pops
                                                 Chief Executive Officer and
                                                 Director
                                                 (Principal Executive Officer)


Date: November 16, 1998                      By: /s/ James M. Frates           
                                                 -------------------------------
                                                 James M. Frates
                                                 Vice President, Chief
                                                 Financial Officer and Treasurer
                                                 (Principal Financial and
                                                 Accounting Officer)







                                      (17)

<PAGE>   18


                                  EXHIBIT INDEX


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


   3.1(a)     Second Amended and Restated Articles of Incorporation of Alkermes,
              Inc., effective July 23, 1991. (Incorporated by reference to
              Exhibit 4.1(a) to the Company's Report on Form 10-Q for the
              quarter ended June 30, 1991).

   3.1(b)     Statement of Change of Registered Office of Alkermes, Inc.
              effective July 23, 1991. (Incorporated by reference to Exhibit
              4.1(b) to the Company's Report on Form 10-Q for the quarter ended
              June 30, 1991).

   3.1(c)     Amendment to the Second Amended and Restated Articles of
              Incorporation, as filed with the Pennsylvania Secretary of State
              on November 1, 1991. (Incorporated by reference to Exhibit 4.1(c)
              to the Company's Report on Form 10-Q for the quarter ended
              September 30, 1991).

   3.1(d)     Amendment to the Second Amended and Restated Articles of
              Incorporation, as amended, as filed with the Pennsylvania
              Secretary of State on February 12, 1993. (Incorporated by
              reference to Exhibit 4.1(d) to the Company's Report on Form 10-Q
              for the quarter ended December 31, 1992).

   3.1(e)     Amendment to the Second Amended and Restated Articles of
              Incorporation, as filed with the Pennsylvania Secretary of State
              on February 26, 1998. (Incorporated by reference to Exhibit 4.6 to
              the Company's Registration Statement on Form S-3, as amended (File
              No. 333-50157)).

   3.2        Amended and Restated By-Laws of Alkermes, Inc., effective as of
              July 1, 1994. (Incorporated by reference to Exhibit 4.2 to the
              Company's Report on Form 10-Q for the quarter ended June 30,
              1994).

   4.1        Specimen of Common Stock Certificate of Alkermes, Inc.
              (Incorporated by reference to Exhibit 4 to the Company's
              Registration Statement on Form S-1, as amended (File No.
              33-40250)).

   4.2        Specimen of Preferred Stock Certificate of Alkermes, Inc.
              (Incorporated by reference to Exhibit 4.1 to the Company's
              Registration Statement on Form S-3, as amended (File No.
              333-50157)).

   4.3        Form of 1992 Warrant to purchase 2,800 shares of the Company's
              Common Stock. (Incorporated by reference to Exhibit 4.2 to the
              Company's Report on Form 10-K for the fiscal year ended March 31,
              1992).




                                      (18)
<PAGE>   19



   4.4        Form of 1995 Warrant to purchase 300 shares of the Company's
              Common Stock. (Incorporated by reference to Exhibit 4.3 to the
              Company's Report on Form 10-K for the fiscal year ended March 31,
              1992).

   4.5        Form of Global Warrant Certificate for 1994 Class A Warrants.
              (Incorporated by reference to Exhibit 4.6 to the Company's Report
              on Form 10-Q for the quarter ended December 31, 1994).

   4.6        Form of Global Warrant Certificate for 1994 Class B Warrants.
              (Incorporated by reference to Exhibit 4.7 to the Company's Report
              on Form 10-Q for the quarter ended December 31, 1994).

   4.7        Form of Global Warrant Certificate for 1994 Affiliate Warrants.
              (Incorporated by reference to Exhibit 4.8 to the Company's Report
              on Form 10-Q for the quarter ended December 31, 1994).

   4.8        Form of Global Warrant Certificate for 1994 Incentive Warrants.
              (Incorporated by reference to Exhibit 4.9 to the Company's Report
              on Form 10-Q for the quarter ended December 31, 1994).

   4.9        Warrant Agreement, dated as of November 18, 1994, by and between
              the Company and The First National Bank of Boston. (Incorporated
              by reference to Exhibit 4.10 to the Company's Report on Form 10-Q
              for the quarter ended December 31, 1994).

   4.10       Stock Purchase Agreement, dated as of February 13, 1997, between
              the Company and ALZA Corporation. (Incorporated by reference to
              Exhibit 4.5 to the Company's Registration Statement on Form S-3,
              as amended (File No. 333-19955)).

   4.11       Indenture, dated as of March 1, 1998, between Alkermes, Inc. and
              State Street Bank and Trust Company, as Trustee. (Incorporated by
              reference to Exhibit 4.7 to the Company's Registration Statement
              on Form S-3, as amended (File No. 333-50157)).

   4.12       Registration Rights Agreement, dated as of March 4, 1998, among
              the Company and the Initial Purchasers. (Incorporated by reference
              to Exhibit 4.12 to the Company's Report on Form 10-K for the
              fiscal year ended March 31, 1998).

   10.1       Third Loan Supplement and Modification Agreement, dated as of
              September 24, 1998, by and among Fleet National Bank, Alkermes
              Controlled Therapeutics, Inc., Alkermes Controlled Therapeutics
              Inc. II and the Company.






                                      (19)
<PAGE>   20


   10.2       $11,000,000 Promissory Note, dated September 24, 1998, from the
              Company, Alkermes Controlled Therapeutics, Inc. and Alkermes
              Controlled Therapeutics Inc. II to Fleet National Bank.

   10.3       $9,000,000 Promissory Note, dated September 24, 1998, from the
              Company, Alkermes Controlled Therapeutics, Inc. and Alkermes
              Controlled Therapeutics Inc. II to Fleet National Bank.

   27         Financial Data Schedule.







                                      (20)