<PAGE>

================================================================================

                                  UNITED STATES
                       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 March 31, 2002

                                       OR

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

                        Commission File Number: 000-26929

                                 _______________

                               ADOLOR CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

                 Delaware                                 31-1429198
      (State of other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                Identification Number)


                             620 Pennsylvania Drive
                            Exton, Pennsylvania 19341
              (Address of Principal Executive Offices and Zip Code)

                                  484-595-1500
              (Registrant's Telephone Number, Including Area Code)

                                 _______________

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

     Number of shares outstanding of the issuer's Common Stock, par value $.0001
per share, as of May 13, 2002: 31,191,028 shares.

================================================================================

<PAGE>

================================================================================
                               ADOLOR CORPORATION

                                     INDEX

<TABLE>
<CAPTION>
<S>                                                                                                  <C>
PART I.   FINANCIAL INFORMATION


ITEM 1.   Financial Statements:

          Consolidated Balance Sheets at December 31, 2001 and March 31, 2002 ......................  1

          Consolidated Statements of Operations for the three months ended March 31, 2001
          and 2002 and the period from August 9, 1993 (inception) to March 31, 2002 ................  2

          Consolidated Statements of Cash Flows for the three months ended March 31, 2001
          and 2002 and the period from August 9, 1993 (inception) to March 31, 2002 ................  3

          Notes to Consolidated Financial Statements ...............................................  4

ITEM 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations ....  6

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk ............................... 11

PART II.  OTHER INFORMATION

ITEM 6.   Exhibits and Reports on Form 8-K ......................................................... 12

          Signatures ............................................................................... 12
</TABLE>

                                      -i-

<PAGE>


PART I.   FINANCIAL INFORMATION
          ---------------------

ITEM 1.   FINANCIAL STATEMENTS

                               ADOLOR CORPORATION
                          (A Development Stage Company)

                           Consolidated Balance Sheets
                      December 31, 2001 and March 31, 2002

<TABLE>
<CAPTION>
                                                                         December 31, 2001       March 31, 2002
                                                                        --------------------- ---------------------
                                                                              Audited              Unaudited
                                                                        --------------------- ---------------------
<S>                                                                     <C>                   <C>
        Assets
 Current assets:
      Cash and cash equivalents .....................................   $   50,017,499        $      58,655,154
      Short-term investments ........................................      106,426,917               85,284,858
      Prepaid expenses and other current assets .....................        4,234,509                3,554,435
                                                                        --------------------- ---------------------
        Total current assets ........................................      160,678,925              147,494,447
      Equipment and leasehold improvements, net .....................        3,420,576                3,630,441
      Other asset ...................................................           82,035                   76,565
                                                                        --------------------- ---------------------
        Total assets ................................................   $  164,181,536        $     151,201,453
                                                                        ===================== =====================

        Liabilities and Stockholders' Equity
 Current liabilities:
      Notes payable-current portion. ................................   $      214,819        $         259,008
      Accounts payable ..............................................        2,294,545                2,367,152
      Accrued expenses ..............................................        8,434,747               14,073,546
      Deferred licensing fees .......................................           26,316                   26,316
                                                                        --------------------- ---------------------
        Total current liabilities ...................................       10,970,427               16,726,022
 Deferred licensing fees ............................................          429,824                  423,245
                                                                        --------------------- ---------------------
        Total liabilities ...........................................       11,400,251               17,149,267
                                                                        --------------------- ---------------------
 Commitments
 Stockholders' equity:
      Series A Junior Participating preferred
        stock, $0.01 par value; 35,000 shares
        authorized, none issued and outstanding .....................                -                        -
      Preferred stock, $0.01 par value; 1,000,000
        shares authorized; none issued and outstanding ..............                -                        -
      Common stock, par value $.0001 per share;
        99,000,000 shares authorized; 31,104,304
        and 31,185,784 shares issued and outstanding at
        December 31, 2001 and March 31, 2002, respectively ..........            3,110                    3,118
      Additional paid-in capital ....................................      259,043,017              259,116,403
      Notes receivable for stock options ............................         (818,046)                (787,091)
      Deferred compensation .........................................      (11,527,697)             (10,257,926)
      Unrealized gains on available for sale securities .............          730,228                  219,072
      Deficit accumulated during the development stage ..............      (94,649,327)            (114,241,390)
                                                                        --------------------- ---------------------
        Total stockholders' equity ..................................      152,781,285              134,052,186
                                                                        --------------------- ---------------------
        Total liabilities and stockholders' equity ..................   $  164,181,536        $     151,201,453
                                                                        ===================== =====================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      -1-

<PAGE>

                               ADOLOR CORPORATION
                          (A Development Stage Company)

                      Consolidated Statements of Operations
                                   (Unaudited)
               Three months ended March 31, 2001 and 2002 and the
            period from August 9, 1993 (inception) to March 31, 2002

<TABLE>
<CAPTION>
                                                                                                      Period from
                                                                                                     August 9, 1993
                                                                Three months ended                   (inception) to
                                                                     March 31,                          March 31,
                                                            2001                   2002                   2002
                                                    ---------------------  ---------------------  ----------------------
<S>                                                 <C>                    <C>                    <C>
Revenues:
  Grant, license and milestone revenue ...........  $         533,095      $         317,339      $       1,908,950
                                                    ---------------------  ---------------------  ----------------------
Operating expenses incurred during the development
  stage:
     Research and development ....................          6,540,653             17,071,153             93,038,239
     General and administrative ..................          3,046,570              4,089,677             35,552,656
                                                    ---------------------  ---------------------  ----------------------
          Total operating expenses ...............          9,587,223             21,160,830            128,590,895
                                                    ---------------------  ---------------------  ----------------------
          Loss from operations ...................         (9,054,128)           (20,843,491)          (126,681,945)
Interest income ..................................          2,112,352              1,257,986             12,730,059
Interest expense .................................            (38,609)                (6,558)              (289,504)
                                                    ---------------------  ---------------------  ----------------------
                  Net loss .......................  $      (6,980,385)     $     (19,592,063)     $    (114,241,390)
                                                    =====================  =====================  ======================
Basic and diluted net loss per share: ............  $           (0.25)     $           (0.63)
                                                    =====================  =====================
Shares used in computing basic and diluted net
   loss per share: ...............................         27,945,145             31,155,742
                                                    =====================  =====================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       -2-

<PAGE>

                               ADOLOR CORPORATION
                          (A Development Stage Company)

                      Consolidated Statements of Cash Flows
                                   (Unaudited)
               Three months ended March 31, 2001 and 2002 and the
            period from August 9, 1993 (inception) to March 31, 2002

<TABLE>
<CAPTION>
                                                                                                    Period from
                                                                                                   August 9, 1993
                                                                       Three months ended          (inception) to
                                                                            March 31,                 March 31,
                                                                      2001             2002             2002
                                                                 --------------   --------------   --------------
<S>                                                              <C>              <C>              <C>
Cash flows from operating activities:
   Net loss ...................................................  $  (6,980,385)   $ (19,592,063)   $(114,241,390)
   Adjustments to reconcile net loss to net cash used in
     operating activities:
     Non-cash compensation expense ............................      1,448,773        1,239,501       12,613,520
     Non-cash warrant value ...................................              -                -           60,000
     Depreciation and amortization expense ....................        139,511          320,401        2,285,077
     Issuance of common stock for technology license
     agreements ...............................................              -                -            6,250
   Changes in assets and liabilities:
     Prepaid expenses and other current assets ................     (1,110,059)         680,074       (3,554,435)
     Other assets .............................................          2,713            5,470          (76,565)
     Accounts payable .........................................     (1,092,767)          72,607        2,367,152
     Deferred licensing fees ..................................        (13,158)          (6,579)         449,561
     Accrued expenses and other current liabilities ...........      1,729,645        5,638,799       14,073,546
                                                                 --------------   --------------   --------------
     Net cash used in operating activities ....................     (5,875,727)     (11,641,790)     (86,017,284)
                                                                 --------------   --------------   --------------
Cash flows from investing activities:
   Purchase of equipment and leasehold improvements ...........       (654,559)        (530,266)      (5,902,178)
   Purchase of short-term investments .........................     (9,131,157)     (14,325,920)    (226,237,714)
   Maturities of short-term investments .......................     21,491,451       34,956,823      141,171,928
                                                                 --------------   --------------   --------------
     Net cash provided by (used in) investing activities ......     11,705,735       20,100,637      (90,967,964)
Cash flows from financing activities:
   Net proceeds from issuance of mandatorily redeemable
     convertible preferred stock and Series B warrants ........              -                -       78,501,909
   Proceeds from Series D mandatorily redeemable convertible
     preferred stock subscription .............................              -                -          600,000
   Net proceeds from issuance of restricted common stock and
     exercise of common stock options .........................         21,808          103,664          821,914
   Proceeds from notes payable-related parties ................              -                -        1,000,000
   Payment of notes payable ...................................       (134,380)        (131,986)      (1,407,311)
   Proceeds received on notes receivable ......................          4,105           80,489          237,328
   Interest receivable converted to principal on notes ........        (69,339)         (49,534)        (118,873)
   Proceeds from notes payable ................................         88,031          176,175        1,666,319
   Net proceeds from issuance of newly registered shares of
     common stock .............................................              -                -       58,962,647
   Net proceeds from IPO ......................................              -                -       95,376,469
                                                                 --------------   --------------   --------------
     Net cash (used in) provided by financing activities ......        (89,775)         178,808      235,640,402
Net increase in cash and cash equivalents .....................      5,740,233        8,637,655       58,655,154
Cash and cash equivalents at beginning of period ..............     67,392,849       50,017,499                -
                                                                 --------------   --------------   --------------
Cash and cash equivalents at end of period ....................  $  73,133,082    $  58,655,154    $  58,655,154
                                                                 ==============   ==============   ==============
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................         38,609            6,558          199,629
Supplemental disclosure of noncash transactions:
Unrealized gains (losses) on available for sale securities ....        389,616         (511,156)         219,072
Deferred compensation from issuance of common stock,
   restricted common stock and common stock options ...........              -                -       23,875,441
Issuance of common stock for technology license agreements or
   for services ...............................................              -                -           19,589
Conversion of Series A through H preferred stock for common
   stock ......................................................              -                -       80,383,703
Conversion of stock subscription to Series D mandatorily
   redeemable preferred stock .................................              -                -          600,000
Conversion of bridge financing, including accrued interest, to
   Series B mandatorily redeemable preferred stock ............              -                -        1,019,787
                                                                 ==============   ==============   ==============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       -3-

<PAGE>

                               Adolor Corporation
                          (A Development Stage Company)

                   Notes to Consolidated Financial Statements

                                 March 31, 2002
                                   (Unaudited)

1.   ORGANIZATION AND BUSINESS ACTIVITIES

     Adolor Corporation (together with its subsidiary, "Adolor" or the
"Company") is a development-stage pharmaceutical company engaged in the
development of proprietary pharmaceutical products for the treatment of pain and
the side effects that are caused by current pain treatments. The Company
commenced operations on November 7, 1994. We have a portfolio of small molecule
product candidates that are in various stages of development ranging from
preclinical studies to Phase 1 through Phase 3 clinical trials. Our lead product
candidate, alvimopan, which is also known as ADL 8-2698, is designed to
selectively block the effects of narcotic analgesics on the gastrointestinal
tract. Alvimopan is in Phase 3 clinical trials for two indications, the
management of post operative ileus and the management of opioid bowel
dysfunction. The Company is currently devoting substantially all of its efforts
toward conducting pharmaceutical discovery and development and licensing
technology.

     The accompanying consolidated financial statements include the results of
operations of the Company for the period from August 9, 1993 (inception) to
March 31, 2002.

     The Company has licensed its core technology from certain universities and
research institutions in exchange for present and future cash payments and, in
certain instances, common stock. The cost of obtaining such technology has been
charged as incurred, to research and development expense in the accompanying
consolidated statements of operations because the core technology which was
licensed had not reached technological feasibility and had no alternative future
uses.

     The Company has not generated any product sales revenues and has not
achieved profitable operations. There is no assurance that profitable
operations, if ever achieved, could be sustained on a continuing basis. In
addition, development activities and clinical and pre-clinical testing and
commercialization of the Company's proprietary technology will require
significant additional financing. The Company's deficit accumulated during the
development stage through March 31, 2002, aggregated approximately $114.2
million, and the Company's management expects to incur substantial and
increasing losses in future periods. Further, the Company's future operations
are dependent on the success of the Company's research, development and
licensing efforts and, ultimately, upon regulatory approval and market
acceptance of the Company's proposed future products.

     The Company plans to finance its future operations with a combination of
license payments, equity offerings, payments from strategic research and
development and marketing arrangements, and revenues from future product sales,
if any. The Company has not generated positive cash flows from operations, and
there are no assurances that the Company will be successful in obtaining an
adequate level of financing for the long-term development and commercialization
of its planned products. The Company believes that its current financial
resources and sources of liquidity are adequate to fund operations through the
end of 2003 based on a level of research and development, marketing and
administrative activities necessary to achieve its short-term objectives.

Principles of Consolidation

     The consolidated financial statements include the accounts of Adolor
Corporation and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation. The information
at March 31, 2002 and for the periods ended March 31, 2001 and 2002, is
unaudited but includes all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to state fairly
the financial information set forth in accordance with accounting principals
generally accepted in the United States of America. The interim results are not
necessarily indicative of results to be expected for the full fiscal year. These
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2001 included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission.

                                       -4-

<PAGE>

                               Adolor Corporation
                          (A Development Stage Company)

                   Notes to Consolidated Financial Statements

                                 March 31, 2002
                                   (Unaudited)

2.   COMPREHENSIVE LOSS

     In the Company's annual consolidated financial statements, comprehensive
loss is presented as a separate financial statement. For interim consolidated
financial statements, the Company is permitted to disclose the information in
the footnotes to the financial statements. The disclosures are required for
comparative purposes. The only comprehensive income item the Company has is
unrealized gains and losses on available for sale securities.

     The following reconciles net loss to comprehensive loss for the three
months ended March 31, 2001 and 2002:

<TABLE>
<CAPTION>

                                                                                2001                  2002
                                                                        --------------------- ---------------------
<S>                                                                     <C>                   <C>
 Net loss ............................................................  $      (6,980,385)    $     (19,592,063)
 Other comprehensive income:
   Unrealized gains (losses) on available for sale securities ........            389,616              (511,156)
                                                                        --------------------- ---------------------
 Comprehensive loss                                                     $      (6,590,769)    $     (20,103,219)
                                                                        ===================== =====================
</TABLE>

3.   SHORT-TERM INVESTMENTS

     Short-term Investments--consist of fixed income securities with original
maturities of greater than three months including U.S. Treasury obligations and
corporate securities and high-grade commercial paper. At December 31, 2001 and
March 31, 2002, all of the short-term investments were deemed as "available for
sale" investments.

     The following summarizes the "available for sale" investments at December
31, 2001 and March 31, 2002:

                                              Gross      Gross
                                            unrealized unrealized
                                   Cost       gains      losses   Fair value
                                ----------- ---------- ---------- -----------

   US Government obligations &
    agencies                   $ 23,588,892    27,972    32,043  $ 23,584,821
   Commercial paper...........      497,309     1,326        --       498,635
   Corporate bonds.............  81,610,488   740,458     7,485    82,343,461
                                -----------  --------   -------   -----------
     December 31, 2001........ $105,696,689  $769,756   $39,528  $106,426,917
                                ===========  ========   =======   ===========

   US Government obligations &
    agencies                   $ 21,455,488        --   111,158  $ 21,344,330
   Corporate bonds.............  63,610,298   372,017    41,787    63,940,528
                                -----------  --------   -------   -----------
     March 31, 2002........... $ 85,065,786  $372,017  $152,945  $ 85,284,858
                                ===========  ========   =======   ===========

   At March 31, 2002, maturities of investments were as follows:

   Less than 1 year...........   85,065,786   372,017   152,945    85,284,858
   Due in 1-5 years...........           --        --        --            --
                                -----------  --------   -------   -----------
     March 31, 2002........... $ 85,065,786  $372,017  $152,945  $ 85,284,858
                                ===========  ========   =======   ===========

4.   SUBSEQUENT EVENTS

     In April 2002, the Company entered into a collaboration agreement with
Glaxo Group Limited, an affiliate of GlaxoSmithKline plc, for the exclusive
worldwide development and commercialization of alvimopan, which is also known as
ADL 8-2698. The companies have agreed to co-develop alvimopan for a number of
indications, both acute and chronic, which would involve the use of alvimopan in
in-patient and out-patient settings. Under the terms of the collaboration
agreement, Glaxo paid the Company a non-refundable and non-creditable signing
fee of $50 million and the Company may receive regulatory milestone payments of
up to $220 million over the term of the agreement depending on the progress of
the various indications.

     In the United States, both companies will co-develop and co-promote
alvimopan and share development expenses and commercial returns. The Company
will lead the development, marketing, and co-promotion strategy for acute-care
indications, and Glaxo will lead the development, marketing, and co-promotion
for chronic care indications. Outside the United States, Glaxo will be
responsible for the development and commercialization of alvimopan, and the
Company will receive royalties on revenues, if any. In connection with the
collaboration agreement, Glaxo will reimburse the Company for a portion of the
development and promotion expenses incurred in the first quarter of 2002. This
reimbursement will be reflected in the second quarter.

                                      -5-

<PAGE>

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

Forward-Looking Statements

          Various statements made in this Report on Form 10-Q and in our other
reports and public filings are forward-looking within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include,
but are not limited to, information about the following:

          .    our product development efforts and the implications of their
               preliminary results;

          .    anticipated clinical trial initiation and completion dates and
               regulatory filing dates for our product candidates;

          .    the status and anticipated timing of regulatory approval for our
               product candidates;

          .    anticipated operating losses and capital expenditures;

          .    our intentions regarding the establishment of collaborations;

          .    the commercialization of our product candidates, including the
               development of a sales and marketing force; and

          .    our intention to rely on third parties for manufacturing.

When used in this Report on Form 10-Q, the words "may", "will", "expect",
"anticipate", "intend", "plan", "believe", "seek", "estimate" and similar
expressions are generally intended to identify forward-looking statements, but
are not the exclusive expressions of forward-looking statements. Readers are
cautioned that such forward-looking statements are only projections of future
events and, because forward-looking statements involve risks and uncertainties,
there are important factors that could cause our actual results and financial
position to differ materially from those expressed or implied by these
forward-looking statements, including, but not limited to those discussed
elsewhere in this Report, including in the Certain Risks Related to Our Business
section of this Report, and the risks discussed in our other Securities and
Exchange Commission, or Commission, filings including our Registration Statement
on Form S-3 declared effective on July 23, 2001 by the Commission (File No.
333-64298) and our Report on Form 10-K for the annual period ended December 31,
2002, filed on April 1, 2002. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date made.
Furthermore, we undertake no obligation to publicly update any forward-looking
statements.

Subsequent Event

          Collaboration Agreement. In April 2002, we entered into a
collaboration agreement with Glaxo Group Limited, an affiliate of
GlaxoSmithKline plc, for the exclusive worldwide development and
commercialization of alvimopan, which is also known as ADL 8-2698. We and Glaxo
have agreed to co-develop alvimopan for a number of indications, both acute and
chronic, which would involve the use of alvimopan in in-patient and out-patient
settings. Under the terms of the agreement, Glaxo paid us a non-refundable and
non-creditable signing fee of $50 million and we may receive regulatory
milestone payments of up to $220 million over the term of the agreement
depending on the progress of the various indications.

          In the United States, we and Glaxo will co-develop and co-promote
alvimopan and share development expenses and commercial returns. We will lead
the development, marketing and co-promotion strategy for acute-care indications,
and Glaxo will lead the development, marketing and co-promotion for chronic care
indications. Outside the United States, Glaxo will be responsible for the
development and commercialization of alvimopan, and we will receive royalties on
revenues, if any. In connection with the collaboration agreement, Glaxo will
reimburse us for a portion of the development and promotion expenses incurred in
the first quarter of 2002. This reimbursement will be reflected in the second
quarter.

Overview

          We are a therapeutic-based biopharmaceutical company. We discover,
develop and plan to commercialize proprietary pharmaceutical products for the
treatment of pain and the side effects that are caused by current pain
treatments. Our lead product candidate, alvimopan, is currently in three Phase 3
clinical trials for the management of postoperative ileus and one Phase 3
clinical trial for the management of opioid-induced bowel dysfunction. Our other
product candidates are in various stages of development ranging from preclinical
studies through Phase 2 clinical trials.

          We are a development stage pharmaceutical company and have not
generated any revenues from product sales. We have not been profitable and,
since our inception, we have incurred a cumulative net loss of approximately
$114.2 million through March 31, 2002. These losses have resulted principally
from costs incurred in research and development activities and general and
administrative expenses.

          We expect to incur additional operating losses for at least the next
several years. Research, development and clinical trial costs relating to
product candidates will continue to increase. We expect manufacturing, marketing
and sales costs to increase in 2003 as we prepare for the potential
commercialization of alvimopan.

                                       -6-

<PAGE>

Certain Risks Related to Our Business

        As further described herein, our performance and financial results are
subject to risks and uncertainties including, but not limited to, the following
specific risks:

        The market price for our common stock has been highly volatile and may
continue to be highly volatile in the future. The market price for our common
stock is highly dependent on the results of our clinical trials, in particular
our Phase 3 clinical trials of alvimopan that are currently underway. Although
we believe that the clinical trial results that preceeded the Phase 3 clinical
trials were positive, there can be no assurance that the results of the Phase 3
clinical trials that are currently underway will be positive. Failure of these
results to be positive would adversely impact the market price for our common
stock.

        Successfully commercializing any of our product candidates entails
significant regulatory, manufacturing, sales and marketing, competitive and
financing risks.

        Because our product candidates are in development, there is a high risk
that further development and testing will demonstrate that our product
candidates are not suitable for commercialization. We have no products that have
received regulatory approval for commercial sale. All of our product candidates
are in development, and we face the substantial risks of failure inherent in
developing drugs based on new technologies. Our product candidates must satisfy
rigorous standards of safety and efficacy before the United States Food and Drug
Administration, or FDA, and foreign regulatory authorities will approve them for
commercial use. We will need to conduct significant additional research, animal
testing, or preclinical testing, and human testing, or clinical trials, to
demonstrate the safety and efficacy of our product candidates to the
satisfaction of the FDA and foreign regulatory authorities to obtain product
approval.

        Preclinical testing and clinical development are long, expensive and
uncertain processes. Failure can occur at any stage of testing. Success in
preclinical testing and early clinical trials does not ensure that later
clinical trials will be successful. We may not be able to enroll a sufficient
number of patients to complete our clinical trials in a timely manner. Based on
results at any stage of clinical trials, we may decide to discontinue
development of our product candidates.

        We believe our existing cash, cash equivalents and short-term
investments as of March 31, 2002 of approximately $143.9 million and anticipated
cash flow from existing collaborations will be sufficient to meet our currently
estimated operating and investing requirements through the end of 2003. We have
generated operating losses since we began operations in November 1994 and we
will need additional funds that may not be available in the future. We have no
products that have generated any revenue, and as of March 31, 2002, we have
incurred a cumulative net loss of approximately $114.2 million. Even if we
succeed in developing a commercial product, we expect to incur losses for at
least the next several years and expect that these losses will increase as we
expand our research and development and sales and marketing activities. If we
fail to obtain the capital necessary to fund our operations, we will be unable
to develop products successfully. We do not know whether additional financing
will be available when needed, or that, if available, we will obtain financing
on terms favorable to our stockholders or to us.

        We have limited experience in conducting and managing the clinical
trials necessary to obtain regulatory approval.

        Our business could suffer if we cannot attract, retain and motivate
skilled personnel and cultivate key academic collaborations.

        The concept of developing peripherally restricted opioid analgesics and
narcotic antagonist drugs is relatively new and may not lead to commercially
successful drugs.

        Third parties are conducting or will conduct many of our product
development activities and almost all of our manufacturing and marketing
activities. If these third parties fail to perform these functions
satisfactorily, our product development could be delayed.

        If we do not realize value from our retained commercialization rights,
we may not achieve our commercial objectives.

        If our competitors develop and market products that are more effective,
have fewer side effects or are less expensive than our product candidates, that
will reduce our commercial opportunities.

        Companies and universities that have licensed product candidates to us
for clinical development and marketing are sophisticated competitors that could
develop similar products to compete with our products.

        Our agreements with our collaborators may not generate as much revenue
as we anticipate. If conflicts arise between our collaborators or advisors and
us, they may act in their self-interest.

        It is difficult and costly to protect our intellectual property rights,
and we cannot ensure their protection.

        If we are unable to contract with third parties to manufacture our
products in sufficient quantities and at an acceptable cost, we may be unable to
meet demand for our products and lose potential revenues.

        If we are unable to create sales, marketing and distribution
capabilities or enter into agreements with third parties to perform these
functions, we will not be able to commercialize products.

        If product liability lawsuits are successfully brought against us, we
may incur substantial liabilities and may have to limit commercialization of our
products.

        If we use biological and hazardous materials in a manner that causes
injury or violates laws, we may be liable for damages.

        We may issue preferred stock as an anti-takeover provision.

        We have not and do not intend to pay any dividends on our common stock.

Critical Accounting Policies and Estimates

        During 2001, the staff of the SEC released a cautionary advice regarding
critical accounting policies and practices. The release defines critical
policies and practices as items that are both most important to the portrayal of
a company's financial condition and results, and require management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effects of matters that are inherently uncertain. Due
to the nature of our operations and our current stage of development, we do not
believe that we currently face the complex or subjective judgments inferred by
the staff in the advice. As we progress in our development and move closer to
product approval and commercial operation, we may face such issues which require
increased levels of management estimation and complex judgment. Our practice of
applying APB Opinion No. 25 to account for our stock option plan rather than
SFAS No. 123 could be considered to fall within the realm of this cautionary
advice.

                                      -7-

<PAGE>

        We enter into contracts with third party vendors to perform clinical
trials and the manufacture of drug candidates. We recognize these expenses based
on the percentage of completion method to match the period in which they are
incurred. These contracts can be terminated by either party.

Milestone Payments, Royalties and License Fees

        We paid Roberts Laboratories, Inc., which merged with Shire
Pharmaceutical, plc, a total of $600,000 through March 31, 2002 for the
exclusive worldwide license to alvimopan. Our license agreement with Roberts
requires us to make payments to Roberts if and when two milestones are achieved.
Roberts licensed the rights to alvimopan from Eli Lilly, and Eli Lilly consented
to the assignment by Roberts to us of Roberts' rights and obligations. Under the
agreement with Eli Lilly, we will make a milestone payment to Eli Lilly if and
when we receive FDA approval to sell alvimopan. We will be required to pay
royalties to Eli Lilly and Roberts on any sales of alvimopan.

Liquidity and Capital Resources

        We have experienced negative operating cash flows since our inception,
and we have funded our operations primarily from the proceeds received from the
sale of our common stock and our mandatorily redeemable convertible preferred
stock. Cash, cash equivalents and short-term investments were $143,940,012 at
March 31, 2002, and $156,444,416 at December 31, 2001, representing 95.2% and
95.3% of our total assets, respectively. We invest excess cash in highly liquid
investment-grade marketable securities including corporate and United States
government agency bonds.

        The following is a summary of selected cash flow information for the
three months ended March 31, 2001 and 2002:

                                                  Three Months Ended March,
                                                   2001               2002
                                                   ----               ----

Net loss                                          $(6,980,385)     $(19,592,063)

Adjustments for non-cash operating items            1,588,284         1,559,902
                                                  -----------      ------------

Net cash operating loss                            (5,392,101)      (18,032,161)

Net change in assets and liabilities                 (483,626)        6,390,371
                                                  -----------      ------------

Net cash used in operating activities              (5,875,727)      (11,641,790)
                                                  ===========      ============

Net cash provided by investing activities          11,705,735        20,100,637
                                                  ===========      ============
Net cash (used in) provided by financing
activities                                            (89,775)          178,808
                                                  ===========      ============

Net Cash Used in Operating Activities

Operating Cash Inflows

        Operating cash inflows for the first quarter of 2002 have been derived
from grant and license revenues and from interest income on cash equivalents and
short-term investments.

Operating Cash Outflows

        Our operating cash outflows for the first quarter of 2002 have continued
to be primarily used for research and development expenditures associated with
our product candidates, in particular including the costs of manufacturing the
clinical trial materials for alvimopan.

Operating Cash Flow Requirements Outlook

        We expect to continue to use cash, cash equivalents and short-term
investments to fund operating activities. Research and development expenditures,
including clinical trial expenditures, are expected to increase as we continue
to develop new product candidates. We expect that our operating expenses will
increase in future periods as a result of the manufacturing scale-up and in
anticipation of commercialization of our product candidates, assuming that we
receive the necessary regulatory approvals.

        The initiation of commercial activities will require the hiring of
additional staff to coordinate contract-manufacturing services at multiple
locations. Preparation for sales and marketing activities will require hiring
and training of a sales and marketing staff in 2002, 2003 and 2004. As of March
31, 2002, we may be required to pay up to an aggregate of $6.0 million upon the
occurrence of certain future clinical and regulatory events under various
agreements (including our agreement with Eli Lilly). We also intend to hire
additional research and development, clinical and administrative staff.

Net Cash Used In Investing Activities

        Our capital expenditures for the three months ended March 31, 2002 and
2001, were $530,266 and $654,559 respectively and were primarily for the
purchase of laboratory equipment, furniture and fixtures, office equipment and
leasehold improvements in order to further expand our product development
capabilities.

Net Cash (Used In) Provided By Financing Activities

        During the first three months of 2002 and 2001, we received $103,664 and
$21,808, respectively, from stock option exercises. We received additional
financing from our insurance policies of $176,175 and $88,031 in the three
months ended March 31, 2002 and 2001, respectively. In addition, $131,986 and
$134,380 was used to repay insurance loan obligations during the first three
months of 2002 and 2001, respectively. Payments on notes receivable for purchase
of stock options was $80,489 and $4,105 for the first three months of 2002 and
2001, respectively. Additionally, interest converted to principal on these notes
was $49,534 and $69,339 for the three months ended March 31, 2002 and 2001,
respectively.

Financing Requirements Outlook

        The extent and timing of proceeds from future exercises of stock
options, if any, are primarily dependent upon our common stock's market price,
as well as the exercise prices and expiration dates of the stock options.

        We do not expect sales to generate cash flow in excess of operating
expenses for at least the next several years, if at all. We expect to continue
to use cash, cash equivalents and short-term investments to fund operating and
investing activities. We believe that our existing cash, cash equivalents and
short-term investments of approximately $143.9 million as of March 31, 2002 will
be sufficient to meet our currently estimated operating and investing
requirements through the end of 2003. Prior to exhausting our current cash, we
will need to raise additional funds to finance our operating activities.

                                       -8-

<PAGE>

Results of Operations

Three Months Ended March 31, 2002 and 2001

        Grant and license revenues. Our grant and license revenues were $317,339
and $533,095 for the three months ended March 31, 2002 and 2001, respectively.
Revenues recognized for the three months ended March 31, 2002 consisted of a
patent agreement fee of $200,000 from Toray Industries, Inc., a milestone
payment of $6,579 which is a portion of the $500,000 license fee received from
Santen Pharmaceutical Co., Ltd. on signing an agreement with Santen in April
2000 and $110,760 from a portion of the Small Business Innovation Research
(SBIR) grants awarded by the National Institutes of Health (NIH) in September
2001. Revenues recognized for the three months ended March 31, 2001 consisted of
a milestone payment of $500,000 from an affiliate of GlaxoSmithKline, $6,579 of
which is a portion of the $500,000 license fee received from the same affiliate
of GlaxoSmithKline on signing of an agreement with that affiliate in July 1999,
$6,579 of which is a portion of the $500,000 license fee received from Santen
Pharmaceutical Co., Ltd. on signing that agreement in April 2000 and a patent
cost reimbursement from Santen Pharmaceutical Co. Ltd of $19,937. The license
fee revenues related to Santen are being recognized over the remaining life of
the patents that were licensed in those collaborations.

        Research and development expenses. Our research and development expenses
consist primarily of salaries and other personnel-related expense, costs of
clinical trials, costs to manufacture drug candidates, stock-based compensation
and other research expense. Research and development expenses increased to
approximately $17.1 million for the three months ended March 31, 2002 from
approximately $6.5 million for the three months ended March 31, 2001. This
increase was primarily due to the higher costs of developing our product
candidates as well as higher personnel costs resulting from increased staffing
levels. In the three months ended March 31, 2002, the costs of conducting Phase
I, Phase II and Phase III clinical trials and the costs of manufacturing the
clinical trial materials for alvimopan increased by approximately $8.6 million
compared to the same period in 2001. Personnel costs increased by approximately
$1.2 million in the three months ended March 31, 2002 compared to the same
period in 2001. The balance was an increase in other expenses including office
rent and office expense in the three months ended March 31, 2002 compared to the
same period in 2001.

        General and administrative expenses. Our general and administrative
expenses increased to approximately $4.1 million for the three months ended
March 31, 2002 from approximately $3.0 million in the three months ended March
31, 2001, an increase of approximately $1.1 million. The increase was primarily
due to approximately $0.2 million of higher payroll expenses related to
additional personnel, approximately $0.5 million of corporate legal fees,
approximately $0.2 million in marketing and general consulting and an increase
of other expenses including insurance, office rent and office expense.

        Net interest income (expense). Our interest income decreased to
approximately $1.3 million for the three months ended March 31, 2002 from
approximately $2.1 million for the same period in 2001 due to a reduction in

                                       -9-

<PAGE>

our cash balance for payments of operating expenses and lower interest rates in
the first quarter of 2002. Our interest expense represents interest incurred on
the financing of insurance premiums.

         Net loss. Our net loss for the three months ended March 31, 2002 and
2001 was approximately $19.6 million and $7.0 million, respectively. The
increase in the net loss reflects higher costs associated with the expansion of
Phase 2 and Phase 3 clinical development, higher costs of clinical trial
materials for alvimopan and increased staffing levels.

Recently Issued Accounting Pronouncements

         In July 2001, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 143, Accounting for Asset Retirement Obligations. SFAS
143 requires the recognition of a liability for an asset retirement obligation
in the period in which it occurred. A retirement obligation is defined as one in
which a legal obligation exists in the future resulting from existing laws,
statutes or contracts. SFAS 143 is effective for fiscal years beginning after
June 15, 2002. The Company does not believe the adoption of SFAS No. 143 will
have an impact on its consolidated financial statements.

                                      -10-

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         A substantial portion of our assets are investment grade debt
instruments, such as direct obligations of the U.S. Treasury and corporate
securities, including commercial paper and corporate debt instruments. The
market value of such investments fluctuates with current market interest rates.
In general, as rates increase, the market value of a debt instrument would be
expected to decrease. The opposite is also true. To minimize such market risk,
we have in the past and, to the extent possible, will continue in the future to
hold such debt instruments to maturity, at which time the debt instruments will
be redeemed at their stated or face value. Due to the short duration and nature
of these instruments, we do not believe that we have a material exposure to
interest rate risk related to our investment portfolio. Our investment portfolio
at March 31, 2002 was $85.3 million and the weighted average interest rate of
that portfolio was approximately 3.1%.

                                      -11-

<PAGE>

PART II.        OTHER INFORMATION
-------         -----------------

ITEM 6.  Exhibits and Reports on Form 8-K:
        (a)   The following exhibits are filed as part of this Report on
Form 10-Q:

          10.1  Agreement by and between Adolor Corporation and Toray
Industries, Inc. dated March 5, 2002.*

         _________________

         *Confidential Treatment Requested.

        (b)   We filed the following Current Reports on Form 8-K during the
quarter ended March 31, 2002:

        None.

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.

                              ADOLOR CORPORATION

Date: May 15, 2002            By:  /s/ Bruce A. Peacock
                                   ----------------------------------------
                                   Bruce A. Peacock
                                   President and Chief Executive Officer

                              By:  /s/ Peter J. Schied
                                   ----------------------------------------
                                   Peter J. Schied
                                   Senior Vice President, Chief Financial
                                   Officer and Secretary

                                      -12-