<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 June 30, 2001

                                       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 or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

                             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
requirement for the past 90 days: Yes X      No
                                      ----     ----

Number of shares outstanding of the issuer's Common Stock, par value $.0001 per
share, as of August 10, 2001: 31,096,025 shares.
<PAGE>

          Adolor Corporation

              INDEX


PART I.   FINANCIAL INFORMATION



<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                  <C>
  Item 1.  Financial Statements:

   Consolidated Balance Sheets at December 31, 2000 and June 30, 2001                                1

   Consolidated Statements of Operations for the three months ended June 30,
    2000 and 2001, the six months ended June 30, 2000 and 2001 and the period
    from August 9, 1993 (inception) to June 30, 2001                                                 2


   Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 2001 and
    the period from August 9, 1993 (inception) to June 30, 2001                                      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                               10

PART II.   OTHER INFORMATION

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

           Signatures                                                                               12
</TABLE>

This Report on Form 10-Q includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934,as amended. We have based these forward-looking
statements on our current expectations and projections about future events.

These forward-looking statements include statements about the following:

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

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

     .    our intentions regarding the establishment of collaborations;

     .    anticipated operating losses and capital expenditures;

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

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

     .    our intention to rely on third parties for manufacturing.

In some cases, you can identify forward-looking statements by terminology such
as "may," "will," "should," "could," "would," "expect," "plan," "anticipate,"
"believe," "estimate," "continue," or the negative of such terms or other
similar expressions. Factors that might cause or contribute to discrepancies
include, but are not limited to, those discussed elsewhere in this Report and
the risks discussed in our other Securities and Exchange Commission ("SEC")
filings including our Registration Statement on Form S-1 declared effective on
November 13, 2000 by the Securities and Exchange Commission, or Commission,
(File No. 333-96333),our Registration Statement on Form S-1 declared effective
on July 23, 2001 by the Commission (File No. 333-64298) and our Report on Form
10-K filed on April 2, 2001.

                                        i
<PAGE>

PART I.     FINANCIAL INFORMATION
---------------------------------
ITEM 1.      FINANCIAL STATEMENTS

                               Adolor Corporation
                          (A Development Stage Company)
                           Consolidated Balance Sheets
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                 December 31,     June 30,
                                                                                     2000           2001
                                                                                 ------------    ------------
<S>                                                                              <C>             <C>
    Assets
Current assets:
 Cash and cash equivalents                                                       $ 67,392,849    $ 95,143,754
 Short-term investments                                                            64,237,605      82,359,748
 Prepaid expenses and other current assets                                          2,503,248       3,634,332
                                                                                 ------------    ------------
   Total current assets                                                           134,133,702     181,137,834

Equipment and leasehold improvements, net                                           1,390,450       2,455,695
Other assets                                                                           86,007          86,164
                                                                                 ------------    ------------
   Total assets                                                                  $135,610,159    $183,679,693
                                                                                 ============    ============
    Liabilities and Stockholders' Equity
Current liabilities:
 Notes payable-current portion                                                        521,053         531,289
 Accounts payable                                                                   1,696,975       1,594,732
 Accrued expenses                                                                   3,192,533       5,097,953
 Deferred licensing fees                                                               52,632          52,632
                                                                                 ------------    ------------
   Total current liabilities                                                        5,463,193       7,276,606
Notes payable, less current portion                                                   214,819            -
Deferred licensing fees                                                               892,543         866,227
                                                                                 ------------    ------------
   Total liabilities                                                                6,570,555       8,142,833
                                                                                 ------------    ------------
Commitments and Contingencies
Stockholders' equity (deficit):
 Series A Junior Participating preferred stock, par value
  $0.01 per share; 35,000 shares
  authorized, none issued and outstanding                                                   -               -
 Preferred stock, par value $0.01 per share;
  1,000,000 shares authorized; none issued and outstanding                                  -               -
 Common stock, par value $.0001 per share; 99,000,000 shares authorized;
  27,944,852 and 31,089,642 shares issued and outstanding at
  December 31, 2000 and June 30, 2001, respectively                                     2,794           3,109
 Additional paid-in capital                                                       200,335,775     259,856,949
 Notes receivable for stock options                                                (1,056,488)       (934,946)
 Deferred compensation                                                            (18,125,961)    (14,718,887)
 Unrealized gains on available for sale securities                                    125,581         486,665
 Deficit accumulated during the development stage                                 (52,242,097)    (69,156,030)
                                                                                 ------------    ------------
   Total stockholders' equity                                                     129,039,604     175,536,860
                                                                                 ------------    ------------

   Total liabilities and stockholders' equity                                    $135,610,159    $183,679,693
                                                                                 ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                        1
<PAGE>

                              Adolor Corporation
                         (A Development Stage Company)

                     Consolidated Statements of Operations
                                  (unaudited)
          Three months ended June 30, 2000 and 2001, six months ended
           June 30, 2000 and 2001 and the period from August 9, 1993
                         (inception) to June 30, 2001


<TABLE>
<CAPTION>
                                                                                                                        Period from
                                                                                                                      August 9, 1993
                                                              Three months ended              Six months ended        (inception) to
                                                                  June 30,                         June 30,               June 30,
                                                            2000            2001             2000           2001           2001
                                                        -------------   -------------    ------------  ------------   --------------
<S>                                                      <C>             <C>              <C>            <C>           <C>
Revenues:
  Grant, license and milestone revenue                   $  10,965    $     29,121      $     17,544  $     562,216   $    767,024
                                                        -----------   -------------     -------------  -------------   ------------

Operating expenses incurred during the
  development stage:
    Research and development                             2,905,213       8,676,902         5,954,372     15,217,555     55,179,597
    General and administrative                           2,254,197       3,142,521         3,394,348      6,158,104     22,392,042
                                                      -------------   -------------     -------------  ------------- --------------
      Total operating expenses                           5,159,410      11,819,423         9,348,720     21,375,659     77,571,639
                                                      -------------   -------------     -------------  ------------- --------------
      Loss from operations                              (5,148,445)    (11,790,302)       (9,331,176)   (20,813,443)   (76,804,615)
Interest income                                            180,379       1,867,273           333,479      3,979,624      7,971,110
Interest expense                                            (2,393)        (41,505)           (4,427)       (80,114)      (322,525)
                                                      -------------   -------------     -------------  ------------- --------------
      Net loss                                          (4,970,459)     (9,964,534)       (9,002,124)   (16,913,933)   (69,156,030)

Undeclared dividends and accretion of mandatorily
  redeemable convertible preferred stock                  (622,257)           -           (1,577,507)          -
Beneficial conversion feature on mandatorily
  redeemable convertible preferred stock                      -               -          (12,306,000)          -

Net loss allocable to common stockholders             $ (5,592,716)   $ (9,964,534)     $(22,885,631) $ (16,913,933)
                                                      =============   =============    ==============  =============
Basic and diluted net loss per share allocable
 to common stockholders:                                    $(2.76)         $(0.34)          $(15.47)        $(0.59)
                                                      =============   =============    ==============  =============
Shares used in computing basic and diluted
 net loss per share allocable to common
 stockholders:                                           2,029,298      29,028,206         1,478,584     28,489,667
                                                      =============   =============    ==============  =============
</TABLE>


See accompanying notes to consolidated financial statements.

                                        2
<PAGE>

                               Adolor Corporation
                          (A Development Stage Company)

                      Consolidated Statements of Cash Flows
                                   (unaudited)
                       Six months ended June 30, 2000 and
                     2001 and the period from August 9, 1993
                          (inception) to June 30, 2001





<TABLE>
<CAPTION>
                                                                                                            Period from
                                                                                                          August 9, 1993
                                                                                 Six months ended         (inception) to
                                                                                       June 30,                June 30,
                                                                                2000             2001           2001
                                                                            --------------   ------------   -------------

Cash flows from operating activities:
<S>                                                                           <C>           <C>            <C>
 Net loss                                                                     $(9,002,124)  $(16,913,933)  $ (69,156,030)
 Adjustments to reconcile net loss to net cash
 used in operating activities:
    Non-cash compensation expense                                               1,290,423      2,934,099       8,121,337
    Non-cash warrant value                                                            -              -            60,000
    Depreciation and amortization expense                                         142,903        314,187       1,405,172
    Issuance of common stock for technology license agreements                        -              -             6,250
    Changes in assets and liabilities:
     Prepaid expenses and other current assets                                   (109,387)    (1,131,084)     (3,634,332)
     Other assets                                                                     -             (157)        (86,164)
     Accounts payable                                                             (10,899)      (102,243)      1,594,732
     Deferred licensing fees                                                      482,455        (26,316)        918,859
     Accrued expenses and other current liabilities                               549,058      1,905,420       5,097,953
                                                                            --------------   ------------   -------------
    Net cash used in operating activities                                      (6,657,571)   (13,020,027)    (55,672,223)
                                                                            --------------   ------------   -------------

Cash flows from investing activities:
 Purchase of equipment and leasehold improvements                                (129,279)    (1,379,432)     (3,847,527)
 Purchase of short-term investments                                              (304,119)   (49,389,704)   (145,731,612)
 Maturities of short-term investments                                           1,491,590     31,628,645      63,858,529
                                                                            --------------   ------------   -------------
     Net cash provided (used in) by investing activities                        1,058,192    (19,140,491)    (85,720,610)
                                                                            --------------   ------------   -------------

Cash flows from financing activities:
 Net proceeds from issuance of mandatorily redeemable convertible
   preferred stock and Series B warrants                                       12,381,000            -        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                                                        168,256        161,814         572,728
 Proceeds from notes payable-related parties                                          -              -         1,000,000
 Payment of notes payable                                                         (59,378)      (292,616)       (958,855)
 Proceeds received on notes receivable                                                -          190,881         190,881
 Interest receivable converted to principal on notes                                  -          (69,339)        (69,339)
 Proceeds from notes payable                                                       97,851         88,033       1,490,144
 Net proceeds from initial public offering                                            -              -        95,376,469
 Net proceeds from issuance of newly registered shares of common stock                        59,832,650      59,832,650
                                                                            -------------   ------------   -------------
     Net cash provided by (used in) financing activities                       12,587,729     59,911,423     236,536,587

Net increase in cash and cash equivalents                                       6,988,350     27,750,905      95,143,754
Cash and cash equivalents at beginning of period                                3,472,164     67,392,849             -
                                                                            -------------   ------------   -------------
Cash and cash equivalents at end of period                                  $  10,460,514   $ 95,143,754   $  95,143,754
                                                                            =============   ============   =============
Supplemental disclosure of cash flow information:
 Cash paid for interest                                                             4,427         48,909         201,445

Supplemental disclosure of noncash transactions:
 Unrealized gains (losses) on available for sale securities                           -          361,084         486,665
Deferred compensation from issuance of common stock, restricted
  common stock and common stock options                                        11,925,576        150,000      23,463,199
Issuance of common stock for technology license agreements or for
  services                                                                            -              -            19,589
Conversion of Series A through H mandatorily redeemable convertible
  preferred stock for common stock                                                    -              -        80,383,703
Conversion of stock subscription for Series D mandatorily redeemable
  convertible preferred stock                                                         -              -           600,000
Conversion of bridge financing, including accrued interest, to Series B
  mandatorily redeemable convertible 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

                                  June 30, 2001
                                   (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 peripheral and central analgesics based on opiate receptors and
opiate-like receptors. The Company commenced operations on November 7, 1994. The
Company is currently devoting substantially all of its efforts toward conducting
pharmaceutical discovery and development, licensing technology, obtaining
regulatory approval for products under development, negotiating strategic
corporate relationships, recruiting personnel and raising capital.

     The accompanying consolidated financial statements include the results of
operations of the Company for the period from August 9, 1993 (inception) to June
30, 2001.

     The Company has licensed its core technologies 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 technologies 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 June 30, 2001, aggregated approximately $69.2 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 for at least
the next year based on a level of research and development 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 June 30, 2001 and for the periods ended June 30, 2000 and 2001, 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, 2000 included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission.

                                        4
<PAGE>

(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 and
six months ended June 30, 2000 and 2001:

<TABLE>
<CAPTION>
                                     Three months ended                 Six months ended
                                          June 30,                          June 30,

                                       2000          2001            2000           2001
                                      ------        -----            ----           ----
<S>                                <C>           <C>             <C>           <C>
 Net loss                          $(4,970,459)  $(9,964,534)    $(9,002,124)  $(16,913,933)

 Other comprehensive income:

   Unrealized gains (losses) not
   available for sale securities           -         (28,532)            -           361,084
                                  -------------  -----------     -----------    -------------
 Comprehensive loss                $(4,970,459)  $(9,993,066)    $(9,002,124)   $(16,552,849)
                                  =============  ============    ===========    =============
</TABLE>

(3) EQUITY COMPENSATION PLAN

In May 2001, the stockholders of the Company approved an amendment to the
Company's 1994 Equity Compensation Plan (the "Plan") to increase the number of
shares of Common Stock authorized for issuance under the Plan by 600,000 shares,
from 3,950,000 to 4,550,000.

(4) ISSUANCE OF NEWLY REGISTERED SHARES OF COMMON STOCK

On May 20, 2001, the Company sold 3 million shares of newly issued common stock
of the Company to current institutional investors for approximately $59.8
million, net of expenses.

                                        5
<PAGE>

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

Overview

     We have devoted substantially all of our resources since we began our
operations in November 1994 to the discovery and development of proprietary
pharmaceutical products for the treatment of pain and the side effects that are
caused by current pain treatments. 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 $69.2 million through June 30, 2001. These losses have resulted
principally from costs incurred in research and development activities and
general and administrative expenses. We have six product candidates in Phase III
or Phase II clinical trials and several compounds in Phase I clinical trials and
preclinical studies.

     Our revenues in the near term are expected to consist primarily of
milestone payments on certain of our product candidates licensed to others for
development. These payments are dependent on continued development and
achievement of certain clinical and regulatory milestones by licensees and will
not, in any event, be material relative to our operating expenses. In the event
that our development efforts or those of our licensees result in regulatory
approval and successful commercialization of our product candidates, we will
generate revenues from sales of our products and from the receipt of royalties
on sales of licensed products. Product revenues will depend on our ability to
receive regulatory approvals for, and successfully market, our product
candidates.

     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. Manufacturing, marketing and sales
costs will increase as we prepare for the commercialization of our product
candidate ADL 8-2698 which, assuming regulatory approval, we expect to occur in
2003.

     We intend to expand our marketing activities in 2001, 2002 and 2003 in
preparation for the establishment of a sales force for our product candidates in
the Unites States. In international markets we intend to rely on collaborations
with pharmaceutical companies to market and sell our product candidates rather
than establish our own sales force.

Milestone Payments, Royalties and License Fees

     We paid Roberts Laboratories, Inc., which merged with Shire
Pharmaceuticals, plc, a total of $600,000 through June 30, 2001 for the
exclusive worldwide license to ADL 8-2698. Our license agreement with Roberts
requires us to make payments to Roberts if and when two milestones are achieved.
Roberts licensed the rights to ADL 8-2698 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 approval from the United States Food and Drug
Administration, or FDA, to sell ADL 8-2698. We will be required to pay royalties
to Eli Lilly and Roberts on any sales of ADL 8-2698.

     Under an agreement with Oregon Health Sciences University, we paid Oregon
Health Sciences University for a nonexclusive license for the use of patented
inventions which relate to an opioid receptor. There are no other payments or
royalties due under this agreement.

     Under an agreement with Arch Development Corporation, the technology
transfer office of the University of Chicago, we obtained an exclusive worldwide
license covering the nucleotide sequence encoding the mammalian kappa opioid
receptor and related opioid receptor technologies. We reimbursed Arch
Development for certain patent expenses incurred as of the date of the agreement
and will reimburse Arch Development Corporation for future patent expenses. In
addition we will make a license payment, milestone payments and royalty payments
on future net sales of products discovered, if any, utilizing this technology.

                                       6
<PAGE>

Results of Operations

 Three months ended June 30, 2001 and 2000

     Grant and license revenues. Our grant and license revenues were $29,121 and
$10,965 for the three months ended June 30, 2001 and 2000, respectively.
Revenues recognized for the three months ended June 30, 2001 consisted of $6,579
which is a portion of the $500,000 license fee received from an affiliate of
GlaxoSmithKline on signing the license agreement in July 1999 and $6,579 which
is a portion of the $500,000 license fee received from Santen Pharmaceutical
Co., Ltd. on signing a license agreement with that company in April 2000.
Revenue recognized for the three months ended June 30, 2000 consisted of $6,579
which is a portion of the $500,000 license fee received from the same affiliate
of GlaxoSmithKline in July 1999 and $4,386 which is a portion of the $500,000
license fee received from Santen Pharmaceutical Co., Ltd. on signing that
agreement in April 2000. The license fee revenues 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 expenses, costs of
clinical trials, costs to manufacture drug candidates, stock-based compensation
and other research expense. Research and development expenses increased to
approximately $8.7 million for the three months ended June 30, 2001 from
approximately $2.9 million for the three months ended June 30, 2000. This
increase is primarily due to the costs of developing our product candidates as
well as higher personnel costs resulting from increased staffing levels. In the
three months ended June 30, 2001, the costs of conducting Phase I and Phase II
clinical trials and continuing Phase III clinical trials and the costs of
manufacturing the clinical trial materials for ADL 8-2698 increased by
approximately $3.4 million compared to the same period in 2000. Laboratory costs
increased by approximately $0.3 million compared to the same period in 2000. In
addition, we paid a license fee of approximately $0.2 million in the three
months ended June 30, 2001. Personnel costs increased by approximately $1.0
million compared to the same period in 2000. Amortization of deferred
stock-based compensation expenses increased by $0.6 million in the three months
ended June 30, 2001 compared to the same period in 2000. An increase in other
expenses, including office rent and office expense, compared to the same period
in 2000 resulted from an increase in office space because of additional
personnel.

     General and administrative expenses. Our general and administrative
expenses increased to approximately $3.1 million for the three months ended June
30, 2001 from approximately $2.3 million in the three months ended June 30,
2000, an increase of $0.8 million. The increase is primarily due to
approximately $0.2 million of higher payroll expenses related to additional
personnel, approximately $0.7 million of marketing research, and an increase of
other expenses including insurance, office rent and office expense.

     Net interest income (expense). Our interest income increased to
approximately $1.9 million for the three months ended June 30, 2001 compared to
approximately $0.2 million for the same period in 2000 due to investment returns
on the proceeds from our initial public offering in November 2000, the sale of
Series H mandatorily redeemable convertible preferred stock in July 2000 and
the issuance of common stock in a follow-on round of financing in May 2001. Our
interest expense represents interest incurred on the financing of insurance
premiums.

     Net loss. Our net loss for the three months ended June 30, 2001 and 2000
was approximately $10.0 million and $5.0 million, respectively. The increase in
the net loss reflects higher costs associated with the expansion of Phase II and
Phase III clinical development, higher manufacturing costs for the clinical
trial materials for ADL 8-2698 and increased staffing levels.

     Net loss allocable to common stockholders. Our net loss allocable to common
stockholders was approximately $10.0 million for the three months ended June 30,
2001 compared to approximately $5.6 million in the same period of 2000. Although
our net loss increased by approximately $5.0 million, the net loss allocable to
common stockholders increased by $4.4 million because of the recording of
undeclared dividends on mandatorily redeemable convertible preferred stock for
the three months ended June 30, 2000.

                                       7
<PAGE>

Six Months Ended June 30, 2001 and 2000

     Grant and license revenues. Our grant and license revenues were $562,216
and $17,544 for the six months ended June 30, 2001 and 2000, respectively.
Revenues recognized for the six months ended June 30, 2001 consisted of a
milestone payment of $500,000 from an affiliate of GlaxoSmithKline, $13,158
which is a portion of the $500,000 license fee received from the same affiliate
of GlaxoSmithKline on signing the license agreement in July 1999 and $13,158
which is a portion of the $500,000 license fee received from Santen
Pharmaceutical Co., Ltd. on signing a license agreement with that company in
April 2000. Revenue recognized for the six months ended June 30, 2000 consisted
of $13,158 which is a portion of the $500,000 license fee received from the same
affiliate of GlaxoSmithKline in July 1999 and $4,386 which is a portion of the
$500,000 license fee received from Santen Pharmaceutical Co., Ltd. on signing
that agreement in April 2000. The license fee revenues 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 expenses, costs of
clinical trials, costs to manufacture drug candidates, stock-based compensation
and other research expense. Research and development expenses increased to
approximately $15.2 million for the six months ended June 30, 2001 from
approximately $6.0 million for the six months ended June 30, 2000. This increase
is primarily due to the costs of developing our product candidates as well as
higher personnel costs resulting from increased staffing levels. In the six
months ended June 30, 2001, the costs of conducting Phase I and Phase II
clinical trials and continuing Phase III clinical trials and the costs of
manufacturing the clinical trial materials for ADL 8-2698 increased by
approximately $5.0 million compared to the same period in 2000. Laboratory costs
increased by approximately $0.5 million compared to the same period in 2000. In
addition, we paid a license fee of approximately $0.2 million in 2001. Personnel
costs increased by approximately $2.0 million compared to the same period in
2000. Amortization of deferred stock-based compensation expenses increased by
$1.1 million in the six months ended June 30, 2001 compared to the same period
in 2000. An increase in other expenses, including office rent and office
expense, compared to the same period in 2000 resulted from an increase in office
space because of additional personnel.

     General and administrative expenses. Our general and administrative
expenses increased to approximately $6.2 million for the six months ended June
30, 2001 from approximately $3.4 million in the six months ended June 30, 2000,
an increase of $2.8 million. The increase is primarily due to approximately $0.5
million of higher amortization of deferred stock-based compensation expense,
approximately $0.6 million of higher payroll expenses related to additional
personnel, approximately $1.3 million of marketing research, and an increase of
other expenses including insurance, office rent and office expense.

     Net interest income (expense). Our interest income increased to
approximately $4.0 million for the six months ended June 30, 2001 from
approximately $0.3 million for the same period in 2000 due to investment returns
on the proceeds from our initial public offering in November 2000, the sale of
Series G and H mandatorily redeemable convertible preferred stock in January and
July 2000, respectively, and the issuance of common stock in a follow-on round
of financing in May 2001. Our interest expense represents interest incurred on
the financing of insurance premiums.

     Net loss. Our net loss for the six months ended June 30, 2001 and 2000 was
approximately $16.9 million and $9.0 million, respectively. The increase in the
net loss reflects higher costs associated with the expansion of Phase II and
Phase III clinical development, higher manufacturing costs for the clinical
trial materials for ADL 8-2698 and increased staffing levels.

     Net loss allocable to common stockholders. Our net loss allocable to common
stockholders was approximately $16.9 million for the six months ended June 30,
2001 compared to approximately $22.9 million in the same period of 2000.
Although our net loss increased by approximately $7.9 million, the net loss
allocable to common stockholders decreased because of the elimination of the
undeclared dividends on mandatorily redeemable convertible preferred stock and
beneficial conversion charges in the six months ended June 30, 2001.

     Beneficial Conversion Feature. In January 2000, we sold 12,306,000 shares
of mandatorily redeemable convertible Series G preferred stock for net proceeds
of approximately $12.3 million. After evaluating the fair value of our common
stock in contemplation of our initial public offering, we determined that the

                                       8
<PAGE>

issuance of the mandatorily redeemable convertible Series G preferred stock
resulted in a beneficial conversion feature calculated in accordance with
Emerging Issues Task Force consensus No. 98-5, "Accounting for Convertible
Securities with Beneficial Conversion Features." Because the shares of
mandatorily redeemable convertible Series G preferred stock were issued below
their fair value, a beneficial conversion feature of $12.3 million was reflected
in calculating the net loss allocable to common shareholders for the six months
ended June 30, 2000. The beneficial conversion feature cannot exceed the
proceeds from the sale of the securities.

Liquidity and capital resources

     As of June 30, 2001, we had cash, cash equivalents and short term
investments of approximately $177.5 million, and our working capital was
approximately $173.9 million.

     From inception through June 30, 2001, net cash used in operating activities
was approximately $55.7 million. Net cash used in investing activities since
inception was approximately $85.7 million and was used primarily for the
acquisition of laboratory equipment, leasehold improvements, furniture and
fixtures and office equipment, and the net purchases of short-term investments.

     From inception through June 30, 2001, we have financed our operations
primarily from the net proceeds generated from the issuance of mandatorily
redeemable convertible preferred stock, the issuance of common stock in our
initial public offering and the issuance of common stock in a follow-on round of
financing in May 2001. As of June 30, 2001, we had received total net proceeds
of approximately $79.1 million from the sales of mandatorily redeemable
convertible preferred stock. In November 2000, we received net proceeds of
approximately $95.0 million from our initial public offering. In May 2001, we
received net proceeds of approximately $59.8 million from a follow-on offering
of shares of our common stock.

     Our capital expenditures in the six months ended June 30, 2001 were
approximately $1.4 million.

     We lease our corporate and research and development facilities under three
operating leases expiring on October 15, 2002, November 30, 2002 and May 31,
2003. Current total minimum annual payments under these leases are $722,345 in
2001, $849,810 in 2002 and $153,885 in 2003.

     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 and capital expenditures will
increase in future periods as a result of the manufacturing scale-up and in
anticipation of commercialization of our product candidates, assuming 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. Sales and marketing activities will require
hiring and training of a sales and marketing staff in 2001, 2002 and 2003. As of
June 30, 2001, 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. Our
capital expenditure requirements will depend on numerous factors, including the
progress of our research and development programs, the time required to file and
process regulatory approval applications, the development of commercial
manufacturing capability, the ability to obtain additional licensing
arrangements, and the demand for our product candidates, if and when approved by
the FDA or other regulatory authorities.

Recently Issued Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations. SFAS No. 141 requires the use of the purchase
method of accounting for all business combinations initiated after June 30, 2001
and eliminates the pooling-of-interests method. The Company does not believe
that the adoption of SFAS No. 141 will have an impact on its consolidated
financial statements.

     In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142 requires goodwill and other intangible assets with
indefinite lives to no longer be amortized, but instead tested for impairment at
least annually. In addition, the standard includes provisions for the
reclassification of certain existing intangibles as goodwill and reassessment of
the useful lives of existing recognized intangibles. SFAS No. 142 is effective
for fiscal years beginning after December 15, 2001. The Company does not believe
that the adoption of SFAS No. 142 will have an impact on its consolidated
financial statements.

                                        9
<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 instrument will be redeemed
at its 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. The investment portfolio at June 30,
2001 was approximately $82.4 million, and the weighted average interest rate was
approximately five point two percent (5.2%).

                                      10
<PAGE>

Part II.  OTHER INFORMATION
---------------------------

Item 2.  Changes in Securities and Use of Proceeds

On May 30, 2001, we sold 3,000,000 shares of newly issued common stock to
institutional investors at a price of $20.00 per share. We realized net proceeds
of $59.8 million from this offering. We expect to use the proceeds from the sale
of the 3,000,000 shares of common stock to fund our operations. We filed a
Registration Statement on Form S-1 (File No. 333-64298) to register the
3,000,000 shares of common stock (as well as certain other shares of common
stock), and the Securities and Exchange Commission declared the Registration
Statement effective on July 23, 2001.

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

On May 15, 2001, we held our Annual Meeting of Stockholders in Wayne,
Pennsylvania. The purposes of the meeting were to approve an amended and
restated certificate of incorporation, to elect directors, to ratify the
appointment of KPMG LLP as our independent certified public accountants for the
fiscal year ending December 31, 2001, and to approve an amendment to our Amended
and Restated 1994 Equity Compensation Plan to increase by 600,000 shares the
number of shares of common stock authorized to be issued under it.

In the vote to approve an amended and restated certificate of incorporation,
18,071,204 shares were voted in favor of the amendment and restatement,
1,962,868 shares were voted against the amendment and restatement and 1,156,071
shares abstained from voting.

Our stockholders voted as follows to elect members of our Board of Directors to
serve in the classes indicated below:

     Nominee            Class           In Favor       Against     Abstain
     -------            -----           --------       -------     -------
     Ellen M. Feeney   Class I         22,969,451         0         46,300
     David M. Madden   Class II        22,969,451         0         46,300
     Robert T. Nelsen  Class II        22,969,451         0         46,300
     John J. Farrar    Class III       22,446,601         0        569,150
     Paul Goddard      Class III       22,969,451         0         46,300
     Claude H. Nash    Class III       22,969,451         0         46,300

In the vote to ratify the appointment of KPMG LLP as our independent certified
public accountants, 23,011,493 shares were voted in favor of ratification, 3,030
shares were voted against ratification and 1,228 shares abstained from voting.

In the vote to approve an amendment to our Amended and Restated 1994 Equity
Compensation Plan, 22,190,789 shares were voted in favor of the amendment,
37,564 shares were voted against the amendment and 787,398 shares abstained from
voting.

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

      (a)  The following exhibits are filed as part of this Report on Form 10-Q:


3.1   Amended and Restated Certificate of Incorporation of Adolor.


10.1  Amended and Restated 1994 Equity Compensation Plan.


      (b) We filed the following Current Reports on Form 8-K during the quarter
          ended June 30, 2001:

          We filed a Current Report on Form 8-K on June 13, 2001 to report,
          pursuant to Item 5, that on May 30, 2001, we entered into definitive
          purchase agreements to sell 3,000,000 shares of newly issued common
          stock to institutional investors at a price of $20.00 per share.

                                      11
<PAGE>

SIGNATURES

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


                                   ADOLOR CORPORATION

Date: August 13, 2001              By: /s/ John J. Farrar
                                   ------------------------------
                                       John J. Farrar
                                       President and Chief Executive Officer

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

                                      12