<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2000

                                       or

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

                  For the transition period from _________ to ___________.

                         Commission File Number 0-21863

                               EPIX Medical, Inc.
                               ------------------
             (Exact name of Registrant as Specified in its Charter)

        DELAWARE                                       04-3030815
 ------------------------------           --------------------------------
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

          71 ROGERS STREET
      CAMBRIDGE, MASSACHUSETTS                             02142
---------------------------------------        -------------------------------
(Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (617) 250-6000

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $.01 Par Value Per Share
                    ---------------------------------------
                                (Title of Class)

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

    As of August 3, 2000, 13,000,831 shares of the registrant's Common Stock,
$.01 par value per share, were issued and outstanding.


<PAGE>

                               EPIX MEDICAL, INC.

                                      INDEX
<TABLE>
<CAPTION>

                                                                                                                        Page
                                                                                                                       Number
                                                                                                                       ------

PART I.              FINANCIAL INFORMATION
<S>                  <C>                                                                                                 <C>
    Item 1.          Financial Statements (Unaudited)

                     Condensed  Balance Sheets--June 30, 2000 and December 31, 1999                                       3

                     Condensed  Statements of Operations--Three and Six Months Ended June 30, 2000 and 1999               4

                     Condensed  Statements of Cash Flows--Six Months Ended June 30, 2000 and 1999                         5

                     Notes to Condensed Financial Statements                                                              6

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

PART II.             OTHER INFORMATION

    Item 2.          Changes in Securities                                                                               12

    Item 4.          Submission of Matters to a Vote of Security Holders                                                 12

    Item 6.          Exhibits and Reports on Form 8-K                                                                    13

    Signatures                                                                                                           14
</TABLE>


                                       2
<PAGE>



                               EPIX MEDICAL, INC.

                            CONDENSED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       JUNE 30,                    DECEMBER 31,
                                                                                         2000                          1999
                                                                                 ---------------------         ---------------------
<S>                                                                                      <C>                           <C>

Assets:
Current assets:
    Cash and cash equivalents                                                             $   943,214                   $   430,124
    Available-for-sale marketable securities                                               32,081,983                    13,709,980
    Prepaid expenses and other current assets                                               1,180,796                     1,214,929
                                                                                 ---------------------         ---------------------
         Total current assets                                                              34,205,993                    15,355,033

Property and equipment, net                                                                 1,588,548                     2,058,282
Notes receivable from officer                                                                 366,295                       356,159
Other assets                                                                                  130,586                       116,109
                                                                                 ---------------------         ---------------------
         Total assets                                                                     $36,291,422                   $17,885,583
                                                                                 =====================         =====================

Liabilities and Stockholders' Equity:
Current liabilities:
    Accounts payable and accrued expenses                                                 $ 3,690,444                   $ 3,753,836
    Contract advances                                                                       4,384,814                       308,955
    Current portion of capital lease obligations                                              379,911                       379,911
    Current portion of note payable                                                           420,188                       397,864
    Current portion of loan payable                                                         1,805,501                             -
                                                                                 ---------------------         ---------------------
         Total current liabilities                                                         10,680,858                     4,840,566

Capital lease obligations, less current portion                                               114,156                       323,748

Note payable, less current portion                                                            191,992                       373,783

Loan payable less current portion                                                           2,797,646                     1,583,557

Common stock, $.01 par value, 15,000,000 shares authorized; 12,960,362 and
    11,680,315 shares issued and outstanding at
    June 30, 2000 and December 31, 1999, respectively                                         129,604                       116,803
Additional paid-in capital                                                                 77,559,170                    56,520,680
Loan to stock option holders                                                                         -                     (387,430)
Accumulated deficit                                                                       (55,129,479)                  (45,398,477)
Other comprehensive loss                                                                      (52,525)                      (87,647)
                                                                                 ---------------------         ---------------------
Total stockholders' equity                                                                 22,506,770                    10,763,929
                                                                                 ---------------------         ---------------------

Total liabilities and stockholders' equity                                                $36,291,422                   $17,885,583
                                                                                 =====================         =====================
</TABLE>


See accompanying notes to condensed financial statements.



                                       3
<PAGE>



                               EPIX MEDICAL, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                       THREE MONTHS ENDED       THREE MONTHS ENDED      SIX MONTHS ENDED      SIX MONTHS ENDED
                                          JUNE 30, 2000            JUNE 30, 1999          JUNE 30, 2000         JUNE 30,1999
                                       --------------------     --------------------   --------------------  -------------------

<S>                                            <C>                      <C>                    <C>                   <C>
Revenues                                       $ 2,286,729              $   266,552            $ 3,146,129           $   553,819

Operating expenses:
    Research and development                     5,456,370                3,431,476             10,507,276            6,717,967
    General and administrative                   1,439,641                1,090,087              2,481,724            2,132,042
                                       --------------------     --------------------   --------------------  -------------------
         Total operating expenses                6,896,011                4,521,563             12,989,000            8,850,009
                                       --------------------     --------------------   --------------------  -------------------

Operating loss                                  (4,609,282)              (4,255,011)            (9,842,871)          (8,296,190)

Interest income                                    142,402                  315,840                311,366              686,733
Interest expense                                  (103,538)                 (53,701)              (199,497)            (108,093)
                                       --------------------     -------------------    --------------------  -------------------
Net loss                                       $(4,570,418)             $(3,992,872)           $(9,731,002)         $(7,717,550)
                                       ====================     ====================   ====================  ===================

Weighted average shares:
     Basic and diluted                          11,869,515               11,494,531             11,795,015           11,479,530
                                       ====================     ====================   ====================  ===================

Loss per common share:
     Basic and diluted                              $(0.39)                  $(0.35)                $(0.83)              $(0.67)
                                       ====================     ====================   ====================  ===================

</TABLE>


See accompanying notes to condensed financial statements.



                                       4
<PAGE>

                               EPIX MEDICAL, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       SIX MONTHS ENDED                SIX MONTHS ENDED
                                                                        JUNE 30, 2000                   JUNE 30, 1999
                                                                  ---------------------------     ---------------------------
<S>                                                                             <C>                            <C>
Operating activities:
Net loss                                                                        $ (9,731,002)                  $  (7,717,550)
Adjustments to reconcile net loss to cash used by
    operating activities:
         Depreciation and amortization                                               487,491                         503,065
         Stock compensation expense                                                        -                          98,956
         Loss on sale of fixed assets                                                      -                          18,501
         Interest income related to stock option loans                                (6,902)                         (4,308)
    Change in operating assets and liabilities:
         Prepaid expenses, other current assets, notes
           receivable from officer and other assets                                    9,520                        (108,138)
         Contract advances                                                         4,075,859                        (404,302)
         Accounts payable and accrued expenses                                       (63,390)                       (132,588)
         Receipt of cash from Schering AG
           for marketing rights                                                   10,000,000                               -
         Disbursement of cash to Mallinckrodt
           for marketing rights                                                  (10,000,000)                              -
                                                                  ---------------------------     ---------------------------
    Net cash used by operating activities                                         (5,228,424)                     (7,746,364)

Investing activities:
Purchase of fixed assets                                                             (17,757)                        (67,698)
Proceeds from sale of fixed assets                                                         -                          19,500
Purchases of marketable securities                                               (68,382,778)                   (113,922,818)
Proceeds from sales or redemptions of marketable securities                       50,045,897                     123,343,657
                                                                  ---------------------------     ---------------------------
    Net cash (used) provided by investing activities                             (18,354,638)                      9,372,641
                                                                  ---------------------------     ---------------------------

Financing activities:
Proceeds from collection of stock option loans and
related interest                                                                     394,331                               -
Proceeds from issuance of loan payable                                             3,019,590                               -
Repayment of capital lease obligations                                              (209,592)                       (208,363)
Repayment of note payable                                                           (159,468)                       (168,791)
Proceeds from ESPP purchases                                                          69,984                          66,895
Proceeds from issuance of stock to Schering BV                                    20,000,000                               -
Proceeds from exercise of stock options                                              981,307                          22,728
                                                                  ---------------------------     ---------------------------
Net cash provided (used) by financing activities                                  24,096,152                        (287,531)
                                                                  ---------------------------     ---------------------------
Increase in cash and cash equivalents                                                513,090                       1,338,746

Cash and cash equivalents at beginning of period                                     430,124                         369,454
                                                                  ---------------------------     ---------------------------

Cash and cash equivalents at end of period                                      $    943,214                   $   1,708,200
                                                                  ===========================     ===========================
Supplemental disclosure of noncash investing and financing
     activities:
Fixed assets acquired through lease financing                                              -                        $154,759
                                                                  ===========================     ===========================
Issuance of stock option loan for exercise of stock options                                -                        $254,302
                                                                  ===========================     ===========================
Supplemental cash flow information:
Cash paid for interest                                                               $86,220                        $108,093
                                                                  ===========================     ===========================

</TABLE>

See accompanying notes to condensed financial statements.


                                       5
<PAGE>

                               EPIX MEDICAL, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 2000
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

    The unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-Q and the
rules of the Securities and Exchange Commission (the "Commission"). Accordingly,
they do not include all of the information and footnotes required to be
presented for complete financial statements. The accompanying condensed
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods presented. Operating
results for the three and six month periods ended June 30, 2000 are not
necessarily indicative of the results expected for the full fiscal year.

    The condensed financial statements and related disclosures have been
prepared with the assumption that users of the interim financial statements have
read or have access to the audited financial statements for the preceding fiscal
year. Accordingly, these condensed financial statements should be read in
conjunction with the audited financial statements and the related notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.

2. SIGNIFICANT AGREEMENTS

    In June 2000, the Company entered into a strategic collaboration
agreement pursuant to which the Company granted Schering AG an exclusive
license to co-develop and market MS-325 worldwide, exclusive of Japan. MS-325
is the Company's cardiovascular magnetic resonance imaging agent formerly
known by the Mallinckrodt Inc. ("Mallinckrodt") product name AngioMARK.
Generally, the Company and Schering AG will share equally in MS-325 costs and
profits. Under the agreement, the Company will assume responsibility for
completing clinical trials and filing for Food and Drug Administration
approval in the United States and Schering AG will lead clinical activities
for the product outside the United States, excluding Japan. In addition, the
Company granted Schering AG an exclusive option to develop and market an
unspecified cardiovascular product from the Company's product pipeline. In
connection with this strategic collaboration agreement and in connection with
the amendment to the strategic collaboration agreement between the Company
and Mallinckrodt, as further described below, Schering AG paid the Company an
up-front fee of $10 million, which the Company then paid to Mallinckrodt.
Schering AG also made a $20 million equity investment in the Company at
$17.98 per share, through its affiliate, Schering Berlin Venture Corporation
("Schering BV"). The Company also may receive up to an additional $20 million
in milestones under this agreement. Also, under the agreement, the Company
has an option to participate in the development and marketing of two of
Schering AG's products currently in clinical trials, SHU 555C and Gadomer-17.

    Also in June 2000, the Company amended its strategic collaboration with
Mallinckrodt to grant Mallinckrodt a non-exclusive, worldwide license to
manufacture MS-325 for clinical development and commercial use in accordance
with a manufacturing and supply agreement entered into in June 2000 between
Mallinckrodt and Schering AG, and to enable the Company to enter into the
collaboration agreement with Schering AG. In connection with this amendment,
the Company may pay Mallinckrodt up to $5 million in milestones. The Company
will also pay Mallinckrodt a share of MS-325 operating margins for sales
within the US and a royalty on MS-325 gross profits for sales outside the US.

    As a result of the above noted agreements, in effect, Schering AG has
purchased the MS-325 marketing rights previously owned by Mallinckrodt. Since
the $10 million payment from Schering AG to the Company was required to be,
and was, then paid by the Company to Mallinckrodt, the Company did not
reflect the receipt and the disbursement in its statement of operations. Such
amounts are, however, reflected in the Company's statement of cash flows for
the six months ended June 30, 2000.

3. COMPREHENSIVE INCOME

    Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" ("SFAS 130") requires unrealized gains or losses on the
Company's available-for-sale securities to be included in other comprehensive
income (loss). Total comprehensive income (loss) for the quarter ended June
30, 2000 amounted to $32,316 compared to ($70,635) in the same period in
1999. Total comprehensive income (loss) for the six months ended June 30,
2000 amounted to $35,122 compared to ($107,685) in the same period in 1999.

4. EARNINGS (LOSS) PER SHARE

    The Company computes earnings (loss) per share in accordance with the
provisions of SFAS No. 128, "Earnings per Share" and related interpretations
and amendments. Basic net earnings (loss) per share is based upon the
weighted-average number of common shares outstanding and excludes the effect
of potentially dilutive common stock issuable upon exercise of stock options.
In computing diluted earnings (loss) per share, only common shares that are
potentially dilutive, those that reduce earnings per share, are included. The
exercise of options is not assumed if the result is antidilutive, such as
when a loss from continuing operations is reported. The following table sets
forth the computation of basic and diluted loss per share:

<TABLE>
<CAPTION>

                                                     THREE MONTHS ENDED                             SIX MONTHS ENDED
                                              -------------------------------------     -----------------------------------------
                                                   JUNE 30,             JUNE 30,                 JUNE 30,             JUNE 30,
                                                     2000                 1999                     2000                 1999
                                                   ------               -------                  -------              ------
<S>                                              <C>                  <C>                      <C>                  <C>
Numerator:

Numerator for basic and diluted loss per
   share                                         $(4,570,418)         $(3,992,872)             $(9,731,002)         $(7,717,550)
                                              ================ ====================      ==================== ====================
Denominator:
   Denominator for basic and diluted loss per
     share - weighted average shares              11,869,515           11,494,531               11,795,015           11,479,530
                                              ================ ====================      ==================== ====================
Basic and diluted loss per share                      $(0.39)              $(0.35)                  $(0.83)              $(0.67)
                                                      =======              =======                  =======              =======
</TABLE>

                                       6
<PAGE>



5. LOAN PAYABLE

    In October 1999, the Company entered into a Non-Negotiable Promissory
Note and Security Agreement (the "Loan") with Mallinckrodt pursuant to which
the Company was eligible to borrow up to $9.5 million from Mallinckrodt, on a
quarterly basis, to cover the Company's share of MS-325 development costs.
The Loan bears interest, adjustable on a quarterly basis, at the Prime Rate
published in the Wall Street Journal. The Company received the third
installment of $1,805,501 pursuant to the Loan during the quarter ended June
30, 2000. The Loan balance at June 30, 2000 is $4,603,147. Pursuant to the
Amended and Restated Strategic Collaboration Agreement the Company entered
into with Mallinckrodt in June 2000 (See Note 2.), the Company will not be
entitled to receive further funding under the Loan, and $1,805,501 is to be
repaid to Mallinckrodt during the third quarter of 2000. The remaining
balance of the Loan, $2,797,646, is to be repaid on October 1, 2002.

6. SUBSEQUENT EVENT

    On July 19, 2000, the Company filed a shelf registration statement on Form
S-3 with the Securities and Exchange Commission for the issuance of up to three
million shares of Common Stock. Once registered, these shares will be available
for sale by the Company when we believe that market conditions are favorable and
as investment opportunities arise. The terms of any sale would be determined at
the time shares are issued.

7. NEW ACCOUNTING PRONOUNCEMENTS

    In December 1999, the SEC issued Staff Accounting Bulletin No. 101, as
amended, ("SAB 101") "Revenue Recognition in Financial Statements," which is
to be implemented by the Company no later than the fourth fiscal quarter of
fiscal years beginning after December 15, 1999. SAB 101 provides guidance on
revenue recognition and the SEC staff's views on the application of
accounting principles to selected revenue recognition issues. The Company is
presently analyzing the impact, if any, that adherence to the SAB will have
on its financial condition or results of operations.

    In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transaction involving Stock
Compensation, an interpretation of APB Opinion No. 25." The Company is required
to adopt the Interpretation on July 1, 2000. The Interpretation requires that
stock options that have been modified to reduce the exercise price be accounted
for as variable. As a result of adopting the Interpretation, the Company will be
required to apply variable accounting to these stock options that have been
modified and if the market price of the Company's stock increases it will
recognize compensation expense that it otherwise would not have incurred. The
Company does not believe that the adoption of this Interpretation will have a
material adverse effect on its financial position or results of operations.


                                       7
<PAGE>


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

OVERVIEW

Since commencing operations in 1992, we have been engaged principally in the
research and development of our product candidates as well as seeking various
regulatory clearances and patent protection. We have had no revenues from
product sales and have incurred losses since inception through June 30, 2000
aggregating approximately $55.1 million. We have received revenues in
connection with various licensing and collaboration agreements. In August
1996, we entered into a strategic alliance with Mallinckrodt pursuant
to which we received $6.0 million in up-front license fees. The agreement
provided for an additional $2.0 million milestone payment, which was received
in July 1997. In March 1996, we entered into a strategic alliance with
Daiichi Radioisotope Laboratories, Ltd. ("Daiichi"). Under this agreement, we
received $3.0 million in license fees and $5.0 million from the sale of
shares of our preferred stock, and were entitled to receive up to $3.3
million in future payments based upon our achievement of certain product
development milestones. We received $900,000 of such milestone payments in
July 1997.

In June 2000, we completed the following strategic transactions:

    -    We entered into a strategic collaboration agreement pursuant to
         which we granted Schering AG an exclusive license to co-develop and
         market MS-325 worldwide, exclusive of Japan. MS-325 is our
         cardiovascular magnetic resonance imaging agent formerly known by
         the Mallinckrodt product name AngioMARK. Generally, we and Schering
         AG will share equally in MS-325 profits. Under the agreement, we
         will assume responsibility for completing clinical trials and filing
         for Food and Drug Administration approval in the United States and
         Schering AG will lead clinical activities for the product outside
         the United States. Costs of the clinical development program
         generally will be shared equally by Schering AG and us beginning
         January 1, 2000. In addition, we granted Schering AG an exclusive
         option to develop and market an unspecified cardiovascular product
         from our product pipeline. In connection with this strategic
         collaboration agreement and in connection with the amendment to the
         strategic collaboration agreement between the Company and
         Mallinckrodt, as further described below, Schering AG paid us an
         up-front fee of $10 million, which we then paid to Mallinckrodt.
         Schering AG also made a $20 million dollar equity investment in us
         at $17.98 per share, through its affiliate, Schering BV. We may
         receive up to an additional $20 million in milestones under this
         agreement. Also, under the agreement, we will have an option to
         participate in the development and marketing of two of Schering AG's
         products currently in clinical trials, SHU 555C and Gadomer-17.

    -    In connection with the exclusive license that we granted to Schering
         AG, we amended our strategic collaboration with Mallinckrodt to
         grant Mallinckrodt a non-exclusive, worldwide license to manufacture
         MS-325 for clinical development and commercial use in accordance
         with a manufacturing and supply agreement entered into between
         Mallinckrodt and Schering AG, and to enable us to enter into the
         collaboration agreement with Schering AG. In connection with this
         amendment, we may pay up to $5 million in milestones to Mallinckrodt.
         We also will pay Mallinckrodt a share of MS-325 operating margins
         for sales within the US and a royalty on MS-325 gross profits for
         sales outside the US. In addition, we will reimburse Mallinckrodt
         for its portion of clinical development costs incurred during 2000
         and we will prepay the portion of the Non-Negotiable Promissory Note
         and Security Agreement related to 2000 expenses. We currently
         estimate the total of these payments to be $3.3 million.

On May 8, 2000, we granted to Schering AG a worldwide, royalty-bearing license
to patents covering Schering AG's development project, Eovist injection, an MRI
contrast agent for imaging the liver, currently in Phase III clinical trials.
Schering AG had been an opposing party in our European patent case prior to the
licensing agreement. On May 9, 2000, the Opposition Division of the European
Patent Office maintained our European Patent in a slightly amended form. The
patent is owned by the Massachusetts General Hospital and is exclusively
licensed to us. The remaining opposing parties can elect to appeal the decision.
Also on May 8, 2000, Schering AG granted us a non-exclusive, royalty-bearing
license to certain of its Japanese patents. We have agreed to withdraw our
invalidation claim of Schering AG's Japanese patent 1,932,626 in the Japanese
Patent Office pursuant to this license agreement.

Our initial product candidate, MS-325, is currently our only product candidate
undergoing human clinical trials. We filed an investigational new drug
application for MS-325 in July 1996. We initiated a Phase I clinical trial in
1996 and a Phase I dose escalation study in 1997, both of which have been
completed. We completed a Phase II clinical trial in June 1998 to test the
safety and preliminary efficacy of MS-325-enhanced magnetic resonance
angiography ("MRA") for the evaluation of peripheral vascular disease and we are
currently conducting a Phase II feasibility trial to test the safety and
feasibility of MS-325-enhanced MRA for the evaluation of coronary artery
disease. In addition, in January 1998, we initiated a Phase II clinical trial to
test the safety and feasibility of MS-325 for detecting breast cancer.
Enrollment in this trial was completed in March 2000. In June 1999, we initiated
a Phase III clinical trial to determine the efficacy of MS-325-enhanced MRA for
the detection of aortoiliac occlusive disease.

We expect continued operating losses for the next several years as we incur
expenses to support research, development and efforts to obtain regulatory
approvals.


                                       8
<PAGE>


We anticipate fluctuation in our quarterly results of operations due to several
factors, including: the timing of fees and milestone payments received from and
paid to strategic partners; the formation of new strategic alliances; the timing
of expenditures in connection with research and development activities; the
timing of product introductions and associated launch, marketing and sales
activities; and the timing and extent of product acceptance for different
indications and geographical areas of the world.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 AND 1999

REVENUES. Second quarter revenues were approximately $2.3 million and $267,000
in 2000 and 1999, respectively, and were derived from product development
contracts with Schering AG in the second quarter of 2000, and with Mallinckrodt
in the second quarter of 1999. The increase in revenues during the second
quarter of 2000 was primarily due to the impact of the development funding terms
under the collaboration agreement with Schering AG entered into in June 2000.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the
three months ended June 30, 2000 were $5.5 million as compared to $3.4 million
for the three months ended June 30, 1999. The increased research and development
expenses were primarily due to the impact of development funding terms under the
collaboration agreement with Schering AG, as well as higher costs associated
with advancing MS-325 through clinical trials. Increased costs for personnel and
resources to support research and development of our thrombus imaging program
also contributed to the increase.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
three months ended June 30, 2000 were $1.4 million as compared to $1.1 million
for the corresponding period of 1999. The increase was primarily due to higher
legal costs related to our collaboration with Schering AG and on-going patent
activities. Higher costs related to corporate communications and marketing
activities also contributed to the increase.

INTEREST INCOME AND EXPENSE. Interest income decreased approximately $174,000 in
2000 as compared to 1999 mainly due to lower average levels of invested cash
during the second quarter of 2000. The increase in interest expense of
approximately $50,000 in 2000 was the result of the loan payable to
Mallinckrodt.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 AND 1999

REVENUES. Revenues for the six months ended June 30, 2000 and June 30, 1999
were approximately $3.1 million and $554,000, respectively, and were derived
from product development contracts with Schering AG in the six months ended
June 30, 2000 and with Mallinckrodt in 1999. The increase in revenues during
the six months ended June 30, 2000 was primarily due to the impact of the
development funding terms under the collaboration agreement with Schering AG.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses for the six
months ended June 30, 2000 were $10.5 million as compared to $6.7 million for
the six months ended June 30, 1999. The increased research and development
expenses were primarily due to the impact of development funding terms under the
collaboration agreement with Schering AG, as well as higher costs associated
with advancing MS-325 through clinical trials. Increased costs for personnel and
resources to support research and development of our thrombus imaging program
also contributed to the increase.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
six months ended June 30, 2000 were $2.5 million as compared to $2.1 million for
the corresponding period of 1999. The increase was primarily due to higher costs
related to corporate communications and marketing activities.

INTEREST INCOME AND EXPENSE. Net interest income decreased approximately
$375,000 in 2000 as compared to 1999 mainly due to lower average levels of
invested cash during the six months ended June 30, 2000. The increase in
interest expense of approximately $91,000 in 2000 was the result of the loan
payable to Mallinckrodt.

                                       9
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

We have primarily financed our operations from inception through June 30, 2000,
with $14.3 million in net proceeds from our initial public offering completed in
February 1997, $22.9 million from a follow-on public offering of common stock in
November 1997, $19.1 million from private sales of equity securities, $38.0
million received from third parties in connection with collaboration and license
arrangements, $2.6 million of equipment lease financing, $5.3 million in
interest income and $20.0 million from a private offering of common stock to
Schering BV, an affiliate of Schering AG in June 2000, as described below. From
inception through June 30, 2000, we have incurred $83.6 million of costs
attributable to operating activities, including $62.8 million related to the
research and development of technology and new product candidates, including
MS-325.

Our principal sources of liquidity consist of cash, cash equivalents and
marketable securities, which totaled $33.0 million at June 30, 2000, as compared
to $14.1 million at December 31, 1999.

In June 2000, in connection with the execution of the strategic collaboration
agreement between us and Schering AG, we entered into a stock purchase
agreement with Schering BV whereby we issued 1,112,075 shares of our common
stock for a total purchase price of $20.0 million, or $17.98 per share. In
addition, in connection with the stock purchase agreement, we entered into a
Standstill Agreement with Schering BV, pursuant to which Schering BV agreed
not to sell or otherwise dispose of the shares purchased except under certain
conditions enumerated in the Standstill Agreement.  We may receive up to an
additional $20 million in milestones under the strategic collaboration
agreement.  In connection with the amended and restated strategic agreement
with Mallinckrodt, we may pay up to $5 million in milestones to Mallinckrodt.

In June 2000, we received $263,765, including interest, as full repayment of a
promissory note with 25% recourse from an executive officer pursuant to an
employee stock option financing program available to all our employees.

In October 1999, we entered into a Non-Negotiable Promissory Note and Security
Agreement (the "Loan") with Mallinckrodt pursuant to which we were eligible to
borrow up to $9.5 million from Mallinckrodt, on a quarterly basis, to cover our
share of MS-325 development costs. The Loan bears interest, adjustable on a
quarterly basis, at the Prime Rate published in the Wall Street Journal. We
received the third installment of $1,805,501 pursuant to the Loan during the
quarter ended June 30, 2000. The Loan balance at June 30, 2000 is $4,603,147.
Pursuant to the Amended and Restated Strategic Collaboration Agreement we
entered into with Mallinckrodt in June 2000, we will not be entitled to receive
further funding under the Loan, and $1,805,501 is to be repaid to Mallinckrodt
during the third quarter of 2000. The remaining balance of the Loan is to be
repaid on October 1, 2002.

We are eligible to receive additional payments of $2.4 million from Daiichi upon
the attainment of certain future MS-325 development milestones. Daiichi is
responsible for funding development of MS-325 in Japan.

During the six months ended June 30, 2000, we used approximately $5.2 million of
cash for operating activities. We expect that our cash needs for operations will
significantly increase in future periods due to planned clinical trials and
other expenses associated with the development of MS-325 and new research and
development programs.

We estimate that existing cash, cash equivalents and marketable securities, will
be sufficient to fund our operations through the first quarter of 2002. We
believe that we will need to raise additional funds for research, development
and other expenses through equity or debt financing, strategic alliances or
otherwise, prior to commercialization of any of our product candidates. There
can be no assurance that additional financing will be available on terms
acceptable to us, or at all. Our future liquidity and capital requirements will
depend on numerous factors, including the following: the progress and scope of
clinical trials; the timing and costs of filing future regulatory submissions;
the timing and costs required to receive both United States and foreign
governmental approvals; the cost of filing, prosecuting, defending and enforcing
patent claims and other intellectual property rights; the extent to which our
products gain market acceptance; the timing and costs of product introductions;
the extent of our ongoing research and development programs; the costs of
training physicians to become proficient with the use of our products; and, if
necessary, once regulatory approvals are received, the costs of developing
marketing and distribution capabilities.

Because of anticipated spending to support development of MS-325 and new
research programs, we do not expect to generate positive cash flow from
operating activities for any future quarterly or annual period prior to
commercialization of MS-325. We anticipate continued investments in fixed
assets, including equipment and facilities expansion to support new and
continuing research and development programs. We have in place a lease agreement
that will enable us to utilize our current principal scientific facilities
through December 31, 2002, and we have an option to extend the lease for an
additional three or five years at 95% of the then market rate. We also have a
lease for nearby office space, which expires in December 2002.

                                       10
<PAGE>


We have incurred tax losses to date and therefore have not paid significant
federal or state income taxes since inception. At December 31, 1999, we had loss
carryforwards of approximately $42.7 million available to offset future taxable
income. These amounts expire at various times through 2014. As a result of
ownership changes resulting from sales of equity securities, our ability to use
the loss carryforwards is subject to limitations as defined in Sections 382 and
383 of the Internal Revenue Code of 1986, as amended (the "Code"). We currently
estimate that the annual limitation on our use of net operating losses through
May 31, 1996 will be approximately $900,000. Pursuant to Sections 382 and 383 of
the Code, the change in ownership resulting from public equity offerings in 1997
and any other future ownership changes may further limit utilization of losses
and credits in any one year. We also are eligible for research and development
tax credits that can be carried forward to offset federal taxable income. The
annual limitation and the timing of attaining profitability may result in the
expiration of net operating loss and tax credit carryforwards before
utilization.

We do not believe that inflation has had a material impact on our operations.

YEAR 2000

In prior years, we discussed the nature and progress of our plans to become Year
2000 ready. In late 1999, we completed our remediation and testing of systems.
As a result of those planning and implementation efforts, we experienced no
significant disruptions in mission critical information technology and
non-information technology systems and believe those systems successfully
responded to the Year 2000 date change. We expensed approximately $25,000 during
1999 and less than $1,000 in 2000 in connection with remediating our systems. We
are not aware of any material problems resulting from Year 2000 issues, either
with our products or services of third parties. We will continue to monitor our
mission critical computer applications and those of our suppliers and vendors
throughout the Year 2000 to ensure that any latent Year 2000 matters that arise
are addressed promptly.

FORWARD-LOOKING STATEMENTS

    The discussion included in this section as well as elsewhere in the
Quarterly Report on Form 10-Q contains forward-looking statements based on the
current expectations of our management. Such statements are subject to risks and
uncertainties which could cause actual results to differ materially from those
projected. See "Important Factors Regarding Forward-Looking Statements" attached
as Exhibit 99.1 and incorporated herein by reference to our Annual Report on
Form 10-K for the year ended December 31, 1999 as previously filed with the
Commission. Readers are cautioned not to place undue reliance on the
forward-looking statements which speak only as of the date thereof. We undertake
no obligation to release publicly the result of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated
events.

                                       11
<PAGE>
PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES

         On June 20, 2000, in connection with the strategic collaboration
agreement we entered into with Schering AG on June 9, 2000, we sold 1,112,075
shares of our common stock to Schering BV, an affiliate of Schering AG, at a
purchase price of $17.98 per share and raised gross proceeds of $20,000,000.
The offer and sale of these shares was made in reliance upon the exemption
from the registration provisions of the Securities Act of 1933 set forth in
Section 4(2) thereof. These shares are restricted securities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER

         The Company held its Annual Meeting of Stockholders on May 1, 2000, and
the following matters were voted on at that meeting:

         1. The election of Luke B. Evnin, Ph.D. and Randall B. Lauffer, Ph.D.
as Class I Directors, each to serve for a three year term of office or until
their successors are elected. The following chart shows the number of votes cast
for or against each director, as well as the number of abstentions, broker
nonvotes and number of votes withheld.

<TABLE>
<CAPTION>

                                                              VOTES                             BROKER
DIRECTOR                 FOR             AGAINST            WITHHELD         ABSTAIN           NONVOTES
--------                 ---             -------            --------         -------           --------
<S>                    <C>                  <C>              <C>                <C>              <C>
Dr. Evnin              9,224,029            N/A              62,105             N/A               N/A

Dr. Lauffer            9,224,029            N/A              62,105             N/A               N/A
</TABLE>


         The following is a list of the directors whose term of office as a
director continued after the meeting:

<TABLE>
<CAPTION>

DIRECTOR                                                 TERM EXPIRES
--------                                                 ------------
<S>                                                      <C>
Stanley T. Crooke, M.D., Ph.D.                           2001
Christopher F.O. Gabrieli                                2002
Michael D. Webb                                          2002

</TABLE>

         2. The proposal to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock from
15,000,000 shares to 40,000,000 shares. The following chart shows the number of
votes cast for or against the proposal, as well as the number of abstentions:
<TABLE>
<CAPTION>

                FOR                                AGAINST                             ABSTAIN
                ---                                -------                             -------
<S>                                                <C>                                  <C>
             8,982,844                             300,726                              2,564
</TABLE>

         3. The proposal to amend the Company's Amended and Restated 1992 Equity
Incentive Plan to increase the aggregate number of shares of common stock as to
which awards may be granted under such plan by 2,000,000 shares. The following
chart shows the number of votes cast for or against the proposal, as well as the
number of abstentions and broker nonvotes:

<TABLE>
<CAPTION>

            FOR                       AGAINST                    ABSTAIN                BROKER NONVOTES
            ---                       -------                    -------                ---------------
<S>                                   <C>                         <C>                      <C>
         6,370,328                    492,669                     2,964                    2,420,173
</TABLE>

                                       12
<PAGE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

    (A) EXHIBITS

         10.1     Second Amendment dated June 30, 2000 to the Short Form Lease
                  dated as of July 7, 1998 with a commencement date as of
                  January 1, 1998 between the Company and the Trustees of The
                  Cambridge East Trust. Filed herewith.

         27.1     Financial Data Schedule for the interim year-to date period
                  ended June 30, 2000 (for electronic filing only).

         99.1     Important Factors Regarding Forward-Looking Statements filed
                  as Exhibit 99.1 to the Company's Annual Report on Form 10-K
                  for the year ended December 31, 1999 and incorporated herein
                  by reference.


    (B) REPORTS ON FORM 8-K

        The following report on Form 8-K was filed during the quarter ended June
        30, 2000:

        (i)  On June 29, 2000, the Company filed with the Securities and
Exchange Commission, a current report on Form 8-K for the June 9, 2000 event
reporting the series of agreements the Company entered into with Schering AG,
Schering BV and Mallinckrodt.

                                       13
<PAGE>



                                   SIGNATURES

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

                                 EPIX Medical, Inc.

Date: August 14, 2000       By: /s/ Pamela E. Carey
                                -------------------

                                 Pamela E. Carey
                                 Vice President of Finance and Administration,
                                 Chief Financial Officer




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