<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549


                                   FORM 10-Q

               Quarterly report pursuant to Section 13 or 15 (d)
                    of the Securities Exchange Act of 1934



For the Quarter Ended June 30, 2001            Commission File No. 0-20948
                                                                   -------



                                AUTOIMMUNE INC.
            (Exact Name of Registrant as Specified in its Charter)



         Delaware                                        13-348-9062
(State of Incorporation)                    (I.R.S. Employer Identification No.)



                     1199 Madia Street, Pasadena, CA 91103
                   (Address of Principal Executive Offices)



                                (626) 792-1235
               (Registrant's Telephone No., including Area Code)



Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


     Yes  _______X________    No  _______________
                 -



     Number of shares outstanding of the registrant's Common Stock as of July
     31, 2001:

Common Stock, par value $.01                 16,919,623 shares outstanding
<PAGE>

                                AUTOIMMUNE INC.

                          QUARTER ENDED JUNE 30, 2001


                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                                                     Page Number
<S>                                                                                                                <C>
Item 1 - Financial Statements

         Balance Sheet
               December 31, 2000 and June 30, 2001................................................................       2

         Statement of Operations
               for the three and six months ended June 30, 2000 and 2001
               and for the period from inception (September 9, 1988)
               through June 30, 2001 .............................................................................       3

         Statement of Cash Flows
               for the six months ended June 30, 2000 and 2001
               and for the period from inception (September 9, 1988)
               through June 30, 2001..............................................................................       4

         Notes to the Unaudited Financial Statements..............................................................       5

Item 2 - Management's Discussion and Analysis of
         Financial Condition and Results of Operations............................................................       7

Item 3 - Quantitative and Qualitative Disclosures about Market Risk ..............................................       8

PART II - OTHER INFORMATION

Item 6(b) - Reports on Form 8-K...................................................................................       9

Signatures........................................................................................................      10
</TABLE>

                                       1
<PAGE>

                                 AUTOIMMUNE INC.
                          (A development stage company)
                                  BALANCE SHEET
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          December 31,           June 30,
                                                                             2000                  2001
                                                                         -------------         -------------
<S>                                                                      <C>                   <C>
ASSETS
Current assets:
      Cash and cash equivalents                                          $   4,719,000         $   1,362,000
      Marketable securities                                                  5,164,000             8,240,000
      Prepaid expenses and other current assets                                 72,000                48,000
                                                                         -------------         -------------

                    Total current assets                                     9,955,000             9,650,000

Fixed assets, net                                                                    -                     -
Other assets                                                                         -               100,000
                                                                         -------------         -------------

                                                                         $   9,955,000         $   9,750,000
                                                                         =============         =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                   $     112,000         $      52,000
      Accrued expenses                                                          90,000               128,000
      Deferred revenue                                                               -                 5,000
                                                                         -------------         -------------

                    Total current liabilities                                  202,000               185,000
                                                                         -------------         -------------

Commitments and contingencies

Stockholders' equity:
      Common stock, $.01 par value; 25,000,000 shares
       authorized; 16,759,623 and 16,919,623 shares issued and
       outstanding at December 31, 2000 and June 30, 2001,
       respectively                                                            168,000               169,000
      Additional paid-in capital                                           117,907,000           117,910,000
      Deficit accumulated during the development stage                    (108,322,000)         (108,514,000)
                                                                         -------------         -------------

                    Total stockholders' equity                               9,753,000             9,565,000
                                                                         -------------         -------------

                                                                         $   9,955,000         $   9,750,000
                                                                         =============         =============
</TABLE>

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

                                       2
<PAGE>

                                 AUTOIMMUNE INC.
                          (A development stage company)
                             STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                    Period from
                                                                                                                     inception
                                                Three months ended                 Six months ended             (September 9, 1988)
                                            June 30,          June 30,        June 30,           June 30,              through
                                              2000              2001            2000               2001             June 30, 2001
                                         ---------------  --------------  ---------------   ------------------  -------------------
<S>                                      <C>              <C>             <C>               <C>                 <C>
Revenue:
    License rights                       $             -  $        8,000  $     4,000,000   $           15,000  $         4,025,000
    Option fees                                        -               -                -                    -            2,200,000
    Research and development
      revenue under collaborative
      agreements                                       -               -                -                    -              955,000
                                         ---------------  --------------  ---------------   ------------------  -------------------

        Total revenues                                 -           8,000        4,000,000               15,000            7,180,000
                                         ---------------  --------------  ---------------   ------------------  -------------------

Costs and expenses:
    Research and development:
        Related party                             10,000          15,000          230,000               30,000           19,622,000
        All other                                148,000          16,000          273,000              115,000           91,392,000
    General and administrative                   176,000         166,000          432,000              346,000           16,680,000
                                         ---------------  --------------  ---------------   ------------------  -------------------

        Total costs and expenses                 334,000         197,000          935,000              491,000          127,694,000
                                         ---------------  --------------  ---------------   ------------------  -------------------

Interest income                                  154,000         119,000          287,000              284,000           12,307,000
Interest expense                                       -               -                -                    -             (303,000)
                                         ---------------  --------------  ---------------   ------------------  -------------------

                                                 154,000         119,000          287,000              284,000           12,004,000
                                         ---------------  --------------  ---------------   ------------------  -------------------

Net income (loss)                        $      (180,000) $      (70,000) $     3,352,000   $         (192,000) $      (108,510,000)
                                         ===============  =============== ===============   ==================  ===================


Net income (loss) per share-basic        $         (0.01) $        (0.00) $          0.20   $            (0.01)
                                         ===============  =============== ===============   ==================

Net income (loss) per share-diluted      $         (0.01) $        (0.00) $          0.19   $            (0.01)
                                         ===============  =============== ===============   ==================

Weighted average common
    shares outstanding-basic                  16,759,623      16,919,623       16,726,895           16,899,292
                                         ===============  ==============  ===============   ==================

Weighted average common
    shares outstanding-diluted                16,759,623      16,919,623       17,326,070           16,899,292
                                         ===============  ==============  ===============   ==================
</TABLE>

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

                                       3
<PAGE>

                                AUTOIMMUNE INC.
                         (A development stage company)
                            STATEMENT OF CASH FLOWS
               Increase (Decrease) in Cash and Cash Equivalents
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                Period from
                                                                                                                 inception
                                                                                                             (September 9, 1988)
                                                                            Six months ended                      through
                                                                       June 30,           June 30,                June 30,
                                                                         2000               2001                    2001
                                                                  ----------------   --------------------   -------------------
<S>                                                                <C>               <C>                    <C>
Cash flows from operating activities:
Net income (loss)                                                     $ 3,352,000        $  (192,000)         $ (108,510,000)
Adjustment to reconcile net loss to net cash
    used by operating activities:
     Interest expense related to demand notes
         converted into Series A mandatorily
         redeemable covertible preferred stock                                  -                  -                  48,000
     Patent costs paid with junior convertible
         preferred and common stock                                             -                  -                   3,000
     Depreciation and amortization                                              -                  -               4,464,000
     Loss on sale/disposal of fixed assets                                      -                  -                 642,000
     Decrease in capitalized patent costs                                       -                  -                 563,000
     (Increase) decrease in prepaid expenses and other current assets     105,000             24,000                 (48,000)
     Increase (decrease) in accounts payable                               16,000            (60,000)                 52,000
     Increase (decrease) in accrued expenses                             (517,000)            38,000                 128,000
     Increase (decrease) in deferred revenue                                    -              5,000                   5,000
                                                                      -----------        -----------          --------------

               Net cash provided (used) by operating activities         2,956,000           (185,000)           (102,653,000)
                                                                      -----------        -----------          --------------

Cash flows from investing activities:
Purchase of available-for-sale marketable securities                   (6,892,000)        (9,664,000)           (283,331,000)
Proceeds from sale/maturity of available-for-sale marketable                    -          6,588,000             264,080,000
    securities
Proceeds from maturity of held-to-maturity marketable                           -                  -              11,011,000
    securities
Proceeds from sale of equipment                                                 -                  -                 306,000
Purchase of fixed assets                                                        -                  -              (5,288,000)
Investment in Oragen                                                            -           (100,000)               (100,000)
Increase in patent costs                                                        -                  -                (563,000)
Increase in other assets                                                        -                  -                (125,000)
                                                                      -----------        -----------          --------------

               Net cash provided (used) by investing activities        (6,892,000)        (3,176,000)            (14,010,000)
                                                                      -----------        -----------          --------------

Cash flows from financing activities:
Proceeds from sale-leaseback of fixed assets                                    -                  -               2,872,000
Payments on obligations under capital leases                                    -                  -              (2,872,000)
Net proceeds from issuance of mandatorily redeemable
    convertible preferred stock                                                 -                  -              10,011,000
Proceeds from bridge notes                                                      -                  -                 300,000
Proceeds from issuance of common stock                                    193,000              4,000             105,514,000
Proceeds from issuance of convertible notes payable                             -                  -               2,200,000
                                                                      -----------        -----------          --------------

          Net cash provided (used) by financing activities                193,000              4,000             118,025,000
                                                                      -----------        -----------          --------------

Net increase (decrease) in cash and cash equivalents                   (3,743,000)        (3,357,000)              1,362,000

Cash and cash equivalents, beginning of period                          6,973,000          4,719,000                       -
                                                                      -----------        -----------          --------------

Cash and cash equivalents, end of period                              $ 3,230,000        $ 1,362,000          $    1,362,000
                                                                      ===========        ===========          ===============
</TABLE>


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

                                       4
<PAGE>

                                AUTOIMMUNE INC.

                  NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1.   Interim Financial Data

     The interim financial data as of June 30, 2001, for the three and six month
     periods ended June 30, 2000 and 2001 and for the period from inception
     (September 9, 1988) through June 30, 2001 are unaudited, however, in the
     opinion of AutoImmune Inc. (the "Company"), these interim data include all
     adjustments, consisting only of normal recurring adjustments necessary for
     a fair presentation of the results for these interim periods.  These
     financial statements should be read in conjunction with the financial
     statements and the notes thereto for the period ended December 31, 2000
     included in the Company's Form 10-K.  Results for interim periods are not
     necessarily indicative of results for the entire year.

2.   Net Income (Loss) Per Share - Basic and Diluted

     Basic earnings (loss) per share is calculated based on the weighted average
     number of common shares outstanding during the period.  Diluted earnings
     per share is calculated based on the weighted average number of common
     shares and dilutive common equivalent shares assumed outstanding during the
     period.  Shares used to compute diluted earnings per share in loss periods
     exclude common share equivalents, as their inclusion would be anti-
     dilutive.  For the six months ended June 30, 2000, the difference between
     weighted average shares outstanding basic and diluted is due to the effect
     of stock options.

3.   Cash Equivalents and Marketable Securities

     The following is a summary of cash equivalents held by the Company. Cash
     equivalents are carried at fair market value, which approximated amortized
     cost at December 31, 2000 and June 30, 2001:

<TABLE>
<CAPTION>
                                                December 31,     June 30,
                                                    2000           2001
                                                ------------    ----------
     <S>                                        <C>             <C>
     Money market                               $    292,000    $1,328,000
     U.S. Government debt securities               4,366,000             -
                                                ------------    ----------

                                                $  4,658,000    $1,328,000
                                                ============    ==========
</TABLE>

     The following is a summary of available-for-sale marketable securities held
     by the Company at December 31, 2000 and June 30, 2001:

<TABLE>
<CAPTION>
                                    Maturity         Fair       Unrealized   Unrealized    Amortized
                                      term           value         gains       losses         cost
                                 -------------    ----------    ----------   ----------    ----------
      <S>                        <C>              <C>           <C>          <C>           <C>
      December 31, 2000
      U.S. Government
          debt securities        within 1 year    $5,164,000    $       -    $        -    $5,164,000

      June 30, 2001
      U.S. Government
          debt securities        within 1 year    $8,240,000    $       -    $        -    $8,240,000
</TABLE>

     All of the Company's marketable securities are classified as current at
     June 30, 2001 as these funds are highly liquid and are available to meet
     working capital needs and to fund current operations.  Gross realized gains
     and losses on sales of marketable securities for the three and six month
     periods ended June 30, 2000 and 2001 were not significant.

     Marketable securities which were purchased and sold in periods prior to
     adoption of Statement of Financial Accounting Standards (SFAS) No. 115 on
     January 1, 1994, other than held-to-maturity marketable securities, are
     included in the category available-for-sale marketable securities in the
     "period from inception" column of the statement of cash flows.

                                       5
<PAGE>

                                AUTOIMMUNE INC.

                  NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

4.   Fixed Assets

     Fixed assets consist of the following:

<TABLE>
<CAPTION>
                                                   Estimated
                                                  useful life    December 31,     June 30,
                                                    (years)         2000            2001
                                                 -------------   ------------   ------------
     <S>                                         <C>             <C>            <C>
     Laboratory equipment                             2 - 5      $    160,000   $    160,000
                                                                 ------------   ------------
                                                                      160,000        160,000
     Less - accumulated depreciation and
        amortization                                                  160,000        160,000
                                                                 ------------   ------------

                                                                 $          -   $          -
                                                                 ============   ============
</TABLE>

5.   Other Assets

     Other assets is comprised of an investment in OraGen Corporation, a private
     company, in which AutoImmune's interest is less than 20%.  This investment
     is carried at cost.

6.   Accrued Expenses

     Accrued expenses consist of  accrued professional expenses as of December
     31, 2000 and June 30, 2001.

7.   Comprehensive Income

     Comprehensive loss for the three month periods ended June 30, 2000 and 2001
     was $180,000 and $70,000, respectively.  Comprehensive income for the six
     month period ended June 30, 2000 was $3,352,000.  Comprehensive loss for
     the six month period ended June 30, 2001 was $192,000.  There was no net
     unrealized gain (loss) on marketable securities for the three and six month
     periods ended June 30, 2000 and 2001.


                                       6
<PAGE>

                                AUTOIMMUNE INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Results of Operations

Overview

Since its inception through June 30, 2001, the Company has incurred ongoing
losses from operations and has cumulative losses as of June 30, 2001 totaling
$108,510,000.  To date, the Company has not recorded any revenues from the sale
of products.  Revenues recorded through June 30, 2001 were earned in connection
with the sale of certain patent rights, granting of certain short-term rights
and contract research.

The Company expects to remain in the development stage for the foreseeable
future and accordingly, may continue to incur losses.

The sections of "Management's Discussion and Analysis of Financial Condition and
Results of Operations" captioned "Overview" and "Liquidity and Capital
Resources" contain forward-looking statements which involve risks and
uncertainties.  What may occur in the future could differ significantly from
what is discussed in the forward-looking statements due to a number of important
factors, including, but not limited to, the developmental stage of the Company's
products and uncertainties of clinical trial results and regulatory approval;
the Company's capital requirements, history of operating losses and lack of
product revenue and its limited manufacturing and marketing experience; and the
risks of technological change and competition.  These factors are more fully
discussed in the Company's most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission in the section captioned "Business - Factors
to be Considered".  The discussion in the Annual Report on Form 10-K is hereby
incorporated by reference into this Quarterly Report.


Three and Six Month Periods Ended June 30, 2000 and 2001

Revenue was $8,000 for the three month period ended June 30, 2001, which
represents monthly license payments from Rycor Technology Investments
Corporation ("Rycor").  There was no revenue for the three month period ended
June 30, 2000.  Revenue was $4,000,000 and $15,000 for the six month period
ended June 30, 2000 and 2001, respectively.  The $4,000,000 represents the
initial payment by a subsidiary of Elan Plc for the purchase of certain patent
rights related to Alzheimer's disease and the $15,000 represents monthly license
payments from Rycor.

Research and development expenses were $158,000 and $31,000 for the three month
periods ended June 30, 2000 and 2001, respectively.  Research and development
expenses were $503,000 and $145,000 for the six month periods ended June 30,
2000 and 2001, respectively.  The decrease is due to the reduction of
contractual payments to The Brigham and Women's Hospital and lower patent legal
costs.

General and administrative expenses were $176,000 and $166,000 for the three
month periods ended June 30, 2000 and 2001, respectively.  General and
administrative expenses were $432,000 and $346,000 for the six month periods
ended June 30, 2000 and 2001, respectively.  The decrease is due to the
reduction of corporate activity.

Interest income was $154,000 and $119,000 for the three month periods ended June
30, 2000 and 2001, respectively.  Interest income was $287,000 and $284,000 for
the six month periods ended June 30, 2000 and 2001, respectively.  The decrease
is due to a  lower average balance of cash available for investment.

The net loss was $180,000 and $70,000 for the three month periods ended June 30,
2000 and 2001, respectively.  Net income was $3,352,000 for the six months ended
June 30, 2000.  The net loss was $192,000 for the six months ended June 30,
2001.  The net loss per share basic and diluted was $0.01 and $0.00 for the
three months ended June 30, 2000 and 2001, respectively.  Net income per share
basic and

                                       7
<PAGE>

                                AUTOIMMUNE INC.

diluted was $0.20 and $0.19, respectively, for the six months ended June 30,
2000.  The net loss per share basic and diluted was $0.01 for the six months
ended June 30, 2001.  The change reflects the reduction in revenue and the
decrease in expenses.


Liquidity and Capital Resources

The Company's needs for funds have historically fluctuated from period to
period as it has increased or decreased the scope of its research and
development activities.  Since inception, the Company has funded these needs
almost entirely through sales of its equity securities.

The Company's working capital and capital requirements will depend on numerous
factors, including the strategic direction that the Company and its shareholders
choose, the level of resources that the Company devotes to the development of
its products, the extent to which it proceeds by means of collaborative
relationships and its competitive environment. The Company believes that current
cash and marketable securities, and the interest earned from the investment
thereof, will be sufficient to meet the Company's operating expenses and capital
requirements for at least five years.  At the appropriate time, the Company may
intend to seek additional funding through public or private equity or debt
financing, collaborative arrangements or from other sources.  If additional
funds are necessary but not available, the Company will have to modify its
business strategy, and its business will be materially adversely affected.

In order to preserve principal and maintain liquidity, the Company's funds are
invested in U.S. Treasury obligations and other short-term instruments.  As of
June 30, 2001, the Company's cash and cash equivalents and marketable securities
totaled $9,602,000.  Current liabilities at June 30, 2001 were $185,000.


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company invests all of its cash in U.S. Treasury obligations and money
market instruments.  These investments are denominated in U.S. dollars.  Due to
the conservative nature of these instruments, the Company does not believe that
it has material exposure to interest rate or market risk.

                                       8
<PAGE>

                                AUTOIMMUNE INC.



PART II - OTHER INFORMATION


Item 6(b) - REPORTS ON FORM 8-K

          No Form 8-K has been filed during the quarter for which this report is
filed.

                                       9
<PAGE>

                                AUTOIMMUNE INC.


SIGNATURES


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



                                      AUTOIMMUNE INC.


Date: August 10, 2001                 /s/ Robert C. Bishop
                                      --------------------------------------
                                      Robert C. Bishop
                                      Chairman and Chief Executive Officer


                                      /s/ Heather A. Ellerkamp
                                      --------------------------------------
                                      Heather A. Ellerkamp
                                      Director of Finance and Treasurer


                                       10