<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934, FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.


                             Commission File Number
                                     0-19659

                       CHRYSALIS INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                            22-2877973
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

575 Route 28, Raritan, New Jersey                                08869
(Address of principal executive offices)                        (Zip Code)

  Registrant's telephone number, including area code:        (908) 722-7900


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

Yes  X  No
   -----  ----

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

     Common Stock $0.01 par value              11,385,557 shares
                                               outstanding at April 30, 1997





<PAGE>   2


              CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                      INDEX
<TABLE>
<CAPTION>

PART I.       FINANCIAL INFORMATION                             PAGE NO.
                                                                --------
<S>                                                            <C>
Item 1. Financial Statements
----------------------------

     Consolidated Balance Sheets -
           March 31, 1997 (unaudited) and December 31, 1996        3

     Unaudited Consolidated Statements of Operations -
           for the three months ended March 31, 1997 and 1996      4

     Unaudited Consolidated Statement of Stockholders' Equity -
           for the three months ended March 31, 1997               5

     Unaudited Consolidated Statements of Cash Flows -
           for the three months ended March 31, 1997 and 1996      6

     Notes to Unaudited Consolidated Financial Statements          7

Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
           Condition and Results of Operations                8 - 18
           -----------------------------------


PART II.      OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                         19
-----------------------------------------
</TABLE>


                                       2

<PAGE>   3


                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

              CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets
                      March 31, 1997 and December 31, 1996
                (in thousands except share and per share amounts)
<TABLE>
<CAPTION>
                        Assets                               March 31, 1997  December 31, 1996
                        ------                               --------------  -----------------
                                                              (unaudited)
Current assets
<S>                                                              <C>               <C>     
    Cash and cash equivalents                                    $ 10,199          10,455  
    Cash in escrow                                                   --             4,550  
    Short-term investments                                           --             2,518  
    Marketable debt securities                                         92             101  
    Trade accounts receivable, net                                  9,525          10,788  
    Prepaid expenses and other current assets                       1,811           1,433  
                                                                 --------         -------  
         Total current assets                                      21,627          29,845  
                                                                                           
Property and equipment, net                                        15,329          15,963  
Marketable debt securities                                            361             396  
Intangible assets, net                                                870             953  
Other assets                                                          305             326  
Restricted cash                                                       499             460  
                                                                 --------         -------  
                                                                 $ 38,991          47,943  
                                                                 ========         =======  
         Liabilities and Stockholders' Equity                                              
         ------------------------------------                                              
                                                                                           
Current liabilities                                                                        
    Short-term borrowings                                           6,144          10,939  
    Note payable - related party                                      276             299  
    Current portion of long-term debt                                 160             180  
    Accounts payable                                                3,173           3,386  
    Accrued expenses                                                6,966           8,273  
    Deferred revenue                                                4,648           5,842  
                                                                 --------         -------  
         Total current liabilities                                 21,367          28,919  
                                                                                           
Long-term debt, excluding current portion                           2,339           2,376  
Deferred income taxes                                               1,865           2,053  
Other liabilities                                                   1,009           1,054  
                                                                 --------         -------  
         Total liabilities                                         26,580          34,402  
                                                                 --------         -------  
                                                                                           
Stockholders' equity                                                                       
    Serial preferred stock, $.01 par value, 5,000,000                                      
         shares authorized; no shares issued and outstanding         --              --    
    Common stock, $.01 par value, 20,000,000 shares                                        
         authorized; issued and outstanding 11,384,807 in 1997                             
         and 11,359,721 in 1996                                       114             113  
    Additional paid-in capital                                     57,591          57,498  
    Translation adjustment                                           (103)            462  
    Employee stock purchase loans                                     (86)            (86) 
    Accumulated deficit                                           (45,185)        (44,541) 
    Net unrealized gain on marketable securities                       80              95  
                                                                 --------         -------  
         Total stockholders' equity                                12,411          13,541  
                                                                 --------         -------  
    Commitments and contingencies                                                          
                                                                                           
                                                                 $ 38,991          47,943  
                                                                 ========         =======  
</TABLE>



See accompanying notes to unaudited consolidated financial statements


                                       3
<PAGE>   4



              CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                 Unaudited Consolidated Statements of Operations
                   Three months ended March 31, 1997 and 1996
                     (in thousands except per share amounts)
<TABLE>
<CAPTION>
                                              Three months ended March 31,
                                                    1997        1996
                                                    ----        ----
<S>                                               <C>           <C>   
Revenues:
         Service revenue                          $ 11,482      11,106
         Less: Reimbursed costs                     (1,853)     (1,628)
                                                  --------    --------
            Net service revenue                      9,629       9,478

         License fees and other                        276         119
                                                  --------    --------
                                                     9,905       9,597
                                                  --------    --------
Operating expenses:
         Direct costs                                6,970       6,272
         Research and development                       52         103
         General, administrative and marketing       2,874       2,676
         Depreciation and amortization                 638         672
                                                  --------    --------
                                                    10,534       9,723
                                                  --------    --------
                           Loss from operations       (629)       (126)
                                                  --------    --------
Other income (expense):
         Interest income                               181         315
         Interest expense                             (191)       (360)
         Foreign currency gain                        --            67
         Other                                           4         121
                                                  --------    --------
                                                        (6)        143
                                                  --------    --------
         Income (loss) before income taxes            (635)         17

Income tax expense                                       9         129
                                                  --------    --------
                           Net Loss               $   (644)   $   (112)
                                                  ========    ========
Loss per common and common
     equivalent share                             $   (.06)   $   (.01)
                                                  ========    ========
Shares used in computing per share amounts          11,372      11,247
                                                  ========    ========
</TABLE>




See accompanying notes to unaudited consolidated financial statements.


                                       4

<PAGE>   5



              CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
            Unaudited Consolidated Statements of Stockholders' Equity
                        Three months ended March 31, 1997
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                                         Net unrealized
                                                                                           gain (loss)
                                                                    Employee                   on          Total
                                          Additional                  stock                marketable     stock-
                                 Common     paid-in   Translation   purchase   Accumulated    debt       holders'
                                  stock     capital   adjustment      loan       deficit   securities     equity
                                  -----     -------   ----------      ----       -------   ----------     ------
<S>               <C> <C>          <C>      <C>            <C>          <C>    <C>               <C>     <C>   
Balance, December 31, 1996         113      57,498         462          (86)   (44,541)          95      13,541

Issuance of 16,538 shares
  of common stock upon
  exercise of stock options          1          50          --           --         --           --          51

Issuance of 8,548 shares
  of common stock pursuant
  to 401(k) plan                    --          43          --           --         --           --          43

Translation adjustment              --          --        (565)          --         --           --        (565)

Decrease in net unrealized
  gain on marketable debt
  securities                        --          --          --           --         --          (15)        (15)

Net loss                            --          --          --           --       (644)          --        (644)
                                   ---      ------        ----          ---    -------           --      ------

Balance, March 31, 1997            114      57,591        (103)         (86)   (45,185)          80      12,411
                                   ===      ======        ====          ===    =======           ==      ======
</TABLE>


See accompanying notes to unaudited consolidated financial statements.


                                       5

<PAGE>   6


              CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
                      Unaudited Consolidated Statements of
                       Cash Flows Three months ended March
                                31, 1997 and 1996
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                           Three months ended
                                                                                 March 31,
                                                                             1997        1996
                                                                           --------    -------
<S>                                                                        <C>            <C>  
Cash flows from operating activities:
     Net loss                                                              $   (644)      (112)
     Adjustments to reconcile net loss to net cash used in
       operating activities:
        Non-cash items:
             Depreciation and amortization                                      638        672
             Deferred income tax expense (benefit)                             (142)        18
             Gain on disposal of property and equipment                           1         --
             Amortization of premium on short-term investments                   --         25
             Foreign currency transaction gain                                   --        (67)
             Noncash charges                                                     43         15
             Change in operating assets and liabilities:
             Decrease in accounts receivable                                    418        297
             Increase in prepaid expenses and other current assets             (329)      (129)
             Increase in other assets                                           (36)       (23)
             Decrease in accounts payable                                       (83)      (304)
             Decrease in accrued expenses                                      (869)      (575)
             Decrease in deferred revenue                                      (835)      (240)
             Increase in other liabilities                                       24         25
                                                                           --------    -------
                     Net cash used in operating activities                   (1,814)      (398)
                                                                           --------    -------
Cash flows from investing activities:
     (Increase) decrease in restricted cash                                     (39)        27
     Purchase of property and equipment                                        (855)      (180)
     Proceeds from disposal of property and equipment                          --         --
     Purchases of intangible assets                                              (1)        (1)
     Purchases of short-term investments                                       --       (5,409)
     Proceeds from maturities of short-term investments                       7,068      1,000
                                                                           --------    -------
                     Net cash provided by (used in) investing activities      6,173     (4,563)
                                                                           --------    -------
Cash flows from financing activities:
     Principal payments on short-term borrowings                             (4,393)      (234)
     Principal payments on long-term debt                                       (36)      (201)
     Proceeds from stock options exercised                                       51          6
                                                                           --------    -------
                     Net cash used in financing activities                   (4,378)      (429)
                                                                           --------    -------
Effect of exchange rate changes on cash                                        (237)       356
                                                                           --------    -------
Decrease in cash and cash equivalents                                          (256)    (5,034)

Cash and cash equivalents, beginning of period                               10,455     21,168
                                                                           --------    -------
Cash and cash equivalents, end of period                                   $ 10,199     16,134
                                                                           ========    =======
Supplemental disclosure of cash flow information
  Cash paid during the period for:
        Interest                                                           $    166        268
        Income taxes                                                             29         28
                                                                           --------    -------
Noncash investing activities:
        Unrealized gain (loss) on marketable securities                    $    (15)        39
                                                                           --------    -------
</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                       6

<PAGE>   7


              CHRYSALIS INTERNATIONAL CORPORATION AND SUBSIDIARIES
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 1997

Note 1.  Statement of Accounting Presentation
         ------------------------------------

         In the opinion of Chrysalis International Corporation and Subsidiaries
(the "Company"), the accompanying unaudited consolidated financial statements
include all significant adjustments (consisting only of normal recurring
accruals) necessary to fairly state the Company's consolidated financial
position as of March 31, 1997, and the consolidated results of operations and
cash flows for the three month periods ended March 31, 1997 and 1996. The
unaudited consolidated financial statements have been prepared in accordance
with the requirements for Form 10-Q and, therefore, do not include all
disclosures of financial information required by generally accepted accounting
principles. The accompanying consolidated financial statements should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. The information set
forth in the accompanying consolidated balance sheet as of December 31, 1996 has
been derived from the audited consolidated balance sheet included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.

         Interim results are not necessarily indicative of the results for the
full year.

Note 2.  Loss Per Share
         --------------

         Loss per common and common equivalent share is computed based upon the
weighted average number of common shares outstanding during the periods, plus
when their effect is dilutive, common stock equivalents consisting of certain
shares subject to stock options and warrants. Primary and fully-diluted loss per
share are the same for each period presented.



                                       7

<PAGE>   8


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

                                 GENERAL SUMMARY

         The Company is an international contract research organization ("CRO")
providing a broad portfolio of integrated drug development services primarily to
the pharmaceutical and biotechnology industries. This portfolio of drug
development services includes preclinical and clinical capabilities that enable
the Company to manage a comprehensive drug development program or a client's
specific requirements. The Company utilizes its international expertise and
experience in preclinical and clinical services to provide a coordinated
approach for a client to transition its drug through various preclinical to
clinical stages of development thereby minimizing certain delays which typically
occur before a new drug is introduced to the market. In addition, the Company is
the only CRO that is currently able to use its proprietary transgenic and other
related technology to provide services for its clients that require transgenic
animal models for the evaluation and development of therapeutic lead compounds
for further development and for genomics research in order to determine the
function of human genes and identify gene targets implicated in disease. The
Company generates substantially all of its revenues from its drug development
services and currently provides services for more than 250 clients in 26
countries.

         On December 18, 1996, the Company issued 2,632,600 shares of Common
Stock in connection with the acquisition (the "Acquisition") by the Company of
all of the outstanding capital stock of, or equity interests in, BioClin, Inc.,
a Delaware corporation, BioClin Europe AG, a Swiss corporation, BioClin GmbH, a
German corporation, Kilmer N.V., a Netherlands Antilles corporation, and BioClin
Institute of Clinical Pharmacology GmbH, a German corporation. The Acquisition
has been recorded using the "pooling-of-interests" method of accounting.

         Chrysalis is also the exclusive commercial licensee of a U.S. patent
covering DNA Microinjection, the process widely used in the pharmaceutical and
biotechnology industries to develop transgenic animals. The Company utilizes
this license for its drug development services and grants sublicenses for the
use of this technology. These sublicenses entitle the Company to receive
revenues consisting of fees and, in certain cases, royalties.

         The Company's financial statements are denominated in U.S. dollars and,
accordingly, changes in the exchange rate between non-U.S. currencies and the
U.S. dollar will affect the translation of non-U.S. revenues and operating
results into U.S. dollars for purposes of reporting the Company's financial
results. For the first three months of 1997, approximately 68% of the Company's
revenues were from operations outside the U.S. Approximately 48% of the
Company's revenues for the quarter ended March 31, 1997 were from operations in
France and denominated in French Francs; accordingly, fluctuations in the
exchange rate between the French Franc and the U.S. dollar may have a material
effect on the Company's operating results. See "-- Liquidity and Capital 
Requirements -- Exchange Rate Fluctuations."

         In addition, the Company may be subject to foreign currency transaction
risk when the Company's multi-country contracts are denominated in a currency
other than the currency in 


                                       8
<PAGE>   9



which the Company incurs the expenses related to such contracts. For such
multi-country drug contracts, the Company seeks to require its client to incur
the effect of fluctuations in the relative values of the contract currency and
the currency in which the expenses are incurred. To the extent the Company is
unable to require its clients to incur the effects of currency fluctuations,
these fluctuations could have a material effect on the results of operations of
the Company. The Company does not currently hedge against the risk of exchange
rate fluctuations.

         The Company's contracts are typically fixed price contracts that
require a portion of the contract amount to be paid at or near the time the
trial is initiated. The Company generally bills its clients upon the completion
of negotiated performance requirements and, to a lesser extent, on a date
certain basis. Certain of the Company's contracts are subject to cost
limitations which cannot be exceeded without client approval. Because, in many
cases, the Company bears the risk of cost overruns, unbudgeted costs in
connection with performing these contracts may have a detrimental effect on the
financial results of the Company. If it is determined that a loss will result
from the performance of a contract, the entire amount of the estimated loss is
charged against income in the period in which the determination is made.

         The Company's contracts generally may be terminated with or without
cause. In the event of termination, the Company is typically entitled to all
sums owed for work performed through the notice of termination and all costs
associated with termination of the study. In addition, most of the Company's
contracts provide for an early termination fee, the amount of which usually
declines as the work progresses. The loss of a large contract or the loss of
multiple contracts, however, could adversely affect the Company's future
revenues and profitability. In addition, termination or delay in the performance
of a contract occurs for various reasons, including, but not limited to,
unexpected or undesired results, inadequate patient enrollment or investigator
recruitment, production problems resulting in shortages of the drug being
tested, adverse patient reactions to the drug being tested, or the client's
decision to not proceed with a particular trial.

         Revenue for contracts extending over more than one accounting period is
recognized on a percentage of completion basis as work is performed. Revenue is
affected by the mix of trials conducted and the degree to which effort is
expended. The Company will incur travel costs and may subcontract with
third-party investigators in connection with multi-site clinical trials. These
costs are passed through to clients and, in accordance with industry practice,
are included in service revenue. The costs may vary significantly from contract
to contract; therefore, changes in service revenue may not be indicative of
trends in revenue growth. Accordingly, the Company considers net service
revenue, which consists of service revenue less these costs, as its primary
measure of revenue growth.

         The Company has had, and will continue to have, certain clients from
which at least 10% of the Company's overall revenue is generated over multiple
contracts. Such concentration of business is not uncommon within the CRO
industry. For the quarter ended March 31, 1997, the Company's top ten customers
accounted for approximately 47% of its combined net revenue. One customer
accounted for approximately 16% of the Company's net revenues. The Company
believes that the loss of any of these customers, if not replaced or if services
provided to existing customers are not expanded, may have a material adverse
effect on the Company. There can be no assurance that the loss of any such
customer would be 


                                       9
<PAGE>   10


replaced or services to existing customers would be expanded on terms acceptable
to the Company.

         The Company has incurred expenses during the last year expanding its
infrastructure, primarily in the clinical operations, to support global drug
development capabilities and utilizing management's resources primarily to
communicate these expanded capabilities to its existing client base and the
pharmaceutical and biotechnology industries. As a result of these efforts, the
Company believes it is capable of supporting higher revenues. However, the
Company's future operating results will be contingent upon successfully
utilizing this expanded infrastructure which will require the Company to convert
proposals into contracts and revenues. There can be no assurance that the
Company will be able to successfully utilize its expanded infrastructure or that
proposals will be converted into revenues in a timely manner. The Company's
ability to utilize its expanded infrastructure into future operating results may
also be affected by factors such as delays in initiating or completing
significant preclinical and clinical trials, the lengthening of lead times to
convert proposals into contracts and revenues, and the termination of
preclinical and clinical trials, all of which may be beyond the control of the
Company. See "--Quarterly Results."

                              RESULTS OF OPERATIONS

REVENUES
--------

         Revenues were $9,905,000 for the three months ended March 31, 1997 as
compared to $9,597,000 for the same period in 1996. The Company generated
approximately 68% of its revenues from operations outside of North America and,
as a result, the Company experienced an unfavorable effect, amounting to
approximately $700,000 for the first quarter of 1997 compared to the same period
in 1996, from the currency translation of the European operations revenues from
local currencies to U.S. dollars. See "--Liquidity and Capital Requirements -
Exchange Rate Fluctuations." After taking into account the impact of foreign
currency translations, revenues for the first quarter of 1997 would have been
approximately $10,600,000 as compared to $9,597,000 for the same period last
year. The increase in revenues was primarily the result of the following: (i) an
increase in the clinical business including services provided under contracts
with the Company's largest customer, (ii) an increase in the Company's specialty
transgenic and molecular biology services, (iii) an increase in licensing
revenues generated from the Company's patented Microinjection technology, and
(iv) an increase in preclinical business in Europe. This increase was partially
offset by a decrease in the preclinical business in North America. In addition,
the Company believes that revenue growth for the clinical business in the first
quarter of 1997 was adversely affected as a result of (i) the focus of senior
management in the clinical business in the negotiation and consummation of the
acquisition and, consequently, having less opportunity to devote to business
development and marketing the clinical business and (ii) the long lead times in
converting requests for proposals into contracts and revenues.

OPERATING EXPENSES
------------------

         Direct costs were $6,970,000 or approximately 70% of net revenues for
the three months ended March 31, 1997 and $6,272,000 or approximately 65% of net
revenues for 


                                       10

<PAGE>   11

the same period in 1996. After taking into account the impact of foreign
currency translations, this increase in direct costs of $698,000 would have been
an increase of approximately $1,150,000. The increase in these costs for the
three months ended March 31, 1997 as compared to the same period in 1996 was
primarily due to (i) investment in personnel and infrastructure to accommodate
anticipated growth in the worldwide clinical business and (ii) increased
variable costs as a result of increased business activity in the European
preclinical services. The increase in these costs as a percent of revenues is
due to a base cost structure of personnel, facilities and related expenses which
is capable of supporting a higher level of business than experienced during the
first three months of 1997.

         General, administrative and marketing expenses were $2,874,000 for the
three months ended March 31, 1997 versus $2,676,000 for the same period 1996.
After taking into account the impact of foreign currency translations, this
increase of $198,000 would have been an increase of approximately $400,000. The
increase in expenses was primarily the result of increased personnel and related
costs for marketing, business development, information systems, general
management and financial management activities.

         Depreciation and amortization expense decreased to $638,000 for the
three months ended March 31, 1997 versus $672,000 for the same period last year.

OTHER INCOME (EXPENSE)
----------------------

         Other income (expense) represented expense of $6,000 for the three
months ended March 31, 1997 compared to income of $143,000 for the same period
last year. The increase in expense for 1997 as compared to the income for 1996
is primarily the result of a decrease in interest income earned in the first
quarter of 1997 as a result of a decrease in cash and other investment balances,
offset by a decrease in interest expense in the first quarter of 1997 resulting
from lower outstanding debt balances (see -- "Liquidity and Capital Requirements
- Debt."). Additionally, other income of $75,000 is included in the first
quarter of 1996 associated with the installment sale of the former Plainsboro
pilot facility which was completed by the fourth quarter of 1996.

TAXES
-----

         The Company's foreign subsidiaries are subject to foreign income taxes
under foreign tax laws on the profits generated in such countries which in
general may not be offset by losses from operations in other countries. As a
result, the Company recorded provisions of $9,000 and $129,000, for the three
months ended March 31, 1997 and 1996, respectively, primarily due to profits
generated by its French operations offset by tax benefits recorded as a result
of losses in other European operations.

         The impact from United States federal income taxes is currently not
significant due to the Company's available net operating loss carryforwards. At
December 31, 1996, the Company has available net operating loss carryforwards of
approximately $25,396,000 for United States federal income tax purposes. Such
loss carryforwards expire through 2011. The Company also has research and
development tax credit carryforwards of approximately $3,000,000 for U.S.
federal income tax reporting purposes which are available to reduce 


                                       11

<PAGE>   12

U.S. federal income taxes, if any, through 2010. The Company has alternative
minimum tax credit carryforwards of approximately $164,000 for U.S. federal
income tax purposes which are available to reduce U.S. federal income taxes, if
any. These tax credits have an unlimited carryforward period. The Company's
acquisition of the clinical drug development business in December 1996 resulted
in an ownership change under the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, the Company's ability to utilize its net operating loss
carryforwards to offset operating profits may be subject to certain limitations
in the future under the Code. These net operating loss carryforwards may not be
utilized to offset profit in other countries.

BACKLOG
-------

         The Company reports backlog based on anticipated net revenues from
uncompleted projects which have been authorized by the client, through a written
contract or otherwise. Once work under a letter of intent or contract commences,
net service revenue is recognized over the life of the contract using the
percentage-of-completion method of accounting. In certain cases, the Company
will commence work on a project prior to finalizing a letter of intent or
contract. Contracts included in backlog are subject to termination or delay at
any time by the client or regulatory authorities. Termination or delays can
result from a number of factors, many of which are beyond the Company's control.
Delayed contracts remain in the Company's backlog pending determination of
whether to continue, modify or cancel the contract.

         The Company believes that its backlog as of any date is not necessarily
a meaningful indicator of future results and no assurance can be given that the
Company will be able to realize net service revenue included in backlog. As of
March 31, 1997, the Company's backlog was approximately $21.6 million compared
to approximately $25.7 million at December 31, 1996. One client of the Company
accounted for approximately $7.9 million of the backlog at March 31, 1997. The
$21.6 million of backlog as of March 31, 1997 includes approximately $2.0
million of a $20.0 million Phase II and Phase III trial, for which the Company
has a signed letter of intent. The $2.0 million included in backlog represents
the anticipated revenue remaining to be earned for the initial phase of this
trial. This Phase II and Phase III trial is with the client which accounted for
approximately 16% of net revenues in the first quarter of 1997.

QUARTERLY RESULTS
-----------------

         The Company's quarterly operating results are subject to variation, and
are expected to continue to be subject to variation, as a result of factors such
as delays in initiating or completing significant preclinical and clinical
trials, the lengthening of lead times to convert proposals into contracts and
revenues, termination of preclinical and clinical trials, acquisitions and
exchange rate fluctuations. Delays and terminations of studies or trials are
often the result of actions taken by clients or regulatory authorities and are
not typically subject to the control of the Company. Since a large amount of the
Company's operating costs are relatively fixed while its revenues are subject to
fluctuation, minor variations in the commencement, progress or completion of
preclinical and clinical trials may cause significant variations in quarterly
operating results.




                                       12
<PAGE>   13

         The following table presents unaudited quarterly operating results for
each of the fiscal quarters of 1996 and the first quarter of 1997. In the
opinion of the Company, this information has been prepared on the same basis as
the audited consolidated financial statements of the Company and reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of results of operations for those periods. This quarterly
financial data should be read in conjunction with the consolidated audited
financial statements and notes thereto included in the Company's 1996 Annual
Report on Form 10-K. The operating results for any quarter are not necessarily
indicative of the results to be expected in any future period. The Company
expects second quarter 1997 results to be consistent with first quarter 1997
results, due primarily to long lead times in converting requests for proposals
into revenues and due to the Company's investment in personnel and
infrastructure to accommodate anticipated growth in worldwide business.
<TABLE>
<CAPTION>

                                                QUARTER ENDED ($000'S EXCEPT PER SHARE DATA)
                                            -----------------------------------------------------
                                                                (UNAUDITED)
                                            March 31,  June 30,  Sept. 30,   Dec. 31,   March 31,
                                              1996       1996       1996       1996       1997
                                            --------    -------    -------    -------    -------
<S>                                         <C>          <C>        <C>        <C>         <C>  
Net revenues                                $  9,597     10,426     11,089     10,375      9,905
Operating expenses:
             Direct costs                      6,272      6,816      7,379      6,846      6,970
             Research and development            103        130         92        203         52
             General, administrative &
                      marketing                2,676      2,519      2,630      3,117      2,874
             Depreciation & amortization         672        679        699        730        638
             Business combination costs         --         --         --        3,649       --
                                            --------    -------    -------    -------    -------
                                               9,723     10,144     10,800     14,545     10,534
Income (loss) from operations                   (126)       282        289     (4,170)      (629)
Other income (expense):
             Interest income                     315        272        309        291        181
             Interest expense                   (360)      (327)      (345)      (413)      (191)
             Foreign currency gain (loss)         67         65        (41)       426       --
             Other                               121        140        108        114          4
                                            --------    -------    -------    -------    -------
                                                 143        150         31        418         (6)
                                            --------    -------    -------    -------    -------
Income before income taxes                        17        432        320     (3,752)      (635)
Income tax expense                               129         86        244         18          9
                                            --------    -------    -------    -------    -------
Net income (loss)                           $   (112)       346         76     (3,770)      (644)
                                            ========    =======    =======    =======    =======

Earnings (loss) per share                   $  (0.01)      0.03       0.01      (0.33)     (0.06)
                                            ========    =======    =======    =======    =======
Shares used in computing
     per share amounts                        11,775     11,944     12,014     11,353     11,307
                                            ========    =======    =======    =======    =======
</TABLE>

REVENUES BY BUSINESS AND GEOGRAPHIC REGION BY QUARTER
<TABLE>
<CAPTION>

                                    QUARTER ENDED ($000'S)
                     ------------------------------------------------------
                                          (UNAUDITED)
                     March 31,  June 30,    Sept. 30,   Dec. 31,   March 31,
                      1996        1996        1996        1996       1997
                     ------      ------      ------      ------      -----
<S>                  <C>          <C>         <C>         <C>        <C>  
Preclinical          $7,001       7,319       7,286       7,484      6,720
Clinical              2,477       2,980       3,698       2,728      2,909
Licensing/Other         119         127         105         163        276
                     ------      ------      ------      ------      -----
Total                 9,597      10,426      11,089      10,375      9,905
                     ======      ======      ======      ======      =====
International         6,591       6,864       7,782       7,085      6,779
North America         2,887       3,435       3,202       3,127      2,850
Licensing/Other         119         127         105         163        276
                     ------      ------      ------      ------      -----
Total                $9,597      10,426      11,089      10,375      9,905
                     ======      ======      ======      ======      =====
</TABLE>


                                       13

<PAGE>   14



                       LIQUIDITY AND CAPITAL REQUIREMENTS

CASH RESERVES
-------------

         The Company finances its operations and activities by relying on (i)
its operating activities for its working capital requirements, (ii) its cash
reserves and (iii) its available lines of credit. As of March 31, 1997, the
Company had cash reserves (consisting of cash and cash equivalents, short-term
investments, marketable debt securities and restricted cash) of $11,151,000. The
Company invests its excess cash in a diversified portfolio of high-grade money
market funds, United States Government-backed securities and commercial paper
and corporate obligations. The Company's cash reserves decreased by $7,329,000
during the first quarter of 1997 from the fourth quarter of 1996 primarily due
to the following: (i) the payment of approximately $5,000,000 of outstanding
debt associated with the acquired clinical business, (ii) the payment in the
first quarter of 1997 of approximately $1,100,000 of nonrecurring business
combination costs also associated with the acquisition of the clinical business
and, (iii) approximately $855,000 in capital expenditures primarily associated
with expansion of specialty transgenic/molecular biology services and
investments in information systems.

DEBT
----

         In connection with the acquisition of the clinical business on December
18, 1996, the Company acquired approximately $9.8 million of short-term
borrowings outstanding under line of credit arrangements with various banks. The
majority of such borrowings and credit arrangements were guaranteed by certain
prior stockholders of the clinical business. One of the conditions of the
closing was the release of these guarantees. In order to satisfy this condition,
on December 18, 1996, the Company paid approximately $4.0 million to reduce
these short-term borrowings and transferred approximately $4.5 million into
escrow for purposes of securing the future payment of the remaining personally
guaranteed borrowings. In January 1997, the Company paid the remaining
outstanding balance on these lines utilizing the cash in escrow and established
a new $3.0 million line of credit with a Swiss bank. As of March 31, 1997, the
outstanding balance under this line of credit was approximately $1,144,000.

         Additionally, The Company has lines of credit and overdraft privileges
with French banks in the aggregate amount of 10.5 million French Francs ($1.8
million at the exchange rate in effect on March 31, 1997). At March 31, 1997,
there were no short-term borrowings outstanding under these facilities.

         In December 1992, the Company acquired preclinical operations in
France. Included in the purchase price were promissory notes having an aggregate
principal amount of $7.0 million (the "Notes"). The remaining unpaid principal
balance as of March 31, 1997 of $5.0 million is due in December 1997 and is
classified as short term borrowings. See " -- Capital Requirements." The payment
of the Notes is secured by a pledge of the capital stock of the French
operations, a pledge of certain assets, a guarantee by the Company and a
security interest in fees and royalties payable to the Company under sublicenses
of its proprietary DNA Microinjection technology. The Notes require prepayments
in specified amounts upon the Company selling any portion of its interest in the
preclinical business. The Notes contain various covenants, the most restrictive
of which prohibit the payment of dividends by the 

                                       14
<PAGE>   15


preclinical business to the Company and the sale of any assets of the French
operations that are not made in the ordinary course of business.

         In connection with its U.S. preclinical facility, in 1994 the Company
secured (i) a $1.5 million 15-year mortgage with a bank and, (ii) a $1.2 million
15-year mortgage from a Pennsylvania agency, which required cash collateral of
$450,000. These two loans are secured by mortgages on the property acquired. The
cash collateral on the mortgage loan with the Pennsylvania agency is classified
as restricted cash as of March 31, 1997. Upon achievement of certain financial
covenants, this $450,000 of cash collateral will be released. Additionally, the
favorable interest rate on the mortgage with the Pennsylvania agency is subject
to change upon review by the agency of certain future conditions.

CAPITAL REQUIREMENTS
--------------------

         The Company believes that with its current financial resources it has
the ability to meet its working capital requirements at least through the end of
fiscal 1997. The Company anticipates that its future capital requirements may
include investment for expansion of its operating infrastructure to meet
anticipated increased demand for drug development services from the
pharmaceutical and biotechnology industries. The Company may, from time to time,
consider funding its future capital requirements by issuing stock or other
securities in public or private equity financings. In anticipation of the
payment of the final $5.0 million principal payment on the Notes which is due in
December 1997, the Company has begun negotiations to refinance or restructure,
on a long-term basis, this debt obligation. The Company is also considering
further supporting its working capital requirements by issuing stock or other
securities in private equity financings or by means of entering into one or more
strategic alliances involving the issuance of securities in private placements.
There can be no assurance that the Company will be able to successfully
renegotiate or restructure the debt obligation due in December 1997 or that it
will be able to issue stock securities or enter into any strategic alliance to
further support its working capital requirements. In addition, there can be no
assurance that any such financings will be on terms acceptable to the Company.

         Additionally, the Company from time to time is engaged in discussions
regarding strategic acquisitions of organizations providing various drug
development services and may finance such an acquisition by additional public or
private debt or equity financings or through the issuance of stock. In the event
that the Company seeks to issue stock or other securities or pursue any such
acquisition requiring financing, there can be no assurance that the Company will
be able to issue such stock or other securities or that any financing will be
available to the Company or that such offering or financing will be available on
acceptable terms. Also, there can be no assurance that the Company will
consummate such an acquisition or obtain any such financing, or if consummated,
that the Company will be able to issue such stock or other securities or obtain
any such financing arrangements that will satisfy a material portion of the
Company's capital needs. Although the Company continually considers and
evaluates potential acquisitions and related opportunities for growth, it does
not have any understandings, arrangements or agreements with respect to any such
acquisitions at this time.

         As a former general partner of Nextran, the Company remains obligated
with respect to certain environmental representations and warranties which
expire on August 29, 1997. 


                                       15
<PAGE>   16


Such representations and warranties are also limited by certain financial
indemnification provisions.

         In addition to the above, the Company's working capital and other
capital requirements will depend on numerous factors, including among others:
success in increasing the Company's revenues and managing its operations;
exchange rate fluctuations between the United States dollar and foreign
currencies; capital expenditures for clinical and preclinical information system
objectives; the level of Company resources devoted to management, marketing,
information and data management capabilities and business and financial
administration; technological advances; the status of competitors; the payment
of remaining expenses for the acquisition of the clinical drug development
business; and costs of potential future acquisitions.

EXCHANGE RATE FLUCTUATIONS
--------------------------

         Approximately 68% of the Company's net revenues for the quarters ended
March 31, 1997 and 1996 were derived from the Company's operations outside the
United States. The Company's consolidated financial statements are denominated
in U.S. dollars and, accordingly, changes in exchange rates between the
applicable foreign currency and the U.S. dollar will affect the translation of
such subsidiary's financial results into U.S. dollars for purposes of reporting
the Company's consolidated financial results.

         The Company may be subject to foreign currency transaction risks when
the Company's multi-country contracts are denominated in a currency other than
the currency in which the Company incurs the expenses related to such contracts.
For such multi-country contracts, the Company seeks to require its client to
incur the effect of fluctuations in the relative values of the contract currency
and the currency in which the expenses are incurred. To the extent the Company
is unable to require its clients to incur the effects of currency fluctuations,
these fluctuations could have a material effect on the results of operations of
the Company.

         Translation adjustments are reported as a separate section of
stockholders' equity. The Company generally does not hedge its currency
translation and transaction exposure.

         Due to its preclinical operations in France, the percentage of the
Company's total revenues recorded in French Francs is significant. For the
quarters ended March 31, 1997 and 1996, the French operations accounted for
approximately 48% and 52% of the Company's revenues, respectively. Accordingly,
changes in the exchange rate between the French Franc and the U.S. dollar will
affect the translation of the French preclinical operation's revenues and
operating results into U.S. dollars for purposes of reporting the Company's
consolidated financial results, and also affect the U.S. dollar amounts actually
received by the Company from the French preclinical operations. Based on the
assumption that the French preclinical operations will continue to represent a
significant portion of the business of the Company, the depreciation of the U.S.
dollar against the French Franc would have a favorable impact on the Company's
revenues and an unfavorable impact on the Company's operating expenses due to
the effect of such currency translation on the French preclinical operation's
operating results; however, the appreciation of the U.S. dollar against the
French Franc would have an unfavorable impact on the Company's revenues and a
favorable impact on the Company's operating expenses.


                                       16

<PAGE>   17

         For purposes of the Company's consolidated financial results, the
results of operations of the French preclinical business denominated in French
Francs have been translated from French Francs into U.S. dollars using the
following exchange rates:
<TABLE>
<CAPTION>
                                         French Franc                 U.S. dollar per
               Period                   per U.S. dollar                French Franc
               ------                   ---------------                ------------
<S>                                    <C>                            <C>  
         1st quarter 1996                  5.0384                         .1985
         2nd quarter 1996                  5.1578                         .1939
         3rd quarter 1996                  5.0965                         .1962
         4th quarter 1996                  5.1821                         .1930

         1st quarter 1997                  5.6038                         .1785
</TABLE>

The rates in the above table represent an average exchange rate calculated using
rates quoted in The Wall Street Journal.

ACCUMULATED DEFICIT
-------------------

         Since its inception in 1988 until the formation in 1994 and subsequent
sale of its partnership interest in Nextran in 1995, the Company expended
substantial funds for research and development and capital expenditures. A
significant portion of such expenditures were made to support the Company's
organ transplantation and blood substitute research and development programs,
which programs were transferred to the Nextran partnership. Historically, these
expenditures accounted for a substantial portion of the Company's accumulated
deficit.

INFLATION
---------

          The Company believes that inflation has not had a material impact on
its results of operations.

FORWARD LOOKING STATEMENTS
--------------------------

         The statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere throughout this
Quarterly Report on Form 10-Q that are not historical facts are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange of 1934. These forward-looking statements
are subject to certain risks and uncertainties described below, which could
cause actual results to differ materially from those reflected in the
forward-looking statements. These forward-looking statements reflect
management's analysis, judgment, belief or expectation only as of the date
hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise after
the date hereof.



                                       17
<PAGE>   18

         Factors that could cause actual results to differ materially from those
reflected in the forward looking statements include, without limitation: the
degree of the Company's success in obtaining new contracts; the scope and
duration of drug development trials; the loss or downsizing of or delay in
existing drug development trials; the lengthening of the lead time to convert
proposals into contracts and revenues; the Company's dependence on certain
clients, especially its largest client, and on the pharmaceutical and
biotechnology industries; the Company's dependence on key management personnel;
competition and consolidation in the drug development services industry;
liability for negligence or errors and omissions arising out of drug development
trials; foreign exchange rate fluctuations; and the costs associated with
integrating future acquired businesses. In addition, the Company's quarterly
operating results will continue to be subject to variation as a result of
factors such as those discussed above as well as the costs associated with
integrating the clinical and preclinical businesses.



                                       18

<PAGE>   19



                           PART II. OTHER INFORMATION

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

         a.       Exhibits

                  27       Financial Data Schedule

         b.       Reports on Form 8-K

                  None.



                                       19

<PAGE>   20


                       CHRYSALIS INTERNATIONAL CORPORATION
                                   SIGNATURES

         The financial information furnished herein has not been audited.
However in the opinion of management, all significant adjustments necessary for
a fair presentation for the three month periods ended March 31, 1997 and 1996,
have been included.

         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.

Date:         May 15, 1997      CHRYSALIS INTERNATIONAL CORPORATION

                                /s/ John G. Cooper
                                --------------------------------------------
                                John G. Cooper
                                Senior Vice President, Chief Financial Officer
                                     and Treasurer
                                (Duly Authorized Officer and Chief
                                     Accounting Officer)





                                       20