<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 September 30, 2001          Commission File No. 000-30981

<TABLE>
<S>                                     <C>
         DELAWARE                                    06-1338846
(State of Incorporation)                (I.R.S. Employer Identification Number)
</TABLE>

                 FIVE SCIENCE PARK, NEW HAVEN, CONNECTICUT 06511
                    (Address of Principal Executive Offices)

                                 (203) 773-1450
              (Registrant's Telephone Number, including Area Code)

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

YES [X]                                NO [ ]

Number of shares outstanding of the registrant's Common Stock as of November 8,
2001:

<TABLE>
<S>                                                     <C>
Common Stock, par value $.001                           22,773,796
                                                        shares outstanding
</TABLE>

<PAGE>

                        GENAISSANCE PHARMACEUTICALS, INC.

                    For the Quarter Ended September 30, 2001

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                        PAGE
<S>                                                                                                     <C>
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements (Unaudited)

Balance Sheets as of September 30, 2001 and December 31, 2000............................................1-2

Statements of Operations for the three and nine months ended September 30, 2001 and 2000...................3

Statements of Cash Flows for the nine months ended September 30, 2001 and 2000.............................4

Notes to Unaudited Financial Statements..................................................................5-6

Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..........7-10

Item 3 - Quantitative and Qualitative Disclosures about Market Risk.......................................11

PART II - OTHER INFORMATION

Item 2 - Changes in Securities and Use of Proceeds........................................................12

Item 5 - Other Information................................................................................12

Item 6(b) - Reports on Form 8-K...........................................................................12

Signature.................................................................................................13
</TABLE>

<PAGE>

                          Part 1: Financial Information

Item 1 - Financial Statements:

                        GENAISSANCE PHARMACEUTICALS, INC.
                                 Balance Sheets

                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,           DECEMBER 31,
                                                                 2001                    2000
                                                            -----------------       ----------------
                                                             (UNAUDITED)
<S>                                                         <C>                  <C>
ASSETS
Current Assets:
   Cash and cash equivalents.......................         $        48,572      $           69,204
   Marketable securities...........................                  20,378                  41,172
   Accounts receivable.............................                      40                     238
   Income taxes receivable.........................                   2,574                       -
   Other current assets............................                   2,107                   1,421
                                                            ---------------         ---------------
         Total current assets......................                  73,671                 112,035

PROPERTY AND EQUIPMENT, net........................                  30,526                  30,725

DEFERRED FINANCING COSTS, net......................                     417                     558

OTHER ASSETS.......................................                     530                     574
                                                            ---------------         ---------------
         Total assets..............................         $       105,144         $       143,892
                                                            ===============         ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
   Current portion of long-term debt, including
     amounts due to related parties of $118 and $52
     at September 30,2001 and December 31, 2000,
     respectively..................................         $           800         $           795
   Current portion of capital lease obligations....                   6,585                   5,549
   Accounts payable................................                   3,476                   5,251
   Accrued expenses................................                   3,804                   2,111
   Current portion of deferred revenue.............                     206                     206
                                                            ---------------         ---------------
         Total current liabilities.................                  14,871                  13,912
                                                            ---------------         ---------------
Long-Term Liabilities:
   Long-term debt, including amounts due to related
     parties of $5,024 and $4,752 at September 30,
     2001, and December 31, 2000, respectively,
     less current portion..........................                   5,024                   5,305
   Capital lease obligations, less current portion.                  11,591                  15,408
   Deferred revenue................................                   1,979                   2,133
   Royalty obligations.............................                     300                     300
   Accrued dividends...............................                   1,159                   1,159
                                                            ---------------         ---------------
         Total long-term liabilities...............                  20,053                  24,305
                                                            ---------------         ---------------
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                        1

<PAGE>

                        GENAISSANCE PHARMACEUTICALS, INC.

                                 Balance Sheets
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                               SEPTEMBER 30,          DECEMBER 31,
                                                                  2001                   2000
                                                            ----------------         -------------
                                                             (UNAUDITED)
<S>                                                         <C>                      <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
   (Continued)

STOCKHOLDERS' EQUITY:
   Common stock, 58,000 authorized shares, $.001
     par value, 22,773 and 22,687 shares issued and
     outstanding at September 30, 2001 and
     December 31, 2000, respectively...............                      23                      23
   Additional paid-in capital......................                 219,194                 218,525
   Accumulated deficit.............................                (149,129)               (112,927)
   Net unrealized investment gains ................                     132                      54
                                                            ---------------         ---------------
         Total stockholders' equity................                  70,220                 105,675
                                                            ---------------         ---------------
         Total liabilities and stockholders'
           equity..................................         $       105,144              $  143,892
                                                            ===============         ===============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       2

<PAGE>

                        GENAISSANCE PHARMACEUTICALS, INC.

                            Statements of Operations
                                   (Unaudited)
                      (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                NINE MONTHS ENDED
                                                             SEPTEMBER 30,                     SEPTEMBER 30,
                                                         2001             2000             2001            2000
                                                       --------         --------         --------        ----------
<S>                                                   <C>              <C>             <C>               <C>
License revenue................................       $  1,083         $      67       $   3,149         $     187

Operating Expenses:
    Research and development (1)...............         12,627             7,813          34,018            15,645
    Selling, general and administrative (1)....          2,896             2,451           8,901             5,706
    Sublicense royalty obligations.............             10                 -              28               515
    Stock based compensation...................             96               754             381             5,101
                                                      --------         ---------       ---------         ---------
    Total operating expenses...................         15,629            11,018          43,328            26,967
                                                      --------         ---------       ---------         ---------
    Loss from operations.......................        (14,546)          (10,951)        (40,179)          (26,780)
Interest income................................            780             1,520           3,423             2,677
Interest expense...............................           (609)             (374)         (2,020)           (1,330)
                                                      --------         ---------       ---------         ---------
    Net loss before income tax benefit.........        (14,375)           (9,805)        (38,776)          (25,433)
Income tax benefit.............................          2,574                 -           2,574                 -
                                                      --------         ---------       ---------         ---------
    Net loss...................................        (11,801)           (9,805)        (36,202)          (25,433)
Preferred stock dividends and accretion........              -            (1,603)              -            (6,327)
Beneficial conversion feature of Series B,
    KBH and C preferred stock..................              -                 -               -           (50,180)
                                                      --------         ---------       ---------         ---------
Net loss attributable to common shareholders...       $(11,801)        $ (11,408)      $ (36,202)        $ (81,940)
                                                      ========         =========       =========         =========
Net loss per common share, basic
    and diluted................................       $   (.52)        $    (.74)      $   (1.59)        $  (11.68)

                                                      ========         =========       =========         =========
Weighted average shares used in computing
    net loss per common share..................         22,773            15,437          22,746             7,013
                                                      ========         =========       =========         =========
Pro forma net loss per share,
    basic and diluted..........................                        $    (.49)                        $   (5.05)
                                                                       =========                         =========
Pro forma weighted average shares outstanding,
    basic and diluted..........................                           19,877                            14,889
                                                                       =========                         =========

(1) Excludes non-cash, stock-based compensation
    expense as follows:
    Research and development...................       $     70         $     659       $     278         $   2,467
    Selling, general and administrative........             26                95             103             2,634
                                                      --------         ---------       ---------         ---------
                                                      $     96         $     754       $     381         $   5,101
                                                      ========         =========       =========         =========
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       3
<PAGE>

                        GENAISSANCE PHARMACEUTICALS, INC.

                            Statements of Cash Flows
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                           NINE MONTHS ENDED
                                                                                                              SEPTEMBER 30,
                                                                                                          2001            2000
                                                                                                          ----            ----
<S>                                                                                                     <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ...................................................................................         $(36,202)         $ (25,433)
   Adjustment to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization ...........................................................            6,305              2,225
      Loss on disposal of equipment ...........................................................               --                 55
      Stock based compensation ................................................................              381              4,781
      Non-cash interest expense ...............................................................               --                376
      Warrants issued in exchange for services ................................................               --                 14
      Changes in assets and liabilities -
         Accounts receivable ..................................................................              198                 --
         Income tax receivable ................................................................           (2,574)                --
         Other current assets .................................................................             (686)              (715)
         Other assets .........................................................................               44               (485)
         Accounts payable .....................................................................           (1,775)               456
         Accrued expenses .....................................................................            1,692              2,723
         Deferred revenue .....................................................................             (154)             1,929
         Due to related party .................................................................               --                 (6)
                                                                                                        --------          ---------
               Net cash used in operating activities ..........................................          (32,771)           (14,080)
                                                                                                        --------          ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment ........................................................           (4,110)            (5,173)
   (Investment in) proceeds from marketable securities ........................................           20,872            (38,346)
                                                                                                        --------          ---------
               Net cash provided by (used in) investing activities ............................           16,762            (43,519)
                                                                                                        --------          ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of preferred stock ..............................................               --             53,925
   Net proceeds from issuance of common stock .................................................              288                634
   Net proceeds from initial public offering, net of issuance costs ...........................               --             82,040
   Proceeds from long-term debt due to related parties, net ...................................              338              3,055
   Repayment of long-term debt, net ...........................................................             (614)              (947)
   Repayment of capital lease obligations .....................................................           (4,635)            (1,879)
                                                                                                        --------          ---------
               Net cash provided by (used in) financing activities ............................           (4,623)           136,828
                                                                                                        --------          ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..........................................          (20,632)            79,229

CASH AND CASH EQUIVALENTS, beginning of period ................................................           69,204              3,666
                                                                                                        --------          ---------
CASH AND CASH EQUIVALENTS, end of period ......................................................         $ 48,572          $  82,895
                                                                                                        ========          =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
      Conversion of liabilities into common or preferred stock ................................         $     --          $   3,561
      Acquisition of equipment pursuant to capital lease obligations ..........................            1,855             18,139
      Issuance of warrants in connection with financing agreements ............................               --              3,320
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                       4
<PAGE>

                        GENAISSANCE PHARMACEUTICALS, INC.

                     Notes to Unaudited Financial Statements
                    For the Quarter Ended September 30, 2001
                      (In thousands, except per share data)

(1)    BASIS OF PRESENTATION

       Genaissance Pharmaceuticals, Inc. is seeking to create personalized
       medicines through the integration of gene variation into drug
       development. We discover inherited differences, or genomic markers, that
       exist in human genes. We use our technological capabilities and methods
       and our clinical development skills to identify which of our genomic
       markers (haplotypes) are predictive of how patients respond to drugs. We
       intend to use these predictive genomic markers to create new therapeutic
       products by reformulating existing drugs and by completing the
       development of drugs through joint ventures and license agreements. We
       also market our technology and our predictive genomic markers to the
       pharmaceutical and biotechnology industries as a means to improve the
       development, marketing and prescribing of drugs.

       We have prepared the accompanying financial statements without audit,
       pursuant to the rules and regulations of the Securities and Exchange
       Commission. Certain information and footnote disclosures normally
       included in financial statements prepared in accordance with accounting
       principals generally accepted in the United States have been condensed or
       omitted pursuant to such rules and regulations. These financial
       statements should be read in conjunction with our audited financial
       statements and related footnotes for the year ended December 31, 2000
       thereto included in our Annual Report on Form 10-K (File No. 000-30981).
       The unaudited financial statements include, in the opinion of management,
       all adjustments (consisting only of normal recurring adjustments)
       necessary to present fairly our financial position as of September 30,
       2001, and the results of our operations for the three-month and
       nine-month periods ended September 30, 2001 and 2000. The results of
       operations for such interim periods are not necessarily indicative of the
       results to be achieved for the full year.

(2)    EARNINGS PER SHARE AND UNAUDITED PRO FORMA PRESENTATION

       We compute and present net loss per share in accordance with SFAS No.
       128, EARNINGS PER SHARE. For the three and nine months ended September
       30, 2001 and 2000, there is no difference in basic and diluted net loss
       per common share as the effect of convertible preferred stock, stock
       options and warrants would be anti-dilutive for all periods presented.
       The outstanding convertible preferred stock, stock options and warrants
       (prior to application of the treasury stock method) would entitle holders
       to acquire 3,238 and 3,047 shares of common stock at September 30, 2001
       and 2000.

       Upon the consummation of our initial public offering in August 2000, all
       of our previously issued preferred stock automatically converted into
       12,704 shares of common stock and certain of the outstanding common stock
       warrants were automatically exercised for 62 shares of common stock.

       The following table sets forth the pro forma net loss per share for the
       three and nine months ended September 30, 2000 assuming conversion of
       outstanding shares of preferred stock and automatic exercise of warrants
       from date of original issuance.

                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                                      THREE MONTHS        NINE MONTHS
                                                                          ENDED              ENDED
                                                                    SEPTEMBER 30, 2000   SEPTEMBER 30, 2000
       <S>                                                           <C>                 <C>
       Numerator--
          Net loss attributable to common shareholders                 $   (11,408)      $    (81,940)
          Preferred stock dividends and accretion                            1,603              6,327
          Puttable warrant interest expense                                     42                376
                                                                       -----------       ------------
          Pro forma net loss applicable to common shareholders         $    (9,763)      $    (75,237)
                                                                       ============      =============
       Denominator--
          Weighted average common shares                                    15,437              7,013
          Weighted average effect of pro forma securities--
              Series A and KBL                                                 848              1,904
              Series B and KBH                                               3,036              5,114
              Series C                                                         535                809
              Warrants                                                          21                 49
                                                                       -----------       ------------
       Denominator for pro forma basic and diluted calculation              19,877             14,889
                                                                       ===========       ============
       Net loss per share-
          Pro forma net loss per share                                 $     (.49)       $      (5.05)
                                                                       ===========       =============
</TABLE>

(3)    PREFERRED STOCK

       In February and March 2000, we sold 8,727 shares of Series B and KBH
       Preferred Stock ("Series B") and 1,539 shares of Series C Redeemable
       Convertible Preferred Stock ("Series C") for aggregate net proceeds of
       $53.9 million. All of our shares of preferred stock were automatically
       converted to common stock upon the consummation of our initial public
       offering in August 2000.

       In connection with the sale of shares of Series B and Series C during the
       nine months ended September 30, 2000, we recorded a charge to accumulated
       deficit of $50.2 million. This amount represents the beneficial
       conversion feature of this stock. This amount was accounted for as a
       non-cash dividend to these preferred stockholders and, as a result,
       increased our paid in capital, net loss applicable to common shareholders
       and the related net loss per share.


                                       6
<PAGE>

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

The following discussion and analysis of our financial condition and the results
of operations should be read in conjunction with the financial statements and
related notes appearing elsewhere in this quarterly report on Form 10-Q. This
report on Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, that involve
risks and uncertainties including but not limited to statements about
management's expectations as to costs and our liquidity position. These
expectations are based on certain assumptions regarding our research and
development activities, projected expenditures, the ability of our technologies
to improve the drug development process and other factors relating to our
growth. These expectations may not materialize if development efforts are
delayed or suspended or if other assumptions prove incorrect. These factors are
more fully discussed under the heading "Risk Factors" in our registration
statement on Form S-3 (File No. 333-71812) filed with the Securities and
Exchange Commission on October 18, 2001. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis, judgement, belief or expectation only as of the date hereof. While we
may elect to update forward-looking statements at some point in the future, we
specifically disclaim any obligation to do so, even if our estimates change.

OVERVIEW

Since our inception, we have incurred significant operating losses, and, as
of September 30, 2001, we had an accumulated deficit of $149.1 million. The
majority of our operating losses have resulted from costs we incurred
developing our HAP(TM) Technology and initiating our Mednostics(TM) Programs.
We expect to dedicate a significant portion of our resources for the
foreseeable future to further develop and maintain our HAP(TM) Technology,
and to expand and intensify our commercialization activities. To date, our
revenue has been primarily from licensing fees from our agreements with
Janssen Research Foundation, a Johnson & Johnson Company (J&J), and Gene
Logic, Inc. (GLI), as well as a sublicensing agreement with Visible Genetics,
Inc. and government grants. In October 2001, we entered into an agreement
with Pfizer, Inc. Revenues from this agreement will be recognized as earned.
We expect that it will be several years, if ever, before we generate
significant revenues.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

License revenue consists primarily of proceeds received in connection with
the licensing of our HAP(TM) Technology and the sublicensing of a patent.
Revenue increased to $1.1 million in the three months ended September 30,
2001 from $67,000 in the three months ended September 30, 2000. The increase
in license revenue is attributable to the commercialization of our HAP(TM)
Partnership program and agreements entered into during 2000 with J&J and GLI.
We are recognizing the annual license and subscription fees over the term of
the agreements and the service fees as the services are performed. Future
milestone and royalty payments, when and if received, will be recognized when
earned. Revenue also includes the amortization, over the remaining life of
the sublicensed patent, of upfront payments received in connection with the
sublicensing of a patent.

Research and development expenses consist primarily of payroll and benefits
for research and development personnel, material and reagent costs, costs
incurred for our Mednostics(TM) Programs, depreciation and maintenance costs
for equipment used for HAP(TM) Marker discovery and HAP(TM) Typing, and
facility related costs. We expense our research and development costs as
incurred. Research and development expenses increased to approximately $12.6
million in the three months ended September 30, 2001 from approximately $7.8
million in the three months ended September 30, 2000. The increase in
expenses is primarily attributable to the initiation of our Mednostics(TM)
Programs, the expansion of our HAP(TM) Typing process and the increase in
resources dedicated to supporting and improving our informatics system.

Selling, general and administrative expenses consist primarily of payroll and
benefits for executive, business development, finance, public affairs and
other administrative personnel, as well as facility-related costs and outside
professional fees incurred in connection with corporate development, general
legal and financial matters. Selling, general and administrative expenses
increased to approximately $2.9 million in the three months ended September
30, 2001 from approximately $2.5 million in the three months ended September
30, 2000. The increase is primarily

                                       7
<PAGE>

attributable to an increase in payroll and related costs to support our
continued growth and our expanded business development efforts related to our
HAP(TM) Technology and Mednostics(TM) programs.

Stock based and other non-cash compensation expense relates to options
granted to employees and options granted to scientific advisory board
members. Stock options granted to employees are accounted for in accordance
with APB No. 25. The accounting for scientific advisory board members
requires us to record periodic charges for unvested options based on an
increase in the fair value of our common stock and the related vesting of the
options. In addition, a 1996 stock sale between certain officers and a then
majority shareholder required us to record periodic charges, through the date
of the initial public offering, based on an increase in the fair value of our
common stock to recognize the benefit obtained by us as a result of this
stock sale. Stock based compensation decreased to approximately $96,000 in
the three months ended September 30, 2001 from approximately $754,000 in the
three months ended September 30, 2000. The decrease is primarily due to the
accounting for the 1996 stock sale and subsequent related officer loans which
resulted in charges of $640,000 during the three months ended September 30,
2000.

Interest income results primarily from investing proceeds raised through the
issuance of equity securities. Interest income decreased to approximately
$780,000 in the three months ended September 30, 2001 from approximately $1.5
million in the three months ended September 30, 2000. The decrease is the
result of higher cash, cash equivalent and short-term investment balances in
2000 as a result of the proceeds from our Series B and C preferred stock
closings in February and March 2000, and our initial public offering in
August 2000.

Interest expense currently reflects capital lease obligations and other
long-term debt. Interest expense increased to approximately $609,000 in the
three months ended September 30, 2001 from approximately $374,000 in the
three months ended September 30, 2000. The increase is due to additional
capital lease and other debt obligations resulting from our significant
investment in equipment to support our HAP(TM) Marker discovery and HAP(TM)
Typing capacity, as well as costs incurred in connection with the expansion
of our facility.

Income tax benefit of $2.6 million represents a net tax benefit from the
State of Connecticut as a result of recent legislation which allows companies
to receive cash refunds from the State at a rate of 65% of the incremental
research and development credit, in exchange for foregoing carryforward of
the research and development tax credit. The net tax benefit recorded
reflects the Company's refund claim for incremental research and development
credits earned in fiscal 2000.

NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

Revenue increased to $3.1 million in the nine months ended September 30, 2001
from $187,000 in the nine months ended September 30, 2000. The increase in
license revenue is attributable to the commercialization of our HAP
Partnership program and agreements entered into during 2000 with J&J and GLI.

Research and development expenses increased to approximately $34.0 million in
the nine months ended September 30, 2001 from approximately $15.6 million in
the nine months ended September 30, 2000. The increase in expenses is
primarily attributable to the initiation of our Mednostics(TM) Programs, the
expansion of our HAP(TM) Typing process and the increase in resources
dedicated to supporting and improving our informatics system.

Selling, general and administrative expenses increased to approximately $8.9
million in the nine months ended September 30, 2001 from approximately $5.7
million in the nine months ended September 30, 2000. The increase is
primarily attributable to an increase in payroll and related costs for
business development, public affairs and administrative personnel to support
our continued growth and our expanded business development efforts related to
our HAP(TM) Technology and Mednostics TM programs. In addition, facility
related costs increased as a result of our continued expansion.

Sublicensing royalty expense represents royalty obligations incurred by us on
sublicensing fees received. The decrease in sublicensing royalty expense to
$28,000 for the nine months ended September 30, 2001 from $515,000 for the
same period in 2000 relates primarily to a non-refundable cash payment
received in the first quarter of 2000 in


                                       8
<PAGE>

connection with an amendment to the patent sublicensing agreement. We have
elected to recognize this expense as incurred.

Stock based compensation decreased to approximately $381,000 in the nine
months ended September 30, 2001 from approximately $5.1 million in the nine
months ended September 30, 2000. The decrease is primarily due to our
decision to vest fully all unvested options previously granted to scientific
advisory board Members in March 2000, which resulted in a charge of $1.4
million, and the accounting for the 1996 stock sale and subsequent related
officer loans which resulted in charges of $2.9 million during the nine
months ended September 30, 2000.

Interest income increased to approximately $3.4 million in the nine months
ended September 30, 2001 from approximately $2.7 million in the nine months
ended September 30, 2000. The increase is the result of our investment of the
proceeds raised from our initial public offering in August 2000.

Interest expense increased to approximately $2.0 million in the nine months
ended September 30, 2001 from approximately $1.3 million in the nine months
ended September 30, 2000. The increase is due to additional capital lease and
other debt obligations resulting from our significant investment in equipment
to support our HAP(TM) Marker discovery, HAP(TM) Typing capacity, as well as
costs incurred in connection with the expansion of our facility.

Income tax benefit of $2.6 million represents a net tax benefit from the
State of Connecticut as a result of recent legislation which allows companies
to receive cash refunds from the State at a rate of 65% of the incremental
research and development credit, in exchange for foregoing carryforward of
the research and development tax credit. The net tax benefit recorded
reflects the Company's refund claim for incremental research and development
credits earned in fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through the sale of common and
preferred stock, government research grants, payments under licensing
agreements, loans and capital leases. From inception through September 30,
2001, we have received aggregate gross proceeds of approximately $163.1
million from issuance of common and preferred stock. In addition, through
September 30, 2001, we had received $4.5 million of government grant funding
and $7.6 million from license fees, royalties and research contracts. We also
have received $26.3 million from capital lease financing and $7.8 million
from other loans. The Company has acquired, through September 30, 2001, $41.6
million of property and equipment. The majority of these assets were financed
through capital lease financing and other loans.

Cash used in operations for the nine months ended September 30, 2001 was
$32.8 million compared with $14.1 million for the same period in 2000. The
cash used in operations for the nine months ended September 30, 2001,
resulted primarily from a net loss of $36.2 million, and a $2.6 million
increase in income tax receivable, partially offset by $6.7 million of
non-cash charges for depreciation and amortization expense and non-cash stock
based compensation.

Cash provided by investing activities for the nine months ended September 30,
2001 was $16.8 million compared with cash used of $43.5 million for the same
period in 2000. Proceeds from the sale of marketable securities totaled $20.9
million for the nine months ended September 30, 2001 while we invested $38.3
million in marketable securities for the same period in 2000. During the nine
months ended September 30, 2001, we used $4.1 million of cash for purchases
of property and equipment, compared to $5.2 million for the same period in
2000.

Cash used for financing activities for the nine months ended September 30,
2001, was $4.6 million compared with cash provided by financing activities of
$136.8 million for the same period in 2000. The primary use of cash from
financing activities for the nine months ended September 30, 2001 was the
repayment of capital lease obligations. During the nine months ended
September 30, 2000, we received $136.6 million through the issuance of
preferred and common stock.


                                       9
<PAGE>

On September 30, 2001, cash, cash equivalents and short-term investments totaled
$69.0 million compared to approximately $110.4 million at December 31, 2000. Our
cash reserves are held in interest-bearing high-grade corporate bonds and money
market accounts. In August 2000, we completed our initial public offering of
6,900,000 shares of common stock at a price of $13.00 per share, for net
proceeds of $82.5 million. We believe that our existing cash reserves will be
sufficient to support our planned operations for approximately 24 months.

Our cash requirements will vary depending upon a number of factors, many of
which are beyond our control, including:

         o  the demand for our HAP(TM) Technology;

         o  the efforts and success of our HAP(TM) Partnership program;

         o  the results of our Mednostics(TM) Programs;

         o  the commercialization of intellectual property derived from our
            Mednostics(TM) Programs;

         o  the level of competition we face;

         o  our ability to develop, market and license new technology; and

         o  our ability to effectively manage operating expenses.

In October 2001, we received $2.8 million from the sale of our research and
development tax credit back to the State of Connecticut.

In October 2001, we filed a universal shelf registration statement on Form S-3
with the Securities and Exchange Commission, which will permit the Company, from
time to time, to offer and sell common stock, preferred stock, debt or warrants
to purchase common stock, preferred stock or debt, up to a value of $35 million.
We cannot assure you that additional funding, if sought, will be available or,
even if available, will be available on terms acceptable to us. Further, any
additional equity financing may be dilutive to stockholders, and debt financing,
if available, may involve restrictive covenants.

INCOME TAXES

We have not generated any taxable income to date and, therefore, have not paid
any federal income taxes since inception. At December 31, 2000, we had available
unused net operating loss carryforwards of approximately $43.3 million and
approximately $42.9 million which may be available to offset future federal and
state taxable income, respectively. Use of our federal and state net operating
loss carryforwards, which will begin to expire in 2007 and 2001, respectively,
may be subject to limitations. The future utilization of these carryforwards may
be limited due to changes within our current and future ownership structure as
defined within the income tax code. We have recorded a full valuation allowance
against our deferred tax asset, which consists primarily of net operating loss
carryforwards, because of uncertainty regarding its recoverability, as required
by Financial Accounting Standard No. 109 "Accounting for Income Taxes."

RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" (SFAS No. 141) and SFAS No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142). SFAS No. 141 and SFAS No. 142 significantly
impact the accounting and disclosures for business combinations. The adoption of
SFAS No. 141 and SFAS No. 142, which is required for fiscal years beginning
after December 15, 2001, will have no current impact on the Company's financial
position or results of operations.


                                       10
<PAGE>

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is principally confined to our cash equivalents and
investments, all of which have maturities of less than two years. We maintain a
non-trading investment portfolio of investment grade, liquid debt securities
that limit the amount of credit exposure to any one issue, issuer or type of
instrument. In view of the nature and mix of our total portfolio, a 10% movement
in market interest rates would not have a significant impact on the total value
of our investment portfolio as of September 30, 2001.

At September 30, 2001, we had aggregate fixed rate debt of approximately $24.0
million, including borrowings outstanding under term loans and capital lease
obligations. A 10% change in interest rates would cause a corresponding increase
in our annual expense of approximately $240,000.



                                       11
<PAGE>

PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

CHANGES IN SECURITIES

Not applicable

USE OF PROCEEDS

On August 1, 2000, the Securities and Exchange Commission declared our
Registration Statement on Form S-1 (File No. 333-35314) effective in connection
with the initial public offering of our common stock. Deutsche Banc Alex. Brown,
Bear, Stearns & Co. Inc., Salomon Smith Barney and UBS Warburg LLC served as
managing underwriters of the offering.

On August 7, 2000, we sold 6,000,000 shares of our common stock (excluding the
underwriters' overallotment option) at $13.00 per share to the underwriters. We
received net proceeds in the initial public offering of approximately
$71,600,000, reflecting gross proceeds of $78,000,000, net of underwriting
discounts and commissions of approximately $5,460,000 and other offering costs
of approximately $940,000.

On August 31, 2000, we sold 900,000 shares of our common stock (in connection
with the exercise of the underwriters' overallotment option) at $13.00 per share
to the underwriters. We received net proceeds of approximately $10,881,000,
reflecting gross proceeds of $11,700,000, net of underwriting discounts of
approximately $819,000.

From the closing of our initial public offering through September 30, 2001, we
have used the proceeds for research and development activities, capital
expenditures, working capital and other general corporate purposes. We intend to
continue to use the proceeds in a similar manner in the future. As of September
30, 2001, $69.0 million of the net proceeds remain available and are primarily
invested in short-term marketable securities.

ITEM 5 - OTHER INFORMATION

Kenneth Kashkin, M.D., our Chief Medical Officer, resigned from the Company
effective November 1, 2001.

ITEM 6(B) - REPORTS ON FORM 8-K

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

                                       12
<PAGE>

                        GENAISSANCE PHARMACEUTICALS, INC.

                                    SIGNATURE

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.

                                 GENAISSANCE PHARMACEUTICALS, INC.

Date: November 13, 2001          By: /s/ Kevin L. Rakin
                                   --------------------------------------------
                                   Kevin L. Rakin
                                   President and Chief Financial Officer
                                   (Principal Executive and Accounting Officer)


                                       13