SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


    X     Quarterly report pursuant to Section 13 or 15(d) of the Securities 
          Exchange Act of 1934.  For the quarterly period ended March 31, 1997.
--------
           

_____    Transition report pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934.  For the transition period from _____ to _____.

                             Commission File Number
                                     0-27410


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


                                     Delaware
          (State or other jurisdiction of incorporation or organization)

                                    56-1924222
                    (I.R.S. Employer Identification Number)

P.O. Box 14287
3200 East Highway 54
Cape Fear Building, Suite 300
Research Triangle Park, NC                                               27709
(Address of Principal Executive Office)                               (Zip Code)

Registrant's Telephone Number, Including Area Code                 919-558-8688


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 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.


               Class                    Outstanding as of May 9, 1997
         ------------------             -----------------------------
Common Stock, par value $.001              6,757,761 Shares


<PAGE>


                                INTERCARDIA, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>

                                                                                            PAGE
<S>                                                                                         <C>  

PART I.  FINANCIAL INFORMATION

                  Item 1.           Financial Statements

                  Consolidated Balance Sheets as of March 31, 1997 (unaudited)
                  and September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . .    3

                  Consolidated Statements of Operations for the Three Months and Six
                  Months ended March 31, 1997 and 1996 (unaudited)  . . . . . . . . . . . . 4

                  Consolidated Statements of Cash Flows for the Six Months ended
                  March 31, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . ..5

                  Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . .6


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


PART II. OTHER INFORMATION

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

                  Item 6.           Exhibits and Reports on Form 8-K . . . . . . . . . . . 12

                  SIGNATURE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

</TABLE>



<PAGE>

                               INTERCARDIA, INC.
                          CONSOLIDATED BALANCE SHEETS
                 (Dollars in thousands, except per share data)


<TABLE>
<CAPTION>


                                                                               March 31,           September 30,
                                                                                 1997                    1996
                                                                            ----------------       ------------------
                                                                              (Unaudited)
<S>                                                                         <C>                      <C>   
                                              ASSETS

Current assets:
 Cash and cash equivalents                                                   $     23,198             $  21,441
 Marketable securities                                                             12,615                14,084
 Accounts receivable                                                                1,191                 1,444
 Prepaids and other current assets                                                    152                    98
                                                                           ----------------       ------------------
             Total current assets                                                  37,156                37,067

Marketable securities                                                               3,094                 1,572
Property and equipment, net                                                           282                   299
Other assets                                                                            6                     7
                                                                            ================       ==================
                                                                             $     40,538             $   38,945
                                                                            ================       ==================

                                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                                            $        578             $      168
 Accrued expenses                                                                   1,243                  1,827
 Current portion of capital lease obligations                                          40                     36
                                                                            ----------------       ------------------
            Total current liabilities                                               1,861                  2,031

Long-term portion of capital lease obligations                                         88                    109
Long-term notes payable                                                                15                     10

Minority interest                                                                   1,032                    568


Stockholders' equity:
 Common stock, $.001 par value per share, 40,000,000 shares
    authorized, 6,757,761 and 6,738,603 shares issued and
    outstanding at March 31, 1997 and September 30, 1996,                                          
     respectively                                                                       7                      7
 Additional paid-in capital                                                        39,979                 39,709
 Deferred compensation                                                               (158)                  (185)
 Accumulated deficit                                                               (2,286)                (3,304)
                                                                            ----------------       ------------------
            Total stockholders' equity                                             37,542                 36,227
                                                                            ----------------       ------------------
                                                                             $     40,538          $      38,945
                                                                            ================       ==================


         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.
</TABLE>
                                       3
<PAGE>
                                INTERCARDIA, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                      (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                      Three Months Ended                      Six Months Ended
                                                           March 31,                              March 31,
                                               ----------------------------------     ----------------------------------
                                                    1997               1996                1997               1996
                                               ---------------    ---------------     ---------------    ---------------

<S>                                             <C>                  <C>                <C>               <C> 
Revenue:
     Contract revenue                             $     1,148      $           4         $     3,297        $     5,004
     Investment income                                    516                293               1,032                323
                                               ---------------    ---------------     ---------------    ---------------
              Total revenue                             1,664                297               4,329              5,327
                                               ---------------    ---------------     ---------------    ---------------

Costs and expenses:
     Research and development                           1,245                449               1,768                905
     General and administrative                           548                513               1,079                871
                                               ---------------    ---------------     ---------------    ---------------
              Total costs and expenses                  1,793                962               2,847              1,776
                                               ---------------    ---------------     ---------------    ---------------

Income (loss) from operations                            (129)              (665)              1,482              3,551
Minority interest                                           75               (19)                464                706
                                               ---------------    ---------------     ---------------    ---------------

Net income (loss)                                 $      (204)       $      (646)        $     1,018        $     2,845
                                               ===============    ===============     ===============    ===============

Net income (loss) per common share                   $  (0.03)       $     (0.11)       $       0.14       $       0.53
                                               ===============    ===============     ===============    ===============

Weighted average common shares
   outstanding                                          6,742              5,836               7,123              5,355
                                               ===============    ===============     ===============    ===============
</TABLE>


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

                                       4

<PAGE>


                                INTERCARDIA, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (In thousands)
<TABLE>
<CAPTION>


                                                                                       Six Months Ended
                                                                                          March 31,
                                                                               ---------------------------------
                                                                                   1997                1996
                                                                               --------------      -------------
<S>                                                                              <C>                 <C>  
Cash flows from operating activities:
       Net income                                                                   $  1,018           $  2,845
       Adjustments to reconcile net income to net cash from
           operating activities:
                Depreciation and amortization                                             71                 27
                Amortization of deferred compensation                                     27                  -
                Minority interest in net income of consolidated
                   subsidiary                                                            464                706
                Change in assets and liabilities:
                   Accounts receivable                                                   253               (882)
                   Other current assets                                                  (54)               (99)
                   Accounts payable                                                      410                 22
                   Accrued expenses                                                     (584)               655
                                                                               --------------      -------------
Net cash provided by operating activities                                              1,605              3,274
                                                                               --------------      -------------

Cash flows from investing activities:
       Proceeds from maturities and sales of marketable securities                     7,928                  -
       Purchases of marketable securities                                             (7,981)           (15,869)
       Purchases of property and equipment                                               (53)               (13)
                                                                               --------------      -------------
Net cash used in investing activities                                                   (106)           (15,882)
                                                                               --------------      -------------

Cash flows from financing activities:
       Net proceeds from issuance of stock                                               270             35,008
       Payments to Interneuron, net                                                        -               (172)
       Principal payments on capital lease obligations                                   (17)               (15)
       Proceeds from long-term notes payable                                               5                  -
                                                                               --------------      -------------
Net cash provided by financing activities                                                258             34,821
                                                                               --------------      -------------

Net increase in cash and cash equivalents                                              1,757             22,213
Cash and cash equivalents at beginning of period                                      21,441              1,122
                                                                               ==============      =============
Cash and cash equivalents at end of period                                           $23,198            $23,335
                                                                               ==============      =============

</TABLE>

           The accompanying notes are integral part of these unaudited
                       consolidated financial statements.

                                       5

<PAGE>




                                INTERCARDIA, INC.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



A.       Basis of Presentation

         Intercardia, Inc. was incorporated in Delaware on March 15, 1994, and
is a majority-owned subsidiary of Interneuron Pharmaceuticals, Inc.
("Interneuron"). The "Company" refers to Intercardia, Inc. ("Intercardia") and
its majority-owned subsidiaries, CPEC, Inc., a Nevada corporation ("CPEC"), and
Aeolus Pharmaceuticals, Inc., a Delaware corporation ("Aeolus"). As of March 31,
1997, Intercardia owned 80.1% of CPEC and 65.8% of Aeolus.

         The Company focuses on development of therapeutics for the treatment of
cardiovascular and pulmonary disease. The Company has directed the majority of
its efforts toward the development and clinical trials of bucindolol, a compound
currently in Phase III clinical trials for the treatment of congestive heart
failure. This clinical trial, which commenced in June 1995, is known as the
Beta-blocker Evaluation of Survival Trial (the "BEST Study") and is sponsored by
the National Institutes of Health and the Department of Veterans Affairs.

         The consolidated financial statements include the accounts of
Intercardia and its subsidiaries, CPEC and Aeolus. All significant intercompany
activity has been eliminated. The consolidated financial statements included
herein have been prepared by the Company without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the accompanying unaudited consolidated financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position, results of operations and
cash flows of the Company. The unaudited consolidated financial statements
included herein should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996. Results for
the interim period are not necessarily indicative of the results for any other
interim period or for the full fiscal year.

         The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share," on December 31, 1997. SFAS No. 128
requires the Company to change its method of computing, presenting and
disclosing earnings per share information. Upon adoption, all prior period data
presented will be restated to conform to the provisions of SFAS No. 128.
Management has not determined the effect of adopting SFAS No. 128.

                                       6
<PAGE>

B.       Income Taxes

         No income tax provision has been provided for the net income realized
during the six months ended March 31, 1997 and 1996 as the Company utilized
projected expenses for the remainder of the fiscal year and net operating loss
carryforwards to offset the normal income tax expense.


C.       Agreement

         In December 1996, the Company executed an agreement ("the Knoll
Collaboration") with BASF Pharma/Knoll AG ("Knoll") to provide for the
development, manufacture and marketing of bucindolol for all countries with the
exception of the United States and Japan (the "Territory"). The Knoll
Collaboration includes both the twice-daily bucindolol formulation and the
once-daily bucindolol formulation currently under development. Under the terms
of the collaboration, Knoll paid CPEC $2,143,000 in December 1996 and $1,000,000
in January 1997. Knoll must also pay to CPEC $10,000,000 upon bucindolol
regulatory approval in a major European Community ("EC") member state and
$10,000,000 upon first attainment of $200,000,000 of net sales in the Territory
during any consecutive 12-month period. Upon product launch, Knoll shall pay
royalties to CPEC for the use of the license and trademarks of bucindolol in the
Territory. The royalty shall be equal to 40% of net profits, as defined in the
Knoll Collaboration. The Company would be responsible for, and pay to Knoll, 40%
of any net loss, as defined.

         Knoll and the Company will share the development and marketing costs of
bucindolol in the Territory. In general, Knoll shall pay approximately 60% of
certain development and marketing costs prior to product launch and the Company
shall pay approximately 40% of such costs, subject to certain maximum dollar
limitations. Knoll shall also bear approximately 60% of once-daily development
costs which relate to development solely for the Territory and approximately
one-third of once-daily development costs which have a worldwide benefit. The
Company is responsible for the remainder of once-daily development costs.

         The Knoll Collaboration continues in effect for 15 years after the
first commercial sale with respect to each country in the Territory, subject to
two additional five-year renewals at Knoll's option. Knoll has the right to
terminate the Knoll Collaboration at any time prior to the termination of the
BEST Study and within 60 days after the BEST Study's primary end-point results
are reported in writing to Knoll.


                                       7

<PAGE>


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

Introduction

         Statements in this Form 10-Q that are not descriptions of historical
facts are forward-looking statements that are subject to risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors, including those set forth herein and in
the Company's other SEC filings, including, in particular, risks relating to
uncertainties relating to clinical trials, dependence on collaborative partners,
the early stage of products under development, dependence on one product,
government regulations and competition.

         The following discussion should be read in conjunction with the
unaudited consolidated financial statements and notes thereto appearing
elsewhere in this report. Unless the context indicates otherwise, all references
to the Company include Intercardia, Inc. and its subsidiaries, CPEC, Inc. and
Aeolus Pharmaceuticals, Inc.

         Intercardia was incorporated in March 1994 and had no operations until
September 1994, when Intercardia acquired 80.0% of CPEC. Intercardia acquired an
additional 0.1% of CPEC in September 1996. In January 1996, Interneuron acquired
directly from the former CPEC minority stockholders the remaining outstanding
capital stock of CPEC not owned by Intercardia. CPEC has a worldwide license for
the development, distribution and sale of bucindolol for the treatment of
congestive heart failure and left ventricular dysfunction. The Company is
currently conducting Phase III clinical trials for the treatment of congestive
heart failure.

         Intercardia purchased a majority interest in Aeolus in July 1995 and
owned 65.8% of the outstanding capital stock of Aeolus at March 31, 1997. Aeolus
is conducting early stage development on catalytic antioxidant small molecules
as therapeutics for a variety of conditions, including neonatal respiratory
distress syndrome and resulting broncho-pulmonary dysplasia, stroke and asthma.

Results of Operations

         The Company incurred net losses of $204,000 and $646,000 for the three
months ended March 31, 1997 and 1996, respectively, and recognized net income of
$1,018,000 and $2,845,000 for the six months ended March 31, 1997 and 1996,
respectively. The realization of net income for each of the six-month periods,
and the relatively small net loss incurred during the quarter ended March 31,
1997, were the result of the receipt of initial payments associated with the
signing of two major collaborative agreements, one in each of the fiscal years.
During the six months ended March 31, 1997, the Company signed the Knoll
Collaboration and Knoll made initial payments of $3,143,000, which were
recognized as contract revenue. During the six months ended March 31, 1996, the
Company signed a collaborative agreement with Astra Merck Inc. ("Astra Merck")
for the development, commercialization and marketing in the United States of a
twice-daily formulation of bucindolol for the treatment of congestive heart
failure ("Astra

                                       8
<PAGE>


Merck Collaboration") and Astra Merck made an initial payment of
$5,000,000, which was also recognized as contract revenue. The initial payments
and contract revenue associated with the signing of these collaborative
agreements are generally one-time events and not recurring. Because the Company
is still in the process of developing its first potential product, it should not
be assumed that the Company will be profitable on an on-going basis over the
next few years.

         Revenues were $1,664,000 and $4,329,000 for the three months and six
months ended March 31, 1997, respectively, versus $297,000 and $5,327,000 for
the three months and six months ended March 31, 1996, respectively. In addition
to the contract revenue from the collaborative agreements, the Company earned
investment income of $516,000 and $1,032,000 during the three months and six
months ended March 31, 1997, respectively, versus $293,000 and $323,000 during
the three months and six months ended March 31, 1996, respectively. Investment
income was higher in fiscal year 1997 than in fiscal 1996 primarily due to the
receipt of approximately $35,000,000 of net proceeds from the Company's initial
public offering completed in February 1996.

         Research and development ("R&D") expenses increased $796,000 (177%) to
$1,245,000 for the three months ended March 31, 1997 from $449,000 for the three
months ended March 31, 1996. R&D expenses increased $863,000 (95%) to $1,768,000
for the six months ended March 31, 1997 from $905,000 for the six months ended
March 31, 1996. Approximately $500,000 of the three-month and six-month
increases resulted from outside contract costs incurred in the second quarter of
fiscal 1997 to develop alternative mechanisms of delivery for bucindolol. In
addition, approximately $200,000 of the increases for the three-month and
six-month periods resulted from increased payroll and related costs, as
Intercardia increased its R&D staff.

         The Astra Merck Collaboration requires Astra Merck to pay for certain
expenses related to bucindolol development in the United States. During the six
months ended March 31, 1997 and the fiscal year ended September 30, 1996, Astra
Merck assumed liabilities on the Company's behalf of $2,092,000 and $4,301,000,
respectively. These amounts did not flow through the Company's Statements of
Operations, as they were offset against related expenses. As of March 31, 1997,
the Company's Balance Sheet included an accounts receivable from Astra Merck of
$1,043,000 and accrued expenses of $975,000 related to obligations assumed by
Astra Merck.

         General and administrative ("G&A") expenses increased $35,000 (7%) to
$548,000 for the three months ended March 31, 1997 from $513,000 for the three
months ended March 31, 1996. G&A expenses increased $208,000 (24%) to $1,079,000
for the six months ended March 31, 1997 from $871,000 for the six months ended
March 31, 1996. These increases primarily resulted from increases in the
administrative staff and additional costs associated with being a public
company.

         The minority interest amounts in the Consolidated Balance Sheets and
the Consolidated Statements of Operations reflect the minority interest in net
income earned by CPEC.

                                       9

<PAGE>


Liquidity and Capital Resources

         As of March 31, 1997, the Company had cash, cash equivalents and
marketable securities of $38,907,000, which was $1,810,000 greater than the
balance at September 30, 1996 primarily due to the $1,482,000 of income from
operations before minority interest for the six months ended March 31, 1997.

         Pursuant to the Astra Merck Collaboration, the Company has agreed to
pay Astra Merck $10,000,000 in December 1997 and up to $11,000,000 for one-third
of product launch costs incurred beginning when the Company files a New Drug
Application ("NDA") with the U.S. Food and Drug Administration (the "FDA") for
the twice-daily formulation of bucindolol and continuing through the first 12
months subsequent to the first commercial sale of the formulation. These amounts
are payable at the option of the Company, and in the event the Company elects
not to make these payments, the royalties payable by Astra Merck to the Company
would be substantially reduced.

         Pursuant to the Knoll Collaboration, the Company is responsible for
approximately 40% of the development and marketing costs of bucindolol in the
Territory, which includes all countries other than the United States and Japan,
subject to certain maximum dollar limitations. The Company's portion of
development and clinical trial costs for the Territory is estimated to be up to
$10,000,000. The Company is also responsible for approximately 40% of the
once-daily development costs which relate to development solely for the
Territory and approximately 67% of once-daily development costs which have a
worldwide benefit.

         The Company will incur additional charges to operations relating to the
acquisition of CPEC in the event that certain milestones are achieved in the
development and commercialization of bucindolol. The first milestone payment
will be due if and when an NDA for bucindolol has been accepted for filing by
the FDA, and the second milestone payment will be due if and when the Company
receives an Approval Letter from the FDA with respect to bucindolol. Achievement
of each of these milestones would require additional payments, each of 75,000
shares of Interneuron common stock, subject to adjustment based on the price of
Interneuron common stock at the time of issuance. In exchange for Interneuron
providing such shares, the Company will pay Interneuron the value of such
shares, in either cash or Intercardia Common Stock, at Intercardia's option.
Each additional payment would have a minimum and maximum charge to the Company
of $750,000 and $1,875,000, respectively.

         The Company is aware of products in research or development by its
competitors that address the diseases being targeted by the Company. In
particular, carvedilol, a non-selective beta-blocker with moderate vasodilating
properties, is owned by Boehringer Mannheim and licensed in the United States
and certain other countries to SmithKline Beecham. In February 1997, the FDA
Cardiovascular and Renal Drug Advisory Committee ("Advisory Panel") recommended
that the FDA approve the use of carvedilol as a treatment for congestive heart
failure in the United States.
                                       10
<PAGE>


         The Company expects to incur substantial additional costs and losses
over the next few years. The Company's working capital and capital requirements
will depend upon numerous factors, including: the progress of the development
and clinical trials of bucindolol; the timing and cost of obtaining regulatory
approvals; the effect of competitive drugs on the BEST Study and on
commercialization of bucindolol; and the ability of the Company to establish
additional collaborative arrangements with other companies to provide research
or development funding to the Company and to conduct clinical trials, obtain
regulatory approvals, and manufacture and market certain of the Company's
products. The Company may acquire other products, technologies or businesses
that complement the Company's existing and planned products, although the
Company currently has no commitment or agreement with respect to any such
acquisitions.

                                       11
<PAGE>


Part II.          OTHER INFORMATION


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

         The Annual Meeting of Stockholders of the Company was held on February
19, 1997. The following is a brief description of each matter voted upon at the
meeting and the number of affirmative votes and the number of negative votes
cast with respect to each matter.

(a)      The stockholders elected the following persons as directors of the
         Company: Glenn L. Cooper, M.D., Clayton I. Duncan, Roger W.
         Brimblecombe, Ph.D., Joseph J. Ruvane, Jr. and David B. Sharrock. The
         votes for and against (withheld) each nominee were as follows:

                                                Votes           Votes    Votes
         Nominee                                 For          Withheld Abstained
         -------                                 ---          -------- ---------
         Glenn L. Cooper, M.D.              6,143,170            3,200        0
         Clayton I. Duncan                  6,143,170            3,200        0
         Roger W. Brimblecombe, Ph.D.       6,143,170            3,200        0
         Joseph J. Ruvane, Jr.              6,143,170            3,200        0
         David B. Sharrock                  6,143,170            3,200        0

(b)      The stockholders approved the amendments to the Intercardia, Inc. 1994
         Stock Option Plan with 4,508,229 shares voting for, 460,610 shares
         voting against and 6,900 shares abstained.

(c)      The stockholders ratified the appointment of Coopers & Lybrand L.L.P.
         as the independent auditors of the Company for the fiscal year ending
         September 30, 1997 with 6,143,070 shares voting for, 2,600 shares
         voting against and 700 shares abstained.


Item 6.           Exhibits and Reports on Form 8-K

(a)      Exhibits
         10.22    Lease Amendment Number Two, dated March 14, 1997, to Office
                  Lease between Highwoods/Forsyth Limited Partnership and
                  Intercardia, Inc.
         11.1     Statement re computation of net income (loss) per share
         27       Financial Data Schedule, which is submitted electronically to
                  the Securities and Exchange Commission for information only
                  and not filed.

(b)      No reports on Form 8-K were filed during the period.


                                       12


<PAGE>


                                    SIGNATURE

         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.


                                     INTERCARDIA, INC.



Date:    May 13, 1997        By:  /s/ Richard W. Reichow
                                  ----------------------
                                    Richard W. Reichow,
                                    Senior Vice President,
                                    Chief Financial Officer and Treasurer
                                    (Principal Financial and Accounting Officer)
                                       13
<PAGE>