FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

           (X) QUARTERLY REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 1997

                                       OR

           ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from _____ to _____

                         Commission file number 0-28434
                             _________________________


                                  DIATIDE, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                         Delaware                         04-3078258
-------------------------------------------------------------------------------
    (State or other jurisdiction of            (IRS Employer Identification No.)
    incorporation or organization)

   Nine Delta Drive, Londonderry, NH                         03053
-------------------------------------------------------------------------------
(Address of principal executive offices)                   (Zip Code)

                                  603-437-8970
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports 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 ____

The number of shares outstanding of the registrant's common stock, $0.001 par
value, as of October 23, 1997 was 10,521,983.


                                     Page 1

<PAGE>


                                  DIATIDE, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

PART I   FINANCIAL INFORMATION                                                              PAGE NO.
<S>      <C>                                                                                    <C>
         ITEM 1   FINANCIAL STATEMENTS (Unaudited)

              Condensed Balance Sheets as of September 30, 1997 and December 31, 1996............3

              Condensed Statements of Operations for the three months ended
              September 30, 1997 and 1996........................................................4

              Condensed Statements of Operations for the nine months ended
              September 30, 1997 and 1996, and for the period from
              February 6, 1990 (date of inception) to September 30, 1997.........................5

              Condensed Statements of Cash Flows for the nine months ended
              September 30, 1997 and 1996, and for the period from
              February 6, 1990 (date of inception) to September 30, 1997.........................6

              Notes to Condensed Financial Statements............................................7

         ITEM 2   Management's Discussion and Analysis of
                  Financial Condition and Results of Operations..................................9

PART II  OTHER INFORMATION

         ITEM 2   Changes in Securities.........................................................12

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

SIGNATURES......................................................................................13

EXHIBIT INDEX...................................................................................14
</TABLE>


                                     Page 2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS

                                  DIATIDE, INC.
                          (A Development Stage Company)
                            CONDENSED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                      September 30, 1997
ASSETS                                                                   (Unaudited)      December 31, 1996
                                                                         ----------------------------------
<S>                                                                      <C>                 <C>
Current assets:
        Cash and cash equivalents                                        $ 16,995,476        $  6,004,207
        Marketable securities                                               4,763,007          10,782,632
        Other current assets                                                  264,833             443,776
                                                                         ------------        ------------
Total current assets                                                       22,023,316          17,230,615

Property and equipment, at cost                                             2,604,980           2,373,540
Less: accumulated depreciation and amortization                             1,642,506           1,300,051
                                                                         ------------        ------------
                                                                              962,474           1,073,489

Other assets                                                                   10,783              10,783
                                                                         ------------        ------------
Total assets                                                             $ 22,996,573        $ 18,314,887
                                                                         ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Accounts payable and accrued expenses                            $  1,471,943        $  1,514,905
        Accrued clinical expenses                                           1,298,598           2,099,826
        Deferred revenue                                                      500,000                   -
        Current portion of capital lease obligation                             3,460               3,460
                                                                         ------------        ------------
 Total current liabilities                                                  3,274,001           3,618,191

Capital lease obligation, less current portion                                 10,584              12,878

Stockholders' equity:
        Preferred stock, $0.01 par value
                Authorized shares - 10,591,874
                Series A convertible preferred stock:
                      Authorized shares - 1,300,000
                      Issued and outstanding shares - 1,210,256                
                      (none in 1996) (liquidation value of
                      $11,800,000)                                             12,103                   -
        Common stock, $0.001 par value
                Authorized shares - 50,000,000
                Issued shares - 10,525,583 (10,404,248 in 1996)                10,526              10,404
        Additional paid-in capital                                         61,476,798          50,140,186
        Deferred compensation                                                (412,686)         (1,285,483)
        Deficit accumulated during development stage                      (41,374,729)        (34,181,265)
                                                                         ------------        ------------
                                                                           19,712,012          14,683,842
        Less: 4,800 shares of common stock in treasury, at cost                   (24)                (24)
                                                                         ------------        ------------
Total stockholders' equity                                                 19,711,988          14,683,818
                                                                         ------------        ------------
Total liabilities and stockholders' equity                               $ 22,996,573        $ 18,314,887
                                                                         ============        ============
</TABLE>


Note: The balance sheet at December 31, 1996 has been derived from audited
financial statements at that date but does not include all of the financial
information and footnotes required by generally accepted accounting principles
for complete financial statements.

See Notes to Condensed Financial Statements.


                                     Page 3

<PAGE>

                                  DIATIDE, INC.
                          (A Development Stage Company)

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)




<TABLE>
<CAPTION>
                                              Three Months Ended September 30,
                                            ----------------------------------
                                                1997                  1996
                                            ------------          ------------
<S>                                         <C>                   <C>
Revenues:
        Sponsored research                  $    500,000          $    500,000
        License fees                           2,000,000                     -
        Research grants                           20,000                20,000
                                            ------------          ------------
Total revenues                                 2,520,000               520,000

Costs and expenses:
        Research and development               2,870,413             3,246,268
        General and administrative               896,409               592,531
                                            ------------          ------------
Total costs and expenses                       3,766,822             3,838,799

Loss from operations                          (1,246,822)           (3,318,799)

Other income (expense):
        Interest income                          118,486               261,666
        Interest expense                            (359)               (1,998)
                                            ------------          ------------
Total other income (expense)                     118,127               259,668

                                            ------------          ------------
Net loss                                    $ (1,128,695)         $ (3,059,131)
                                            ============          ============

Net loss per share (Note 4)                 $      (0.11)         $      (0.30)
                                            ============          ============

Shares used in computing net loss
   per share (Note 4)                         10,515,518            10,216,146
</TABLE>


See Notes to Condensed Financial Statements.


                                     Page 4

<PAGE>

                                  DIATIDE, INC.
                          (A Development Stage Company)

                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                 For the Period
                                                                                February 6, 1990
                                                                                    (date of
                                                                                  inception) to
                                          Nine Months Ended September 30,         September 30,
                                          -------------------------------
                                               1997                1996               1997
                                          ------------       ------------      ----------------
<S>                                       <C>                <C>                 <C>
Revenues:
        Sponsored research                $  1,500,000       $  1,500,000        $   4,278,388
        License fees                         2,000,000            500,000            3,300,000
        Research grants                        130,000             76,073              685,498
                                          ------------       ------------        -------------
Total revenues                               3,630,000          2,076,073            8,263,886
                                                                                 
Costs and expenses:                                                              
        Research and development             8,860,420          9,438,515           40,247,732
        General and administrative           2,477,852          1,616,131           11,101,539
                                          ------------       ------------        -------------
Total costs and expenses                    11,338,272         11,054,646           51,349,271
                                                                                 
Loss from operations                        (7,708,272)        (8,978,573)         (43,085,385)
                                                                                 
Other income (expense):                                                          
        Interest income                        516,124            486,423            1,952,624
        Interest expense                        (1,316)           (18,174)            (241,968)
                                          ------------       ------------        -------------
Total other income (expense)                   514,808            468,249            1,710,656
                                                                                 
                                          ------------       ------------        -------------
Net loss                                  $ (7,193,464)      $ (8,510,324)       $ (41,374,729)
                                          ============       ============        =============
                                                                                 
Net loss and pro forma net loss                                                  
        per share (Note 4)                $      (0.69)      $      (0.95)       
                                          =============      ============        
                                                                                 
Shares used in computing net loss                                                
     and pro forma net loss per                                                  
     share (Note 4)                         10,475,644          8,963,370        
</TABLE>


See Notes to Condensed Financial Statements.                                   


                                     Page 5

<PAGE>

                                                   DIATIDE, INC.
                                           (A Development Stage Company)
                                        CONDENSED STATEMENTS OF CASH FLOWS
                                                    (Unaudited)

<TABLE>
<CAPTION>
                                                                                      For the Period
                                                                                     February 6, 1990
                                                                                         (date of
                                                    Nine Months Ended September 30,    inception) to
                                                    ------------------------------     September 30,
                                                          1997            1996             1997
                                                    -------------     ------------     --------------
<S>                                                 <C>               <C>              <C>
Operating activities:
Net loss                                            $  (7,193,464)    $ (8,510,324)    $ (41,374,729)
Adjustments to reconcile net loss to
     cash used in operating activities:
        Depreciation and amortization                     342,455          311,232         1,681,361
        Cancellation of accrued interest                       -                -            111,438
        Amortization of deferred compensation             285,766          250,402           663,283
        Compensation associated with stock option         
         grants                                           136,424           75,960           212,384
        Changes in operating assets and liabilities      (165,247)       2,364,181         2,956,070
                                                    -------------     ------------     -------------
           Cash used in operating activities           (6,594,066)      (5,508,549)      (35,750,193)

Investing activities:
Additions to property and equipment                      (231,440)        (497,456)       (2,585,622)
Purchases of marketable securities                     (4,976,190)      (1,351,749)      (21,603,916)
Sales and maturities of marketable securities          10,995,815        5,345,094        16,840,909
                                                    -------------     ------------     -------------
           Cash provided by (used in) investing         
            activities                                  5,788,185        3,495,889        (7,348,629)

Financing activities:
Sale of preferred stock                                11,695,231                -        39,950,364
Issuance of convertible notes                                   -                -         3,508,464
Repayment of convertible notes                                  -                -          (315,000)
Issuance of long-term debt                                      -                -           900,518
Repayment of long-term obligations                         (2,294)        (286,418)         (905,832)
Sale of common stock                                      104,213       16,630,645        16,955,808
Repurchase of common stock                                      -                -               (24)
Capitalized financing costs                                     -                -                 -
                                                    -------------     ------------     -------------
           Cash provided by (used in) financing        
            activities                                 11,797,150       16,344,227        60,094,298
                                                    -------------     ------------     -------------

Net increase in cash and cash equivalents              10,991,269       14,331,567        16,995,476
Cash and cash equivalents at beginning of period        6,004,207        5,084,197                 -
                                                    -------------     ------------     -------------
                                                                                       
Cash and cash equivalents at end of period          $  16,995,476     $ 19,415,764     $  16,995,476
                                                    =============     ============     =============

Noncash transactions:
        Acquisition of equipment through capital                                                
                lease obligation                    $            -    $          -     $      19,358
        Conversion of convertible notes and                                                   
                accrued interest to preferred 
                stock                               $            -    $          -     $   3,304,902
        Deferred compensation associated with                                                 
                stock options issued  at less 
                than fair value                     $            -    $          -     $   1,663,000
         Forfeiture of stock options issued at                                                
                less than fair value                $      587,031    $          -     $     587,031
         Conversion of preferred stock                                                          
                to common stock                     $            -    $ 31,559,922     $  31,559,922
</TABLE>

See Notes to Condensed Financial Statements.


                                     Page 6

<PAGE>

                                  DIATIDE, INC.
                          (A Development Stage Company)
                     Notes to Condensed Financial Statements
                                   (Unaudited)

1. Nature of Business

Diatide, Inc. (the "Company") was founded in 1990 and is a development stage
biopharmaceutical company engaged in the discovery, development and
commercialization of proprietary, disease-specific diagnostic agents and
therapeutics for life-threatening conditions. The foundation of Diatide's
diagnostic imaging products is the Company's proprietary peptide (Techtide(R))
technology.

2. Basis of Presentation

The accompanying unaudited financial statements for the three and nine months
ended September 30, 1997 and 1996 and for the period February 6, 1990 (date of
inception) to September 30, 1997 have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying financial statements include all adjustments of a
normal recurring nature necessary for a fair presentation of results for these
interim periods. The results of operations for the three and nine months ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the year ending December 31, 1997.

These financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1996
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1996.

3. Sale of Preferred Stock

On September 23, 1997, the Company completed the sale of 1,210,256 shares of the
Company's Series A convertible preferred stock (the "Preferred Stock") to three
of the Company's existing investors in a private transaction for $11.7 million,
net of issuance costs. The Preferred Stock is convertible into the Company's
Common Stock on a one-for-one basis, subject to adjustment for certain events.
Each share of Preferred Stock is entitled to the same number of votes as each
share of Common Stock into which it is convertible and will vote together with
the Common Stock. Dividends on the Common Stock, if and when declared by the
Board of Directors, are payable to the holders of the Preferred Stock based on
the number of shares of Common Stock into which the Preferred Stock is
convertible before any distribution to the holders of the Common Stock. The
Preferred Stock holders are entitled to priority liquidation rights of an amount
equal to $9.75 per share, as adjusted for certain events, plus any declared but
unpaid dividends. The Company also issued Common Stock Purchase Warrants (the
"Warrants") to the investors to purchase in the aggregate 181,538 shares of
Common Stock at an exercise price of $11.70 per share.
The Warrants will expire on September 23, 1999.

Under the terms of a Registration Rights Agreement, dated as of September 23,
1997, the investors holding in the aggregate at lease 51% of the Stockholder
Registrable Shares (as defined) have the right to require the Company to
register the Common Stock issuable upon the conversion of the Preferred Stock or
the exercise of the Warrants at any time after October 1, 1998. The Preferred
Stock is redeemable solely at the Company's option after September 23, 2000 and,
accordingly, is classified as equity in the accompanying condensed financial
statements.


                                     Page 7

<PAGE>

4.   Public Offering

In June 1996, the Company completed its initial public offering of 2,200,000
shares of Common Stock raising approximately $16.4 million of net proceeds after
deducting offering costs. Concurrent with the completion of the initial public
offering, all 12,551,928 shares of Series A, Series B, Series C, Series D and
Series E Convertible Preferred Stock (collectively, the "Convertible Preferred
Stock") outstanding at that time were converted into 7,531,140 shares of Common
Stock. In connection with this conversion, all such shares of Convertible
Preferred Stock were retired.

5.   Financial Information

For 1996, pro forma net loss per share is computed using the weighted average
number of outstanding shares of Common Stock and Common Stock equivalents and
assuming the previously outstanding Convertible Preferred Stock had been
converted into common shares effective at the beginning of the respective
period. Common Stock equivalent shares are excluded from the computation if
their effect is anti-dilutive; however, pursuant to the requirements of the SEC,
common shares issued by the Company and common equivalent shares relating to
stock options (using the treasury stock method) issued during the twelve months
prior to the initial public offering are included whether or not they are
anti-dilutive. Historical earnings per share have not been presented for the
nine months ended September 30, 1996 since such amounts are not deemed
meaningful due to the significant change in the Company's capital structure that
occurred in connection with the initial public offering. For the three and nine
months ended September 30, 1997, net loss per share is computed using the
weighted average number of outstanding shares of common stock. Common stock
equivalents are excluded from the computation since their effect is
anti-dilutive.

The common share amounts and per share dollar amounts have been adjusted for all
periods presented to reflect the effect of the 6-for-10 reverse stock split
effective June 6, 1996.

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share (FAS No. 128), which is required to be adopted for
fiscal years ending after December 15, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under FAS No. 128, the dilutive effect of stock
options will be excluded in calculating earnings per share. There is no material
impact on the net loss or proforma net loss per share for the three and nine
months ended September 30, 1997 and 1996 under FAS No. 128.

6.   Recent Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." Both SFAS No. 130 and SFAS No. 131 are effective for fiscal years
beginning after December 15, 1997. The Company believes that the adoption of
these new accounting standards will not have a material impact on the Company's
financial statements.


Page 8

<PAGE>



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

   The Company is engaged in the discovery, development and commercialization of
proprietary, disease-specific diagnostic agents and therapeutics for
life-threatening conditions. The foundation of Diatide's diagnostic imaging
products is the Company's proprietary peptide (Techtide(R)) technology. To date,
the Company has not received revenue from the sale of products. In order to
commercialize products, the Company will need to address a number of
technological challenges and comply with comprehensive regulatory requirements.
Accordingly, it is not possible to predict the amount of funds that will be
required or the length of time that will pass before the Company receives
revenues from sales of its products. All revenues received by the Company
through September 30, 1997 have resulted from research grants from the National
Institutes of Health (the "NIH") and the Department of Defense (collectively,
the "Research Grants"), fees received for entering into option agreements with a
pharmaceutical company, and research and development support payments and option
exercise and milestone payments under the Company's collaborative agreements
with Nycomed.

   The Company has incurred net losses since its inception. No revenues have
been generated from product sales and no product sales are anticipated for the
next 9 to 12 months. The Company expects to incur additional significant
operating losses over the next 15 to 18 months and expects its cumulative net
losses to increase significantly as the Company's research and development and
clinical trial efforts expand. The Company expects that its personnel and patent
costs will also increase in the future. Patent costs also would increase if the
Company became involved in litigation or administrative proceedings involving
its patents or those of third parties. The Company has incurred cumulative net
losses since inception through September 30, 1997 of $41,374,729.

   This Quarterly Report on Form 10-Q contains forward-looking statements that
involve a number of risks and uncertainties. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated by such forward-looking statements. These factors include,
without limitation, those set forth in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
That May Affect Future Results" of the Company's Annual Report on Form 10-K as
of December 31, 1996, which are expressly incorporated by reference herein.


Results of Operations

   Three Months Ended September 30, 1997 and 1996

     Revenues. The Company had revenues of $2,520,000 and $520,000 in the three
months ended September 30, 1997 and 1996, respectively. Revenues in the three
months ended September 30, 1997 were comprised of $20,000 of contract revenues
received under research grants from the NIH, and $500,000 of research and
development support payments and a $2,000,000milestone payment for the FDA
filing of a New Drug Application ("NDA") for AcuTect(TM) (formerly known as
P280) received by the Company under its collaborative agreements with Nycomed.
Revenues in the three months ended September 30, 1996 were comprised of $20,000
received under research grants from the NIH, and $500,000 of research and
development support payments.

     Research and development. During the three months ended September 30, 1997
and 1996, the Company expended $2,870,413 and $3,246,268, respectively, on
research and development activities. The $375,855 decrease in the three months
ended September 30, 1997 in comparison with the same period in 1996 resulted
from reduced expenses associated with the timing of costs for clinical trials
which were offset by increases in staffing.

     General and administrative. The Company's general and administrative
expenses were $896,409 and $592,531 in the three months ended September 30, 1997
and 1996, respectively. The $303,878 increase in 1997 from 1996 resulted from
increases in staffing and outside services to support the Company's growth.


                                     Page 9

<PAGE>

     Interest. Interest income was $118,486 in the three months ended September
30, 1997 compared with $261,666 in the three months ended September 30, 1996,
reflecting a higher level of cash, cash equivalents and marketable securities
during the third quarter of 1996 compared to the third quarter of 1997. Interest
expense in the three months ended September 30, 1997 and 1996 was $359 and
$1,998, respectively, and was comprised primarily of interest incurred on
borrowings to finance the acquisition of certain equipment and leasehold
improvements. During the third quarter of 1996, the Company repaid its bank
borrowings.

     Net loss. As a result of the above factors, the Company incurred net losses
of $1,128,695 and $3,059,131 in the three months ended September 30, 1997 and
1996, respectively.

   Nine Months Ended September 30, 1997 and 1996

     Revenues. The Company had revenues of $3,630,000 and $2,076,073 in the nine
months ended September 30, 1997 and 1996, respectively. Revenues in the nine
months ended September 30, 1997 were comprised of $130,000 of contract revenues
received under grants from the NIH and $1,500,000 of research and development
support payments and a $2,000,000 milestone payment for the FDA filing of an NDA
for AcuTect received by the Company under its collaborative agreements with
Nycomed. Revenues in the nine months ended September 30, 1996 were comprised of
$76,073 of contract revenues received under research grants from the NIH, and
$1,500,000 of research and development support payments and a $500,000 option
exercise payment for P829 received by the Company under its collaborative
agreements with Nycomed.

     Research and development. During the nine months ended September 30, 1997
and 1996, the Company expended $8,860,420 and $9,438,515, respectively, on
research and development activities. The $578,095 decrease in the nine months
ended September 30, 1997 resulted from reduced expenses associated with reduced
clinical trial activity for AcuTect in 1997 as compared to 1996 and the timing
of costs of other clinical trials, which were offset by increases in staffing.

     General and administrative. The Company's general and administrative
expenses were $2,477,852 and $1,616,131 in the nine months ended September 30,
1997 and 1996, respectively. The $861,721 increase in the nine months ended
September 30, 1997 resulted from increases in staffing and outside services to
support the Company's growth.

     Interest. Interest income was $516,124 in the nine months ended September
30, 1997 compared with $486,423 in the nine months ended September 30, 1996,
reflecting a higher level of the Company's cash, cash equivalents and marketable
securities during 1997 resulting from the proceeds of the Company's initial
public stock offering. Interest expense in the nine months ended September 30,
1997 and 1996 was $1,316 and $18,174, respectively, and was comprised primarily
of interest incurred on borrowings to finance the acquisition of certain
equipment and leasehold improvements. During the third quarter of 1996, the
Company repaid its bank borrowings.

     Net loss. As a result of the above factors, the Company incurred net losses
of $7,193,464 and $8,510,324 in the nine months ended September 30, 1997 and
1996, respectively.


Liquidity and Capital Resources

   In September 1997, the Company issued 1,210,256 shares of convertible
preferred stock and warrants to purchase 181,538 shares of Common Stock raising
$11.7 million of net proceeds. The Company completed its initial public offering
of 2,200,000 shares of Common Stock in June 1996 raising approximately $16.4
million of net proceeds. As of September 30, 1997, the Company had $21,758,483
of cash, cash equivalents and marketable securities and working capital of
$18,749,315.

   During the nine months ended September 30, 1997, the Company's capital
expenditures totaled $231,440, primarily for the acquisition of certain
equipment and furniture and fixtures.

   The Company's future capital requirements will depend on many factors,
including continued progress in its research and product development programs,
the magnitude of these programs, the results of preclinical studies and clinical
trials, the time and costs involved in obtaining regulatory approvals, the costs
involved in filing, prosecuting, enforcing and defending patent claims,
competing technological and market developments, the ability of 


                                    Page 10

<PAGE>

the Company to establish and maintain collaborative academic and commercial
research, development and marketing relationships, and the costs and success of
commercialization activities and arrangements.

   Based on its current operating plan, the Company anticipates that its
existing capital resources, including the proceeds of the initial public
offering and the preferred stock sale in September 1997 and interest earned
thereon, will be adequate to satisfy its capital requirements through mid-1999.
Substantial additional funds will be required from external sources to support
the Company's operations beyond that time, although there can be no assurance
that additional funds will be available, or, if available, that such funds will
be available on acceptable terms.

   The Company intends to seek additional equity, debt and lease financing to
fund future operations, depending upon the terms on which such sources may be
available from time to time. In addition, the Company intends to seek additional
collaborative development and commercialization relationships with potential
corporate partners in order to fund certain of its programs, including the
continued development and commercialization of Sn-117 DTPA.

   Except for research and development funding from Nycomed pursuant to its
collaboration with Diatide (which is subject to early termination in certain
circumstances), the Company has no committed external sources of capital, and,
as discussed above, expects no product revenues for a number of years. If the
Company is unable to obtain necessary additional funds, it would be required to
delay, scale back or eliminate certain of its research and development programs
or commercialization efforts or license to third parties certain technologies
which the Company would otherwise pursue on its own.


                                    Page 11

<PAGE>

                           PART II. OTHER INFORMATION


ITEM 2 CHANGES IN SECURITIES

     On September 23, 1997, the Company issued and sold 1,210,256 of convertible
preferred stock to three of the Company's existing investors for an aggregate
purchase price of $11.8 million pursuant to Section 4(2) of the Securities Act
of 1933, as amended. The convertible preferred stock is convertible into the
Company's Common Stock on a one-for-one basis, subject to adjustment for certain
events. The Company also issued to such investors two-year Common Stock Purchase
Warrants to purchase in the aggregate 181,538 shares of Common Stock at an
exercise price of $11.70 per share pursuant to Section 4(2).

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:

     (a)  Exhibits. The Exhibits listed in the Exhibit Index immediately
                    preceding such Exhibits are filed as part of this Quarterly
                    Report on Form 10-Q.

     (b)  Reports on Form 8-K. On October 1, 1997, the Company filed a current
                               report on Form 8-K to report the sale of $11.8
                               million of convertible preferred stock and the
                               issuance of common stock purchase warrants on
                               September 23, 1997.


                                    Page 12

<PAGE>

                                  DIATIDE, INC.
                                    FORM 10-Q
                               September 30, 1997


                                   SIGNATURES


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.


                                     DIATIDE, INC.


DATE: October 31, 1997                BY:_______________________________________
                                         Daniel F. Harrington
                                         Vice President, Chief Financial Officer
                                         and Treasurer (Principal Financial
                                         Officer)


                                    Page 13

<PAGE>

                                  EXHIBIT INDEX


Exhibit Number                           Description
--------------                           -----------
     11.1           Statement Re: Computation of Net Loss and Pro Forma Net Loss
                    Per Share
      27            Financial Data Schedule (EDGAR)
      99            Pages 24 through 32 of the Company's Annual Report on
                    Form 10-K for the year ended December 31, 1996 as
                    filed with the SEC (which is not deemed filed except
                    to the extent that portions thereof are expressly
                    incorporated by reference herein)


                                    Page 14