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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

(Mark One)

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2001

or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number:0-27118

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

Delaware(State or other jurisdiction of
incorporation or organization)

33-0557266(I.R.S. Employer Identification No.)CN 5350, Princeton, New Jersey(Address of principal executive offices)

08543-5350(Zip code)


(609) 452-3600(Registrant's telephone number, including area code)

Not Applicable(Former name, former address and former fiscal year, if changed since last report)

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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:

ClassCommon Stock, $.0001 par value

Outstanding at May 7, 200123,729,622 shares


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PHARMACOPEIA, INC.

Form 10-Q

Table of Contents

|Item                          |  |                                                                                       |  | Page
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|Item 1.                       |  | Consolidated Unaudited Financial Statements:                                          |  |     
|                              |  | Balance SheetsMarch 31, 2001 and December 31, 2000                                   |  | 3   
|                              |  | Statements of OperationsThree Months Ended March 31, 2001 and 2000                   |  | 4   
|                              |  | Statements of Cash FlowsThree Months Ended March 31, 2001 and 2000                   |  | 5   
|                              |  | Notes to Consolidated Unaudited Financial Statements                                  |  | 6   
|Item 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 7   
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 10  
|PART II. OTHER INFORMATION    |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 11  
|Item 2.                       |  | Changes in Securities and Use of Proceeds                                             |  | 11  
|Item 3.                       |  | Defaults upon Senior Securities                                                       |  | 11  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 11  
|Item 5.                       |  | Other Information                                                                     |  | 11  
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                      |  | 11  
|Signature                     |  | 12                                                                                   
|Index to Exhibits             |  | 13                                                                                   

2

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

Pharmacopeia, Inc.        Consolidated Balance Sheets        (Dollars in thousands)

|                                                    |                                                                                             | March 31,
2001             |                                            | December 31,
2000 |        
|--------------------------------------------------- | ------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------------- | -------
|
|ASSETS                                              |                                                                                            
|Current assets:                                     |                                                                                             |                            |                                            |                   |        
|                                                    | Cash and cash equivalents                                                                   |                            | $                                          | 74,070            |        
|                                                    | Marketable securities                                                                       |                            |                                            | 98,536            |        
|                                                    | Trade receivables, net of allowance for doubtful accounts of $2,085 and $2,305 respectively |                            |                                            | 18,848            |        
|                                                    | Prepaid expenses and other current assets                                                   |                            |                                            | 8,211             |        
|                                                    |                                                                                             |                            |                                            |                   |        
|                                                    |                                                                                             | Total current assets       |                                            |                   | 199,665
|Property and equipmentnet                          |                                                                                             |                            | 11,706                                     |                   |        
|Capitalized softwarenet                            |                                                                                             |                            | 15,259                                     |                   |        
|Goodwill and other intangiblesnet                  |                                                                                             |                            | 41,108                                     |                   |        
|Other assets                                        |                                                                                             |                            | 1,975                                      |                   |        
|                                                    |                                                                                             |                            |                                            |                   |        
|                                                    |                                                                                             | Total assets               |                                            | $                 | 269,713
|                                                    |                                                                                             |                            |                                            |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                |                                                                                            
|Current liabilities:                                |                                                                                             |                            |                                            |                   |        
|                                                    | Accounts payable                                                                            |                            | $                                          | 3,019             |        
|                                                    | Accrued liabilities                                                                         |                            |                                            | 27,137            |        
|                                                    | Deferred revenue, current portion                                                           |                            |                                            | 28,326            |        
|                                                    | Notes payable, current portion                                                              |                            |                                            | 44                |        
|                                                    |                                                                                             |                            |                                            |                   |        
|                                                    |                                                                                             | Total current liabilities  |                                            |                   | 58,526 
|Notes payable, long-term portion                    |                                                                                             |                            | 175                                        |                   |        
|Other long-term liabilities                         |                                                                                             |                            | 39                                         |                   |        
|Deferred revenue, long-term                         |                                                                                             |                            | 4,752                                      |                   |        
|Commitments and contingencies Stockholders' equity: |                                                                                             |                            |                                            |                   |        
|                                                    | Capital stock                                                                               |                            |                                            | 2                 |        
|                                                    | Additional paid-in capital                                                                  |                            |                                            | 278,417           |        
|                                                    | Accumulated deficit                                                                         |                            |                                            | (73,654           | )      
|                                                    | Accumulated comprehensive income                                                            |                            |                                            | 1,456             |        
|                                                    |                                                                                             |                            |                                            |                   |        
|                                                    |                                                                                             | Total stockholders' equity |                                            |                   | 206,221
|                                                    |                                                                                             |                            |                                            |                   |        
|                                                    |                                                                                             |                            | Total liabilities and stockholders' equity |                   | $      
|                                                    |                                                                                             |                            |                                            |                   |        

See
accompanying notes to these unaudited financial statements.

3

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Pharmacopeia, Inc.        Consolidated Statements of Operations        (Unaudited, in thousands, except per share data)

|                                                            |                                                  | For the Three Months
Ended March 31, |       
|----------------------------------------------------------- | ------------------------------------------------ | ------------------------------------ | ------
|
|Revenues:                                                   |                                                  |                                      |       
|                                                            | Drug discovery services                          |                                      | $     
|                                                            | Software license, service and other              |                                      |       
|                                                            | Hardware                                         |                                      |       
|                                                            |                                                  |                                      |       
|                                                            |                                                  | Total revenues                       |       
|Cost of revenues:                                           |                                                  |                                      |       
|                                                            | Drug discovery services                          |                                      |       
|                                                            | Software license, service and other              |                                      |       
|                                                            | Hardware                                         |                                      |       
|                                                            |                                                  |                                      |       
|                                                            |                                                  | Total cost of revenues               |       
|                                                            |                                                  |                                      |       
|Gross margin                                                |                                                  |                                      | 15,880
|Operating costs and expenses:                               |                                                  |                                      |       
|                                                            | Research and development                         |                                      |       
|                                                            | Sales, general and administrative                |                                      |       
|                                                            | Amortization of goodwill                         |                                      |       
|                                                            | Write-off of in-process research and development |                                      |       
|                                                            |                                                  |                                      |       
|                                                            |                                                  | Total operating costs and expenses   |       
|                                                            |                                                  |                                      |       
|Operating loss                                              |                                                  |                                      | (7,550
|Interest and other income, net                              |                                                  |                                      | 1,899 
|                                                            |                                                  |                                      |       
|Loss before provision for income taxes                      |                                                  |                                      | (5,651
|Provision for income taxes                                  |                                                  |                                      | 129   
|                                                            |                                                  |                                      |       
|Net loss                                                    |                                                  | $                                    | (5,780
|                                                            |                                                  |                                      |       
|Net loss per shareBasic                                    |                                                  | $                                    | (0.25 
|                                                            |                                                  |                                      |       
|Net loss per shareDiluted                                  |                                                  | $                                    | (0.25 
|                                                            |                                                  |                                      |       
|Weighted average number of common stock outstandingBasic   |                                                  |                                      | 23,553
|                                                            |                                                  |                                      |       
|Weighted average number of common stock outstandingDiluted |                                                  |                                      | 23,553
|                                                            |                                                  |                                      |       

See
accompanying notes to these unaudited financial statements.

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Pharmacopeia, Inc.        Consolidated Statements of Cash Flows        (Unaudited, dollars in thousands)

|                                                |                                                                                | For the Three Months Ended
March 31,             |                                 
|----------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------------ | --------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:           |                                                                                |                                                  |                                 
|                                                | Net loss                                                                       |                                                  | $                               
|                                                | Adjustments to reconcile net loss to net cash provided by (used in) operations |                                                  |                                 
|                                                |                                                                                | Depreciation                                     |                                 
|                                                |                                                                                | Amortization                                     |                                 
|                                                |                                                                                | Contribution of stock to 401 (k) members         |                                 
|                                                |                                                                                | Write-off of in-process research and development |                                 
|                                                |                                                                                | Changes in assets and liabilities:               |                                 
|                                                |                                                                                |                                                  | Accounts receivable             
|                                                |                                                                                |                                                  | Prepaid and other current assets
|                                                |                                                                                |                                                  | Accounts payable                
|                                                |                                                                                |                                                  | Accrued liabilities             
|                                                |                                                                                |                                                  | Deferred revenue                
|                                                |                                                                                |                                                  | Other assets                    
|                                                |                                                                                |                                                  |                                 
|                                                |                                                                                |                                                  |                                 
|CASH FLOWS FROM INVESTING ACTIVITIES:           |                                                                                |                                                  |                                 
|                                                | Capital expenditures                                                           |                                                  |                                 
|                                                | Purchases of marketable securities                                             |                                                  |                                 
|                                                | Proceeds from sales of marketable securities                                   |                                                  |                                 
|                                                | Acquisition of businesses, net of cash acquired                                |                                                  |                                 
|                                                | Increase in capitalized software development costs                             |                                                  |                                 
|                                                |                                                                                |                                                  |                                 
|                                                |                                                                                |                                                  |                                 
|CASH FLOWS FROM FINANCING ACTIVITIES:           |                                                                                |                                                  |                                 
|                                                | Proceeds from issuance of common stock                                         |                                                  |                                 
|                                                | Principal payments on notes payable                                            |                                                  |                                 
|                                                | Principal payments under capital lease obligations                             |                                                  |                                 
|                                                |                                                                                |                                                  |                                 
|                                                |                                                                                |                                                  |                                 
|Exchange rate effect on cash and equivalents    |                                                                                |                                                  | (458                            
|                                                |                                                                                |                                                  |                                 
|Net increase in cash and equivalents            |                                                                                |                                                  | 4,720                           
|Cash and equivalents, beginning of period       |                                                                                |                                                  | 69,350                          
|                                                |                                                                                |                                                  |                                 
|Cash and equivalents, end of period             |                                                                                | $                                                | 74,070                          
|                                                |                                                                                |                                                  |                                 
|SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION: |                                                                                |                                                  |                                 
|Cash paid during the period for:                |                                                                                |                                                  |                                 
|                                                | Interest                                                                       |                                                  | $                               
|                                                |                                                                                |                                                  |                                 
|                                                | Income taxes                                                                   |                                                  | $                               
|                                                |                                                                                |                                                  |                                 

See
accompanying notes to these unaudited financial statements.

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Pharmacopeia, Inc.    Notes to Consolidated Financial Statements    (Unaudited)

Note (1)Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited financial statements do not include all of
the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the financial statements have been included.

Interim
results are not necessarily indicative of the results that may be expected for the year. For further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000.

Note (2)Segment Information

The Company operates in two business segments: drug discovery services and software (which includes software licenses, maintenance, hardware and other).
Summarized information concerning industry segment operations for the three months ended March 31, 2001 and 2000, and for industry segment assets as of March 31, 2001 and 2000, is
presented below.

|                                     |                | Three Months Ended March 31, 2001 |        
|------------------------------------ | -------------- | --------------------------------- | -------
|
|Revenues:                            |                |                                   |        
|Drug discovery services              |                | $                                 |       
|Software licenses, service and other |                |                                   | 19,190 
|Hardware                             |                |                                   | 1,577  
|                                     |                |                                   |        
|                                     | Total revenues |                                   | $      
|                                     |                |                                   |        
|Operating loss                       |                | $                                 | (4,127 
|                                     |                |                                   |        
|Total assets as of March 31, 2001    |                | $                                 | 107,306
|                                     |                |                                   |        

|                                     |                | Three Months Ended March 31, 2000 |       
|------------------------------------ | -------------- | --------------------------------- | ------
|
|Revenues:                            |                |                                   |       
|Drug discovery services              |                | $                                 |      
|Software licenses, service and other |                |                                   | 12,256
|Hardware                             |                |                                   | 964   
|                                     |                |                                   |       
|                                     | Total revenues |                                   | $     
|                                     |                |                                   |       
|Operating income (loss)              |                | $                                 | (7,162
|                                     |                |                                   |       
|Total assets as of March 31, 2000    |                | $                                 | 64,903
|                                     |                |                                   |       

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Note (3)Net Loss Per Share

The
Company computes net loss per share in accordance with Statement of Financial Accounting Standard (SFAS) No. 128, Earnings Per Share. Under the provisions of SFAS
No. 128, basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted
net income per share is computed by dividing the net income for the period by the weighted-average number of common and common equivalent shares outstanding during the period. Diluted earnings per
share are required to be calculated to include the potentially dilutive effect of the conversion of outstanding stock options.
Because the Company has a net loss for the periods presented, the inclusion of outstanding stock options would be anti-dilutive and therefore the weighted-average shares used to calculate
both basic and diluted loss per share are the same.

Note (4)Recently Issued Accounting Pronouncements

In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
ActivitiesDeferral of Effective Date of FASB Statement No. 133". The statement defers for one year the effective date of SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities". The FASB issued SFAS No. 133 in June 1998, which establishes accounting and reporting standards for derivative instruments on the Company's balance sheet at fair
value. The Company adopted SFAS 133 in January 2001. As of March 31, 2001, the Company did not hold any derivative instruments or conduct any hedging activities. The adoption of SFAS
No.'s 137 and 133 did not impact the Company's financial position or results of operations.

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

The following discussion and analysis of financial condition and results of operations of Pharmacopeia, Inc. ("Pharmacopeia" or the "Company") should be
read in conjunction with the Unaudited Financial Statements and related notes included elsewhere in this Form 10-Q, and also in conjunction with the Consolidated Financial
Statements and related notes included in the Company's Form 10-K for the year ended December 31, 2000. This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties that may cause actual results, levels of activity,
performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. In some
cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative
of such terms or expressions. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to
update any such forward-looking statements.

The
Company's registration statement on Form S-3 (Reg. No. 333-34478) and most recent Form 10-K describe certain risk factors
and uncertainties that may cause actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements
expressed or implied by such forward-looking statements. These risk factors and uncertainties should be considered in connection with any investment in the Company's common stock. These uncertainties
include the acceptance by potential customers of combinatorial chemistry and analysis of compounds provided by the Company as an effective tool in drug discovery, the ability of the Company to
establish additional collaborative or licensing arrangements on terms favorable to the Company, the expertise of third parties in developing and commercializing products based on library compounds
produced and lead compounds discovered by the Company, and the ability of the Company's Software Segment to achieve increased market acceptance and penetration.

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BUSINESS OVERVIEW

Pharmacopeia designs, develops, markets and supports science and technology-based products and services intended to improve and accelerate the processes of
drug discovery and chemical development. The Company's Software Segment provides molecular modeling and simulation, bioinformatics and cheminformatics software solutions that facilitate the discovery
and development of new drug and chemical products and processes in the pharmaceutical, biotechnology, chemical, petrochemical and materials industries. The Company's Drug Discovery Services Segment
provides drug discovery services to pharmaceutical and biotechnology companies based on proprietary combinatorial chemistry and high throughput screening technologies.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2001 AND 2000

Total revenue increased 14% to $27.1 million in the first quarter of 2001 compared to $23.9 million in the first quarter of 2000.

Software
Segment revenue (license, service and other revenue and hardware revenue) increased 58% to $20.8 million in the first quarter of 2001 compared to $13.2 million
in the first quarter of 2000. The increase is due in part to revenue generated from last year's acquisitions of Synopsys and the Software Subsidiaries of Oxford Molecular in February and September,
respectively ("the Acquisitions"). If the revenues generated by these acquired companies, as separate companies, had been included in the 2000 first quarter results, then the 2001 first quarter
revenue growth rate would have been about 12%. Hardware revenues, which result from the resale of computers at low margins based on customer requirements which can vary widely
quarter-to-quarter, also increased by 64% in the first quarter of 2001 compared to the first quarter in 2000.

Drug
Discovery Services revenue decreased 40% to $6.4 million in the first quarter of 2001 compared to $10.6 million in the first quarter of 2000. The first quarter of
2000 results included a multi million-dollar payment from a non-recurring source of revenue, the out licensing of certain patented detection technology for high throughput screening. In
addition, the first quarter of 2000 results included about $1.0 million of revenue from a drug discovery collaboration that terminated in June 2000. The
non-recurring out license fee, together with the revenue from the terminated collaboration, account for the majority of the $4.2 million decrease in first quarter Drug Discovery
Services revenue. Excluding this technology out-license fee, Drug Discovery Services revenue decreased slightly due to decreased lead optimization work and library outlicensing revenue, as
expected. Management continues to seek new drug discovery collaborations to replace the decline in Drug Discovery Services revenue, but there can be no assurance that these efforts will be successful.

Gross
margin generated from Software segment revenue (license, service and other revenue and hardware revenue) increased 41% to $14.7 million (71% of related sales) in the
first quarter of 2001 compared to $10.4 million (79% of related sales) in the first quarter of 2000. The increase in the amount of gross margin dollars resulted from the increase in Software
license, service and other revenue and hardware revenue. The decrease in gross margin as a percentage of related sales is primarily due to the amortization of the developed technology allocated in the
Acquisitions.

Gross
margin generated from Drug Discovery Services decreased 75% to $1.2 million (19% of related revenues) in the first quarter of 2001 compared to $4.8 million (45% of
related sales) in the first quarter of 2000. The decrease resulted primarily from the prior year's first quarter technology out-license fee described above, which fee carried no related
prior year's first quarter cost of revenues.

Research
and development expenses increased by 48% to $8.4 million in the first quarter of 2001 compared to $5.7 million in the first quarter of 2000. Research and
development costs include costs associated with internal drug discovery programs, software development, ultra high-throughput

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screening and informatics. The increase in research and development expenses is primarily attributable to the acquisitions made in 2000. In addition, the Company has increased its software research
and development staff in response to the anticipated product integration needs created by the increased breadth of its software product line.

Sales,
general and administrative expenses increased by 43% to $13.2 million in the first quarter of 2001 compared to $9.3 million in the first quarter of 2000. The
increase in sales, general and administrative expenses is primarily attributable to the Acquisitions, including amortization of certain acquired intangible assets. In addition, the company has
increased its sales and marketing staff in anticipation of increased future demand for its integrated software product offering.

Goodwill
amortization increased to $1.8 million in the first quarter of 2001 compared to $0.3 million in the first quarter of 2000. The increase is attributable to the
Acquisitions.

A
write-off of $6.4 million of in-process research and development was recorded in the first quarter of 2000 related to the acquisition of Synopsys. No
comparable write-offs were made in the first quarter of 2001.

Interest
and other income, net, increased to $1.9 million in the first quarter of 2001 compared to $0.8 million for the first quarter of 2000. The increase resulted from
the investment of the proceeds from a $110 million private placement of the Company's common stock in March 2000. Interest income in the first quarter of 2001 was offset by a
$0.5 million write-down for impairment of one of the Company's investments.

The
Company recorded an income tax provision of $0.1 million for both the first quarter of 2001 and the first quarter of 2000. The 2001 and 2000 tax provisions are primarily
due to foreign taxable income generated from the Software operations. These provisions differ from the Federal tax rate primarily because of the effect of permanent book-tax differences,
net operating loss carryforwards, and net operating loss carrybacks.

As
a result of the increased revenues offset by increased costs as described above, the Company generated a net loss of $5.8 million ($0.25 per diluted share) in the first
quarter of 2001 compared to a loss of $5.8 million ($0.27 per diluted share) in the first quarter of 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its activities to date primarily through the sale of equity securities, drug discovery services, software licenses, software maintenance
services and hardware. As of March 31, 2001, the Company had working capital of $141.1 million compared to $140.7 million as of December 31, 2000.

As
of March 31, 2001, the Company's cash, cash equivalents and marketable securities totaled $172.6 million, which are invested in U.S. Treasury and government agency
obligations, investment grade commercial paper and other short-term money market instruments.

The
Company anticipates that its capital requirements may increase in future periods as the Company expands its research and development activities, expands its facilities, and
acquires additional equipment. The Company's capital requirements may also increase in future periods as the Company seeks to expand its technology platform through investments, licensing
arrangements, technology alliances or acquisitions.

The
Company anticipates that its existing capital resources will be adequate to fund the Company's operations at least through 2002. However, there can be no assurance that changes
will not occur that
would consume available capital resources before such time. The Company's capital requirements depend on numerous factors, including the ability of the Company to continue to generate software sales,
the ability of the Company to extend existing Drug Discovery Services agreements and to enter

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into additional arrangements, competing technological and market developments, changes in the Company's existing collaborative relationships, the cost of filing, prosecuting, defending and enforcing
patent claims and other intellectual property rights and the outcome of related litigation, the purchase of additional capital equipment, acquisitions of other businesses or technologies, and the
progress of the Company's customers' milestone and royalty producing activities. There can be no assurance that additional funding, if necessary, will be available on favorable terms, if at all. The
Company's forecasts of the period of time through which its financial resources will be adequate to support its operations is forward looking information, and actual results could vary. The factors
described earlier in this paragraph will impact the Company's future capital requirements and the adequacy of its available funds.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to various market risks consisting primarily of changes in foreign currency exchange rates. The Company's international sales generally
are denominated in local currencies. The Company's exchange rate risk is greatest for Dollar/Euro and Dollar/Yen fluctuations. When deemed appropriate, the Company engages in exchange
rate-hedging transactions in an attempt to mitigate the impact of adverse exchange rate fluctuations. At March 31, 2001, the Company had no hedging transactions in effect.

The
Company does not use derivative financial instruments for trading or speculative purposes. However, the Company regularly invests excess cash in overnight repurchase agreements
that are subject to changes in short-term interest rates. The Company believes that the market risk arising from holding these financial instruments is minimal.

The
Company's exposure to market risks associated with changes in interest rates relates primarily to the increase or decrease in the amount of interest income earned on its
investment portfolio since the Company has minimal debt. The Company ensures the safety and preservation of invested funds by limiting default risks, market risk and reinvestment risk. The Company
mitigates default risk by investing in investment grade securities. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect
the fair value of the Company's interest sensitive financial instruments at March 31, 2001. Declines in interest rates over time will, however, reduce the Company's interest income.

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PART II

OTHER INFORMATION

Item 1.Legal Proceedings

The
Company is not a party to any material litigation and is not aware of any threatened material litigation.

Item 2.Changes in Securities and Use of ProceedsNone

Item 3.Defaults upon Senior SecuritiesNone

Item 4.Submission of Matters to a Vote of Security HoldersNone

Item 5.Other InformationNone

Item 6.Exhibits and Reports on Form 8-K



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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.

| |  | PHARMACOPEIA, INC.
| |  | ------------------
| |  | By:               
| |  |                   

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PHARMACOPEIA, INC.

INDEX TO EXHIBITS

|No.      |  | EXHIBIT                                             
|-------- |  | ----------------------------------------------------
|10.2(a)# |  | Amendment No. 1 to the Employee Stock Purchase Plan.
|10.3(b)# |  | Amendment No. 2 to the 1995 Director Option Plan.   

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