FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934

For the quarterly period ended September 30, 1999

Commission file number 0-16005

Unigene Laboratories, Inc.
--------------------------
(Exact name of registrant as specified in its charter)

            Delaware                             22-2328609
-------------------------------              ----------------
(State or other jurisdiction of              (I.R.S. Employer
 incorporation or organization)              Identification No.)


110 Little Falls Road, Fairfield, New Jersey            07004
---------------------------------------------------------------
(Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code: (973) 882-0860
------------------------------------------------------------------

(Former  name,  former  address and former  fiscal year,  if changed  since last
report.)

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

APPLICABLE ONLY TO CORPORATE ISSUERS

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

Common Stock, $.01 Par Value - 41,174,329 shares as of November 1, 1999
<PAGE>
                                      INDEX

                           UNIGENE LABORATORIES, INC.

PART I.  FINANCIAL INFORMATION                                          PAGE

Item 1. Financial Statements (Unaudited)

Condensed balance sheets-
    September 30, 1999 and December 31, 1998                             3

Condensed statements of operations-
    Three months and nine months ended September 30, 1999 and 1998       4

Condensed statements of cash flows-
    Nine months ended September 30, 1999 and 1998                        5

Notes to condensed financial statements-
    September 30, 1999                                                   6

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

Item 3. Quantitative and Qualitative Disclosures About
    Market Risk                                                         13

PART II. OTHER INFORMATION

Item 2.       Changes in Securities and Use of Proceeds                 14

Item 6.       Exhibits and Reports on Form 8-K                          15

SIGNATURES                                                              16
<PAGE>
PART I.  FINANCIAL INFORMATION
Item 1. Financial Statements

                           UNIGENE LABORATORIES, INC.
                            CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                              September 30       December 31
                                                                                  1999              1998
                                                                              ------------      ------------
ASSETS                                                                        (Unaudited)
<S>                                                                           <C>               <C>
Current assets:
    Cash and cash equivalents                                                 $    668,379      $    402,664
    Contract receivable                                                          2,000,000              --
    Prepaid expenses                                                                68,633           317,823
    Other current assets                                                           702,028           887,904
                                                                              ------------      ------------
         Total current assets                                                    3,439,040         1,608,391

Contract receivable                                                              2,000,000              --
Property, plant and equipment-net
    of accumulated depreciation and amortization                                 7,030,523         8,085,250
Patents and other intangibles, net                                               1,228,076         1,206,018
Other assets                                                                       512,957           664,434
                                                                              ------------      ------------
                                                                              $ 14,210,596      $ 11,564,093
                                                                              ============      ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                          $    924,605      $    982,752
    Accrued expenses                                                             1,645,016         1,329,199
    Notes payable - stockholders                                                 1,140,000         1,040,000
    Current portion-stockholder notes                                              758,988              --
    Current portion-capital lease obligations                                       61,464            61,464
                                                                              ------------      ------------
  Total current liabilities                                                      4,530,073         3,413,415

Stockholder notes, excluding current portion                                     1,111,012              --
5% convertible debentures                                                        2,800,000         3,802,807
Capital lease obligations, excluding current portion                                75,994           127,783

   Stockholders' equity:
    Common stock-par value $.01 per share;
       authorized 60,000,000 shares, issued
       41,181,619 shares in 1999 and 39,384,822 in 1998                            411,816           393,848
    Additional paid-in capital                                                  66,462,635        65,158,403
    Accumulated deficit                                                        (61,179,903)      (61,331,132)
    Less: Treasury stock, at cost, 7,290 shares                                     (1,031)           (1,031)
                                                                              ------------      ------------
         Total stockholders' equity                                              5,693,517         4,220,088
                                                                              ------------      ------------
                                                                              $ 14,210,596       $11,564,093
                                                                              ============      ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
                           UNIGENE LABORATORIES, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                Three Months Ended                  Nine Months Ended
                                                   September 30                        September 30
                                              1999              1998              1999              1998
                                          ------------      ------------      ------------      ------------
<S>                                       <C>               <C>               <C>               <C>
Licensing and other revenue               $  7,000,733      $  3,008,795      $  9,527,575      $  5,020,652
Operating expenses:

    Research and development                 2,651,584         2,384,413         7,261,543         6,791,085
    General and administrative                 561,811           494,585         1,653,944         1,552,113
                                          ------------      ------------      ------------      ------------

                                             3,213,395         2,878,998         8,915,487         8,343,198
                                          ------------      ------------      ------------      ------------

Operating income (loss)                      3,787,338           129,797           612,088        (3,322,546)
                                          ------------      ------------      ------------      ------------
Other income (expense):
   Interest/other income                        13,308            37,290            28,850            81,384
   Interest expense                           (108,052)         (103,692)         (489,709)         (211,970)
                                          ------------      ------------      ------------      ------------
                                               (94,744)          (66,402)         (460,859)         (130,586)
                                          ------------      ------------      ------------      ------------
Income (loss) before
   extraordinary item                        3,692,594            63,395           151,229        (3,453,132)

Extraordinary item-loss
   on extinguishment of debt (Note D)             --            (143,810)              --           (143,810)
                                          ------------      ------------      ------------      ------------

Net income (loss)                         $  3,692,594      $    (80,415)     $    151,229      $ (3,596,942)
                                          ============      ============      ============      ============
Earnings per share (Note E):
    Basic:
     Income (loss) before
       extraordinary item                 $        .09      $       --        $       --        $       (.09)
     Extraordinary item                           --                --                --                --
                                          ------------      ------------      ------------      ------------
     Net income (loss)                    $        .09      $       --        $       --        $       (.09)
                                          ============      ============      ============      ============
    Diluted:
     Income (loss) before
       extraordinary item                 $        .09      $       --        $       --        $       (.09)
     Extraordinary item                           --                --                --                --
                                          ------------      ------------      ------------      ------------
     Net income (loss)                    $        .09      $       --        $       --        $       (.09)
                                          ============      ============      ============      ============
Weighted average number of shares
 outstanding:     Basic                     41,169,120        38,647,682        40,284,824        38,562,591
                                          ============      ============      ============      ============
                  Diluted                   43,159,961        38,647,682        40,284,824        38,562,591
                                          ============      ============      ============      ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
                           UNIGENE LABORATORIES, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                    September 30
                                                            ----------------------------
                                                               1999             1998
                                                            -----------      -----------

<S>                                                         <C>              <C>
Net cash used for operating activities                      $(1,553,470)     $(2,085,805)
                                                            -----------      -----------
Investing activities:

    Purchase of equipment and furniture                         (75,263)        (261,927)
    Increase in patents and other assets                        (19,753)        (122,474)
    Construction of leasehold and building improvements          (4,010)          (5,284)
                                                            -----------      -----------
                                                                (99,026)        (389,685)
                                                            -----------      -----------
Financing activities:

    Issuance of stockholder notes                             1,970,000             --
    Issuance of 5% Debenture, net of related expenses              --          3,751,919
    Exercise of stock options and warrants                         --             47,969
    Repayment of capital lease obligations                      (51,789)            --
    Redemption of convertible debentures                           --           (107,171)
                                                            -----------      -----------
                                                              1,918,211        3,692,717
                                                            -----------      -----------
Net increase in cash and cash equivalents                       265,715        1,217,227

Cash and cash equivalents at beginning of year                  402,664        2,126,327
                                                            -----------      -----------
Cash and cash equivalents at end of period                  $   668,379      $ 3,343,554
                                                            ===========      ===========
SUPPLEMENTAL CASH FLOW INFORMATION:

Non-cash investing and financing activities:

Conversion of convertible debentures and
   accrued interest into Common Stock                       $ 1,390,959      $   204,375
                                                            ===========      ===========
Conversion of notes payable-stockholders
   into Common Stock                                        $      --        $   225,000
                                                            ===========      ===========
Cash paid for interest                                      $    17,448      $    43,455
                                                            ===========      ===========
</TABLE>
See notes to condensed financial statements
<PAGE>
                           UNIGENE LABORATORIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999

NOTE A - BASIS OF PRESENTATION

The accompanying  unaudited condensed financial statements 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 of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments considered necessary
for a fair presentation have been included. Operating results for the nine-month
period ended  September 30, 1999 are not  necessarily  indicative of the results
that  may be  expected  for the  year  ended  December  31,  1999.  For  further
information,  please refer to the Company's  financial  statements and footnotes
thereto  included in the Company's annual report on Form 10-K for the year ended
December 31, 1998.

NOTE B - CONVERTIBLE DEBENTURES

During  January  1999,   $200,000  of  principal  amount  of  the  Company's  5%
Convertible  Debentures,  due December 31, 2001, were converted into (a) 164,102
shares of Common Stock and (b) warrants,  expiring January 29, 2004, to purchase
6,564  shares of  Common  Stock at an  exercise  price of $1.52  per  share.  In
addition,  the  Company  issued  79,384  shares of Common  Stock as  payment  of
interest on the 5% Convertible Debentures in lieu of a semi-annual cash interest
payment in the amount of $101,000.

During  the  second  quarter  of 1999,  $1,000,000  of  principal  amount of the
Company's 5% Convertible Debentures,  due December 31, 2001, were converted into
(a)  1,457,458  shares of Common Stock and (b) warrants,  expiring  April - June
2004,  to purchase an  aggregate  of 58,298  shares of Common  Stock at exercise
prices ranging from $.78 to $1.15 per share.

During July 1999, the Company issued 95,853 shares of Common Stock as payment of
interest on the 5% Convertible Debentures in lieu of a semi-annual cash interest
payment in the amount of $90,000.

NOTE C - NOTES PAYABLE - STOCKHOLDERS

During the second quarter of 1999 (a) Jay Levy, the chairman of the board and an
officer of the Company,  loaned the Company $1,500,000 evidenced by demand notes
bearing interest at 6% per year, and (b) Warren Levy and Ronald Levy,  directors
and officers of the  Company,  loaned the Company  $100,000  evidenced by demand
notes  bearing  interest at the Merrill Lynch Margin Loan Rate plus .25% (8.625%
at September 30, 1999) (the "Floating  Rate"). In July 1999, Jay Levy loaned the
Company an additional $370,000 evidenced by term notes maturing January 2002 and
bearing  interest at 6% per year, and the $1,500,000 of demand notes  evidencing
loans made by Jay Levy in the second  quarter were  converted into 6% term notes
maturing  January 2002. The Company has granted Jay Levy a security  interest in
all of its equipment  and a mortgage on its real  property to secure  payment of
the term notes  which are senior to all notes  payable to Warren Levy and Ronald
Levy.  The Company is required  to make  installment  payments on the term notes
commencing in October 1999 and ending in January 2002 in an aggregate  amount of
$72,426  per month.  Jay Levy has agreed to postpone  the  October and  November
installment payments.
<PAGE>
NOTE D - EXTRAORDINARY ITEM

During  September  1998,  $178,515  of  principal  amount of the  Company's  10%
Convertible  Debentures due March 4, 1999, plus $44,060 of accrued interest, was
converted into 214,131 shares of Common Stock.  Due to restrictions on the total
number of shares which could be issued upon  conversion of the  Debentures,  the
Company  redeemed  an  additional  $271,485  of  principal,  and  in  connection
therewith  paid to the holder  $68,899  of  accrued  interest  and  $143,810  in
redemption  premiums,  for an  aggregate  payment of  $484,194.  The  premium of
$143,810 was recorded as an extraordinary loss in September 1998.

NOTE E - EARNINGS PER SHARE

Basic  earnings  per share is computed by dividing  the net income  available to
common  shareholders  by the weighted  average  number of shares of common stock
outstanding.  For  purposes  of  calculating  diluted  earnings  per share,  the
denominator  includes both the weighted average number of shares of common stock
outstanding and the number of dilutive common stock equivalents.

The Company's 5% Convertible Debentures were dilutive for the three-month period
ended September 30, 1999, but anti-dilutive for all other periods. Stock options
to purchase  1,746,490 shares of Common Stock and warrants to purchase 3,983,768
shares of Common Stock were not included in computing diluted earnings per share
because their effects are anti-dilutive.

The following table sets forth the  computation  for basic and diluted  earnings
per share (EPS) for the three months ended September 30, 1999:

<TABLE>
<CAPTION>
<S>                                              <C>
Numerator for basic EPS - net income             $ 3,692,594
Interest expense - 5% Convertible Debentures          35,287
                                                 -----------
Numerator for diluted EPS                        $ 3,727,881
                                                 -----------
Denominator for basic EPS - weighted
  average shares outstanding                      41,169,120

Effect of conversion of 5% Convertible
  Debentures into maximum number of shares         1,990,841
                                                 -----------

Denominator for diluted EPS                       43,159,961
                                                 ===========
</TABLE>
NOTE F - LIQUIDITY

The Company has incurred annual  operating  losses since its inception and, as a
result,  at  September  30,  1999 had an  accumulated  deficit of  approximately
$61,180,000  and a working  capital  deficit of  approximately  $1,091,000.  The
independent  auditors'  report covering the Company's 1998 financial  statements
includes  an   explanatory   paragraph  that  states  the  above  factors  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
However,  the financial  statements  have been prepared on a going concern basis
and as such do not include any adjustments that might result from the outcome of
this  uncertainty.  In October  1999,  the Company was  delisted by Nasdaq.  The
delisting  of the  Company's  Common  Stock  may have an  adverse  effect on the
Company's ability to raise capital.
<PAGE>
In August 1999,  the Company and  Warner-Lambert  successfully  concluded  their
second pilot human study for their oral calcitonin  formulation,  resulting in a
payment to the  Company of $2.5  million.  In  September  1999,  the Company and
Warner-Lambert  identified an oral  calcitonin  formulation  to be used in their
upcoming Phase I clinical study entitling the Company to a milestone, payable in
installments,  totaling  $4.5  million.  The first  installment  of $500,000 was
received in September 1999, with payment of an additional  $500,000 due every 90
days  thereafter,  with the unpaid  balance  payable upon the  initiation of the
Phase I study, which the Company expects to occur in the first half of 2000. Due
to the  completion of this milestone in September  1999, the Company  recognized
$4.5  million as revenue in the third  quarter;  $2 million  was  recorded  as a
current  contract  receivable  and an  additional  $2 million was  recorded as a
non-current contract receivable.

With the receipt of almost $2 million in stockholder loans during the second and
third  quarters of 1999,  in addition to an  aggregate of $3 million in payments
from  Warner-Lambert in the third quarter,  management believes that the Company
will have  sufficient  financial  resources  to sustain  its  operations  at the
current level into the fourth  quarter of 1999.  The Company  expects to receive
$500,000 from  Warner-Lambert  in December 1999, and $3.5 million in one or more
payments in the first half of 2000 from the  milestone  completed  in  September
1999.  The  Company  also  expects to achieve  additional  milestones  under the
Warner-Lambert  agreement  during 2000,  which will result in further  payments.
However,  there can be no  assurance  as to when or if the Company  will achieve
such milestones.  The Company is currently pursuing licensing agreements for its
nasal  and  injectable  calcitonin  products.  These  agreements  could  provide
short-term  funds  to the  Company  in  upfront  payments  as well as  milestone
payments.  The  Company  has  executed  an  agreement  for the sale of state tax
benefits,  to  yield  approximately  $4  million,  under a New  Jersey  Economic
Development Authority program, which allows certain New Jersey taxpayers to sell
their  state tax  benefits  to  third-parties.  However,  the  proceeds  will be
received  over the next few years and the size and timing of such  proceeds  are
subject to the  continued  funding of the  program by the State of New Jersey as
well as limitations based on the level of participation by other companies.  The
Company's  application  for the sale was  approved  by the New  Jersey  Economic
Development  Authority  in October  1999 and the  Company  expects to receive at
least $1  million  in the  first  year's  allocation.  However,  there can be no
assurance  that any of these  transactions  will be completed  or, if completed,
that the terms and timing of such transactions would provide sufficient funds to
sustain operations at the current level.

While the Company  believes that the  transactions  it currently is pursuing and
the milestone  payments  under the  Warner-Lambert  agreement  would satisfy the
Company's  liquidity  requirements  in the near term,  satisfying  the Company's
long-term liquidity  requirements will require the successful  commercialization
of its nasal or oral calcitonin product. In addition,  the  commercialization of
its  calcitonin  products will require the Company to incur  additional  capital
expenditures,   including  expenditures  to  expand  or  upgrade  the  Company's
manufacturing   operations  to  satisfy   certain  of  its   calcitonin   supply
obligations.  However,  neither the cost nor timing of such capital expenditures
is determinable at this time.
<PAGE>
NOTE G - DIRECTORS STOCK OPTION PLAN

At the Company's June 23, 1999 Annual  Meeting,  the  stockholders  approved the
adoption of a new  Directors  Stock  Option Plan (the "New Plan") to replace the
1994 Outside Directors Stock Option Plan (the "1994 Plan").  Under the New Plan,
each person elected to the Board after June 23, 1999 who is not an employee will
receive,  on the date of his  initial  election,  an option to  purchase  21,000
shares of Common Stock. In addition,  on May 1st of each year, commencing May 1,
1999,  each  non-employee  director  will  receive an option to purchase  10,000
shares of Common Stock if he or she has served as a non-employee director for at
least six months prior to the May 1st grant.  Each option  granted under the New
Plan will have a ten-year  term and the  exercise  price of each  option will be
equal to the fair value of the Company's  Common Stock on the date of the grant.
A total of 350,000  shares of Common Stock are  reserved for issuance  under the
New Plan.

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

RESULTS OF OPERATIONS

Revenue  increased 133% from $3 million to $7 million and 90% from $5 million to
$9.5  million for the three  months and nine months  ended  September  30, 1999,
respectively,  as compared to the same periods in 1998.  Revenue for all periods
consisted  primarily of milestone revenue from  Warner-Lambert  Company,  as the
result of the achievement of benchmarks in the development of an oral calcitonin
product for treating osteoporosis.

Research and  development,  the Company's  largest  expense,  increased 11% from
$2,384,000  to  $2,652,000  for the three months ended  September  30, 1999,  as
compared to the same period in 1998. Research and development expenses increased
7% from  $6,791,000 to $7,262,000 for the nine months ended  September 30, 1999,
as  compared  to the same  period in 1998.  The 1999  increases  were  primarily
attributable to consulting and testing expenses related to the Company's Type II
variation for its injectable calcitonin product, development expenses related to
the Company's  nasal  calcitonin  product,  and  consulting  fees related to the
Company's collaboration with Warner-Lambert.

General and administrative  expenses increased 14% from $495,000 to $562,000 and
7% from  $1,552,000  to  $1,654,000  for the three  months and nine months ended
September 30, 1999,  respectively,  as compared to the same periods in 1998. The
increases were primarily due to increased personnel costs and professional fees,
partially offset by reductions in public relations and travel expenses.

Interest  income  decreased  $24,000 and  $53,000 for the three  months and nine
months ended September 30, 1999,  respectively,  as compared to the same periods
in 1998, due to reduced funds available for investment in 1999.

Interest  expense  increased  $4,000 and  $278,000 for the three months and nine
months ended September 30, 1999,  respectively,  as compared to the same periods
in 1998. The nine month increase for 1999 was due primarily to the  amortization
of the value of the beneficial  conversion  feature and related  warrants of the
Company's 5% Convertible Debentures in the amount of $197,000 for the first nine
months of 1999.
<PAGE>
As a result of increased  revenue from  Warner-Lambert  milestones  during 1999,
partially  offset by increased  operating  expenses and  interest  expense,  net
income  improved by $3.7 million ($.09 per share) for both the  three-month  and
nine-month  periods  ended  September  30,  1999.  The Company had net income of
$3,693,000  for the three months ended  September  30, 1999 as compared to a net
loss of $80,000 for the comparable period in 1998. The Company had net income of
$151,000 for the nine months ended  September 30, 1999 as compared to a net loss
of $3,597,000 for the comparable period in 1998.

As of  December  31,  1998,  the Company had  available  for federal  income tax
reporting purposes net operating loss carryforwards in the approximate amount of
$58,400,000,  expiring  from 1999 through  2018,  which are  available to reduce
future earnings that would otherwise be subject to federal income taxes. For the
nine months ending September 30, 1999, the Company had a profit of approximately
$151,000.  In addition,  the Company has investment tax credits and research and
development  credits in the  amounts of $19,000  and  $2,178,000,  respectively,
which are available to reduce the amount of future federal  income taxes.  These
credits  expire from 1999 through 2018. For 1999, the Company does not expect to
have income before  income taxes in excess of its  available net operating  loss
and tax credit carryforwards.

The Company follows Statement of Financial  Accounting Standards (SFAS) No. 109,
"Accounting  for Income  Taxes".  Given the Company's  past history of incurring
operating losses,  any deferred tax assets that are recognizable  under SFAS 109
have been fully reserved. As of January 1, 1999, under SFAS 109, the Company had
deferred  tax  assets  of  approximately  $25,500,000,  subject  to a  valuation
allowance of $25,500,000.  The deferred tax assets are primarily a result of the
Company's net operating  losses and tax credits  generated.  For the  nine-month
period ended September 30, 1999, the Company's deferred tax assets and valuation
allowances each decreased by approximately $60,000.

LIQUIDITY AND CAPITAL RESOURCES

The  Company  currently  has no  material  commitments  outstanding  for capital
expenditures  relating  to the  Boonton,  New Jersey  production  facility,  the
Company's facility in Fairfield, New Jersey, or to its other activities.

The Company,  at September 30, 1999, had cash and cash  equivalents of $668,000,
an increase of $266,000 from December 31, 1998.

The Company has incurred annual  operating  losses since its inception and, as a
result,  at  September  30,  1999 had an  accumulated  deficit of  approximately
$61,180,000  and a working  capital  deficit of  approximately  $1,091,000.  The
independent  auditors'  report covering the Company's 1998 financial  statements
includes  an   explanatory   paragraph  that  states  the  above  factors  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
However,  the financial  statements  have been prepared on a going concern basis
and as such do not include any adjustments that might result from the outcome of
this  uncertainty.  In October  1999,  the Company was  delisted by Nasdaq.  The
delisting  of the  Company's  Common  Stock  may have an  adverse  effect on the
Company's ability to raise capital.

The  Company's  future  ability to  generate  cash from  operations  will depend
primarily  upon signing  research or  licensing  agreements,  achieving  defined
benchmarks in such agreements,  receiving  regulatory  approval for its licensed
products, and the commercial sale of these products.
<PAGE>
In July 1997,  the Company  entered into an agreement  under which it granted to
the Parke-Davis  division of  Warner-Lambert  Company a worldwide license to use
the Company's  oral  calcitonin  technology.  Through  September  30, 1999,  the
Company had received an aggregate of $16.5  million from  Warner-Lambert  in the
form of an equity investment,  a licensing fee and milestone payments. Under the
terms of the  license  agreement,  the  Company is  eligible to receive up to an
additional  $38  million  in  milestone   payments  during  the  course  of  the
development  program.  Early-stage  milestones primarily relate to the product's
performance  characteristics,  while the  latter-stage  milestones are primarily
related to regulatory  activities and approvals.  If the product is successfully
commercialized, the Company also would receive revenue from royalties on product
sales by Warner-Lambert  and its affiliates and from the sale of raw material to
Warner-Lambert.  The  Company has  retained  the right to license the use of its
technologies for injectable and nasal  formulations of calcitonin on a worldwide
basis. The Company is actively seeking other licensing and/or supply  agreements
with  pharmaceutical  companies for  injectable  and nasal forms of  calcitonin.
However, there is no assurance that any additional revenue-generating agreements
will be signed.

The Company's cash requirements are approximately $10-11 million per year due to
the  operations of its research and peptide  manufacturing  facilities  and with
three  calcitonin  products in various stages of development.  In addition,  the
Company has principal and interest obligations over the next several years under
its  outstanding  notes payable to stockholders  and 5% Convertible  Debentures.
However,  because of the conversion features of the 5% Convertible Debentures, a
substantial  portion of this debt is expected to be converted into Common Stock,
thereby  decreasing  the amount of cash  required for  principal  payments.  The
Company may elect to pay interest on these  debentures  in Common  Stock,  which
would  decrease the amount of cash  required for interest  payments.  Due to the
delisting  of its Common  Stock  from the Nasdaq  National  Market  System,  the
Company  is  required  to make  payments  to the  holder  of the 5%  Convertible
Debentures, in an amount equal to 2% per month of the aggregate principal amount
of these  debentures  for any month or  portion  thereof.  In  addition,  if the
delisting  period lasts for 4 months,  then, at the option of the investor,  the
Company shall redeem these  debentures on a redemption  date  designated by such
investor at a redemption price equal to 120% of the outstanding principal amount
of these debentures.

During the second quarter of 1999 (a) Jay Levy, the chairman of the board and an
officer of the Company,  loaned the Company $1,500,000 evidenced by demand notes
bearing interest at 6% per year, and (b) Warren Levy and Ronald Levy,  directors
and officers of the  Company,  loaned the Company  $100,000  evidenced by demand
notes  bearing  interest at the Merrill Lynch Margin Loan Rate plus .25% (8.625%
at June 30,  1999) (the  "Floating  Rate").  In July 1999,  Jay Levy  loaned the
Company an additional $370,000 evidenced by term notes maturing January 2002 and
bearing  interest at 6% per year, and the $1,500,000 of demand notes  evidencing
loans made by Jay Levy in the second  quarter were  converted into 6% term notes
maturing  January 2002. The Company has granted Jay Levy a security  interest in
all of its equipment  and a mortgage on its real  property to secure  payment of
the term notes  which are senior to all notes  payable to Warren Levy and Ronald
Levy.  The Company is required  to make  installment  payments on the term notes
commencing in October 1999 and ending in January 2002 in an aggregate  amount of
$72,426  per month.  Jay Levy has agreed to postpone  the  October and  November
installment payments.

In August 1999,  the Company and  Warner-Lambert  successfully  concluded  their
second pilot human study for their oral calcitonin  formulation,  resulting in a
payment to the  Company of $2.5  million.  In  September  1999,  the Company and
Warner-Lambert  identified an oral  calcitonin  formulation  to be used in their
upcoming Phase I clinical study entitling the Company to a milestone, payable in
installments,  totaling  $4.5  million.  The first  installment  of $500,000 was
received in September 1999, with payment of an additional  $500,000 due every 90
days  thereafter,  with the unpaid  balance  payable upon the  initiation of the
Phase I study, which the Company expects to occur in the first half of 2000. Due
to the  completion of this milestone in September  1999, the Company  recognized
$4.5  million as revenue in the third  quarter;  $2 million  was  recorded  as a
current  contract  receivable  and an  additional  $2 million was  recorded as a
non-current contract receivable.
<PAGE>
With the receipt of almost $2 million in stockholder loans during the second and
third  quarters of 1999,  in addition to an  aggregate of $3 million in payments
from  Warner-Lambert in the third quarter,  management believes that the Company
will have  sufficient  financial  resources  to sustain  its  operations  at the
current level into the fourth  quarter of 1999.  The Company  expects to receive
$500,000 from  Warner-Lambert  in December 1999, and $3.5 million in one or more
payments in the first half of 2000 from the  milestone  completed  in  September
1999.  The  Company  also  expects to achieve  additional  milestones  under the
Warner-Lambert  agreement  during 2000,  which will result in further  payments.
However,  there can be no  assurance  as to when or if the Company  will achieve
such milestones.  The Company is currently pursuing licensing agreements for its
nasal  and  injectable  calcitonin  products.  These  agreements  could  provide
short-term  funds  to the  Company  in  upfront  payments  as well as  milestone
payments.  The  Company  has  executed  an  agreement  for the sale of state tax
benefits,  to  yield  approximately  $4  million,  under a New  Jersey  Economic
Development Authority program, which allows certain New Jersey taxpayers to sell
their  state tax  benefits  to  third-parties.  However,  the  proceeds  will be
received  over the next few years and the size and timing of such  proceeds  are
subject to the  continued  funding of the  program by the State of New Jersey as
well as limitations based on the level of participation by other companies.  The
Company's  application  for the sale was  approved  by the New  Jersey  Economic
Development  Authority  in October  1999 and the  Company  expects to receive at
least $1  million  in the  first  year's  allocation.  However,  there can be no
assurance  that any of these  transactions  will be completed  or, if completed,
that the terms and timing of such transactions would provide sufficient funds to
sustain operations at the current level.

While the Company  believes that the  transactions  it currently is pursuing and
the  milestone  payments  under the  Warner-Lambert  agreement  will satisfy the
Company's  liquidity  requirements  in the near term,  satisfying  the Company's
long-term liquidity  requirements will require the successful  commercialization
of its nasal or oral calcitonin product. In addition,  the  commercialization of
its  calcitonin  products will require the Company to incur  additional  capital
expenditures,   including  expenditures  to  expand  or  upgrade  the  Company's
manufacturing   operations  to  satisfy   certain  of  its   calcitonin   supply
obligations.  However,  neither the cost nor timing of such capital expenditures
is determinable at this time.

YEAR 2000

The  Company has  established  a Year 2000  taskforce  that is  responsible  for
identifying  and reviewing all of the Company's  internal  computer  systems for
Year 2000 compliance,  including  workstations,  the accounting  system, and the
control  systems for equipment in the  Company's  manufacturing  and  laboratory
facilities.  The taskforce has reviewed and tested all critical and non-critical
systems for Year 2000 compliance.  All critical systems,  such as the accounting
and  telephone  systems have been brought  into  compliance  so that the Company
believes that its business will not be adversely affected by the non-performance
of these systems. Of the non-critical workstations tested and found not to be in
compliance,  most have been  updated to be  compliant.  The  Company  intends to
repair or  replace  the few  remaining  non-critical  noncompliant  systems in a
timely manner. To date, the costs of remediation have not been material.
<PAGE>
The Company has no material  relationships  with third-party  suppliers,  to the
extent that third-party  noncompliance could seriously disrupt  operations.  The
Company could be significantly  affected by Year 2000  noncompliance on the part
of  Warner-Lambert  as the Company  currently is dependent upon timely milestone
payments from Warner-Lambert. In addition, the loss of the utility supply to the
Company's  laboratory,  production and  administrative  facilities would cause a
shut down of those facilities which, depending on the duration of the shut down,
may have a material adverse impact on the Company's business.  In addition,  the
loss of  telecommunications  services and banking services would, as is the case
with all businesses, adversely affect the Company.

OTHER

The Company's  Common Stock has been delisted  from the Nasdaq  National  Market
System  effective  October 5, 1999 and is now trading on the OTC Bulletin Board.
The stock price has been adversely affected,  but the impact on the liquidity of
the stock has not yet been  determined.  The  Company  has filed an appeal  with
Nasdaq to review the delisting decision. However, the ultimate resolution of the
hearing is unknown.

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting For Derivative  Instruments and Hedging  Activities." This statement
establishes  accounting  and  reporting  standards for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities.  SFAS  No.  133,  as  amended,  will be  effective  for the
Company's fiscal year beginning January 1, 2001. The adoption of SFAS No. 133 is
not expected to have a material  effect on the Company's  financial  position or
results of operations.

Item 3.      Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK

In the normal  course of  business,  the Company is exposed to  fluctuations  in
interest  rates as the Company seeks debt  financing to sustain its  operations.
The  Company  does not use  derivative  instruments  or  hedging  to manage  its
exposures.

The information below summarizes the Company's market risks associated with debt
obligations  as of September  30, 1999.  Fair values  included  herein have been
estimated taking into  consideration the nature and terms of each instrument and
the  prevailing  economic and market  condition at September 30, 1999. The table
below  presents  principal  cash  flows and  related  interest  rates by year of
maturity  based on the terms of the debt.  The  information  presented as to the
convertible  debentures is without  consideration as to conversion features,  as
the  Company  is  unable to  predict  if and when such  conversions  may  occur.
Variable interest rates disclosed represent the rates at September 30, 1999.
<PAGE>
<TABLE>
<CAPTION>
                                          Estimated                                            Year of Maturity
                                             Fair             Carrying                         ----------------
                                            Value              Amount              1999        2000        2001       2002   2003
                                            ------             ------              ----        ----        ----       ----   ----
<S>                                      <C>                 <C>                <C>          <C>         <C>         <C>      <C>
Notes payable - stockholders             $1,140,000          1,140,000        1,140,000         --          --         --     --
Variable interest rate                                                        8.625%            --          --         --     --

Notes payable - stockholders             $1,870,000          1,870,000          171,922      788,684     837,328     72,066   --
Fixed interest rate                                                               6%           6%          6%         6%

5% convertible debentures                $2,800,000          2,800,000              --          --     2,800,000       --     --
Fixed interest rate (1)                                                             5%           5%        5%          --     --
</TABLE>
(1)  At the  option of the  Company,  interest  payments  may be made  using the
     Company's Common Stock.
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain  statements in this Form 10-Q  constitute  "forward-looking  statements"
within the meaning of the Private Securities  Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking  statements involve known and unknown risks,
uncertainties  and other factors that may cause the actual results,  performance
or activities of the Company,  or industry results,  to be materially  different
from any future results,  performance or activities expressed or implied by such
forward-looking  statements. Such factors include: general economic and business
conditions, the financial condition of the Company, including the Company's need
for and success in securing  additional  financing,  competition,  the Company's
dependence on other  companies to  commercialize,  manufacture and sell products
using the Company's technologies,  the uncertainty of results of preclinical and
clinical testing, the risk of product liability and liability for human clinical
trials,  the  Company's  dependence  on patents  and other  proprietary  rights,
dependence on key management  officials,  the  availability and cost of capital,
the  availability of qualified  personnel,  changes in, or the failure to comply
with,  governmental  regulations,  the failure to obtain regulatory approvals of
the  Company's  products and other factors  discussed in the  Company's  various
filings with the  Securities  and Exchange  Commission,  including the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

(a)      Not applicable.

(b)      Not applicable.

(c)      Recent Sales of Unregistered Securities.

In July 1999,  the Company  issued  95,853  shares of Common Stock as payment of
approximately  $90,000 in  accrued  interest  on the  Company's  5%  Convertible
Debentures  due December 31, 2001. All of such shares were issued by the Company
without  registration  in reliance on an  exemption  under  Section 4 (2) of the
Securities Act.

(d)      Not applicable.
<PAGE>
Item 6.           Exhibits and Reports on Form 8-K

         (a)      Exhibits:

                  Exhibit 10.1      Amended and Restated Secured Note dated July
                                    13, 1999.
                  Exhibit 10.2      Amended  and  Restated  Security   Agreement
                                    dated July 13, 1999.
                  Exhibit 10.3      Subordination Agreement dated July 13, 1999.
                  Exhibit 10.4      Mortgage and Security  Agreement  dated July
                                    13, 1999.
                  Exhibit 10.5      $70,000 Secured Note dated July 30, 1999.
                  Exhibit 10.6      $200,000 Secured Note dated August 5, 1999.
                  Exhibit 10.7      Modification   of  Mortgage   and   Security
                                    Agreement dated August 5, 1999.
                  Exhibit 10.8      Amendment to Security Agreement and
                                    Subordination  Agreement between the Company
                                    and Jay Levy,  Warren  Levy and Ronald  Levy
                                    dated August 5, 1999.
                  Exhibit-27        Financial   Data  Schedule  -  period  ended
                                    September 30, 1999.

         (b)      Reports on Form 8-K:

The Company did not file any reports on Form 8-K during the three  months  ended
September 30, 1999.
<PAGE>
                                   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.

                                                    UNIGENE LABORATORIES, INC.
                                                    -----------------------
                                                    (Registrant)

                                                    /s/ Warren P. Levy
November 15, 1999                                   -----------------------
                                                    Warren P. Levy, President
                                                    (Chief Executive Officer)


                                                    /s/ Jay Levy
November 15, 1999                                   -----------------------
                                                    Jay Levy, Treasurer
                                                    (Chief Financial Officer and
                                                    Chief Accounting Officer)