UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 10-Q


(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1996

                                       OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934



Commission File number:    0-19750
                         -------------

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



         Delaware                                          94-2957068
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)


34700 Campus Drive, Fremont, California                       94555
(Address of principal executive offices)                   (Zip  Code)



       Registrant's telephone number, including area code: (510) 742-9900



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  preceeding 12 months (or for such shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  Yes  X    No
                                     -----     -----   

Number of shares of Common Stock,  $.01 par value,  outstanding  as of September
30, 1996: 21,253,618.



<PAGE>


                           MATRIX PHARMACEUTICAL, INC.


                                      INDEX




      PART I.               FINANCIAL INFORMATION                       Page No.

Item 1.  Financial   Statements


         Condensed Consolidated Balance Sheets -
         September 30, 1996 and December 31, 1995                           3

         Condensed Consolidated Statements of Operations -
         Three Months and Nine Months Ended September 30, 1996 and 1995     4

         Condensed Consolidated Statements of Cash Flows -
         Nine Months Ended September 30, 1996 and 1995                      5

         Notes to Condensed Consolidated Financial Statements               6


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


         PART II.         OTHER INFORMATION

         Risk Factors                                                      11

Item 6.  Exhibits and Reports on Form 8-K                                  20

         Signatures                                                        21




                                                                          Page 2
<PAGE>

<TABLE>

                           MATRIX PHARMACEUTICAL, INC.
                          (a development stage company)

                      Condensed Consolidated Balance Sheets


<CAPTION>


                                                                (In thousands)

                                                          September 30,  December 31,
                                                               1996         1995
                                                          -------------  ------------
Assets                                                     (Unaudited)
<S>                                                         <C>          <C>      
Current assets:
    Cash and cash equivalents ...........................   $  19,683    $  55,675
    Short-term investments ..............................      32,688        9,646
    Other current assets ................................       2,206          952
                                                            ---------    ---------
       Total current assets .............................      54,577       66,273

Property and equipment, net .............................      17,055       15,919
Non-current investments .................................      68,970       12,010
Deposits and other assets, net ..........................         178          217
                                                            ---------    ---------
                                                            $ 140,780    $  94,419
                                                            =========    =========

Liabilities and Stockholders' Equity

Current liabilities:
    Accounts payable ....................................   $   1,414    $   1,605
    Accrued compensation ................................       1,051          844
    Accrued clinical trial costs ........................       1,035        1,814
    Other accrued liabilities ...........................         771          664
    Current portion of debt and capital lease obligations         661          830
                                                            ---------    ---------
       Total current liabilities ........................       4,932        5,757

Debt and capital lease obligations, less current portion       11,890       12,307
Stockholders' equity
    Capital stock .......................................     222,367      153,427
    Other ...............................................      (1,067)        (826)
    Deficit accumulated during the development stage ....     (97,342)     (76,246)
                                                            ---------    ---------
       Total stockholders' equity .......................     123,958       76,355
                                                            ---------    ---------
                                                            $ 140,780    $  94,419
                                                            =========    =========
<FN>
                             See Accompanying Notes
</FN>
</TABLE>
                                                                          Page 3

<PAGE>

                           MATRIX PHARMACEUTICAL, INC.
                          (a development stage company)

                 Condensed Consolidated Statements of Operations

                     (In thousands except per share amounts)



                                   Three Months Ended      Nine Months Ended
                                      September 30,           September 30,
                                 ---------------------   ---------------------
                                   1996        1995        1996        1995
                                 --------    --------    --------    --------
                                (Unaudited) (Unaudited) (Unaudited)  (Unaudited)
Revenues .....................   $   --      $   --      $   --      $   --

Costs and expenses:
   Research and development ..      6,110       5,471      18,114      14,406
   General and administrative       2,732       3,562       7,036       6,198
                                 --------    --------    --------    --------
      Total costs and expenses      8,842       9,033      25,150      20,604
                                 --------    --------    --------    --------

Loss from operations .........     (8,842)     (9,033)    (25,150)    (20,604)

Interest and other income, net      2,030         361       4,054       1,093
                                 --------    --------    --------    --------

Net loss .....................   $ (6,812)   $ (8,672)   $(21,096)   $(19,511)
                                 ========    ========    ========    ======== 


Net loss per share ...........   $  (0.32)   $  (0.76)   $  (1.07)   $  (1.78)
                                 ========    ========    ========    ======== 

Weighted average number of
shares outstanding ...........     21,248      11,366      19,689      10,975
                                 ========    ========    ========    ======== 



                             See Accompanying Notes

                                                                          Page 4


<PAGE>

                           MATRIX PHARMACEUTICAL, INC.
                          (a development stage company)

                 Condensed Consolidated Statements of Cash Flows
                Increase (Decrease) in Cash and Cash Equivalents

                                 (In thousands)



                                                           For the nine months
                                                           ended September 30,
                                                             1996         1995
                                                        ----------   -----------
                                                        (Unaudited)  (Unaudited)
Cash flows from operating activities:
       Net loss ......................................   $ (21,096)   $ (19,511)
       Adjustments to reconcile net loss to
        net cash used by operating activities:
          Depreciation and amortization ..............         772          677
          Amortization of deferred compensation ......         120          101
          Accrued marketing rights and fees (payments)        (250)       2,104
          Other ......................................         138          128
          Changes in other assets and liabilities ....      (1,871)         797
                                                         ---------    ---------
           Net cash (used) by operating activities ...     (22,187)     (15,704)
Cash flows from investing activities:
       Capital expenditures ..........................      (1,908)        (363)
       Investment in securities available-for-sale ...    (144,531)     (14,796)
       Proceeds of securities available-for-sale .....      42,832        5,114
       Maturities of investments .....................      21,734        4,072
                                                         ---------    ---------
          Cash flows (used) by investing activities ..     (81,873)      (5,973)
Cash flows from financing activities:
       Payments on debt and capital lease obligations         (336)        (309)
       Net cash proceeds from issuance of:
          Debt and capital lease financing ...........          --          232
          Convertible preferred stock ................          --          (45)
          Common stock ...............................      68,404       17,006
                                                         ---------    ---------
          Cash flows provided by financing activities       68,068       16,884
Net decrease in cash and cash equivalents ............     (35,992)      (4,793)
Cash and cash equivalents at the beginning of period .      55,675       10,276
                                                         ---------    ---------
Cash and cash equivalents at the end of period .......   $  19,683    $   5,483
                                                         =========    =========


                                                                          Page 5
<PAGE>

                           MATRIX PHARMACEUTICAL, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                               September 30, 1996




1.       Basis of presentation

                  The results of  operations  for the interim  periods  shown in
         this report are not  necessarily  indicative  of results to be expected
         for the year ending  December 31, 1996.  In the opinion of  management,
         the information  contained herein reflects all adjustments necessary to
         make the results of operations for the interim periods a fair statement
         of such  operations.  All such  adjustments  are of a normal  recurring
         nature.

                  These condensed  consolidated  financial  statements should be
         read in conjunction with the Company's audited  consolidated  financial
         statements for the year ended December 31, 1995,  which were filed with
         the Securities and Exchange  Commission on Form 10-K, and the Company's
         quarterly  reports on Form 10-Q, filed with the Securities and Exchange
         Commission for the quarters ended March 31, 1996 and June 30, 1996.

2.       Principles of consolidation

                  The consolidated  financial statements include the accounts of
         the Company and its wholly-owned  subsidiary  after  elimination of all
         material intercompany balances and transactions.

3.       Net loss per share

                  Net loss per  share is  computed  using the  weighted  average
         number of shares of common stock outstanding during the period.  Common
         stock  equivalents  consisting of stock options,  convertible  Series A
         preferred  shares and  warrants are excluded  from the  computation  as
         their impact is anti-dilutive.

4.       Cash and cash  equivalents,  short-term  investments,  and  non-current
         investments

                  The  Company   invests  its  excess  cash  in  government  and
         corporate  securities.  Highly liquid  investments  with  maturities of
         three months or less at the date of  acquisition  are considered by the
         Company to be cash  equivalents.  Investments  with  maturities  beyond
         three months at the date of acquisition and that mature within one year
         from  the  balance   sheet  date  are   considered   to  be  short-term
         investments.  Investments with maturities longer than one year from the
         balance  sheet  date  are  classified  as  short-term   investments  or
         non-current investments based on the Company's intended holding period.

                  The  Company   maintains  its  cash,   cash   equivalents  and
         investments in several different  instruments held by various banks and
         brokerage houses.  This  diversification of risk is consistent with the
         Company's  policy  to  maintain  liquidity  and  ensure  the  safety of
         principal.


                                                                          Page 6

<PAGE>

                  The Company determines the appropriate  classification of debt
         securities at the time of purchase and reevaluates  such designation as
         of each balance sheet date.  The amortized  cost of debt  securities is
         adjusted for  amortization  of premiums  and  accretion of discounts to
         maturity.  Such  amortization is included in interest and other income.
         Realized   gains  and  losses  and  declines  in  value  judged  to  be
         other-than-temporary  are also  included in interest and other  income.
         The cost of  securities  sold is based on the  specific  identification
         method.  Debt  securities are classified as  held-to-maturity  when the
         Company has the positive  intent and ability to hold the  securities to
         maturity and are carried at amortized cost.

                  Debt securities  which are not classified as  held-to-maturity
         and which are not held for resale in anticipation of short-term  market
         movements  are  classified  as  available-for-sale.  Available-for-sale
         securities  are carried at fair value,  with the  unrealized  gains and
         losses,  net of tax, reported in a separate  component of stockholders'
         equity.

5.       Stockholders' equity

                  On April  8,  1996,  the  Company  closed  a  public  offering
         pursuant to which 3,162,500  shares of the Company's  common stock were
         sold at $22.63 per share  resulting in net proceeds of $67.4 million to
         the Company.



                                                                          Page 7
<PAGE>

                           MATRIX PHARMACEUTICAL, INC.


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

         This report contains  certain  statements of a  forward-looking  nature
relating  to future  events  or the  future  performance  of the  Company.  Such
statements  are only  predictions  and the actual  events or results  may differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such  differences  include those  discussed in
"Risk Factors" in the Company's reports on Form 10-K for 1995 and Forms 10-Q for
the  quarters  ended  March  31 and June 30,  1996,  as well as those  discussed
elsewhere in this report.

Results of Operations

         Three and Nine Months Ended September 30, 1996 and 1995

         Since  the  Company's  inception  in  1985,  the  primary  focus of its
operations  has been research and  development,  and to date it has not received
any revenues from the commercial sale of products.  The Company anticipates that
it will not recognize any revenues from commercial sales until 1997. The Company
has a history of operating  losses and expects to incur  substantial  additional
losses over the next several years as it continues to develop its products.  For
the period from February 11, 1985  (inception) to September 30, 1996 the Company
has incurred a cumulative net loss of $97,342,000.

         The Company  had no revenue in the third  quarters of 1996 and 1995 and
the first nine months of 1996 and 1995.

         Research  and  development  expenses  for  the  third  quarter  of 1996
increased by 12% to $6,110,000  compared to $5,471,000  for the third quarter of
1995.  For the first nine  months of 1996,  research  and  development  expenses
increased by 26% to  $18,114,000  compared to $14,406,000 in 1995. The quarterly
and  year-to-date  increases  were primarily due to higher  personnel  expenses,
higher  clinical  costs to support  studies in the areas of head and neck cancer
and other accessible tumors,  higher occupancy  expenses,  and higher production
costs in preparation for the commercial launch of AccuSite(TM) for the treatment
of genital warts.  This increase was partially  offset by a decrease in clinical
costs for basal cell cancer.

         General and administrative  expenses decreased by 23% to $2,732,000 for
the third quarter of 1996 compared to $3,562,000  for the third quarter of 1995.
For the first nine months of 1996, general and administrative expenses increased
by 14% to  $7,036,000  compared to $6,198,000  for the same period in 1995.  The
third  quarter  1996  reflected  a net  decrease  in expenses as a result of the
repurchase of the US and European  marketing rights to AccuSite(TM) in the third
quarter 1995 for $2,000,000. This was offset by increases in personnel expenses,
including  the  hiring  of  additional  marketing  staff,   Accusite(TM)  market
prelaunch  expenses,   and  legal  expenses  due  to  ongoing  litigation.   The
year-to-date increase was due to increases in personnel expenses,  including the
hiring of additional  marketing staff,  Accusite(TM)  market prelaunch expenses,
legal  expenses due to ongoing  litigation,  and office related  expenses.  This
increase  was  partially  offset  by  the  repurchase  of  marketing  rights  to
AccuSite(TM)  in the  third  quarter  of 1995.  Legal  expenses  related  to the
Company's ongoing  litigation,  regardless of outcome,  may exceed $2,000,000 in
1996.


                                                                          Page 8

<PAGE>

         Net  interest and other income  increased to  $2,030,000  for the third
quarter of 1996  compared to  $361,000  for the third  quarter of 1995.  For the
first nine months of 1996, net interest and other income increased to $4,054,000
compared to $1,093,000 in 1995.  The increase was primarily the result of higher
average balances in cash, cash equivalents and marketable securities in 1996 and
rental  income  received  from the lease of a portion of the Company's San Diego
facility.  This was partially offset by higher interest expense  associated with
the mortgage on the Company's San Diego manufacturing facility.

Liquidity and Capital Resources

         At September  30, 1996,  the Company had $121.3  million in cash,  cash
equivalents and marketable  securities compared to $77.3 million at December 31,
1995.

         On April 8, 1996,  the  Company  closed a public  offering  pursuant to
which  3,162,500  shares of the  Company's  common stock were sold at $22.63 per
share resulting in net proceeds of $67.4 million to the Company.

         During the first  quarter  of 1996,  13,334  outstanding  shares of the
Company's  Series A preferred stock were converted into 1,333,400  shares of the
Company's common stock.

         From its inception, the Company has financed its operations and capital
asset  acquisitions  through the sale of equity  securities,  contract  research
revenues,  interest  income,  and capital lease and debt financing.  The Company
expects to finance its continued operating requirements principally with cash on
hand as well as with  additional  capital  generated  through  equity  and  debt
financings and collaborative agreements.

         The Company's  working capital and capital  requirements will depend on
numerous  factors,   including  the  progress  of  the  Company's  research  and
development  programs,  preclinical  testing and clinical trial activities,  the
timing and cost of obtaining regulatory approvals,  the levels of resources that
the  Company  devotes  to  the  development  of   manufacturing   and  marketing
capabilities, technological advances and the status of competitors.

         In December  1995, the Company  purchased a research and  manufacturing
facility in San Diego,  California.  The Company intends to use this facility to
meet its  long-term  commercial  scale  production  requirements.  This facility
requires   validation  and  process   installation  that  will  require  capital
expenditures  of  approximately  $10.5  million.  On July 15, 1996,  the Company
entered into an agreement to lease out a portion of its San Diego  manufacturing
facility.  The lease has a term of two years and the  rental  income  during the
period totals approximately $2.9 million.

         In May  1996  the  Company  announced  a delay  in the  development  of
AccuSite(TM) Injectable Gel for patients with basal cell cancer. This delay is a
result of  disappointing  findings in preliminary data analysis of two identical
Phase II  "contribution  of components"  trials.  These studies were designed to
demonstrate  that each major component of the AccuSite(TM) gel system provides a
statistically  significant  contribution to the  performance of the product.  In
September  1996, the Company further updated the status of its basal cell cancer
program.  As a result of  conducting  an interim  analysis of data from  another
Phase III basal cell cancer  study,  the Company has  concluded  that it will be
difficult to  commercialize  this program given the high response rates obtained
by surgical procedures.


                                                                          Page 9

<PAGE>


         The Company expects to incur  substantial  additional costs relating to
the  continued  clinical  development  of its products,  continued  research and
development   programs,   the   development   of  marketing  and   manufacturing
capabilities,  the purchase of additional  capital equipment and general working
capital  requirements.  The Company  anticipates that its existing and committed
capital  resources,  including  the proceeds of the April 1996 public  offering,
will enable it to maintain its current and planned  operations through 1998. The
Company may require  additional  outside  financing  to complete  the process of
bringing current  products to market,  and while the Company is not aware of any
limitations  on future  sources of capital,  there can be no assurance that such
financing will be available on favorable terms, if at all.

         Capital  expenditures  for  environmental   control  efforts  were  not
material during the first nine months of 1996 and 1995.



                                                                         Page 10


<PAGE>

                           MATRIX PHARMACEUTICAL, INC.

                                  RISK FACTORS

No Assurance of Regulatory Approvals

         The preclinical and clinical testing,  manufacturing,  and marketing of
the  Company's  products  are  subject  to  extensive   regulation  by  numerous
governmental  authorities in the United States and other  countries,  including,
but not  limited  to, the FDA.  Among other  requirements,  FDA  approval of the
Company's  products,  including  a review  of the  manufacturing  processes  and
facilities used to produce such products,  will be required before such products
may be marketed in the United States. Similarly, marketing approval by a foreign
governmental  authority  is  typically  required  before  such  products  may be
marketed in a particular foreign country. Matrix has no products approved by the
FDA and one  product  approved  by a foreign  authority  and does not  expect to
achieve  profitable   operations  unless  other  product  candidates  now  under
development  receive  FDA and foreign  regulatory  approval  and are  thereafter
commercialized successfully.

         In  order to  obtain  FDA  approval  of a  product,  the  Company  must
demonstrate  to the  satisfaction  of the FDA  that  such  product  is safe  and
effective for its intended uses and that the Company is capable of manufacturing
the product with procedures that conform to the FDA's current good manufacturing
practice ("GMP")  regulations,  which must be followed at all times. The Company
has  had  only  limited   experience  in  submitting  and  pursuing   regulatory
applications.  The  process of  obtaining  FDA  approvals  can be  costly,  time
consuming,  and subject to unanticipated  delays. There can be no assurance that
such approvals will be granted to the Company on a timely basis, or at all.

         The process of obtaining FDA regulatory  approval  involves a number of
steps that, taken together,  may involve seven years or more from the initiation
of clinical trials and require the expenditure of substantial  resources.  Among
other  requirements,  this process  requires that the product undergo  extensive
preclinical and clinical testing and that the Company file an NDA requesting FDA
approval.  When a product  contains more than one component that  contributes to
the product's effect, as do all of the Company's current product candidates, the
FDA may request that  additional  data be submitted in order to demonstrate  the
contribution  of each such  component to clinical  efficacy.  In addition,  when
there has been a  manufacturing  change in a product  component  (either  in the
process  by  which  the  component  is  manufactured  or the site at which it is
manufactured) during product  development,  as is the case with the collagen gel
used in the Company's AccuSite product, the FDA may request that additional data
be submitted to demonstrate that the  manufacturing  change has not affected the
clinical performance of the product. In addition,  the manufacturing  facilities
for the product must be inspected and accepted by the FDA as being in compliance
with GMP regulations prior to approval of the product. There can be no assurance
that the  Company's  current  manufacturing  facilities in San Jose and Milpitas
will continue to be accepted by the FDA, or that its San Diego  facility will be
accepted in the future, and failure to receive or maintain such acceptance would
have a material adverse effect on the Company's business.

         Matrix has used three different sources of collagen gel in the products
on which it has conducted clinical trials:  Koken Co., Ltd. ("Koken"),  Collagen
Corporation  ("Collagen")  and its own  production.  The Company  intends to use
collagen gel of its own  manufacture in products it markets  commercially if FDA
approval is received.  Accordingly,  the Company has not  referenced  Collagen's
Pre-Market Approval files in its NDA. (See "--Litigation" )


                                                                         Page 11

<PAGE>

         However, as noted above, when there has been a manufacturing  change in
a product, such as a change in the supplier of a component,  the FDA may request
that additional data be submitted to demonstrate that the  manufacturing  change
has not  affected the  clinical  performance  of the product as shown in earlier
clinical  trials.  Accordingly,  Matrix has  conducted  a series of  preclinical
studies to show  comparability of products made from Collagen,  Koken and Matrix
collagen gel, a human  pharmakokinetic  study to show  comparability of products
made with Matrix and Collagen  collagen  gel,  and Phase III clinical  trials to
show comparability in clinical performance of a product made with Koken collagen
gel and a product made with Collagen  collagen gel. The Company also conducted a
Phase III(b) clinical trial to demonstrate the comparable  clinical  performance
of a product  made with  Matrix  collagen  gel to a product  made with  Collagen
collagen  gel.  The Company  believes  that all studies  conducted  to date have
supported the comparable clinical performance of products made with collagen gel
from all three  sources,  but there can be no assurance that the FDA will agree.
In  addition,  there can be no assurance  that the FDA will not require  further
clinical  demonstrations  either of the  comparability  of a  product  made with
Matrix collagen gel to product made with Collagen collagen gel or Koken collagen
gel, or the safety and efficacy of a product made with Matrix  collagen  gel. If
questions arise during the FDA review process about  comparability  or about the
safety and efficacy of a product made with collagen, it could delay the approval
process  or prevent  approval  and will  increase  the costs of  obtaining  such
approval.

         The Company's analysis of the results of its clinical studies submitted
as part of an NDA is subject to review and  interpretation by the FDA, which may
differ from the Company's analysis. There can be no assurance that the Company's
data or its  interpretation  of data will be accepted  by the FDA. In  addition,
delays or rejections may be encountered  based upon changes in applicable law or
FDA policy during the period of product  development and FDA regulatory  review.
Any failure to obtain,  or delay in  obtaining,  FDA approvals  would  adversely
affect the ability of the  Company to market its  proposed  products.  Moreover,
even  if  FDA  approval  is  granted,  such  approval  may  include  significant
limitations on indicated uses for which a product could be marketed.

         Both  before  and  after   approval  is   obtained,   a  product,   its
manufacturer,  and  the  holder  of the  NDA  for the  product  are  subject  to
comprehensive regulatory oversight. Violations of regulatory requirements at any
stage,  including the preclinical  and clinical  testing  process,  the approval
process  or  thereafter  (including  after  approval),  may  result  in  adverse
consequences,  including  the FDA's delay in  approving  or refusal to approve a
product,  withdrawal  of  an  approved  product  from  the  market,  and/or  the
imposition of criminal penalties against the manufacturer and/or the NDA holder.
In  addition,  later  discovery of  previously  unknown  problems  relating to a
marketed  product may result in restrictions on such product,  manufacturer,  or
the NDA holder,  including  withdrawal of the product from the market. Also, new
government   requirements  may  be  established  that  could  delay  or  prevent
regulatory   approval  of  the  Company's   products  under   development.   See
"--Uncertainty   of   Pharmaceutical   Pricing;   No   Assurance   of   Adequate
Reimbursement."

         The processes  required by European  regulatory  authorities before the
Company's products can be marketed in Western Europe are similar to those in the
United States.  First,  appropriate  preclinical  laboratory and animal tests as
well as analytical product quality tests must be done, followed by submission of
a  clinical  trial  exemption  ("CTX")  or similar  documentation  before  human
clinical   trials  can  be   initiated.   Upon   completion   of  adequate   and
well-controlled  clinical  trials in humans that establish that the drug is safe
and efficacious, regulatory approval of a Market Authorization Application (MAA)
must be obtained from the relevant regulatory authorities. The Company filed its
MAA for AccuSite in the United Kingdom in August 1995. The Company  subsequently
filed an MAA in Germany, France, Italy and Sweden. As with the United States FDA
review  process,  there  are  numerous  risks  associated  with the MAA  review.
Additional data may be requested by the regulatory  agency  reviewing the MAA to
demonstrate the  contribution of a 

                                                                         Page 12

<PAGE>

product  component  to the  clinical  safety and  efficacy  of a product,  or to
confirm  the  comparable   performance  of  materials   produced  by  a  changed
manufacturing process or at a changed manufacturing site.

         In June 1996, the Company was notified by the Medicines  Control Agency
in the United Kingdom that a product  license has been granted for  AccuSite(TM)
for the treatment of genital warts. However, there can be no assurance of mutual
recognition  by other  participating  countries of the approval  obtained in the
United Kingdom.

Uncertainties Associated with Clinical Trials

         Matrix has conducted  and plans to continue to undertake  extensive and
costly  clinical  testing to assess the safety  and  efficacy  of its  potential
products.  Failure to comply with FDA regulations applicable to such testing can
result in delay, suspension,  or cancellation of such testing, and/or refusal by
the FDA to accept the results of such testing. In addition,  the FDA may suspend
clinical  trials  at any time if it  concludes  that the  subjects  or  patients
participating  in such trials are being  exposed to  unacceptable  health risks.
Further,  there can be no assurance  that human  clinical  testing will show any
current  or  future  product  candidate  to be safe and  effective  or that data
derived therefrom will be suitable for submission to the FDA.

         The Company is currently  conducting  multiple  clinical  trials in the
United  States and certain  foreign  countries,  including two ongoing Phase III
trials.  The rate of completion of the  Company's  clinical  trials is dependent
upon, among other factors, the rate of patient enrollment. Patient enrollment is
a function of many factors,  including the size of the patient  population,  the
nature of the  protocol,  the  proximity  of patients to clinical  sites and the
eligibility  criteria for the study.  Delays in planned  patient  enrollment may
result in increased costs and delays, which could have a material adverse effect
on the Company.  Generally similar considerations apply to clinical testing that
is  subject  to  regulatory  oversight  by foreign  authorities  and/or  that is
intended to be used in connection with foreign marketing applications.

         In May  1996  the  Company  announced  a delay  in the  development  of
AccuSite(TM) Injectable Gel for patients with basal cell cancer. This delay is a
result of  disappointing  findings in preliminary data analysis of two identical
Phase II  "contribution  of components"  trials.  These studies were designed to
demonstrate  that each major component of the AccuSite(TM) gel system provides a
statistically  significant  contribution to the  performance of the product.  In
September  1996, the Company further updated the status of its basal cell cancer
program.  As a result of  conducting  an interim  analysis of data from  another
Phase III basal cell cancer  study,  the Company has  concluded  that it will be
difficult to  commercialize  this program given the high response rates obtained
by surgical  procedures.  If the Company fails to  commercialize  its basal cell
cancer program, this could have a material adverse impact on the Company.

History of Losses; Future Profitability Uncertain

         Matrix was incorporated in 1985 and has experienced  significant losses
since that date. As of September 30, 1996, the Company's accumulated deficit was
approximately  $97.3  million.  The Company has not generated  revenues from its
products  and  expects  to incur  significant  additional  losses  over the next
several years. The Company's ability to achieve a profitable level of operations
is  dependent  in large  part on  successfully  developing  products,  obtaining
regulatory  approvals  for  its  products,  and  making  the  transition  to  an
organization  producing  commercial  products and entering into  agreements  for
product commercialization.  No assurance can be given that the Company's product
development efforts will be completed,  that required regulatory  approvals will
be obtained,  that any products will be manufactured and marketed  successfully,
or that profitability will be achieved.

                                                                         Page 13

<PAGE>

Additional Financing Requirements and Uncertain Access to Capital Markets

         The Company has expended and will continue to expend  substantial funds
to complete the research, development and marketing of its products. The Company
will require  additional funds for these purposes through  additional  equity or
debt  financings,  collaborative  arrangements  with corporate  partners or from
other  sources.  No assurance  can be given that such  additional  funds will be
available on acceptable  terms,  if at all. If adequate  funds are not available
from operations or additional sources of financing, the Company's business could
be materially and adversely  affected.  Based on its current operating plan, the
Company  anticipates  that its existing  capital  resources  will be adequate to
satisfy its  capital  needs  through  1998.  See  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations."

Limited Sales and Marketing Experience

         The  Company  intends to market and sell  certain of its  products,  if
successfully developed and approved,  through a direct sales force in the United
States, by co-promoting  certain products to selected physician  specialties and
through sales and marketing partnership  arrangements outside the United States.
The Company  currently  has limited  marketing  and sales staff,  and has yet to
announce  any  co-promotion  or  distribution   arrangements.   The  Company  is
developing a sales and  marketing  plan for  AccuSite and its other  products in
clinical development. In order to market its products directly, the Company must
develop a sales force with technical  expertise.  There can be no assurance that
the Company will be able to establish a successful direct sales  organization or
co-promotion  or  distribution  arrangements.  In  addition,  there  can  be  no
assurance  that there will be sufficient  sales of AccuSite or other products to
fund related  expenses,  many of which must be incurred  before sales  commence.
Failure to  establish  a marketing  and sales  capability  in the United  States
and/or  outside  the United  States may have a  material  adverse  effect on the
Company.

Limited Manufacturing Experience

         The Company's  ability to conduct clinical trials on a timely basis, to
obtain  regulatory  approvals and to  commercialize  its products will depend in
part upon its ability to manufacture  its products,  either  directly or through
third parties,  at a competitive  cost and in accordance with applicable FDA and
other  regulatory  requirements,  including  GMP  regulations.  The  Company  is
currently  manufacturing  AccuSite and IntraDose for its clinical  trials at its
manufacturing  facilities  in San  Jose  and  Milpitas,  California,  as well as
contract manufacturing  facilities.  The Company anticipates that its facilities
in San Jose and Milpitas should provide sufficient  production  capacity to meet
clinical and early commercial  requirements of its AccuSite product and selected
components  for  IntraDose  products  through  1997.  However,  there  can be no
assurance  that the Company will be able to produce  adequate  quantities of its
products  for   commercial   marketing   and  for  its  clinical   trials  in  a
cost-effective  manner or that the Company's  current  manufacturing  facilities
will continue to be accepted by the FDA.

         In December  1995, the Company  purchased a research and  manufacturing
facility in San Diego,  California.  The Company intends to use this facility to
meet its  long-term  commercial  scale  production  requirements.  This facility
requires   validation  and  process   installation  that  will  require  capital
expenditures of  approximately  $10.5 million.  The Company  estimates that this
facility  will not be  available  for  production  until  1998.  There can be no
assurance  that the Company will be able to validate and scale up this  facility
in a timely manner or that this facility will be adequate for Matrix's long-term
needs  without  delay to the Company's  ability to meet product  demand.  Matrix
expects to continue to use selected contract  manufacturers,  in addition to its
own manufacturing capability, for some or all of its product components. Failure
to  establish  additional  manufacturing  capacity on a timely  basis may have a
material adverse effect on the Company.

                                                                         Page 14

<PAGE>

Dependence on Sources of Supply

         Several of the materials  used in the Company's  products are available
from a limited  number of  suppliers.  These items,  including  collagen gel and
various bulk drug substances used in the Company's products, have generally been
available to Matrix and others in the  pharmaceutical  industry on  commercially
reasonable  terms.  If the Company's  manufacturing  facilities  are not able to
produce  sufficient  quantities  of collagen gel in accordance  with  applicable
regulations,  the Company would have to obtain  collagen gel from another source
and gain regulatory approval for that source. There can be no assurance that the
Company would be able to locate an alternative,  cost-effective source of supply
of collagen  gel.  Matrix has  negotiated  and intends to continue to  negotiate
supply agreements, as appropriate,  for the components of raw materials utilized
in its products.  Matrix is also in the process of attempting to approve  second
sources for as many as possible of these  supplies.  Any  interruption of supply
could have a material adverse effect on the Company's ability to manufacture its
products,   and  thus  the  ability  to  complete  the  clinical  trials  or  to
commercialize  products. In addition,  cisplatin,  a chemotherapeutic drug being
used by the Company in its current clinical trials, is currently  available only
for  research  purposes in the United  States.  Prior to the  expiration  of the
patent  in the  United  States,  the  Company  may  not  commercialize  products
incorporating cisplatin in the United States without a license. To the Company's
knowledge,  there are no such restrictions in Europe.  The Company's process for
manufacturing  collagen gel is currently  being  challenged in  litigation  with
Collagen. See "--Litigation."

Litigation

         On December 21, 1994,  Collagen filed a lawsuit  against the Company in
Santa Clara County  Superior  Court alleging  misappropriation  of trade secrets
concerning the manufacturing process for collagen,  including breach of contract
and fraud. The Complaint seeks unspecified damages and injunctive relief related
to Matrix's  manufacture of collagen,  its regulatory  filings and its hiring of
current or former  Collagen  employees.  On February 14, 1995, the Company filed
its answer to  Collagen's  complaint,  denying  all claims of  misappropriation,
asserting  several  affirmative  defenses and seeking recovery of its attorneys'
fees.  Matrix  has also  filed a  cross-complaint  against  Collagen  and Howard
Palefsky,  Collagen's Chief Executive  Officer,  seeking recovery of damages for
defamation,  violations of California  antitrust law and other causes of action.
The parties are  currently  conducting  discovery and no trial date has been set
with respect to any of the claims asserted by Collagen or by the Company.

         On September 12, 1995, Collagen filed a First Amended Complaint, adding
as  defendants  two  former  Collagen  employees  currently  working  at Matrix,
alleging  that these  employees  used  confidential  documents  and  information
acquired  by  them as  Collagen  employees  for the  benefit  of  Matrix.  These
employees had been accused of wrong-doing in the original  Complaint  along with
other former Collagen employees, but not named as defendants.  The First Amended
Complaint purports to add causes of action for conversion against Matrix and the
two  individual  defendants,  and for breach of contract,  breach of confidence,
breach of  fiduciary  obligation  and breach of the duty of loyalty  against the
former Collagen employees.  Matrix is alleged to have induced such breaches. The
First Amended  Complaint adds to the requested relief of the original  Complaint
for damages and injunctive relief a request for the imposition of a constructive
trust on the alleged fruits of the alleged trade secret misappropriation.

         The lawsuit follows a series of contract  negotiations in 1994 aimed at
developing a long-term supply relationship between Collagen and Matrix. Although
processes to  manufacture  collagen gel have been in the public  domain for many
years,  Collagen is presently the only commercial source for collagen gel in the
United States.  Prior to developing its own manufacturing  process,  Matrix used
collagen  gel from two  additional  sources in its  clinical  trials,  including

                                                                         Page 15

<PAGE>

collagen  gel  manufactured  by Koken and by  Collagen.  See "-- No Assurance of
Regulatory Approvals."

         The  Company  believes  that  the  manufacturing  process  which it has
developed for collagen gel does not  incorporate  any Collagen trade secrets and
that the  lawsuit  filed by  Collagen  is without  merit.  Although  the Company
intends to defend  against  this suit  vigorously,  no  assurances  can be given
regarding its eventual  outcome.  This litigation does not involve any claims of
patent infringement. A finding of misappropriation of trade secrets could result
in  damages  and/or  a  significant  restriction  on the  Company's  ability  to
manufacture its products. Such a finding would also require the Company to alter
its  manufacturing  process,  or seek an alternate source of collagen gel. There
can be no assurance  that the Company  would be able to alter its  manufacturing
process, if required,  in a timely manner, or at all or that it would be able to
secure an alternative  source of collagen gel on commercially  reasonable terms,
or at all. As a result,  there can be no  assurance  that this  lawsuit will not
delay the Company's  product  approvals or affect its ability to manufacture its
products, each of which would have a material adverse effect on the Company, its
prospects and financial  condition.  Additionally,  the costs of litigating this
matter, regardless of outcome, may exceed $2,000,000 in 1996.

Uncertainty Regarding Patents and Proprietary Rights

         The Company's  success  depends in part on its ability to obtain patent
protection  for its  products  and to  preserve  its trade  secrets  and operate
without infringing on the proprietary rights of third parties.  No assurance can
be given that the Company's pending patent applications will be approved or that
any patents will provide  competitive  advantages for the Company's  products or
will not be  successfully  challenged or circumvented  by its  competitors.  The
Company has not  conducted an  exhaustive  patent search and no assurance can be
given  that  patents  do not  exist or could  not be filed  which  would  have a
material  adverse  effect on the  Company's  ability to market its  products  or
maintain its  competitive  position with respect to its products.  The Company's
patents  may not prevent  others  from  developing  competitive  products  using
related  technology.  Other companies  obtaining  patents  claiming  products or
processes  useful to the  Company  may bring  infringement  actions  against the
Company. As a result, the Company may be required to obtain licenses from others
to develop,  manufacture or market its products.  There can be no assurance that
the Company will be able to obtain any such licenses on commercially  reasonable
terms,  if at all.  The  Company  also relies on trade  secrets and  proprietary
know-how which it seeks to protect, in part, by confidentiality  agreements with
its employees,  consultants,  suppliers and licensees. There can be no assurance
that these agreements will not be breached, that the Company would have adequate
remedies for any breach,  or that the Company's trade secrets will not otherwise
become known or be independently developed by competitors.

         No  assurance  can be given that any patent  issued to, or licensed by,
the Company will provide  protection that has commercial  significance.  In this
regard,  the patent  position of  pharmaceutical  compounds and  compositions is
particularly uncertain.  Even issued patents may later be modified or revoked by
the United States Patent and Trademark Office ("PTO") in proceedings  instituted
by Matrix or others.  During an  opposition  proceeding  in Japan,  the  Company
became  aware of a  reference  which may affect  the scope of its United  States
Patent  claims  which cover the collagen  gel matrix  products.  The Company has
brought this  reference to the attention of the PTO for a  determination  of the
extent to which the claims  should be  modified in light of this  reference.  No
assurance can be given concerning the outcome of the determination, although the
Company  believes that  modifications of the claims that may be required because
of the reference will not materially adversely affect the Company's  proprietary
protection  for its  products.  In addition,  no assurance can be given that the
Company's  patents  will afford  protection  against  competitors  with  similar
compounds or technologies,  that others will not obtain patents claiming aspects
similar to those covered by the Company's  patents or applications,  or that the
patents of others will not have an adverse  effect on the ability of the Company
to do business.  Moreover,  the 

                                                                         Page 16

<PAGE>

Company  believes that  obtaining  foreign  patents may be more  difficult  than
obtaining domestic patents because of differences in patent laws, and recognizes
that its patent  position  therefore  may be stronger in the United  States than
abroad. In addition,  the protection provided by foreign patents,  once they are
obtained, may be weaker than that provided by domestic patents.

Rapid Technological Change and Substantial Competition

         The  pharmaceutical  industry  is  subject  to  rapid  and  substantial
technological   change.   Technological   competition   in  the  industry   from
pharmaceutical and biotechnology companies, universities,  governmental entities
and others  diversifying  into the field is intense and is expected to increase.
Most of these  entities  have  significantly  greater  research and  development
capabilities, as well as substantially more marketing,  financial and managerial
resources  than the  Company,  and  represent  significant  competition  for the
Company.  Acquisitions of, or investments in, competing  biotechnology companies
by large  pharmaceutical  companies could increase such competitors'  financial,
marketing and other  resources.  There can be no assurance that  developments by
others will not render the Company's products or technologies  noncompetitive or
that the  Company  will be able to keep  pace with  technological  developments.
Competitors have developed or are in the process of developing technologies that
are, or in the future may be, the basis for competitive products.  Some of these
products  may have an  entirely  different  approach  or means of  accomplishing
similar therapeutic effects than products being developed by the Company.  These
competing  products  may be more  effective  and less costly  than the  products
developed by the Company.  In addition,  conventional drug therapy,  surgery and
other more familiar  treatments  and  modalities  will offer  competition to the
Company's products.

         Any product which the Company  succeeds in developing  and for which it
gains  regulatory  approval must then compete for market  acceptance  and market
share. Accordingly,  important competitive factors, in addition to completion of
clinical  testing and the gaining of regulatory  approval,  will include product
efficacy,  safety,  timing and scope of regulatory  approvals,  availability  of
supply,  marketing and sales  capability,  reimbursement  coverage,  pricing and
patent protection.

Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate Reimbursement

         The future revenues and  profitability  of and  availability of capital
for  biopharmaceutical  companies may be affected by the  continuing  efforts of
governmental  and third  party  payers to  contain or reduce the costs of health
care through various means.  For example,  in certain foreign markets pricing or
profitability of prescription  pharmaceuticals is subject to government control.
In the United States,  there have been, and the Company  expects that there will
continue to be, a number of federal and state  proposals  to  implement  similar
government   control.   While  the  Company  cannot  predict  whether  any  such
legislative  or  regulatory  proposals  will be  adopted,  the  announcement  or
adoption of such proposals could have a material adverse effect on the Company's
prospects. Additionally, the cost of prescription drugs is receiving substantial
attention  in the United  States  Congress.  Legislation  enacted  in 1990,  and
amended and  strengthened  in 1992,  requires  pharmaceutical  manufacturers  to
rebate to the  government a portion of their  revenues  from drugs  furnished to
Medicaid  patients.  In  1992,   legislation  was  enacted  that  extends  these
requirements to cover outpatient pharmaceuticals,  and also mandates a reduction
in pharmaceutical prices charged to certain federally-funded  facilities as well
as to certain hospitals serving a disproportionate share of low-income patients.
It is likely that Congressional  attention will continue to focus on the cost of
drugs  generally,  and particularly on increases in drug prices in excess of the
rate of inflation, given recent government initiatives pertaining to the overall
reform of the U.S.  health  care  system,  and those  specifically  directed  at
lowering  total costs.  The Company  cannot predict the likelihood of passage of
federal and state  legislation  related to health  care reform or lowering  drug
costs.

                                                                         Page 17

<PAGE>

         The Company's ability to commercialize  its products  successfully will
depend in part on the extent which appropriate reimbursement levels for the cost
of such products and related treatment are obtained from government authorities,
private  health  insurers and other  organizations,  such as health  maintenance
organizations  ("HMOs").  Third-party  payers are  increasingly  challenging the
prices  charged for medical  products  and  services.  Also,  the trend  towards
managed  health  care  in  the  United  States  and  the  concurrent  growth  of
organizations  such as HMOs, which could control or significantly  influence the
purchase of health care services and products,  as well as legislative proposals
to reform health care or reduce government insurance programs, may all result in
lower prices for the  Company's  products.  The cost  containment  measures that
health care payers and  providers are  instituting  and the effect of any health
care reform could  adversely  affect the Company's  ability to sell its products
and may have a material adverse effect on the Company.

Dependence Upon Qualified and Key Personnel

         Because  of the  specialized  nature  of the  Company's  business,  the
Company's ability to maintain its competitive position depends on its ability to
attract and retain qualified  management and scientific  personnel.  Competition
for such  personnel is intense.  There can be no assurance that the Company will
be able to continue to attract or retain such persons. The loss of key personnel
or the failure to recruit  additional  personnel  could have a material  adverse
effect on the Company's business.

Product Liability Exposure; Limited Insurance Coverage

         The  Company  faces an  inherent  business  risk of exposure to product
liability  claims in the  event  that the use of  products  during  research  or
commercialization results in adverse effects. While the Company will continue to
attempt to take appropriate precautions,  there can be no assurance that it will
avoid  significant  product  liability  exposure.  The Company maintains product
liability  insurance for clinical  studies.  However,  there can be no assurance
that such  coverage  will be adequate or that  adequate  insurance  coverage for
future  clinical  or  commercial  activities  will be  available  at all,  or at
acceptable  cost,  or  that a  product  liability  claim  would  not  materially
adversely affect the business or financial condition of the Company.

Hazardous Materials and Product Risks

         The Company's  research and development  involves the controlled use of
hazardous  materials,  such as  cytotoxic  drugs,  other toxic and  carcinogenic
chemicals and various radioactive compounds.  Although the Company believes that
its safety  procedures for handling and disposing of such materials  comply with
the standards  prescribed by federal,  state and local regulations,  the risk of
accidental  contamination  or injury from these  materials  cannot be completely
eliminated.  In the event of such an accident,  the Company could be held liable
for any damages that result,  and any such  liability  could be  extensive.  The
Company is also  subject to  substantial  regulation  relating  to  occupational
health and safety,  environmental  protection,  hazardous substance control, and
waste management and disposal. The failure to comply with such regulations could
subject the Company to, among other things, fines and criminal liability.

         Certain of the  chemotherapeutic  agents employed by the Company in its
Therapeutic  Implant,  ADV and Therapeutic  Adhesive  products are known to have
toxic  side  effects,   particularly   when  used  in  traditional   methods  of
administration.  Each product  incorporating such a chemotherapeutic  agent will
require  separate  FDA  approval  as a new drug under the  procedures  specified
above.  Bovine  collagen is a  significant  component of the  Company's  protein
matrix.  Two rare autoimmune  connective  tissue  conditions,  polymyositis  and
dermatomyositis  ("PM/DM"),  have been alleged to occur with increased frequency
in patients  who have  received  cosmetic  collagen  treatments.  Based upon the
occurrence of these conditions, the FDA requested a major manufacturer of bovine
collagen  products for cosmetic  applications  to investigate the safety of such

                                                                         Page 18

<PAGE>

uses of its collagen.  In October  1991, an expert panel  convened by the FDA to
examine  this issue found no  statistically  significant  relationships  between
injectable  collagen and the  occurrence of autoimmune  disease,  but noted that
certain  limitations  in the  available  data made it  difficult  to establish a
statistically significant association.

Volatility of Stock Price; No Dividends

         The market prices for securities of biopharmaceutical and biotechnology
companies  (including the Company) have historically  been highly volatile,  and
the  market  has from time to time  experienced  significant  price  and  volume
fluctuations  that are  unrelated to the  operating  performance  of  particular
companies. Future announcements concerning the Company, its competitors or other
biopharmaceutical products,  governmental regulation,  developments in patent or
other  proprietary  rights,  litigation  or public  concern  as to the safety of
products  developed by the Company or others and general  market  conditions may
have a significant  effect on the market price of the Common Stock.  The Company
has not paid any cash  dividends  on its  Common  Stock and does not  anticipate
paying any dividends in the foreseeable future.

Anti-Takeover Provisions

         The ability of the Board of Directors of the Company to issue shares of
Preferred  Stock  without  stockholder  approval and a  stockholder  rights plan
adopted by the Company may, alone or in combination,  have certain anti-takeover
effects.  The Company  also is subject to  provisions  of the  Delaware  General
Corporation Law which may make certain business combinations more difficult.





                                                                         Page 19

<PAGE>

                           MATRIX PHARMACEUTICAL, INC.



Item 6.  Exhibits and Reports on Form 8-K


                  (a)      Exhibits


Number            Exhibit Table
------            -------------

27                Financial Data Schedule


                  (b)       Reports on Form 8-K


                  The  Company  filed no Current  Reports on Form 8-K during the
quarter ended September 30, 1996.


                                                                         Page 20

<PAGE>

                           MATRIX PHARMACEUTICAL, INC.


                                    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.


                           MATRIX PHARMACEUTICAL, INC.





Date:   November  5,  1996              By:   /s/ James R. Glynn
     ---------------------------        ------------------------------------
                                             James R. Glynn
                                             Senior Vice President, Chief
                                             Financial Officer & Secretary




                                             Signing on behalf of the registrant
                                             and as principal financial officer



                                                                         Page 21