<PAGE>  1
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                                 Form 10-Q

                                (Mark one)

 (X)  Quarterly report pursuant to Section 13 or 15(d) of the 
Securities Exchange Act of 1934.  For the quarterly period ended 
September 30, 1996.

      Transition report pursuant to Section 13 or 15(d) of the 
Securities Exchange Act of 1934.  For the transition period 
from ____ to _____.
                          Commission File Number
                                 0-19423

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

             Delaware                                   84-0991858
(State or other jurisdiction of                    (I.R.S. Employer
 incorporation or organization)                   Identification No.)

  2545 Central Ave., Boulder, CO                           80301
 (Address of principal executive offices)              (Zip Code)
Registrant's telephone number, including area code:  (303) 440-9988

  Securities registered pursuant to Section 12(g) of the Act:

                      Common Stock $.001 par value
                          (Title of Class)

    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 registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
        Yes  /X/                                      No /  /    

    Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date.
   
Common Stock $.001 par value                     20,709,732
          Class                     Outstanding at November 11, 1996 

Somatogen, the Somatogen logo and Optro(TM) are trademarks of the 
Company.  All other brand names or trademarks appearing in this 10-Q 
are the property of their respective holders.












<PAGE>  2
SOMATOGEN, INC.
INDEX




 
PART I.    FINANCIAL INFORMATION                              PAGE NO.

  Consolidated Balance Sheet -
      September 30, 1996 and June 30, 1996..................    3-4

  Consolidated Statement of Operations- 
      for the three-month periods ended September 30, 
      1996 and 1995 and the period from July 10, 1985 
      (inception) to September 30, 1996.....................     5

  Consolidated Statement of Cash Flows -
      for the three-month periods ended September 30, 1996 and 
      1995 and the period from July 10, 1985 (inception) to
      September 30, 1996....................................    6-7

  Notes to Consolidated Financial Statements................    8-9

  Management's Discussion and Analysis of Financial Condition
      and Results of Operations.............................   10-13

PART II.    OTHER INFORMATION...............................    14

SIGNATURES..................................................    15





























<PAGE>  3
SOMATOGEN, INC.
(A Corporation in the Development Stage)
PART I.  FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS                                                 September 30,        June 30,
                                                            1996              1996
                                                        -----------        ----------
                                                        (unaudited)
<S>                                                      <C>                <C> 
Current assets:
    Cash and cash equivalents ........................   $33,753            $29,541
    Short-term investments............................    16,502             24,735
    Receivable from Lilly.............................     1,702              1,852
    Other receivables.................................       704              1,013
    Prepaid expenses and other current assets.........       293                444
                                                         -------            -------
          Total current assets........................    52,954             57,585

Property and equipment, at cost, net of
      accumulated depreciation and amortization.......     3,934              4,042
Assets held for sale..................................     6,352              6,446
Other assets, net.....................................     1,121              1,088
                                                         -------            -------
                                                         $64,361            $69,161
                                                         =======            =======
LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Accounts payable..................................   $ 1,421            $ 1,826
    Accrued payroll...................................       946                801
    Payable to Lilly..................................     2,131              2,454
    Other accrued liabilities.........................       720                606
    Current portion of capital lease obligations......        84                159
                                                         -------            -------
        Total current liabilities.....................     5,302              5,846
Capital lease obligations, less current portion.......         9                 11
                                                         -------            -------
Total liabilities.....................................     5,311              5,857
                                                         -------            -------

</TABLE>
See accompanying notes to consolidated financial statements















<PAGE>  4
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED BALANCE SHEET (continued)
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                       September 30,        June 30,
                                                            1996              1996
                                                        -----------        ----------
                                                        (unaudited)
<S>                                                      <C>              <C> 
Commitments and contingencies
Stockholders' equity:
    Preferred stock, $.001 par value, 10,000,000 shares 
        authorized at September 30, 1996,
        no shares issued or outstanding...............          --              --
    Common stock, $.001 par value; 35,000,000 shares 
        authorized, 20,706,757 and 20,684,970 shares 
        issued and outstanding at September 30, 1996
        and June 30, 1996, respectively...............          21              21
    Additional paid-in capital........................     204,611         204,518
    Deficit accumulated during the development stage..    (145,325)       (140,948)
    Deferred compensation related to grant of options.        (257)           (287)
                                                          --------        --------
        Total stockholders' equity....................      59,050          63,304
                                                          --------        --------
                                                          $ 64,361        $ 69,161
                                                          ========        ========








</TABLE>


See accompanying notes to consolidated financial statements



















<PAGE>  5
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
                                                Three-months ended        Period From
                                                   September 30,         July 10, 1995
                                               --------------------      (inception) to
                                                 1996         1995     September 30, 1996
                                                 ----         ----     ------------------
<S>                                           <C>         <C>             <C>
Revenue:
    Technology disclosure and license fees...  $    --    $      --        $  4,904
    Research and development grants
        and contracts........................       --           --           1,684
                                              --------    ---------        --------
            Total revenue....................       --           --           6,588
                                              --------    ---------        --------
Operating expenses:
    Research and development.................    4,881        4,608         106,133
    Reimbursements from Lilly................   (1,669)      (1,325)        (11,841)
    Reimbursements to Lilly..................      840           --           4,190
                                              --------    ---------        --------
    Research and development, net............    4,052        3,283          98,482
    General, administrative and marketing....    1,010          937          28,777
    Writedown of manufacturing
        facility assets......................       --            --         29,194
                                              --------    ---------        --------
            Total operating expenses.........    5,062        4,220         156,453
                                              --------    ---------        --------
    Operating loss...........................   (5,062)      (4,220)       (149,865)
    Interest and other income, net...........      685          600           9,458
                                              --------    ---------        --------
    Loss from continuing operations..........   (4,377)      (3,620)       (140,407)
Discontinued operations:
    Loss from operations of subsidiary.......       --           --          (1,225)
    Gain on sale of subsidiary...............       --           --             300
                                              --------    ---------        --------
    Net loss................................. $ (4,377)    $ (3,620)      $(141,332)
                                              ========    =========        ========
    Net loss per share....................... $  (0.21)    $  (0.19)  
Shares used in calculating
    per share data                          20,703,000   18,727,000   
                                            ==========   ==========   
</TABLE>
See accompanying notes to consolidated financial statements











<PAGE>  6
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands - unaudited)
<TABLE>
<CAPTION>
                                                                                           Period from
                                                                 Three-months ended       July 10, 1985
                                                                   September 30,          (inception) to
                                                                 1996         1995      September 30, 1996
                                                                 ----         ----      ------------------
<S>                                                             <C>         <C>           <C> 
Cash flows provided by (used in) operating activities:
    Net loss...............................................     $ (4,377)   $ (3,620)      $(141,332)
    Adjustments to reconcile net loss to net cash
        used in operating activities:
        Depreciation and amortization......................          400         537          15,167
        Writedown of manufacturing facility assets.........           --          --          29,194
        Other, net                                                    30          74             992
    Changes in assets and liabilities:
        Receivables........................................          459         828          (2,244)
        Prepaid expenses and other current assets..........          151         101            (268)
        Accounts payable and accrued liabilities...........         (466)        163           5,369
        Other, net.........................................           --          (6)            328
                                                                --------     --------        --------
          Net cash used in operating activities............       (3,803)     (1,923)        (92,794)
                                                                --------     --------        --------
Cash flows provided by (used in) investing activities:
    Purchase of short-term investments.....................       (5,246)     (8,018)       (254,207)
    Proceeds from sale of short-term investments...........       13,479      11,374         237,705
    Purchases of property and equipment....................         (272)       (625)        (22,527)
    Proceeds from sale of property and equipment...........          102         121           2,880
    Additions to construction-in-progress..................           --          --         (18,956)
    Other                           .......................          (61)       (178)         (8,947)
                                                                --------     --------       ---------
        Net cash provided by (used in) 
          investing activities.............................        8,002       2,674         (64,052)
                                                                --------     --------       --------

</TABLE>
See accompanying notes to consolidated financial statements

















<PAGE>  7
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
Increase (Decrease) in Cash and Cash Equivalents
(In thousands - unaudited)
<TABLE>
<CAPTION>
                                                                                            Period from
                                                                 Three-months ended        July 10, 1985
                                                                    September 30,         (inception) to
                                                                 1996         1995      September 30, 1996
                                                                 ----         ----      ------------------
<S>                                                           <C>         <C>                 <C> 
Cash flows provided by (used in) financing activities:
    Payments of capital lease obligations and long- 
        term debt .........................................       (80)        (321)           (10,374)
    Net proceeds from issuance of stock and warrants.......        93        2,365            197,454
    Other..................................................        --           --              3,519
                                                              -------      -------            -------
    Net cash provided by financing activities..............        13        2,044            190,599
                                                              -------      -------            -------

Net increase in cash and cash equivalent...................     4,212        2,795             33,753
Cash and cash equivalents at beginning of period...........    29,541       26,376                 --
                                                              -------      -------            -------
Cash and cash equivalents at end of period.................   $33,753      $29,171            $33,753
                                                              =======      =======            =======
Supplemental disclosures of cash flow information:
    Cash paid for interest.................................   $     7      $    42            $ 2,387
    Capital lease obligations incurred for purchase 
        of property and equipment..........................        --           --              5,318
    Equipment deposits transferred to net
        property, plant and equipment......................        --           --              3,423
    Net property, plant and equipment transferred
        to assets held for sale............................        --           --              9,541

</TABLE>
See accompanying notes to consolidated financial statements





















<PAGE>  8
SOMATOGEN, INC.
(A Corporation in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)


Note 1--STATEMENT OF ACCOUNTING PRESENTATION

      In the opinion of the Company, the accompanying unaudited 
consolidated financial statements include all adjustments (consisting 
only of normal recurring accruals) necessary to fairly state the 
Company's consolidated financial position as of September 30, 1996 and 
the consolidated results of operations and of cash flows for the 
three-month periods ended September 30, 1996 and 1995, and for 
the period from July 10, 1985 (inception) to September 30, 1996.  The 
accompanying consolidated financial statements should be read in 
conjunction with the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1996.
The information set forth in the accompanying consolidated balance sheet
as of June 30, 1996, has been derived from the audited consolidated 
balance sheet included in the Company's Annual Report on Form 10-K for 
the year ended June 30, 1996.

      Interim results are not necessarily indicative of the results for
the full year.

Note 2--STRATEGIC ALLIANCE AND RESEARCH AND DEVELOPMENT ARRANGEMENT

        In June 1994, Somatogen entered into a global strategic 
alliance with Eli Lilly and Company ("Lilly") whereby Lilly is co-
developing Optro (the "Lilly Alliance") and in September 1995, 
Somatogen and Lilly agreed to amend certain terms of the Lilly 
Alliance.  Under the terms of the Lilly Alliance, Lilly is responsible 
for establishing manufacturing facilities to supply Optro for Phase 
III clinical trials and for global commercialization. In North America, 
the Company's expanded Phase II and Phase III trials for Optro will be 
performed in conjunction with Lilly's clinical and research groups, and 
Lilly and Somatogen will co-promote the product, splitting the 
development costs and sharing equally in the profits. Outside North 
America, except in Scandinavia, Lilly will be responsible for clinical 
development of Optro and related costs, and will have exclusive 
marketing rights. Lilly will pay Somatogen a royalty on product sales 
outside North America. Lilly has invested $30,000,000 in exchange for 
Somatogen Common Stock.  The Lilly Alliance originally contemplated a 
March 1996 determination date at which Lilly would have made a decision 
whether to proceed with the clinical development and commercialization 
of Optro.  The September 1995 amendment to the Lilly Alliance 











<PAGE> 9
SOMATOGEN, INC.


accelerated $7,000,000 of the $10,000,000 equity investment which Lilly 
would have made at such determination date.  Pursuant to the amendment,  
Lilly made such $7,000,000 equity investment in October 1995. In 
addition, the amendment eliminated the March 1996 determination date 
and combined all remaining milestone equity investments into a single 
$7,000,000 milestone equity investment to be made if the joint 
Somatogen-Lilly steering committee for the alliance determines that 
certain conditions have been met. The amendment also modified the 
termination provisions of the alliance, which provide for payment of 
certain financial consideration by Lilly to Somatogen in the event that 
the alliance is terminated under certain circumstances. Pharmacia & 
Upjohn, Inc. has the marketing rights to Optro in Scandinavia under its 
1991 agreement with Somatogen.

     In accordance with the terms of the Lilly Alliance, Somatogen and 
Lilly share certain clinical development costs and effective January 1, 
1996, Somatogen and Lilly began to share certain process improvement 
costs.  Expense reimbursements from Lilly and payable to Lilly are 
disclosed as a separate component of research and development on the 
Consolidated Statement of Operations.

Note 3.     Net Loss Per Share

      Net loss per share is computed using the weighted average number 
of shares of common stock outstanding.  Common equivalent shares from 
stock options and warrants are excluded from the computation as their 
effect is antidilutive.





























<PAGE>  10
SOMATOGEN, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations


        Except for the historical information contained herein, the 
following discussion contains forward-looking statements that involve 
risks and uncertainties.  The Company's actual results could differ 
materially from those discussed here.  Factors that could cause or 
contribute to such differences include, but are not limited to, those 
discussed in this section, those discussed in the Company's Annual 
Report on Form 10-K for the year ended June 30, 1996, and those 
discussed in the Company's Registration Statement on Form S-3 as 
declared effective on October 12, 1995.


RESULTS OF OPERATIONS

        Revenue

        The Company did not recognize any revenue for the three-month
periods ended September 30, 1996 or 1995.

        Operating Expenses

        Total operating expenses increased by 20% to $5,062,000 during 
the quarter ended September 30, 1996 from $4,220,000 for the comparable 
period in the previous fiscal year. 

        Net research and development expense for the quarter ended 
September 30, 1996 increased by 23% to $4,052,000 from $3,283,000 for 
the comparable period in the previous fiscal year.    

        Excluding Lilly reimbursements, research and development 
expense for the quarter ended September 30, 1996 increased by 6% to 
$4,881,000 from $4,608,000 for the comparable period in the previous 
fiscal year.  This increase is primarily a result of increased product 
and process development expenditures.  

        For the quarter ended September 30, 1996, reimbursements from 
Lilly increased by 26% to $1,669,000 from $1,325,000 for the comparable 
period in the previous fiscal year.  The increase in reimbursements 
from Lilly are primarily a result of increased reimbursable clinical 
development expenditures and from the September 1995 amendment to the 
Lilly Alliance which provided that certain process development 
expenditures would be reimbursable beginning January 1, 1996. 













<PAGE> 11
SOMATOGEN, INC.


        Reimbursements to Lilly aggregated $840,000 for the three-
months ended September 30, 1996.  There were no reimbursements to Lilly 
in the comparable period of the previous fiscal year.  Reimbursements 
to Lilly for the quarter and three-months ended September 30, 1996 
result from the sharing of clinical development costs and from sharing 
process development costs which began January 1, 1996.    

        Reimbursements attributable to the Lilly Alliance may vary 
significantly from quarter to quarter.  

        General, administrative and marketing expense increased to 
$1,010,000 for the quarter ended September 30, 1996 from $937,000 for 
the comparable quarter in the previous fiscal year.  This increase is 
primarily a result of increases in consulting fees. 

        Interest Income and Other, Net

        Interest and other income increased to $685,000 for the 
quarter ended September 30, 1996 from $600,000 for the quarter ended 
September 30, 1995.  The increase in interest and other income for 
the quarter ended September 30, 1996 as compared to the quarter ended 
September 30, 1995 is primarily a result of increased average 
investment balances and a decrease in interest expense, partially 
offset by a decrease in other income.   

        Net Loss

        The net loss for the quarter ended September 30, 1996 was 
$4,377,000 (or $0.21 per share) compared to $3,620,000 (or $0.19 per 
share) for the same period in fiscal 1996.

LIQUIDITY AND CAPITAL RESOURCES

        Somatogen's operations to date have consumed substantial 
amounts of cash.  It is expected that negative cash flow from 
operations will increase during the remainder of fiscal 1997 and in 
future years, from the level experienced during the three-month period
ended September 30, 1996.  Such increase is expected as preclinical 
and clinical studies of new products are undertaken, as clinical 
trials for Optro increase in scope and as additional product and 
process improvement costs are incurred.  Somatogen will need to raise 
significant additional funds in order to fund the Company's future 
operations and capital expenditures prior to commercialization of the 
Company's products.  












<PAGE> 12
SOMATOGEN, INC.


        The Company has relied primarily on public and private 
offerings of equity and cost sharing and equity investments pursuant 
to the Lilly Alliance to fund its operations and upon equipment 
leasing arrangements to finance the acquisition of capital equipment 
for the Company's laboratory and pilot manufacturing facilities.    

        At September 30, 1996 the Company had cash, cash equivalents 
and short-term investments of $50,255,000.  The Company's cash, cash 
equivalents and short-term investments decreased approximately 
$4,021,000 during the three-month period ended September 30, 1996.  
This decrease is primarily a result of the use of cash for operations.
The Company believes that capital resources existing at September 30, 
1996 will be adequate to meet its needs through at least December 
1997.

        Under the terms of its agreement with Somatogen, Lilly has 
made equity investments in Somatogen totaling $30,000,000.  The 
agreement provides for Lilly to make an additional $7,000,000 
milestone equity investment if the joint Somatogen-Lilly steering 
committee determines that certain conditions have been met.  
Furthermore, the agreement provides that Lilly will be responsible 
for providing manufacturing facilities to supply Optro for Phase III 
clinical trials and global commercialization thus eliminating the 
need for Somatogen to build commercial scale manufacturing 
facilities for Optro, which the Company estimates would have 
cost more than $150,000,000.

      In September 1992, the Company commenced construction of a 
clinical manufacturing facility.  The Company had also acquired land 
for, and begun the design of, a larger commercial manufacturing 
facility.  In conjunction with entering into the Lilly Alliance, an 
evaluation of the Company's future manufacturing requirements was 
completed and construction of the clinical manufacturing facility was 
discontinued.  During the fourth quarter of fiscal 1994, the Company 
recognized a non-recurring charge, which was principally non-cash, 
associated with the writedown of its clinical and commercial 
manufacturing assets of $29,200,000.  The components of the charge 
included approximately $21,000,000 for the clinical manufacturing 
facility, $6,000,000 for related manufacturing equipment and 
$2,200,000 for engineering design costs for the proposed commercial 
manufacturing facility.  

Land and building related to manufacturing facilities and the 
related manufacturing equipment aggregating $6,352,000 are classified 
in Somatogen's balance sheet as assets held for sale.  During the 
three-months ended September 30, 1996, the Company realized $94,000 in 
proceeds from the sale of assets held for sale.  The Company believes 
the aggregate carrying value of all assets held for sale approximates 
the assets' net realizable value; however, the Company continues to 
monitor estimated realizable values on a quarterly basis.  There can 
be no assurances that the Company will realize the aggregate carrying 
value of assets held for sale.  Proceeds from such asset sales are 
being used for general corporate purposes.      



<PAGE> 13
SOMATOGEN, INC.


The Company historically has leased a significant portion of 
the equipment used in its laboratory and pilot manufacturing 
facilities.  As of September 30, 1996, the Company had outstanding 
capital lease obligations of $93,000.  Additionally, the Company had 
aggregate future operating lease obligations of approximately 
$1,392,000 at September 30, 1996.  The Company spent $272,000 during 
the three-months ended September 30, 1996 for the purchase of capital 
equipment and leasehold improvements.  

        The Company's near term operating requirements include 
increased research and development expenditures, including costs 
related to clinical trials and new product development and 
manufacturing.  The Company's capital spending program includes 
purchases of additional equipment for its research and development 
laboratories and pilot manufacturing facility.  In subsequent fiscal 
years, the Company's operating requirements are expected to include 
continuing increases in research and development funding to cover the 
costs of manufacturing process improvements, expanded clinical trials 
and new product development, as well as general, administrative, 
marketing and distribution expenses.

        In order to meet its long-term financing requirements, the 
Company may pursue a number of financing alternatives, including 
public and/or private offerings of securities and additional strategic 
alliances.  However, there can be no assurance that the Company will 
be able to raise additional financing from any of such sources, or 
that any additional funding which may become available to the Company 
will be on acceptable terms.  The Company's ability to raise 
additional financing may be dependent on many factors beyond the 
Company's control, including the state of the capital markets and the 
rate of progress of the Company's clinical trials.  Any additional 
financing that the Company may be able to obtain could result in 
substantial dilution to existing stockholders.  If adequate funds are 
not available, the Company will be required to significantly curtail 
operations.  Any such action could impact the Company's research and 
development programs, including the Company's clinical trial program.  
Any of these events could adversely affect the Company's ability to 
commercialize its products. 

        Cash requirements for the Company may vary materially from 
those now planned due to results of research and development, results 
of clinical testing, changes in focus and direction of the Company's 
research and development programs, manufacturing processes, 
competitive and technological advances, the FDA regulatory process, 
changes in the Company's marketing and distribution strategy and other 
factors.










<Page 14>
SOMATOGEN, INC.
PART II.  OTHER INFORMATION






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

        a)    Exhibits

              (27) Financial Data Schedule (submitted to the SEC only
                   in electronic format)

        b)    Reports on Form 8-K

              None









































<PAGE>  15
SOMATOGEN, INC.
SIGNATURES


        The financial information furnished herein has not been audited 
by independent auditors; however, in the opinion of management all 
adjustments necessary for a fair presentation for the three-month 
periods ended September 30, 1996 and 1995, have been included.

        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.

Date:   November 13, 1996              SOMATOGEN, INC.


                                       Andre de Bruin
                                       -------------------------
                                       President and Chief Executive
                                       Officer (Authorized Signatory)


                                       Timothy D. Hoogheem
                                       -------------------------
                                       Senior Vice President of Finance
                                       and Administration, Chief
                                       Financial Officer and Treasurer
                                       (Principal Financial Officer)


                                       Conrad A. McCarty
                                       -------------------------
                                       Corporate Controller
                                       (Principal Accounting Officer)