<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 March 31, 2000 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934

    For the transition period from _____________ to _____________

Commission File Number:    00024889


                               CELL PATHWAYS, INC.

             (Exact name of registrant as specified in its charter)


                 Delaware                                       23-2969600
-------------------------------------------              -----------------------
      (State or Other Jurisdiction of                        (I.R.S. Employer
      Incorporation or Organization)                      Identification Number)


702 Electronic Drive Horsham, Pennsylvania                         19044
-------------------------------------------              -----------------------
  (Address of principal executive office)                       (Zip Code)


                                 (215) 706-3800
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

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

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


At April 30, 2000 there were 27,562,477 shares of Common Stock, par value $0.01
per share, outstanding.
<PAGE>   2
                      CELL PATHWAYS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                               INDEX TO FORM 10-Q
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000

<TABLE>
<CAPTION>
PART 1        FINANCIAL INFORMATION (UNAUDITED)                                         Page
                                                                                        ----
<S>           <C>                                                                       <C>
    Item 1    Financial Statements:

              Condensed Consolidated Balance Sheets as of March 31, 2000
              and December 31, 1999.............................................          3

              Condensed Consolidated Statements of Operations for the three
              months ended March 31, 2000 and 1999 and for the period from
              inception (August 10, 1990) to March 31, 2000.....................          4

              Condensed Consolidated Statements of Cash Flows for the three
              months ended March 31, 2000 and 1999 and for the period from
              inception (August 10, 1990) to March 31, 2000.....................          5

              Notes to Condensed Consolidated Financial Statements .............          6 - 7

    Item 2    Management's Discussion and Analysis of Financial Condition
              and Results of Operations.........................................          8 - 10

    Item 3    Quantitative and Qualitative Disclosures about Market Risk........          11

PART II       OTHER INFORMATION

    Item 1    Legal Proceedings.................................................          12

    Item 2    Change in Securities and Use of Proceeds..........................          12

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

              Signatures........................................................          13
</TABLE>


                                       2
<PAGE>   3
                      CELL PATHWAYS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         MARCH 31,       DECEMBER 31,
                                                                           2000              1999
                                                                       ------------      ------------
<S>                                                                    <C>               <C>
                              ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.....................................       $ 41,832,503      $ 32,013,118
  Prepaid expenses and other....................................          1,739,369           875,433
                                                                       ------------      ------------
        Total current assets....................................         43,571,872        32,888,551

EQUIPMENT, FURNITURE and LEASEHOLD IMPROVEMENTS, NET ...........          1,503,751         1,519,655
OTHER ASSETS....................................................            860,637           870,765
                                                                       ------------      ------------

                                                                       $ 45,936,260      $ 35,278,971
                                                                       ============      ============
               LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current installments of obligation under capital lease........       $    146,260      $    146,260
  Accounts payable..............................................          1,438,274         1,510,569
  Other accrued liabilities.....................................          2,324,532         2,125,483
                                                                       ------------      ------------
        Total current liabilities...............................          3,909,066         3,782,312
                                                                       ------------      ------------

OBLIGATION UNDER CAPITAL LEASE, EXCLUDING CURRENT
  INSTALLMENTS..................................................                --             33,917
                                                                       ------------      ------------

STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, 5,000,000 shares authorized, none
  issued and outstanding .......................................                 --                --
Common Stock $.01 par value, 70,000,000 shares authorized;
  27,506,499 and 26,105,894 shares issued and outstanding.......            275,065           261,059
Additional paid-in capital......................................        113,289,595        96,202,177
Stock subscription receivable from issuance of Common Stock.....            (37,000)          (37,000)
Deficit accumulated during the development stage................        (71,500,466)      (64,963,494)
                                                                       ------------      ------------
        Total stockholders' equity .............................         42,027,194        31,462,742
                                                                       ------------      ------------
                                                                       $ 45,936,260      $ 35,278,971
                                                                       ============      ============
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.


                                       3
<PAGE>   4
                      CELL PATHWAYS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                       PERIOD FROM
                                                           THREE MONTHS ENDED           INCEPTION
                                                                MARCH 31,              (AUGUST 10,
                                                     ---------------------------         1990) TO
                                                          2000            1999        MARCH 31, 2000
                                                     -----------     -----------      --------------
<S>                                                  <C>             <C>              <C>
    EXPENSES:
       Research and development....................  $ 5,379,962     $ 4,527,893      $ 58,763,150
       General and administrative..................    1,631,211       1,144,544        15,289,418
       Provision for redemption of the
         Redeemable Preferred Stock................           --              --         1,017,000
                                                     -----------     -----------      ------------
         Total expenses............................    7,011,173       5,672,437        75,069,568
    INTEREST INCOME................................      474,201         367,846         3,569,102
                                                     -----------     -----------      ------------
    NET LOSS.......................................  $(6,536,972)    $(5,304,591)     $(71,500,466)
                                                     ===========     ===========      ============

    Basic and diluted net loss per Common Share....  $     (0.24)    $     (0.22)
                                                     ===========     ===========
    Shares used in computing basic and
       diluted net loss per Common Share...........   26,682,240      24,309,333
                                                     ===========     ===========
</TABLE>


The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.


                                       4
<PAGE>   5
                      CELL PATHWAYS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                PERIOD FROM
                                                                   THREE MONTHS ENDED            INCEPTION
                                                                        MARCH 31,               (AUGUST 10,
                                                               ----------------------------       1990) TO
                                                                   2000           1999         MARCH 31, 2000
                                                               -----------    -------------    --------------
<S>                                                            <C>            <C>              <C>
OPERATING ACTIVITIES:
Net loss...................................................    $(6,536,972)    $(5,304,591)     $(71,500,466)
Adjustments to reconcile net loss to net cash used in
operating activities:
   Depreciation expense and amortization...................        185,610         134,368         1,106,176
   Issuance of Common Stock for services rendered..........             --              --            48,578
   Issuance of Common Stock options for services
     rendered..............................................        620,555              --           730,919
   Provision for redemption of Redeemable Preferred
     Stock.................................................             --              --         1,017,387
   Write-off of deferred offering costs....................             --              --           469,515
   Other ..................................................             --              --            68,399
   Increase in prepaid expenses and other current assets ..       (863,936)        (90,579)       (1,420,743)
   (Increase) decrease in other assets.....................         42,996            (200)          (36,892)
   Increase (decrease) in accounts payable and accrued
     liabilities ..........................................        126,754        (429,005)        1,141,815
                                                               -----------     -----------      ------------
     Net cash flows used in operating activities...........     (6,424,993)     (5,690,007)      (68,375,312)
                                                               -----------     -----------      ------------
INVESTING ACTIVITIES:
   Purchase of equipment, furniture and leasehold
     improvements .........................................       (169,706)       (278,218)       (5,088,076)
   Sale of leasehold improvements .........................             --              --         3,000,000
   Cash paid for deposits..................................        (24,673)             --           (75,440)
                                                               -----------     -----------      ------------
   Net cash flows used in investing activities ............       (194,379)       (278,218)       (2,163,516)
                                                               -----------     -----------      ------------
FINANCING ACTIVITIES:
   Proceeds from the issuance of Common Stock, net of
     related offering costs ...............................             --              --        13,579,145
   Proceeds from the issuance of Common Stock under
     the Employee Stock Purchase Plan .....................        159,685              --           330,805
   Proceeds from issuance of Convertible Preferred
     Stock, net of related offering costs..................             --              --        47,185,046
   Proceeds from the transaction with Tseng Labs, Inc. ....             --              --        27,966,372
   Proceeds from the exercise of warrants to purchase
     Common Stock..... ....................................     14,033,000              --        14,033,000
   Proceeds from exercise of Series E, F and G warrants
     to purchase stock ....................................        535,101           4,876         2,056,944
  Proceeds from the exercise of options to purchase
     Common Stock....... ..................................      1,753,083         238,541         2,476,505
  Decrease in shareholder receivable ......................             --              --            23,626
  Redemption of Redeemable Preferred Stock.................             --              --          (546,051)
  Proceeds from bridge loan ...............................             --              --           791,000
  Partner cash contributions ..............................             --              --         5,312,355
  Increase in restricted cash..............................         (8,195)             --          (648,305)
  Principal payments under capital lease obligations.......        (33,917)        (30,200)         (189,111)
  Proceeds from borrowings ................................             --              --           150,000
  Repayment of borrowings .................................             --              --          (150,000)
                                                               -----------     -----------      ------------
     Net cash flows provided by financing activities ......     16,438,757         213,217       112,371,331
                                                               -----------     -----------      ------------
Net increase (decrease) in cash and cash equivalents ......      9,819,385      (5,755,008)       41,832,503
CASH AND CASH EQUIVALENTS, beginning of
  Period ..................................................     32,013,118      37,232,404                --
                                                               -----------     -----------      ------------
CASH AND CASH EQUIVALENTS, end of period ..................    $41,832,503     $31,477,396      $ 41,832,503
                                                               ===========     ===========      ============
SUPPLEMENTAL DISCLOSURES OF NONCASH
  FINANCING ACTIVITIES:
Accrual of leasehold improvements payable..................    $        --     $        --      $     848,000
                                                               ===========     ===========      =============
Accrual of deferred offering costs ........................    $        --     $        --      $     441,375
                                                               ===========     ===========      =============
Conversion of partners' investment to Preferred Stock .....    $        --     $        --      $   5,312,355
                                                               ===========     ===========      =============
Conversion of bridge loan to Convertible
  Preferred Stock .........................................    $        --     $        --      $     791,000
                                                               ===========     ===========      =============
Conversion of Convertible Preferred Stock for
  Common Stock.............................................    $        --     $        --      $  53,766,991
                                                               ===========     ===========      =============
Issuance of Convertible Preferred Stock
  to investment advisors ..................................    $        --     $        --      $     540,742
                                                               ===========     ===========      =============
Issuance of Common Stock as payment of
  management bonus ........................................    $        --     $        --      $      59,200
                                                               ===========     ===========      =============
Redemption of Redeemable Preferred Stock for
  Common Stock ............................................    $        --     $        --      $     545,949
                                                               ===========     ===========      =============
Sale of Common Stock in exchange for
  stock subscription receivable ...........................    $        --     $        --      $      37,000
                                                               ===========     ===========      =============
Sale of Convertible Preferred Stock in exchange for
  stock subscription receivable............................    $        --     $        --      $      23,626
                                                               ===========     ===========      =============
Issuance of Common Stock as payment for
   accounts payable .......................................    $        --     $        --      $      48,578
                                                               ===========     ===========      =============
</TABLE>

The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.


                                       5
<PAGE>   6
                      CELL PATHWAYS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000

                                   (UNAUDITED)

1.       ORGANIZATION AND BASIS OF PRESENTATION

Organization

         Cell Pathways, Inc. was incorporated in Delaware in July 1998 as a
subsidiary of, and as of November 3, 1998 successor to, a Delaware corporation
of the same name. As the context requires, "Company" is used herein to signify
the successor and/or the predecessor corporations.

         The Company is a pharmaceutical company focused on the research,
development and future commercialization of products to prevent and treat
cancer. The Company is in the development stage and has not generated any
product revenues to date, nor is there any assurance of any future product
revenues. The Company's intended products are subject to long development cycles
and there is no assurance the Company will be able to successfully develop,
manufacture, obtain regulatory approval for or market its products. During the
period required to develop its products, the Company plans to continue to
finance operations through debt and equity financings, corporate alliances or
through combinations thereof. There is no assurance, however, that such
additional funding will be available on terms acceptable to the Company, if at
all. The Company will continue to be considered in the development stage until
such time as it generates significant revenues from its principal operations. As
of March 31, 2000, the Company had a deficit accumulated during the
developmental stage of $71,500,466.

         On November 3, 1998, the Company completed a financing through the
acquisition of Tseng Labs, Inc. ("Tseng") (a publicly held shell company) in
which the Company issued to Tseng stockholders approximately 5.5 million shares
of the Company's Common Stock and received net proceeds of approximately $26.4
million. The accompanying consolidated financial statements include the accounts
of the Company from inception (August 10, 1990) and the accounts of Tseng after
November 3, 1998.

Basis of Presentation

         The unaudited condensed consolidated financial statements as of March
31, 2000 and for the three months ended March 31, 2000 and 1999, are unaudited
but include all adjustments (consisting only of normal recurring adjustments)
which, in the opinion of management, are necessary to state fairly the financial
information set forth therein in accordance with generally accepted accounting
principles. The interim results may not be indicative of the results that may be
expected for the year. These financial statements should be read in conjunction
with the audited consolidated financial statements for the year ended December
31, 1999 included in the Company's annual report on Form 10-K filed with the
Securities and Exchange Commission.

2.       BASIC AND DILUTED NET LOSS PER COMMON SHARE

         The Company provides basic and diluted net loss per Common share
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." SFAS No. 128 requires dual presentation of basic and
diluted net loss per Common share. "Basic" net loss per Common share equals net
loss divided by the weighted average Common shares outstanding during the
period. "Diluted" net loss per Common share equals net loss divided by the sum
of the weighted average Common shares outstanding during the period plus Common
Stock equivalents. The Company's basic and diluted net loss per share amounts
are the same since the assumed exercise of stock options and warrants are
anti-dilutive. The amount of Common Stock equivalents excluded from the
calculation are options and warrants to purchase 2,609,270 and 2,108,737 shares
of Common Stock outstanding as of March 31, 2000 and 1999, respectively.



                                       6
<PAGE>   7
3.       LITIGATION

         In February and March of 1999, five stockholder class actions were
filed against the Company and certain of its officers and directors in the
United States District Court for the Eastern District of Pennsylvania seeking
unspecified damages on behalf of various classes of persons, including all
persons who purchased Company Common Stock during certain periods in 1998 and
1999. The complaints alleged that the Company made false and misleading
statements about the efficacy and near-term commercialization of the Company's
lead drug candidate which had the effect of artificially inflating the price of
the Company's Common Stock. These actions were consolidated into one action in
April 1999, and a consolidated amended complaint was filed in late June 1999
asserting a class period extending from October 7, 1998 to February 2, 1999. The
litigation is at a very preliminary stage. The Company believes that the
allegations are without merit and intends to vigorously defend the litigation.



                                       7
<PAGE>   8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         Cell Pathways, Inc. was incorporated in Delaware in July 1998 as a
subsidiary of, and, as of November 3, 1998, the successor to, a Delaware
corporation of the same name. As the context requires, the "Company" or "CPI" is
used herein to signify the successor and/or the predecessor corporations

         The business of the Company is subject to substantial risks and
uncertainties. These risks and uncertainties relate to, among other factors, the
absence of product sales; the absence of approved products; the history of
operating losses; the early stage of development; the costs, delays and
uncertainties inherent in basic pharmaceutical research, drug development,
clinical trials and the regulatory approval process, with respect to both the
Company's current product candidates and its future product candidates, if any;
dependence on development of Aptosyn(TM) (exisulind); the limitations on, or
absence of, the predictive value of data obtained in laboratory tests, animal
models and human clinical trials when planning additional steps in product
development; the uncertainty of obtaining regulatory approval of the New Drug
Application ("NDA") submitted for the Company's first product candidate,
Aptosyn(TM) (exisulind), for familial adenomatous polyposis ("FAP") (a rare
disease that puts those afflicted at high risk of developing colon cancer),
whether in connection with the adequacy of the data generated in the clinical
trials of Aptosyn(TM) (exisulind) or otherwise; the uncertainty of whether the
Company's second product candidate will demonstrate safety or effectiveness or
that it will ever be submitted for regulatory approval; the uncertainty of the
effect of any product approval, if achieved, on the market price of the Common
Stock; the timing and scope of any approval which might be received for any
compound for any indication in the future; acceptance by providers of healthcare
reimbursement; the validity, scope and enforceability of patents; the actions of
competitors; dependence upon third parties; product liability; and the need for
further financing. These and other risks are detailed in the Company's reports
filed from time to time under the Securities Act of 1933 and/or the Securities
Exchange Act of 1934, including the sections entitled "Business," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Other Events" in the Company's reports on Form 10-K
for the year ended December 31, 1999, Form 8-K for the month of August 1999,
Form S-3 filed in December 1999 and including any future reports and other
filings. Current and prospective investors are encouraged to read these filings
as they are made from time to time. They are available over the Internet from
the SEC in its EDGAR database or directly from the Company. Certain statements
made in this document or in those filings, and oral statements which may be made
about them, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are those which express plan, anticipation, intent, contingency or
future development and/or otherwise are not statements of historical fact. These
statements are subject to risks and uncertainties, known and unknown, such as
the risks described above, which could cause actual results and developments to
differ materially from those expressed or implied in such statements Given the
uncertainties affecting development stage pharmaceutical enterprises like the
Company, current and prospective investors are cautioned not to place undue
reliance on any such forward-looking statements, any of which may turn out to be
wrong due to inaccurate assumptions, unknown risks, uncertainties or other
factors. The Company undertakes no obligation to update or revise such
statements or the factors which may relate thereto.

OVERVIEW

         CPI is a development stage pharmaceutical company focused on the
research, development and commercialization of products to prevent and treat
cancer. From the inception of the Company's business in 1990, operating
activities have related primarily to conducting research and development,
raising capital and recruiting personnel. The Company's initial investigational
new drug application ("IND") was filed with the Food and Drug Administration
("FDA") in December 1993 for human clinical trials of the Company's first
product candidate, Aptosyn(TM) (exisulind). The Company filed an IND for its
second product candidate, CP 461, in December 1998. In August 1999, the Company
submitted to the FDA an NDA for Aptosyn(TM) for FAP, an FDA designated orphan
drug indication. The Company is continuing to conduct clinical trials of
Aptosyn(TM) and CP 461 for the prevention and treatment of various precancer and
cancer indications.

         On November 3, 1998, CPI completed a financing through the acquisition
of Tseng Labs, Inc. ("Tseng") (a publicly-held company with no continuing
operations which, subsequent to the transaction, became a subsidiary of CPI), in
which CPI issued to Tseng stockholders approximately 5.5 million shares of CPI
Common Stock and received net proceeds of approximately $26.4 million. In
October 1999, the Company issued 1.555 million shares of Common Stock for net
proceeds of approximately $13.5 million. This increased the Common Stock
outstanding to 26.1 million shares. During the three months ended March 31,
2000, the Company received approximately $16.5 million primarily from the
exercise of previously issued Common Stock warrants and options. This increased
the Common Stock outstanding to 27.5 million shares.



                                       8
<PAGE>   9
         The Company has not received any revenue from the sale of products, and
no product candidate of CPI has been approved for marketing. CPI's income has
been limited to interest income from investments, and CPI's primary source of
capital has been the sale of its equity securities, including the transaction
with Tseng. Annual losses were $19,633,722 and $19,345,436 in 1999 and 1998,
respectively. As of March 31, 2000 CPI's accumulated deficit was $71,500,466 and
its unrestricted cash and cash equivalents were $41,832,503. CPI anticipates
that it will continue to incur additional operating losses for the next several
years. There can be no assurance that any of CPI's product candidates will be
approved for marketing, that CPI will attain profitability or, if profitability
is achieved, that CPI will remain profitable on a quarterly or annual basis in
the future. CPI's operating results will fluctuate from quarter to quarter. Some
of these fluctuations may be significant and, as a result, quarter to quarter
comparisons may not be meaningful.

RESULTS OF OPERATIONS

         Three Months Ended March 31, 2000 Compared with Three Months Ended
March 31, 1999. Total expenses for the three months ended March 31, 2000 were
$7,011,173, an increase of $1,338,736 or 23.6% from the same period in 1999.
Research and development expenses for the three months ended March 31, 2000 were
$5,379,962, an increase of $852,069 or 18.8%, from the three months ended March
31, 1999. Such increase was primarily due to a non-cash charge of $620,555
related to the estimated value of Scientific Advisory Board members' stock
options, based upon the Company's current stock price, which increased
substantially during the period. General and administrative expenses were
$1,631,211 for the three months ended March 31, 2000, an increase of $486,667 or
42.5%, from the same period in 1999. Such increase was primarily due to expenses
associated with preparations for commercialization of Aptosyn(TM), the Company's
lead product.

         Interest income was $474,201 for the three months ended March 31, 2000,
an increase of $106,355 or 28.9% from the same period of 1999 due to higher
average cash balances.

LIQUIDITY AND CAPITAL RESOURCES

         CPI has financed its operations since inception primarily with the net
proceeds received from private placements of equity securities and the
transaction with Tseng. Financing activities have generated net proceeds of
$112,371,331 from inception through March 31, 2000. During the first three
months ended March 31, 2000, the Company's cash from financing activities
increased $16,438,757, primarily as a result of the exercise of Common Stock
warrants and options.

         At March 31, 2000, the Company had cash and cash equivalents of
$41,832,503. The Company's cash position increased by $9,819,385 for the three
months ended March 31, 2000. The cash used to finance the net loss of $6,536,972
was offset by approximately $16,438,757 related to financing activities,
principally the exercise of Common Stock warrants and options as described in
Part II, Item 2. In addition, the Company made deposits of $1,089,688 for the
future manufacturing of its first product candidate during the three months
ended March 31, 2000. CPI invests its excess cash primarily in low risk, highly
liquid money market funds and U.S. government treasuries. CPI had $648,305 in a
restricted account pledged as security for a letter of credit for a security
deposit under the lease of its Horsham, Pennsylvania facility, and as security
to a letter of credit for a portion of a software lease commitment.

         CPI leases approximately 40,000 square feet of laboratory and office
space in Horsham, Pennsylvania under a ten-year lease which expires in 2008 and
which contains two five-year renewal options. The Company believes its
facilities will be adequate for the foreseeable future.

         During the three months ended March 31, 2000 and 1999, the Company
acquired $169,706 and $278,518, respectively, in equipment, furniture and
leasehold improvements for its research laboratories and offices in its Horsham
facility.

         CPI anticipates that quarterly and annual expenditures for preclinical
studies, clinical trials, product development, research, selling, marketing and
administrative expenses will increase significantly in future periods. In
anticipation of possible FDA approval for the marketing of Aptosyn(TM), the
Company has incurred expenses for the commercialization of CPI's first product.
Such expenses were expected to be significant in 2000. There can be no assurance
that CPI will be able to successfully complete the clinical development of
Aptosyn(TM) for FAP or any other indication, that the FDA will grant approval
within the time frame expected, if at all, that the other developments or
expansions in CPI's research, development and commercialization programs will
not require additional funding or encounter delays or that, in light of these or
other circumstances, CPI will be able to achieve anticipated levels of revenue,
expense and cash flow.



                                       9
<PAGE>   10
         CPI cannot predict the date of its first product approval, if any, the
rate of revenue generated from initial product sales, if achieved, or the level
of expense which may be associated with such initial product sales. Accordingly,
while the Company has no present plans for financing, the Company anticipates
that it may require additional financing in the future to continue its research
and development programs. Absent sufficient revenue from product sales, CPI
plans to finance its anticipated growth and development largely through equity
or debt financing and/or strategic alliances with corporate partners. CPI
believes, based on its current operating plans, and without benefit of any
revenue from product sales if product approval is achieved, that its existing
cash and cash equivalents balance of approximately $41.8 million as of March 31,
2000, together with interest earned on these balances, will provide sufficient
working capital to sustain operations into the second half of 2001. However,
there can be no assurance the Company will not require additional funding prior
to that time, as the Company must adapt to changing circumstances arising from
within the Company's programs or from outside the Company. There can be no
assurance that additional equity or debt financing or corporate collaborations
will be available on terms acceptable to CPI, if at all. Any additional equity
financing would be dilutive to stockholders. Debt financing, if available, may
include restrictive covenants. Corporate alliances could require the Company to
give up certain marketing rights or other rights to its potential products and
technology. If additional funds should be needed but are not available, CPI may
be required to modify its operations significantly or to obtain funds by
entering into collaborative arrangements or other arrangements on unfavorable
terms. The failure by CPI to raise capital on acceptable terms if and when
needed would have a material adverse effect on CPI's business, financial
condition and results of operations.

INFLATION

         The Company does not believe that inflation has had any significant
impact on its business to date.

INCOME TAXES

         As of March 31, 2000, CPI has net operating loss carryforwards ("NOLs")
for income tax purposes available to offset future federal income tax, subject
to limitations for alternative minimum tax. In addition, the Company has other
significant deferred tax assets that will also offset future income tax. As the
Company has not yet achieved profitable operations, management believes the tax
assets do not satisfy the realization criteria of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" and therefore the
Company has recorded a valuation allowance for the entire amount of its net tax
asset as of March 31, 2000. (Also see Note 11 of notes to consolidated financial
statements in the Company's annual report on Form 10-K.)

         The Tax Reform Act of 1986 contains provisions that may limit the NOLs
available to be used in any given year upon the occurrence of certain events,
including significant changes in ownership interest. A change in ownership of a
company of greater than 50% within a three-year period results in an annual
limitation on CPI's ability to utilize its NOLs from tax periods prior to the
ownership change. The Company believes that the transaction with Tseng triggered
such limitation. However, the Company does not expect such limitation to have a
significant impact on its operations.

NEW ACCOUNTING PRONOUNCEMENTS

         In December 1999, the Securities and Exchange Commission staff issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). The bulletin draws on existing accounting rules and provides
specific guidance on how those accounting rules should be applied, and
specifically addresses revenue recognition for non-refundable technology access
fees in the pharmaceutical and biotechnology industries. SAB 101 is effective
for fiscal years beginning after December 15, 1999. The impact of adopting SAB
101 had no impact on the Company's financial position or results of operations.



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<PAGE>   11

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

           The Company's exposure to market risk for changes in interest rates
primarily relates to the Company's investment portfolio. The Company is averse
to principal loss and seeks to limit default risk, market risk and reinvestment
risk. In particular, the Company does not use derivative financial instruments
in its investment portfolio, places its investments with high quality issuers
and, except for investments with the U.S. Government, limits the amount of
credit exposure to any one issuer. The Company mitigates default risk by
investing in only the safest and highest credit quality securities,
predominantly those of the U.S. Government, and by positioning its portfolio to
respond appropriately to a significant reduction in a credit rating of any
investment issuer, guarantor or depository. The portfolio includes only
marketable securities with active secondary or resale markets to ensure
portfolio liquidity and has historically been invested in securities which have
original maturities of less than three months to ensure principal preservation.
As of March 31, 2000 and 1999, the Company was primarily invested in U.S.
Government securities and money market funds, which were classified as cash and
cash equivalents in the Company's financial statements. The investments had
principal (or notional) amounts of $41,909,432 and $31,824,446, respectively,
which were equal to their fair value, average interest rates of 5.1% and 5.0%,
respectively, and maturities of less than three months.



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<PAGE>   12
PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         The information set forth in Footnote 3 to the notes to the Company's
condensed consolidated financial statements included herein is hereby
incorporated by reference.

ITEM 2.  CHANGE IN SECURITIES AND USE OF PROCEEDS

         During the three months ended March 31, 2000, the Company issued
117,247 shares of common stock for $568,102 pursuant to the exercise of
previously outstanding warrants issued in 1998; 1,000,000 shares of common stock
for $14,000,000 pursuant to the exercise of previously outstanding warrants
issued in 1999; and, as part of the placement fee in connection with the
financing previously reported on Form 10Q for the third quarter of 1999, a
warrant for 34,821 shares of Common Stock exercisable at $14 per share; all
pursuant to the exemption provided by Section 4(2) of the Securities Act. The
Company plans to use the proceeds from the aforementioned exercises of warrants
to support the development of Aptosyn(TM) (exisulind), to support the Company's
research and development programs and for general corporate needs.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      The following is a list of exhibits filed as part of the Form 10-Q.

         27.1 Financial Data Schedule, which is submitted electronically to the
         Securities and Exchange Commission for information only, and not filed.

(b)      There were no reports on Form 8-K filed during the quarter ending
         March 31, 2000.



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<PAGE>   13
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                     CELL PATHWAYS,  INC.

Dated: May 2, 2000                   By:  /s/ Robert J. Towarnicki
                                     -------------------------------------------
                                     Robert J. Towarnicki

                                     President, Chief Executive Officer and
                                     Director (Principal Executive Officer)



Dated: May 2, 2000                   By:  /s/ Brian J. Hayden
                                     -------------------------------------------
                                     Brian J. Hayden

                                     Chief Financial Officer; Vice President -
                                     Finance; Treasurer (Principal Financial and
                                     Accounting Officer)


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