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, 2001      



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 0-12992                                



|                                                                             | SYNTHETECH, INC. |                                     
|---------------------------------------------------------------------------- | ---------------- | ------------------------------------
|(Exact name of registrant as specified in its charter)                      
|                                                                             |                  |                                     
|Oregon                                                                       |                  | 84-0845771                          
|(State or Other Jurisdiction
of Incorporation or Organization)               |                  | (I.R.S. Employer
Identification No.)
|                                                                             |                  |                                     
|1290 Industrial Way, Albany, Oregon
(Address of Principal Executive Offices) |                  | 97321
(Zip Code)                    
|                                                                             |                  |                                     
|                                                                             | (541) 967-6575   |                                     
|(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.

YesXNo_____

The number of shares of the registrant's common stock, $.001 par value, outstanding as of November 7, 2001 was 14,290,383.

<Page>



|PART I. FINANCIAL INFORMATION                                             
|--------------------------------------------------------------------------
|Item 1. Financial Statements                                              
|<Table>                                                                   
|<Caption>                                                                 
|SYNTHETECH, INC.                                                          
|BALANCE SHEETS                                                            
|-------------------------                                                 
|<S><C>                                                                    
|                                                                          
|                                                                          
|                                                                          
|------------                                                              
|ASSETS                                                                    
|------------                                                              
|CURRENT ASSETS:                                                           
|Cash and cash equivalents                                                 
|Accounts receivable, less allowance                                       
|For doubtful accounts of $15,000 for                                      
|Both periods                                                              
|Income tax receivable                                                     
|Inventories                                                               
|Prepaid expenses                                                          
|Deferred income taxes                                                     
|Other current assets                                                      
|                                                                          
|TOTAL CURRENT ASSETS                                                      
|                                                                          
|PROPERTY, PLANT AND EQUIPMENT, at cost, net                               
|                                                                          
|TOTAL ASSETS                                                              
|                                                                          
|</Table>                                                                  
|The accompanying notes are an integral part of these financial statements.
|<Page>                                                                    



|<Table>                                                                    |                 |                
|-------------------------------------------------------------------------- | --------------- | ---------------
|<Caption>                                                                  |                 |                
|SYNTHETECH, INC.                                                          
|BALANCE SHEETS                                                            
|-------------------------                                                 
|(continued)                                                               
|<S><C>                                                                     | <C>             | <C>            
|                                                                           | (unaudited)     |                
|                                                                           | September 30,   | March 31,      
|                                                                           | 2001            | 2001           
|---------------------------------------------------------------            | ------          | ------         
|LIABILITIES AND SHAREHOLDERS' EQUITY                                       |                 |                
|---------------------------------------------------------------            |                 |                
|CURRENT LIABILITIES:                                                       |                 |                
|Current portion of long term obligations                                   | $ 19,000        | $ 46,000       
|Accounts payable                                                           | 579,000         | 781,000        
|Accrued compensation                                                       | 124,000         | 118,000        
|Deferred revenue                                                           | -               | 17,000         
|Other accrued liabilities                                                  | 25,000          | 11,000         
|                                                                           | --------------- | ---------------
|TOTAL CURRENT LIABILITIES                                                  | 747,000         | 973,000        
|                                                                           |                 |                
|DEFERRED INCOME TAXES                                                      | 655,000         | 655,000        
|                                                                           |                 |                
|LONG TERM OBLIGATIONS, net of current portion                              | 108,000         | 117,000        
|                                                                           |                 |                
|SHAREHOLDERS' EQUITY:                                                      |                 |                
|Common stock, $.001 par value; authorized                                  |                 |                
|100,000,000 shares; issued and outstanding,                                |                 |                
|14,290,000 and 14,280,000 shares                                           | 14,000          | 14,000         
|Paid-in capital                                                            | 8,889,000       | 8,858,000      
|Deferred compensation                                                      | (71,000)        | (72,000)       
|Retained earnings                                                          | 14,392,000      | 15,450,000     
|                                                                           | --------------- | ---------------
|TOTAL SHAREHOLDERS' EQUITY                                                 | 23,224,000      | 24,250,000     
|                                                                           | --------------- | ---------------
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                 | $ 24,734,000    | $ 25,995,000   
|                                                                           | ==========      | ==========     
|</Table>                                                                   |                 |                
|The accompanying notes are an integral part of these financial statements.
|<Page>                                                                    



|<Table>                                                                                                                          |                            |                          |                |                 
|-------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------ | -------------- | ----------------
|<Caption>                                                                                                                        |                            |                          |                |                 
|SYNTHETECH, INC.                                                                                                                
|STATEMENTS OF OPERATIONS                                                                                                        
|----------------------------------------------                                                                                  
|(unaudited)                                                                                                                     
|<S><C>                                                                                                                           | <C>                        | <C>                      | <C>            | <C>             
|                                                                                                                                 | For the Three Months Ended | For the Six Months Ended
|                                                                                                                                 | September 30,              | September 30,           
|                                                                                                                                 | 2001                       | 2000                     | 2001           | 2000 (1)        
|------------------------------------------                                                                                       | --------------             | --------------           | -------------- | --------------- 
|REVENUES                                                                                                                         | $ 2,409,000                | $ 1,082,000              | $ 4,731,000    | $ 3,780,000     
|COST OF REVENUES                                                                                                                 | 3,086,000                  | 1,491,000                | 5,396,000      | 3,229,000       
|                                                                                                                                 | --------------             | --------------           | -------------- | --------------- 
|GROSS PROFIT (LOSS)                                                                                                              | (677,000)                  | (409,000)                | (665,000)      | 551,000         
|                                                                                                                                 |                            |                          |                |                 
|RESEARCH AND DEVELOPMENT                                                                                                         | 175,000                    | 131,000                  | 298,000        | 226,000         
|SELLING, GENERAL AND ADMINISTRATIVE                                                                                              | 358,000                    | 322,000                  | 826,000        | 713,000         
|                                                                                                                                 | --------------             | --------------           | -------------- | --------------- 
|OPERATING EXPENSE                                                                                                                | 533,000                    | 453,000                  | 1,124,000      | 939,000         
|                                                                                                                                 | --------------             | --------------           | -------------- | ----------------
|OPERATING LOSS                                                                                                                   | (1,210,000)                | (862,000)                | (1,789,000)    | (388,000)       
|OTHER INCOME, net                                                                                                                | 34,000                     | 115,000                  | 89,000         | 215,000         
|INTEREST EXPENSE                                                                                                                 | (2,000)                    | (3,000)                  | (6,000)        | (6,000)         
|                                                                                                                                 | --------------             | --------------           | -------------- | ----------------
|LOSS BEFORE INCOME TAXES                                                                                                         | (1,178,000)                | (750,000)                | (1,706,000)    | (179,000)       
|                                                                                                                                 |                            |                          |                |                 
|BENEFIT FOR INCOME TAXES                                                                                                         | (447,000)                  | (285,000)                | (648,000)      | (68,000)        
|                                                                                                                                 | --------------             | --------------           | -------------- | ----------------
|NET LOSS                                                                                                                         | $ (731,000)                | $ (465,000)              | $ (1,058,000)  | $ (111,000)     
|                                                                                                                                 | =========                  | =========                | =========      | =========       
|                                                                                                                                 |                            |                          |                |                 
|BASIC AND DILUTED LOSS PER COMMON SHARE                                                                                          | $ (0.05)                   | $ (0.03)                 | $ (0.07)       | $ (0.01)        
|                                                                                                                                 | =========                  | =========                | =========      | =========       
|</Table>                                                                                                                         |                            |                          |                |                 
|(1) Restated to reflect the reversal of a $73,000 equipment write down incorrectly reported in the first quarter of fiscal 2001.
|                                                                                                                                 |                            |                          |                |                 
|The accompanying notes are an integral part of these financial statements.                                                      
|<Page>                                                                                                                           |                            |                          |                |                 

|<Table>                                                                                                                          |                |               
|-------------------------------------------------------------------------------------------------------------------------------- | -------------- | --------------
|<Caption>                                                                                                                        |                |               
|SYNTHETECH, INC.                                                                                                                
|STATEMENTS OF CASH FLOWS                                                                                                        
|----------------------------------------------                                                                                  
|(unaudited)                                                                                                                     
|<S><C>                                                                                                                           | <C>            | <C>           
|For the Six Month Period Ended September 30                                                                                      | 2001           | 2000 (1)      
|-----------------------------------------------------------------                                                                | ----------     | ----------    
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                            |                |               
|Net loss                                                                                                                         | $ (1,058,000)  | $ (111,000)   
|Adjustments to reconcile net loss to                                                                                             |                |               
|net cash (used in) provided by operating activities:                                                                             |                |               
|Depreciation, amortization and other                                                                                             | 1,404,000      | 1,282,000     
|Amortization of deferred compensation                                                                                            | 14,000         | 14,000        
|                                                                                                                                 |                |               
|(Increase) decrease in assets:                                                                                                   |                |               
|Accounts receivable, net                                                                                                         | (602,000)      | 2,003,000     
|Inventories                                                                                                                      | 28,000         | (244,000)     
|Prepaid expenses                                                                                                                 | 158,000        | 60,000        
|Income tax receivable                                                                                                            | (649,000)      | (539,000)     
|Other assets                                                                                                                     | (8,000)        | 30,000        
|                                                                                                                                 |                |               
|Decrease in liabilities:                                                                                                         |                |               
|Accounts payable and accrued liabilities                                                                                         | (182,000)      | (250,000)     
|Deferred revenue                                                                                                                 | (17,000)       | (500,000)     
|                                                                                                                                 | -------------- | --------------
|Net cash (used in) provided by operating activities                                                                              | (912,000)      | 1,745,000     
|                                                                                                                                 | -------------- | --------------
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                            |                |               
|Property, plant and equipment purchases, net                                                                                     | (1,296,000)    | (959,000)     
|                                                                                                                                 | -------------- | --------------
|Net cash used in investing activities                                                                                            | (1,296,000)    | (959,000)     
|                                                                                                                                 | -------------- | --------------
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                            |                |               
|Principal payments under long-term debt obligations                                                                              | (36,000)       | (8,000)       
|Proceeds from stock purchase plan                                                                                                | 18,000         | -             
|                                                                                                                                 | -------------- | --------------
|Net cash used in financing activities                                                                                            | (18,000)       | (8,000)       
|                                                                                                                                 | -------------- | --------------
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                             | (2,226,000)    | 778,000       
|                                                                                                                                 |                |               
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                                                                 | $ 5,389,000    | $ 6,404,000   
|                                                                                                                                 | -------------- | --------------
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                                       | $ 3,163,000    | $ 7,182,000   
|                                                                                                                                 | =========      | =========     
|NON-CASH INVESTING ACTIVITIES:                                                                                                   |                |               
|Issuance of stock options at below fair value                                                                                    | $ 13,000       | $ 11,000      
|</Table>                                                                                                                         |                |               
|(1) Restated to reflect the reversal of a $73,000 equipment write down incorrectly reported in the first quarter of fiscal 2001.
|                                                                                                                                 |                |               
|The accompanying notes are an integral part of these financial statements.                                                      
|<Page>                                                                                                                           |                |               



NOTES TO FINANCIAL STATEMENTS



NOTE A. GENERAL AND BUSINESS



Synthetech, Inc., an Oregon corporation, specializes in developing and producing Peptide Building Blocks (PBBs), which are chemically modified forms of natural amino acids, and synthetic non-natural amino acids (Specialty Amino Acids) using a combination of organic chemistry and biocatalysis. The Company's PBBs are used predominantly by pharmaceutical companies to make a wide range of peptide-based drugs under development and on the market for the treatment of AIDS, cancer, cardiovascular and other diseases. The Company has established a worldwide reputation in a unique product and technology area as a leading supplier for all phases of the drug development cycle from discovery through market launch.

The summary financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although Synthetech management believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these summary financial statements are read in conjunction with the financial statements and the notes thereto included in Synthetech's Annual Report on Form 10-K for the year ended March 31, 2001.

Interim financial statements are by necessity somewhat tentative; judgments are used to estimate quarterly amounts for items that are normally determinable only on an annual basis. For example, provision for income taxes is an estimate of the annual liability pro-rated over the quarters of the fiscal year based on estimates of annual income. Further, all inventory quantities are verified by physically counting the units on hand at least once a year. Normally, selected inventory items are cycle counted during each quarter. For those inventories not counted during the quarter, quantities are determined using measured sales and production data for the period.

The interim period information included herein reflects all adjustments that are, in the opinion of Synthetech management, necessary for a fair statement of the results of the respective interim periods. Results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

NOTE B. STATEMENTS OF CASH FLOWS



Supplemental cash flow disclosures for the six-month period ended September 30:

|Cash Paid    |              |           
|------------ | ------------ | ----------
|             | Three Months | Six Months
|             | 2001         | 2000      
|Income Taxes | $ -          | $ 389,000 
|Interest     | $ 3,000      | $ 3,000   

<Page>







NOTES TO FINANCIAL STATEMENTS (continued)

NOTE C. EARNINGS PER SHARE

Basic earnings per share (EPS) are computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding during the period, calculated using the treasury stock method as defined in SFAS No. 128. The following is a reconciliation of the shares used to calculate basic earnings per share and diluted earnings per share:



|                                                                                 | For the Three Months
Ended September 30, | For the Six Months
Ended September 30,
|-------------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------
|                                                                                 | 2001                                     | 2000                                  
|Weighted average shares outstanding for Basic EPS                                | 14,284,428                               | 14,276,641                            
|Dilutive effect of common stock options issuable under treasury stock method     | -                                        | -                                     
|                                                                                 | ------------                             | -------------                         
|Weighted average common and common equivalent shares outstanding for Diluted EPS | 14,284,428                               | 14,276,641                            
|                                                                                 | ========                                 | ========                              



The following common stock equivalents were excluded from the earnings per share computation because their effect would have been anti-dilutive:



|                                 | For the Three Months
Ended September 30, | For the Six Months
Ended September 30,
|-------------------------------- | ---------------------------------------- | --------------------------------------
|                                 | 2001                                     | 2000                                  
|Common stock options outstanding | 275,100                                  | 758,025                               

<Page>



NOTES TO FINANCIAL STATEMENTS (continued)

NOTE D. NEW ACCOUNTING PRONOUNCEMENTS



In June 1999, the FASB issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 137"). SFAS 137 is an amendment to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 137 establishes accounting and reporting standards for all derivative instruments. SFAS 137 is effective for fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which amended certain guidance within SFAS 137. The Company does not currently have any derivative instruments and, accordingly, the adoption of these standards in fiscal 2002 did not have an impact on its financial position or results of operations.



In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Use of the pooling-of-interest method will be prohibited on a prospective basis only. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this Statement. SFAS No. 142 becomes effective for fiscal years beginning after December 15, 2001, with early adoption permitted for entities with fiscal years beginning after March 15, 2001. The adoption of SFAS No. 141 and SFAS 142 will not have an impact on financial condition or results of operations.





NOTE E. RECLASSIFICATIONS

Certain reclassifications were made to prior year amounts to conform with the current year presentation.



NOTE F. COMPREHENSIVE INCOME OR LOSS



The Company has no material components of comprehensive income or loss other than net income or loss. Accordingly, comprehensive income/loss was equal to net income/loss for all periods presented.

<Page>



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

RESULTS OF OPERATIONS



The following table sets forth, for the periods indicated, the percentage of revenues represented by each item included in the Statements of Operations.

| | <Table>                                                               
| | ----------------------------------------------------------------------
| | <Caption>                                                             
| | Percentage of Revenues                                                
| | <S><C>                                                                
| |                                                                       
| |                                                                       
| |                                                                       
| | ------------------------------                                        
| |                                                                       
| | Revenues                                                              
| | Cost of Revenues                                                      
| |                                                                       
| | Gross Profit (Loss)                                                   
| |                                                                       
| | Research and Development                                              
| | Selling, General and Administration                                   
| |                                                                       
| | Operating Expense                                                     
| |                                                                       
| | Operating Loss                                                        
| | Other Income                                                          
| | Interest Expense                                                      
| |                                                                       
| | Loss Before Income Taxes                                              
| |                                                                       
| | Benefit For Income Taxes                                              
| |                                                                       
| | Net Loss                                                              
| |                                                                       
| | </Table>                                                              
| | (1) Restated to reflect the reversal of a $73,000 equipment write down
| | incorrectly reported in the first quarter of fiscal 2001.             



Revenues

Revenues increased by 123% to $2.41 million in the second quarter of fiscal 2002 from $1.08 million in the second quarter of fiscal 2001. Revenues for the second quarter of fiscal 2002 included the initial $1.39 million of the $1.70 million Peptide Building Blocks (PBBs) order to support production of launch volumes of a drug in late-stage clinical trials and $317,000 of the $1.06 million cosmeceutical order that were received in the fourth quarter of fiscal 2001. Revenues were $4.73 million for the first half of fiscal 2002, a 25% increase from revenues of $3.78 million in the first half of fiscal 2001. In addition to the $1.39 million mentioned above, revenues for the first half of fiscal 2002 included $1.02 million relating to the cosmeceutical order. A cosmeceutical is a product that makes no therapeutic claims but is intended for topical use by humans. International sales were $235,000 and $1.06 million for the second quarter and first half of fiscal 2002, respectively, as compared to $385,000 and $712,000 for the second quarter and first half of fiscal 2001, respectively. International sales, like all Company revenues, are subject to significant quarterly fluctuations.

<Page>

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

The increase in revenues for the second quarter of fiscal 2002 from the second quarter of fiscal 2001 is the result of the receipt of additional orders that the Company was able to ship during the quarter, and continues to reflect the unpredictability and potential for significant revenue fluctuations associated with the industry environment in which the Company operates. Looking ahead, the Company expects revenues for the second half of fiscal 2002 to exceed revenues from the first half of the fiscal year.

The Company has orders for an additional $3.14 million for the two large-scale projects mentioned above expected to be delivered in the second half of fiscal 2002. In addition, the Company continues to be a supplier of PBBs for pharmaceutical development projects advancing through late-stage clinical trials. While these projects could have substantial future business potential, the receipt and timing of orders relating to these projects is uncertain. The Company believes that it is well positioned in terms of facilities and organization to take advantage of business opportunities as a supplier of PBBs and other projects. There are many additional factors affecting the future progress of these drug and cosmeceutical projects and the resulting demand for Synthetech's PBBs. (See "Industry Factors" below.)



Gross Profit (Loss)

Cost of revenues for the second quarter fiscal 2002 was $3.09 million, resulting in a gross loss of $677,000, or 28% of revenues compared to a gross loss of $409,000 for the second quarter of fiscal 2001 or 38% of revenues. For the first half fiscal 2002, cost of revenues was $5.40 million, resulting in a gross loss of $665,000, or 14% of revenues compared to a gross profit of $551,000 for the first half of fiscal 2001 or 15% of revenues. Cost of revenues includes raw materials consumed, all labor, facility and similar expenses incurred by the Company's manufacturing department during the period including expenses not directly allocated to manufacturing the products sold during the period, and adjustments to inventory. The plant expansions over the past several years and recent increases to organization resources have significantly contributed to the increase in fixed manufacturing costs included in cost of revenues in the first half of fiscal 2002 as compared to the first half of fiscal 2001. Accordingly, with the current level of revenues, this has a significant negative effect on gross profit. In addition, cost of revenues in the first half of fiscal 2002 included added costs associated with the initial development and production of products not previously manufactured by the Company and there were approximately $441,000 in non-recurring inventory write-offs resulting from production batches not meeting specification. Also, the first half of fiscal 2001 included $2.15 million of revenue from a project, which contributed an unusually high gross profit to that period.

<Page>



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



Operating Expenses

Research and development (R&D) expense in the second quarter and first half of fiscal 2002 increased to $175,000 and $298,000, respectively, compared to $131,000 and $226,000 for the second quarter and first half of fiscal 2001, respectively. As a percentage of sales, R&D expenses decreased to 7% in the second quarter of fiscal 2002 from 12% in the same period of fiscal 2001 and were 6% for the first half of fiscal 2002 and fiscal 2001. The increase in R&D expense for the first half of fiscal 2002 primarily reflected increased depreciation costs associated with the lab remodel completed in May of 2001 and the hiring of additional staff during the second quarter of fiscal 2002. The Company expects R&D expense to increase in future quarters due to the hiring of additional R&D staff in connection with the expanded capacity that resulted from the completion of the R&D lab remodel. Selling, general and administrative (SG&A) expense in the second quarter and first half of fiscal 2002 increased to $358,000 and $826,000, respectively, compared to $322,000 and $713,000, respectively, for the second quarter and first half of fiscal 2001. As a percentage of sales, SG&A expenses decreased to 15% in the second quarter of fiscal 2002 from 30% in the same period of fiscal 2001 and 18% for the first half fiscal 2002 compared to 19% for fiscal 2001. The increase in SGA expense in the first half of fiscal 2002 compared to fiscal 2001 primarily reflected additional marketing compensation and other marketing related costs. Operating expenses as a percentage of revenues were approximately 22% and 24%, respectively, in the second quarter and first half of fiscal 2002 and were 42% and 25%, respectively, in the second quarter and first half of fiscal 2001.



Operating Loss

Operating loss in the second quarter and first half of fiscal 2002 was $1.21 million and $1.79 million, respectively, compared with operating loss in the second quarter and first half of fiscal 2001 of $862,000 and $388,000, respectively.



Other Income

Other income in the second quarter and first half of fiscal 2002 was $34,000 and $89,000, respectively, compared to $115,000 and $215,000, respectively, for the second quarter and first half of fiscal 2001. Other income in the second quarter and first half of fiscal 2002 and 2001 primarily reflected interest earnings.



Interest expense

Interest expense was $2,000 and $6,000, respectively, for the second quarter and first half of fiscal 2002 and $3,000 and $6,000 for the second quarter and fist half of fiscal 2001, respectively.

<Page>

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

Net Loss

For the second quarter and first half of fiscal 2002 the Company incurred a loss before taxes of $1.18 million and $1.71 million, respectively. In light of these losses, the Company recorded an income tax benefit of $447,000 and $648,000 for the second quarter and first half of fiscal 2002, respectively. This resulted in a net loss of $731,000 for the second quarter and $1.06 million for first half of fiscal 2002.



INDUSTRY FACTORS

Market Factors

The Company manufactures PBBs for use in synthetically manufactured peptide, peptidomimetic small molecule and other drugs. The market for PBBs is driven by the market for the drugs in which they are incorporated. The drug development process is dictated by the marketplace, drug companies and the regulatory environment. The Company has no control over the pace of these drug development efforts, which drugs get selected for clinical trials, which drugs are approved by the FDA or, even if approved, the ultimate market potential of the drugs. The Company also manufactures PBBs for use in a cosmeceutical, and faces similar factors in that market.

The three stages of the drug development process include: R&D or discovery stage, clinical trial stage and marketed drug stage. Synthetech's customers can spend years researching and developing new drugs, taking only a small percentage to clinical trials and fewer yet to commercial market. A substantial amount of the activity continues to occur at the earlier stages of research and development and clinical trials. The market for peptide and peptidomimetic small molecule drugs is still developing.

Recurring sales of PBBs for development programs is sporadic at best. The high cancellation rate for drug development programs results in a significant likelihood that there will be no subsequent or "follow-on" PBB sales for any particular drug development program. Accordingly, the level and timing of orders by the Company's customers relating to specific drug development programs varies substantially from quarter to quarter and the Company cannot rely on any one customer as a constant source of revenue.

The size of the PBB orders for marketed drugs can be substantially larger than those for the discovery or clinical trial stages. Sales of PBBs for marketed drugs can also provide an opportunity for continuing longer-term sales. While not subject to the same high cancellation

<Page>

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

rate faced by discovery and clinical trial stage drug development programs, the demand for the approved drugs, however, remains subject to many uncertainties, including, without limitation, the drug price, the drug side effects and the existence of other competing drugs. These factors, which are outside of the control of the Company, will affect the level of demand for the drug itself and, therefore, the demand for PBBs. Also, industry cost pressures can cause pharmaceutical companies to explore and ultimately adopt alternative manufacturing processes which may not include the Company's PBBs as an intermediate. Finally, with the longer-term, larger-scale orders, the Company expects increased competition to supply these PBBs.

Similar dynamics affect the cosmeceutical development process and market, except that the regulatory oversight and, consequently, the typical length of a product's "time to market" is reduced. Cosmeceutical products make no therapeutic claims and, accordingly, the more extensive and time-consuming clinical trials to establish efficacy are not required. These industry factors create an inability for the Company to predict future demand beyond its current order base. Until the Company develops a stable baseload of demand, the Company is likely to continue to experience significant fluctuations in its quarterly results.

Production factors

Synthetech has a full cycle "grams to tons" production capability and has made over 400 products. With over 14 years of experience, Synthetech has developed extensive PBB process technology and is recognized as one of the leaders in this area. Nevertheless, initial batches of new products and scaling up production processes of existing products may result significantly lower than expected yields, extended processing time and may require substantial rework to meet the required specification. These factors could cause increased costs and delay shipments and, thus, affect periodic operating results.



LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2001, the Company had working capital of $10.65 million compared to $11.57 million at March 31, 2001. The Company's cash and cash equivalents at September 30, 2001 totaled $3.16 million compared to $5.39 million at March 31, 2001. The Company believes that its existing cash and cash equivalents, its bank line of credit and funds generated from operations will be sufficient to support operations for the next twelve months. The $2.23 million reduction in cash and cash equivalents primarily reflected $912,000 used in operating activities and $1.30 million of capital expenditures. Depreciation expense included in operating activities was $1.40 million for the quarter. In addition, the Company has a $1 million unsecured bank line of credit of which there was no amount outstanding at September 30, 2001. The line of credit is renewable on September 1, 2002.

The increase in accounts receivable to $1.77 million at September 30, 2001 from $1.17 million at March 31, 2001 primarily reflected differences in the timing of shipments between the periods. The increase in income tax receivable to $1.57 million at September 30, 2001 from $924,000 at March 31, 2001 reflected the tax benefit for the first six months of fiscal 2002. The

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

decrease in accounts payable to $579,000 at September 30, 2001 from $781,000 at March 31, 2001 reflected the reduction of expenditure commitments related to capital projects.

The Company had approximately $1.30 million of capital expenditures during the first half of fiscal 2002 which included $247,000 for equipment and equipment upgrades in the existing plant, $84,000 for the completion of the R&D lab remodel, and $969,000 for the wastewater treatment system. The Company anticipates capital expenditures in second half of fiscal 2002 to be approximately $375,000 for a total of $1.68 million for the fiscal year. The Company expects to finance all capital expenditures from internal cash flow and financial resources and does not anticipate the need for any new debt or equity financing.



Item 3. Quantitative and Qualitative Disclosure about Market Risk

The Company's primary market risk exposure is the impact of interest rate fluctuations on interest income earned on our cash deposits and cash equivalents. The risks associated with market, liquidity and principal are mitigated by investing in high-credit quality securities and limiting concentrations of issuers and maturity dates. Derivative financial instruments are not part of the Company's investments.

Substantially all of the Company's purchases and sales are denominated in U.S. dollars and as a result, it has relatively little exposure to foreign currency exchange risk with respect to any of its purchases and sales. The Company does not currently hedge against foreign currency rate fluctuations. The effect of an immediate 10 percent change in exchange rates would not have a material impact on the Company's operating results or cash flows.

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_____________________________



This Form 10-Q includes "forward-looking" information (as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Investors are cautioned that forward-looking statements involve risks and uncertainties, and various factors could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," or words or phrases of similar meanings. The risks and uncertainties include, but are not limited to, the following: the uncertain market for our products, customer concentration, potential quarterly revenue fluctuations, production factors, industry cost factors, competition, government regulation, product liability risks, technological change, increased costs associated with the Company's facility expansions, and international business risks. Investors are directed to the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended March 31, 2001which are available from the Company without charge, for a further description of the risks and uncertainties related to forward-looking statements made by the Company as well as to other aspects of the Company's business.

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PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security-Holders

The Company held its Annual Meeting of Shareholders on July 19, 2001. At that meeting, the election of Class I Directors was approved by the Shareholders:

Election of Directors



|Class/Name                                 | Votes For  | Votes Withheld
|------------------------------------------ | ---------- | --------------
|                                           |            |               
|Class I Directors (term expiring in 2004): |            |               
|Paul C. Ahrens                             | 12,238,036 | 458,367       
|Page E. Golsan, III                        | 12,487,736 | 208,667       
|Daniel T. Fagan                            | 12,489,286 | 207,117       



Continuing Directors



|Class/Name                                 
|-------------------------------------------
|Class II Directors (term expiring in 2002):
|Edward M. Giles                            
|Charles B. Williams                        



|Class III Directors (term expiring in 2003):
|--------------------------------------------
|Howard L. Farkas                            
|M. ("Sreeni") Sreenivasan                   



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Item 6. Exhibits and Reports on Form 8-K

(a)	Exhibits

3(i)(1)	Articles of Incorporation of Synthetech, Inc., as amended.

3(ii) Bylaws of Synthetech, Inc., as amended.

__________________

|(1) Incorporated by reference herein from the Company's Form 10-KSB for the year ended March 31, 1997.
|------------------------------------------------------------------------------------------------------



(b)	Reports

No reports on Form 8-K were filed during the quarter.

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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.





| | SYNTHETECH, INC.
| | ----------------
| | (Registrant)    



|Date: November 12, 2001 |  |  | /s/ M. Sreenivasan
|----------------------- |  |  | ------------------
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|Date: November 12, 2001 |  |  | /s/ Charles B. Williams
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