SECURITIES AND EXCHANGE COMMISSION
                     Washington D.C.  20549
                                
                            FORM 10-Q

   [X] Quarterly Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
        For the quarterly period ended September 30, 1997
                               or
  [  ] Transition Report Pursuant to Section 13 or 15(d) of the
                 Securities Exchange Act of 1934
                                
                Commission File Number:  0-25210


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


Washington                                        91-1436093
(State or other jurisdiction of               (I.R.S. Employer
incorporation or organization)               Identification No.)


8271 - 154th Avenue NE, Redmond, Washington         98052
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code:  (425) 869-7284
                                

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 [  ]


Indicate  the  number  of shares outstanding  of  each  of  the
issuer's  classes of common stock, as of the latest practicable
date.
           Class                Outstanding at October 31, 1997
(Common stock, $.01 par value)             14,379,385

<PAGE>
                                
                                
                                
                                
                                
                                
                                
                                
                                
                          NEOPATH, INC.
                                
                 QUARTERLY  REPORT ON FORM 10-Q
                                
                        TABLE OF CONTENTS
     
     
                                
     Part I FINANCIAL INFORMATION
                                                                            Page

     Item 1. Financial Statements                                             1
     
             Balance Sheets - September 30, 1997 (unaudited) and
              December 31, 1996

             Statements  of Operations (unaudited)  -  for  the
              three months and nine months ended September 30, 1997 and 1996
     
             Statements of Cash Flows (unaudited) - for the nine
              months ended September 30, 1997 and 1996
     
             Notes to Financial Statements
     
     Item 2. Management's Discussion and Analysis of Financial
               Condition and Results of Operations                            6
     
     
     Part II OTHER  INFORMATION
     
     Item 1. Legal Proceedings                                                10
     
     Item 6. Exhibits and Reports on Form 8-K                                 10
     
     Signatures                                                               11
     
     
     
                                
<PAGE>

Part I   FINANCIAL INFORMATION               
                                 
Item 1.  Financial Statements 
                                                        
                      NEOPATH, INC.
                                                              
                     BALANCE SHEETS
                                                    
<TABLE>
<CAPTION>
                                                 
                                           
                                                            September 30,     December 31,
                                                                1997              1996
                                                            ------------      ------------
Assets                                                      (Unaudited)                    
<S>                                                         <C>               <C>                    
Current assets:                                                                           
 Cash and cash equivalents                                  $  2,589,079      $  7,871,401
 Securities available-for-sale                                31,688,125        50,616,477
 Accounts receivable, net                                      3,543,529           840,256
 Inventories                                                   8,368,379         5,641,914
 Other current assets                                            446,865           197,726
                                                            ------------      ------------
Total current assets                                          46,635,977        65,167,774
                                                                                          
Fee-per-use systems, net                                       8,082,222         5,994,137
Property and equipment, net                                    5,580,194         4,813,745
Intangible assets, net                                         3,571,921                -
Deposits and other assets                                        386,853           155,899
                                                            ------------      ------------
Total assets                                                $ 64,257,167      $ 76,131,555
                                                            ============      ============
Liabilities and shareholders' equity                                                      
                                                                                          
Current liabilities:                                                                      
 Accounts payable                                           $  2,358,452      $  1,496,630
 Salaries and wages payable                                    2,133,482         2,208,454
 Other accrued liabilities                                     1,190,278           565,939
 Note payable                                                    500,000                 - 
 Current portion of obligations under capital leases              78,699            75,861
                                                            ------------      ------------
Total current liabilities                                      6,260,911         4,346,884
                                                                                          
Obligations under capital leases, less current portion           121,606           182,535
                                                                                          
                                                                                          
Shareholders' equity:                                                                     
 Common stock                                                141,007,347       136,255,746
 Deferred compensation                                                 -           (74,246)
 Accumulated deficit                                         (83,132,697)      (64,579,364)
                                                            ------------      ------------
Total shareholders' equity                                    57,874,650        71,602,136
                                                            ------------      ------------
Total liabilities and shareholders' equity                  $ 64,257,167      $ 76,131,555
                                                            ============      ============
See accompanying notes.                                                                   
</TABLE>

Page 1                                
<PAGE>
              NEOPATH, INC.
                                                      
        STATEMENTS OF OPERATIONS
               (Unaudited)
                                
<TABLE>
<CAPTION>
                                         
                                                                         
                                                    Three months ended                    Nine months ended
                                                       September 30,                         September 30,
                                             ----------------------------------     --------------------------------
                                                   1997               1996              1997               1996
                                             -------------        -------------     -------------      -------------
<S>                                          <C>                <C>              <C>               <C>                
Revenues                                     $   3,109,044      $    877,424     $   7,584,101     $   1,504,051
Cost of revenues                                 1,230,849           414,017         3,276,289           979,725
                                              -------------     -------------     -------------      ------------
    Gross margin                                 1,878,195           463,407         4,307,812           524,326
                                                                                                                 
                                                                                                                 
Operating expenses:                                                                                              
    Research and development                     3,109,225         2,916,124        11,418,727         8,200,000
    Selling, general and administrative          5,231,003         3,100,200        13,635,188         7,943,604
                                              -------------     -------------     -------------      ------------
                                                 8,340,228         6,016,324        25,053,915        16,143,604
                                              -------------     -------------     -------------      ------------
Loss from operations                            (6,462,033)       (5,552,917)      (20,746,103)      (15,619,278)
                                                                                                                 
Interest income                                    537,724           940,323         1,956,999         2,884,637
Interest expense                                   (14,540)          (10,889)          (29,150)          (38,465)
                                              -------------     -------------     -------------      ------------
Net loss                                    $   (5,938,849)     $ (4,623,483)    $ (18,818,254)    $ (12,773,106)
                                             ==============    ==============    ==============    ==============
                                                                                                    
Net loss per share                          $        (0.41)     $      (0.35)    $       (1.33)    $       (1.00)
                                             ==============    ==============    ==============    ==============
                                                                                                                 
Shares used in computation of                                                                                    
    net loss per share                          14,358,144        13,284,449        14,135,615        12,823,190
                                             ==============    ==============    ==============    ==============
                                                                                                                 
See accompanying notes.                                                                                          
</TABLE>

Page 2
<PAGE>

                                  NEOPATH, INC. 
                                      
                             STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                   
<TABLE>
<CAPTION>                                                                     
                                                                                      Nine months ended
                                                                                         September 30,
                                                                                    1997             1996
                                                                                -------------  ------------
<S>                                                                            <C>              <C>  
Operating activities                                                                                               
Net loss                                                                       $(18,818,254)    $(12,773,106)
Adjustments to reconcile net loss to net cash                                                                
   used in operating activities:                                                                            
 Depreciation and amortization                                                    2,901,103        1,261,065
 Deferred compensation                                                               74,246           72,154
 Stock issued for services/donation                                                       -           18,278
 Accrued interest on securities available-for-sale                                  917,863          427,535
 Net change in operating accounts:                                                                                 
   Accounts receivable                                                           (2,703,273)        (800,468)
   Inventories and fee-per-use systems                                           (7,151,457)      (8,464,786)
   Accounts payable and accrued liabilities                                       1,361,189        1,484,085
   Deferred revenue                                                                       -          500,000
   Other                                                                           (523,703)        (558,063)
                                                                              --------------    -------------
Net cash used in operating activities                                           (23,942,286)     (18,833,306)
                                                                                                             
Investing activities                                                                                         
Purchases of securities available-for-sale                                       (5,349,511)     (75,750,434)
Maturities of securities available-for-sale                                      23,624,921       31,094,630
Purchase of Pathfinder System product line                                       (2,696,114)               -
Additions to property and equipment                                                (758,679)      (3,175,989)
Other                                                                                (4,163)          66,997
                                                                                ------------     ------------
Net cash provided by (used in) investing activities                              14,816,454      (47,764,796)
                                                                                                             
Financing activities                                                                                         
Issuance of common stock, net                                                             -       61,740,351
Exercise of stock options/warrants                                                3,901,601        2,835,984
Principal payments on obligations under capital leases                              (58,091)        (163,219)
                                                                                ------------     ------------
Net cash provided by financing activities                                         3,843,510       64,413,116
                                                                                ------------     ------------
                                                                                                             
Net decrease in cash and cash equivalents                                        (5,282,322)      (2,184,986)
Cash and cash equivalents:                                                                                   
 Beginning of period                                                              7,871,401        4,150,923
                                                                                ------------      -----------
 End of period                                                                 $  2,589,079     $  1,965,937
                                                                                ============     ============
Noncash transactions and supplemental disclosures                                                                  
Inventories transferred to fee-per-use systems                                    3,083,867        3,556,896
Inventories transferred to property and equipment                                 1,579,191                -
Short-term note payable issued in purchase of Pathfinder System product line        500,000                -
                                                                                                                   
The purchase of the Pathfinder System product line included 97,127 shares of NeoPath common stock (see Note 5).
                                                                                                                   
See accompanying notes.                                                                                            
</TABLE>
                                        
                  
Page 3                                
<PAGE>

                                
                                
                          NEOPATH, INC.
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Unaudited)
                                
Note 1 - Basis of Presentation

      The  accompanying unaudited financial statements have  been
prepared  by  NeoPath, Inc. (the "Company")  in  accordance  with
generally  accepted accounting principles for  interim  financial
information  and  according to the rules and regulations  of  the
Securities  and Exchange Commission.  Accordingly,  they  do  not
include  all  of  the  information  and  footnotes  required   by
generally  accepted accounting principles for complete  financial
statements. In the opinion of management, all adjustments  (which
include  only normal recurring adjustments) considered  necessary
for a fair presentation have been included.  The balance sheet at
December  31,  1996  has been derived from the audited  financial
statements  at  that  date,  but does  not  include  all  of  the
information   and   footnotes  required  by  generally   accepted
accounting  principles  for complete financial  statements.   The
results  of operations for the three-month and nine-month periods
ended  September  30,  1997,  are not necessarily  indicative  of
results  to  be expected for the entire year ending December  31,
1997  or  for  any other fiscal period.  For further information,
refer   to   the  financial  statements  and  footnotes   thereto
incorporated by reference in the Company's Form 10-K for the year
ended December 31, 1996.

Note 2 - Revenue Recognition

      The  Company recognizes fee-per-use revenues based  on  the
number  of  customer  slides processed,  subject  to  agreed-upon
minimum processing levels, beginning in the month  an  AutoPap(R)
System is initially placed in commercial use at the customer site
and  is  accepted by the customer.  Sales of AutoPap Systems  are
recognized as revenues at date of shipment.

Note 3 - Recently Issued Accounting Standards

      In February 1997,  the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share," which is required
to  be  adopted for periods ending after December 15, 1997.   The
new Statement requires that companies change the method currently
used to compute earnings per share and restate all prior periods,
if necessary.  Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will  be
excluded.   Because the Company's stock options are not  dilutive
(due  to  net  losses), the impact of Statement No.  128  on  the
Company's calculation of net loss per share is not expected to be
material.

      In  June  1997,   the Financial Accounting Standards  Board
issued Statement No. 130, "Reporting Comprehensive Income," which
is  required  to  be  adopted for fiscal  years  beginning  after
December  15,  1997.  The new Statement requires  that  companies
report  and  display comprehensive income and its components,  as
defined  in the Statement, for all periods presented.  Under  the
new requirements, comprehensive income must be displayed with the
same prominence as other financial statements.  The Company plans
to adopt the new Statement in 1998.

      In  June  1997,  The Financial Accounting  Standards  Board
issued  Statement  No.  131, "Disclosures about  Segments  of  an
Enterprise  and  Related Information," which is  required  to  be
adopted  for periods beginning after December 15, 1997.  The  new
Statement   supersedes  Financial  Accounting   Standards   Board
Statement No. 14, "Financial Reporting for Segments of a Business
Enterprise."  Companies will be required to report each operating
segment and related information, as defined in the Statement,  in
the  Company's notes to financial statements.  The Company  plans
to adopt the new Statement in 1998.

Page 4
<PAGE>

Note 4 - Inventories

     Inventories consist of the following:

                                                     
                          September 30,   December 31,
                               1997          1996
                          ------------   ------------
     Raw materials        $  4,235,802   $  2,725,725
     Work-in-process         1,935,066        166,437
     Finished goods          2,197,511      2,749,752
                          ------------   ------------
                          $  8,368,379   $  5,641,914
                          ============   ============

Note 5 - Purchase of Pathfinder System Product Line

     In June 1997, the Company acquired the Pathfinder(R)  System
product  line  from  CompuCyte Corporation ("CompuCyte")  for  an
initial purchase price of $4.1 million in cash and Company common
stock.   The initial purchase price included cash of $2.7 million
(including  transaction-related expenses), a $500,000  short-term
note  paid  in October 1997, and 48,564 shares of Company  common
stock.   In addition, 48,563 shares of Company common stock  were
issued  and  are held in escrow contingent upon certain  specific
technology  decisions to be made within one year of closing.   In
accordance  with  accounting rules, the value of  the  contingent
shares  is  excluded from the initial purchase price  allocation,
and   the   48,563  contingent  shares  are  excluded  from   the
calculation of weighted average shares outstanding. Including the
value  of contingent shares at the closing date, which value  the
Company  expects  to  recognize as an  intangible  asset  if  the
contingency  is  removed, the total purchase  price  approximated
$5.1 million.
     
     As  a  result  of  the  acquisition,  the  Company  recorded
approximately $240,000 in inventories, $100,000 in  property  and
equipment,  and  recognized $3.8 million in  acquired  intangible
assets.  The intangible assets are amortized over five years.

Note 6 -  Litigation

     On July 15, 1996, Neuromedical Systems, Inc. filed a lawsuit
against NeoPath, Inc. in the United States District Court for the
Southern  District  of  New York.  The complaint  alleges  patent
infringement, unfair competition, false advertising, and  related
claims.  On  September 5, 1996, the Company filed its answer  and
counter claims.  In late September 1997, a motion for preliminary 
injunction against the Company was heard by a judge in the United
States  District Court for the Southern District of New York.  No
decision  has yet been rendered.  The Company  believes  it has a
strong position  in  this action  and  continues to defend itself
vigorously.

      On  March 31, 1997, the Company filed a patent infringement
lawsuit  against Neuromedical Systems, Inc. in the United  States
District  Court  for  the Western District  of  Washington.   The
complaint  alleges patent infringement and seeks preliminary  and
permanent injunctions against Neuromedical Systems, Inc.

Page 5
<PAGE>

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

Overview

      NeoPath,  Inc.  (the "Company" or "NeoPath")  develops  and
markets  products  that  automate the interpretation  of  medical
images.   The  Company's initial products include  two  automated
screening  systems  that integrate proprietary  high-speed  image
processing  computers, video imaging technology and sophisticated
visual intelligence software to capture and analyze thousands  of
microscopic  images from a Papanicolaou ("Pap") smear  slide,  as
well as  the Pathfinder(R)  System  product  line  acquired  from
CompuCyte Corporation ("CompuCyte") in June 1997.

     NeoPath's first product, the AutoPap(R) 300 QC Automatic Pap
Screener  System (the "AutoPap QC"), received approval  from  the
United  States  Food  and  Drug  Administration  (the  "FDA")  in
September  1995  and  approval from  the  Health  Care  Financing
Administration  in March 1996.  The AutoPap QC is currently  used
by  clinical laboratories to rescreen Pap smears classified by  a
cytotechnologist  as  normal in order  to  improve  detection  of
abnormal smears.

     NeoPath  is  seeking FDA approval for the AutoPap  Automatic
Pap  Screener System (the "AutoPap Screener" and, in  combination
with  the  AutoPap QC, the "AutoPap System").   During  1997  the
Company completed a prospective intended-use clinical study which
included  more  than  31,500 Pap smear slides  at  five  clinical
laboratories  in  the United States and Canada  to  evaluate  the
performance  of  the  AutoPap Screener  as  a  primary  screening
device.   Based  on  the  results of the study,  in  August  1997
NeoPath  submitted an amendment to its PreMarket Approval ("PMA")
to the FDA for use of the AutoPap System as a primary screener of
Pap smear slides.
     
     Currently, the Company recognizes revenue on either  a  sale
or  fee-per-use basis (subject to certain license agreements  and
minimum  payments).  Under its fee-per-use program,  the  Company
retains ownership of AutoPap Systems placed at customer sites and
assesses  customers a charge for each Pap smear  slide  analyzed.
The  fee-per-use program entails a significant capital commitment
since the Company retains ownership of the AutoPap Systems.   The
cost  of each AutoPap System is reclassified from inventories  to
depreciable  equipment  upon shipment to a  fee-per-use  customer
site.  Such equipment, reflected on the balance sheet under "fee-
per-use  systems,  net," is depreciated on a straight-line  basis
over  a  four-year period, commencing upon commercial  operation.
To   date,   the  Company's  product  placements  have  primarily
consisted of fee-per-use contracts in the United States and  sale
contracts  internationally.  The Company anticipates that  future
product  placements will continue to consist of both  fee-per-use
and  sale  contracts;  however, the mix  could  vary  as  product
features and markets mature, and as reimbursement changes.
     
Acquisition of Pathfinder System
     
     In  June  1997,  the Company acquired the Pathfinder  System
product line from CompuCyte for an initial purchase price of $4.1
million  in cash and Company common stock. The Pathfinder  System
is used to provide improved productivity and quality assurance in
the   clinical   cytology   laboratory   by   computerizing   the
cytotechnologists'  microscopes,  thereby  helping  to  eliminate
screening errors and facilitating critical cell identification in
applications such as Pap smear screening for the early  detection
of  cervical  cancer.   During the third quarter,  NeoPath  began
selling  the  Pathfinder  System as  a  stand-alone  product  and
continues  to evaluate a potential integration of the  technology
into the AutoPap System.
     
     The  initial  purchase price included cash of  $2.7  million
(including  transaction-related expenses), a $500,000  short-term
note  paid  in October 1997, and 48,564 shares of Company  common
stock.   In addition, 48,563 shares of Company common stock  were
issued  and  are held in escrow contingent upon certain  specific
technology  decisions to be made within one year of closing.   In
accordance  with  accounting rules, the value of  the  contingent
shares  is  excluded from the initial purchase price  allocation,
and   the   48,563  contingent  shares  are  excluded  from   the
calculation of weighted average shares outstanding. Including the
value  of contingent shares at the closing date, which value  the
Company  expects  to  recognize as an  intangible  asset  if  the
contingency  is  removed, the total purchase  price  approximated
$5.1 million.

Page 6
<PAGE>
     
     As  a  result  of  the  acquisition,  the  Company  recorded
approximately $240,000 in inventories, $100,000 in  property  and
equipment,  and  recognized $3.8 million in  acquired  intangible
assets.  The intangible assets are amortized over five years.

Results of Operations

     NeoPath's revenues for the third quarter were $3.1  million,
representing  an increase of over 250 percent compared  to  third
quarter  1996 revenues of $877,000 and an increase of 39  percent
over  revenues for the second quarter of 1997.  Domestic fee-per-
use revenues increased over 220 percent from the third quarter of
1996 and increased approximately 20 percent over similar revenues
for  the  second quarter of 1997.  More than 65 percent of  third
quarter revenues resulted from AutoPap System sales worldwide and
other revenues associated with upgrades to previous international
product placements.  The remaining revenues consisted of domestic
fee-per-use revenues and limited revenues from initial  sales  of
Pathfinder  Systems.  The Company anticipates that  revenues  for
the  next  several quarters will continue to consist  of  greater
sales  of  AutoPap Systems than revenues generated from NeoPath's
fee-per-use program.
     
     During  the  third  quarter of 1997, the  Company  signed  a
distribution agreement with a firm in Hong Kong and  shipped  its
first  AutoPap System to Hong Kong.  Third quarter  and  year-to-
date  revenues include amounts from Nikon Corporation,  NeoPath's
distributor  in  Japan, for upgrading AutoPap Systems  previously
shipped. Approximately 40 percent of total revenues in the  third
quarter were attributable to international product placements.

      The Company recognized revenues of $7.6 million in the nine
months ended September 30, 1997, compared to $1.5 million in  the
comparable  period  in 1996.  NeoPath began  recognizing  product
revenues in early 1996.

     Earlier in 1997, the Company signed a distribution agreement
with a Korean firm and shipped its first AutoPap System to Korea;
in  addition, NeoPath obtained CE mark approval and  shipped  its
first  commercial AutoPap System to Europe at a customer site  in
Italy.  In June 1997, the Company announced that it had signed  a
national  agreement with SmithKline Beecham Clinical Laboratories
to place AutoPap QC Systems at ten additional sites in the United
States.   NeoPath shipped AutoPap QC Systems under this agreement
during  the second  and  third  quarters.  Fee-per-use agreements  
generally begin to generate revenues  in  the  quarter  following
placement.

     Gross  margin  increased to 60 percent in the quarter  ended
September  30, 1997, compared to a gross margin of 54 percent  in
the  first  six months of 1997 and a 38 percent gross margin  for
all  of  1996.  NeoPath's gross margin for the nine months  ended
September 30, 1997 was 57 percent, compared to a gross margin  of
35  percent  in  the  comparable period  in  1996.   The  primary
components  of  cost of revenues for fee-per-use systems  include
depreciation  and  allocated  service  and  support  costs.   For
AutoPap  Systems  sold,  cost of revenues  includes  the  related
manufacturing  cost  and  estimated  one-year  warranty  expense.
Gross  margin  is expected to continue to fluctuate depending  on
the  mix of fee-per-use revenues, AutoPap System sales, and other
revenues,  which  include  revenues to be  recognized  under  the
agreement  with  Nikon Corporation for upgrading AutoPap  Systems
previously   shipped.    The   continued   development   of   the
manufacturing, service and support functions, as well as  overall
production   levels,   are  also  expected   to   contribute   to
fluctuations in gross margin.

      Research and development expenses were $3.1 million in  the
quarter ended September 30, 1997, compared to $2.9 million in the
comparable quarter of 1996 and an average of $4.2 million in  the
first two quarters of 1997.  The decrease from expense levels for
the  first  half of 1997 is primarily  a result of the  Company's
completion  of  the clinical study to support  the  amendment  to
NeoPath's  PMA to the FDA  for  use of  the  AutoPap  System as a
primary screener of Pap smears.

     Research and development expenses were $11.4 million in  the
nine months ended September 30, 1997, compared to $8.2 million in
the  comparable period in 1996.  The increase from  1996  is  due
primarily  to  expenditures  from the primary  screener  clinical
study,  as  well  as other expenses relating to the  August  1997
submission  to  the FDA.  Research and development  expenses  are
expected to remain stable over the near team, but are expected to

Page 7
<PAGE>

increase  over time due to expenditures for product  improvements
and new product development, as well as expenditures relating  to
future submissions to the FDA.

     Selling,  general  and  administrative  expenses  were  $5.2
million in the quarter ended September 30, 1997, compared to $3.1
million in the comparable quarter in 1996 and an average of  $4.2
million  in the first two quarters of 1997. Selling, general  and
administrative  expenses were $13.6 million in  the  nine  months
ended  September  30,  1997, compared  to  $7.9  million  in  the
comparable  period  in  1996.  These increases  are  primarily  a
result  of  the Company's investment in significant new marketing
and sales initiatives and costs related to the integration of the
Pathfinder  System  product line.  The increase  from  the  prior
year   also   reflects  higher  staffing,  legal,   and   overall
infrastructure expenses.

      Interest income for the third quarter of 1997 decreased  to
$538,000,  compared  to  $940,000 for the comparable  quarter  in
1996.   For  the  nine months ended September 30, 1997,  interest
income  was  $2.0 million, compared to $2.9 million in  the  nine
months ended September 30, 1996.  The decrease in interest income
is  due  primarily to decreased cash equivalents  and  securities
available-for-sale  resulting from NeoPath's  negative  operating
cash flow.

 Liquidity and Capital Resources

       The   Company's  cash,  cash  equivalents  and  securities
available-for-sale  totaled $34.3 million  as  of  September  30,
1997,  compared  to  $58.5 million at  December  31,  1996.   The
decrease is a result of cash used in the Company's operations for
the nine months ended September 30, 1997 and the $2.7 million  in
cash  paid for the Pathfinder System product line, offset by  the
receipt  of $3.9 million from the exercise of stock warrants  and
options.

      During  the nine months ended September 30, 1997, excluding
the  Pathfinder System product line acquisition, the Company used
$24.7  million  to  fund  operating  activities,  including  $4.7
million for inventories subsequently classified as either fee-per-
use  systems  or  transferred  to  property  and  equipment   and
$760,000  to purchase other property and equipment.   During  the
comparable  nine-month  period in 1996, the  Company  used  $22.0
million  to fund its operating activities, including $3.6 million
for  inventories subsequently classified as  fee-per-use  systems
and  $3.2 million  for  property  and  equipment.  The investment
in  fee-per-use  systems is expected to increase as  the  Company
continues to place AutoPap Systems into commercial service  under
fee-per-use service contracts.

      The  Company expects negative cash flow from operations  to
continue at least through the majority of 1998 as it manufactures
AutoPap   Systems  to  support  fee-per-use  product  placements,
continues  to  expand its marketing, sales, and customer  service
and  support capabilities, continues its research and development
activities, and conducts and analyzes data from clinical studies.
The  Company currently estimates that its existing cash resources
and  interest income will enable it to sustain operations for  at
least  the  next 12 months.  There can be no assurance,  however,
that the Company will not be required to seek additional cash  in
the  form  of  either  debt or equity at an  earlier  date.   The
Company's  future  capital  requirements  will  depend  on   many
factors, including the extent and rate of adoption of use of  the
AutoPap QC and, if regulatory approvals are obtained, the AutoPap
Screener; the increase in the Company's fee-per-use program;  the
mix  of  fee-per-use and sale placements; the extent and rate  of
development  of  the  Company's marketing,  sales,  and  customer
service  and  support capabilities; and the status  of  competing
products.   The  Company may, from time to time, seek  additional
funding  through  public or private financing,  including  equity
financing.  There can be no assurance that adequate funding  will
be available as needed or on terms acceptable to the Company.  If
additional   funds  are  raised  by  issuing  equity  securities,
existing  shareholders  will experience  dilution.   Insufficient
funds  may  require the Company to delay, scale back or eliminate
some  or  all  of its manufacturing, research and development  or
clinical programs.

Factors Affecting Future Results and Forward-Looking Statements

      The  preceding  Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations contains "forward-
looking  statements"  which reflect the Company's  current  views
with  respect to future events and financial performance.   These
forward-looking  statements  are subject  to  certain  risks  and
uncertainties   that  could  cause  actual  results   to   differ
materially  from  historical results or those  anticipated.   The
words "plan," "expect,"

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<PAGE>

"anticipate,"  and  similar expressions identify  forward-looking
statements.  Readers are cautioned not to place undue reliance on
these  forward-looking  statements.  The  Company  undertakes  no
obligation  to  publicly  update or  revise  any  forward-looking
statements,  whether  as  a  result of  new  information,  future
events, or otherwise.  Factors that could cause actual results to
differ  materially  from historical results or those  anticipated
include,   without  limitation,  the  following:   the  Company's
limited   operating  history  and  history  of   losses;   market
acceptance  of  the  Company's products; the  acceptance  of  the
Company's fee-per-use or sale programs; product and manufacturing
regulatory  approvals;  the Company's limited  marketing,  sales,
customer service and support capabilities; uncertainties relating
to  international  transactions; the Company's  sole  or  limited
source  of  supply of certain components; the status of competing
products;  dependence  on  reimbursement;  dependence  on  single
product  line;  product  liability;  dependence  on  patents  and
property  rights; the risk of third-party claims of infringement;
and  dependence on key personnel.  For a more detailed discussion
of  these  factors,  see "Factors Affecting  Future  Results  and
Forward-Looking Statements" of the Company's Form  10-K  for  the
fiscal year ended December 31, 1996.

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Part II   OTHER INFORMATION

Item 1. Legal Proceedings

     On July 15, 1996, Neuromedical Systems, Inc. filed a lawsuit
against NeoPath, Inc. in the United States District Court for the
Southern  District  of  New York.  The complaint  alleges  patent
infringement, unfair competition, false advertising, and  related
claims.  On  September 5, 1996, the Company filed its answer  and
counter claims. In late  September 1997, a motion for preliminary 
injunction against the Company was heard by a judge in the United 
States District Court for the Southern District of New  York.  No
decision  has yet  been  rendered.  The Company  believes it  has
a strong position  in this action  and continues to defend itself
vigorously.

      On  March 31, 1997, the Company filed a patent infringement
lawsuit  against Neuromedical Systems, Inc. in the United  States
District  Court  for  the Western District  of  Washington.   The
complaint  alleges patent infringement and seeks preliminary  and
permanent injunctions against Neuromedical Systems, Inc.
  

Item 6.  Exhibits and Reports on Form 8-K

(a)  The following exhibits are filed as part of this report.

     Exhibit No.  Description
     ------------------------------------
     27           Financial Data Schedule
     


(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended
September 30, 1997.

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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.

                                      NeoPath, Inc.


Date:   November 13, 1997             By:  /s/ ALAN C. NELSON
                                      -----------------------
                                      Alan C. Nelson
                                      President and Chief Executive Officer


                                      By: /s/ WILLIAM L. SCOTT
                                      ------------------------
                                      William L. Scott
                                      Vice President and Chief Financial Officer


                                      By:  /s/ ROBERT C.BATEMAN
                                      -------------------------
                                      Robert C. Bateman
                                      Corporate Controller and Treasurer
Page 11 
<PAGE>
 



                          NEOPATH, INC.
                                
                        INDEX TO EXHIBITS



     Exhibit No.  Description
     ------------------------------------
     27           Financial Data Schedule
     
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