<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                                   FORM 10-QSB

(Mark One)

|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO
         ________________.

                         Commission file number 0-22170

                           EPOCH PHARMACEUTICALS, INC.
        (exact name of small business issuer as specified in its charter)

         Delaware                        91-1311592
(State or other jurisdiction             (I.R.S. Employer Identification Number)
of incorporation or organization)

           1725 220th Street, S.E., No. 104, Bothell, Washington 98021
                    (Address of principal executive offices)

                                 (425) 485-8566
                           (Issuer's telephone number)

                                 NOT APPLICABLE

                            -------------------------

              (Former name, former address and former fiscal year,
                          if changed since last report)

Check whether the issuer (1) filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 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
                                   ---------     ---------

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.

<TABLE>
<CAPTION>
              Class                                Outstanding at July 21, 1997
              -----                                ----------------------------
<S>                                                           <C>       
Common Stock, $.01 par value                                  14,746,709
Redeemable Common Stock Purchase Warrants                      7,431,108
</TABLE>




                               Page 1 of ___ Pages


<PAGE>   2

                           EPOCH PHARMACEUTICALS, INC.
                              INDEX TO FORM 10-QSB


<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION                                                                                  Page Number
<S>                                                                                                                <C>
     Item 1.  Financial Statements

                  Balance Sheets as of December 31, 1996
                  and June 30, 1997 (unaudited)...........................................................          3

                  Statements of Operations (unaudited) for the three
                  months and six months ended June 30, 1996 and 1997......................................          4

                  Statements of Cash Flows (unaudited) for the six months ended
                  June 30, 1996 and 1997..................................................................          5

                  Notes to Financial Statements..........................................................           6

     Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................................................           6

PART II.  OTHER INFORMATION

     Item 6.  Exhibits and Reports on Form 8-K............................................................         10

     NOTE:  Items 1-5 are omitted as they are not applicable.

SIGNATURE ................................................................................................         11
</TABLE>




<PAGE>   3

                           EPOCH PHARMACEUTICALS, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,          JUNE 30, 1997
                                                                                       1996                (UNAUDITED)
                                                                                 -----------------     ------------------
<S>                                                                          <C>                   <C>              

                                                           ASSETS
Current assets:
     Cash and cash equivalents..........................................     $       4,890,358     $       3,332,950
     Receivables  ......................................................                58,742                29,979
     Prepaid expenses...................................................                69,989                52,746
                                                                                 -----------------     ------------------
         Total current assets...........................................             5,019,089             3,415,675

Equipment and leasehold improvements, net...............................               277,498               199,641

Other assets                                                                            21,150                21,150
                                                                                 -----------------     ------------------
         Total assets...................................................     $       5,317,737     $       3,636,466
                                                                                 =================     ==================

                                          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Notes payable......................................................     $          11,188     $           5,761
     Accounts payable...................................................               200,236               191,052
     Accrued liabilities................................................               230,555               288,511
                                                                                 -----------------     ------------------
         Total current liabilities......................................               441,979               485,324
                                                                                 -----------------     ------------------
Stockholders' equity:
     Preferred stock, par value $.01; authorized 10,000,000
         shares; no shares issued and outstanding.......................                    --                    --
     Common stock, par value $.01; authorized
         30,000,000 shares; issued and outstanding
         14,723,856 shares at December 31, 1996
         and 14,746,709 at June 30, 1997................................               147,239               147,467
     Additional paid-in capital.........................................            52,892,549            52,903,543
     Deferred compensation..............................................               (39,029)               (7,419)
     Accumulated deficit................................................           (48,125,001)          (49,892,449)
                                                                                 -----------------     ------------------
         Total stockholders' equity.....................................             4,875,758             3,151,142
                                                                                 -----------------     ------------------
         Total liabilities and stockholders' equity.....................     $       5,317,737     $       3,636,466
                                                                                 =================     ==================
</TABLE>


                 See accompanying notes to financial statements.


<PAGE>   4

                           EPOCH PHARMACEUTICALS, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED                    SIX MONTH ENDED
                                                                         JUNE 30,                             JUNE 30,
                                                              --------------------------------    ---------------------------------
                                                                  1996              1997              1996               1997
                                                              --------------    --------------    --------------     --------------
<S>                                                        <C>               <C>               <C>               <C>            
Research contract revenue................................  $          --     $      46,191     $           --    $        89,711

Operating Expenses:
  Research and development...............................  $     483,542     $     632,342     $    1,012,464    $     1,280,576
  General and administrative.............................        121,763           358,678            529,079            813,669
                                                              --------------    --------------    --------------     --------------
     Total operating expenses............................        605,305           991,020          1,541,543          2,094,245
                                                              --------------    --------------    --------------     --------------
     Operating loss......................................       (605,305)         (944,829)        (1,541,543)        (2,004,534)

Other income (expense):
  Interest income........................................         26,250            45,154             62,193             97,176
  Interest and financing expense.........................        (23,495)             (982)          (179,251)            (1,593)
  Other income...........................................          4,601            40,240              9,401             71,508
                                                              --------------    --------------    --------------     --------------
     Loss from continuing operations.....................       (597,949)         (860,417)        (1,649,200)        (1,837,443)

Discontinued operations:
  Loss from operations of discontinued
     Diagnostics Division................................        (79,934)               --            (72,901)                --
  Gain on disposal of Diagnostics Division...............             --            50,000                 --             70,000
                                                              --------------    --------------    --------------     --------------
     Net loss............................................       (677,883)         (810,417)        (1,722,101)        (1,767,443)
                                                              ==============    ==============    ==============     ==============
Loss per share from continuing operations................          (0.08)            (0.06)             (0.22)             (0.12)

Loss per share from discontinued operations..............          (0.01)              --               (0.01)               --
                                                              --------------    --------------    --------------     --------------
     Net loss per share..................................          (0.09)            (0.06)             (0.23)             (0.12)
                                                              ==============    ==============    ==============     ==============
Weighted average common shares outstanding...............      7,756,794        14,743,934          7,390,616         14,736,774
</TABLE>





                 See accompanying notes to financial statements.


<PAGE>   5

                           EPOCH PHARMACEUTICALS, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          SIX MONTHS ENDED
                                                                                              JUNE 30,
                                                                               --------------------------------------
                                                                                    1996                  1997
                                                                               ---------------       ----------------
<S>                                                                       <C>                  <C>                 
Cash flows from operating activities:
     Net loss .........................................................   $       (1,722,101)  $        (1,767,443)

     Adjustments to reconcile net loss to net cash used in 
      operating activities:

       Continuing operations:
         Depreciation and amortization.................................              127,014                97,130
         Amortization of discount on notes payable.....................              122,326                    --

       Changes in operating assets and liabilities:
         Other assets..................................................               21,573                46,006
         Accounts payable and accrued liabilities......................             (446,745)               80,382
         Other current liabilities.....................................                 (625)                   --

       Discontinued operations:
         Changes in current assets and current liabilities.............               75,334                    --
                                                                               ---------------       ----------------

       Net cash used in operating activities...........................           (1,823,224)           (1,543,925)
                                                                               ---------------       ----------------
Cash used in investing activities - acquisition of equipment
        and leasehold improvements.....................................              (30,516)              (19,275)
                                                                               ---------------       ----------------
Cash flows from financing activities:
     Principal payments on notes payable...............................           (1,324,019)               (5,427)
     Proceeds from sale of common stock................................            4,632,500                    --
     Exercise of warrants and stock options............................              666,994                11,222
                                                                               ---------------       ----------------
     Net cash provided by financing activities.........................            3,975,475                 5,795
                                                                               ---------------       ----------------
     Net increase (decrease) in cash and cash equivalents..............            2,121,735            (1,557,408)
Cash and cash equivalents at beginning of period.......................            3,739,144             4,890,358
                                                                               ---------------       ----------------
Cash and cash equivalents at end of period.............................   $        5,860,879   $         3,332,950
                                                                               ===============       ================
Supplemental disclosure of cash flow information-cash
        payments made during the period for interest...................   $           68,101   $             1,593
                                                                               ===============       ================
</TABLE>



                 See accompanying notes to financial statements.


<PAGE>   6


                           EPOCH PHARMACEUTICALS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1997
                                   (UNAUDITED)

(1)  BASIS OF PRESENTATION

Epoch Pharmaceuticals, Inc. ("Epoch" or "the Company"), was organized to
develop, manufacture and market therapeutic and diagnostic products utilizing
oligonucleotide technology. In November 1995, the Company sold substantially all
of its diagnostics assets to Becton, Dickinson and Company. The Company's
continuing activities are focused on the development of therapeutic technologies
and products. The Company's revenues from continuing operations to date are
primarily from Federal government and other research grants and contracts.

The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required to be presented for complete financial
statements. The accompanying financial statements include all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented.

The financial statements and related disclosures have been prepared with the
presumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto included in the
Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission on March 31, 1997.

The Company has experienced significant quarterly fluctuations in operating
results and it expects that these fluctuations in revenue, expenses and net
losses will continue.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS; PLAN OF OPERATIONS

At June 30, 1997, the Company had cash and cash equivalents of $3,333,000 which
provides sufficient working capital to operate approximately nine months. The
Company's continuing operations are research and development, and will not
generate working capital in the near term to fund future operations.

In June 1996, the Company announced that it intends to exchange for every two
Redeemable Common Stock Purchase Warrants, which were issued in conjunction with
the Company's public offering in September 1993 at $6.50 per share (the "Public
Warrants"), one new warrant to purchase one share of the Company's Common Stock
until June 20, 2001, that is exercisable at $2.50 per share (the "Exchange
Warrants"). Each Exchange Warrant shall be redeemable by the Company at any time
after eighteen months from the date that they are issued at $0.05 per warrant,
provided that the closing trading price per share of Common Stock is at least
$3.75 for twenty consecutive trading days. In June 1997 this exchange of
warrants was completed, with 2,603,825 of the Public Warrants being exchanged
for 1,301,912 of the Exchange Warrants.




                                       6
<PAGE>   7

Since inception, the Company has financed its operations primarily through the
sales of its equity securities. In addition, the Company received $8,510,000
from the sale of the diagnostics division. To continue operations, the Company
will be required to sell additional equity securities, borrow additional funds,
or obtain additional financing through licensing, joint venture, or other
collaborative arrangements. The Company is pursuing such financing arrangements
but has no commitments for such financing and there can be no assurance that
such financing will be available on satisfactory terms, if at all.

In July 1997, Fred Craves, Chairman of the Board of Directors and Chief
Executive Officer of the Company purchased on the public market 127,500 shares
of the Company's Common Stock at a price of $0.4375.

In July 1997, Sanford S. Zweifach, President and Chief Financial Officer of the
Company purchased on the public market 25,000 shares of the Company's Common
Stock at a price of $0.4375. Simultaneously with the purchase, the Company
loaned Mr. Zweifach, with full recourse, $12,192 due in two years at an interest
rate of 7%.

In July 1997, Rich B. Meyer, Jr., Vice President, Research and Development of
the Company purchased on the public market 25,000 shares of the Company's Common
Stock at a price of $0.4375. Simultaneously with the purchase, the Company
loaned Mr. Meyer, with full recourse, $12,192 due in two years at an interest
rate of 7%.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
(EPS), replacing the presentation of currently required primary EPS with a
presentation of Basic EPS. For entities with complex capital structures, the
statement requires that dual presentation of both Basic EPS and Diluted EPS on
the face of the statement of operations. Under this new statement, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution. Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock and is similar to the currently required fully diluted EPS. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods, and earlier application is not
permitted. When adopted, the Company will be required to restate its EPS data
for all prior periods presented. The Company does not expect the impact of the
adoption of this statement to be material to previously reported EPS amounts.

This Quarterly Report on Form 10-QSB contains certain forward-looking statements
that are based on current expectations. In light of the important factors that
can materially affect results, including those set forth below and elsewhere in
this Quarterly Report on Form 10-QSB, the inclusion of forward-looking
information herein should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
The Company may encounter competitive, technological, financial and business
challenges making it more difficult than expected to continue to develop and
market therapeutic technologies and 




                                       7
<PAGE>   8

products; the market may not accept the Company's therapeutic products; the
Company may be unable to retain existing key management personnel; and there may
be other material adverse changes in the Company's operations or business.
Certain important factors affecting the forward-looking statements made herein
include, but are not limited to (i) the successful development of viable
therapeutic technologies and products, (ii) accurately forecasting capital
expenditures, and (iii) obtaining new sources of external financing. Assumptions
relating to budgeting, marketing, product development and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its marketing,
capital expenditure or other budgets, which may in turn affect the Company's
financial position and results of operations.

Future operating results may be impacted by a number of factors that could cause
actual results to differ materially from those stated herein, which reflect
management's current expectations. These factors include industry specific
factors, the Company's ability to maintain access to external financing sources
and its financial liquidity, the Company's ability to timely develop and produce
commercially viable therapeutic products and the Company's ability to manage
expense levels.

RESULTS OF OPERATIONS

The following discussion of results of operations reflects the Company's
Diagnostics Division as discontinued operations for the three months and six
months ended June 30, 1996 and 1997.

Research and development expenses for the three months and six months ended June
30, 1997 increased $149,000 and $268,000, respectively, over the same periods in
the prior year as a result of increased research activity. Additional increases
in expenditures for research and development throughout 1997 are anticipated as
the Company devotes additional resources to these efforts.

General and administrative expenses increased $237,000 in the three month period
ended June 30, 1997 and $285,000 in the six month period ended June 30, 1997
compared to the prior year periods. In July 1996 the In Re Blech Securities
Litigation suit was dismissed. Accordingly, $250,000 of estimated costs which
had been accrued for this matter was reversed as a reduction of expenses in the
three and six month periods ended June 30, 1996.

Additionally, general and administrative expenses in the six month period ended
June 30, 1997 included $153,000 in fees toward filing patents on new
technologies, the majority of which was incurred in the first quarter, as
compared to $43,000 in the comparable six month period ended June 30, 1996. The
Company believes that these patents, if issued, will improve the Company's
proprietary position with regards to its targeted gene mutagenesis technologies.
There can be no assurance that the Company's patent applications will result in
further issued patents or that such issued patents will offer protection against
competitors with similar technology. Additionally, there can be no assurance
that any manufacture, use or sale of the Company's technology or products will
not infringe on patents or proprietary rights of others, and the Company may be
unable to obtain licenses or other rights to these other technologies that may
be required for commercialization of the Company's proposed products. Additional
variations in, general and administrative expenses are the result of normal
business fluctuations.





                                       8
<PAGE>   9

Interest income in the three month and six month periods ended June 30, 1997
increased compared with the respective periods in the prior year due to higher
investable cash balances.

Interest expense in the current periods decreased from the respective periods in
the prior year primarily due to $122,000 of debt discount having been amortized
in the first quarter of 1996 related to a $480,000 warrant price adjustment
associated with a bridge refinancing. The price adjustment was credited to
additional paid-in capital and the debt discount was amortized over the term of
the notes. At March 31, 1996 the discount had been fully amortized.
Additionally, all significant notes payable were repaid in 1996.

In November 1996, the Company entered into an agreement with Saigene Corporation
(Saigene), whereby Epoch transferred its remaining diagnostic technologies to
Saigene for $1,100,000. The $1,100,000 is in the form of an 8% note receivable
with terms of $50,000 down and $10,000 per month. The note is secured by the
assets and technologies transferred to Saigene in the agreement. The balance of
the note was originally due March 31, 1997, or upon Saigene completing financing
arrangements, whichever occurs first. On June 20, 1997, the note was amended to
payments of $10,000 per month up to the closing of an anticipated private
placement in September 1997 by Saigene and increasing to $20,000 per month after
completion of the anticipated private placement. If the private placement raises
$1,500,000 or more, then Epoch is to receive a payment on the note of $500,000.
Additionally, Epoch now holds a 12% equity position in Saigene. The note must by
repaid in full upon completion of any additional financing in excess of
$1,000,000 or on June 20, 1999, whichever occurs first.

Due to the uncertainty of Saigene obtaining financing, the Company has recorded
as Gain on Disposal of Diagnostics Division only that portion of the gain,
$50,000 and $70,000, for which cash payments were received during the quarter
and six month periods ended June 30, 1997, respectively. As of June 30, 1997,
Saigene was current on all payments, however, the Company does not anticipate
receiving the balance of the note receivable when due, and there is no assurance
Saigene will obtain financing to pay this debt.

LIQUIDITY AND CAPITAL RESOURCES

Cash decreased by $1,557,000 from December 31, 1996 to June 30, 1997 as a result
of disbursements for normal operating expenditures.

The Company's primary future needs for capital are for continued research and
development. The Company's working capital requirements may vary depending upon
numerous factors including the progress of the Company's research and
development, competitive and technological advances, the FDA regulatory process
and other factors.

The Company will require additional funds to continue its operations and, over
the longer term, will require substantial additional funds to maintain and
expand its research and development activities and to ultimately commercialize,
with or without the assistance of corporate partners, any of its proposed
products. The Company will seek collaborative or other arrangements with larger
pharmaceutical companies, under which such companies would provide additional
capital to the 




                                       9
<PAGE>   10

Company in exchange for exclusive or non-exclusive license or other rights to
certain of the technologies and products the Company is developing. However, the
competition for such arrangements with major pharmaceutical companies is
intense, with a large number of biopharmaceutical companies attempting to
satisfy their funding requirements through such arrangements. There can be no
assurance that an agreement or agreements will arise from these discussions in a
timely manner, or at all, or that revenues that may be generated thereby will
offset operating expenses sufficiently to satisfy the Company's short- or
long-term funding requirements. Additional equity or debt financings may be
required, and there can be no assurance that funds will be available from such
financings on favorable terms, or at all.

PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (A) EXHIBITS

             10.69  Asset Purchase Agreement made as of November 26, 1996, by 
                    and between Epoch Pharmaceuticals, Inc. and Saigene 
                    Corporation.

             10.70  Secured Promissory Note dated as of November 7, 1996
                    executed by Saigene Corporation in favor of Epoch
                    Pharmaceuticals, Inc.

             10.71  Sideletter dated June 20, 1997 between Epoch 
                    Pharmaceuticals, Inc. and Saigene Corporation amending the
                    terms of the Secured Promissory Note dated as of November 7,
                    1996. 

             27     Financial Data Schedule.

         (B) REPORTS ON FORM 8-K

             None

ITEM 7.  RECENT SALES OF UNREGISTERED SECURITIES

         Beginning in April 1997 and continuing through June 1997, the Company
offered to exchange for every two Public Warrants one new Exchange Warrant. As
of June 30, 1997, 46 holders of the Public Warrants exchanged an aggregate of 
2,603,825 Public Warrants for 1,301,912 Exchange Warrants. The issuance of the
Exchange Warrants was exempt from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, by reason of Section 3(a)(9) thereunder
and based upon the following facts: (i) the Exchange Warrants were offered by
the same entity that issued the Public Warrants; (ii) the holders of the Public
Warrants were not required to part with anything of value besides the Public
Warrants; (iii) the exchange was offered exclusively to the Company's existing
security holders; and (iv) the Company did not pay any corporation for the
solicitation of the exchange.



                                       10
<PAGE>   11

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                           EPOCH PHARMACEUTICALS, INC.

Date: August 12, 1997                      By: /s/ SANFORD S. ZWEIFACH
      ----------                               ---------------------------------
                                               Sanford S. Zweifach
                                               President/Chief Financial Officer



  
                                     11
<PAGE>   12
                                 EXHIBIT INDEX

   EXHIBIT
   NUMBER                           DESCRIPTION
   -------                          -----------
    10.69       Asset Purchase Agreement made as of November 26, 1996, by 
                and between Epoch Pharmaceuticals, Inc. and Saigene 
                Corporation.

    10.70       Secured Promissory Note dated as of November 7, 1996
                executed by Saigene Corporation in favor of Epoch
                Pharmaceuticals, Inc.

    10.71       Sideletter dated June 20, 1997 between Epoch 
                Pharmaceuticals, Inc. and Saigene Corporation amending the
                terms of the Secured Promissory Note dated as of November 7,
                1996. 

     27         Financial Data Schedule.