<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 MARCH 31, 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 May 1, 1997
           -----                                --------------------------
<S>                                                   <C>       
Common Stock, $.01 par value                          14,741,658
Redeemable Common Stock Purchase Warrants              8,733,021
</TABLE>




                               Page 1 of 10 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 March 31, 1997 (unaudited).........................................................           3

                  Statements of Operations (unaudited) for the three
                  months ended March 31, 1996 and 1997...................................................           4

                  Statements of Cash Flows (unaudited) for the three months ended
                  March 31, 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...........................................................           9

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

SIGNATURE ...............................................................................................          10
</TABLE>




<PAGE>   3
                           EPOCH PHARMACEUTICALS, INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             DECEMBER 31,     MARCH 31, 1997
                                                                 1996          (UNAUDITED)
                                                             ------------      ------------
<S>                                                          <C>               <C>         
                                     ASSETS
Current assets:
  Cash and cash equivalents ............................     $  4,890,358      $  4,070,623
  Receivables ..........................................           58,742            36,561
  Prepaid expenses .....................................           69,989            58,003
                                                             ------------      ------------
         Total current assets ..........................        5,019,089         4,165,187
Equipment and leasehold improvements, net ..............          277,498           247,360
Other assets ...........................................           21,150            21,150
                                                             ------------      ------------
         Total assets ..................................     $  5,317,737      $  4,433,697
                                                             ============      ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable ........................................     $     11,188      $      8,515
  Accounts payable .....................................          200,236           198,903
  Accrued liabilities ..................................          230,555           282,001
                                                             ------------      ------------

    Total current liabilities ..........................          441,979           489,419
                                                             ------------      ------------

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 14,741,658 at March 31, 1997 ...................          147,239           147,417
  Additional paid-in capital ...........................       52,892,549        52,902,077
  Deferred compensation ................................          (39,029)          (23,189)
  Accumulated deficit ..................................      (48,125,001)      (49,082,027)
                                                             ------------      ------------

    Total stockholders' equity .........................        4,875,758         3,944,278
                                                             ------------      ------------

    Total liabilities and stockholders' equity .........     $  5,317,737      $  4,433,697
                                                             ============      ============
</TABLE>

                 See accompanying notes to financial statements.


<PAGE>   4
                           EPOCH PHARMACEUTICALS, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED
                                                                             MARCH 31,
                                                                      1996              1997
                                                                  ------------      ------------
<S>                                                               <C>               <C>         
Research contract revenue ...................................     $         --      $     43,520
Operating Expenses:
  Research and development ..................................          528,922           648,234
  Selling, general and administrative .......................          407,316           454,991
                                                                  ------------      ------------
    Total operating expenses ................................          936,238         1,103,225
                                                                  ------------      ------------
    Operating loss ..........................................         (936,238)       (1,059,705)
Other income (expense):
  Interest income ...........................................           35,943            52,022
  Interest and financing expense ............................         (155,756)             (611)
  Other income ..............................................            4,800            31,268
                                                                  ------------      ------------
    Loss from continuing operations .........................       (1,051,251)         (977,026)
Discontinued operations:
  Income from operations of discontinued Diagnostics Division            7,033                --
  Gain on disposal of Diagnostics Division ..................               --            20,000
                                                                  ------------      ------------
     Net loss ...............................................       (1,044,218)         (957,026)
                                                                  ============      ============
Loss per share from continuing operations ...................     $      (0.15)     $      (0.06)
Income per share from discontinued operations ...............               --                --
                                                                  ------------      ------------
     Net loss per share .....................................     $      (0.15)     $      (0.06)
                                                                  ============      ============
Weighted average number of common shares outstanding ........        7,024,437        14,729,535
</TABLE>


                 See accompanying notes to financial statements.


<PAGE>   5
                           EPOCH PHARMACEUTICALS, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                           MARCH 31,
                                                                     1996            1997
                                                                 ------------     -----------
<S>                                                              <C>              <C>         
Cash flows from operating activities:
     Net loss ..............................................     $(1,044,218)     $  (957,026)
     Adjustments to reconcile net loss to net cash used
      in operating activities:

     Continuing operations:
     Depreciation and amortization .........................          61,895           48,175
     Amortization of discount on notes payable .............         122,326               --
     Changes in operating assets and liabilities:
     Other assets ..........................................          27,076           34,167
     Accounts payable and accrued liabilities ..............        (128,033)          65,953
     Discontinued operations:
     Changes in current assets and current liabilities .....          13,355               --
                                                                 -----------      -----------
     Net cash used in operating activities .................        (947,599)        (808,731)
Cash used in investing activities - acquisition of equipment
          and leasehold improvements .......................         (30,516)         (18,037)
                                                                 -----------      -----------
Cash flows from financing activities:
     Principal payments on notes payable ...................          (2,371)          (2,673)
     Exercise of warrants and stock options ................           3,790            9,706
                                                                 -----------      -----------
     Net cash provided by financing activities .............           1,419            7,033
                                                                 -----------      -----------
Net (decrease) in cash and cash equivalents ................        (976,695)        (819,735)
Cash and cash equivalents at beginning of period ...........       3,739,144        4,890,358
                                                                 -----------      -----------
Cash and cash equivalents at end of period .................     $ 2,762,449      $ 4,070,623
                                                                 ===========      ===========
Supplemental disclosure of cash flow information-cash
          payments made during the period for interest .....     $       902      $       610
                                                                 ===========      ===========
</TABLE>


                See accompanying notes to financial statements.


<PAGE>   6
                           EPOCH PHARMACEUTICALS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 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 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. Certain 1996 balances have been reclassified to conform with
the 1997 presentation.

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 March 31, 1997, the Company had cash and cash equivalents of $4,071,000 which
provides sufficient working capital to operate approximately twelve (12) months.
The Company's continuing operations are research and development, and will not
generate working capital in the near term to fund future operations.

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 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 



<PAGE>   7

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 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 ended March
31, 1996 and 1997.

Research and development expenses for the three months ended March 31, 1997
increased $119,000 over the same period 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.

Selling, general and administrative expenses increased $48,000 in the three
month period ended March 31, 1997 compared to the respective prior year period.
The Company expended $104,000, in the current quarter in fees toward filing
patents on new technologies, as compared to $8,000 in the comparable period of
the prior year. 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 



<PAGE>   8

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.

Interest income in the three month period ended March 31, 1997 increased
compared with the respective period in the prior year due to higher investable
cash balances.

Interest expense in the current period decreased from the respective period in
the prior year primarily due to $122,000 of debt discount having been amortized
in 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 March 31, 1997, the due date of the
note was extended to May 15, 1997 in return for: a cash payment of $10,000
against the note, which was received in April 1997; and an equity position in
Saigene equal to 10% of the fully diluted shares outstanding.

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,
$20,000, for which cash payments were received during the quarter, which were
the scheduled receipts for January and February 1997. Epoch received the March
1997 payment in April 1997. The Company does not anticipate receiving the
balance of the note receivable when due May 15, 1997, and there is no assurance
Saigene will obtain financing to pay this debt.

LIQUIDITY AND CAPITAL RESOURCES

Cash decreased by $820,000 from December 31, 1996 to March 31, 1997 as a result
of disbursements for normal operating expenditures.

The Company's accounts payable and accrued liabilities balances increased by
$50,000 from December 31, 1996 to March 31, 1997 due to normal business
fluctuations.

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 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 



<PAGE>   9

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 reduce 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

                  27  Financial Data Schedule

              (B) REPORTS ON FORM 8-K

                  None


<PAGE>   10



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: May 14, 1997                      By:        s/ Sanford S. Zweifach
      ------                                -----------------------------------
                                            Sanford S. Zweifach
                                            President/Chief Financial Officer