<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 SEPTEMBER 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>
                Class                        Outstanding at September 30, 1997
                -----                        ---------------------------------
<S>                                                      <C>       
       Common Stock, $.01 par value                      14,775,606
       Common Stock Purchase Warrants                     7,431,108
</TABLE>


                               Page 1 of 11 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 September 30, 1997 (unaudited)......................................        3

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

               Statements of Cash Flows (unaudited) for the nine months ended
               September 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,  SEPTEMBER 30, 1997
                                                                           1996          (UNAUDITED)
                                                                        ------------    ------------
<S>                                                                     <C>             <C>         
                                     ASSETS
Current assets:
    Cash and cash equivalents .......................................   $  4,890,358    $  2,381,196
    Receivables .....................................................         58,742          54,763
    Prepaid expenses ................................................         69,989          53,092
                                                                        ------------    ------------

        Total current assets ........................................      5,019,089       2,489,051

Equipment and leasehold improvements, net ...........................        277,498         150,684

Other assets ........................................................         21,150          64,298
                                                                        ------------    ------------

        Total assets ................................................   $  5,317,737    $  2,704,033
                                                                        ============    ============



                                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Notes payable ...................................................   $     11,188    $      2,924
    Accounts payable ................................................        200,236         182,783
    Accrued liabilities .............................................        230,555         247,298
                                                                        ------------    ------------

        Total current liabilities ...................................        441,979         433,005
                                                                        ------------    ------------

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 14,775,606 at September 30, 1997 ........................        147,239         147,756
    Additional paid-in capital ......................................     52,892,549      52,911,923
    Deferred compensation ...........................................        (39,029)             --
    Accumulated deficit .............................................    (48,125,001)    (50,788,651)
                                                                        ------------    ------------

        Total stockholders' equity ..................................      4,875,758       2,271,028
                                                                        ------------    ------------

        Total liabilities and stockholders' equity ..................   $  5,317,737    $  2,704,033
                                                                        ============    ============
</TABLE>


                 See accompanying notes to financial statements.


                                       3


<PAGE>   4
                           EPOCH PHARMACEUTICALS, INC.

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED              NINE MONTH ENDED
                                                     SEPTEMBER 30,                  SEPTEMBER 30,
                                             ----------------------------    ----------------------------
                                                 1996            1997           1996             1997
                                             ------------    ------------    ------------    ------------
<S>                                          <C>             <C>             <C>             <C>         
Research contract revenue ................   $         --    $     43,983    $         --    $    133,694

Operating Expenses:
Research and development .................   $    498,798    $    661,589    $  1,511,262    $  1,942,165
General and administrative ...............        381,284         363,086         910,363       1,176,755
                                             ------------    ------------    ------------    ------------
    Total operating expenses .............        880,082       1,024,675       2,421,625       3,118,920

                                             ------------    ------------    ------------    ------------
    Operating loss .......................       (880,082)       (980,692)     (2,421,625)     (2,985,226)

Other income (expense):
Interest income ..........................         64,358          35,198         126,546         132,374
Interest and financing expense ...........         (2,536)         (1,433)       (181,787)         (3,026)
Other income .............................          6,200          20,720          15,601          92,228
                                             ------------    ------------    ------------    ------------

    Loss from continuing operations ......       (812,060)       (926,207)     (2,461,265)     (2,763,650)

Discontinued operations:
Loss from operations of discontinued
    Diagnostics Division .................       (160,735)             --        (233,635)             --
Gain on disposal of Diagnostics Division .             --          30,000              --         100,000
                                             ------------    ------------    ------------    ------------

    Net loss .............................   $   (972,795)   $   (896,207)   $ (2,694,900)   $ (2,663,650)
                                             ============    ============    ============    ============

Loss per share from continuing operations    $      (0.06)   $      (0.06)   $      (0.26)   $      (0.19)

Income (loss) per share from discontinued    $      (0.01)   $       0.00    $      (0.02)   $       0.01
operations
                                             ------------    ------------    ------------    ------------

    Net loss per share ...................   $      (0.07)   $      (0.06)   $      (0.28)   $      (0.18)
                                             ============    ============    ============    ============

Weighted average common shares outstanding     14,266,713      14,751,820       9,700,692      14,742,936
</TABLE>


                 See accompanying notes to financial statements.


                                       4


<PAGE>   5
                           EPOCH PHARMACEUTICALS, INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                   NINE MONTHS ENDED
                                                                     SEPTEMBER 30,
                                                              --------------------------
                                                                    1996               1997
                                                              -----------    -----------
<S>                                                           <C>            <C>         
Cash flows from operating activities:
    Net loss ..............................................   $(2,694,900)   $(2,663,652)

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

      Continuing operations:
        Depreciation and amortization .....................       148,871        146,089
        Amortization of discount on notes payable .........       122,326             --

      Changes in operating assets and liabilities:
        Accounts receivable ...............................         1,627          3,979
        Other assets ......................................        12,414         16,897
        Accounts payable and accrued liabilities ..........      (447,990)        38,321
        Other current liabilities .........................          (625)            --

      Discontinued operations:
        Changes in current assets and current liabilities .        95,577             --
                                                              -----------    -----------

     Net cash used in operating activities ................    (2,762,700)    (2,458,366)
                                                              -----------    -----------

Cash used in investing activities:
    Acquisition of equipment and leasehold improvements ...       (52,229)       (19,275)
    Issuance of notes receivable ..........................            --        (43,148)
                                                              -----------    -----------
      Net cash used in investing activities ...............       (52,229)       (62,423)
                                                              -----------    -----------

Cash flows from financing activities:
    Principal payments on notes payable ...................    (1,326,537)        (8,264)
    Proceeds from sale of common stock ....................     4,632,500             --
    Exercise of warrants and stock options ................       676,994         19,891
                                                              -----------    -----------
      Net cash provided by financing activities ...........     3,982,957         11,627
                                                              -----------    -----------

      Net increase (decrease) in cash and cash equivalents      1,168,021     (2,509,162)
Cash and cash equivalents at beginning of period ..........     3,739,144      4,890,358
                                                              -----------    -----------
Cash and cash equivalents at end of period ................   $ 4,907,165    $ 2,381,196
                                                              ===========    ===========

Supplemental disclosure of cash flow information-cash
       payments made during the period for interest .......   $    80,665    $     3,026
                                                              ===========    ===========
</TABLE>


                 See accompanying notes to financial statements.


                                       5


<PAGE>   6
                           EPOCH PHARMACEUTICALS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 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 September 30, 1997, the Company had cash and cash equivalents of $2,381,000
which provides sufficient working capital to operate approximately six 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 intended 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, one new
warrant to purchase one share of the Company's Common Stock until June 20, 2001,
(the "Public Warrants"), that is exercisable at $2.50 per share (the "Exchange
Warrants"). 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.
Each Exchange Warrant is redeemable by the Company at any time after eighteen
months from the date that they were issued at $0.05 per warrant, provided that
the closing trading 


                                       6


<PAGE>   7
price per share of Common Stock is at least $3.75 for twenty consecutive trading
days.

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 its 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 Dr. Meyer, with full recourse, $12,192 due in two years at an interest
rate of 7%.

The Company's current building lease expires November 30, 1997 and, although the
landlord has informed the Company that the lease will not be renewed, the
Company is in negotiations with the new lessee of the building, Darwin Molecular
Corp., Bothell, WA to sublease the space currently used by the Company. Although
the Company does not anticipate any difficulties in negotiating the sublease,
there can be no assurance that the Company will conclude such negotiations on
favorable terms, or 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 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 


                                       7


<PAGE>   8
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 and nine
months ended September 30, 1996 and 1997.

Research contract revenue in 1997 reflects revenue from U.S. Government grants
and contracts and subcontracts.

Research and development expenses for the three months and nine months ended
September 30, 1997 increased $163,000 and $431,000, 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 decreased $18,000 in the three month period
ended September 30, 1997 and increased $266,000 in the nine month period ended
September 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 nine month period ended September 30, 1996.
Additionally, general and administrative expenses in the nine month period ended
September 30, 1997 included $214,000 in fees toward filing patents on new
technologies, as compared to $87,000 in the comparable nine month period ended
September 30, 1996. The Company believes that these patents, if issued, will
improve the Company's proprietary position with regards to its targeted gene
mutagenesis 


                                       8


<PAGE>   9
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.

Interest income in the three month period ended September 30, 1997 decreased
compared with the respective period in the prior year due to lower 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 which has not been completed and
has been extended through November 1997. 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,
$30,000 and $100,000, for which cash payments were received during the quarter
and nine month periods ended September 30, 1997, respectively. As of September
30, 1997, Saigene was current on all payments; however, there can be no
assurance that Saigene will be able to pay the note receivable when due.

LIQUIDITY AND CAPITAL RESOURCES

Cash decreased by $2,509,000 from December 31, 1996 to September 30, 1997 as a
result of disbursements for normal operating expenditures. The remaining cash
and cash equivalents of $2,381,000 will provide sufficient working capital to
operate approximately six months. Assuming there is sufficient cash to continue
operations, the Company neither expects to make any purchase or sales of any
significant assets or equipment, nor experience any significant changes in the
number of its employees in the next twelve months.


                                       9


<PAGE>   10
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 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

               27.0   Financial Data Schedule


           (b) REPORTS ON FORM 8-K

               None


                                       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:                               By:  /s/ Sanford S. Zweifach
                                         ---------------------------------------
                                         Sanford S. Zweifach
                                         President/Chief Financial Officer



                                       11