U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q  (Mark
One) xQUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 oTRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM  TO .  Commission
  File Number 000-30493BioNebraska, Inc.(Exact
  name of small business issuer as specified in its charter)Delaware
  47-0727668(State
  or other jurisdiction
  of incorporation or organization
  (I.R.S.
  Employer 
  Identification No.)4130 N.W. 37th Street, Lincoln, Nebraska
  68524-1637(Address
  of principal executive offices)
  Zip
  Code
  (402) 470-2100(Issuer's
  Telephone Number)
   Check whether the issuer (1) filed all
reports required 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 report), and (2) has been subject to such filing requirements for
the past 90 days.  YESxNOo As
of May 11, 2001 the Company had 7,360,454 shares of Common Stock, $.01 par
value per share, outstanding.   BIONEBRASKA, INC.
INDEX

PART I.FINANCIAL
  INFORMATIONITEM
  1.
  FINANCIAL STATEMENTSCondensed
  Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000Condensed
  Consolidated Statements of Operations for the three month periods ended March
  31, 2001 and 2000Condensed
  Consolidated Statements of Cash Flows for the three month periods ended March
  31, 2001 and 2000Notes
  to Condensed Consolidated Financial StatementsITEM
  2.
  MANAGEMENTS
  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCautionary
  Statement About Forward-Looking StatementsOverviewResults of OperationsLiquidity and Capital
  ResourcesMarket RiskITEM
  3.
  QUALITATIVE
  AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISKPART II.           OTHER
  INFORMATIONITEM 1.
  LEGAL PROCEEDINGSITEM 2.
  CHANGES IN
  SECURITIESITEM 3.
  DEFAULTS
  UPON SENIOR SECURITIESITEM
  4.
  SUBMISSION
  OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5.
  OTHER INFORMATIONITEM
  6.
  EXHIBITS
  AND REPORTS ON FORM 8-KSIGNATURES

BIONEBRASKA, INC.(a development
stage company)Condensed Consolidated Balance
Sheets
(unaudited)



March 31, 
  2001
  December 31, 
  2000ASSETSCurrent assetsCash and cash
  equivalents
  $5,522,156
  $9,492,135Prepaid expenses
  237,959
  174,499Other current assets
  51,223
  45,734Total current assets
  5,811,338
  9,712,368Property and equipment,
  net of accumulated depreciation $3,195,794 and $2,973,722
  5,973,641
  5,780,172Patents and patents
  licensed, net of accumulated amortization of $182,793 and $170,529
  651,173
  663,437Deferred financing costs,
  net of accumulated amortization of $192,258 and $128,172
  320,431
  384,517Other assets
  37,599
  32,599Total assets
  $12,794,182
  $16,573,093LIABILITIES AND SHAREHOLDERS' DEFICITCurrent liabilities:Accounts payable
  $730,808
  $628,374Accrued expenses
  308,833
  288,354Capital lease
  obligations - current portion
  618,003
  617,251Notes payable -
  current portion
  629,158
  608,299Total current
  liabilities
  2,286,802
  2,142,278Long-term liabilities:Capital lease
  obligations - less current portion
  880,746
  1,036,871Notes payable - less
  current portion
  1,390,134
  1,555,465Total long-term
  liabilities
  2,270,880
  2,592,336Total
  liabilities
  4,557,682
  4,734,614Redeemable preferred stockSeries A,F and A,E,F ($0.01 par value, 211,750 and 411,750 shares
  authorized, 121,018 and 138,088 issued and outstanding, at redemption value)
  15,721,861
  16,675,502Shareholders' deficitCommon stock, ($0.01 par value, 20,000,000 shares authorized,
  7,360,454 and 7,329,845 shares issued and outstanding)
  73,605
  73,298Convertible preferred
  stock, Series B,C,D,E,G and B,C,D,G ($0.01 par value; 416,500 and 216,500
  shares authorized, 165,174 and 148,104 shares issued and outstanding)
  1,652
  1,481Additional paid-in
  capital
  59,858,400
  58,603,886Deficit accumulated
  during development stage
  (67,419,018)
  (63,515,688)Total
  shareholders' deficit
  (7,485,361)
  (4,837,023)Total
  liabilities and shareholders' deficit
  $12,794,182
  $16,573,093See accompanying notes to consolidated financial
  statements

BIONEBRASKA,
INC.(a development
stage company)Condensed Consolidated
Statement of Operations
(unaudited)

Three Months Ended 
  March 31,
  Cumulative period
  From April 15, 1988
  (date of incorporation)2001
  2000
  to March 31, 2001Revenues
  $1,318
  $-
  $3,661,695Operating costs and expenses:General and administrative
  802,195
  608,942
  19,804,745Research and development
  3,007,158
  3,091,487
  51,293,741Total operating
  costs and expenses
  3,809,353
  3,700,429
  71,098,486Operating loss
  (3,808,035)
  (3,700,429)
  (67,436,791)Other income (expense)Interest income
  110,153
  211,772
  1,707,412Interest expense
  (205,448)
  (75,400)
  (1,689,639)(95,295)
  136,372
  17,773NET LOSS
  ($3,903,330)
  ($3,564,057)
  ($67,419,018)Preferred stock dividends
  accreted and accumulating but not declared
  ($690,984)
  ($693,055)
  ($10,556,903)Net loss applicable to
  common stock
  ($4,594,314)
  ($4,257,112)
  ($77,975,921)Basic and diluted loss per
  common share
  ($0.62)
  ($0.62)
  ($18.03)Average number of common
  shares outstanding - basic and diluted
  7,351,494
  6,860,071
  4,324,492See accompanying notes to consolidated financial statements

BIONEBRASKA,
INC.(a development stage company)Condensed Consolidated Statement of Cash Flows(unaudited)

Three Months Ended
  March 31,
  Cumulative period
  from April 15, 1988
  (date of incorporation)to March 31, 20012001
  2000CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
  ($3,903,330)
  ($3,564,057)
  ($67,419,018)Adjustments to reconcile net loss to net cash flows from operating
  activities:Depreciation and amortization
  234,336
  195,591
  3,617,561Amortization of deferred financing costs
  64,086
  -
  192,258Acquired in process research and development
  -
  -
  1,200,000Stock-based compensation expense
  87,087
  -
  5,976,495Change in operating assets and liabilities:Accounts receivable and other current assets
  (68,949)
  348
  (289,180)Accounts payable and accrued expenses
  122,913
  (163,578)
  1,996,018Net cash flows from operating activities
  (3,463,857)
  (3,531,696)
  (54,725,866)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
  (415,541)
  (150,873)
  (9,169,435)Increase in deposits and other assets
  (5,000)
  (719,086)
  (269,278)Increase in patents
  -
  -
  (841,260)Acquisition of R&C, Inc. and GRFCo
  -
  -
  (1,200,000)Net cash flows from investing activities
  (420,541)
  (869,959)
  (11,479,973)CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from issuance of common stock
  214,263
  2,058,420
  39,577,583Net proceeds from issuance of preferred stock
  -
  -
  27,231,371Proceeds from long-term obligations
  -
  (25,000)
  5,439,432Payments on notes payable and capital leases
  (299,844)
  (161,014)
  (1,921,391)Proceeds from bridge notes payable
  -
  -
  3,765,500Payments on bridge notes payable
  -
  -
  (2,364,500)Net cash flows from financing activities
  (85,581)
  1,872,406
  71,727,995NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
  (3,969,979)
  (2,529,249)
  5,522,156CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
  9,492,135
  18,393,567
  -CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $5,522,156
  $15,864,318
  $5,522,156Supplemental Disclosures of Investing Financing Activities:Interest paid
  $141,362
  $75,400
  $1,218,809See accompanying notes to consolidated financial
  statements

BioNebraska, Inc.Notes
to Condensed Consolidated Financial StatementsMarch 31, 2001 and 2000
(unaudited)

(1)         Summary
of Significant Accounting Policies

Basis of Presentation -The
condensed consolidated balance sheet as of March 31, 2001, the condensed
consolidated statements of operations for the three month periods ended March
31, 2001 and 2000 and the condensed consolidated statements of cash flows for
the three month periods ended March 31, 2001 and 2000 have been prepared by the
Company without audit in accordance with accounting principles generally
accepted in the United States of America. 
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America.  In the opinion of management,
all adjustments (all of which are normal and recurring in nature) considered
necessary to present fairly the financial position at March 31, 2001, and
results of operations and cash flows for the three month periods ended March
31, 2001 and 2000 have been included. 
Results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the full fiscal year, or any
other period.  These financial
statements and notes should be read in conjunction with the audited financial
statements for the year ended December 31, 2000, included in the Companys Form
10-K filed with the Securities and Exchange Commission.

The
Company adopted Statement of Financial Accounting Standards (SFAS) No. 133
Accounting for Derivatives and Similar Financial Instruments and for Hedging
Activities, as amended by SFAS No. 137 and SFAS No. 138 on January 1,
2001.  There was no impact to the
condensed consolidated financial statements as a result of adopting this
standard.

Shareholders Equity -During
the three month period ended March 31, 2001, warrants to purchase a total of
30,609 shares of common stock were exercised with gross proceeds of
$214,263.  In addition, holder
redemption rights on Series E Preferred Stock expired on March 31, 2001.  In connection with the expiration of these
rights, the Series E Preferred Stock has been reclassified to shareholders
equity as of March 31, 2001.

Subsequent Event In
April of 2001, the Company sold 80,000 shares of Series H Convertible Preferred
Stock at $100 per share.  The Series H
Preferred Stock resulted in net proceeds to the Company of approximately $7.3
million.

Each
share of Series H Convertible Preferred Stock is convertible at the option of
the holder at any time into approximately 6.666 shares of the Companys common
stock, which is based on an initial conversion price of $15.00 per share and is
subject to adjustment.  In the event the
Company closes an initial public offering of common stock which raises at least
$7 million, the Series H Convertible Preferred Stock will automatically convert
to common stock and any accrued dividends will be extinguished.

Going
Concern Considerations- The Company, from
inception, has experienced losses from its activities in research and
development, without fully offsetting revenues.  This and the fact that the Company is a development stage
business create a substantial doubt as to its ability to continue as a going
concern.

The Company has obtained financing
through private placement offerings.  As
in the past, the Company is pursuing additional equity placement offerings to
fund several of its programs as well as its corporate overhead.

The Companys ability to obtain
profitability on substantial portions of its operations will also depend in
large part on:  obtaining regulatory
approvals of its products; entering into satisfactory agreements for product
commercialization; making the transition from a developmental stage business to
a manufacturing and marketing company; and obtaining additional financing
through equity or debt issues or development collaborations, as necessary.

The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.

Item 2.              MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following
is a discussion and analysis of the Companys consolidated condensed financial
condition and results of operations for the three months ended March 31, 2001
and 2000.  The section should be read in
conjunction with the Companys audited financial statements for the year ended
December 31, 2000, and Managements Discussion and Analysis of Financial
Condition and Results of Operations contained in the Companys Form 10-K for
the year ended December 31, 2000, as filed with the Securities and Exchange
Commission.

Cautionary Statement About
Forward-Looking Statements

This Form 10-Q contains, in
addition to historical information, forward-looking statements that are based
on the Companys current expectations, beliefs, intentions or future
strategies.  We use words such as
anticipate, believe, plan, expect, intend, and similar expressions to
identify forward-looking statements.

These
statements are subject to risks and uncertainties that could cause actual
results to differ materially from the statements, including the uncertainties
involved in the additional development of the Companys new pharmaceutical
products, the outcomes of clinical trials, obtaining regulatory approvals or
clearances, the ability of the Companys products to be manufactured in
commercial quantities, construction of additional facilities for commercial
production, the development of internal or contractual distribution and
marketing capabilities, the extent to which reimbursement for the costs of the
products and treatments will be available from government health administration
authorities, private health insurers and other organizations, protection of the
Companys patent and proprietary rights and avoiding infringement of other
parties patents and proprietary rights, potential competition and the
dependence of the Company on obtaining future financing.  These risks are further described in the Companys
Form 10-K for the year ended December 31, 2000 under the heading, Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Additional Factors That May Affect Future Performance.  The Company does not undertake responsibility
to update such forward-looking statements to reflect events that arise after
the date of this report.

Overview

We are a development stage
therapeutics company engaged in the recombinant production and clinical
development of middle range peptide hormones (referred to generally as MR
Peptides) to treat diseases of aging, such as type 2 diabetes, obesity,
advanced cases of osteoporosis and other various acute conditions.  We have developed the capability to
biologically produce, purify and amidate MR Peptides in a natural form.  Our MR Peptide hormones serve to naturally
activate certain endocrine hormone systems governing bodily functions in
persons whose hormones are deficient or lacking as a result of advancing age or
body malfunctions.  We are conducting
clinical trials for several of these applications.  No regulatory approvals have been obtained, and consequently, we
have derived no revenues from the sale of these products.  We have financed operations to date
primarily through the sale of equity securities.

Since inception in 1989, we have
experienced operating losses and anticipate that our operating losses will
continue for the foreseeable future until such time as one or more therapeutic
products receive regulatory approval and are successfully marketed.  Expenditures will be primarily related to
research and development activities, clinical trials, and scale-up of
commercial manufacturing.

Results of Operations

Research and development expenses
include those costs associated with the research, development, production and
testing of our pharmaceutical products, including all direct costs incurred in
conducting our clinical trials and all costs related to the protection of
proprietary rights.  These costs have
aggregated $51,293,741 since our inception. 
Research and development costs were $3,007,158 for the three month
period ended March 31, 2001, as compared to $3,091,487 for the same period in
the prior fiscal year.  Clinical trial
expenditures are projected to increase significantly during the remainder of
2001.

General and
administrative expenses increased to $802,195 for the three month period ended
March 31, 2001, as compared to $608,942 for the same period in 2000.  The increase primarily reflects the
strengthening of our administrative support structure.

Interest income decreased to
$110,153 for the three months ended March 31, 2001 as compared to $211,772 for
the same period in 2000.  Higher
interest income in the prior year period is primarily due to higher average
cash and cash equivalent balances, following the sale of equity securities in
the fourth quarter of 1999.  We incurred
interest expense of $205,448 for the three month period ended March 31, 2001
compared to $75,400 for the same period in 2000.  The increase reflects non-cash interest charges associated with
the extension of certain redeemable preferred stock terms and an increase in
equipment financing costs.

Liquidity and Capital Resources

During the three months ended March
31, 2001 we used $3,463,857 for research and development and administrative
activities and $415,541 for equipment acquisitions.  As of March 31, 2001 we had total cash and cash equivalents of
$5,522,156.  This figure excludes net
proceeds of approximately $7.3 million from the sale of Series H Convertible
Preferred Stock which was received in April 2001.  Based on our current operating plan, we believe that existing
cash and cash equivalents, including the proceeds received from the sale of
shares of Series H Convertible Preferred Stock, will be sufficient to fund our
operations at the current levels until the fourth quarter of 2001.  Our plan of operations assumes that
additional funding will be received prior to that date from the sale of
additional equity securities.

At March 31, 2001, we had a shareholders
deficit accumulated during the development stage of $67.4 million.  Historically, the auditors reports on our
financial statements have contained an explanatory paragraph concerning our
ability to continue as a going concern. 
We expect to continue to incur additional losses, and will require
additional working capital, as we incur substantial expenses related to
additional personnel, clinical trials, research and development activities, and
scale-up of commercial manufacturing.

Market Risk

We are exposed to market risk
related to changes in interest rates. The Company does not use derivative
financial instruments for speculative or trading purposes.  Due the nature of cash and cash equivalents,
we believe that there is no material market risk exposure.

Item 3.QUALITATIVE AND QUANTITATIVE DISCLOSURE
ABOUT MARKET RISK.

See Item 2, Managements
Discussion and Analysis of Financial Condition and Results of Operations -
Market Risk.

PART II

OTHER
INFORMATION



Item 1.LEGAL PROCEEDINGS.

None

Item 2.CHANGES IN SECURITIES.

During
the first three months of 2001, warrants to purchase a total of 30,609 shares
of common stock were exercised by former placement agents and advisers with
gross proceeds of $214,263.  Because the
sales were made to a limited number of persons who purchased the securities as
an investment for his or her own account under Regulation D of the Securities
Act of 1933, as amended (the Act), the Company believes that these sales were
exempt under Section 4(2) of the Act and from the registration and prospectus
delivery requirements of the Act.

In
April 2001, the Company sold 80,000 shares of Series H Convertible Preferred
Stock at $100 per share to an accredited investor outside the United States in
an offshore offering in accordance with Regulation S under the Act.  The Company paid an 8% finders fee in
connection with the sale.  Each share of
Series H Convertible Preferred Stock is convertible at the option of the holder
at any time into approximately 6.666 shares of the Companys common stock,
which is based on an initial conversion price of $15.00 per share and is
subject to adjustment.  In the event the
Company closes an initial public offering of common stock which raises at least
$7 million, the Series H Convertible Preferred Stock will automatically convert
to common stock and any accrued dividends will be extinguished.  Because the shares were sold in an offshore
offering to a Non-U.S. Person under Regulation S, the Company believes that
this transaction was exempt under Section 4(2) of the Securities Act of 1933
and from the registration and prospectus delivery requirements of the Act.

Item 3.DEFAULTS UPON SENIOR SECURITIES.

None

Item 4.SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS.

None

Item 5.OTHER INFORMATION.

The
Companys principal executive offices were moved during the quarter to 4130 N.
W. 37th Street, Lincoln, NE 68524-1637.Item 6.EXHIBITS AND REPORTS ON FORM 8-K.

(a)
  Exhibits3.10
  Certificate of Designation of Rights and Preferences of Series H
  Convertible Preferred Stock as filed with the Delaware Secretary of State
  on April 23, 2001.(b)
  Reports on Form 8-KNoneSIGNATURES

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.

BIONEBRASKA, INC.Dated:  May 11, 2001
  /s/ Thomas R. CoolidgeThomas R. Coolidge
  Chief Executive Officer and Chairman
  (Duly Authorized Officer)/s/ David S. WalkerDavid S. Walker
  Senior Vice President and Chief Financial Officer
  (Principal Financial Officer)