SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

    [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934

    [_]  For the quarterly period ended SEPTEMBER 30, 2005
                                        ------------------

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from _____________ to _____________

                         Commission File Number 0-28674

                                CADUS CORPORATION
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified on its Charter)

                   Delaware                                  13-3660391
---------------------------------------------------  ---------------------------
(State of Other Jurisdiction of Incorporation             (I.R.S. Employer
               or Organization)                         Identification No.)


     767 Fifth Avenue, New York, New York                      10153
---------------------------------------------------  ---------------------------
   (Address of Principal Executive Offices)                  (Zip Code)


Registrant's Telephone Number, Including Area Code         (212) 702-4315
                                                     ---------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                              Yes    _X_       No  ___

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

                              Yes    ___       No  _X_

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12-b-2 of the Exchange Act).

                              Yes    ___       No  _X_

The number of shares of registrant's common stock, $0.01 par value,  outstanding
as of October 31, 2005 was 13,144,040.

<PAGE>


                                CADUS CORPORATION

                                      INDEX
                                                                        PAGE NO.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS                           3

        PART I - CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

             Condensed Consolidated Balance Sheets - September 30, 2005
             (unaudited) and December 31, 2004 (audited)                    4

             Condensed Consolidated Statements of Operations -
             Three Months Ended September 30, 2005 and 2004 (unaudited)     5

             Condensed Consolidated Statements of Operations -
             Nine Months Ended September 30, 2005 and 2004 (unaudited)      6

             Condensed Consolidated Statements of Cash Flows -
             Nine Months Ended September 30, 2005 and 2004 (unaudited)      7

             Notes to Condensed Consolidated Financial Statements
             (unaudited)                                                  8 - 11

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                       12 - 13

Item 3.  Quantitative and Qualitative Disclosures About Market Risk        14

Item 4.  Controls and Procedures                                           14

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                 14

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds       14

Item 3.  Defaults Upon Senior Securities                                   14

Item 4.  Submission of Matters to a Vote of Security Holders               15

Item 5.  Other Information                                                 15

Item 6.  Exhibits                                                          15

SIGNATURES                                                                 16

EXHIBIT INDEX                                                              17

                                       2
<PAGE>


SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain   statements  in  this   Quarterly   Report  on  Form  10-Q   constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities  Exchange Act of 1934, as amended.
All statements  other than  statements of historical  fact are  "forward-looking
statements"  for purposes of federal and state  securities  laws,  including any
projections  or  expectations  of  earnings,   revenue,  financial  performance,
liquidity and capital  resources or other financial  items; any statement of our
plans,  strategies  and  objectives  for our future  operations;  any statements
regarding future economic  conditions or performance;  any statements of belief;
and  any   statements   of   assumption   underlying   any  of  the   foregoing.
Forward-looking  statements  may  include  the words  "may,"  "will,"  "should,"
"could," "would," "predicts," "potential," "continue," "expects," "anticipates,"
"future," "intends," "plans,"  "believes,"  "estimates" and other similar words.
Although  the  Company   believes  that  the   expectations   reflected  in  our
forward-looking  statements  are  reasonable,  such  forward-looking  statements
involve  known and unknown  risks,  uncertainties,  and other  factors which may
cause the actual  results,  performance,  or  achievements  of the Company to be
materially  different  from any  future  results,  performance  or  achievements
expressed  or implied by such  forward-looking  statements.  Factors  that could
cause  or  contribute  to such  differences  include,  but are not  limited  to,
technological  uncertainties  regarding  the Company's  technologies,  risks and
uncertainties  relating to the Company's  ability to license its technologies to
third parties, the Company's ability to acquire and operate other companies, the
Company's capital needs and uncertainty of future funding, the Company's history
of operating losses, the Company's dependence on proprietary  technology and the
unpredictability of patent protection, intense competition in the pharmaceutical
and biotechnology industries, rapid technological development that may result in
the  Company's  technologies  becoming  obsolete,  as well as  other  risks  and
uncertainties  discussed in the Company's  other filings with the Securities and
Exchange  Commission.  The  forward-looking  statements  made in this  Quarterly
Report on Form 10-Q are made only as of the date hereof and the Company does not
have  or  undertake  any  obligation  to  publicly  update  any  forward-looking
statements  to  reflect  subsequent  events or  circumstances  unless  otherwise
required by law.

                                       3
<PAGE>


ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                CADUS CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                     ------
                                                  September 30,     December 31,
                                                      2005              2004
                                                   -----------      -----------
                                                   (Unaudited)       (Audited)
Current assets:
   Cash and cash equivalents                       $23,968,513      $24,045,800
   Prepaid and other current assets                     40,140           15,550
   Investment in marketable securities                 386,821          580,232
                                                   -----------      -----------

      Total current assets                          24,395,474       24,641,582

Investment in other ventures                           159,268          157,637
Other assets, net                                      745,308          747,029
                                                   -----------      -----------
      Total assets                                 $25,300,050      $25,546,248
                                                   ===========      ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
Accrued expenses and other current
liabilities                                      $     48,253     $     14,327
                                                 ------------     ------------

      Total current liabilities                        48,253           14,327
                                                 ------------     ------------


Commitments
Stockholders' equity:
   Common stock                                       132,857          132,857
   Additional paid-in capital                      59,844,355       59,844,355
   Accumulated deficit                            (33,675,783)     (33,589,070)
   Accumulated other comprehensive (loss)            (749,557)        (556,146)
   Treasury stock                                    (300,075)        (300,075)
                                                 ------------     ------------
      Total stockholders' equity                   25,251,797       25,531,921
                                                 ------------     ------------
      Total liabilities and
      stockholder's equity                       $ 25,300,050     $ 25,546,248
                                                 ============     ============


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                       Three Months Ended
                                                          September 30,
                                                     2005              2004
                                                 ------------      ------------
                                                  (Unaudited)       (Unaudited)
License and maintenance fees                     $         --      $         --
                                                 ------------      ------------
      Total revenues                                       --                --
                                                 ------------      ------------
Costs and expenses:
   General and administrative expenses                188,676           231,674

   (Gain) from equity in other ventures                (1,840)             (615)
                                                 ------------      ------------
      Total costs and expenses                        186,836           231,059
                                                 ------------      ------------
Operating loss                                       (186,836)         (231,059)
Other income:
   Interest income                                    201,692            71,296
   Refund of prior year franchise tax                      --            42,740
                                                 ------------      ------------
Income (loss) before income taxes                      14,856          (117,023)
Income taxes                                               --                --
                                                 ------------      ------------

      Net income (loss)                          $     14,856      ($   117,023)
                                                 ============      ============
Basic and diluted income (loss) per weighted
average share of common stock outstanding        $       0.00      ($      0.01)
                                                 ============      ============
Weighted average shares of common stock
outstanding - basic and diluted                    13,144,040        13,144,040
                                                 ============      ============


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                       Nine Months Ended
                                                         September 30,
                                                     2005              2004
                                                 ------------      ------------
                                                 (Unaudited)       (Unaudited)

License and maintenance fees                     $    100,000      $    100,000
                                                 ------------      ------------
      Total revenues                                  100,000           100,000
                                                 ------------      ------------
Costs and expenses:
   General and administrative expenses                705,119           616,113
   (Gain) loss from equity in other ventures           (1,631)            2,555
                                                 ------------      ------------
      Total costs and expenses                        703,488           618,668
                                                 ------------      ------------
Operating loss                                       (603,488)         (518,668)
Other income:
   Interest income                                    516,775           141,738
   Refund of prior year franchise tax                      --            42,740
                                                 ------------      ------------
(Loss) before income taxes                            (86,713)         (334,190)
Income taxes                                               --                --
                                                 ------------      ------------
      Net (loss)                                 ($    86,713)     ($   334,190)
                                                 ============      ============
Basic and diluted (loss) per weighted
average share of common stock outstanding        ($      0.01)     ($      0.03)
                                                 ============      ============

Weighted average shares of common stock
outstanding - basic and diluted                    13,144,040        13,144,040
                                                 ============      ============


     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>


                                CADUS CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                        Nine Months Ended
                                                          September 30,
                                                      2005             2004
                                                  ------------     ------------
                                                   (Unaudited)      (Unaudited)
Cash flows from operating activities:
   Net (loss)                                     ($    86,713)    ($   334,190)
   Adjustments to reconcile net (loss) to
   net cash (used in) operating activities:
      Amortization of patent costs                      62,522           60,679
      (Gain) loss of equity in other ventures           (1,631)           2,555
   Changes in assets and liabilities:
      (Increase) in prepaid and other
      current assets                                   (24,590)              (4)
      Increase (decrease) in accrued expenses
      and other current liabilities                     33,926          (30,969)
                                                  ------------     ------------
Cash (used in) operating activities                    (16,486)        (301,929)
                                                  ------------     ------------
Cash flows from investing activities:
   Patent licenses acquired                            (60,801)              --
                                                  ------------     ------------
Cash (used in) investing activities                    (60,801)              --
                                                  ------------     ------------
Net (decrease) in cash and cash equivalents            (77,287)        (301,929)
Cash and cash equivalents - beginning of period     24,045,800       24,369,223
                                                  ------------     ------------
Cash and cash equivalents - end of period         $ 23,968,513     $ 24,067,294
                                                  ============     ============


    See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>


                                CADUS CORPORATION
              Notes to Condensed Consolidated Financial Statements


Note - 1    ORGANIZATION AND BASIS OF PREPARATION

            The information presented as of September 30, 2005 and for the three
            and nine-month  periods then ended,  is unaudited,  but includes all
            adjustments  (consisting only of normal recurring accruals) that the
            Company's   management   believes  to  be  necessary  for  the  fair
            presentation   of  results  for  the  periods   presented.   Certain
            information and footnote  disclosures normally included in financial
            statements   prepared  in  accordance  with  accounting   principles
            generally accepted in the United States of America have been omitted
            pursuant  to  the   requirements  of  the  Securities  and  Exchange
            Commission,  although  the  Company  believes  that the  disclosures
            included  in these  financial  statements  are  adequate to make the
            information  not  misleading.  The  December  31, 2004  consolidated
            balance  sheet  was  derived  from  audited  consolidated  financial
            statements. These financial statements should be read in conjunction
            with the  Company's  annual  report on Form 10-K for the year  ended
            December 31, 2004.

            The consolidated  financial  statements  include the accounts of the
            Company and its wholly owned subsidiary,  Cadus  Technologies,  Inc.
            All inter-company  balances and transactions have been eliminated in
            consolidation.

            The results of operations for the three and nine-month  period ended
            September 30, 2005 are not necessarily  indicative of the results to
            be expected for the year ending December 31, 2005.

Note - 2    NET  INCOME (LOSS) PER SHARE

            For the three and  nine-month  periods ended  September 30, 2005 and
            2004,  basic net income (loss) per share is computed by dividing the
            net income  (loss) by the weighted  average  number of common shares
            outstanding.  The Company had net income for the three-month  period
            ended  September  30,  2005, a net loss for the  three-month  period
            ended  September 30, 2004 and a net loss for the nine-month  periods
            ended  September  30, 2005 and 2004.  The  inclusion  of options and
            warrants  for 79,236  shares in the  calculation  of diluted  income
            (loss) per share  would have been  anti-dilutive  and was  therefore
            excluded.

Note - 3    LICENSING AGREEMENTS

            In  December  2001,  the  Company   licensed  its  yeast-based  drug
            discovery   technologies  on  a  non-exclusive   basis  to  a  major
            pharmaceutical  company. Under the licensing agreement,  the Company
            received  an  up-front  non-refundable  fee  of  $500,000  that  was
            recorded as revenue in the December 31, 2001 consolidated  statement
            of  operations  as the Company has no further  involvement  with the
            development of the product.  The Company received payment in January
            2002.  The Company  received an additional  licensing fee in 2002 of
            $1,000,000  upon the licensee  achieving a research  milestone.  The
            licensee is entitled to use the technologies for five years from the
            date of the  agreement.  Following the initial  five-year  term, the
            licensee  may renew the license  annually  upon payment of an annual
            licensing fee of $250,000.  In September  2003, the parties  entered
            into an  addendum  to the  agreement  pursuant  to which the Company
            extended   the  license  to  an   affiliate   of  the   licensee  in
            consideration  for the  licensee  agreeing  to pay  $120,000  to the
            Company.

                                       8
<PAGE>


                                CADUS CORPORATION
              Notes to Condensed Consolidated Financial Statements


            In  February  2000,  Cadus  licensed  to OSI  Pharmaceuticals,  Inc.
            ("OSI"),  on a non-exclusive  basis,  its yeast-based drug discovery
            technologies,  including  various  reagents  and its library of over
            30,000 yeast strains, and its bioinformatics  software.  OSI paid to
            Cadus a license fee of $100,000 and an access fee of $600,000 and in
            December 2000 a  supplemental  license fee of $250,000.  OSI is also
            obligated  to pay an annual  maintenance  fee of $100,000  until the
            earlier of 2010 or the termination of the license. OSI may terminate
            the license at any time on 30 days prior written notice.  During the
            nine-month  periods ended  September 30, 2005 and 2004,  the Company
            recognized $100,000 of license revenue related to this agreement.

Note - 4    INVESTMENT IN MARKETABLE SECURITIES

            The Company had an equity  interest in Axiom  Biotechnologies,  Inc.
            ("Axiom"). Due to Axiom's operating losses, the Company's investment
            was written  down to $0 at December  31,  2001.  On August 30, 2002,
            Axiom  entered  into  a  merger   agreement  with  a  wholly-  owned
            subsidiary of Sequenom,  Inc. which is publicly traded on the Nasdaq
            National Market. In connection with the merger, the Company received
            441,446 common shares of Sequenom,  Inc. with a fair market value of
            $2.43 per share in exchange for its shares in Axiom. Pursuant to the
            merger,  102,685 of the Company's 441,446 common shares of Sequenom,
            Inc. were held in escrow (the "Escrow Shares") for a one-year period
            that  expired on August 30,  2003.  The Escrow  Shares  were held to
            secure rights to indemnification,  compensation and reimbursement of
            Sequenom,  Inc.  and other  indemnitees  as  provided  in the merger
            agreement.  Upon the closing of the  transaction,  Cadus  recorded a
            realized  gain of  $823,189  related to the  338,761  common  shares
            received in the  consolidated  statement of operations  for the year
            ended  December  31,  2002.  The Company was advised that the Escrow
            Shares had been  released on August 30, 2003 and,  accordingly,  the
            Company recorded a realized gain on marketable securities related to
            the Escrow  Shares of  $313,189  in the  consolidated  statement  of
            operations  for the year ended  December 31, 2003. In May 2004,  the
            Company became aware that 38,507 shares of the 102,685 Escrow Shares
            were  forfeited  pursuant to the  indemnification  provisions of the
            merger   agreement   and   therefore  not  issued  to  the  Company.
            Accordingly, to reflect this reduction of the Escrow Shares received
            by the Company, the investment in marketable  securities was reduced
            by $123,222 on the March 31, 2004 consolidated balance sheet.

            Pursuant to the  provisions  of Statement  of  Financial  Accounting
            Standards  No.  115,   "Accounting   for  Certain  Debt  and  Equity
            Securities" management deems its investment in Sequenom,  Inc. to be
            available for sale and reports its investment at fair value with net
            unrealized   gains  or  losses   reported   in   accumulated   other
            comprehensive income within stockholders' equity.

Note - 5    ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS

            Statement of Financial Accounting Standards No. 144, "Accounting for
            the  Impairment  or Disposal of  Long-Lived  Assets"  ("SFAS  144"),
            addresses  financial  accounting and reporting for the impairment or
            disposal of  long-lived  assets.  The  Company's  long-lived  assets
            (principally  capitalized  patent costs) are required to be measured
            at the lower of carrying  amount or fair  value,  less cost to sell,
            whether   reported  in   continuing   operations   or   discontinued
            operations. Intangibles with determinable lives and other long-lived
            assets are reviewed  for  impairment  whenever  events or changes in
            circumstances  indicate


                                       9
<PAGE>


                                CADUS CORPORATION
              Notes to Condensed Consolidated Financial Statements


            that the  carrying  value of an asset  may not be  recoverable.  The
            Company's judgments regarding the existence of impairment indicators
            are based on historical  and  projected  future  operating  results,
            changes in the Company's overall business  strategy,  and market and
            economic  trends.  In the future,  events could cause the Company to
            conclude  that   impairment   indicators   exist  and  that  certain
            intangibles with determinable  lives and other long-lived assets are
            impaired  which may  result in an  adverse  impact on the  Company's
            financial  condition and results of  operations.  The  provisions of
            SFAS  No.  144 did not have an  impact  on the  Company's  financial
            statements  as of and for the three  and  nine-month  periods  ended
            September 30, 2005.

Note - 6    RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

            In December 2004, the Financial  Accounting Standards Board ("FASB")
            issued Statement of Financial Accounting Standards ("SFAS") No. 123R
            "SHARE BASED PAYMENT." This statement is a revision to SFAS No. 123,
            supersedes  Accounting  Principles Board ("APB") No. 25, "ACCOUNTING
            FOR STOCK ISSUED TO EMPLOYEES,"  and amends SFAS No. 95,  "STATEMENT
            OF CASH FLOWS." This  statement  will require the Company to expense
            the cost of employee  services  received in exchange for an award of
            equity instruments. This statement also provides guidance on valuing
            and expensing these awards, as well as disclosure  requirements.  On
            April 14, 2005,  the Securities  and Exchange  Commission  adopted a
            rule amendment  that delayed the compliance  dates for SFAS No. 123R
            such that the Company is now allowed to adopt the  standard no later
            than January 1, 2006.

            SFAS No.  123R  permits  public  companies  to  choose  between  the
            following two adoption methods:

            1.    A "modified  prospective" method in which compensation cost is
            recognized  beginning  with  the  effective  date  (a)  based on the
            requirements of SFAS No. 123R for all share-based  payments  granted
            after the effective date and (b) based on the  requirements  of SFAS
            No. 123 for all awards  granted to employees  prior to the effective
            date of SFAS No. 123R that remain unvested on the effective date, or

            2.    A  "modified   retrospective"   method   which   includes  the
            requirements of the modified prospective method described above, but
            also  permits  entities to restate  based on the amounts  previously
            recognized under SFAS No. 123 for purposes of pro forma  disclosures
            either (a) all prior periods  presented or (b) prior interim periods
            of the year of adoption.

            As  permitted by SFAS No. 123,  the Company  currently  accounts for
            share-based  payments to  employees  using the APB No. 25  intrinsic
            value method and recognizes no compensation  cost for employee stock
            options.  The  impact of the  adoption  of SFAS No.  123R  cannot be
            predicted  at  this  time  because  it  will  depend  on  levels  of
            share-based  payments granted in the future.  However,  valuation of
            employee  stock  options  under SFAS No. 123R is similar to SFAS No.
            123,  with minor  exceptions.  The adoption of SFAS No.  123R's fair
            value  method  may  have  an  impact  on the  Company's  results  of
            operations, although it will have no impact on its overall financial
            position. Due to timing of the release of SFAS No. 123R, the Company
            has not yet completed the analysis of the ultimate  impact that this
            new  pronouncement  will have on the results of operations,  nor the
            method of adoption for this new standard.

                                       10
<PAGE>


                                CADUS CORPORATION
              Notes to Condensed Consolidated Financial Statements


            In  December  2004,  the FASB  issued  SFAS No.  153,  EXCHANGES  OF
            NONMONETARY  ASSETS,  AN  AMENDMENT  OF APB No. 29,  ACCOUNTING  FOR
            NONMONETARY  TRANSACTIONS.   SFAS  No.  153  requires  exchanges  of
            productive assets to be accounted for at fair value,  rather than at
            carryover basis, unless (1) neither the asset received nor the asset
            surrendered has a fair value that is determinable  within reasonable
            limits or (2) the transactions lack commercial  substance.  SFAS No.
            153 is effective for nonmonetary asset exchanges occurring in fiscal
            periods  beginning  after June 15, 2005. The Company does not expect
            the  adoption  of this  standard  to have a  material  effect on its
            financial position, results of operations or cash flows.

            In March 2004, the FASB Emerging Issues Task Force ("EITF") released
            Issue No. 03-1, "THE MEANING OF OTHER-THAN-TEMPORARY  IMPAIRMENT AND
            ITS APPLICATION TO CERTAIN INVESTMENTS." EITF 03-1 provides guidance
            for  determining  whether  impairment  for  certain  debt and equity
            investments  is  other-than-temporary  and  the  measurement  of  an
            impaired loss. The recognition and measurement  requirements of EITF
            03-1 were initially  effective for reporting periods beginning after
            June 15, 2004. In September  2004,  the FASB Staff issued FASB Staff
            Position  ("FSP")  EITF 03-1-1 that delayed the  effective  date for
            certain measurement and recognition guidance contained in EITF 03-1.
            The FSP requires that entities continue to apply previously existing
            "other-than-temporary"  guidance until a final consensus is reached.
            Management  does not anticipate  that issuance of a final  consensus
            will materially impact the Company's  financial condition or results
            of operations.

Note - 7    COMPREHENSIVE INCOME

            The Company  classifies its  investment in marketable  securities as
            available-for-sale.

            Unrealized  gains and losses on  available-for-sale  securities  are
            reported in accumulated other  comprehensive  (loss), a component of
            stockholders' equity.

            Other  comprehensive  (loss)  for the nine and  three-month  periods
            ended September 30,

                                       NINE MONTHS            THREE MONTHS
                                 -----------------------   --------------------
                                    2005         2004        2005        2004
                                 ---------   -----------   --------   ---------

            Net (loss) income    ($ 86,713)  ($  334,190)  $ 14,856   ($117,023)
            Accumulated other
            comprehensive (loss)  (193,411)   (1,029,835)   (80,588)   (205,499)
                                 ---------   -----------   --------   ---------
            Comprehensive (loss) ($280,124)  ($1,364,025)  ($65,732)  ($322,522)
                                 =========   ===========   ========   =========

                                       11
<PAGE>


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

            OVERVIEW

            The  Company  was  incorporated  in 1992 and  until  July 30,  1999,
            devoted  substantially  all of its resources to the  development and
            application   of  novel   yeast-based   and  other  drug   discovery
            technologies.  On July 30, 1999, the Company sold its drug discovery
            assets  and  ceased  its  internal  drug  discovery  operations  and
            research efforts for collaborative partners.

            At September  30, 2005,  the Company had an  accumulated  deficit of
            approximately  $33.7  million.  The  Company's  losses have resulted
            principally  from costs incurred in connection with its research and
            development  activities  and from general and  administrative  costs
            associated with the Company's operations.  These costs have exceeded
            the Company's  revenues and interest income. As a result of the sale
            of its drug discovery  assets and the cessation of its internal drug
            discovery   operations  and  research   efforts  for   collaborative
            partners,  the Company ceased to have research  funding revenues and
            substantially reduced its operating expenses. The Company expects to
            generate  revenues  in the future  only if it is able to license its
            technologies.

            RESULTS OF OPERATIONS

            THREE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

            REVENUES

            There were no revenues for the three months ended September 30, 2005
            and 2004.

            COSTS AND EXPENSES

            General and  administrative  expenses  decreased to $188,676 for the
            three months  ended  September  30, 2005 from  $231,674 for the same
            period in 2004.  Professional  fees decreased by $36,779,  insurance
            decreased  by  $13,336,  directors'  fees  decreased  by $5,000  and
            stockholder   relationship  expenses  increased  by  $14,060.  Other
            expenses decreased by $1,943.

            INTEREST INCOME

            Interest  income for the three months ended  September  30, 2005 was
            $201,692  compared to interest income of $71,296 for the same period
            in 2004. This increase is attributable  primarily to higher interest
            rates earned on invested funds.

            NET INCOME (LOSS)

            Net  income  for the  three  months  ended  September  30,  2005 was
            $14,856,  compared to a net loss of $117,023  for the same period in
            2004.  This decrease in net loss can be  attributed  primarily to an
            increase in interest income and a decrease in professional fees.

                                       12
<PAGE>


            NINE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER 30, 2004

            REVENUES

            Revenues for the nine months ended  September 30, 2005 and 2004 were
            $100,000, which is the annual maintenance fee from OSI.

            COSTS AND EXPENSES

            General and  administrative  expenses  increased to $705,119 for the
            nine months  ended  September  30, 2005 from  $616,113  for the same
            period in 2004. Patent costs increased by $53,323, professional fees
            increased by $7,534, license fees increased by $50,000 and franchise
            taxes  increased  by $38,653.  Insurance  decreased by $40,012 and a
            prior  year's  sales tax  assessment  decreased  by  $12,960.  Other
            expenses decreased by $7,532.

            For the nine months ended September 30, 2005 the Company  recognized
            a gain of  $1,631  in its  investment  in  Laurel  Partners  Limited
            Partnership. The loss for the same period in 2004 was $2,555.

            INTEREST INCOME

            Interest  income for the nine months  ended  September  30, 2005 was
            $516,775 compared to interest income of $141,738 for the same period
            in 2004. This increase is attributable  primarily to higher interest
            rates earned on invested funds.

            NET (LOSS)

            Net loss for the nine months  ended  September  30, 2005 was $86,713
            compared to a net loss of $334,190 for the same period in 2004. This
            decrease in net loss can be  attributed  primarily to an increase in
            interest income offset by increases in patent costs,  licensing fees
            and franchise taxes.

            LIQUIDITY AND CAPITAL RESOURCES

            At September 30, 2005, the Company held cash and cash equivalents of
            approximately  $24.0  million.  The  Company's  working  capital  at
            September 30, 2005 was approximately $24.3 million.

            The Company believes that its existing capital  resources,  together
            with interest  income,  will be sufficient to support its operations
            through the end of 2006. This forecast of the period of time through
            which the Company's  financial resources will be adequate to support
            its  operations is a  forward-looking  statement  that may not prove
            accurate  and,  as such,  actual  results  may vary.  The  Company's
            capital  requirements  may vary as a result of a number of  factors,
            including  the  transactions,  if any,  arising  from the  Company's
            efforts  to  acquire  or invest in  companies  and  income-producing
            assets and the expenses of pursuing such transactions.

                                       13
<PAGE>


            Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                     MARKET RISK

            The  Company's  earnings and cash flows are subject to  fluctuations
            due to changes in interest  rates  primarily  from its investment of
            available  cash  balances in money market funds with  portfolios  of
            investment  grade  corporate  and U.S.  government  securities.  The
            Company  does not  believe  it is  materially  exposed to changes in
            interest rates.  Under its current policies the Company does not use
            interest rate derivative  instruments to manage exposure to interest
            rate changes.

            Item 4.  CONTROLS AND PROCEDURES

            EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

            Based on the  evaluation  of the Company's  disclosure  controls and
            procedures conducted as of the period covered by this report on Form
            10-Q, the Company's President and Chief Executive Officer,  who also
            performs the functions of a principal  financial officer,  concluded
            that the Company's disclosure controls and procedures (as defined in
            Rules  13a-15(e)  and  15d-15(e)  promulgated  under the  Securities
            Exchange Act of 1934) are effective.

            CHANGES IN INTERNAL CONTROLS

            There were no significant changes in the Company's internal controls
            or in other factors that could  significantly  affect these controls
            subsequent to the date of their evaluation,  nor were any corrective
            actions  required  with  regard  to  significant   deficiencies  and
            material weaknesses. It should be noted that any system of controls,
            however well  designed  and  operated,  can provide only  reasonable
            assurance,  and not absolute  assurance,  that the objectives of the
            system are met. In  addition,  the design of any  control  system is
            based in part  upon  certain  assumptions  about the  likelihood  of
            future events.  Because of these and other  inherent  limitations of
            control  systems,  there can be no  assurance  that any design  will
            succeed in  achieving  its stated goals under all  potential  future
            conditions, regardless of how remote.

            PART II - OTHER INFORMATION
            ---------------------------

            Item 1.  Legal Proceedings.

                     None.

            Item 2.  Unregistered  Sales  of  Equity  Securities  and  Use  of
                     Proceeds.

                     None.

            Item 3.  Defaults Upon Senior Securities.

                     None.

                                       14
<PAGE>


            Item 4.  Submission of Matters to a Vote of Security Holders.

            On  September  14,  2005,  the  Company  held its annual  meeting of
            stockholders in New York, New York. The holders of 10,970,997 shares
            of  Common  Stock  were  present  or   represented   by  proxy  and,
            accordingly,  a quorum was present.  The following  matter was voted
            upon and received the votes set forth below:

            All of the  following  persons  nominated  were  elected to serve as
            directors  and  received  the  number  of votes set  opposite  their
            respective names:
                                                Votes For      Votes Withheld
                     James R. Broach           10,051,334         919,663
                     Russell D. Glass          10,098,134         872,863
                     Carl C. Icahn             10,049,290         921,707
                     Peter S. Liebert          10,051,490         919,507
                     Jack G. Wasserman         10,051,190         919,807

            Item 5.  Other Information.

                     None.

            Item 6.  Exhibits.

                     The  Exhibits  listed in the Exhibit  Index are included in
                     this quarterly report on Form 10-Q.

                                       15
<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                    CADUS CORPORATION
                                    (REGISTRANT)


Dated:      November 4, 2005        By:  /s/ David Blitz
                                        -------------------------------
                                        David Blitz
                                        President and Chief Executive Officer
                                        (Authorized Officer and Principal
                                        Financial Officer)

                                       16
<PAGE>


                                  EXHIBIT INDEX


The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

Exhibit No.       Description
-----------       -----------

31                Certifications

32                Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

                                       17