**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 |
|---|-----------------------------------------------------------------------------------------------------------------------|

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

| Delaware                                                                      |   | 13-3660391                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                of Other Jurisdiction of Incorporation or Organization) |   | (I.R.S.                Employer 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                       |

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**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, 2006 (unaudited) and                  December                  31, 2005 (audited)            | 4                            |
|                                                                               |   |                                                                                                                                                                 |                         |
|                                                                               |   | Condensed                  Consolidated Statements of Income - Three Months Ended September                  30, 2006                  and 2005 (unaudited)     | 5                            |
|                                                                               |   |                                                                                                                                                                 |                         |
|                                                                               |   | Condensed                  Consolidated Statements of Operations - Nine Months Ended September                  30,                  2006 and 2005 (unaudited)  | 6                            |
|                                                                               |   |                                                                                                                                                                 |                         |
|                                                                               |   | Condensed                  Consolidated Statements of Cash Flows - Nine Months Ended September                  30,                  2006 and 2005 (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                  1A.                                                          |   | Risk                  Factors                                                                                                                                        | 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     |

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**SPECIAL      NOTE REGARDING FORWARD LOOKING STATEMENTS**

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**CADUS      CORPORATION**

**Condensed      Consolidated Balance Sheets**

|                                                            |   | September                30,2006 |                        | December                31, 2005 |   |
|-----------------------------------------------------------------|--------|----------------------------------|-----------------------------|----------------------------------|--------|
|                                                            |   | (Unaudited)                      |                        | (Audited)                        |   |
| **ASSETS**                                                      |   |                             |                        |                             |   |   |   |
|                                                            |   |                             |                        |                             |   |   |   |
| Current                assets:                                  |   |                             |                        |                             |   |   |   |
| Cash                and cash equivalents                        |   | $                                | 24,466,024                  |                             | $      | 24,044,619 |   |
| Prepaid                and other current assets                 |   |                             | 39,420                      |                             |   | 8,170 |   |
| Investment                in marketable securities              |   |                             | 287,430                     |                             |   | 273,999 |   |
| Total                current assets                             |   |                             | 24,792,874                  |                             |   | 24,326,788 |   |
|                                                            |   |                             |                        |                             |   |   |   |
| Investment                in other ventures                     |   |                             | 170,074                     |                             |   | 161,406 |   |
| Other                assets, net                                |   |                             | 658,876                     |                             |   | 723,700 |   |
| Total                assets                                     |   | $                                | 25,621,824                  |                             | $      | 25,211,894 |   |
|                                                            |   |                             |                        |                             |   |   |   |
| **LIABILITIES                AND STOCKHOLDERS’ EQUITY**   |        |                                  |
|                                                            |   |                             |                        |                             |   |   |   |
| Current                liabilities:                             |   |                             |                        |                             |   |   |   |
| Accrued                expenses and other current liabilities   |   | $                                | 47,256                      |                             | $      | 27,290 |   |
|  Total                current liabilities                  |   |                             | 47,256                      |                             |   | 27,290 |   |
|  Commitments                                               |   |                             |                        |                             |   |   |   |
| Stockholders’                equity:                      |   |                             |                        |                             |   |   |   |
| Common                stock                                     |   |                             | 132,857                     |                             |   | 132,857 |   |
| Additional                paid-in capital                       |   |                             | 59,844,355                  |                             |   | 59,844,355 |   |
| Accumulated                deficit                              |   |                             | (                33,253,621 | )                                |   | (                33,630,154 | ) |
| Accumulated                other comprehensive (loss) income    |   |                             | (                848,948    | )                                |   | (                862,379 | ) |
| Treasury                stock                                   |   |                             | (                300,075    | )                                |   | (                300,075 | ) |
| Total                stockholders’ equity                 |   |                             | 25,574,568                  |                             |   | 25,184,604 |   |
| Total                liabilities and stockholder’s equity |   | $                                | 25,621,824                  |                             | $      | 25,211,894 |   |

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**CADUS      CORPORATION**

**Condensed      Consolidated Statements of Income**

|                                                                                                          |   | Three                Months EndedSeptember                30, |       |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|
|                                                                                                          |   | 2006                                                          |       | 2005 |   |
|                                                                                                          |   | (Unaudited)                                                   |       | (Unaudited) |   |
| License                and maintenance fees                                                                   |   | $                                                             | -          |   | $ | - |   |
| Total                revenues                                                                                 |   |                                                          | -          |   |   | - |   |
| Costs                and expenses:                                                                            |   |                                                          |       |   |   |   |   |
| General                and administrative expenses                                                            |   |                                                          | 122,383    |   |   | 188,676 |   |
| (Gain)                from equity in other ventures                                                           |   |                                                          | (3,300     | ) |   | (1,840 | ) |
| Total                costs and expenses                                                                       |   |                                                          | 119,083    |   |   | 186,836 |   |
| Operating                loss                                                                                 |   |                                                          | (119,083   | ) |   | (186,836 | ) |
| Other                income:                                                                                  |   |                                                          |       |   |   |   |   |
| Interest                income                                                                                |   |                                                          | 319,418    |   |   | 201,692 |   |
| Income                before income taxes                                                                     |   |                                                          | 200,335    |   |   | 14,856 |   |
| Income                taxes                                                                                   |   |                                                          | -          |   |   | - |   |
| Net                income                                                                                     |   | $                                                             | 200,335    |   | $ | 14,856 |   |
| Basic                and diluted income per weighted average share of common stock                outstanding |   | $                                                             | 0.02       |   | $ | 0.00 |   |
| Weighted                average shares of common stock outstanding - basic and                diluted         |   |                                                          | 13,144,040 |   |   | 13,144,040 |   |

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**CADUS      CORPORATION**

**Condensed      Consolidated Statements of Operations**

|                                                                                                                 |   | Nine                Months EndedSeptember                30, |       |
|----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|
|                                                                                                                 |   | 2006                                                         |       | 2005 |   |
|                                                                                                                 |   | (Unaudited)                                                  |       | (Unaudited) |   |
| License                and maintenance fees                                                                          |   | $                                                            | 100,000    |   | $ | 100,000 |   |
| Total                revenues                                                                                        |   |                                                         | 100,000    |   |   | 100,000 |   |
| Costs                and expenses:                                                                                   |   |                                                         |       |   |   |   |   |
| General                and administrative expenses                                                                   |   |                                                         | 603,289    |   |   | 705,119 |   |
| (Gain)                from equity in other ventures                                                                  |   |                                                         | (8,668     | ) |   | (1,631 | ) |
| Total                costs and expenses                                                                              |   |                                                         | 594,621    |   |   | 703,488 |   |
| Operating                loss                                                                                        |   |                                                         | (494,621   | ) |   | (603,488 | ) |
| Other                income:                                                                                         |   |                                                         |       |   |   |   |   |
| Interest                income                                                                                       |   |                                                         | 871,154    |   |   | 516,775 |   |
| Income                (loss) before income taxes                                                                     |   |                                                         | 376,533    |   |   | (86,713 | ) |
| Income                taxes                                                                                          |   |                                                         | -          |   |   | - |   |
| Net                income (loss)                                                                                     |   | $                                                            | 376,533    |   |   | ($                86,713 | ) |
| Basic                and diluted income (loss) per weighted average share of common stock                outstanding |   | $                                                            | 0.03       |   |   | ($                0.01 | ) |
| Weighted                average shares of common stock outstanding - basic and                diluted                |   |                                                         | 13,144,040 |   |   | 13,144,040 |   |

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**CADUS      CORPORATION**

**Condensed      Consolidated Statements of Cash Flows**

|                                                                                                                                            |   | Nine                Months EndedSeptember                30, |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|
|                                                                                                                                            |   | 2006                                                         |       | 2005 |   |
|                                                                                                                                            |   | (Unaudited)                                                  |       | (Unaudited) |   |
| Cash                flows from operating activities:                                                                                            |   |                                                         |       |   |   |   |   |
| Net                income (loss)                                                                                                                |   | $                                                            | 376,533    |   |   | ($                86,713 | ) |
| Adjustments                to reconcile net income (loss) to net cash provided by (used in)                operating                activities: |   |                                                         |       |   |   |   |   |
| Amortization                of patent costs                                                                                                     |   |                                                         | 64,824     |   |   | 62,522 |   |
| (Gain)                of equity in other ventures                                                                                               |   |                                                         | (8,668     | ) |   | (1,631 | ) |
| Changes                in assets and liabilities:                                                                                               |   |                                                         |       |   |   |   |   |
| (Increase)                in prepaid and other current assets                                                                                   |   |                                                         | (31,250    | ) |   | (24,590 | ) |
| Increase                in accrued expenses and other current liabilities                                                                       |   |                                                         | 19,966     |   |   | 33,926 |   |
| Net                cash provided by (used in) operating activities                                                                              |   |                                                         | 421,405    |   |   | (16,486 | ) |
| Cash                flows from investing activities:Patent                licenses acquired                                                     |   |                                                         | -          |   |   | (60,801 | ) |
| Net                cash (used in) investing activities                                                                                          |   |                                                         | -          |   |   | (60,801 | ) |
| Net                increase (decrease) in cash and cash equivalents                                                                             |   |                                                         | 421,405    |   |   | (77,287 | ) |
| Cash                and cash equivalents - beginning of period                                                                                  |   |                                                         | 24,044,619 |   |   | 24,045,800 |   |
| Cash                and cash equivalents - end of period                                                                                        |   | $                                                            | 24,466,024 |   | $ | 23,968,513 |   |

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**Organization      and Basis of Preparation**

**Net      Income (Loss) Per Share**

**Licensing      Agreements **

----

**Investment      in Marketable Securities**

*"Accounting      for Certain Debt and Equity Securities,"*

**Accounting      for Impairment of Long-Lived Assets**

**Recently      Issued Accounting Pronouncements**

*“Share      Based Payment.”*
*“Accounting      for Stock Issued to Employees,”*
*“Statement      of Cash Flows.”*

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|                                                   |   |                              |   | Options                Outstanding                                        |   | Options                Exercisable                            |   |
|--------------------------------------------------------|--------|-----------------------------------|--------|---------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| Range                of Exercise                Prices |   | Number                Outstanding |   | Weighted                Average Remaining Contractual                Life |   | Weighted                Average Exercise                Price |   | Number                Exercisable |   | Weighted                Average Exercise                Price |   |
| $6.75                                                  |   |                              | 48,000 |                                                                      |   | 0.13                                                          |   | $ | 6.75 |   |   | 48,000 |   | $ | 6.75 |   |

----

|                                                   |   |                              |   | Options                Outstanding                                        |   | Options                Exercisable                            |   |
|--------------------------------------------------------|--------|-----------------------------------|--------|---------------------------------------------------------------------------|--------|---------------------------------------------------------------|--------|
| Range                of Exercise                Prices |   | Number                Outstanding |   | Weighted                Average Remaining Contractual                Life |   | Weighted                Average Exercise                Price |   | Number                Exercisable |   | Weighted                Average Exercise                Price |   |
| $6.38                to $6.63                          |   |                              | 9,167  |                                                                      |   | 0.52                                                          |   | $ | 6.56 |   |   | 9,167 |   | $ | 6.56 |   |

**Comprehensive      Income**

|                                                         |   | Nine                Months |    | Three                Months |   |
|--------------------------------------------------------------|--------|----------------------------|---------|-----------------------------|--------|
|                                                         |   | 2006                       |    | 2005                        |   | 2006 |   | 2005 |   |
| Net                income (loss)                             |   | $                          | 376,533 |                        |   | ($                86,713 | ) | $ | 200,335 |   | $ | 14,856 |   |
| Accumulated                other comprehensive income (loss) |   |                       | 13,431  |                        |   | (                193,411 | ) |   | 59,608 |   |   | (                80,588 | ) |
| Comprehensive                income (loss)                   |   | $                          | 389,964 |                        |   | ($280,124 | ) | $ | 259,943 |   |   | ($                65,732 | ) |

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

**Overview**

**Results      of Operations**

*Three      Months Ended September 30, 2006 and September 30, 2005*

*Revenues*

*Costs      and Expenses*

*Interest      Income*

*Net      Income*

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*Nine      Months Ended September 30, 2006 and September 30, 2005*

*Revenues*

*Costs      and Expenses*

*Interest      Income*

*Net      Income*

*Liquidity      and Capital Resources*

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**QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**CONTROLS      AND PROCEDURES**

**PART      II - OTHER INFORMATION**

**LEGAL      PROCEEDINGS**

**RISK      FACTORS**

**UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

**DEFAULTS      UPON SENIOR SECURITIES**

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**SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**OTHER      INFORMATION**

**EXHIBITS**

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**SIGNATURES**

|                                         |                                                                                                                           |                         |
|----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|------------------------------|
|                                         | **CADUS                CORPORATION****(Registrant)**                                                                           |
|                                    |                                                                                                                      |                    |
| Dated: November                14, 2006 | By:                                                                                                                  | /s/              David Blitz |
|                                         | David                Blitz                                                                                                     |
|                                         | President                and Chief Executive Officer (Authorized Officer and Principal                Financial Officer)  |

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**EXHIBIT      INDEX**

| 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 |

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