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, 2000
                                            ------------------


|_|  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 PHARMACEUTICAL 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 ___

The number of shares of registrant's common stock, $0.01 par value,  outstanding
as of September 30, 2000 was 13,144,040.

<PAGE>


                        CADUS PHARMACEUTICAL CORPORATION

                                      INDEX
                                                                        PAGE NO.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS                              3

                    PART I - CONDENSED FINANCIAL INFORMATION

Item  1.  Condensed Financial Statements

          Condensed Balance Sheets - September 30, 2000 (unaudited)
          and December 31, 1999 (audited)                                      4

          Condensed Statements of Operations - Three and Nine Months
          ended September 30, 2000 and 1999 (unaudited)                      5-6

          Condensed Statements of Cash Flows - Nine Months Ended
          September 30, 2000 and 1999 (unaudited)                              7

          Notes to Condensed Financial Statements (unaudited)               8-10


Item  2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                        10-14

Item  3.  Quantitative and Qualitative Disclosures About Market Risk          14

                           PART II - OTHER INFORMATION

Item  1.  Legal Proceedings                                                   15

Item  2.  Changes in Securities and Use of Proceeds                           15

Item  3.  Defaults Upon Senior Securities                                     15

Item  4.  Submission of Matters to a Vote of Security Holders                 16

Item  5.  Other Information                                                   16

Item  6.  Exhibits and Reports on Form 8K                                     16

SIGNATURES                                                                    17

EXHIBIT INDEX                                                                 18

                                       -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 21E of the Securities
Exchange Act of 1934, as amended. 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,   the  Company's   capital  needs  and
uncertainty of future funding, risks and uncertainties relating to the Company's
ability  to  realize  value  from  its  assets,  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
prospectus dated July 17, 1996.

                                       -3-
<PAGE>


                        CADUS PHARMACEUTICAL CORPORATION

                             CONDENSED BALANCE SHEET

                                     ASSETS
                                     ------

                                                   September 30,   December 31,
                                                       2000            1999
                                                    -----------     -----------
                                                    (Unaudited)      (Audited)
Current assets
    Cash and cash equivalents                        $5,003,084      $5,082,212
    Cash held in escrow - current                    19,841,489              --
    Restricted cash                                          --          13,566
    Due from officer and director                            --         294,636
    Prepaid and other current assets                    176,314          69,783
                                                    -----------     -----------

            Total current assets                     25,020,887       5,460,197

Cash held in escrow - noncurrent                             --      19,065,431
Investments in other ventures                           158,934         999,590
Other assets, net                                     1,112,879       1,173,558
                                                    -----------     -----------

            Total assets                            $26,292,700     $26,698,776
                                                    ===========     ===========

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

Current liabilities
    Accounts payable                                $        --         $17,644
    Accrued expenses and other current liabilities       63,226         121,843
    Accrued legal fees                                1,000,000              --
    Deferred revenue                                      5,030          28,500
                                                    -----------     -----------

            Total current liabilities                 1,068,256         167,987

Reserve for litigation damages                               --      19,065,431
                                                    -----------     -----------

            Total liabilities                         1,068,256      19,233,418

Stockholders' equity
    Common stock, $.01 par value. Authorized
        35,000,000 shares at September 30, 2000
        and December 31, 1999; issued 13,285,707
        shares and 13,210,607 shares at
        September 30, 2000 and December 31, 1999,
        respectively; outstanding 13,144,040
        shares and 13,068,940 shares at
        September 30, 2000 and December 31, 1999,
        respectively                                    132,857         132,106
    Additional paid-in capital                       59,844,355      59,689,446
    Accumulated deficit                             (34,452,693)    (52,056,119)
    Treasury stock, 141,667 shares of common
        stock at September 30, 2000
        and December 31, 1999, respectively            (300,075)       (300,075)
                                                    -----------     -----------

            Total stockholders' equity               25,224,444       7,465,358
                                                    -----------     -----------

            Total liabilities and
              stockholders' equity                  $26,292,700     $26,698,776
                                                    ===========     ===========

           See accompanying notes to condensed financial statements.

                                       -4-
<PAGE>


                        CADUS PHARMACEUTICAL CORPORATION

                       CONDENSED STATEMENTS OF OPERATIONS

                                                        Three Months Ended
                                                           September 30,
                                                       2000            1999
                                                    -----------     -----------
                                                    (Unaudited)     (Unaudited)
Revenues, principally from related parties          $        --     $   949,992

License and maintenance fee                              23,470              --
                                                    -----------     -----------

        Total revenues                                   23,470         949,992
                                                    -----------     -----------

Costs and expenses:
    Research and development costs                           --       1,711,630
    General and administrative expenses                 251,701         864,022
                                                    -----------     -----------

        Total costs and expenses                        251,701       2,575,652
                                                    -----------     -----------

Operating loss                                         (228,231)     (1,625,660)
                                                    -----------     -----------

Other income (expense):
    Gain on reversal of litigation
      judgment, net of legal fees                    18,841,489              --
    Interest income                                      71,394          76,868
    Loss of equity in other ventures, net              (126,418)       (299,820)
    Gain on sales of equipment                               --         118,179
    Loss on sale of assets                                   --        (805,555)
                                                    -----------     -----------

        Total other income (expense)                 18,786,465        (910,328)
                                                    -----------     -----------

Income (loss) before income taxes                    18,558,234      (2,535,988)

State and local taxes                                   (16,181)          1,332
                                                    -----------     -----------

        Net income (loss)                           $18,574,415      (2,537,320)
                                                    ===========     ===========

Basic and diluted income (loss) per share           $      1.41     $     (0.19)
                                                    ===========     ===========

Weighted average shares of common stock
  outstanding - basic and diluted                    13,144,040      13,068,940
                                                    ===========     ===========

            See accompanying notes to condensed financial statements

                                       -5-
<PAGE>


                        CADUS PHARMACEUTICAL CORPORATION

                       CONDENSED STATEMENTS OF OPERATIONS

                                                        Nine Months Ended
                                                           September 30,
                                                       2000            1999
                                                    -----------     -----------
                                                    (Unaudited)     (Unaudited)
Revenues, principally from related parties          $        --      $6,027,544

License and maintenance fee                             723,470              --
                                                    -----------     -----------

        Total revenues                                  723,470       6,027,544
                                                    -----------     -----------

Costs and expenses:
    Research and development costs                           --       8,891,517
    General and administrative expenses               1,451,793       3,306,205
                                                    -----------     -----------

        Total costs and expenses                      1,451,793      12,197,722
                                                    -----------     -----------

Operating loss                                         (728,323)     (6,170,178)
                                                    -----------     -----------

Other income (expense):
    Gain on reversal of litigation
      judgment, net of legal fees                    18,841,489              --
    Interest income                                     214,735         493,670
    Loss of equity in other ventures, net              (840,656)       (980,752)
    Gain on sales of equipment                          100,000         150,585
    Loss on sale of assets                                   --        (805,555)
                                                    -----------     -----------

        Total other income (expense)                 18,315,568      (1,142,052)
                                                    -----------     -----------

Income (loss) before income taxes                    17,587,245      (7,312,230)

State and local taxes                                   (16,181)        (16,359)
                                                    -----------     -----------

        Net income (loss)                           $17,603,426     $(7,295,871)
                                                    ===========     ===========

Basic and diluted income (loss) per share           $      1.34     $     (0.56)
                                                    ===========     ===========

Weighted average shares of common stock
    outstanding - basic and diluted                  13,130,140      13,068,940
                                                    ===========     ===========

            See accompanying notes to condensed financial statements

                                       -6-
<PAGE>


                        CADUS PHARMACEUTICAL CORPORATION

                       CONDENSED STATEMENTS OF CASH FLOWS

                                                          Nine Months Ended
                                                            September 30,
                                                         2000          1999
                                                      -----------   -----------
                                                      (Unaudited)   (Unaudited)
Cash flows from operating activities:
    Net income (loss)                                 $17,603,426   ($7,295,871)
    Adjustments to reconcile net income (loss)
    to net cash provided by (used in) operating
    activities:
        Recognition of deferred revenue                   (23,470)           --
        Depreciation and amortization                      60,679       678,466
        Loss of equity in other ventures                  840,656       980,752
        Gain on sales of equipment                       (100,000)     (150,585)
        Loss on sale of assets                                 --       805,555

    Changes in assets and liabilities:
        Decrease in due from officer and director         294,636            --
        Decrease in prepaid and other
        current assets                                   (106,531)      (90,221)
        Decrease in other assets                               --       117,521
        Increase in deferred revenue                           --        28,500
        (Decrease) increase in reserve for
        litigation damages                            (19,065,431)      330,735
        Decrease in accounts payable                      (17,644)      (24,587)
        Increase in accrued legal fees                  1,000,000            --
        Decrease in accrued expenses and other
          current liabilities                             (58,617)   (1,594,297)
                                                      -----------   -----------

Net cash provided by (used in) operating activities       427,704    (6,214,032)
                                                      -----------   -----------

Cash flows from investing activities:
        Increase in cash held in escrow - current        (762,492)      (57,437)
        Acquisition of fixed assets                            --      (470,378)
        Proceeds from sale of fixed assets and patents    100,000     1,644,073
        Capitalized patent costs                               --      (167,500)
                                                      -----------   -----------

Net cash (used in) provided by investing activities      (662,492)      948,758
                                                                    -----------

Cash flows from financing activities:
        Proceeds from issuance of common stock
          upon exercise of stock options
                                                          155,660            --
                                                      -----------   -----------
Net cash provided by financing activities                 155,660            --
                                                      -----------   -----------

Net decrease in cash and cash equivalents                 (79,128)   (5,265,274)

Cash and cash equivalents - beginning of period         5,082,212    10,975,528
                                                      -----------   -----------

Cash and cash equivalents - end of periods            $ 5,003,084   $ 5,710,254
                                                      ===========   ===========

            See accompanying notes to condensed financial statements

                                       -7-
<PAGE>


                        CADUS PHARMACEUTICAL CORPORATION

                     NOTES TO CONDENSED FINANCIAL STATEMENTS


Note - 1  ORGANIZATION AND BASIS OF PREPARATION

     The  information  presented as of September  30, 2000 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
     generally accepted accounting  principles 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,  1999  balance  sheet  was  derived  from  audited  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,
     1999.

     The  results  of  operations  for the three and nine  month  periods  ended
     September  30,  2000 are not  necessarily  indicative  of the results to be
     expected for the year ending December 31, 2000.

Note - 2  NET INCOME (LOSS) PER SHARE

     For the three month and nine month  periods  ended  September  30, 2000 and
     1999 basic net income  (loss) per share is  computed  by  dividing  the net
     income (loss) by the weighted average number of common shares  outstanding.
     Diluted net income  (loss) per share is the same as basic net income (loss)
     per share since the inclusion of potential common stock equivalents  (stock
     options and warrants) in the computation would be anti-dilutive.

Note - 3  PATENT LITIGATION

     In July 1996,  SIBIA  Neuroscience,  Inc.  ("SIBIA") (which was acquired by
     Merck & Co. in 1999)  commenced a patent  infringement  action  against the
     Company alleging infringement by the Company of a patent concerning the use
     of cells,  engineered  to express any type of cell  surface  receptor and a
     reporter gene, used to report results in the screening of compounds against
     target assays and seeking  injunctive  relief and monetary  damages.  After
     trial,  on December 18,  1998,  the jury issued a verdict in favor of SIBIA
     and awarded SIBIA $18.0 million in damages.  On January 29, 1999 the United
     States District Court granted  SIBIA's  request for injunctive  relief that
     precludes the Company from using the method claimed in SIBIA's  patent.  On
     February 26, 1999,  the United States  District  Court denied the Company's
     motions to set aside the jury  verdict,  to grant a new trial and to reduce
     or set aside the $18.0 million  judgment  awarded by the jury.  The Company
     appealed the judgment.  In order to stay  execution  pending  appeal of the
     $18.0 million judgment obtained by SIBIA, in

                                       -8-
<PAGE>


     March 1999, the Company deposited $18.5 million in escrow to secure payment
     of the  judgments  in the event the Company  were to lose the appeal.  Such
     $18.5 million was previously classified as "cash held in escrow-noncurrent"
     and the Company's "cash and cash equivalents" were reduced by $18.5 million
     in 1998.  The Company  recorded a reserve for  litigation  damages of $18.5
     million in the  statement  of  operations  for the year ended  December 31,
     1998.  On  September 6, 2000 the United  States  Court of Appeals  ruled in
     favor of the Company and overturned the prior judgment  entered by the U.S.
     District  Court.  The Court of  Appeals  ruled that the claims of the SIBIA
     patent  asserted  against the Company  were  invalid and that the  District
     court erred in denying the Company's motion for judgment as a matter of law
     on the issue of invalidity.  On October 30, 2000,  the U.S.  District Court
     set aside  the  $18,000,000  judgment  in favor of SIBIA  and  vacated  the
     injunction  against the Company.  Separately,  in October 2000, the Company
     obtained the release of the cash escrow of $19.9 million  representing  the
     original  $18.5  million and interest  that has  accumulated  on the escrow
     balance.  The  interest  earned on the  escrow has been added to the escrow
     balance and the reserve for litigation damages.  The reserve for litigation
     damages  of  $18,841,489  (net of  direct  legal  costs of $1  million)  at
     September  30, 2000 has been  reversed  and  credited to the  statement  of
     operations for the three and nine months ended September 30, 2000.

Note - 4  ASSET SALE

     On July 30,  1999 the Company  sold to OSI  Pharmaceuticals,  Inc.  ("OSI")
     pursuant to an asset purchase  agreement various assets and ceased its drug
     discovery  operations and research efforts for collaborators as a result of
     this transaction.  The Company  recognized a loss of $805,555 in connection
     with the  transaction.  The Company  terminated all employees that were not
     hired  by OSI or who did  not  voluntarily  resign,  except  for the  Chief
     Executive  Officer  who  resigned  in  April  2000.  The  Company  retained
     ownership of all its other assets  including its core yeast  technology for
     developing drug discovery assays, its collection of over 25,000 proprietary
     yeast  strains,  human and mammalian  cell lines,  and genetic  engineering
     tools, its joint ownership of the human orphan G protein-coupled  receptors
     identified   pursuant  to  its  collaboration   with  Genome   Therapeutics
     Corporation,  its proprietary software, its genomics databases related to G
     protein-coupled receptors, all assays and technologies reverting to it from
     its collaboration with Bristol Myers Squibb Company,  an equity position in
     Axiom Biotechnologies,  Inc., the Company's cash and cash equivalents,  and
     the funds that were being held in escrow  pending  appeal of the verdict in
     favor of SIBIA.


Note - 5  RELATED PARTY TRANSACTION

     In August 1998, the Company  guaranteed the payment of a $286,000 loan made
     to a board member and secured its guarantee obligation with cash collateral
     of  $286,000.  In August  1999,  the  lender  called on the  guarantee  and
     foreclosed  on the cash  collateral.  The  Director  executed  an  interest
     bearing  promissory note in the amount of $286,000 in favor of the Company,
     which was payable,  together with accrued interest, on August 31, 2000. The
     amount  owed as of December  31,  1999 is included in due from  officer and
     director. This loan was repaid in its entirety in March 2000.

                                       -9-
<PAGE>


Note - 6  NON-EXCLUSIVE LICENSE OF YEAST TECHNOLOGY

     In February 2000, the Company  licensed to OSI, on a  non-exclusive  basis,
     its yeast technologies,  including various reagents and its library of over
     30,000  yeast  strains  and its  bioinformatics  software.  OSI paid to the
     Company a license fee of $100,000 and an access fee of $600,000,  which has
     been  recorded as license fee revenue in the quarter  ended March 31, 2000.
     OSI is also  obligated to pay an annual  maintenance  fee of $100,000 until
     2010 and a supplemental  license fee of $250,000 if the injunction obtained
     by SIBIA is lifted or dissolved.  The  injunction  was dissolved on October
     30,  2000 and the  supplemental  license  fee of $250,000 is payable to the
     Company in November 2000.

Note - 7 NEW ACCOUNTING  PRONOUNCEMENTS
     On December 3, 1999, the Securities and Exchange  Commission ("SEC") issued
     Staff  Accounting  Bulletin  No. 101 - "Revenue  Recognition  in  Financial
     Statements"  ("SAB No. 101"). SAB No. 101 provides the SEC staff's views on
     the recognition of revenue including  nonrefundable  technology access fees
     received  by   biotechnology   companies  in   connection   with   research
     collaborations  with third  parties.  SAB No.  101  states  that in certain
     circumstances   the  SEC  staff  believes  that  up-front  fees,   even  if
     nonrefundable,  should be deferred and recognized  systematically  over the
     term  of  the  research  arrangement.   SAB  No.  101B,  which  amends  the
     implementation  date for SAB No.  101,  requires  registrants  to adopt the
     accounting  guidance  contained  therein by no later than the fourth fiscal
     quarter of the fiscal year  beginning  after December 15, 1999. The Company
     is currently  assessing the financial  impact of complying with SAB No. 101
     and does not believe that applying the  accounting  guidance of SAB No. 101
     will have a  material  effect  on its  financial  position  or  results  of
     operations.

Note - 8  EQUITY IN OTHER VENTURES

     For the three months ended September 30, 2000 the Company  recognized a net
     loss of $126,418  in its  investment  in Axiom  Biotechnologies,  Inc.  and
     Laurel Partners Limited  Partnership.  The loss for the same period in 1999
     was  $299,820.   As  of  September  30,  2000,   the  investment  in  Axiom
     Biotechnologies, Inc. has been written down to zero.

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 to OSI  Pharmaceuticals,  Inc.
     ("OSI") and ceased its  internal  drug  discovery  operations  and research
     efforts for collaborative  partners.  The Company  terminated all employees
     who were not hired by OSI or who did not voluntarily  resign except for the
     Chief Executive Officer who resigned in April 2000.

     The Company has incurred operating losses in each year since its inception.
     At  September  30,  2000,  the  Company  had  an  accumulated   deficit  of
     approximately  $34.5 million,  after

                                      -10-
<PAGE>


     reversing the $18.5 million charge for  litigation  damages with respect to
     the patent  infringement  litigation  with SIBIA after the Court of Appeals
     ruled  in  the  Company's   favor.   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 to OSI 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, 2000 AND SEPTEMBER 30, 1999

REVENUES

Revenues for the three months ended September 30, 2000 decreased to $23,470 from
$949,992 for the same period in 1999. The decrease was attributable primarily to
the Company having ceased research efforts for collaborators and, therefore, not
receiving any research funding in 2000.

OPERATING EXPENSES

The  Company's  research  and  development  expenses  for the three months ended
September 30, 2000 decreased to $0 from  $1,711,630 for the same period in 1999.
This decrease was  attributable  to the Company having ceased its drug discovery
operations  and  research  efforts  for  collaborators  and  having no  research
personnel after its asset sale in July 1999.

General and  administrative  expenses decreased to $251,701 for the three months
ended  September  30,  2000 from  $864,022  for the same  period  in 1999.  This
decrease was  attributable  primarily  to the  elimination  of facility  related
expenses and the reduction in administrative personnel.

GAIN ON REVERSAL OF LITIGATION JUDGMENT

On September 6, 2000,  the U.S.  Court of Appeals  ruled in favor of the Company
and  overturned  the  prior  judgment  of $18.0  million.  The  gain  recognized
represents  the original  $18.5  million  reserve plus  interest  accrued on the
escrow  balance  through  September  30, 2000 of  $1,341,489  less legal fees of
$1,000,000 that were contingent on the success of the appeal.

NET INTEREST INCOME

                                      -11-
<PAGE>


Interest  income for the three  months  ended  September  30, 2000  decreased to
$71,394  from  $76,868 for the same period in 1999.  The  decrease is  primarily
attributable  to the  decrease  in the  Company's  unrestricted  cash  and  cash
equivalents balance as compared to the prior year's quarter.

EQUITY IN OTHER VENTURES

For the three months ended September 30, 2000 the Company  recognized a net loss
of $126,418 in its investment in Axiom Biotechnologies, Inc. and Laurel Partners
Limited  Partnership.  The loss for the same period in 1999 was $299,820.  As of
September  30, 2000,  the  investment  in Axiom  Biotechnologies,  Inc. has been
written down to zero.

NET INCOME (Loss)

The net income for the three  months  ended  September  30,  2000  increased  to
$18,574,415  from a $2,537,320  loss for the same period in 1999.  This increase
can be  attributed  to the  reversal of the SIBIA  litigation  judgment  (net of
direct  legal  expense of  $1,000,000)  and a  decrease  in  operating  expenses
partially offset by a decrease in revenue.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999

REVENUES

Revenues for the nine months ended September 30, 2000 decreased to $723,470 from
$6,027,544 for the same period in 1999. This decrease was attributable primarily
to the Company having ceased research efforts for collaborators and,  therefore,
not  receiving  any  research  funding  for the first nine  months of 2000.  The
Company's revenues for the first nine months of 2000 were derived primarily from
the licensing of its yeast technology to OSI.

OPERATING EXPENSES

The  Company's  research  and  development  expenses  for the nine months  ended
September 30, 2000 decreased to $0 from  $8,891,517 for the same period in 1999.
This decrease was  attributable  to the Company having ceased its drug discovery
operations  and  research  efforts  for  collaborators  and  having no  research
personnel after its asset sale in July 1999.

General and  administrative  expense decreased to $1,451,793 for the nine months
ended  September  30, 2000 from  $3,306,205  for the same  period in 1999.  This
decrease was  attributable  primarily  to the  elimination  of facility  related
expenses and the  reduction  in  administrative  personnel.  For the nine months
ended  September  30,  2000,  the Chief  Executive  Officer's  compensation  was
$607,500 which includes  $497,500 in severance pay recorded in the quarter ended
March 31, 2000 and fully paid in May 2000.

GAIN ON REVERSAL OF LITIGATION JUDGMENT


                                      -12-
<PAGE>


On September 6, 2000,  the U.S.  Court of Appeals  ruled in favor of the Company
and  overturned  the  prior  judgment  of $18.0  million.  The  gain  recognized
represents  the original  $18.5  million  reserve plus  interest  accrued on the
escrow  balance  through  September  30, 2000 of  $1,341,489  less legal fees of
$1,000,000 that were contingent on the success of the appeal.

NET INTEREST INCOME

Interest  income for the nine  months  ended  September  30, 2000  decreased  to
$214,735 from $493,670 for the same period in 1999. The decrease is attributable
primarily  to  the  decrease  in  the  Company's   unrestricted  cash  and  cash
equivalents balance as compared to the prior year's nine month period.

EQUITY IN OTHER VENTURES

For the nine months ended  September 30, 2000 the Company  recognized a net loss
of $840,656 in its investment in Axiom Biotechnologies, Inc. and Laurel Partners
Limited  Partnership.  The loss for the same period in 1999 was $980,752.  As of
September  30, 2000,  the  investment  in Axiom  Biotechnologies,  Inc. has been
written down to zero.

NET INCOME (LOSS)

The net income  for the nine  months  ended  September  30,  2000  increased  to
$17,603,426  from a $7,295,871  loss for the same period in 1999.  This increase
can be attributed  to the reversal of the SIBIA  litigation  settlement  (net of
direct  legal  expense of  $1,000,000)  and a  decrease  in  operating  expenses
partially offset by a decrease in revenues.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2000 the Company held cash and cash  equivalents of $24,844,573
including the escrow cash that was later released to the Company in October 2000
as discussed in Note 3 to the accompanying  financial statements.  The Company's
working capital at September 30, 2000 was $23,952,631.

On July 30, 1999, the Company sold its drug  discovery  assets to OSI and ceased
its internal drug discovery  operations and research  efforts for  collaborative
partners.  Pursuant to such sale transaction,  OSI assumed,  among other things,
the Company's lease to the Company's  research  facility in Tarrytown,  New York
and the  Company's  equipment  lease  with  GECC.  The  Company  terminated  all
employees who were not hired by OSI or who did not  voluntarily  resign,  except
for its Chief  Executive  Officer who resigned in April 2000. As a result of the
foregoing,  the Company  ceased to have 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.

In February 2000, the  Company  licensed to OSI, on a non-exclusive  basis,  its
yeast  technologies.  OSI paid to the Company a license  fee of $100,000  and an
access fee of $600,000.  OSI is also obligated to pay an annual  maintenance fee
of $100,000 until 2010 and a supplemental license fee


                                      -13-
<PAGE>


of $250,000 if the  injunction  obtained by SIBIA is  lifted or  dissolved.  The
injunction was dissolved on October 30, 2000 and the supplemental license fee of
$250,000 is payable to the Company in November 2000.

The Company believes that its existing resources, together with interest income,
will be  sufficient to support its current and  projected  funding  requirements
through the end of 2001.  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 license its technologies and otherwise  realize value from
its assets;  the  transactions,  if any,  arising from the Company's  efforts to
acquire  technologies or products or to acquire or invest in companies;  and the
expenses of pursuing such transactions.

NEW ACCOUNTING PRONOUNCEMENTS

On December 3, 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting  Bulletin No. 101 - "Revenue  Recognition  in  Financial  Statements"
("SAB No. 101").  SAB No. 101 provides the SEC staff's views on the  recognition
of  revenue   including   nonrefundable   technology  access  fees  received  by
biotechnology  companies in connection with research  collaborations  with third
parties. SAB No. 101 states that in certain circumstances the SEC staff believes
that up-front  fees,  even if  nonrefundable,  should be deferred and recognized
systematically  over the term of the research  arrangement.  SAB No. 101B, which
amends the  implementation  date for SAB No. 101, requires  registrants to adopt
the  accounting  guidance  contained  therein by no later than the fourth fiscal
quarter of the fiscal year  beginning  after  December 15, 1999.  The Company is
currently  assessing the financial impact of complying with SAB No. 101 and does
not believe  that  applying the  accounting  guidance of SAB No. 101 will have a
material effect on its financial position or results of operations.

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 consisting 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.

                                      -14-
<PAGE>


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

Item 1.  Legal Proceedings

     The Company is not a party to any  material  legal  proceedings  other than
     SIBIA  Neurosciences,  Inc.  v.  Cadus  Pharmaceutical  Corporation  and an
     arbitration  proceeding  commenced by Philip N. Sussman,  the former Senior
     Vice  President,  Finance and Corporate  Development,  and Chief  Financial
     Officer of the Company.

     (a) SIBIA (which was  acquired by Merck & Co. in 1999)  commenced an action
     on July 9,  1996 in the  United  States  District  Court  for the  Southern
     District of  California  alleging  infringement  by the Company of a patent
     covering the use of cells,  engineered  to express any type of cell surface
     receptor and a reporter  gene,  used to report  results in the screening of
     compounds against target assays, and seeking injunctive relief and monetary
     damages.  After trial,  on December 18, 1998,  the jury issued a verdict in
     favor of SIBIA and awarded SIBIA $18.0  million in damages.  On January 29,
     1999,  the  United  States  District  Court  granted  SIBIA's  request  for
     injunctive  relief that precluded the Company from using the method claimed
     in SIBIA's  patent.  On February 26, 1999, the United States District Court
     denied the Company's motions to set aside the jury verdict,  to grant a new
     trial and to reduce or set  aside  the $18.0  million  damage  award by the
     jury. The Company  appealed the judgment.  On September 6, 2000, the United
     States Court of Appeals  ruled in favor of the Company and  overturned  the
     prior judgment  entered by the U.S.  District  Court.  The Court of Appeals
     ruled that the claims of SIBIA  asserted  against the Company  were invalid
     and that the  District  Court  erred in denying  the  Company's  motion for
     judgment  as a matter of law on the issue of  invalidity.  On  October  30,
     2000, the U.S.  District Court set aside the $18,000,000  judgment in favor
     of SIBIA and vacated the injunction against the Company.

     (b) On  October  4,  1999,  Philip  N.  Sussman,  the  former  Senior  Vice
     President,  Finance and Corporate Development,  and Chief Financial Officer
     of the Company,  commenced an  arbitration  proceeding  against the Company
     seeking severance pay of approximately  $525,000. The Company believes that
     Mr. Sussman is not entitled to such severance pay and intends to vigorously
     defend the action.

Item 2.   Changes in Securities and Use of Proceeds

          Nothing to Report.

Item 3.   Defaults Upon Senior Securities

          Nothing to Report

                                      -15-
<PAGE>


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

          Nothing to Report

Item 5.   Other Information

          Nothing to Report

Item 6.   Exhibits and Reports on Form 8-K.

     (a)  The exhibits listed in the Exhibit Index are included in this report.

     (b)  Reports on Form 8-K.

          None

                                      -16-
<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 PHARMACEUTICAL CORPORATION
(REGISTRANT)


Date: November 14, 2000              By: /s/ RUSSELL D. GLASS
                                         -------------------------------------
                                         Russell D. Glass
                                         President and Chief Executive Officer
                                         (Authorized Officer and
                                         Principal Financial Officer)



                                      -17-
<PAGE>


                                  EXHIBIT INDEX


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


             27                      Financial Data Schedule


                                      -18-