<PAGE>


                                  UNITED STATES
                       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, 1999

   ____           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: 0-23247

                                   FOCAL, INC.
             (Exact name of registrant as specified in its charter)

         Delaware                                          94-3142791
   --------------------------------------             --------------------
   (State or other jurisdiction of                    (I.R.S. employer
   incorporation or organization)                     identification no.)

                       4 Maguire Road, Lexington, MA 02421
                       -----------------------------------
                     (Address of principal executive offices
                               including zip code)

                                 (781) 280-7800
                         -----------------------------
                         (Registrant's telephone number
                              including area code)


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 of time that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.

   Yes   X                          No
        ---                                ---

As of October 31, 1999, the Registrant had 13,445,421 shares of Common Stock
outstanding.



<PAGE>





                                   FOCAL, INC.
               Form 10-Q for the Quarter Ended September 30, 1999

                                      INDEX

<TABLE>
<CAPTION>

                                                                           PAGE NUMBER

   <S>                                                                         <C>
   INDEX                                                                        2

   PART I - FINANCIAL INFORMATION

   ITEM 1 - FINANCIAL STATEMENTS

         Condensed Balance Sheets at December 31, 1998
             and September 30, 1999                                             3

         Condensed Statements of Operations for the Three
            Months and Nine Months Ended September 30, 1998 and 1999            4

         Condensed Statements of Cash Flows for the Nine Months Ended
           September  30, 1998 and 1999                                         5

         Notes to Condensed Financial Statements                                6

   ITEM 2 - Management's Discussion & Analysis of Financial                     8
                  Condition and Results of Operations

   ITEM 3 - Qualitative and Quantitative Disclosures About                      16
                Market Risk

   PART II - OTHER INFORMATION

   ITEMS 1 - 6                                                                  17

   SIGNATURES                                                                   18

   EXHIBIT INDEX                                                                19

</TABLE>



                                       2
<PAGE>


                                  FOCAL, INC.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                      DECEMBER 31,          SEPTEMBER 30,
                                                                          1998                   1999
                                                                    -----------------     -------------------
<S>                                                                       <C>                     <C>
ASSETS                                                                                       (Unaudited)
Current assets:
     Cash and cash equivalents                                            $8,516,936              $9,739,031
     Marketable securities                                                16,829,291               2,001,947
     Inventories                                                             937,017               1,481,582
     Accounts receivable and prepaid expenses                              1,199,377                 480,801
                                                                    -----------------     -------------------
Total current assets                                                      27,482,621              13,703,361

Notes receivable from related parties                                        282,442                 290,772

Property, plant & equipment, net                                           2,682,398               2,919,816

Other assets                                                                  13,368                  13,787
                                                                    -----------------     -------------------
Total assets                                                             $30,460,829             $16,927,736
                                                                    =================     ===================

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued liabilities                             $3,857,944              $3,366,703
     Deferred revenue                                                        550,000                       -
     Current portion of capital lease obligations                            886,517                 927,021
                                                                    -----------------     -------------------
Total current liabilities                                                  5,294,461               4,293,724

Capital lease obligations                                                  1,390,821               1,295,058

Stockholders' equity:
     Common stock                                                            133,678                 134,419
     Additional paid-in capital                                           84,884,786              85,210,553
     Notes receivable from related parties                                (1,443,133)               (965,303)
     Deferred compensation                                                  (464,206)               (262,899)
     Accumulated other comprehensive income                                   (8,218)                 (1,394)
     Accumulated deficit                                                 (59,327,360)            (72,776,422)
                                                                    -----------------     -------------------
Total stockholders' equity                                                23,775,547              11,338,954
                                                                    -----------------     -------------------
Total liabilities and stockholders' equity                               $30,460,829             $16,927,736
                                                                    =================     ===================

</TABLE>

SEE ACCOMPANYING NOTES.


                                       3
<PAGE>

                                   FOCAL, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                 Three months                               Nine months
                                                              ended September 30,                      ended September 30,
                                                -------------------------------------------  ---------------------------------------
                                                        1998                     1999            1998                    1999
<S>                                                       <C>                      <C>          <C>                   <C>
Revenues:
     Collaborative R&D revenues                           $1,521,226               $18,236      $3,560,019            $720,635
     Product revenues                                        866,150                12,986       2,337,787           1,410,085
                                                ---------------------  --------------------  --------------  ------------------
         Total revenues                                    2,387,376                31,222       5,897,806           2,130,720

Costs and Expenses:
     Cost of product revenues                              1,196,145               201,311       2,748,508           2,072,691
     Research & development                                3,867,498             3,410,460      11,901,285          11,221,694
     General & administrative                                968,295               925,083       2,874,078           2,870,390
                                                ---------------------  --------------------  --------------  ------------------
         Total costs and expenses                          6,031,938             4,536,854      17,523,871          16,164,775

Interest income (net)                                        370,652               138,859       1,217,198             584,994
                                                ---------------------  --------------------  --------------  ------------------

NET LOSS                                                 ($3,273,910)          ($4,366,773)   ($10,408,867)       ($13,449,061)
                                                =====================  ====================  ==============  ==================
Basic and diluted net income (loss)
   per share                                                  ($0.25)               ($0.32)         ($0.78)             ($1.00)
                                                =====================  ====================  ==============  ==================
Shares used in computing net income (loss)
   per share                                              13,333,059            13,441,931      13,267,971          13,413,666
                                                =====================  ====================  ==============  ==================
</TABLE>

SEE ACCOMPANYING NOTES.



                                       4
<PAGE>

                                   FOCAL, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                      NINE MONTHS ENDED SEPTEMBER 30,
                                                                              ------------------------------------------------
                                                                                     1998                      1999
                                                                              ------------------------------------------------
<S>                                                                                 <C>                          <C>
OPERATING ACTIVITIES
Net income (loss)                                                                   ($10,408,867)                ($13,449,061)
Adjustments to reconcile net loss to
     net cash provided by (used in) operating activities:
         Depreciation and amortization                                                   844,715                      827,029
         Amortization of deferred
            compensation                                                                 228,494                      237,557
         Interest accrued on notes receivable                                            (84,415)                     (49,424)
         Loss on disposal of equipment, furniture and fixtures                                                            828
         Increase (decrease) in cash arising
            from changes of operating assets
            and liabilities:
            Inventories                                                                 (575,484)                    (544,565)
            Accounts receivable and prepaid expenses                                   1,320,843                      718,576
            Accounts payable and accrued liabilities                                     (88,957)                    (491,241)
            Deferred revenue                                                             750,000                     (550,000)
            Other assets                                                                    (509)                        (419)
            Notes receivable                                                             164,318                       41,094
                                                                              ------------------------------------------------
Net cash used in operating activities                                                 (7,849,862)                 (13,259,626)

INVESTING ACTIVITIES
Purchase of marketable securities                                                    (24,277,676)                  (3,087,226)
Sale of marketable securities                                                         11,792,755                   17,921,393
Purchase of property and equipment                                                      (872,778)                  (1,065,275)
                                                                              ------------------------------------------------

Net cash provided by (used in) investing activities                                  (13,357,699)                  13,768,892

FINANCING ACTIVITIES
Proceeds from equity financings,
     net of issuance costs                                                             3,549,500                            -
Proceeds from exercise of
     stock options                                                                        84,994                      175,274
Proceeds from issuance of common stock
     under the employee stock purchase plan                                              285,124                      125,868
Principal payments on notes receivable                                                   104,317                      466,946
Proceeds from lease financing                                                            739,446                      753,772
Principal payments on capital lease
     obligations                                                                        (821,192)                    (809,031)
                                                                              ------------------------------------------------
Net cash provided by financing
     activities                                                                        3,942,189                      712,829
Net decrease in cash and cash
     equivalents                                                                     (17,265,372)                   1,222,095
Cash and cash equivalents at
     beginning of the period                                                          26,810,777                    8,516,936
                                                                              ------------------------------------------------
Cash and cash equivalents at
     end of the period                                                                $9,545,405                   $9,739,031
                                                                              ================================================

</TABLE>

SEE ACCOMPANYING NOTES.


                                       5
<PAGE>



                                   FOCAL, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                   (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

Focal, Inc. develops, manufactures and commercializes synthetic, absorbable,
liquid surgical sealants, tissue coatings and local drug delivery products,
based on its proprietary polymer technology. The Company's family of surgical
sealant products is being developed for use inside the body to seal air and
fluid leaks resulting from lung, neurological, cardiovascular and
gastrointestinal surgery.

The accompanying unaudited, condensed financial statements have been prepared by
the Company in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying financial statements include all
adjustments, including normal recurring accruals, considered necessary for a
fair presentation of the financial position, results of operations, and cash
flows for the periods presented.

The results of operations for the three months and nine months ended September
30, 1999 are not necessarily indicative of the results that may be expected for
the entire fiscal year ended December 31, 1999.

These financial statements should be reviewed in conjunction with the audited
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.

NOTE 2. NET LOSS PER SHARE

Basic and diluted net loss per share is computed using the weighted average
number of shares of common stock outstanding during the period. The effect of
stock options and warrants are excluded in the diluted calculation, as their
effect is antidilutive.

NOTE 3. REVENUE RECOGNITION FOR PRODUCT SALES

Revenues from product sales are recorded in full as product shipments are made,
as there are no contractual right of return or stock rotation privileges. All
product revenues recorded during the three month and nine month periods ended
September 30, 1998 and 1999 were attributable to sales of surgical sealant
products to Ethicon Inc., a Johnson & Johnson company.


                                       6
<PAGE>



NOTE 4. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market. At December 31, 1998 and September 30, 1999, inventories consisted of
the following:
<TABLE>
<CAPTION>

                          December 31,              September 30,
                            1998                         1999
                          ---------------------------------------
<S>                       <C>                        <C>
Raw materials             $219,298                   $   190,704
Work in process            672,928                     1,132,807
Finished goods              44,791                       158,071
                          ---------------------------------------
                          $937,017                   $ 1,481,582
                          ---------------------------------------
                          ---------------------------------------
</TABLE>

NOTE 5. COMPREHENSIVE LOSS

The components of comprehensive loss for the three month and nine month periods
ended September 30, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>

                                      Three months ended September 30,
                                            1998            1999
                                      --------------------------------
<S>                                   <C>               <C>
Net loss                              $(3,273,910)      $(4,366,773)

Other comprehensive income:
Change in unrealized loss
   on marketable securities               $23,976       $     9,881
                                      ------------------------------
Comprehensive loss                    $(3,249,934)      $(4,356,892)
                                      ------------------------------
                                      ------------------------------
</TABLE>

<TABLE>
<CAPTION>

                                      Nine months ended September 30,
                                            1998            1999
                                      -------------------------------
<S>                                   <C>               <C>
Net loss                              $(10,408,867)     $(13,449,061)

Other comprehensive income:
Change in unrealized loss
   on marketable securities           $     20,569      $      6,824
                                      ------------------------------
Comprehensive loss                    $(10,388,298)     $(13,442,237)
                                      ------------------------------
                                      ------------------------------
</TABLE>

NOTE 6. SUBSEQUENT EVENT

In October 1999, Focal entered into a marketing and distribution agreement
with the Genzyme Surgical Products division of Genzyme Corporation
("Genzyme"). Under the terms of this agreement, Genzyme will serve as Focal's
exclusive distributor of surgical sealant products for pulmonary,
cardiovascular and gastrointestinal surgery in North America following FDA
approval. Focal will receive a price per unit equal to Focal's manufacturing
costs plus a percentage of the gross profits generated by sales of these
products.

                                       7
<PAGE>

In addition, Focal and Genzyme entered into a stock purchase agreement
whereby Genzyme has committed to purchase up to $20 million of Focal's common
stock over an eighteen month period, upon satisfaction of certain conditions
in each of four $5 million investments. The initial $5 million investment was
made on November 8, 1999 and 810,372 shares of common stock were purchased by
Genzyme at $6.17 per share, representing a 25% premium to the average closing
price over the preceding 10 trading days. At Focal's option, up to three
additional $5 million investments will be made by Genzyme. The first of these
investments will be priced at a 25% premium to the then current share price,
or at the market price if the price is at or above $8 per share. The
remaining two investments of $5 million each will be priced at market value
and are subject to the receipt of regulatory approval of
FocalSeal-Registration Mark- L surgical sealant in the United States.

ITEM 2.

MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS:

The following discussion should be read in conjunction with the accompanying
unaudited, condensed financial statements and the related footnotes thereto,
appearing elsewhere in this report. This Management's Discussion and Analysis
contains certain forward-looking statements regarding future events with respect
to the Company. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," "intends," and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the Company's actual results to differ materially from those indicated in
such forward-looking statements, including those factors set forth under the
captions "Business -Patents and Proprietary Rights," "-Government Regulation,"
"-Sales and Marketing," "-Manufacturing," "-Competition and Technological
Change," "-Third Party Reimbursement" and "Factors Affecting Operating Results"
in the Company's Annual Report on Form 10-K for the year ended December 31,
1998, which captioned discussion is expressly incorporated herein by reference.

OVERVIEW

The Company was founded in 1991, and is focused on the development, manufacture
and commercialization of synthetic, absorbable, liquid surgical sealants, tissue
coatings and local drug delivery products, based on the Company's proprietary
polymer technology. Since inception, the Company has funded its operations
primarily through the private placement of equity securities and, in December
1997, through an initial public offering of common stock. In addition, the
Company has entered into strategic alliances with corporate partners and has
recorded revenues totaling $27.4 million through September 30, 1999, in
conjunction with these alliances. In October 1999, the company entered into a
marketing and distribution agreement



                                       8
<PAGE>

with Genzyme and received a commitment from Genzyme for the purchase of up to
$20 million in each of four $5 million investments shares of Focal's common
stock over the next eighteen months, subject to certain conditions in each of
four $5 million investments. The first investment of $5.0 million dollars was
made in November 1999.

The Company has incurred net losses in each year since its inception,
including a net loss of approximately $4.4 million for the three months ended
September 30, 1999, and a net loss of approximately $13.5 million for the
nine months ended September 30, 1999. At September 30, 1999, the Company had
an accumulated deficit of $72.8 million. The company's operating losses have
resulted primarily from expenses incurred in connection with the Company's
research and development activities, including preclinical and clinical
trials, development of manufacturing processes and general and administrative
expenses. The Company expects to incur net losses at least through 2001 and
may incur net losses in subsequent periods although the amount of future net
losses and time required by the Company to reach profitability are highly
uncertain. The Company is dependent upon the remaining commitments of up to
$15 million dollars in equity financing from Genzyme, each of which is
subject to the satisfaction of certain conditions. If the Company does not
continue to receive funding from Genzyme, or is unable to otherwise obtain
third party funding, net losses could continue to increase.

The Company's ability to achieve and sustain profitability will be dependent
upon obtaining regulatory approval for and successfully commercializing its
FocalSeal surgical sealants, and developing the manufacturing capacity and sales
and marketing capability for its products. There can be no assurance that Focal
will obtain the required regulatory approvals, or successfully develop,
manufacture, commercialize and market products or that the Company will ever
achieve profitability. In addition, if the Company achieves profitability, there
can be no assurance that such profitability would be sustained.

The Company introduced its first commercial product, FocalSeal-L surgical
sealant for lung surgery indications, in Europe in March 1998 through its
strategic marketing and distribution alliance with Ethicon Inc., a Johnson &
Johnson company ("Ethicon"). Since the introduction of this product, the
Company has recorded approximately $4.5 million in product revenues based on
its sales to Ethicon. In July 1999, the Company announced that it had
received notification from Ethicon that Ethicon's product inventory levels
will be sufficient to support its anticipated sales for the second half of
1999. As a result of the excess inventory, sales to Ethicon of FocalSeal
surgical sealant were minimal in the three months ended September 30, 1999
and are expected to remain so for at least the remainder of 1999. In October
1999, Focal entered into a marketing and distribution agreement with the
Genzyme Surgical Products Division of Genzyme Corporation. Under the terms of
this agreement, Genzyme will market the Company's surgical sealant products
for pulmonary, cardiovascular, and gastrointestinal surgery throughout North
America.

                                       9
<PAGE>


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998

Revenues for the three months ended September 30, 1999, (the "1999 Quarterly
Period") decreased to $31,000 from $2.4 million for the three months ended
September 30, 1998 (the "1998 Quarterly Period"). Included in the 1999 Quarterly
period were product revenues of $13,000 and collaborative revenues of $18,000
compared with $866,000 of product revenues and $1,521,000 of collaborative
revenues during the 1998 Quarterly Period. The decrease in product revenue was
the result of Ethicon notifying the company that it had sufficient inventory to
support its anticipated sales for the second half of 1999. The decrease in
collaborative revenue in the 1999 Quarterly Period was primarily due to the fact
that the quarterly funding under the alliance with Ethicon relating to the
pulmonary and neurological sealants ceased after the fourth quarter of 1998, per
the original contractual terms of the agreement with Ethicon. Collaborative
revenue in the 1999 Quarterly period included funding for the pass through of
certain marketing and training costs to Ethicon.

Cost of product revenues for the 1999 Quarterly period of $201,000 were recorded
relating to the commercial sales of the Company's FocalSeal-L surgical sealant
product versus cost of product revenues of $1,196,000 for the 1998 Quarterly
Period. Gross margins remained negative due to the startup phase of the
Company's manufacturing operations and the resulting lack of economies of scale.
Additionally, costs related to fixed overhead, and inefficiencies surrounding
sterile fill and finish processes further burdened cost of product revenues for
the 1999 Quarterly Period.

Research and development expenses decreased to $3,410,000 for the 1999 Quarterly
Period, from $3,867,000 for the 1998 Quarterly Period. This decrease was
primarily due to reduced staffing levels and lower clinical trial costs in the
1999 Quarterly Period, compared with the same period in 1998. During the 1998
Quarterly Period, the Company was engaged in a European clinical trial of
FocalSeal S surgical sealant for neuro surgery indications. There were no
ongoing clinical trials during the 1999 Quarterly Period.

General and administrative expenses remained relatively flat at $925,000 for the
1999 Quarterly Period, compared with $968,000 for the same period in 1998.

Interest income, net of interest expense, decreased to $139,000 for the 1999
Quarterly Period, from $371,000 for the 1998 Quarterly Period, as a result of
lower average cash balances available for investment.

The Company recorded a net loss of $(4,367,000) for the 1999 Quarterly Period.
During the 1998 Quarterly Period, the Company recorded a net loss of
$(3,274,000). The increase in net loss is primarily attributed to decreasing
collaborative revenues, and decreased interest income in the 1999 Quarterly
Period, when compared to the 1998 Quarterly Period. The Company expects that it
will incur net operating losses through at least 2001.


                                       10
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

For the nine month period ended September 30, 1999 (the "1999 Nine Month
Period") revenues decreased to $2,131,000 from $5.9 million for the nine
month period ended September 30, 1998 (the "1998 Nine Month Period"). The
decline in revenues was primarily due to the fact that the quarterly funding
under the alliance with Ethicon relating to the pulmonary and neurological
sealants ceased after the fourth quarter of 1998, per the original
contractual terms of the agreement with Ethicon. Collaborative revenue in the
1999 Nine Month Period included funding for the development of a
cardiovascular sealant and the pass through of certain marketing and training
costs to Ethicon, a small amount of funding for an NIH grant, and funding
from Genentech for a drug compatibility and release study. Product revenues
in the 1999 Nine Month Period declined to $1,410,000 from $2,338,000 in the
1998 Nine Month Period due to the announcement by the Company in the second
quarter that it had received notification from Ethicon that Ethicon's product
inventory levels would be sufficient to support its anticipated sales for the
second half of 1999.

Cost of product revenues for the 1999 Nine Month Period of $2,073,000 were
recorded relating to the commercial sales of the Company's FocalSeal-L surgical
sealant product versus cost of product revenues of $2,749,000 for the 1998 Nine
Month Period. Gross margins remained negative in the 1999 Nine Month Period due
to the startup phase of the Company's manufacturing operations and the resulting
lack of economies of scale. Additionally, costs related to fixed overhead and
inefficiencies surrounding sterile fill and finish processes further burdened
cost of product revenues for the 1999 Nine Month Period.

Research and development expenses for the 1999 Nine Month Period decreased to
$11,222,000 from $11,901,000 for the 1998 Nine Month Period. This decrease
resulted from lower staffing levels and lower clinical trial costs in the 1999
Nine Month Period, compared with the 1998 Nine Month Period. During the 1998
Nine Month Period, the Company was engaged in a pivotal U.S. 180 patient
clinical trial of FocalSeal L surgical sealant for lung surgery indications and
a European trial of FocalSeal S for neuro surgery indications. The clinical
trial for FocalSeal L was completed in the third quarter of 1998. There were no
ongoing clinical trials during the first nine months of 1999.

General and administrative expenses for the 1999 Nine Month Period were
$2,870,000 compared with $2,874,000 for the 1998 Nine Month Period.

Interest income, net of interest expense, decreased to $585,000 for the 1999
Nine Month Period, from $1,217,000 for the 1998 Nine Month Period, as a result
of lower average cash balances available for investment.

The Company recorded a net loss of $(13,449,000) for the 1999 Nine Month Period.
During the 1998 Nine Month Period, the Company recorded a net loss of
$(10,409,000). The increase in net loss is primarily attributed to decreasing



                                       11
<PAGE>

collaborative revenues and decreased interest income in the 1999 Nine Month
Period offset by lower staffing levels when compared to the 1998 Nine Month
Period. The Company expects that it will incur net operating losses through
at least 2001.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed operations primarily from the sale
of preferred stock in private placements as well as the Company's December 1997
initial public offering. Through September 30, 1999, the Company has raised
approximately $83.5 million from equity financings, net of offering costs and
has received $7.7 million in equipment lease financing. In addition, the Company
has received funding from Ethicon and other corporate partners totaling
approximately $27.4 million through September 30, 1999. At September 30, 1999,
the Company had cash, cash equivalents and marketable securities of $11.7
million. In October 1999, Focal entered into a stock purchase agreement for up
to $20 million in equity financing from Genzyme.

Under the terms of the stock purchase agreement entered into with Genzyme, a
commitment was received from Genzyme for up to four investments of $5 million
each, subject to certain conditions. The initial $5 million investment was made
on November 8, 1999 and 810,372 shares of common stock were purchased by Genzyme
at $6.17 per share, representing a 25% premium to the average closing price over
the preceding 10 trading days. At Focal's option, up to three additional $5
million investments will be made by Genzyme. The first of these investments will
be priced at a 25% premium to the then current share price, or at the market
price if the price is at or above $8 per share. The remaining two investments of
$5 million each will be priced at market value and are subject to the receipt of
regulatory approval of FocalSeal L surgical sealant in the United States and
certain other conditions

Cash used in operations totaled $13.3 million for the Nine Months ended
September 30, 1999 compared with cash used in operations of $7.8 million for the
same period in 1998. The change in cash used in operations was due to the
increased net losses generated in the nine months ended September 30, 1999. Cash
used in operations is equal to the net income or loss incurred for each period,
plus non-cash charges such as depreciation and amortization of property and
equipment plus any changes in working capital.

Capital expenditures from inception through September 30, 1999 totaled $8.2
million, representing laboratory equipment, office furniture and equipment,
computers and certain leasehold improvements. The majority of these purchases
have been financed through either direct financing leases or sale and leaseback
arrangements. Capital expenditures for the nine months ended September 30, 1999
totaled $1,065,000. As of September 30, 1999, the Company did not have any
material commitments for future capital expenditures. The Company has
commitments from lenders in the form of lease lines totaling $1.5 million to
provide for its expected capital needs during 1999,


                                       12
<PAGE>

and expects to secure additional lease lines to provide for its needs in 2000
and beyond.

The Company believes that its existing capital resources, the remaining
committed equity financings of $15 million from Genzyme, if received,
interest income and future payments due under strategic alliances, will be
sufficient to satisfy its current and projected funding requirements for at
least eighteen months. The remaining commitments from Genzyme are contingent
upon the satisfaction of certain conditions, including in the case of the
last two commitments, the receipt of regulatory approval for FocalSeal-L
surgical sealant in the United States. Under the Company's surgical sealant
collaboration with Ethicon, Focal may receive additional funding upon
achievement of specified development milestones; however, as such payments
are dependent upon the achievement of such milestones, there can be no
assurance as to the receipt or timing of any such payments. A milestone
payment of $1.0 million is currently due to Focal based upon the receipt in
November 1999 of CE mark approval of FocalSeal-S surgical sealant for
neurological indications. A future milestone payment will be due upon CE mark
submission of FocalSeal surgical sealant for cardiovascular indications.
There are currently no commitments for additional research and development
funding from Ethicon. Under certain agreements with universities and
consultants, the Company is obligated to make payments for sponsored research
and consulting services. The Company's research funding commitments under
these agreements totaled approximately $33,000 at September 30, 1999.
Payments under these agreements are typically made on a quarterly or monthly
basis.

There can be no assurance that the Company's capital resources will be
sufficient to enable the Company to conduct its research and development
programs as planned. The Company's future capital requirements will depend on
many factors, including continued progress in its research and development
programs, progress with preclinical testing and clinical trials, the time and
costs involved in obtaining regulatory approvals, if any, the costs involved in
filing and prosecuting patent applications and enforcing patent claims,
competing technological and market developments, the establishment of additional
strategic alliances, the cost of manufacturing facilities and of
commercialization activities and arrangements, and the cost of product
in-licensing and any possible acquisitions. There can be no assurance that the
Company's cash, cash equivalents and marketable securities and interest income
earned thereon, together with funding that may be received under the Company's
strategic alliances, will be adequate to satisfy its capital and operating
requirements.

The Company intends to seek additional funding through strategic alliances, and
may seek additional funding through public or private sales of the Company's
securities, including equity securities. In addition, the Company has obtained
equipment lease financing and other forms of debt financing and expects to
continue to pursue opportunities to obtain additional lease or debt financing in
the future. There can be no assurance, however, that additional equity or debt
financing will be available on reasonable terms, if at all. Any additional
equity financing would be dilutive to the Company's stockholders. If adequate
funds are not available, the Company may be


                                       13
<PAGE>

required to curtail significantly one or more of its research and development
programs and/or obtain funds through arrangements with corporate partners or
others that may require the Company to relinquish rights to certain of its
technologies or product candidates.

Year 2000 Readiness Disclosure

The Company is preparing for the impact of the arrival of the Year 2000 on its
business, as well as on the businesses of its customers, suppliers and business
partners. The "Year 2000 Issue" is a term used to describe the problems created
by systems that are unable to accurately interpret dates after December 31,
1999. These problems are derived predominantly from the fact that many software
programs have historically categorized the year in a two-digit format. The Year
2000 Issue creates potential risks for the Company, including the Information
Technology ("IT") and non-IT systems that the Company uses in its business
operations. The Company may also be exposed to risks from third parties with
which the Company interacts who fail to adequately address their own Year 2000
Issues.

The Company's plan for IT systems consists of four phases: (1)
inventory-identifying all IT systems; (2) assessment - identifying IT systems
that use date functions and assessing them for Year 2000 functionality; (3)
remediation -reprogramming, or replacing where necessary, inventoried items to
ensure they are Year 2000 ready; and (4) testing and certification - testing the
code modifications and new inventory with other associated systems, including
extensive date testing and performing quality assurance testing to ensure
successful operation in the post-1999 environment. The Company has assessed its
products and non-IT systems and has determined that there are no material
exposures in these areas.

The Company completed the inventory and assessment phases for substantially all
of its IT systems by year-end 1998. The Company's IT systems are currently in
the remediation, testing and certification phases. The Company expects to
complete the remediation, testing and certification of all of its IT systems on
or before November 30, 1999. Activities to be completed are limited to the
installation of various equipment in the company's analytical chemistry area.

The Company also faces the risk that one or more of its material suppliers or
customers ("external relationships") will not be able to interact with the
Company due to the third party's inability to resolve its own Year 2000 issues,
including those associated with such third party's own external relationships.

The Company has initiated a formal process designed to determine the overall
Year 2000 readiness of its external relationships and has received responses
from the majority of these parties by September 30, 1999. In the case of
important suppliers and customers, the Company is engaged in discussions with
such parties and is attempting to obtain detailed information as to such
parties' Year 2000 plans and state of readiness. The Company, however, does
not have sufficient information at the current time to predict whether its
external relationships will be Year 2000 ready.

                                       14
<PAGE>

Focal's reliance on its key suppliers, and therefore on the proper functioning
of their information systems and software, is increasing, and there can be no
assurance that a vendor's failure to address year 2000 issues would not have an
adverse effect on Focal.


Total Year 2000 project costs are currently estimated to be $300,000 to $400,000
in 1999. A large majority of these costs are expected to be incremental expenses
that will not recur in the Year 2000 or thereafter. The Company's current
estimates primarily reflect increased remediation and testing efforts, increased
use of outside resources, and certain software and hardware expenditures related
to remediation. Focal is currently implementing a fully integrated enterprise
resource planning system ("ERP system") and expects to complete the installation
of the system during early 2000. A key requirement of this ERP system is year
2000 compliance. Also, affecting the cost estimates are expenses related to
upgrading much of the Company's Analytical Chemistry equipment to full year 2000
compliance. During 1998, the Company upgraded many of the personal computers
used by employees, and the Company now believes that the majority of the
computers currently in use are year 2000 ready. The costs incurred in 1998
related to these upgrades and other year 2000 activities were approximately
$200,000.

The Company believes that its reasonably likely worst case Year 2000 scenario
would be that a material single-source supplier would, as a result of its own
Year 2000 difficulties, fail to deliver to us a key component of our products.
Any such failure could result in delays in our ability to produce and distribute
our products to customers, which could have material adverse effect on our
business, financial condition and results of operations. To date, the Company
has not formulated contingency plans relating to its or a third party's Year
2000 remediation efforts. However, as discussed above, the Company is engaged in
ongoing Year 2000 assessment, remediation and testing activities. These results
and the responses received from external relationships will be taken into
account in determining the nature and extent of any contingency plans if
necessary.

Any material unresolved Year 2000 issues at the Company or its external
relationships could have a material adverse effect on the Company's results of
operations, liquidity or financial condition. In addition, the Company's
expectations about the future costs and timely and successful completion of its
Year 2000 program are subject to uncertainties that could cause actual results
to differ materially from what has been discussed above under "Year 2000".
Factors that could influence the amount of future costs and the completion dates
and effectiveness of remediation, testing and certification and contingency
planning efforts include the Company's success in identifying IT systems and
embedded systems that contain two-digit year codes, the nature and amount of
required reprogramming, testing and certification, the rate and magnitude of
related labor and consulting costs, the availability of qualified personnel and
the success of the Company's external relationships in addressing their own Year
2000 issues.


                                       15
<PAGE>

ITEM 3.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company maintains an investment portfolio in accordance with its Investment
Policy. The primary objectives of the Company's Investment Policy are to
preserve principal, maintain proper liquidity to meet operating needs and
maximize yields. The Company's Investment Policy specifies credit quality
standards for the Company's investments and limits the amount of credit exposure
to any single issue, issuer or type of investment.

The Company's investments consist of securities of various types and maturities.
The Company accounts for its investments in accordance with Statement of
Accounting Standards No. 115, "Accounting for certain investments in Debt and
Equity Securities" (SFAS 115). All of the Company's cash equivalents and
marketable securities are treated as available-for-sale under SFAS 115.

The securities held in the company's investment portfolio are subject to
interest rate risk. Changes in interest rates affect the fair market value of
the available-for-sale securities. After a review of the Company's marketable
securities as of September 30, 1999, the Company has determined that in the
event of a hypothetical ten percent increase in interest rates, the resulting
decrease in fair market value of the Company's marketable investment securities
would be insignificant to the financial statements as a whole.




                                       16
<PAGE>

PART II.   OTHER INFORMATION

Item 1.   Legal Proceedings.              None

Item 2.   Changes in Securities and use of Proceeds.

     There have been no material changes in the use of proceeds from the sale of
securities under the Company's Registration Statement on Form S-1 (333-38379),
which was declared effective on December 11, 1997, from that set forth in the
Company's report on Form 10-K for the year ended December 31, 1998.

Item 3.   Defaults upon Senior Securities.   None

Item 4.   Submission of Matters to a Vote of Security Holders.    None.

Item 5.   Other Matters.    None

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

          (a) Exhibits

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

          (b) Reports on Form 8-K

              None.



                                       17
<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.

    Date:    November 15, 1999                   FOCAL, INC.

                                                 By:  /s/ W. Bradford Smith
                                                     ---------------------------
                                                       W. Bradford Smith
                                                       Vice President and Chief
                                                       Financial Officer





                                       18
<PAGE>


                                  EXHIBIT INDEX


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

EXHIBIT NO.        DESCRIPTION
-----------        -----------

27                 Financial Data Schedule

99.1               Pages 12 through 25 of the Company's Annual Report on Form
                   10-K for the year ended December 31, 1998, as filed with the
                   Securities and Exchange Commission (which pages are deemed
                   filed hereunder except to the extent that portions are not
                   expressly incorporated by reference herein)




                                       19