SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q


(Mark One)
[X]                  QUARTERLY REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2005

                                       or

[ ]            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 0-13634

                              MACROCHEM CORPORATION
                              ---------------------
             (Exact name of registrant as specified in its charter)

            DELAWARE                                             04-2744744
---------------------------------                           --------------------
  (State or Other Jurisdiction                                (I.R.S. Employer
of Incorporation or Organization)                           Identification No.)

            110 HARTWELL AVENUE, LEXINGTON, MASSACHUSETTS 02421-3134
            --------------------------------------------------------
               (Address of principal executive offices, Zip Code)

                                  781-862-4003
                                  ------------
              (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 that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes     X         No
    ---------        ---------

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes                  No       X
     -----------        --------

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

         CLASS                                    OUTSTANDING AT AUGUST 1, 2005:
----------------------------                      ------------------------------
Common Stock, $.01 par value                                41,863,455



                                       1
<PAGE>

                              MACROCHEM CORPORATION

                               INDEX TO FORM 10-Q
                               ------------------


                                                                     PAGE NUMBER
                                                                     -----------
PART I    FINANCIAL INFORMATION

Item 1    Financial Statements

            Condensed Balance Sheets
            June 30, 2005 and December 31, 2004 (Unaudited)              3

            Condensed Statements of Operations for the
            Three and Six Months Ended June 30, 2005
            and 2004 (Unaudited)                                         4

            Condensed Statements of Cash Flows for the
            Six Months Ended June 30, 2005
            and 2004 (Unaudited)                                         5

            Notes to Unaudited Condensed Financial                       6-11
            Statements

Item 2    Management's Discussion and Analysis of                        12-19
          Financial Condition and Results of Operations

Item 3    Quantitative and Qualitative Disclosures About Market Risk     19

Item 4    Control and Procedures                                         20


PART II   OTHER INFORMATION

Item 4    Submission of Matters to a Vote of Security Holders            21

Item 6    Exhibits                                                       22

SIGNATURES                                                               23

EXHIBIT INDEX                                                            24

                                       2
<PAGE>

<TABLE>
<CAPTION>

ITEM 1.  FINANCIAL STATEMENTS

                              MACROCHEM CORPORATION
                            CONDENSED BALANCE SHEETS
                                   (Unaudited)

                                                                               JUNE 30,        DECEMBER 31,
                                                                                 2005              2004
                                                                            -------------     -------------
<S>                                                                         <C>               <C>
ASSETS
Current assets:
    Cash and cash equivalents                                              $    2,130,860    $    4,888,868
    Short-term investments                                                      1,199,778         1,185,406
    Prepaid expenses and other current assets                                     380,054           328,908
                                                                            -------------     -------------
       Total current assets                                                     3,710,692         6,403,182

Property and equipment, net                                                       147,479           183,079

Patents, net                                                                      550,178           523,603
                                                                            -------------     -------------

Total assets                                                               $    4,408,349    $    7,109,864
                                                                            =============     =============
LIABILITIES
Current liabilities:
    Accounts payable                                                              282,150           244,148
Accrued expenses and other liabilities                                            374,965           523,703
                                                                            -------------     -------------
       Total current liabilities                                                  657,115           767,851

Deferred rent                                                                         ---             5,509
                                                                            -------------     -------------
Total liabilities                                                                 657,115           773,360

Commitments and contingencies (Note 3)

STOCKHOLDERS' EQUITY
Preferred stock, authorized and unissued, 6,000,000 shares                            ---               ---
Common stock, $.01 par value, 100,000,000 shares authorized;
    41,885,688 and 38,903,983 shares issued at June 30, 2005 and
    December 31, 2004, respectively                                               418,857           389,040
Additional paid-in capital                                                     83,583,890        82,941,131
Accumulated deficit                                                           (80,192,403)      (76,824,517)
Less treasury stock, at cost, 22,233 and 62,260 shares at June 30, 2005
    and December 31, 2004, respectively                                           (59,110)         (169,150)
                                                                            -------------     -------------
Total stockholders' equity                                                      3,751,234         6,336,504
                                                                            -------------     -------------

Total liabilities and stockholders' equity                                 $    4,408,349    $    7,109,864
                                                                            =============     =============
</TABLE>


The accompanying notes are an integral part of these unaudited condensed
financial statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>

                              MACROCHEM CORPORATION
                     CONDENSED STATEMENTS OF OPERATIONS
           For the three and six months ended June 30, 2005 and 2004
                                   (Unaudited)

                                                     FOR THE THREE MONTHS ENDED JUNE 30,      FOR THE SIX MONTHS ENDED JUNE 30,
                                                     -----------------------------------      ---------------------------------
                                                         2005                   2004              2005                 2004
                                                     ------------           ------------      ------------         ------------
<S>                                                 <C>                    <C>               <C>                  <C>
REVENUES:

     TOTAL REVENUES                                 $         ---          $         ---     $         ---        $         ---

OPERATING EXPENSES:
    Research and development                              739,008              1,185,313         1,769,068            2,506,259
    Marketing, general and administrative                 809,280              1,300,888         1,644,278            2,219,707
                                                     ------------           ------------      ------------         ------------
       TOTAL OPERATING EXPENSES                         1,548,288              2,486,201         3,413,346            4,725,966
                                                     ------------           ------------      ------------         ------------

LOSS FROM OPERATIONS                                   (1,548,288)            (2,486,201)       (3,413,346)          (4,725,966)

OTHER INCOME:
    Interest income                                        21,942                 32,631            45,460               53,868
                                                     ------------           ------------      ------------         ------------
       TOTAL OTHER INCOME                                  21,942                 32,631            45,460               53,868
                                                     ------------           ------------      ------------         ------------

NET LOSS                                            $  (1,526,346)         $  (2,453,570)    $  (3,367,886)       $  (4,672,098)
                                                     ============           ============      ============         ============

BASIC AND DILUTED NET LOSS PER SHARE                $       (0.04)         $       (0.06)    $       (0.08)       $       (0.13)
                                                     ============           ============      ============         ============

SHARES USED TO COMPUTE BASIC AND DILUTED NET
    LOSS PER SHARE                                     41,054,088             38,621,117        39,954,238           36,507,961
                                                     ============           ============      ============         ============
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
financial statements.

                                       4
<PAGE>
<TABLE>
<CAPTION>


                              MACROCHEM CORPORATION
                       CONDENSED STATEMENTS OF CASH FLOWS
                 For the six months ended June 30, 2005 and 2004
                                   (Unaudited)

                                                                      FOR THE SIX MONTHS ENDED JUNE 30,
                                                                  -----------------------------------------
                                                                       2005                       2004
                                                                  --------------             --------------
<S>                                                              <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                     $    (3,367,886)           $    (4,672,098)
    Adjustments to reconcile net loss to net cash used by
     operating activities:
       Depreciation and amortization                                      73,908                     91,574
       Stock-based compensation                                              ---                     29,190
       401(k) contributions in company common stock                       15,610                     34,315
       Deferred rent                                                      (5,509)                   (12,304)
       Reduction to capitalized patents                                      ---                    124,853
    Change in assets and liabilities:
       Prepaid expenses and other current assets                         (51,146)                  (137,403)
       Accounts payable and accrued expenses                            (110,739)                   179,422
       Deposits                                                              ---                     29,193
                                                                  --------------             --------------

Net cash used in operating activities                                 (3,445,762)                (4,333,259)
                                                                  --------------             --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Sales of short-term investments                                          ---                  2,000,000
    Purchases of short-term investments                                  (14,522)                    (7,394)
    Expenditures for patents                                             (50,365)                   (30,707)
    Expenditures for property and equipment                              (14,372)                   (14,268)
                                                                  --------------             --------------
Net cash (used in) provided by investing activities                      (79,259)                 1,947,632
                                                                  --------------             --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from sale of common stock (net of legal
       and financial costs)                                              679,505                  6,681,274
    Proceeds from exercise of warrants                                    87,500                    443,816
                                                                  --------------             --------------
Net cash provided by financing activities                                767,005                  7,125,090
                                                                  --------------             --------------

Net change in cash and cash equivalents                               (2,758,008)                 4,739,464
Cash and cash equivalents at beginning of period                       4,888,868                  3,839,772
                                                                  --------------             --------------

Cash and cash equivalents at end of period                       $     2,130,860            $     8,579,235
                                                                  ==============             ==============
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
financial statements.


                                       5
<PAGE>

                              MACROCHEM CORPORATION
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1)    BASIS OF PRESENTATION AND OPERATIONS
       ------------------------------------

       The financial statements included herein have been prepared by MacroChem
       Corporation ("MacroChem" or the "Company") without audit, pursuant to the
       rules and regulations of the Securities and Exchange Commission. Certain
       information and footnote disclosures normally included in financial
       statements prepared in accordance with accounting principles generally
       accepted in the United States of America have been condensed or omitted
       pursuant to such rules and regulations. In the opinion of management, the
       accompanying unaudited condensed financial statements include all
       adjustments (consisting only of normal recurring adjustments) necessary
       to present fairly the financial position, results of operations and cash
       flows of the Company at the dates and for the periods indicated. The
       unaudited condensed financial statements included herein should be read
       in conjunction with the audited financial statements and the notes
       thereto included in the Company's Annual Report on Form 10-K for the
       fiscal year ended December 31, 2004.

       The financial statements do not include any adjustments relating to the
       recoverability and classification of recorded asset amounts or the
       amounts and classification of liabilities that might be necessary should
       the Company be unable to continue as a going concern. The Company's
       continuation as a going concern depends on its ability to obtain
       additional financing, to consummate a strategic transaction, to obtain
       concessions from its employees, including concessions under management
       severance agreements, or to make alternative arrangements to fund its
       operations. There can be no assurance that the Company will be able to
       obtain additional financing, to consummate a strategic transaction, to
       obtain any concessions from employees or management, or to make
       alternative arrangements to fund its operations, as there are currently
       no commitments.

       The Company has been engaged primarily in research and development since
       its inception in 1981 and has derived limited revenues from the
       commercial sale of its products, licensing of certain technology and
       feasibility studies. The Company has had no revenues relating to the sale
       of any products currently under development. The Company has incurred net
       losses every year since its inception and the Company anticipates that
       losses may continue for the foreseeable future. At June 30, 2005, the
       Company's accumulated deficit was approximately $80.2 million.

       The Company is exploring alternatives, such as a merger or acquisition, a
       sale of MacroChem, or a sale or licensing of its intellectual property.
       There are currently no commitments with respect to any such transaction.
       The Company cannot assure that it will be able to consummate a
       transaction on favorable terms, if at all, that would substantially
       improve its liquidity and capital resource position. If the Company is
       not successful in arranging additional funding or consummating an
       alternative transaction on a timely basis, the Company will be required
       to cease operations. The Company believes that its cash, cash equivalents
       and short-term investments of $3,330,638 at June 30, 2005 are only
       sufficient to fund its operations through August 2005, and expenses in
       connection with any eventual termination of the Company's operations.

                                       6
<PAGE>

       Pending the outcome of management's review of potential strategic
       alternatives and any definitive decision to cease operations and
       liquidate, the Company will continue to prepare its financial statements
       on the assumption that it will continue as a going concern, which
       contemplates the realization of assets and liquidation of liabilities in
       the normal course of business. If management were to decide to cease
       operations or liquidate, the financial statements would be prepared and
       presented on the liquidation basis of accounting, whereby assets are
       valued at their estimated net realizable values and liabilities are
       stated at their estimated settlement amounts. The Company has employment
       and severance agreements with certain key employees. The terms of each
       key employee agreement provide that the employee is an employee at-will.
       These agreements provide for aggregate annual salary payments of
       approximately $1,085,250, and provide for severance payments computed
       with reference to the employee's compensation. There can be no assurance
       that, in the event of a liquidation, there will be any assets remaining
       to be distributed to shareholders.

       In addition, the lease of the Company's office and laboratory space
       expires on August 31, 2005. The Company currently does not have
       sufficient funds to obtain a new long-term lease of suitable space. There
       can be no assurance that the Company will be able to obtain a new
       long-term lease on favorable terms, if at all. The Company is also
       evaluating potential short-term lease options but there can be no
       assurance that it will be able to obtain a short-term lease on favorable
       terms, if at all.

       The results disclosed in the Statement of Operations for the six months
       ended June 30, 2005 are not necessarily indicative of the results to be
       expected for the full year.

(2)    STOCK BASED COMPENSATION
       ------------------------

       The Company applies the intrinsic value method of accounting for stock
       options and awards granted to employees. The Company accounts for stock
       options and awards to non-employees using the fair value method.

       Under the intrinsic value method, compensation associated with stock
       awards to employees is determined as the difference, if any, between the
       current fair value of the underlying common stock on the date
       compensation is measured and the price an employee must pay to exercise
       the award. The measurement date for employee awards is generally the date
       of grant. Under the fair value method, compensation associated with stock
       awards to non-employees is determined based on the estimated fair value
       of the award itself, measured using either current market data or an
       established option pricing model. The measurement date for non-employee
       awards is generally the date performance of services is complete.

       In December 2004, the Financial Accounting Standards Board ("FASB")
       issued Statement of Financial Accounting Standards No. 123R, Share-Based
       Payment ("SFAS No. 123R"). This Statement is a revision of SFAS No. 123,
       Accounting for Stock-Based Compensation, and supersedes Accounting
       Principles Board Opinion No. 25, Accounting for Stock Issued to
       Employees, and its related implementation guidance. SFAS No. 123R focuses
       primarily on accounting for transactions in which an entity obtains
       employee services in share-based payment transactions. The Statement


                                       7
<PAGE>

       requires entities to recognize stock compensation expense for awards of
       equity instruments to employees based on the grant-date fair value of
       those awards (with limited exceptions). SFAS No. 123R is effective as of
       the beginning of the first fiscal year after December 15, 2005. The
       Company expects to adopt SFAS No. 123R using the Statement's modified
       prospective application method. The Company does not yet have an estimate
       of the effect on its statements of operations of adopting SFAS No. 123.

       The Company has used the intrinsic value method to account for
       stock-based compensation to employees and directors. The following table
       illustrates the effect on net loss and net loss per share assuming the
       Company had applied the fair value method to stock-based employee and
       director compensation:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED JUNE 30,             SIX MONTHS ENDED JUNE 30,
                                                   ---------------------------             -------------------------
                                                     2005               2004                 2005             2004
                                                     ----               ----                 ----             ----

       <S>                                      <C>                <C>                  <C>               <C>
       Net loss as reported                     $  (1,526,346)     $  (2,453,570)       $  (3,367,886)   $  (4,672,098)

       Add: Stock-based employee
           compensation expense included
           in reported net loss                           ---                ---                  ---            7,000

       Deduct: Total stock-based employee
           compensation measured using the
           fair value method                         (314,383)          (197,148)            (613,187)        (444,345)
                                                 ------------       ------------         ------------     ------------

       Pro forma net loss                       $  (1,840,729)     $  (2,651,000)       $  (3,981,073)   $  (5,109,000)
                                                 ============       ============         ============     ============

       Basic and diluted net loss per share
           - as reported                        $       (0.04)     $       (0.06)       $       (0.08)   $       (0.13)
                                                 ============       ============         ============     ============

       Basic and diluted net loss per share
           - pro forma                          $       (0.04)     $       (0.07)       $       (0.10)   $       (0.14)
                                                 ============       ============         ============     ============
</TABLE>

       The fair value of options on their grant date was measured using the
       Black-Scholes option pricing model. Key assumptions used to apply this
       pricing model are as follows:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED JUNE 30,             SIX MONTHS ENDED JUNE 30,
                                                   ---------------------------             -------------------------
                                                     2005               2004                 2005             2004
                                                     ----               ----                 ----             ----

       <S>                                       <C>                <C>                  <C>              <C>
        Risk-free interest rate                  3.05% - 4.25%      3.05% - 4.04%        3.05% - 4.25%    3.05% - 4.04%
        Expected life of option grants             6 years            6 years              6 years          6 years
        Expected volatility of underlying
            stock                                    93%                97%                  93%              97%
        Expected dividend payment rate, as a
            percentage of the stock price on
            the date of grant                        ---                ---                  ---              ---
</TABLE>

       The option pricing model used was designed to value readily tradable
       stock options with relatively short lives. The options granted to
       employees are not tradable and have contractual lives of up to ten years.

                                       8
<PAGE>

(3)    COMMITMENTS AND CONTINGENCIES
       -----------------------------

       EMPLOYMENT AGREEMENTS - The Company has employment and severance
       agreements with certain key employees. The terms of each key employee
       agreement provide that the employee is an employee at-will. These
       agreements provide for aggregate annual salary payments of approximately
       $1,085,250, and provide for severance payments computed with reference to
       the employee's compensation.

       LEASE COMMITMENTS- In accordance with certain capital lease contracts, in
       the event that they are terminated early, approximately $40,000 would be
       owed as early termination payments.

(4)    BASIC AND DILUTED LOSS PER SHARE
       --------------------------------

       The following table sets forth the computation of basic and diluted loss
       per share:
<TABLE>
<CAPTION>

                                                   THREE MONTHS ENDED JUNE 30,             SIX MONTHS ENDED JUNE 30,
                                                 -------------------------------         -----------------------------
                                                     2005               2004                 2005             2004
                                                     ----               ----                 ----             ----
       <S>                                      <C>                <C>                  <C>              <C>
       Numerator for basic and diluted
        loss per share:
           Net loss                             $  (1,526,346)     $  (2,453,570)       $ (3,367,886)    $  (4,672,098)
                                                 ============       ============         ============     ============

       Denominator for basic and diluted
        loss per share:
           Weighted average shares
           outstanding                             41,054,088         38,621,117           39,954,238       36,507,961
                                                 ============       ============         ============     ============

       Net loss per share - basic and
        diluted                                 $       (0.04)     $       (0.06)       $       (0.08)   $       (0.13)
                                                 ============       ============         ============     ============
</TABLE>

       Potential common shares are not included in the per share calculations
       for diluted EPS, because the effect of their inclusion would be
       anti-dilutive. Anti-dilutive potential shares not included in per share
       calculations for the six months ended June 30, 2005 and 2004 were
       8,614,491 and 6,553,611, respectively.

(5)    PATENTS
       -------

       On April 14, 2004, the Company announced that preliminary data from its
       Phase 2 pharmacodynamic study of Topiglan(R), a topical cream for
       erectile dysfunction, demonstrated that Topiglan did not meet the study's
       primary clinical endpoints. The Company has conducted a more complete
       review of the data and has no plans for further clinical studies of
       Topiglan at this time. Accordingly, the Company recorded a reduction of
       $124,853 to the carrying value of certain patent assets related to
       Topiglan in June 2004.

(6)    STOCKHOLDERS' EQUITY
       --------------------

       During the three months ended June 30, 2005, 331,100 options were granted
       and no options were exercised or cancelled under the 2001 Incentive Plan


                                       9
<PAGE>

       (the "Plan"). During the six months ended June 30, 2005, 951,848 options
       were granted and no options were exercised or cancelled under the 2001
       Incentive Plan (the "Plan").

       Under the 1994 Equity Incentive Plan (the "1994 Plan"), no options were
       granted or exercised and 1,820 were cancelled during the three and
       six-month period ended June 30, 2005.

       In October 2000, warrants to purchase common stock were issued in
       connection with a private placement to two institutional investors. The
       warrants issued allow for the purchase of an aggregate of 363,332 shares
       of common stock at an exercise price of $5.90 per share for five years.
       As a result of subsequent financing transactions, the exercise price of
       these warrants has been adjusted to $4.23 in accordance with the terms of
       the warrants. Through June 30, 2005, none of these warrants had been
       exercised. The placement agent for this transaction received a warrant to
       purchase 108,999 shares of common stock at a purchase price of $7.43 for
       five years. As a result of subsequent financing transactions, the
       exercise price of these warrants has been adjusted to $5.21 in accordance
       with the terms of the warrants. As of June 30, 2005, 50,000 of these
       warrants had been exercised. None were exercised in the six months ended
       June 30, 2005.

       In July 2001, the Company sold 1,566,047 shares of its common stock for
       approximately $10,148,000 in gross proceeds ($9,406,291 net of issuance
       costs) in a private placement to institutional investors. The investors
       in the July 2001 common stock transaction received warrants to purchase
       an aggregate of 313,209 shares of common stock at a purchase price of
       $8.995 per share. As a result of subsequent financing transactions, the
       exercise price of these warrants has been adjusted to $6.30 in accordance
       with the terms of the warrants. These warrants expire five years from the
       closing date and are callable by the Company if the closing price of the
       stock is higher than $17.99 for 15 consecutive trading days at any time
       before expiration. As of June 30, 2005, none of these warrants had been
       exercised.

       In September 2003, the Company sold 4,553,680 shares of its common stock
       for approximately $3,246,000 in gross proceeds ($2,971,505 net of
       issuance costs) in a private placement to primarily institutional
       investors. The investors in the September 2003 common stock transaction
       received warrants to purchase an aggregate of 910,736 shares of common
       stock at a purchase price of $1.173 per share for a period of three
       years. As of June 30, 2005, 378,360 of these investor warrants had been
       exercised. The placement agent for this transaction received a warrant to
       purchase 150,000 shares of common stock at a purchase price of $1.173 for
       a period of three years. As of June 30, 2005, none of these placement
       agent warrants had been exercised.

       On March 9, 2004, the Company sold 5,402,000 shares of its common stock
       for $7,292,700 in gross proceeds ($6,681,274 net of issuance costs) in a
       private placement to institutional investors. The investors also received
       warrants to purchase an aggregate of 1,080,400 shares of common stock at
       a purchase price of $2.09 per share expiring five years from the closing
       date. As of June 30, 2005, none of these warrants had been exercised.

                                       10
<PAGE>

       On June 23, 2004, at the Company's Annual Meeting of Stockholders, the
       Company's stockholders approved amendments to the Company's 2001
       Incentive Plan to increase the number of shares of Common Stock
       authorized for issuance under the Incentive Plan by an additional
       4,000,000. The Company's stockholders also approved a Certificate of
       Amendment to the Company's Certificate of Incorporation, as amended, to
       increase the number of authorized shares of capital stock from 60,000,000
       shares of Common Stock and 6,000,000 shares of Preferred Stock to
       100,000,000 shares of Common Stock and 6,000,000 shares of Preferred
       Stock. On August 6, 2004, the Company filed the Certificate of Amendment
       to its Certificate of Incorporation with the Secretary of State of the
       State of Delaware.

       On April 19, 2005, the Company completed a private placement of 2,731,705
       shares of common stock and five-year warrants to purchase 1,365,852
       shares of the Company's common stock for approximately $815,000 in gross
       proceeds. The securities were sold in units, with each unit containing
       one share of common stock and a warrant to purchase one-half of a share
       of common stock. Institutional investors purchased 2,000,000 units at a
       purchase price per unit of $0.25, with the accompanying warrants to
       purchase 1,000,000 shares having an exercise price of $0.35 per share. As
       of June 30, 2005, 250,000 of these warrants had been exercised. Certain
       of the Company's executive officers and directors purchased 731,705 units
       at a per unit purchase price of $0.4305, with the accompanying warrants
       to purchase 365,852 shares having an exercise price of $0.52 per share.
       As of June 30, 2005, none of these warrants had been exercised. The
       Placement Agent for the transaction received a five-year warrant to
       purchase 50,000 shares of the Company's common stock at an exercise price
       of $0.35 per share. As of June 30, 2005, none of these warrants had been
       exercised.

(7)    COMPREHENSIVE LOSS
       ------------------

       Comprehensive loss is equal to the Company's net loss for the six months
       ended June 30, 2005 and 2004.


                                       11
<PAGE>

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

NOTE REGARDING FORWARD LOOKING STATEMENTS

       This report and the documents incorporated in this report by reference
may contain "forward-looking statements" within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE Act"). These
statements may be identified by the use of forward-looking words or phrases such
as "anticipate," "believe," "could," "expect," "intend," "look forward," "may,"
"planned," "potential," "should," "will," and "would." These forward-looking
statements reflect our current expectations and are based upon currently
available data. The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for such forward-looking statements. In order to comply with the
terms of the safe harbor, we note that a variety of factors could cause actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the forward-looking statements. These factors
include, but are not limited to: our history of operating losses and our need
for continued working capital; our need for significant additional product
development efforts and additional financing; technological uncertainty relating
to transdermal drug delivery systems; no assurance of our entering into license
or strategic arrangements; the early stage of development of our proposed
products; the lack of success of our prior development efforts; uncertainties
related to clinical trials of our proposed products; uncertainties relating to
government regulation and regulatory approvals; our dependence on third parties
for the FDA application process; uncertainties regarding market acceptance of
our product candidates; uncertainties regarding the potential health risks of
hormone replacement therapies; our ability to identify and obtain rights to
products or technologies in order to build our portfolio of product candidates;
our dependence on third parties for marketing and distribution; our reliance on
key employees; our limited personnel and our dependence on continued access to
scientific talent; uncertainties relating to competition, patents and
proprietary technology; our dependence on third parties for manufacturing;
uncertainties relating to risks of product liability claims, lack of product
liability insurance, and expense and difficulty of obtaining adequate insurance
coverage; uncertainty of pharmaceutical pricing and related matters; volatility
of our stock price; and our ability to comply with the minimum listing
qualifications of The Nasdaq SmallCap Market. Additional information on these
and other factors which could affect the Company's actual results and experience
are included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 and, in particular, the section entitled "Risk Factors".

       These or other events or circumstances could cause our actual performance
or financial results in future periods to differ materially from those expressed
in the forward-looking statements. We undertake no obligation to make any
revisions to the forward-looking statements contained in this report or the
documents incorporated by reference in this report, or to update the
forward-looking statements to reflect events or circumstances occurring after
the date of this report.

GENERAL
-------

       We are a specialty pharmaceutical company that develops and seeks to
commercialize topically delivered pharmaceutical products by employing SEPA
(Soft Enhancement of Percutaneous Absorption), our patented topical drug
delivery technology. SEPA enhances the efficiency and rate of diffusion of drugs


                                       12
<PAGE>

into and through the skin. SEPA, when properly combined with active
pharmaceutical ingredients, can provide for a variety of convenient and
easy-to-apply formulations, including creams, gels, ointments, lacquers and
solutions for the treatment of a variety of systemic and localized conditions.
We believe that products incorporating SEPA may allow selected drugs to be
administered more effectively and with improved patient compliance compared to
alternative methods of drug administration, such as ingestion and injection.

       Our current cash reserves are only sufficient to fund our operations
through August 2005, and expenses in connection with any eventual termination of
the Company's operations. Our ability to continue operations after August 2005
depends on our ability to arrange additional funding, to consummate a strategic
transaction, to obtain concessions from our employees, including concessions
under management severance agreements, or to make alternative arrangements to
fund our operations. There can be no assurance that we will be able to obtain
additional financing, to consummate a strategic transaction, to obtain any
concessions from employees or management, or to make alternative arrangements to
fund our operations, as there are currently no commitments.

       We are exploring alternatives, such as a merger or acquisition, a sale of
MacroChem, or a sale or licensing of our intellectual property. There are
currently no commitments with respect to any such transaction. We cannot assure
you that we will be able to consummate a transaction on favorable terms, if at
all, that would substantially improve our liquidity and capital resource
position. If we are not successful in arranging additional funding or
consummating an alternative transaction on a timely basis, we will be required
to cease operations.

       In addition, the lease of our office and laboratory space expires on
August 31, 2005. We currently do not have sufficient funds to obtain a new
long-term lease of suitable space. There can be no assurance that we will be
able to obtain a new long-term lease on favorable terms, if at all. We are also
evaluating potential short-term lease options but there can be no assurance that
we will be able to obtain a short-term lease on favorable terms, if at all.

       Since inception, we have been engaged primarily in research and
development. We have not generated any meaningful revenues from operations and
we have sustained significant operating losses. We anticipate that we will
continue to incur significant losses for the foreseeable future. We cannot
guarantee that we will be successful in commercializing our products, or that we
will ever become profitable. As of June 30, 2005, we had an accumulated deficit
of approximately $80.2 million. Our product candidates are in discovery or
developmental stages and must undergo a rigorous regulatory approval process,
which includes costly and extensive pre-clinical and clinical testing, to
demonstrate safety and efficacy before we can market any resulting product. To
date, neither the FDA nor any of its international equivalents has approved any
of our product candidates for marketing.

       Our results of operations can vary significantly from year to year and
quarter to quarter, and depend, among other factors, on:

       o  the progress of clinical trials we conduct;

       o  the degree of our research, marketing and administrative efforts;



                                       13
<PAGE>

       o  the development, when appropriate, of our own sales and marketing
          capabilities;

       o  the signing of licenses and product development agreements;

       o  the timing of revenues recognized pursuant to license agreements; and

       o  the achievement of milestones by licensees.

The timing of our revenues may not match the timing of our associated product
development expenses. To date, our research and development expenses generally
have exceeded our revenues in any particular period or fiscal year.

       RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
       consist of:

       o  salaries and expenses for our research and development personnel;

       o  payments to consultants, investigators, contract research
          organizations and manufacturers in connection with our pre-clinical
          and clinical trials;

       o  costs associated with conducting our clinical trials;

       o  costs of developing and obtaining regulatory approvals; and

       o  allocable costs, including occupancy and depreciation.

       Because a significant portion of our research and development expenses
(including employee payroll and related benefits, laboratory supplies, travel,
dues and subscriptions, temporary help costs, consulting costs and allocable
costs such as occupancy and depreciation) benefit multiple projects or our drug
delivery technologies in general, we do not track these expenses by project. For
the three months ended June 30, 2005, we spent $739,008 on research and
development, including $111,739 and $22,965 in costs associated with clinical
trials for Opterone and EcoNail, respectively, and $604,304 in costs not
specifically tracked to a particular project. For the three months ended June
30, 2004, we spent $1,185,313 on research and development, including $38,145,
$467,385, and $126,659 in costs associated with clinical trials related to
Topiglan, Opterone, and EcoNail, respectively, and $553,124 in costs not
specifically tracked to a particular project. For the six months ended June 30,
2005, we spent $1,769,068 on research and development, including $327,434 and
$195,434 in costs associated with clinical trials for Opterone and EcoNail,
respectively, and $1,246,200 in costs not specifically tracked to a particular
project. For the six months ended June 30, 2004, we spent $2,506,259 on research
and development, including $386,343, $708,363, and $228,974 in costs associated
with clinical trials related to Topiglan, Opterone, and EcoNail, respectively,
and $1,182,579 in costs not specifically tracked to a particular project.

       Each of our research and development programs is subject to risks and
uncertainties, including the requirement to seek regulatory approval, that are
outside of our control. Moreover, the product candidates identified in these


                                       14
<PAGE>

research and development programs, which currently are in developmental stages,
must overcome significant technological, manufacturing and marketing challenges
before they can be successfully commercialized. As a result of these risks and
uncertainties, we are unable to predict with any certainty the period in which
material net cash inflows from these projects could be expected to commence or
the completion date of these programs. In addition, these risks and
uncertainties also prevent us from estimating with any certainty the specific
timing and future costs of our clinical development programs, although
historical trends at similarly situated companies indicate that research and
development expenses tend to increase in later stages of clinical development.
Our failure to obtain requisite governmental approvals timely or at all will
delay or preclude us from licensing or marketing our products or limit the
commercial use of our products, which could adversely affect our business,
financial condition and results of operations.

       MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and
administrative expenses consist primarily of salaries and other related costs
for personnel, marketing and promotion, professional fees and facilities costs.

CRITICAL ACCOUNTING POLICIES
----------------------------

       Our discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. Note 1 to our financial statements included within our
Form 10-K for the year ended December 31, 2004 includes a summary of the
significant accounting policies and methods we use in the preparation of our
financial statements. The following is a brief discussion of the more
significant accounting policies and methods that affect the judgments and
estimates used in the preparation of our financial statements.

       BASIS OF ACCOUNTING. Pending the outcome of management's review of
potential strategic alternatives and any definitive decision to cease operations
and liquidate, the Company will continue to prepare its financial statements on
the assumption that it will continue as a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. If management were to decide to cease operations or liquidate, the
financial statements would be prepared and presented on the liquidation basis of
accounting, whereby assets are valued at their estimated net realizable values
and liabilities are stated at their estimated settlement amounts. There can be
no assurance that, in the event of a liquidation, there will be any assets
remaining to be distributed to shareholders.

       RESEARCH AND DEVELOPMENT. Generally, we recognize research and
development funding as revenue at the time the research and development
activities are performed under the terms of the related agreements, when the
counterparty is obligated to pay, and when no future performance obligation
exists. We make estimates of the status of performance with respect to research
and development contracts. In the past, we have found such estimates to be
sufficiently accurate for revenue recognition purposes. We bill research and
development revenue on a cost reimbursement basis, which includes direct costs
we incur in connection with research activities and an allocation of certain
other costs we incur.

                                       15
<PAGE>

       PATENT ASSETS. We defer costs and expenses incurred in connection with
pending patent applications. We amortize costs related to successful patent
applications over the estimated useful lives of the patents using the
straight-line method. We charge accumulated patent costs and deferred patent
application costs related to patents that are considered to have limited future
value to operations. Estimates we use to determine the future value of deferred
patent costs include analysis of potential market size, time and cost to
complete clinical trials, anticipated interest in our products and potential
value for licensing or partnering opportunities. We recognize revenues derived
or expected to be derived from the sale, assignment, transfer, or licensing of
patents or other intellectual property over various periods based upon the terms
of the relevant agreement.

RESULTS OF OPERATIONS
---------------------

       We had no revenues for the three-month and six-month periods ended June
30, 2005 and June 30, 2004.

       During the three-month period ended June 30, 2005, management has delayed
the start of new clinical trials and reduced certain general and administrative
expenditures in an effort to minimize cash used in operations.

       For the three-month period ended June 30, 2005, research and development
expenses decreased by $446,306, or 38%, to $739,008 from $1,185,313 in the
three-month period ended June 30, 2004. The decrease is primarily attributable
to a decrease of $423,283 spent on clinical trials and other miscellaneous
savings of approximately $22,023 in the three-month period ended June 30, 2005
compared with the same three-month period of 2004. For the six-month period
ended June 30, 2005, research and development expenses decreased by $737,191, or
29%, to $1,769,068 from $2,506,259 in the six-month period ended June 30, 2004.
The decrease is primarily attributable to a decrease of $749,506 spent on
clinical trials in the six-month period ended June 30, 2005 compared with the
same six-month period of 2004.

       For the three-month period ended June 30, 2005, marketing, general and
administrative expenses decreased by $491,608, or 38%, to $809,280 from
$1,300,888 in the three-month period ended June 30, 2004. The decrease is
primarily attributable to an decrease of $110,298 in consulting fees relating to
investor relations and business development, a reduction of insurance premiums
of $26,207, a reduction in salaries of $174,800 and a reduction of other
miscellaneous expenses of $119,400 during the three months ended June 30, 2005
compared with the same three-month period of 2004. For the six-month period
ended June 30, 2005, marketing, general and administrative expenses decreased by
$575,429, or 26%, to $1,644,278 from $2,219,707 in the six-month period ended
June 30, 2004. The decrease is primarily attributable to an decrease of $152,200
in consulting fees relating to investor relations and business development, a
decrease in travel expenses of $27,398, a reduction of insurance premiums of
$45,296, a reduction in salaries of $206,979 and a reduction of other
miscellaneous expenses of $91,903 during the six months ended June 30, 2005
compared with the same six-month period of 2004.

       Other income decreased by $10,689, or 33%, to $21,942 in the three-month
period ended June 30, 2005 from $32,631 in the three-month period ended June 30,
2004. The decrease is due to lower amounts of cash available for investing
purposes. For the six-month period ended on June 30, 2005, other income
decreased by $8,408, or 16%, to $45,460 from $53,868 in the six-month period


                                       16
<PAGE>

ended June 30, 2004. The decrease is due to lower amounts of cash available for
investing purposes.

       For the reasons described above, net loss decreased by $927,224, or 38%,
to $1,526,346 in the three-month period ended June 30, 2005 from $2,453,570 in
the three-month period ended June 30, 2004. For the six-month period net loss
decreased by $1,304,212, or 28%, to $3,367,886 in the six-month period ended
June 30, 2005 from $4,672,098 in the six-month period ended June 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

       GENERAL. We believe that our cash, cash equivalents and short-term
investments of $3,330,638 at June 30, 2005 are only sufficient to fund our
operations through August 2005, and expenses in connection with any eventual
termination of the Company's operations. Our ability to continue operations
after August 2005 depends on our ability to arrange additional funding, to
consummate a strategic transaction, to obtain concessions from our employees,
including concessions under management severance agreements, or to make
alternative arrangements to fund our operations. There can be no assurance that
we will be able to obtain additional financing, to consummate a strategic
transaction, to obtain any concessions from employees or management, or to make
alternative arrangements to fund our operations, as there are currently no
commitments.

       We are exploring alternatives, such as a merger or acquisition, a sale of
MacroChem or a sale or licensing of our intellectual property. There are
currently no commitments with respect to any such transaction. We cannot assure
you that we will be able to consummate a transaction on favorable terms, if at
all, that would substantially improve our liquidity and capital resource
position. If we are not successful in raising additional capital or consummating
an alternative transaction on a timely basis, we will be required to cease
operations.

       Pending the outcome of management's review of potential alternatives and
any definitive decision to cease operations and liquidate, we will continue to
prepare our financial statements on the assumption that we will continue as a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. Consequently, the financial
statements do not include any adjustments to reflect possible future effects of
the recoverability and classification of assets or the amounts and
classification of liabilities that may result from any decisions made with
respect to management's assessment of alternatives. If management were to decide
to cease operations and liquidate, we would need to prepare and present
financial statements on the liquidation basis of accounting, whereby assets are
valued at their estimated net realizable values and liabilities are stated at
their estimated settlement amounts. There can be no assurance that, in the event
of a liquidation, there will be any assets remaining to be distributed to
shareholders.

       FUNDING. Since inception, our primary source of funding for our
operations has been the private and public sale of our securities, and, to a
lesser extent, the licensing of our proprietary technology and products,
research collaborations, feasibility studies, government grants and the limited
sales of products and test materials. During the first six months of 2005, we


                                       17
<PAGE>

received net proceeds of $87,500 from the exercise of warrants and gross
proceeds of $815,000 (before issuance costs) as a result of the sale of our
common stock in a private placement transaction. During the first six months of
2004, we received net proceeds from the exercise of warrants of $444,000 and
proceeds of $6,681,000 (net of issuance costs) as a result of the sale of our
common stock in a private placement transaction.

       At June 30, 2005, working capital was approximately $3.1 million,
compared to $5.6 million at December 31, 2004. The decrease in our working
capital reflects the use of funds in operations. On April 19, 2005, the Company
sold 2,731,705 shares of its common stock for gross proceeds of $815,000 in a
private placement to institutional investors and to certain executive officers
and directors of the Company. The institutional investors also received five
year warrants to purchase an aggregate of 1,000,000 shares of common stock at a
purchase price of $0.35 per share and the participating executive officers and
directors of the Company received warrants to purchase an aggregate of 365,852
shares of common stock at a purchase price of $0.52. Until such time as we
obtain agreements with third-party licensees or partners to provide funding for
our anticipated business activities, or otherwise generate revenue from the
commercialization of our products, our working capital will be utilized to fund
our operating activities.

       EXPENDITURES. Pursuant to a plan approved by our Board of Directors in
1998, we are authorized to repurchase 1,000,000 shares of our common stock to be
held as treasury shares for future use. During the six-month period ended June
30, 2005, we did not repurchase any shares of common stock. At June 30, 2005,
repurchased shares remain available for future use and 679,587 shares remain
available for repurchase under the plan.

       Capital and patent expenditures were $14,526 and $50,121 for the first
three months and six months, respectively, of 2005.

       On July 10, 2003, the Board of Directors approved retention payments for
certain key employees, including certain executive officers, in order to enhance
retention of those employees. Payments of approximately $80,000 were paid on
January 8, 2004 and payments of approximately $153,000 were paid on July 2,
2004.

       NO SPECULATIVE TRADING; NO OFF-BALANCE SHEET TRANSACTIONS; INFLATION. We
do not enter into financial instrument transactions for trading or speculative
purposes. We do not intend to establish any special purpose entity and do not
have any material off balance sheet financing transactions. We do not believe
that inflation has or will have any significant effect on the results of our
operations.

       CONTRACTUAL OBLIGATIONS. The lease of our office and laboratory space
expires on August 31, 2005. We currently do not have sufficient funds to obtain
a new long-term lease of suitable space. There can be no assurance that we will
be able to obtain a new long-term lease on favorable terms, if at all. We are
also evaluating potential short-term lease options but there can be no assurance
that we will be able to obtain a short-term lease on favorable terms, if at all.

                                       18
<PAGE>

       The following summarizes our contractual obligations at December 31,
2004, and the effect that such obligations are expected to have on future cash
flows and liquidity:
<TABLE>
<CAPTION>
                                                                            DUE IN
                                                            ---------------------------------------------------
                                                            1 YEAR OR                                5 YEARS OR
Obligations:                                TOTAL AMOUNT      LESS        1-3 YEARS     3-5 YEARS       MORE
                                            ------------    ---------     ---------     ---------    ----------
<S>                                         <C>             <C>           <C>           <C>          <C>
Lease commitment (through August 2005)      $    313,600    $  313,600    $      --     $      --    $       --
Employment agreements (per year).......        1,085,200     1,085,200           --            --            --
                                            ------------    ----------    ---------     ---------    ----------
Total contractual cash obligations...       $  1,398,800    $1,398,800    $      --     $      --    $       --
                                            ============    ==========    =========     =========    ==========
</TABLE>

       NASDAQ LISTING. On October 18, 2004, we received written notice from
Nasdaq that the bid price of our common stock had closed below $1.00 for the
prior 30 consecutive business days. In accordance with Marketplace Rule
4310(c)(8), we had 180 calendar days, or until April 18, 2005, to regain
compliance with this requirement. In order to regain compliance, we had to
demonstrate a closing bid price for our common stock of $1.00 per share or more
for a minimum of 10 consecutive business days. We were unable to regain
compliance with the $1.00 minimum bid price requirement by April 18, 2005, but
Nasdaq granted us an additional 180 calendar days, or until October 13, 2005, to
regain compliance with the Nasdaq SmallCap Market's $1.00 minimum bid price
requirement in accordance with Marketplace Rule 4310(c)(8)(D). If we cannot
regain compliance with the $1.00 minimum bid price requirement by the end of
this second 180 day compliance period, our common stock may be delisted from
trading on The Nasdaq SmallCap Market.

       We cannot give any assurance that we will be able to regain compliance
with Nasdaq's present listing standards, including the minimum bid price of
$1.00. If our common stock were delisted from The Nasdaq SmallCap Market, it may
become eligible immediately thereafter for quotation on the Over-The-Counter
Market on the NASD Electronic Bulletin Board or in the "pink sheets" maintained
by the National Quotation Bureau, Inc., which are generally considered to be
less efficient systems than markets such as Nasdaq or other national exchanges.
Further, for companies whose securities are traded on the Over-The-Counter
Market, it is more difficult to obtain accurate quotations, to obtain coverage
for significant news events because major wire services, including the Dow Jones
News Service, generally do not publish press releases about these companies, and
to obtain needed capital.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

       As of June 30, 2005, we are exposed to market risks which relate
primarily to changes in U.S. interest rates. Our cash equivalents and short-term
investments are subject to interest rate risk and will decline in value if
interest rates increase. Due to the short duration of these financial
instruments, generally one year or less, changes in interest rates would not
have a material effect upon our financial position. A hypothetical 10% change in
interest rates would not have a material effect on our Statement of Operations
or Cash Flows for the six months ended June 30, 2005.

                                       19
<PAGE>

ITEM 4.   CONTROL AND PROCEDURES

       As of the end of the period covered by this report, we carried out a
review, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined in the SEC
rules promulgated under the Securities Exchange Act of 1934, as amended), which
are designed to ensure that information required to be disclosed in our
Securities and Exchange Commission reports is properly and timely recorded,
processed, summarized and reported. Based upon that review, our Chief Executive
Officer and Chief Financial Officer concluded that these controls and procedures
are operating in an effective manner as of June 30, 2005.

       There were no changes in our internal control over financial reporting
that occurred during the quarter ended June 30, 2005 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.


                                       20
<PAGE>

PART II - OTHER INFORMATION

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

The Company's Annual Meeting of Stockholders was held on June 14, 2005. At the
meeting (i) all five director nominees were elected, (ii) the appointment of
Deloitte & Touche LLP as the Company's independent auditors was ratified, and
(iii) amendments to the Company's certificate of incorporation to effect a
reverse split of the Company's Common Stock, pursuant to which any whole number
of outstanding shares between, and including, three and seven would be combined
into one share were approved and the Company's Board of Directors was
authorized, in its discretion, to select and file one such amendment.

       (i)   The following directors were elected for one year terms by the
             votes indicated:

             John L. Zabriskie, 32,978,796 for, 1,047,797 against or withheld;
             Peter G. Martin, 32,890,144 for, 1,136,449 against or withheld;
             Michael A. Davis, 32,811,835 for, 1,214,758 against or withheld;
             Robert J. DeLuccia, 32,941,226 for, 1,085,367 against or withheld;
             and Paul S. Echenberg, 32,937,063 for, 1,089,530 against or
             withheld

       (ii)  The appointment of Deloitte & Touche LLP was ratified by a vote of
             33,657,797 for, 250,941 against and 117,855 abstaining.

       (iii) Amendments to the Company's certificate of incorporation to effect
             a reverse split of the Company's Common Stock were approved and the
             Company's Board of Directors was authorized, in its discretion, to
             select and file one such amendment by a vote of 31,668,208 for,
             2,223,296 against and 135,089 abstaining.

             As of June 30, 2005, the Company's Board of Directors had not
             selected or filed any of the amendments to effect a reverse split.


                                       21
<PAGE>

ITEM 6.    EXHIBITS.

The following is a list of exhibits to this Quarterly Report on Form 10-Q:

       3.1 Certificate of Incorporation as amended, incorporated by reference to
       Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
       quarter ended June 30, 2004 (File No. 0-13634).

       3.2 Amended and Restated By-Laws of the Company, incorporated by
       reference to Exhibit 5 to the Company's Current Report on Form 8-K dated
       August 13, 1999 (File No. 0-13634).

       10.1 Securities Purchase Agreement, dated as of April 19, 2005, by and
       between the Company and the institutional investors listed on the
       signature pages thereto, incorporated by reference to Exhibit 10.1 to the
       Company's Current Report on Form 8-K dated April 22, 2005 (File No.
       0-13634).

       10.2 Securities Purchase Agreement, dated as of April 19, 2005, by and
       between the Company and the directors and officers of the Company listed
       on the signature pages thereto, incorporated by reference to Exhibit 10.2
       to the Company's Current Report on Form 8-K dated April 22, 2005 (File
       No. 0-13634).

       10.3 Registration Rights Agreement, dated as of April 19, 2005 by and
       among the Company and the purchasers listed on the signature page
       thereto, incorporated by reference to Exhibit 10.3 to the Company's
       Current Report on Form 8-K dated April 22, 2005 (File No. 0-13634).

       10.4 Form of Common Stock Purchase Warrant, incorporated by reference to
       Exhibit 10.4 to the Company's Current Report on Form 8-K dated April 22,
       2005 (File No. 0-13634).

       31.1 Certification of Principal Executive Officer Pursuant to Section 302
       of the Sarbanes-Oxley Act of 2002.

       31.2 Certification of Principal Financial Officer Pursuant to Section 302
       of the Sarbanes-Oxley Act of 2002.

       32.1 Certification of Principal Executive Officer Pursuant to Section
       1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
       Section 906 of the Sarbanes-Oxley Act of 2002.

       32.2 Certification of Principal Financial Officer Pursuant to Section
       1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
       Section 906 of the Sarbanes-Oxley Act of 2002.


                                       22
<PAGE>

                                   SIGNATURES


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


                                          MACROCHEM CORPORATION
                                          (Registrant)



August 15, 2005                           /S/  ROBERT J. DELUCCIA
                                          --------------------------------------
                                          Robert J. DeLuccia
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)

                                          /S/  BERNARD R. PATRIACCA
                                          --------------------------------------
                                          Bernard R. Patriacca
                                          Vice President, Chief Financial
                                            Officer and Treasurer
                                          (Principal Financial Officer)


                                       23
<PAGE>

                                  EXHIBIT INDEX


The following is a list of exhibits to this Quarterly Report on Form 10-Q:

       3.1 Certificate of Incorporation as amended, incorporated by reference to
       Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
       quarter ended June 30, 2004 (File No. 0-13634).

       3.2 Amended and Restated By-Laws of the Company, incorporated by
       reference to Exhibit 5 to the Company's Current Report on Form 8-K dated
       August 13, 1999 (File No. 0-13634).

       10.1 Securities Purchase Agreement, dated as of April 19, 2005, by and
       between the Company and the institutional investors listed on the
       signature pages thereto, incorporated by reference to Exhibit 10.1 to the
       Company's Current Report on Form 8-K dated April 22, 2005 (File No.
       0-13634).

       10.2 Securities Purchase Agreement, dated as of April 19, 2005, by and
       between the Company and the directors and officers of the Company listed
       on the signature pages thereto, incorporated by reference to Exhibit 10.2
       to the Company's Current Report on Form 8-K dated April 22, 2005 (File
       No. 0-13634).

       10.3 Registration Rights Agreement, dated as of April 19, 2005 by and
       among the Company and the purchasers listed on the signature page
       thereto, incorporated by reference to Exhibit 10.3 to the Company's
       Current Report on Form 8-K dated April 22, 2005 (File No. 0-13634).

       10.4 Form of Common Stock Purchase Warrant, incorporated by reference to
       Exhibit 10.4 to the Company's Current Report on Form 8-K dated April 22,
       2005 (File No. 0-13634).

       31.1 Certification of Principal Executive Officer Pursuant to Section 302
       of the Sarbanes-Oxley Act of 2002.

       31.2 Certification of Principal Financial Officer Pursuant to Section 302
       of the Sarbanes-Oxley Act of 2002.

       32.1 Certification of Principal Executive Officer Pursuant to Section
       1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
       Section 906 of the Sarbanes-Oxley Act of 2002.

       32.2 Certification of Principal Financial Officer Pursuant to Section
       1350, Chapter 63 of Title 18, United States Code, as Adopted Pursuant to
       Section 906 of the Sarbanes-Oxley Act of 2002.

                                       24