SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                (AMENDMENT NO. 1)



(Mark One)
[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended March 31, 2006
                                       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.)

      40 WASHINGTON STREET, SUITE 220, WELLESLEY HILLS, MASSACHUSETTS 02481
      ---------------------------------------------------------------------
               (Address of principal executive offices, Zip Code)

                                  781-489-7310
              (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 a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer____   Accelerated filer____   Non-accelerated filer__X__

     Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange 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 APRIL 11, 2007:
-----------------------------                     ------------------------------
Common Stock, $.01 par value                                3,187,792



                                       1
<PAGE>

                                EXPLANATORY NOTE

We are filing this Amendment No.1 to our Quarterly Report on Form 10-Q
("Amendment No.1") for the quarter ended March 31, 2006. The Quarterly Report on
Form 10-Q was originally filed on May 15, 2006 (the "Original Filing").
Amendment No. 1 is being filed in order to correct the classification of the
warrants issued to the placement agent for services rendered in connection with
our Series C Convertible Preferred Stock Offering in December 2005 and January
2006 (See Note 5 to the financial statements included in this Amendment No. 1).
The fair value of the placement agent warrants was originally accounted for as
an offset to the proceeds from the Series C Convertible Preferred Stock offering
and a credit to additional paid in capital. Upon further review of the terms of
the warrants, which include a put feature enabling the holder, at its option, to
require the Company to repurchase the warrants for cash in the event of a change
in control, the Company determined that the warrants meet the definition of a
derivative instrument as defined in SFAS 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. As such, the fair value of the warrants
should have been recorded in warrant liability pursuant to the guidance in
paragraphs 12 and 27 of EITF 00-19, ACCOUNTING FOR DERIVATIVE FINANCIAL
INSTRUMENTS INDEXED TO, AND POTENTIALLY SETTLED IN, A COMPANY'S OWN STOCK, and
adjusted to their current fair value at each reporting period. The Balance
Sheet, Income Statement, Statement of Cash flows and related footnotes have been
adjusted accordingly for the correction of the error. The effect has been an
increase in the warrant liability of $755,833, a decrease in additional paid in
capital of $505,337 and in increase to net loss of $250,496 for the quarter
ended March 31, 2006. In addition, the Management's Discussion and Analysis of
Financial Condition and Results of Operations has been amended to reflect the
adjustment.

The year end December 31, 2005 balance sheet has been restated to reflect the
change in accounting for the Series C Cumulative Preferred Stock Offering
described above. As such, the Balance Sheet has been adjusted to reflect a
reclass of $174,922 from additional paid in capital to warrant liability. There
was no impact on the Statement of Operations or the Statement of Cash Flows for
the year ended December 31, 2005.

Except as described above, no other information in the Original Filing is
amended hereby. Amendment No. 1 does not reflect events occurring after the
filing of the Original Filing or modify or update those disclosures affected by
subsequent events. Accordingly, Amendment No. 1 should be read in conjunction
with our other filings made with the SEC subsequent to the filing of the
Original Filing.




                                       2
<PAGE>



                             MACROCHEM CORPORATION

                              INDEX TO FORM 10-Q/A
                             ----------------------

                                                                     PAGE NUMBER
PART I     FINANCIAL INFORMATION

Item 1     Financial Statements

              Condensed Balance Sheets
              March 31, 2006 (Unaudited) and December 31, 2005            4

              Condensed Statements of Operations for the
              Three Months Ended March 31, 2006
              and 2005 (Unaudited)                                        5

              Condensed Statements of Cash Flows for the
              Three Months Ended March 31, 2006
              and 2005 (Unaudited)                                        6

              Notes to Unaudited Condensed Financial
              Statements                                                 8-18

Item 2     Management's Discussion and Analysis of                      19-25
           Financial Condition and Results of Operations

PART II    OTHER INFORMATION

Item 6     Exhibits                                                     26-27

SIGNATURES                                                                28

EXHIBIT INDEX                                                           29-30


                                       3
<PAGE>




ITEM 1.  FINANCIAL STATEMENTS

                              MACROCHEM CORPORATION
                            CONDENSED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                      (UNAUDITED) MARCH 31, 2006              DECEMBER 31, 2005
                                                            ------------------------------------------------  -----------------
                                                             AS REPORTED       ADJUSTMENT      RESTATED            RESTATED
                                                            -------------    -------------   -------------       ------------
                                                                                                                 (See Note 1)
<S>                                                         <C>              <C>             <C>                 <C>
ASSETS
Current assets:
     Cash and cash equivalents                              $     767,500                    $     767,500       $  3,023,436
     Short-term investments                                     6,529,547                        6,529,547                ---
     Prepaid expenses and other current assets                    393,481                          393,481            106,761
                                                            -------------    -------------   -------------       ------------
        Total current assets                                    7,690,528                        7,690,528          3,130,197

Property and equipment, net                                        60,729                           60,729             72,203

Patents, net                                                      580,936                          580,936            579,053
                                                            -------------    -------------   -------------       ------------

 Total assets                                               $   8,332,193                    $   8,332,193       $  3,781,453
                                                            =============    =============   =============       ============

LIABILITIES
Current liabilities:
     Accounts payable                                       $     170,888                          170,888       $    125,478
      Accrued expenses and other liabilities                      271,387                          271,387            249,552
                                                            -------------    -------------   -------------       ------------
        Total current liabilities                                 442,275                          442,275            375,030

Warrants liability (Note 5)                                     7,044,873          755,833       7,800,706          1,795,700
                                                            -------------    -------------   -------------       ------------
Total liabilities                                               7,487,148          755,833       8,242,981          2,170,730

Commitments and contingencies (Note 3)

Preferred stock, $.01 par value, liquidation value of
     $8,255,000 and $2,500,000; 6,000,000 shares
     authorized, 825.5 and 250 shares Series C
     Convertible issued and outstanding at March 31, 2006
     and December 31, 2005, respectively
     (Note 5)                                                     342,138                          342,138            330,243
                                                            -------------    -------------   -------------       ------------
                                                                  342,138                          342,138            330.243

STOCKHOLDERS' EQUITY

Common stock, $.01 par value, 100,000,000 shares
      authorized;  1,080,023 and 997,438 shares issued at
      March 31, 2006 and December 31, 2005, respectively           10,800                           10,800              9,974
Additional paid-in capital                                     85,016,725        (505,337)      84,511,388         83,914,608
Accumulated deficit                                          (84,465,508)        (250,496)    (84,716,004)       (82,584,992)

Less treasury stock, at cost, 529 shares at March 31,
      2006 and December 31, 2005                                 (59,110)                         (59,110)           (59,110)
                                                            -------------    -------------   -------------       ------------
Total stockholders' equity                                        502,907        (755,833)       (252,926)          1,280,480
                                                            -------------    -------------   -------------       ------------
Total liabilities and stockholders' equity                  $   8,332,193    $           0   $   8,332,193       $  3,781,453
                                                            =============    =============   =============       ============
</TABLE>


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


                                       4
<PAGE>
                              MACROCHEM CORPORATION
                       CONDENSED STATEMENTS OF OPERATIONS
               For the three months ended March 31, 2006 and 2005
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                           FOR THE THREE MONTHS ENDED MARCH 31,
                                                            -----------------------------------------------------------------
                                                                                 2006                                2005
                                                            ----------------------------------------------       ------------
                                                             AS REPORTED      ADJUSTMENT       RESTATED
<S>                                                         <C>              <C>             <C>                 <C>
  OPERATING EXPENSES:
       Research and development                             $      65,982                    $      65,982       $  1,030,061
       Marketing, general and administrative                    1,141,127                        1,141,127            834,998
                                                            -------------    -------------   -------------       ------------
           TOTAL OPERATING EXPENSES                             1,207,109                        1,207,109          1,865,059
                                                            -------------    -------------   -------------       ------------
  LOSS FROM OPERATIONS                                        (1,207,109)                      (1,207,109)        (1,865,059)

  OTHER INCOME:
       Interest income                                             45,742                           45,742             23,519
       Loss on change in value of warrant liability             (579,497)        (250,496)       (829,993)                ---
                                                            -------------    -------------   -------------       ------------
           TOTAL OTHER INCOME AND EXPENSE                       (533,755)        (250,496)       (784,251)             23,519
                                                            -------------    -------------   -------------       ------------
  NET LOSS                                                  $ (1,740,864)    $   (250,496)   $ (1,991,360)       $(1,841,540)
                                                            =============    =============   =============       ============
  BENEFICIAL CONVERSION FEATURE (NOTE 5)                         (11,895)                         (11,895)                ---

  DIVIDEND ON SERIES C CUMULATIVE PREFERRED STOCK

                                                                (139,652)    -------------       (139,652)                ---
                                                            -------------    -------------   -------------       ------------
  NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS              $ (1,892,411)    $   (250,496)   $ (2,142,907)       $(1,841,540)
                                                            =============    =============   =============       ============
  BASIC AND DILUTED NET LOSS PER SHARE                      $      (1.75)    $       (.23)   $      (1.98)       $     (1.99)
                                                            =============    =============   =============       ============
  SHARES USED TO COMPUTE BASIC AND DILUTED NET LOSS PER
       SHARE
                                                                1,079,494        1,079,494       1,079,494            924,813
                                                            =============    =============   =============       ============
</TABLE>

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




                                       5
<PAGE>
                              MACROCHEM CORPORATION
                       CONDENSED STATEMENTS OF CASH FLOWS
               For the three months ended March 31, 2006 and 2005
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                           FOR THE THREE MONTHS ENDED MARCH 31,
                                                            -----------------------------------------------------------------
                                                                                 2006                                2005
                                                            ----------------------------------------------       ------------
                                                             AS REPORTED       ADJUSTMENT      RESTATED
<S>                                                         <C>              <C>             <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                               $ (1,740,864)    $   (250,496)   $ (1,991,360)       $(1,841,540)
     Adjustments to reconcile net loss to net cash used by
       operating activities:
         Depreciation and amortization                             24,504                           24,504             39,496
         Stock-based compensation                                 457,954                          457,954                ---
         401(k) contributions in company common stock                 ---                              ---             15,610
         Deferred rent                                                ---                              ---            (5,509)
         Loss on change in value of warrant liability             579,497          250,496         829,993                ---
     Change in assets and liabilities:
         Prepaid expenses and other current assets              (286,720)                        (286,720)          (151,271)
         Accounts payable and accrued expenses                     67,245                           67,245            102,748
Net cash used in operating activities                           (898,384)                0       (898,384)        (1,840,466)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Sales of short-term investments                                  ---                              ---                ---
     Purchases of short-term investments                      (6,529,547)                      (6,529,547)            (6,384)
     Expenditures for property and equipment                        (436)                            (436)           (14,526)
     Additions to patents                                        (14,477)                         (14,477)                ---
Net cash provided by investing activities                     (6,544,460)                      (6,544,460)           (20,910)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from issuance of Series C Cumulative
     Convertible Preferred Stock and Warrants                   5,186,908                        5,186,908                ---
Net cash provided by financing activities                       5,186,908                        5,186,908                ---

Net change in cash and cash equivalents                       (2,255,936)                      (2,255,936)        (1,861,376)
Cash and cash equivalents at beginning of period                3,023,436                        3,023,436          4,888,868

Cash and cash equivalents at end of period                  $     767,500    $           0   $     767,500       $  3,027,492
</TABLE>


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


                                                                     (Continued)

                                       6
<PAGE>




                              MACROCHEM CORPORATION
                      STATEMENTS OF CASH FLOWS (CONTINUED)


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

The Company did not pay any cash for interest expense or income taxes during the
three-month periods ended March 31, 2006 and 2005.

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






                                       7
<PAGE>



                              MACROCHEM CORPORATION
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

     All references to share amounts, share prices and per share data in the
Unaudited Condensed Financial Statements and these accompanying Notes reflect
both the 1-for-7 reverse stock split effected on December 30, 2005 and the
1-for-6 reverse stock split effected on February 9, 2006. Accordingly, where
appropriate, share amounts, share prices and per share data have been adjusted
to give retroactive effect to the reverse splits.

(1)      BASIS OF PRESENTATION AND OPERATIONS

         We are filing this Amendment No. 1 in order to correct the
         classification of the warrants issued to the placement agent for
         services rendered in connection with our Series C Convertible Preferred
         Stock Offering in December 2005 and January 2006 (See Note 5 to the
         financial statements included in this Amendment No. 1). The fair value
         of the placement agent warrants was originally accounted for as an
         offset to the proceeds from the Series C Convertible Preferred Stock
         offering and a credit to additional paid in capital. Upon further
         review of the terms of the warrants, which include a put feature
         enabling the holder, at its option, to require the Company to
         repurchase the warrants for cash in the event of a change in control,
         the Company determined that the warrants meet the definition of a
         derivative instrument as defined in SFAS 133, ACCOUNTING FOR DERIVATIVE
         INSTRUMENTS AND HEDGING ACTIVITIES. As such, the fair value of the
         warrants should have been recorded in warrant liability pursuant to the
         guidance in paragraphs 12 and 27 of EITF 00-19, ACCOUNTING FOR
         DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND POTENTIALLY SETTLED
         IN, A COMPANY'S OWN STOCK, and adjusted to their current fair value at
         each reporting period. The Balance Sheet, Income Statement, Statement
         of Cash flows and related footnotes have been adjusted accordingly for
         the correction of the error. The effect has been an increase in the
         warrant liability of $755,833, a decrease in additional paid in capital
         of $505,337 and in increase to net loss of $250,496 for the quarter
         ended March 31, 2006. In addition, the Management's Discussion and
         Analysis of Financial Condition and Results of Operations has been
         amended to reflect the adjustment.

         The year end December 31, 2005 balance sheet has been restated to
         reflect the change in accounting for the Series C Cumulative Preferred
         Stock Offering described above. As such, the Balance Sheet has been
         adjusted to reflect a reclass of $174,922 from additional paid in
         capital to warrant liability. There was no impact on the Statement of
         Operations or the Statement of Cash Flows for the year ended December
         31, 2005.

         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


                                       8
<PAGE>

         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, 2005.

         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 will continue for the foreseeable future. At
         March 31, 2006, the Company's accumulated deficit was $84,716,004. At
         March 31, 2006, the Company believes that its existing cash and cash
         equivalents are sufficient to fund operations under the Company's
         operating plan for at least the next twelve months. The Company's
         ability to continue operations after its current capital resources are
         exhausted depends on its ability to obtain additional financing and
         achieve profitable operations, as to which no assurances can be given.
         The Company's cash requirements may vary materially from those now
         planned because of changes in the focus and direction of its research
         and development programs, competitive and technical advances, patent
         developments or other developments.

         The Company organizes itself as one segment reporting to the chief
         executive officer. Products and services consist primarily of research
         and development activities in the pharmaceutical industry.

         The results disclosed in the Statement of Operations for the three
         months ended March 31, 2006 are not necessarily indicative of the
         results to be expected for the full year.

(2)      STOCK BASED COMPENSATION

         STOCK INCENTIVE PLANS

         The Company has granted options to purchase the Company's common stock
         to employees and directors under various stock incentive plans. Under
         the plans, employees and non-employee directors are eligible to receive
         awards of various forms of equity-based incentive compensation,
         including stock options, restricted stock, and performance awards,
         among others. The plans are administered by the Board of Directors or
         the Compensation Committee of the Board of Directors, which determine
         the terms of the awards granted. Stock options are generally granted
         with an exercise price equal to the market value of a share of common
         stock on the date of grant, have a term of ten years or less, and vest
         over terms of two to three years from the date of grant.

         ADOPTION OF SFAS 123(R)

         Prior to January 1, 2006, the Company accounted for stock-based
         compensation issued to employees using the intrinsic value method,
         which follows the recognition and measurement principles of Accounting
         Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
         to Employees," and Financial Accounting Standards Board ("FASB")
         Interpretation ("FIN") No. 44, "Accounting for Certain Transactions
         Involving Stock Compensation." Generally, no stock-based employee
         compensation cost related to stock options was reflected in net income,
         as all options granted under stock-based compensation plans had an
         exercise price equal to the market value of the underlying common stock


                                       9
<PAGE>

         on the grant date. Compensation cost related to restricted stock units
         granted to non-employee directors and certain key employees was
         reflected in net loss as services were rendered.

         On January 1, 2006, the Company adopted Statement of Financial
         Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment," using
         the modified prospective method, which requires measurement of
         compensation cost for all stock awards at fair value on the date of
         grant and recognition of compensation over the requisite service period
         for awards expected to vest. The fair value of stock options is
         estimated using the Black-Scholes valuation model, and the fair value
         of restricted stock units is determined based on the number of shares
         granted and the quoted price of the Company's common stock on the date
         of grant. Such value is recognized as expense over the requisite
         service period, net of estimated forfeitures, using the straight-line
         attribution method. The estimate of awards that will ultimately vest
         requires significant judgment, and to the extent actual results or
         updated estimates differ from the Company's current estimates, such
         amounts will be recorded as a cumulative adjustment in the period
         estimates are revised. The Company considers many factors when
         estimating expected forfeitures, including types of awards, employee
         class and historical employee attrition rates. Actual results, and
         future changes in estimates, may differ substantially from the
         Company's current estimates.

         On March 29, 2005, the Securities and Exchange Commission ("SEC")
         published Staff Accounting Bulletin ("SAB") No. 107, which provides the
         Staff's views on a variety of matters relating to stock-based payments.
         SAB No. 107 requires that stock-based compensation be classified in the
         same expense line items as cash compensation. The Company has
         classified stock-based compensation during the three months ended March
         31, 2006 within the same operating expense line items as cash
         compensation paid to employees.

         Stock-based compensation expense under SFAS No. 123(R) was $457,954
         during the three months ended March 31, 2006. As a result of adopting
         SFAS No. 123(R) on January 1, 2006, the Company's loss from operations
         and net loss for the three months ended March 31, 2006 were $457,954
         lower than if it had continued to account for share-based compensation
         using the intrinsic method of accounting. Basic and diluted net loss
         per share would have been $1.81 if the Company had not adopted SFAS No.
         123(R), compared to the reported basic and diluted net loss per share
         of $1.98. The incremental impact of SFAS No. 123(R) during the three
         months ended March 31, 2006 represents stock-based compensation expense
         related to stock options.

         VALUATION ASSUMPTIONS FOR STOCK OPTIONS

         The fair value of stock options granted during the three months ended
         March 31, 2005 and 2006 was estimated using the Black-Scholes
         option-pricing model with the following assumptions:



                                       10
<PAGE>




                                                   THREE MONTHS ENDED MARCH 31,
                                                         2006             2005
                                                         ----             ----

           Risk-free interest rate                       4.72%            4.25%
           Expected life of option grants               6 years          6 years
           Expected volatility of underlying stock        102%             95%
           Expected dividend payment rate, as a
             percentage of the stock price on the
             date of grant                                ---               ---

         The dividend yield assumption is based on the Company's history and
         expectation of future dividend payouts. The expected volatility is
         based on a combination of the Company's historical stock price and
         implied volatility. The selection of implied volatility data to
         estimate expected volatility was based upon the availability of
         actively traded options on the Company's stock. The risk-free interest
         rate assumption is based upon the U.S. Treasury yield curve in effect
         at the time of grant for periods corresponding with the expected life
         of the option. The expected life of employee stock options represents
         the weighted-average period the stock options are expected to remain
         outstanding.


         PRO FORMA INFORMATION FOR PERIOD PRIOR TO SFAS 123(R) ADOPTION

         In accordance with FAS 123R, the Company adopted the provisions of FAS
         123R at January 1, 2006 using the modified prospective approach. Under
         this method, prior periods are not restated. Had the Company previously
         recognized compensation costs as prescribed by FAS 123, previously
         reported net loss, basic earnings per share and diluted earnings per
         share would have changed to the pro forma amounts shown as follows:

                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                                     2005

       Net loss as reported                                        $ (1,841,540)

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

       Deduct: Total stock-based employee compensation
            measured using the fair value method                    (   298,805)
                                                                     -----------

       Pro forma net loss                                          $ (2,140,345)
                                                                   =============

       Basic and diluted net loss per share - as reported      $          (1.99)
                                                               =================

       Basic and diluted net loss per share - pro forma        $          (2.31)
                                                               =================

                                       11
<PAGE>

 (3)     COMMITMENTS AND CONTINGENCIES

         LEASE COMMITMENTS- In accordance with certain capital lease contracts,
         in the event that they are terminated early, approximately $50,950
         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:

                                                    THREE MONTHS ENDED MARCH 31,
                                                  ------------------------------
                                                      2006              2005
                                                      ----              ----
       Numerator for basic and diluted loss per
       share:
         Net loss attributable to common
         stockholders                             $(2,142,907)      $(1,841,540)
                                                  ============      ============

       Denominator for basic and diluted loss per
       share:
         Weighted average shares outstanding         1,079,494           924,813
                                                  ============      ============

       Net loss per share - basic and diluted     $(     1.98)      $(     1.99)
                                                  ============      ============

         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 three months ended March 31, 2006 and 2005 were
         17,645,966 and 170,699, respectively.

(5)      STOCKHOLDERS' EQUITY

         AUTHORIZED CAPITAL STOCK - Authorized capital stock consists of
         100,000,000 shares of $.01 par value common stock of which 1,080,023
         shares are issued (1,079,494 are outstanding) and 17,645,966 are
         reserved for issuance upon exercise of common stock options and
         warrants and conversion of Series C Cumulative Convertible Preferred
         Stock at March 31, 2006. Authorized preferred stock totals 6,000,000
         shares, of which 500,000 shares have been designated Series A Preferred
         Stock, 600,000 shares have been designated Series B Preferred Stock and
         1,500 shares have been designated Series C Cumulative Convertible
         Preferred Stock (825.5 shares were outstanding at March 31, 2006). The
         Series C Preferred Stock has a liquidation value of $10,000 per share,
         is entitled to a dividend of 10% per annum, payable in cash or shares
         of our common stock at our option, which dividend rate is subject to
         increase to 14% upon the occurrence of certain events. The Series C
         Preferred Stock is redeemable at the holder's election in the event the
         Company fails or refuses to convert any shares of Series C Preferred
         Stock in accordance with the terms of the Certificate of Designation,
         Rights and Preferences of the Series C Preferred Stock. The number of
         shares of common stock into which each share of Series C Preferred
         Stock is convertible is determined by dividing the liquidation value
         per share plus all accrued and unpaid dividends thereon by $1.05.

         During 1998, the Company's Board of Directors authorized the repurchase
         of up to 23,809 shares of common stock at market price. The Company


                                       12
<PAGE>

         repurchased no shares in 2003, 2004 and 2005. At March 31, 2006, 529
         repurchased shares remain available for future use and 16,180 shares
         are available to be repurchased.

         SERIES C CONVERTIBLE PREFERRED STOCK - On December 23, 2005, pursuant
         to the terms of a Preferred Stock and Warrant Purchase Agreement (the
         "Purchase Agreement"), the Company completed the first closing of a
         private placement (the "Series C Financing") in which institutional
         investors (the "Purchasers") acquired 250 shares of Series C Cumulative
         Convertible Preferred Stock (the "Series C Preferred Stock") and
         six-year Warrants to purchase 2,380,951 shares of common stock at an
         exercise price of $1.26 per share, for an aggregate purchase price of
         $2.5 million (the "First Closing"). The net proceeds from the First
         Closing were $2,125,943. In the second closing of the Series C
         Financing, on February 13, 2006, the Company issued to institutional
         investors (the "Purchasers") 575.5 shares of Series C Preferred Stock
         and six-year warrants (the "Warrants") to purchase 5,480,961 shares of
         the Company's common stock at an exercise price of $1.26 per share, for
         an aggregate purchase price of approximately $5.75 million (the "Second
         Closing"). The net proceeds from the Second Closing were $5,186,908.
         The terms of the Series C Preferred Stock and Warrants issued in the
         First Closing and the Second Closing were identical.

         RELEVANT MATERIAL TERMS: The terms and provisions of the Series C
         Preferred Stock are set forth in the Certificate of Designations,
         Rights and Preferences of Series C Cumulative Convertible Preferred
         Stock (the "Certificate of Designations"). Certain material terms of
         the Series C Preferred Stock relevant to this response are summarized
         below:

         OBLIGATIONS TO REGISTER SHARES: When issued, the securities offered and
         sold to the Purchasers in the Series C Financing were not registered
         under the Securities Act of 1933, as amended (the "Securities Act") and
         were sold in reliance upon the exemption from securities registration
         afforded by Regulation D under the Securities Act. All of the
         Purchasers represented to MacroChem that they were "accredited
         investors", as defined in Rule 501 of Regulation D. In connection with
         the Series C Financing, MacroChem entered into an Investor Rights
         Agreement with the Purchasers, pursuant to which MacroChem was required
         to file a registration statement with the Securities and Exchange
         Commission covering the resale of the common stock issuable upon
         conversion of the Series C Preferred Stock, issuable as payment of
         dividends on the Series C Preferred Stock and issuable upon exercise of
         the Warrants and the warrants issued to the placement agent, no later
         than March 27, 2006, and to use its best efforts to cause the
         registration statement to become effective within a specified time
         period. The Investor Rights Agreement further provides that if a
         registration statement is not filed or declared effective within
         specified time period, the Company would be required to pay each holder
         an amount in cash, as liquidated damages, equal to 2.0% per month of
         the aggregate purchase price paid by such holder in the private
         placement for the common stock and warrants then held.

         DIVIDENDS: The Series C Preferred Stock accrues dividends at the rate
         of 10% of the stated price annually, payable quarterly in cash or
         common stock. The first dividend payment date was March 31, 2006.

         LIQUIDATION: Upon liquidation, dissolution or winding up, the holders
         of Series C Preferred Stock are entitled, before any distributions are
         made to the holders of the common stock, or any other class or series
         of capital stock of the Company ranking junior to the Series C


                                       13
<PAGE>

         Preferred Stock as to such distributions, to be paid an amount equal to
         $10,000 per share and any unpaid dividends thereon, subject to
         adjustment.

         VOTING: The Certificate of Designations contains a provision that
         restricts a holder of Series C Preferred Stock from (i) converting
         Series C Preferred Stock into common stock to the extent that such
         conversion would result in the holder owning more than 4.95% of the
         issued and outstanding common stock of the Company or (ii) voting
         together with the common stock on an as-if-converted to common stock
         basis in respect of more than 4.95% of the issued and outstanding
         common stock of the Company. The Warrants issued pursuant to the
         purchase agreement contain a similar restriction (collectively, the
         "Beneficial Ownership Cap"). A holder of Series C Preferred Stock or a
         Warrant may elect, subject to certain conditions, to be exempt from the
         Beneficial Ownership Cap. Subject to the Beneficial Ownership Cap
         restrictions, as of the date of the second closing of the private
         placement financing in February 2006 (the "Second Closing"), the Series
         C Preferred Stock acquired by the purchasers was convertible into
         4,057,885 shares of common stock and the holders of the Series C
         Preferred Stock vote on an as-converted basis with the holders of our
         common stock, and therefore held approximately 80.28% of the voting
         power of our outstanding securities. Assuming both the conversion of
         the Series C Preferred Stock and the exercise of all of the Warrants
         acquired by the purchasers, in each case subject to the Beneficial
         Ownership Cap restrictions, the purchasers would have held
         approximately 89.06% of the outstanding common stock of the Company as
         of the date of the Second Closing.

         REDEMPTION: If the Company fails or refuses to convert any shares of
         Series C Preferred Stock in accordance with the terms of the Series C
         Preferred Stock, the holders of the Series C Preferred Stock are
         entitled to elect to require the Company to redeem their Series C
         Preferred Stock. In the event of a redemption, the redemption price per
         share of Series C Preferred Stock is an amount in cash equal to the
         greater of (1) all accrued but unpaid dividends as of the date the
         holder makes the demand for redemption with respect to each share to be
         redeemed plus the $10,000 liquidation preference per share or (2) the
         total number of shares of common stock into which such Series C
         Preferred Stock is convertible multiplied by the then-current market
         price of the common stock.

         Given that the redemption provision described above does not embody an
         unconditional obligation requiring the Company to redeem the instrument
         at a specified or determinable date or upon an event certain to occur,
         the Series C Preferred Stock is not a mandatorily redeemable financial
         instrument. Therefore, the Company determined that the guidance in FAS
         150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS
         OF BOTH LIABILITIES AND EQUITY, which requires liability classification
         for mandatorily redeemable financial instruments, does not apply.

         Rule 5-02.28 of Regulation S-X requires securities with redemption
         features that are not solely within the control of the issuer to be
         classified outside of permanent equity. The holders of the Series C
         Preferred Stock control a majority of the voting power of the Company's
         common stock and, as a result of this control, could directly or
         indirectly influence the triggering of the redemption provision by, for
         example, refusing to approve an increase in the authorized but unissued
         shares of common stock of the Company if, in the future, such increase
         were necessary to effect the conversion of the Series C Preferred
         Stock. Accordingly, the redemption provision is not solely within the
         Company's control, and thus the Series C Preferred Stock is not
         permanent equity.


                                       14
<PAGE>

         Because the Series C Preferred Stock did not qualify for treatment as a
         liability or as permanent equity as described above, the Company
         recorded the portion of the proceeds attributable to the Series C
         Preferred Stock as mezzanine equity pursuant to EITF Topic D-98,
         CLASSIFICATION AND MEASUREMENT OF REDEEMABLE SECURITIES. Because the
         Company has a substantial amount of authorized but unissued common
         stock (in excess of 95 million shares), the occurrence of a redemption
         event is not considered probable, and thus the carrying value of the
         Series C Preferred Stock was not accreted to its redemption value.

         CONVERSION: Each convertible preferred share is convertible into shares
         of common stock. The number of shares of common stock into which each
         share of Series C Preferred Stock is convertible is determined by
         dividing the liquidation value per share plus all accrued but unpaid
         dividends thereon by $1.05. The conversion price for the Series C
         Preferred Stock and the Warrant exercise price were each subject to
         reset adjustment such that if the average price of the common stock
         over the twenty trading days immediately preceding May 8, 2006 (the
         "Average Price") was lower than the conversion and/or exercise price,
         then such conversion and/or exercise price would have been adjusted to
         equal the Average Price.

         The Company evaluated whether the embedded conversion feature in the
         Series C Preferred Stock required bifurcation and determined, in
         accordance with paragraph 12 of SFAS 133, that the economic
         characteristics and risks of the embedded conversion feature in the
         Series C Preferred Stock were clearly and closely related to the
         underlying common stock. In conducting this evaluation, the Company
         recognized that the cumulative fixed dividend and the potential
         redemption requirement of the Series C Preferred Stock are
         characteristics of debt. The Company also recognized, however, that the
         Series C Preferred Stock had the following equity like characteristics:
         the Series C Preferred Stock clearly gives the stockholders both
         existing and ongoing rights of ownership (i.e., a residual interest),
         as the holders of Series C Preferred Stock are entitled to vote on an
         as-converted basis with the holders of our common stock; the dividend,
         while fixed, is payable quarterly in cash or common stock at the
         Company's election, and, to date, the Company's Board of Directors has
         declared each quarterly dividend to be paid in shares of common stock;
         the redemption rights of the Series C preferred stock are perpetual and
         do not have a stated maturity or redemption date, unlike debt
         instruments; and the right of the holders of the Series C Preferred
         stock to receive payments, including the liquidation preference, is not
         secured by any collateral. Consequently, when all of the economic
         characteristics and risks of the Series C Preferred Stock are
         considered as a whole, the Company concluded that the Series C
         Preferred Stock is more akin to equity than to debt and, as a result,
         the Company concluded that bifurcation was not required under SFAS 133.

         Pursuant to the guidance in paragraph 5 of EITF 00-27, APPLICATION OF
         ISSUE NO. 98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS, we allocated the
         proceeds from the Series C financing between the Series C Preferred
         Stock and the warrants based upon their estimated fair values as of the
         closing date. We then calculated the intrinsic value of the beneficial
         conversion feature embedded in the Series C Preferred Stock. As the
         amount of the beneficial conversion feature exceeded the value
         allocated to the Series C Preferred Stock, the amount of the beneficial
         conversion feature recorded was limited to the proceeds allocated to
         the Series C Preferred Stock. The beneficial conversion value of
         $330,243 was recognized as an additional discount on the Series C
         Preferred Stock which amount was immediately accreted and treated as a
         deemed dividend to the holder of the shares of Series C Preferred Stock


                                       15
<PAGE>

         as all of the Series C Preferred Stock was eligible for conversion upon
         issuance.

         STOCK SALES - In September 2003, the Company sold 108,420 shares of
         common stock and warrants to purchase 21,684 shares of common stock to
         primarily institutional investors. Gross proceeds were $3,246,000
         ($2,971,505 net of issuance costs) and were allocated between the
         common stock and the warrants based on the relative fair value of the
         warrants and common stock. In March 2004, the Company sold 128,619
         shares of common stock and warrants to purchase 25,723 shares of common
         stock to primarily institutional investors. Gross proceeds were
         $7,292,700 ($6,681,274 net of issuance costs) and were allocated
         between the common stock and the warrants based on the relative fair
         value of the warrants and common stock. In April 2005, the Company sold
         approximately 65,040 shares of common stock and warrants to purchase
         32,520 shares of common stock to institutional investors and to certain
         executive officers and directors of the Company. Gross proceeds were
         $815,000 ($601,342 net of cash issuance costs) and were allocated
         between the common stock and the warrants based on the relative fair
         value of the warrants and common stock. In December 2005, the Company
         sold 250 shares of Series C Cumulative Convertible Preferred Stock and
         warrants to purchase 2,380,951 shares of common stock to institutional
         investors. Gross proceeds were $2,500,000 ($2,125,943 net of cash
         issuance costs) and were allocated between the Series C Cumulative
         Convertible Preferred Stock and the warrants based on the fair value of
         the warrants. In February 2006, the Company sold 575.5 shares of Series
         C Cumulative Convertible Preferred Stock and warrants to purchase
         5,480,952 shares of common stock to institutional investors. Gross
         proceeds were $5,755,000 ($5,186,908 net of cash issuance costs) and
         were allocated between the Series C Cumulative Convertible Preferred
         Stock and the warrants based on the fair value of the warrants.

         WARRANTS - On February 13, 2006, the Company closed a private placement
         in which institutional investors received six-year warrants to purchase
         5,480,961 shares of the Company's common stock at an exercise price of
         $1.26 per share ("Investor Warrants"). As of March 31, 2006, none of
         the $1.26 Investor Warrants had been exercised. The placement agent in
         the transaction received a warrant to purchase approximately 548,095
         shares of common stock at a purchase price of $1.05 for a period of six
         years ("Placement Agent Warrants"). As of March 31, 2006, none of these
         $1.05 Placement Agent Warrants had been exercised. On December 23,
         2005, the Company closed a private placement in which institutional
         investors received warrants to purchase 2,380,951 shares of common
         stock at an exercise price of $1.26 per share for a period of six years
         ("Investor Warrants"). As of March 31, 2006, none of these $1.26
         Investor Warrants had been exercised. The placement agent in this
         transaction received a warrant to purchase approximately 238,905 shares
         of common stock at a purchase price of $1.05 for a period of six years
         ("Placement Agent Warrants"). As of March 31, 2006, none of the $1.05
         Placement Agent Warrants had been exercised. In accordance with EITF
         00-19, "ACCOUNTING FOR DERIVATIVE FINANCIAL INSTRUMENTS INDEXED TO, AND
         POTENTIALLY SETTLED IN, A COMPANY'S OWN STOCK," the Investor Warrants
         and the Placement Agent Warrants are included as a liability and valued
         at fair market value until the Company meets the criteria under EITF
         00-19 for permanent equity. The Company valued the Investor Warrants
         and the Placement Agent Warrants at $7,800,706 on March 31, 2006 using
         the Black-Scholes method with the following assumptions: a risk-free
         interest rate of 4.82%, volatility of 100%, and a dividend yield of 0%.

                                       16
<PAGE>

         On April 19, 2005, the Company closed a private placement in which
         institutional investors and certain executive officers and directors of
         the Company received warrants to purchase approximately 32,520 shares
         of common stock for a period of five years. The exercise price of the
         warrants is $14.70 per share for the institutional investors and $21.84
         for the participating executive officers and directors. As of March 31,
         2006, approximately 6,012 of the $14.70 warrants issued to the
         institutional investors had been exercised and none of the $21.84
         warrants issued to participating executive officers and directors had
         been exercised. The placement agent in this transaction received a
         warrant to purchase approximately 1,190 shares of common stock at a
         purchase price of $14.70 for a period of five years. As of March 31,
         2006, none of the $14.70 warrants issued to the placement agent had
         been exercised.

         During 2004, the Company conducted a private placement in which
         primarily institutional investors received warrants to purchase an
         aggregate of 25,723 shares of common stock at a purchase price of
         $87.78 per share for a period of five years. As of March 31, 2006, none
         of the $87.78 warrants had been exercised.

         During 2003, the Company conducted a private placement in which
         primarily institutional investors received warrants to purchase an
         aggregate of 21,684 shares of common stock at a purchase price of
         $49.266 per share for a period of three years. As of March 31, 2006,
         9,011 of the $49.266 warrants issued to the institutional investors had
         been exercised. The placement agent in this transaction received a
         warrant to purchase 3,571 shares of common stock at a purchase price of
         $49.266 for a period of three years. As of March 31, 2006, none of the
         $49.266 warrants issued to the placement agent had been exercised.

         During 2001, institutional investors received warrants to purchase an
         aggregate of 7,457 shares of common stock at a purchase price of
         $277.62 per share expiring in five years in connection with a private
         placement. The warrants are callable by the Company if the closing
         price of the stock is higher than $755.58 for 15 consecutive trading
         days at any time before expiration. As a result of subsequent financing
         transactions, the exercise price of these warrants has been adjusted to
         $277.62 in accordance with the terms of the warrants. As of March 31,
         2006, none of these warrants had been exercised.

         STOCK OPTION PLANS - The Company has two stock option plans, the 1994
         Equity Incentive Plan (1994 Plan) and the 2001 Incentive Plan (the 2001
         Plan).

         Under the terms of the 1994 Plan, the Company may no longer award any
         options. All options previously granted under the 1994 Plan may be
         exercised at any time up to ten years from the date of award. During
         the three-month period ended March 31, 2006, no options were granted or
         exercised and 4,212 options were cancelled under the 1994 Plan.

         Under the terms of the 2001 Plan, the Company may grant options to
         purchase up to a maximum of 123,809 shares of common stock to certain
         employees, directors and consultants. During the three months ended
         March 31, 2006, no options were granted or exercised and 638 options
         were cancelled under the 2001 Plan.

         STOCK AND STOCK OPTION ISSUANCES OUTSIDE THE STOCK OPTION PLANS -
         During the three months ended March 31, 2006, options to purchase an
         aggregate of 945,000 shares of common stock were granted to executive
         officers and directors of the Company.



                                       17
<PAGE>

         One third of the options vested on the date of grant and the remaining
         options vest over a two year period with an exercise price of $1.62.

         During the three months ended March 31, 2006, 75,000 shares of
         restricted stock were granted to Robert J. DeLuccia, the Company's
         Chief Executive Officer. The restricted stock vests if and when the
         Company's common stock trades at or above $4.00 per share for thirty
         consecutive trading days.

(6)      COMPREHENSIVE LOSS

         Comprehensive loss is equal to the Company's net loss for the three
         months ended March 31, 2006 and 2005.






                                       18
<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, our decision
to discontinue research and development activities and our need for additional
external financing; our need for significant additional product development
efforts and additional financing; technological uncertainty relating to
transdermal drug delivery systems; 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 ability to recruit additional key employees; our limited
personnel and our dependence on continued access to scientific talent; no
assurance of our entering into license arrangements; our lack of laboratory
facilities and scientific personnel and uncertainties regarding our reliance on
third parties to conduct research and development activities for our
technologies and product candidates; uncertainties relating to competition,
patents and proprietary technology; our dependence on third parties to conduct
research and development activities; our dependence on third-party suppliers and
manufacturers; uncertainties relating to risks of product liability claims, lack
of product liability insurance, and expense and difficulty of obtaining adequate
insurance coverage; our majority shareholders, who own a large portion of our
voting stock, could control company decisions and could substantially lower the
market price of our common stock if they were to sell large blocks of our common
stock in the future; uncertainty of pharmaceutical pricing and related matters;
volatility of our stock price; the effect that our quotation on the OTC Bulletin
Board will have on the liquidity of our common stock; and dilution of our shares
as a result of our contractual obligation to issue shares in the future.
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, 2005 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.


                                       19
<PAGE>

GENERAL

     On December 30, 2005 we implemented a 1-for-7 reverse stock split of our
common stock and on February 9, 2006 we implemented a subsequent 1-for-6 reverse
stock split of our common stock. Unless otherwise noted, data used throughout
this Quarterly Report on Form 10-Q has been adjusted to reflect these reverse
splits.

     We are a specialty pharmaceutical company that develops and seeks to
commercialize pharmaceutical products. Currently, our portfolio of product
candidates is based on our proprietary drug delivery technologies: SEPA(R),
MacroDerm(TM) and DermaPass(TM). Our patented SEPA topical drug delivery
technology (SEPA is an acronym for "Soft Enhancement of Percutaneous
Absorption," where "soft" refers to the reversibility of the skin effect, and
"percutaneous" means "through the skin") enhances the efficiency and rate of
diffusion of drugs into and through the skin. Our patented MacroDerm drug
delivery technology encompasses a family of low to moderate molecular weight
polymers that impede dermal drug or chemical penetration. We have also filed a
patent application for our DermaPass family of transdermal absorption enhancers
that have a different drug delivery profile than SEPA, which we believe could be
used with a wider range of active pharmaceutical ingredients. Currently, we have
two clinical stage investigational new drugs: EcoNail, our lead product, for the
treatment of fungal infections of the nails and Opterone, for the treatment of
male hypogonadism. We believe that products incorporating our drug delivery
technologies 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.

     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 March 31, 2006, we had an accumulated deficit
of $84,716,004. 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;

o        our ability to raise additional capital;

o        the signing of licenses and product development agreements;

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


                                       20
<PAGE>
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.

     We expect to continue to spend significant amounts on developing and
seeking regulatory approval of our lead product, EcoNail. Ultimately, if we
receive regulatory approval for EcoNail, significant expenses may be incurred in
connection with its commercialization. In addition, we also plan to identify and
develop, internally, through in-licensing, or through other collaborative
arrangements, additional product candidates and technologies that fit within our
growth strategy. If we identify potential product candidates, we will incur
additional costs in connection with testing and seeking regulatory approval of
those product candidates.

     We recently completed a private placement of our securities to
institutional investors, consisting of two closings, for approximately
$8,255,000 in gross proceeds. The first closing of the private placement, in
which institutional investors acquired 250 shares of Series C Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock") and six-year
warrants to purchase 2,380,951 shares of common stock at an exercise of $1.26
per share, for an aggregate purchase price of $2,500,000, took place on December
23, 2005 and is described in our Current Report on Form 8-K filed on December
27, 2005. The second closing of the private placement, in which institutional
investors acquired 575.5 shares of our Series C Preferred Stock and six-year
warrants to purchase 5,480,961 shares of the Company's common stock at an
exercise price of $1.26 per share, for an aggregate purchase price of
$5,755,000, occurred on February 13, 2006 and is described in our Current Report
on Form 8-K filed on February 16, 2006. The Series C Preferred Stock has a
liquidation value of $10,000 per share, is entitled to a dividend of 10% per
annum, payable in cash or shares of our common stock at our option, which
dividend rate is subject to increase to 14% upon the occurrence of certain
events. The number of shares of common stock into which each share of Series C
Preferred Stock is convertible is determined by dividing the liquidation value
per share plus all accrued and unpaid dividends thereon by $1.05

     We believe that our existing cash and cash equivalents and short term
investments of $7,297,047 as of March 31, 2006 will be sufficient to meet our
operating expenses and capital expenditure requirements for at least the next
twelve months. As noted above, on February 13, 2006 we received $5,755,000 in
gross proceeds ($5,186,908 net of cash issuance costs) from the sale of our
Series C Preferred Stock and warrants to purchase shares of our common stock. We
intend to use these proceeds for working capital and other general corporate
purposes.

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

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.

                                       21
<PAGE>

     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. On
August 31, 2005, we discontinued all research and development activities and
terminated substantially all of our non-management personnel. For the
three-month period ended March 31, 2006, we spent $65,982 on research and
development, including $64,632 in costs associated with a clinical trial for
EcoNail and $1,350 in costs not specifically tracked to a project. For the three
months ended March 31, 2005, we spent $1,030,061 on research and development,
including $172,469 and $258,940 in costs associated with our clinical trials for
EcoNail and Opterone, respectively, and $598,652 in costs not specifically
tracked to a 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
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. For example, we are seeking a partner to
advance development of our Opterone product candidate. We cannot predict whether
our efforts to find a partner will be successful nor can we predict the manner
and timing in which any eventual partner may elect to pursue development of
Opterone. Moreover, we may elect not to develop Opterone further if we cannot
find a partner. 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.
Assuming we are able to raise sufficient capital, we anticipate that marketing,
general and administrative expenses will increase over the next several years as
we begin, when appropriate, to license, partner, or market our product
candidates if and when they receive regulatory approval.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     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
Annual Report on Form 10-K for the year ended December 31, 2005, 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.

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<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 based upon the terms of the relevant
agreement.

     RESEARCH AND DEVELOPMENT. Research and development costs are expensed as
incurred.

     WARRANTS LIABILITY. Based on certain terms in the warrants that we issued
in connection with the sale of our Series C Cumulative Convertible Preferred
Stock, we determined that the warrants should be classified as a liability and
valued at fair market value each reporting period, with the changes in fair
value recorded in earnings, in accordance with EITF 00-19, "Accounting for
Derivative Financial Investments Indexed to, and Potentially Settled in, a
Company's Own Stock." We will continue to evaluate the warrants under EITF 00-19
to determine when, if ever, they meet certain criteria under EITF 00-19 for
permanent equity.

RESULTS OF OPERATIONS

     We had no revenues for the three months ended March 31, 2006 and March 31,
2005. For the year ending December 31, 2006, we do not expect to have any
revenues.

     For the three-month period ended March 31, 2006, research and development
costs decreased by $964,079, or 93.6%, to $65,982 from $1,030,061 in the
three-month period ended March 31, 2005. The decrease is primarily attributable
to the temporary cessation of research and development activities in August
2005, including a reduction in spending on clinical trials of $366,777 in the
three-month period ended March 31, 2006 compared with the same period in 2005 as
well as a reduction in payroll and related expenses of $269,937 and a reduction
in laboratory operating expenses of $327,365 in the three-month period ended
March 31, 2006 as a result of a staff reduction in August 2005. For each of the
next three quarters, we expect research and development spending to increase
from the level seen in the first quarter of 2006 as we commence a clinical trial
for EcoNail.

     For the three-month period ended March 31, 2006, marketing, general and
administrative costs increased by $306,129, or 36.7%, to $1,141,127, from
$834,998 in the three-month period ended March 31, 2005. The increase is
primarily attributable to the Company's adoption of SFAS No. 123R, which
requires the expensing of stock options granted to employees based on the fair
value on the date of the grant, resulting in an expense of $457,954. The Company
also incurred additional costs of $60,236 relating to certain SEC filings and
reverse stock splits. The increase was partially offset by savings attributable
to a staff reduction in August 2005 which resulted in a reduction of salary and
related expenses of $137,443 during the three-month period ended March 31, 2006.
In addition, in the three-month period ended March 31, 2006, legal and audit
expenses decreased by approximately $13,000, insurance expenses decreased by
approximately $12,000, and consulting and investor relations expenses decreased
by $42,293. For each of the next three quarters, we expect marketing, general
and administrative spending to approximate the same level as seen in the first
quarter of 2006.

                                       23
<PAGE>

     Other income decreased by $807,770 to a loss of $784,251 in the three-month
period ended March 31, 2006 from a gain of $23,519 in the three-month period
ended March 31, 2005. The decrease is primarily attributable to a loss
associated with the change in value of warrant liability of $829,993 in the
three-month period ended March 31, 2005. The decrease is partially offset by an
increase in interest income of $22,223, or 94%, to $45,742 in the three-month
period ended March 31, 2006 from $23,519 in the three-month period ended March
31, 2005. The increase in interest income is due to higher amounts of cash
available for investing purposes and higher interest rate returns available for
cash that is invested.

     For the reasons described above, net loss increased by $149,820, or 8.1%,
to $1,991,360 in the three-month period ended March 31, 2006 from $1,841,540 in
the three-month period ended March 31, 2005.

LIQUIDITY AND CAPITAL RESOURCES

     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 three months of 2006, we received no proceeds
from the exercise of options and warrants, and gross proceeds of $5,755,000
($5,186,908 net of cash issuance costs) as a result of the sale of our Series C
Cumulative Convertible Preferred Stock in a private placement financing
transaction. During the first three months of 2005, we received no proceeds from
the exercise of options and warrants or the sale of stock.

     At March 31, 2006, working capital was approximately $7,248,200, compared
to $3,828,900 at March 31, 2005. The increase in our working capital reflects
the receipt of private placement proceeds, partially offset by the use of funds
in operations. On February 13, 2006, we sold 575.5 shares of our Series C
Cumulative Convertible Preferred Stock for $5,755,000 in gross proceeds
($5,186,908 net of cash issuance costs) in a private placement to institutional
investors. The investors also received warrants to purchase 5,480,961 shares of
the Company's common stock at an exercise price of $1.26 per share. 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, we will use our working capital to
fund our operating activities.

     Pursuant to a plan approved by our Board of Directors in 1998, we are
authorized to repurchase 23,809 shares of our common stock to be held as
treasury shares for future use. During the three-month period ended March 31,
2006, we did not repurchase any shares of common stock. At March 31, 2006, 529
repurchased shares remain available for future use and 16,180 shares remain
available for repurchase under the plan.

     Capital expenditures were $436 and patent development costs were $14,477
for the first three months of 2006. Capital expenditures were $14,526 and there
were no patent development costs for the three-month period ended March 31,
2005. We anticipate additional capital and patent expenditures will be
approximately $75,000 for the remainder of the fiscal year ending December 31,
2006.

     On August 31, 2005, at the direction of our Board of Directors, we
discontinued all research and development activities and terminated


                                       24
<PAGE>

substantially all of our non-management personnel. We made payments of
approximately $156,839 in connection with this staff reduction and related
expenses. In September 2005, the Company entered into transition agreements with
its executive officers. The transition agreements terminated the existing
employment and severance agreements between the Company and each executive.
Pursuant to the terms of the transition agreements, the executives agreed that
they would remain employed by the Company until November 30, 2005. Three
executives executed amendments to their transition agreements extending their
employment through December 31, 2005 and beyond. We made payments of
approximately $709,646 in connection with all executive transition agreements.
We also made aggregate payments of approximately $35,000 on November 30, 2005
and $35,000 on December 15, 2005 under a separate provision of the transition
agreements. There are no further payments due as a result of the staff reduction
or under the transition agreements.

     As of March 31, 2006, we had $7,297,047 in cash, cash equivalents and
short-term investments. We believe that our existing cash and cash equivalents
will be sufficient to meet our operating expenses and capital expenditure
requirements for at least the next twelve months. Our cash requirements may vary
materially from those now planned because of changes in the focus and direction
of our research and development programs, competitive and technical advances,
patent developments or other developments. We will require additional financing
to continue operations after we exhaust our current capital resources and to
continue our long-term plans for clinical trials and new product development. We
expect to continue financing our operations through sales of our securities,
strategic alliances or other financing vehicles, if any, that might become
available to us on terms that we deem acceptable.

     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 will have any significant effect on the results of our
operations.

     At March 31, 2006, the Company had no long-term contractual obligations.

RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2005, the FASB issued Statement of Financial Accounting Standards
No. 154, "Accounting Changes and Error Corrections, a replacement of APB Opinion
No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting
Changes in Interim Financial Statements" ("SFAS No. 154"). SFAS No. 154 provides
guidance on the accounting for and reporting of accounting changes and error
corrections. It establishes, unless impracticable, retrospective application as
the required method for reporting a change in accounting principle in the
absence of explicit transition requirements specific to the newly adopted
accounting principle. SFAS No. 154 also provides guidance for determining
whether retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective application is
impracticable. The provisions of SFAS No. 154 are effective for accounting
changes and corrections of errors made in fiscal periods beginning after
December 15, 2005. The adoption of the provisions of SFAS No. 154 is not
expected to have a material impact on the Company's financial position or
results of operations.

                                       25
<PAGE>
PART II - OTHER INFORMATION

ITEM     6. EXHIBITS.

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

         3.1 Amended and Restated Certificate of Incorporation, incorporated by
         reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K
         for the year ended December 31, 2005 (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).

         4.1 Common Stock Purchase Warrant, incorporated by reference to Exhibit
         10.3 to our Current Report on Form 8-K dated February 16, 2006 (File
         No. 0-13634).

         10.1 Amended and Restated Preferred Stock and Warrant Purchase
         Agreement, dated as of February 13, 2006, by and between the Company
         and the purchasers listed on the signature pages thereto, incorporated
         by reference to Exhibit 10.1 to our Current Report on Form 8-K dated
         February 16, 2006 (File No. 0-13634).

         10.2 Amended and Restated Investor Rights Agreement dated as of
         February 13, 2006, between MacroChem Corporation and the purchasers
         listed on the signature pages thereto incorporated by reference to
         Exhibit 10.2 to our Current Report on Form 8-K dated February 16, 2006
         (File No.0-13634).

         10.3 Form of Employment Agreement, dated February 13, 2006, by and
         between the Company and Robert J. DeLuccia incorporated by reference to
         Exhibit 10.4 to our Current Report on Form 8-K dated February 16, 2006
         (File No. 0-13634).

         10.4 Form of Employment Agreement, dated February 13, 2006, by and
         between the Company and Bernard R. Patriacca, including Form of
         Confidential Information, Inventions and Non-Competition Agreement
         (attached as Exhibit B to the Form of Employment Agreement),
         incorporated by reference to Exhibit 10.5 to our Current Report on Form
         8-K dated February 16, 2006 (File No. 0-13634).

         10.5 Form of Severance Agreement, dated February 13, 2006, by and
         between the Company and Bernard R. Patriacca, incorporated by reference
         to Exhibit 10.6 to our Current Report on Form 8-K dated February 16,
         2006 (File No. 0-13634).

         10.6 Form of Employment Agreement, dated February 13, 2006, by and
         between the Company and Glenn E. Deegan, including Form of Confidential
         Information, Inventions and Non-Competition Agreement (attached as
         Exhibit B to the Form of Employment Agreement), incorporated by
         reference to Exhibit 10.7 to our Current Report on Form 8-K dated
         February 16, 2006 (File No. 0-13634).

         10.7 Form of Severance Agreement, dated February 13, 2006, by and
         between the Company and Glenn E. Deegan, incorporated by reference to


                                       26
<PAGE>

         Exhibit 10.8 to our Current Report on Form 8-K dated February 16, 2006
         (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.





                                       27
<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)


April 11, 2007             /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)


                                       28
<PAGE>



                                 EXHIBIT INDEX


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

         3.1 Amended and Restated Certificate of Incorporation, incorporated by
         reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K
         for the year ended December 31, 2005 (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).

         4.1 Common Stock Purchase Warrant, incorporated by reference to Exhibit
         10.3 to our Current Report on Form 8-K dated February 16, 2006 (File
         No. 0-13634).

         10.1 Amended and Restated Preferred Stock and Warrant Purchase
         Agreement, dated as of February 13, 2006, by and between the Company
         and the purchasers listed on the signature pages thereto, incorporated
         by reference to Exhibit 10.1 to our Current Report on Form 8-K dated
         February 16, 2006 (File No. 0-13634).

         10.2 Amended and Restated Investor Rights Agreement dated as of
         February 13, 2006, between MacroChem Corporation and the purchasers
         listed on the signature pages thereto incorporated by reference to
         Exhibit 10.2 to our Current Report on Form 8-K dated February 16, 2006
         (File No.0-13634).

         10.3 Form of Employment Agreement, dated February 13, 2006, by and
         between the Company and Robert J. DeLuccia incorporated by reference to
         Exhibit 10.4 to our Current Report on Form 8-K dated February 16, 2006
         (File No. 0-13634).

         10.4 Form of Employment Agreement, dated February 13, 2006, by and
         between the Company and Bernard R. Patriacca, including Form of
         Confidential Information, Inventions and Non-Competition Agreement
         (attached as Exhibit B to the Form of Employment Agreement),
         incorporated by reference to Exhibit 10.5 to our Current Report on Form
         8-K dated February 16, 2006 (File No. 0-13634).

         10.5 Form of Severance Agreement, dated February 13, 2006, by and
         between the Company and Bernard R. Patriacca, incorporated by reference
         to Exhibit 10.6 to our Current Report on Form 8-K dated February 16,
         2006 (File No. 0-13634).

         10.6 Form of Employment Agreement, dated February 13, 2006, by and
         between the Company and Glenn E. Deegan, including Form of Confidential
         Information, Inventions and Non-Competition Agreement (attached as
         Exhibit B to the Form of Employment Agreement), incorporated by
         reference to Exhibit 10.7 to our Current Report on Form 8-K dated
         February 16, 2006 (File No. 0-13634).

         10.7 Form of Severance Agreement, dated February 13, 2006, by and
         between the Company and Glenn E. Deegan, incorporated by reference to

                                       29
<PAGE>

         Exhibit 10.8 to our Current Report on Form 8-K dated February 16, 2006
         (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.




                                       30