SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)
[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 2000

                                       or

[ ]            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the Transition Period from ____ to ____

                         Commission file number 0-13634

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

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

            110 Hartwell Avenue, Lexington, Massachusetts 02421-3134
            --------------------------------------------------------
               (Address of principal executive offices, Zip Code)

                                  781-862-4003
                                  ------------
              (Registrant's telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.

Yes    X          No
    -------          -------

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

         CLASS                                 OUTSTANDING AT OCTOBER 31, 2000:
----------------------------                   --------------------------------
Common Stock, $.01 par value                               24,726,783



<PAGE>
                              MACROCHEM CORPORATION

                               INDEX TO FORM 10-Q


                                                                    PAGE NUMBER
PART I    FINANCIAL INFORMATION

Item 1    Unaudited Financial Statements

          Balance Sheets as of September 30, 2000
              and December 31, 1999.................................     2

          Statements of Operations for the Three and Nine Months ended
              September 30, 2000 and 1999...........................     3

          Statements of Cash Flows for the Nine Months ended
              September 30, 2000 and 1999...........................     4

          Notes to Unaudited Financial Statements...................    5-7


Item 2    Management's Discussion and Analysis of Financial
              Condition and Results of Operations...................   7-10

Item 3    Quantitative and Qualitative Disclosures
            About Market Risk.......................................    11


PART II   OTHER INFORMATION

Item 6    Exhibits and Reports on Form 8-K..........................    11


SIGNATURES..........................................................    12


                                       1
<PAGE>

ITEM 1.       FINANCIAL STATEMENTS

                              MACROCHEM CORPORATION
                                 BALANCE SHEETS
                                   (Unaudited)
                    (Amounts in thousands except share data)

                                                   September 30,    December 31,
                                                      2000              1999
                                                   ------------     ------------
                                     ASSETS
Current Assets:
    Cash and cash equivalents                      $ 10,354          $ 15,183
    Accounts receivable                                  32                67
    Receivable due from related party                    22                21
    Prepaid expenses and other current assets           255               166
                                                     ------            ------
         Total current assets                        10,663            15,437
                                                     ------            ------

Property and equipment, net                             394               375
                                                     ------            ------

Other assets:
    Patents, net                                        509               471
    Deposits                                             29                29
                                                     ------            ------
         Total other assets                             538               500
                                                     ------            ------

Total assets                                       $ 11,595          $ 16,312
                                                     ======            ======

                                   LIABILITIES
Current liabilities:
    Accounts payable                               $     26          $     71
    Accrued expenses                                    738               492
    Deferred compensation and related
         accrued interest                               ---                96
                                                     ------            ------
         Total current liabilities                      764               659

Deferred revenue                                        ---               500
Other liabilities                                       ---               ---
                                                     ------            ------

Commitments and contingencies

                              STOCKHOLDERS' EQUITY
Preferred Stock                                         ---               ---
Common Stock, $.01 par value, 60,000,000
    shares authorized; 22,808,620 and
    22,597,564 shares issued at September 30,
    2000 and December 31, 1999, respectively            228               226
Additional paid-in capital                           52,241            49,387
Accumulated deficit                                 (40,488)          (33,295)
Unearned compensation                               (   318)          (   382)
Less treasury stock, at cost, 166,581
    and 160,165 shares at September 30, 2000
    and December 31, 1999, respectively             (   832)          (   783)
                                                     ------            ------
         Total stockholders' equity                  10,831            15,153

Total liabilities and stockholders' equity         $ 11,595          $ 16,312
                                                     ======            ======

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


                                       2
<PAGE>
<TABLE>
<CAPTION>

                              MACROCHEM CORPORATION
                            STATEMENTS OF OPERATIONS
           For the three and nine months ended Sept 30, 2000 and 1999
                                   (Unaudited)
             (Amounts in thousands except share and per share data)

                                        FOR THE THREE MONTHS ENDED SEPT 30,  FOR THE NINE MONTHS ENDED SEPT 30,
                                        -----------------------------------  ----------------------------------
                                                2000            1999             2000           1999
                                                ----            ----             ----           ----

<S>                                        <C>             <C>             <C>             <C>

Research contract revenues                 $         29    $        143    $        601    $        377
                                             ----------      ----------      ----------      ----------


Costs and expenses:
    Research and development                      1,187           1,230           3,316           4,387
    Marketing, general and administrative           754             565           4,993           1,978
    Consulting fees with related parties             13              12              37              36
                                             ----------      ----------      ----------      ----------
         Total costs and expenses                 1,954           1,807           8,346           6,401
                                             ----------      ----------      ----------      ----------

Loss from operations                        (     1,925)    (     1,664)    (     7,745)    (     6,024)
                                             ----------      ----------      ----------      ----------

Other income (expense):
    Interest income                                 175             204             553             632
    Interest expense                                ---     (         1)    (         1)    (         2)
                                             ----------      ----------      ----------      ----------
         Total other income                         175             203             552             630
                                             ----------      ----------      ----------      ----------

Net loss                                   $(     1,750)   $(     1,461)   $(     7,193)   $(     5,394)
                                             ==========      ==========      ==========      ==========

Net loss per common share -
    basic and diluted                      $(      0.08)   $(      0.07)   $(      0.32)   $(      0.24)
                                             ==========      ==========      ==========      ==========

Weighted average common shares
    outstanding (basic and diluted)          22,593,000      22,383,000      22,494,000      22,306,000
                                             ==========      ==========      ==========      ==========
</TABLE>
















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

                                       3
<PAGE>
                              MACROCHEM CORPORATION
                            STATEMENTS OF CASH FLOWS
              For the nine months ended September 30, 2000 and 1999
                                   (Unaudited)
                             (Amounts in thousands)

                                             FOR NINE MONTHS ENDED SEPTEMBER 30,
                                             -----------------------------------
                                                         2000          1999
                                                         ----          ----

Cash flows from operating activities:
    Net Loss                                          $( 7,193)     $( 5,394)
                                                        ------        ------
    Adjustments to reconcile net loss
      to net cash used by operating activities:
      Depreciation and amortization                        131           163
      Stock-based compensation                           2,757           417
      401(k) contribution in company common stock           54            58
      Changes in assets and liabilities:
         Accounts receivable                                35       (    51)
         Prepaid expenses and other current assets     (    90)      (    23)
         Accounts payable and accrued expenses and
           other liabilities                               201       (   289)
         Deferred compensation and related
           accrued interest                            (    96)            2
         Deferred revenue                              (   500)          ---
                                                        ------
Net cash used by operating activities                  ( 4,701)      ( 5,117)
                                                        ------        ------

Cash flows from investing activities:
    Expenditures for property and equipment            (   135)      (   158)
    Additions to patents                               (    53)      (   101)
                                                        ------        ------
Net cash used for investing activities                 (   188)      (   259)
                                                        ------        ------

Cash flows from financing activities:
    Purchases of treasury stock                        (    21)          ---
    Proceeds from exercise of common stock options          81           370
    Proceeds from exercise of  warrants                    ---           834
                                                        ------        ------
Net cash provided from financing activities                 60         1,204
                                                        ------        ------

Net change in cash and cash equivalents                ( 4,829)      ( 4,172)
Cash and cash equivalents at beginning of period        15,183        20,504
                                                        ------        ------

Cash and cash equivalents at end of period            $ 10,354      $ 16,332
                                                        ======        ======


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

During the nine months ended September 30, 2000 and 1999, cash paid for interest
aggregated $1,000 and $275, respectively.

The Company did not pay any income taxes during those periods.


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


                                       4
<PAGE>
                              MACROCHEM CORPORATION
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1)      BASIS OF PRESENTATION

         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 generally
         accepted accounting  principles have been condensed or omitted pursuant
         to such  rules and  regulations.  In the  opinion  of  management,  the
         accompanying  unaudited  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
         financial statements included herein should be read in conjunction with
         the audited financial  statements and the notes thereto included in the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 1999.

         The results  disclosed in the  Statements  of  Operations  for the nine
         months ended September 30, 2000 are not  necessarily  indicative of the
         results to be expected for the full year.

         MacroChem is a biopharmaceutical company engaged in the development and
         commercialization of a portfolio of products through the application of
         SEPA(R)  (Soft  Enhancer  of  Percutaneous  Absorption),  its  patented
         topical drug delivery technology.


(2)      BASIC AND DILUTED LOSS PER SHARE

         The  following  table sets forth the  computation  of basic and diluted
         loss per share:

                          Three Months Ended Sept 30, Nine Months Ended Sept 30,
                          --------------------------- --------------------------
                              2000           1999         2000         1999
                          ------------   ------------ -----------  -------------

Numerator for basic and
diluted loss per share:
  Net loss               $ 1,750,000     $ 1,461,000  $ 7,193,000   $ 5,394,000
                          ==========      ==========   ==========    ==========

Denominator for basic and
diluted loss per share:
  Weighted average shares
   outstanding            22,593,000      22,383,000   22,494,000    22,306,000
                          ==========      ==========   ==========    ==========

Net loss per share -
basic                    $      0.08     $      0.07  $      0.32   $      0.24
                          ==========      ==========   ==========    ==========

Net loss per share -
diluted                  $      0.08     $      0.07  $      0.32   $      0.24
                          ==========      ==========   ==========    ==========


                                       5
<PAGE>
         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 nine months ended September 30, 2000 and 1999 were
         1,886,100 and 2,693,597  respectively.  Anti-dilutive  potential shares
         not  included  in per share  calculations  for the three  months  ended
         September 30, 2000 and 1999 were approximately  2,054,100 and 2,272,736
         respectively.


(3)      STOCKHOLDERS' EQUITY

         The Company  granted 970,000 Common Stock Options under the 1994 Equity
         Incentive Plan (the "1994 Plan") during the nine months ended September
         30, 2000.  During this same period,  20,666 options under the 1994 Plan
         were  exercised  and 174,500  options were  canceled.  All options were
         issued  with  an  exercise  price  at  the  fair  market  value  of the
         underlying common stock determined on the date of grant.

(4)      COMPREHENSIVE INCOME

         The Company reports  comprehensive  income in accordance with Statement
         of  Financial   Accounting   Standards  ("SFAS")  No.  130,  "Reporting
         Comprehensive   Income",   which   requires   businesses   to  disclose
         comprehensive  income  and  its  components  in  their  general-purpose
         financial  statements.  Comprehensive  income  (loss)  is  equal to the
         Company's  net loss for the three and nine months ended  September  30,
         2000 and 1999.

(5)      RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
         SFAS No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
         Activities"  ("SFAS No. 133"). SFAS No. 133 establishes  accounting and
         reporting  standards  for  derivative  instruments,  including  certain
         derivative  instruments  embedded  in  other  contracts   (collectively
         referred to as derivatives),  and for hedging activities.  SFAS No. 133
         requires  companies to recognize  all  derivatives  as either assets or
         liabilities,   with  the  instruments   measured  at  fair  value.  The
         accounting for changes in fair value,  gains or losses,  depends on the
         intended  use of the  derivative  and its  resulting  designation.  The
         adoption of SFAS No. 133 is not  expected to have a material  effect on
         the Company's  financial position or the results of operations,  as the
         Company has not utilized  such  instruments  to date.  The Company will
         adopt SFAS No. 133 on January 1, 2001, as required.


         In December 1999, the Securities and Exchange Commission ("SEC") issued
         Staff  Accounting  Bulletin  101,  "Revenue  Recognition  in  Financial
         Statements"  ("SAB 101"),  which provides  guidance  related to revenue
         recognition based on interpretations and practices followed by the SEC.
         SAB 101 is effective for the Company in the quarter ending December 31,
         2000,  and  requires   companies  to  report  any  changes  in  revenue
         recognition as a cumulative change in accounting  principle at the time
         of  implementation  in  accordance  with  Accounting  Principles  Board
         Opinion No. 20,  "Accounting  Changes." The  implementation  of SAB 101
         will not impact past revenue  recognition  practices or have any effect
         on the Company's financial position.



                                       6
<PAGE>

(6)      OPTION EXTENSION

         During the period ended June 30, 2000, the Company's Board of Directors
         approved a two year  extension  of the terms of certain  stock  options
         expiring in March 2001 granted to a present and a former officer of the
         Company.  In  connection  with  the  extension  of the  options  and in
         accordance with Accounting Principles Board Opinion No. 25, "Accounting
         for stock Issued to Employees,"  the Company  recognized a compensation
         charge of approximately $2,810,000.


(7)      SUBSEQUENT EVENT

         In October 2000, the Company sold 1,816,658  shares of its common stock
         for $9,000,000 in gross proceeds  ($8,402,500 net of issuance costs) in
         a private  placement to two institutional  investors.  The Company also
         may require the  investors  to purchase  an  additional  $7,000,000  of
         common stock seven months after the  effectiveness  of the required SEC
         registration statement, subject to certain conditions.

         The  investors  also  received  warrants to purchase  an  aggregate  of
         363,322  shares of common stock at a purchase  price of $5.90 per share
         for five  years.  The  placement  agent  received a warrant to purchase
         108,999  shares of common  stock at a purchase  price of $7.43 for five
         years.   The  warrants   may  be  exercised  on  a  "cashless"   basis.
         Additionally,  each investor received a warrant to purchase  additional
         shares  of  common  stock  at  a  purchase  price  of  $.01  per  share
         exercisable only upon certain conditions  relating to the trading price
         of the common stock during the period  following the  effectiveness  of
         the registration statement.

         Also  in  October  2000,  a  newly-appointed  director  of the  Company
         purchased  104,577  shares  of  common  stock,  at fair  market  value,
         resulting in $500,000 of proceeds to the Company.



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

GENERAL

MacroChem  Corporation's  primary business is the development of  pharmaceutical
products  for   commercialization   by  employing   SEPA(R)  (Soft  Enhancer  of
Percutaneous  Absorption),  its patented topical drug delivery technology.  SEPA
compounds,   when   properly   combined  with  drugs,   provide   pharmaceutical
formulations  (creams,  gels,  solutions,  etc.) that  enhance  the  transdermal
delivery of drugs into the skin or into the bloodstream.  The Company  currently
derives no significant  revenue from product  sales,  royalties or license fees.
The Company plans to develop specific SEPA formulations for use with proprietary
and  non-proprietary  drugs  manufactured by  pharmaceutical  companies,  and to
commercialize  these products through the formation of  partnerships,  strategic
alliances  and  license  agreements  with those  companies.  In order to attract
strategic  partners,  the  Company  is  conducting  clinical  testing of certain
SEPA-enhanced drugs.

The Company's results of operations can vary significantly from year to year and
quarter to quarter,  and  depend,  among  other  factors,  on the signing of new
licenses and product development  agreements,  the timing of revenues recognized
pursuant to license agreements,  the achievement of milestones by licensees, the
progress of clinical  trials  conducted by the licensees and the Company and the
degree of  research,  marketing  and  administrative  effort.  The timing of the
Company's revenues may not match the timing of the Company's  associated product
development  expenses. To date, research and development expenses have generally
exceeded revenue in any particular period and/or fiscal year.

                                       7
<PAGE>

AMERICAN HOME PRODUCTS LICENSE AGREEMENT

The  Company was  notified by American  Home  Products  ("AHP"),  that AHP,  for
internal  strategic  reasons,  was  terminating  its License and Stock  Purchase
Agreement  between  the  Company  and AHP (the "AHP  Agreement")  related to the
development of a SEPA-based product.  All rights to the subject product reverted
to the Company and the Company is continuing  to develop and seek  licensees for
the product.

As a result of the termination of the AHP Agreement,  the Company has recognized
$500,000 in deferred revenue in the nine month period ended September 30, 2000.

TOPIGLAN(R)

On July  10,  2000,  the  Company,  following  a  favorable  U.S.  Food and Drug
Administration ("FDA") review of its proposed trial protocol,  announced that it
was beginning a pivotal Phase III clinical trial of its topical  impotence drug,
Topiglan.  The  double-blind,  randomized and placebo  controlled  trial will be
conducted  in  approximately  20  specialized  centers  around the U.S. and will
involve  more than 400  patients  with a well  documented  history  of  erectile
dysfunction and their partners. The Phase III clinical trial will begin the last
phase of Topiglan's development prior to its submission to the FDA for marketing
approval.

RESULTS OF OPERATIONS

Revenues,  consisting of research contract revenues, decreased $114,000, or 80%,
to $29,000 in the three month period ended  September  30, 2000 from $143,000 in
the three month period ended September 30, 1999 and increased $224,000,  or 59%,
to $601,000 in the nine month period ended  September  30, 2000 from $377,000 in
the nine month  period  ended  September  30,  1999.  The  decrease  in research
contract  revenues  is due to the  absence  of  revenues  generated  by the  AHP
contract in the three month period  ended  September  30, 2000.  The increase in
revenues  during the nine month period ended  September  30, 2000 is a result of
the Company's  recognition of $500,000 in revenue  previously  deferred upon the
termination of the AHP Agreement in the first quarter of fiscal 2000, as well as
recognition of contract income from research and development  feasibilty studies
with a major pharmaceutical company.

Research and development expenses decreased $43,000, or 3%, to $1,187,000 in the
three month period ended  September 30, 2000 from  $1,230,000 in the three month
period ended September 30, 1999 and decreased $1,071,000,  or 24%, to $3,316,000
in the nine month period ended  September  30, 2000 from  $4,387,000 in the nine
month period ended  September 30, 1999. The change for the three month period is
primarily attributable to an increase of $108,000 due to the initiation of Phase
III  clinical  trials of Topiglan  net of a decrease of $235,000  due to a stock
compensation  market  adjustment.  The  decrease  for the nine  month  period is
primarily attributable to Phase I/II clinical trials in 1999.



                                       8
<PAGE>

Marketing,  general and administrative  expenses increased $189,000,  or 33%, to
$754,000 in the three month period ended September 30, 2000 from $565,000 in the
three month period ended September 30, 1999 and increased  $3,015,000,  or 152%,
to $4,993,000 in the nine month period ended  September 30, 2000 from $1,978,000
in the nine month period  ended  September  30, 1999.  The increase for the nine
month  period  is  primarily  attributable  to a stock  compensation  charge  of
$2,810,000  related to the  extension of certain  stock options to key employees
from second quarter 2000.

Other  income  decreased  by $28,000,  or 14%, in the three month  period  ended
September  30,  2000 and by  $78,000,  or 12%,  in the nine month  period  ended
September 30, 2000. The decreases are due to lower average invested  balances of
cash and cash equivalents resulting from funds used in Company operations.

For the  reasons  described  above,  net loss  increased  $289,000,  or 20%,  to
$1,750,000 in the three month period ended September 30, 2000 from $1,461,000 in
the three month period ended  September  30, 1999 and increased  $1,799,000,  or
33%,  to  $7,193,000  in the nine month  period  ended  September  30, 2000 from
$5,394,000 in the nine month period ended September 30, 1999.

LIQUIDITY AND CAPITAL RESOURCES

Since inception,  the primary source of funding for the Company's operations has
been the private and public sale of its securities,  and to a lesser extent, the
licensing of its proprietary technology and products,  government grants and the
limited  sales of products and test  materials.  During the first nine months of
2000, the Company received aggregate net proceeds of approximately  $81,000 from
the exercise of stock options,  compared to approximately  $1,204,000 related to
the exercise of stock  options and  warrants in the nine months ended  September
30, 1999.

At September 30, 2000 working capital was approximately $9,899,000,  compared to
$14,778,000 at December 31, 1999. The reduction in the Company's working capital
was due primarily to the cash used by operating  activities.  Until such time as
the Company obtains agreements with third-party licensees or partners to provide
funding for the Company's anticipated business activities or the Company is able
to obtain  funds  through  the  private or public  sale of its  securities,  the
Company's  working  capital  will be utilized  primarily  to fund its  operating
activities.

Pursuant to a plan approved by the Company's Board of Directors,  the Company is
authorized  to  repurchase  1,000,000  shares of its Common  Stock to be held as
treasury shares for future use. During the nine month period ended September 30,
2000, the Company repurchased 5,000 shares of Common Stock at a cost of $21,000.
At September 30, 2000,  154,018  repurchased  shares remain available for future
use and 807,650  shares  remain  available  for  repurchase  under the plan.  In
addition,  during the quarter  ended  September  30,  2000,  12,563  shares were
tendered to the Company,  and are being held as treasury stock, as consideration
for the exercise of options under the Company's 1984 Non-Qualified  Stock Option
Plan to receive 179,500 shares of common stock.  At September 30, 2000,  166,581
shares are held as treasury stock.

Capital expenditures and additional patent development costs for the nine months
ended September 30, 2000 were approximately $188,000.

In October  2000,  the Company  sold  1,816,658  shares of its common  stock for
$9,000,000 in gross  proceeds  ($8,402,500  net of issuance  costs) in a private
placement  to two  institutional  investors.  The  Company  also may require the
investors  to purchase an  additional  $7,000,000  of common  stock seven months
after the effectiveness of the required SEC registration  statement,  subject to
certain conditions.

                                       9
<PAGE>

The investors also received  warrants to purchase an aggregate of 363,322 shares
of common  stock at a  purchase  price of $5.90 per  share for five  years.  The
placement agent received a warrant to purchase 108,999 shares of common stock at
a purchase  price $7.43 for five  years.  The  warrants  may be  exercised  on a
"cashless"  basis.  Additionally,  each investor  received a warrant to purchase
additional  shares  of  common  stock at a  purchase  price  of $.01  per  share
exercisable  only upon certain  conditions  relating to the trading price of the
common stock during the period  following the  effectiveness of the registration
statement.

Also in October  2000,  a  newly-appointed  director  of the  Company  purchased
104,577 shares of common stock,  at fair market value,  resulting in $500,000 of
proceeds to the Company.

The Company's long term capital  requirements will depend upon numerous factors,
including the progress of the Company's research and development  programs;  the
resources  that  the  Company  devotes  to  self-funded   clinical   testing  of
SEPA-enhanced   compounds,   proprietary   manufacturing  methods  and  advanced
technologies;  the  ability of the  Company to enter into  additional  licensing
arrangements  or other  strategic  alliances;  the  ability  of the  Company  to
manufacture products under those arrangements and the demand for its products or
the products of its  licensees or  strategic  partners if and when  approved for
sale by regulatory authorities.  In any event, substantial additional funds will
be  required  before the  Company is able to  generate  revenues  sufficient  to
support its  operations.  There is no assurance that the Company will be able to
obtain such  additional  funds on  favorable  terms,  if at all.  The  Company's
inability to raise  sufficient  funds could  require it to delay,  scale back or
eliminate certain research and development programs.

The  Company  believes  that its  existing  cash and  cash  equivalents  will be
sufficient to meet its operating expenses and capital  expenditure  requirements
for at least the next twelve months.  The Company's cash  requirements  may vary
materially  from those now planned  because of changes in focus and direction of
the  Company's  research and  development  programs,  competitive  and technical
advances,  patent  developments or other  developments.  It is not believed that
inflation  will have any  significant  effect on the  results  of the  Company's
operations.

FUTURE ADOPTION OF ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS No.
133").  SFAS  No.  133  establishes   accounting  and  reporting  standards  for
derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  (collectively  referred  to as  derivatives),  and for hedging
activities.  SFAS No. 133 requires  companies to recognize  all  derivatives  as
either assets or liabilities,  with the instruments  measured at fair value. The
accounting for changes in fair value,  gains or losses,  depends on the intended
use of the  derivative and its resulting  designation.  The adoption of SFAS No.
133 is not  expected  to  have a  material  effect  on the  Company's  financial
position or the results of  operations,  as the  Company has not  utilized  such
instruments  to date. The Company will adopt SFAS No. 133 on January 1, 2001, as
required.

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin 101,  "Revenue  Recognition in Financial  Statements" ("SAB
101"),  which  provides  guidance  related  to  revenue   recognition  based  on
interpretations  and practices  followed by the SEC. SAB 101 is effective in the
quarter ending  December 31, 2000, and requires  companies to report any changes
in revenue  recognition  as a cumulative  change in accounting  principle at the
time of  implementation  in accordance with Accounting  Principles Board Opinion
No. 20, "Accounting Changes." The implementation of SAB 101 will not impact past
revenue  recognition  practices  or have any effect on the  Company's  financial
position.


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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CASH AND CASH EQUIVALENTS

As of September  30,  2000,  the Company is exposed to market risks which relate
primarily to changes in U.S.  interest rates. The Company's cash equivalents are
subject  to  interest  rate risk and will  decline  in value if  interest  rates
increase. Due to the short duration of these financial instruments, three months
or less,  changes to interest  rates  would not have a material  effect upon the
Company's financial position.

THIS  REPORT  CONTAINS   FORWARD-LOOKING   STATEMENTS  THAT  INVOLVE  RISKS  AND
UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER  SIGNIFICANTLY  FROM THE
RESULTS  DISCUSSED  IN THE  FORWARD-LOOKING  STATEMENTS  IN THIS  REPORT  AND IN
FORWARD-LOOKING STATEMENTS MADE FROM TIME TO TIME BY THE COMPANY ON THE BASIS OF
MANAGEMENT'S  THEN-CURRENT  EXPECTATIONS.   FACTORS  THAT  MIGHT  CAUSE  SUCH  A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO THE FOLLOWING:  THE COMPANY'S HISTORY
OF  OPERATING  LOSSES  AND NEED FOR  CONTINUED  WORKING  CAPITAL;  TECHNOLOGICAL
UNCERTAINTY RELATING TO TRANSDERMAL DRUG DELIVERY SYSTEMS AND THE EARLY STAGE OF
DEVELOPMENT  OF  THE  COMPANY'S  PROPOSED  PRODUCTS;   THE  COMPANY'S  NEED  FOR
SIGNIFICANT  ADDITIONAL PRODUCT  DEVELOPMENT  EFFORTS AND ADDITIONAL  FINANCING;
UNCERTAINTIES RELATED TO CLINICAL TRIALS OF THE COMPANY'S PROPOSED PRODUCTS; THE
COMPANY'S  DEPENDENCE  ON THIRD PARTIES FOR  COMMERCIALIZATION;  NO ASSURANCE OF
LICENSE  ARRANGEMENTS;  THE LACK OF SUCCESS OF THE COMPANY'S  PRIOR  DEVELOPMENT
EFFORTS;   UNCERTAINTIES   RELATING  TO  GOVERNMENT  REGULATION  AND  REGULATORY
APPROVALS;  THE COMPANY'S  DEPENDENCE  ON THIRD PARTIES FOR THE FDA  APPLICATION
PROCESS; THE COMPANY'S LACK OF EXPERIENCED MARKETING PERSONNEL AND DEPENDENCE ON
THIRD PARTIES FOR MARKETING AND DISTRIBUTION;  THE COMPANY'S DEPENDENCE ON THIRD
PARTIES FOR MANUFACTURING;  THE COMPANY'S RELIANCE ON KEY EMPLOYEES, THE LIMITED
PERSONNEL  OF THE COMPANY AND ITS  DEPENDENCE  ON ACCESS TO  SCIENTIFIC  TALENT;
UNCERTAINTIES  RELATING  TO  COMPETITION,  PATENTS AND  PROPRIETARY  TECHNOLOGY;
UNCERTAINTIES  RELATING TO RISKS OF PRODUCT  LIABILITY  CLAIMS,  LACK OF PRODUCT
LIABILITY INSURANCE,  AND EXPENSE AND DIFFICULTY OF OBTAINING ADEQUATE INSURANCE
COVERAGE;  UNCERTAINTY OF PHARMACEUTICAL  PRICING AND RELATED MATTERS; AND OTHER
FACTORS.  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, 1999 AND, IN PARTICULAR, THE
SECTION ENTITLED "RISK FACTORS."


PART II - OTHER INFORMATION

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K.

           (a)  The following exhibits are filed herewith:

                27.      Financial Data Schedule

           (b)  No reports on Form 8-K were filed during the quarter for which
                this report is filed.

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                                   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)



November 14, 2000                        /S/ ALVIN J. KARLOFF
                                         ---------------------------------------
                                         Alvin J. Karloff
                                         Chairman, President and Chief Executive
                                         Officer
                                         (Principal Executive Officer)

                                         /S/ KENNETH L. RICE, JR.
                                         ---------------------------------------
                                         Kenneth L. Rice, Jr.
                                         Chief Financial Officer, Treasurer,
                                         and Secretary
                                         (Principal Financial Officer)





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