SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)
[X]             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2002

                                       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 July 31, 2002:
----------------------------                       -----------------------------
Common Stock, $.01 par value                                 27,932,804

<PAGE>

                              MACROCHEM CORPORATION

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

                                                                     Page Number
                                                                     -----------
PART I   FINANCIAL INFORMATION

Item 1   Unaudited Financial Statements

              Condensed Balance Sheets
              June 30, 2002 and December 31, 2001                         3

              Condensed Statements of Operations for the
              Three and Six months Ended June 30, 2002 and 2001           4

              Condensed Statements of Cash Flows for the
              Six Months Ended June 30, 2002 and 2001                     5

              Notes to Unaudited Condensed Financial
              Statements                                                 6-8


Item 2   Management's Discussion and Analysis of
         Financial Condition and Results of Operations                   9-12

Item 3   Quantitative and Qualitative Disclosures About Market Risk     12-13


PART II  OTHER INFORMATION

Item 4   Submission of Matters to a Vote of Security Holders             14

Item 6   Exhibits and Reports on Form 8-K                                14

SIGNATURES                                                               15

EXHIBIT INDEX                                                            16


                                       2
<PAGE>

ITEM 1.       FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                             MACROCHEM CORPORATION
                                           CONDENSED BALANCE SHEETS
                                                  (Unaudited)
                                   (Amounts in thousands except share data)

                                                                            June 30,             December 31,
                                                                              2002                   2001
                                                                        ---------------        ---------------

                                     ASSETS
<S>                                                                     <C>                    <C>
Current assets:
       Cash and cash equivalents                                        $         1,040        $           697
       Short-term investments                                                    11,050                 15,833
       Accounts receivable                                                          ---                    375
       Receivable due from related party                                             25                     24
       Prepaid expenses and other current assets                                    353                    171
                                                                        ---------------        ---------------
           Total current assets                                                  12,468                 17,100
                                                                        ---------------        ---------------

Property and equipment, net                                                         465                    530
                                                                        ---------------        ---------------

Other assets:
       Patents, net                                                                 622                    599
       Deposits                                                                      29                     29
                                                                        ---------------        ---------------
           Total other assets                                                       651                    628
                                                                        ---------------        ---------------

Total assets                                                            $        13,584        $        18,258
                                                                        ===============        ===============

                                   LIABILITIES

Current liabilities:
       Accounts payable                                                 $            27        $             5
       Accrued expenses                                                             770                  1,355
                                                                        ---------------        ---------------
           Total current liabilities                                                797                  1,360

Deferred rent                                                                        50                     49
                                                                        ---------------        ---------------

Total liabilities                                                                   847                  1,409
                                                                        ---------------        ---------------

Commitments and contingencies

                                                STOCKHOLDERS' EQUITY
Preferred stock, authorized and unissued, 6,000,000 shares                          ---                    ---
Common stock, $.01 par value, 60,000,000 shares authorized;
       28,163,054 and 28,158,054 shares issued at June 30,
       2002 and December 31, 2001, respectively                                     282                    282
Additional paid-in capital                                                       73,083                 73,020
Accumulated deficit                                                            (59,726)               (55,374)
Unearned compensation                                                               (4)                   (71)
Less treasury stock, at cost, 230,250 and 253,346
       shares at June 30, 2002 and December 31, 2001,
       respectively                                                              (898)                (1,008)
                                                                        ---------------        ---------------
           Total stockholders' equity                                            12,737                 16,849
                                                                        ---------------        ---------------
Total liabilities and stockholders' equity                              $        13,584        $        18,258
                                                                        ===============        ===============
</TABLE>

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


                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                 MACROCHEM CORPORATION
                                          CONDENSED STATEMENTS OF OPERATIONS
                               For the three and six months ended June 30, 2002 and 2001
                                                      (Unaudited)
                                (Amounts in thousands except share and per share data)


                                               For the three months ended June 30,   For the six months ended June 30,
                                               -----------------------------------   ---------------------------------
                                                     2002              2001                 2002            2001
                                                     ----              ----                 ----            ----

<S>                                               <C>              <C>                  <C>              <C>
Research contract revenues                        $       ---      $       ---          $        43      $       ---
                                                  -----------      -----------          -----------      -----------


Operating expenses:
    Research and development                              964            2,481                2,199            5,025
    Marketing, general and administrative               1,222            1,145                2,286            1,921
    Consulting fees with related parties                   15               15                   30               31
                                                  -----------      -----------          -----------      -----------
       Total operating expenses                         2,201            3,641                4,515            6,977
                                                  -----------      -----------          -----------      -----------

Loss from operations                                  (2,201)          (3,641)              (4,472)          (6,977)
                                                  ----------       ----------           -----------      -----------

Other income (expense):
    Interest income                                        53              191                  120              345
                                                  -----------      -----------          -----------      -----------
       Total other income                                  53              191                  120              345
                                                  -----------      -----------          -----------      -----------

Net loss                                          $   (2,148)      $   (3,450)          $   (4,352)      $   (6,632)
                                                  ===========      ===========          ===========      ===========

Net loss per share -
    basic and diluted                             $    (0.08)      $    (0.13)          $    (0.16)      $    (0.28)
                                                  ===========      ===========          ===========      ===========

Weighted average shares                            27,920,000       25,862,000           27,914,000       23,332,000
outstanding (basic and diluted)

</TABLE>

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


                                       4
<PAGE>

<TABLE>
<CAPTION>
                                              MACROCHEM CORPORATION
                                       CONDENSED STATEMENTS OF CASH FLOWS
                                 For the six months ended June 30, 2002 and 2001
                                                   (Unaudited)
                                             (Amounts in thousands)

                                                                               For the six months ended June 30,
                                                                               ---------------------------------
                                                                                   2002                  2001
                                                                                   ----                  ----
<S>                                                                          <C>                   <C>
Cash flows from operating activities:
       Net loss                                                              $    (4,352)          $   (6,632)
       Adjustments to reconcile net loss to net cash
         used by operating activities:
           Depreciation and amortization                                              109                   81
           Stock-based compensation                                                   185                  329
           401(k) contribution in Company common stock                                 55                   47
           Deferred rent                                                                1                    7
       Changes in assets and liabilities:
           Accounts receivable                                                        375                   31
           Prepaid expenses and other current assets                                (182)                 (64)
           Accounts payable and accrued expenses                                    (562)                  522
                                                                             ------------          -----------


Net cash used by operating activities                                             (4,371)              (5,679)
                                                                             ------------          -----------

Cash flows from investing activities:
       Sales of short-term investments                                              4,783                4,333
       Expenditures for property and equipment                                       (28)                (190)
       Additions to patents                                                          (39)                 (18)
                                                                             ------------          -----------
Net cash provided by investing activities                                           4,716                4,125
                                                                             ------------          -----------

Cash flows from financing activities:
       Proceeds from exercise of common stock options                                 ---                1,854
       Proceeds from exercise of warrants                                             ---                  372
                                                                             ------------          -----------
Net cash provided by financing activities                                             ---                2,226
                                                                             ------------          -----------

Net change in cash and cash equivalents                                               343                  672
Cash and cash equivalents at beginning of period                                      697                  589
                                                                             ------------          -----------

Cash and cash equivalents at end of period                                   $      1,040          $     1,261
                                                                             ============          ===========

</TABLE>

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


                                       5
<PAGE>

                              MACROCHEM CORPORATION
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(1)      Basis of Presentation
         ---------------------

         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 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, 2001.

         The results disclosed in the Statement of Operations for the six months
         ended June 30, 2002 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)      Revenue Recognition
         -------------------

         Research contract revenues consist of non-refundable research and
         development funding under collaborative agreements with various
         corporate or government organizations. Research and development funding
         is generally recognized as revenue at the time the research and
         development activities are performed under the terms of the related
         agreements, when the corporate partner is obligated to pay and when no
         future performance obligations exist. Payments received in advance of
         services provided result in the deferral of revenue recognition to
         future periods.


                                       6
<PAGE>

(3)      Basic and Diluted Loss Per Share
         --------------------------------

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

<TABLE>
<CAPTION>
                                                     Three Months Ended June 30,         Six Months Ended June 30,
                                                     ---------------------------         -------------------------
                                                         2002             2001              2002           2001
                                                         ----             ----              ----           ----
           <S>                                      <C>               <C>               <C>             <C>
           Numerator for basic and diluted
           loss per share:
              Net loss                              $ (2,148,000)     $(3,450,000)      $(4,352,000)    $(6,632,000)
                                                    =============     ============      ============    ============

           Denominator for basic and diluted
           loss per share:
              Weighted average shares
                outstanding                           27,920,000       25,862,000        27,914,000      23,332,000
                                                    =============     ============      ============    ============

           Net loss per share - basic and
           diluted                                  $      (0.08)     $     (0.13)      $     (0.16)    $     (0.28)
                                                    =============     ============      ============    ============

</TABLE>

         Potential common shares are not included in the per share calculations
         for diluted EPS, because the effect of their inclusion would be
         anti-dilutive. Anti-dilutive potential shares not included in per share
         calculations for the six months ended June 30, 2002 and 2001 were
         5,075,485 and 4,399,966 respectively.

(4)      Stockholders' Equity
         --------------------

         During the six months ended June 30, 2002, 493,000 options were granted
         under the 2001 Incentive Plan (the "Plan"). No options were exercised
         during the same period. Also during the same period, 46,100 options
         were canceled under the Plan.

         Under the 1994 Equity Incentive Plan (the "1994 Plan"), no shares were
         exercised during the six-month period ended June 30, 2002. During the
         same period, 144,000 options were canceled under the 1994 Plan.

         During the six months ended June 30, 2002, no options were exercised or
         canceled under the 1984 Non Qualified Plan.

         Warrants to purchase common stock were issued in connection with an
         October 2000 private placement to two institutional investors. The
         warrants issued consist of warrants to purchase an aggregate of 363,322
         shares of common stock at a purchase price of $5.90 per share for five
         years. Through June 30, 2002, none of the $5.90 warrants had been
         exercised. 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 common stock during the period following the effectiveness of the
         related registration statement. A total of 880,314 of the $.01 warrants
         were exercised through June 30, 2001, and there are no further
         exercises available under these $.01 warrants. The placement agent
         received a warrant to purchase 108,999 shares of common stock at a


                                       7
<PAGE>

         purchase price of $7.43 for five years. Through June 30, 2002, 50,000
         of the $7.43 warrants had been exercised. None were exercised in the
         six months ended June 30, 2002.

         In July 2001, the Company sold 1,566,047 shares of its common stock for
         approximately $10,148,000 in gross proceeds ($9,406,000 net of issuance
         costs) in a private placement to institutional investors.

         The investors in the July 2001 transaction also received warrants to
         purchase an aggregate of 313,209 shares of common stock at a purchase
         price of $8.995 per share. These warrants expire five years from the
         closing date and are callable by the Company if the closing price of
         the stock is higher than $17.99 for 15 consecutive trading days at any
         time before expiration. As of June 30, 2002, none of the $8.995
         warrants had been exercised.

(5)      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 six months ended June 30, 2002 and 2001.

(6)      Recent Accounting Pronouncements
         --------------------------------

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
         two new pronouncements: Statement of Financial Accounting Standards
         ("SFAS") No. 141, Business Combinations ("SFAS No. 141"), and SFAS No.
         142, Goodwill and Other Intangible Assets ("SFAS No. 142"). SFAS No.
         141 is effective as follows: a) use of the pooling-of-interest method
         is prohibited for business combinations initiated after June 30, 2001;
         and b) the provisions of SFAS No. 141 also apply to all business
         combinations accounted for by the purchase method that are completed
         after June 30, 2001 (that is, the date of acquisition is July 2001 or
         later). SFAS No. 142 is effective for fiscal years beginning after
         December 15, 2001 to all goodwill and other intangible assets
         recognized in an entity's statement of financial position at that date,
         regardless of when those assets were initially recognized. SFAS No. 142
         requires that upon adoption, amortization of goodwill and other
         intangible assets with indefinite useful lives will cease and instead,
         the carrying value of these assets will be evaluated for impairment on
         an annual basis. On January 1, 2002, the Company adopted these
         statements, which had no effect on the Company's financial position or
         results of operations.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
         Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), which
         addresses financial accounting and reporting for the impairment or
         disposal of long-lived assets. This Statement supercedes SFAS No. 121,
         and the accounting and reporting provisions of APB 30, for the disposal
         of a segment of a business. The provisions of SFAS No. 144 were
         required to be adopted by the Company effective January 1, 2002. On
         January 1, 2002, the Company adopted this statement, which had no
         effect on the Company's financial position or results of operations.


                                       8
<PAGE>

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

General
-------

MacroChem's primary business is the development of pharmaceutical products for
commercialization by employing SEPA(R) (Soft Enhancer of Percutaneous
Absorption), its patented drug delivery technology. SEPA compounds, when
properly combined with drugs, provide pharmaceutical formulations (creams, gels,
lacquers, 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 is developing
specific SEPA formulations for use with proprietary and non-proprietary drugs
manufactured by other pharmaceutical companies, and to commercialize these
products through the formation of partnerships, strategic alliances and
licensing arrangements with those companies. In order to attract strategic,
development or marketing 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 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 revenues in any particular period and/or fiscal year.

Critical Accounting Policies
----------------------------

Note 1 of the consolidated financial statements included within the Company's
Form 10-K for the year ended December 31, 2001, includes a summary of the
significant accounting policies and methods used in the preparation of our
consolidated financial statements. The following is a brief discussion of the
more significant accounting policies and methods used by us.

The Company's discussion and analysis of its financial condition and results of
operations are based upon 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 the Company to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its financial
statements. As more fully described in the notes to the consolidated financial
statements included in the Form 10-K for the year ended December 31, 2001, we
derive revenue from research and co-development programs. Research and
development funding is generally recognized as revenue at the time the research
and development activities are performed under the terms of the related
agreements, when the counter-party is obligated to pay, and when no future
performance obligation exists. Research and co-development revenue is billed on


                                       9
<PAGE>

a cost reimbursement basis, which includes direct costs incurred in connection
with research activities and an allocation of certain other costs incurred by
the Company.

Costs and expenses incurred in connection with pending patent applications are
deferred. Costs related to successful patent applications are amortized over the
estimated useful lives of the patents using the straight-line method.
Accumulated costs related to patents or deferred patent application costs that
are considered to have limited future value are charged to operations.

Results of Operations
---------------------

Revenues, consisting of research contract revenues, were zero in the three-month
period ended June 30, 2002 and increased to $43,000, in the six-month period
ended June 30, 2002. The increase in revenues during the six-month period ended
June 30, 2002 is the result of the Company obtaining a small business grant in
September of 2001, funded by the Department of Health and Human Services.

Research and development expenses decreased $1,517,000, or 61%, to $964,000 in
the three-month period ended June 30, 2002 from $2,481,000 in the three-month
period ended June 30, 2001 and decreased $2,826,000, or 56%, to $2,199,000 in
the six-month period ended June 30, 2002. The decrease in the three and
six-month period is primarily attributable to the funding of Topiglan Phase III
clinical trial studies being performed during the first and second quarters of
2001. The level of research and development expenses is highly dependent on the
timing and extent of new and ongoing clinical trials.

Marketing, general and administrative expenses increased $77,000, or 7%, to
$1,222,000 in the three months ended June 30, 2002 from $1,145,000 in the
three-month period ended June 30, 2001 and increased $365,000, or 19%, to
$2,286,000 in the six months ended June 30, 2002 from $1,921,000 in the six
months ended June 30, 2001. The increase in the three and six-month periods is
primarily attributable to normal yearly salary increases, additional personnel,
including an in-house legal counsel and administrative assistant, and an
increase in related personnel expenses, offset by a decrease in stock
compensation expense and legal fees. We anticipate no significant incremental
increases in marketing, general and administrative expenses for the next two
quarters.

Other income decreased $138,000, or 72%, to $53,000 in the three-month period
ended June 30, 2002 from $191,000 in the three-month period ended June 30, 2001
and decreased $225,000, or 65%, to $120,000 in the six-month period ended June
30, 2002 from $345,000 in the six months ended June 30, 2001. The decrease in
the three and six-month periods were due to an average lower invested balance of
cash and cash equivalents resulting from funds used in Company operations and a
decrease in overall return rates.

For the reasons described above, net loss decreased $1,302,000, or 38%, to
$2,148,000 in the three-month period ended June 30, 2002 from $3,450,000 in the
three-month period ended June 30, 2001 and decreased $2,280,000, or 34%, to
$4,352,000 in the six-month period ended June 30, 2002 from $6,632,000 in the
six months ended June 30, 2001.


                                       10
<PAGE>

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 six months of
2002, the Company did not receive any net proceeds from the exercise of stock
options and warrants compared to approximately $2,226,000 from the exercise of
stock options for the six months ended June 30, 2001.

At June 30, 2002, working capital was approximately $11,700,000, compared to
$15,700,000 at December 31, 2001. The decrease in the Company's working capital
was due primarily to funds used for operations and resulted in a lower balance
of cash and equivalents and short term investments. 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 additional funds through the private or public sale of its securities,
the Company's working capital will be utilized primarily to fund its operating
activities.

Capital expenditures and additional patent development costs for the six months
ended June 30, 2002 were approximately $67,000. The Company anticipates
additional capital expenditures of approximately $190,000 for the remainder of
the current year.

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 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 may 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, cash
equivalents and short term investments 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.

Recent Accounting Pronouncements
--------------------------------

In June 2001, the Financial Accounting Standards Board ("FASB") issued two new
pronouncements: Statement of Financial Accounting Standards ("SFAS") No. 141,
Business Combinations ("SFAS No. 141"), and SFAS No. 142, Goodwill and Other
Intangible Assets ("SFAS No. 142"). SFAS No. 141 is effective as follows: a) use
of the pooling-of-interest method is prohibited for business combinations
initiated after June 30, 2001; and b) the provisions of SFAS No. 141 also apply


                                       11
<PAGE>

to all business combinations accounted for by the purchase method that are
completed after June 30, 2001 (that is, the date of acquisition is July 2001 or
later). SFAS No. 142 is effective for fiscal years beginning after December 15,
2001 to all goodwill and other intangible assets recognized in an entity's
statement of financial position at that date, regardless of when those assets
were initially recognized. SFAS No. 142 requires that upon adoption,
amortization of goodwill and other intangible assets with indefinite useful
lives will cease and instead, the carrying value of these assets will be
evaluated for impairment on an annual basis. On January 1, 2002, the Company
adopted these statements, which had no effect on the Company's financial
position or results of operations.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This Statement supercedes SFAS No. 121, and the accounting and reporting
provisions of APB 30, for the disposal of a segment of a business. The
provisions of SFAS No. 144 were required to be adopted by the Company effective
January 1, 2002. On January 1, 2002, the Company adopted this statement, which
had no effect on the Company's financial position or results of operations.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

As of June 30, 2002, the Company is exposed to market risks which relate
primarily to changes in U.S. interest rates. The Company's cash equivalents and
short term investments are subject to interest rate risk and will decline in
value if interest rates increase. Due to the short duration of these financial
instruments, generally one year or less, changes to interest rates would not
have a material effect upon the Company's financial position. A hypothetical 10%
change in interest rates would not have a material effect on our Statement of
Operations or Cash Flows for the six months ending June 30, 2002.

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


                                       12
<PAGE>

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, 2001 AND, IN PARTICULAR, THE
SECTION ENTITLED "RISK FACTORS".


                                       13
<PAGE>

PART II - OTHER INFORMATION


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

The Company's Annual Meeting of Stockholders was held on June 27, 2002. At the
meeting (i) all six director nominees were elected and (ii) the appointment of
Deloitte & Touche LLP as the independent auditors was ratified.

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

           Robert J. Palmisano, 25,733,270 for, 390,550 against or withheld;
           John L. Zabriskie, 25,766,045 for, 357,775 against or withheld; Peter
           G. Martin, 25,765,945 for, 357,875 against or withheld; Michael A.
           Davis, 25,765,800 for, 358,020 against or withheld; Robert J.
           DeLuccia, 25,766,045 for, 357,775 against or withheld; and Paul S.
           Echenberg, 25,765,945 for, 357,875 against or withheld.

    (ii)   The appointment of Deloitte & Touche LLP was ratified by a vote of
           25,949,930 for, 107,252 against and 66,638 abstaining.

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

           (a)    The following exhibits are filed herewith:

                  10.1     Form of Employment Agreement between the Company and
                           Dennis R. Fowler, M.D., Ph.D.
                  99.1     Certification 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.

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


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<PAGE>

                                   SIGNATURES
                                   ----------

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


                                          MacroChem Corporation
                                          ---------------------
                                          (Registrant)



August 14, 2002                           /s/ Robert Palmisano
                                         ---------------------------------------
                                          Robert Palmisano
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


                                          /s/ Bernard Patriacca
                                          --------------------------------------
                                          Bernard Patriacca
                                          Chief Financial Officer
                                          (Principal Financial Officer)



                                       15
<PAGE>

                                  EXHIBIT INDEX

The following designated exhibits are filed herewith:

10.1     Form of Employment Agreement between the Company and Dennis R. Fowler,
         M.D., Ph.D.

99.1     Certification 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.


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