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, 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 November 7, 2002:
-----------------------------                   --------------------------------
Common Stock, $.01 par value                               27,952,194


<PAGE>
                              MACROCHEM CORPORATION

                               INDEX TO FORM 10-Q


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

Item 1       Unaudited Financial Statements

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

                 Condensed Statements of Operations for the
                 Three and Nine months Ended September 30, 2002           4
                 and 2001

                 Condensed Statements of Cash Flows for the
                 Nine Months Ended September 30, 2002 and 2001            5

                 Notes to Unaudited Condensed Financial
                 Statements                                              6-10


Item 2       Management's Discussion and Analysis of
             Financial Condition and Results of Operations              10-14

Item 3       Quantitative and Qualitative Disclosures About Market Risk  15

Item 4       Control and Procedures                                      15

PART II      OTHER INFORMATION

Item 6       Exhibits and Reports on Form 8-K                            16

SIGNATURES                                                               17

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE                           18-21
SARBANES-OXLEY ACT OF 2002

EXHIBIT INDEX                                                            22


                                       2
<PAGE>

ITEM 1.       FINANCIAL STATEMENTS

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

                                                                          September 30,          December 31,
                                                                              2002                   2001
                                                                        ---------------        ---------------

                                     ASSETS
<S>                                                                     <C>                    <C>
Current assets:
       Cash and cash equivalents                                        $           251        $           697
       Short-term investments                                                    10,088                 15,833
       Accounts receivable                                                          ---                    375
       Receivable due from related party                                             25                     24
       Prepaid expenses and other current assets                                    300                    171
                                                                        ---------------        ---------------
           Total current assets                                                  10,664                 17,100
                                                                        ---------------        ---------------

Property and equipment, net                                                         422                    530
                                                                        ---------------        ---------------

Other assets:
       Patents, net                                                                 615                    599
       Deposits                                                                      29                     29
                                                                        ---------------        ---------------
           Total other assets                                                       644                    628
                                                                        ---------------        ---------------

Total assets                                                            $        11,730        $        18,258
                                                                        ===============        ===============

                                   LIABILITIES
Current liabilities:
       Accounts payable                                                 $           ---        $             5
       Accrued expenses                                                             409                  1,355
                                                                        ---------------        ---------------
           Total current liabilities                                                409                  1,360

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

Total liabilities                                                                   458                  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 September 30,
       2002 and December 31, 2001, respectively                                     282                    282
Additional paid-in capital                                                       73,056                 73,020
Accumulated deficit                                                            (61,255)               (55,374)
Unearned compensation                                                               (4)                   (71)
Less treasury stock, at cost, 210,860 and 253,346
       shares at September 30, 2002 and December 31, 2001,
       respectively                                                               (807)                (1,008)
                                                                        ---------------        ---------------
           Total stockholders' equity                                            11,272                 16,849
                                                                        ---------------        ---------------
Total liabilities and stockholders' equity                              $        11,730        $        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 nine months ended September 30, 2002 and 2001
                                                             (Unaudited)
                                       (Amounts in thousands except share and per share data)

                                                   For the three months ended            For the nine months ended
                                                  ----------------------------          -----------------------------
                                                          September 30,                        September 30,
                                                          -------------                        -------------
                                                     2002              2001                 2002            2001
                                                     ----              ----                 ----            ----

<S>                                               <C>              <C>                  <C>              <C>
Research contract revenues                        $       ---      $       189          $        43      $       189
                                                  -----------      -----------          -----------      -----------


Operating expenses:
    Research and development                            1,004            2,456                3,204            7,481
    Marketing, general and administrative                 555              942                2,841            2,862
    Consulting fees with related parties                   11               15                   41               46
                                                  -----------      -----------          -----------      -----------
       Total operating expenses                         1,570            3,413                6,086           10,389
                                                  -----------      -----------          -----------      -----------

Loss from operations                                  (1,570)          (3,224)              (6,043)         (10,200)
                                                  -----------      -----------          -----------      -----------

Other income (expense):
    Interest income                                        42              185                  162              530
                                                  -----------      -----------          -----------      -----------
       Total other income                                  42              185                  162              530
                                                  -----------      -----------          -----------      -----------

Net loss                                          $   (1,528)      $   (3,039)          $   (5,881)      $   (9,670)
                                                  ===========      ===========          ===========      ===========

Net loss per share -
    basic and diluted                             $    (0.05)      $    (0.11)          $    (0.21)      $    (0.39)
                                                  ===========      ===========          ===========      ===========

Weighted average shares                            27,933,000       27,177,000           27,921,000       24,574,000
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 nine months ended September 30, 2002 and 2001
                                                             (Unaudited)
                                                       (Amounts in thousands)

                                                                            For the nine months ended September 30,
                                                                                   2002                  2001
                                                                                   ----                  ----
<S>                                                                          <C>                   <C>
Cash flows from operating activities:
       Net loss                                                              $    (5,881)          $   (9,670)
       Adjustments to reconcile net loss to net cash
         used by operating activities:
           Depreciation and amortization                                              163                  131
           Stock-based compensation                                                   230                  382
           401(k) contribution in Company common stock                                 74                   71
           Deferred rent                                                              ---                   10
           Deferred revenue                                                           ---                  225
       Changes in assets and liabilities:
           Accounts receivable                                                        375                 (10)
           Prepaid expenses and other current assets                                (130)                  (2)
           Accounts payable and accrued expenses                                    (951)                  435
                                                                             ------------          -----------


Net cash used by operating activities                                             (6,120)              (8,428)
                                                                             ------------          -----------

Cash flows from investing activities:
       Sales of short-term investments                                              5,745              (2,596)
       Expenditures for property and equipment                                       (32)                (257)
       Additions to patents                                                          (39)                 (95)
                                                                             ------------          -----------
Net cash provided by investing activities                                           5,674              (2,948)
                                                                             ------------          -----------

Cash flows from financing activities:
       Proceeds from sale of common stock                                             ---                9,406
       Proceeds from exercise of common stock options                                 ---                1,980
       Proceeds from exercise of warrants                                             ---                  371
                                                                             ------------          -----------
Net cash provided by financing activities                                             ---               11,757
                                                                             ------------          -----------

Net change in cash and cash equivalents                                             (446)                  381
Cash and cash equivalents at beginning of period                                      697                  589
                                                                             ------------          -----------

Cash and cash equivalents at end of period                                   $        251          $       970
                                                                              ===========           ==========

</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 nine months
     ended September 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 September 30,         Nine Months Ended September 30,
                                          --------------------------------         -------------------------------
                                                 2002            2001                  2002               2001
                                                 ----            ----                  ----               ----
     <S>                                    <C>              <C>                   <C>                <C>
     Numerator for basic and diluted
     loss per share:
        Net loss                            $ (1,528,000)    $(3,039,000)          $(5,881,000)       $(9,670,000)
                                            =============    ============          ============       ============

     Denominator for basic and diluted
     loss per share:
        Weighted average shares
           outstanding                         27,933,000     27,177,000             27,921,000        24,574,000
                                            =============    ===========           ============       ===========

     Net loss per share - basic and
     diluted                                $      (0.05)    $    (0.11)           $     (0.21)       $    (0.39)
                                            =============    ===========           ============       ===========

</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 nine months ended September 30, 2002 and 2001 were 4,911,753 and
     4,685,175 respectively.

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

     During the nine months ended September 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, 61,932
     options were canceled under the Plan.

     Under the 1994 Equity Incentive Plan (the "1994 Plan"), no shares were
     exercised during the nine-month period ended September 30, 2002. During the
     same period, 310,000 options were canceled under the 1994 Plan.

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

                                       7
<PAGE>

     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 September 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 nine months ended
     September 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>

(7)  Subsequent Events
     -----------------

     On October 11, 2002, MacroChem Corporation announced the Food and Drug
     Administration (FDA) had advised the Company that further clinical trials
     of MacroChem's drugs containing its absorption enhancer SEPA(R) had been
     placed on clinical hold until issues regarding a transgenic mouse
     carcinogenicity study have been resolved. During the clinical hold, the
     Company will be unable to conduct human clinical trials on its SEPA-based
     investigational drug products.

     According to the FDA, the Executive Committee of its Carcinogenicity
     Advisory Committee has determined that SEPA is responsible for carcinogenic
     findings in a six-month transgenic Tg.AC mouse assay. That study, which was
     conducted by MacroChem in 1999 and reported to the FDA in February 2000,
     yielded no adverse effects at SEPA doses up to 50 mg/kg/day. At the two
     highest doses used in the study, skin injury and inflammation preceded the
     development of papillomas in the treated animals.

     In addition to the transgenic mouse study, MacroChem has completed and
     submitted to the FDA results from a range of genetic and dermal toxicity
     studies of SEPA in animals, as well as a two-year rat carcinogenicity
     study. Results from these studies showed that SEPA was not genotoxic and
     not carcinogenic.

     There can be no assurance that the Company will succeed in its attempts to
     have the clinical hold lifted, nor can there be any assurance that the FDA
     will ultimately approve any of MacroChem's investigational drugs. The
     impact of this FDA decision on the carrying value of certain of the
     Company's patent assets, amounting to $615,000 at September 30, 2002,
     cannot be currently determined. Accordingly, the Company has not recorded a
     reduction in value to its patent assets. Certain risks and uncertainties
     associated with the filing and the FDA review of any future NDA and FDA
     regulation of the Company's proposed products are described or referenced
     elsewhere in this Quarterly Report on Form 10-Q and in the section entitled
     "Risk Factors" contained in the Company's Annual Report on Form 10-K for
     the year ended December 31, 2001.

     On November 8, 2002, in light of the recent FDA action described above, the
     Company reduced its staff by 14 employees, representing approximately
     one-half of its work force. This action was taken to reduce cash
     expenditures in the short term and concentrate the Company's resources on
     addressing the FDA clinical hold, while attempting to minimize the impact
     on the future development of the Company's products. The Company expects to
     take a one-time charge during the quarter ending December 31, 2002 of
     approximately $269,000 relating to the November 8, 2002 staff reduction.
     Dr. Dennis Fowler, the Company's Vice President, Clinical Affairs and Drug
     Development, was dismissed as a part of this workforce reduction.

                                       9
<PAGE>

     In addition to approving the staff reduction described above, in order to
     enhance retention of the remaining employees of the Company, the
     Compensation Committee of the Board of Directors has approved retention
     payments for most remaining employees other than executive officers and
     severance augmentations for certain key employees including certain
     executive officers. The Company anticipates the aggregate expense of this
     retention program will be approximately $290,000, approximately $181,360 of
     which represents severance augmentation to be paid to certain executive
     officers upon termination. As of the date of this Quarterly Report on Form
     10-Q, the documentation of these arrangements has not yet been finalized.

     On November 11, 2002, the Company received a notification from NASDAQ
     indicating that, for the previous thirty consecutive trading days, the
     Company's common stock had not satisfied the minimum bid price requirement
     of $1.00 per share required for continued inclusion on the NASDAQ National
     Market. The Company has until February 10, 2003 to regain compliance. The
     Company can regain compliance if the closing bid price of its common stock
     is $1.00 per share or more for ten consecutive trading days before February
     10, 2003. If the Company is unable to regain compliance, the Company will
     consider other potential actions, including applying to transfer its common
     stock to The NASDAQ SmallCap Market. A delisting of the Company's common
     stock from the NASDAQ National Market could reduce the liquidity of an
     investment in the Company's common stock and affect the Company's ability
     to raise additional funds in the future.


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 seeks to commercialize these
products through the formation of partnerships, strategic alliances and
licensing arrangements with those companies.

On October 11, 2002, MacroChem Corporation announced the Food and Drug
Administration (FDA) had advised the Company that further clinical trials of
MacroChem's drugs containing its absorption enhancer SEPA(R) had been placed on
clinical hold until issues regarding a transgenic mouse carcinogenicity study
have been resolved. During the clinical hold, the Company will be unable to
conduct human clinical trials on its SEPA-based investigational drug products.

According to the FDA, the Executive Committee of its Carcinogenicity Advisory
Committee has determined that SEPA is responsible for carcinogenic findings in a
six-month transgenic Tg.AC mouse assay. That study, which was conducted by
MacroChem in 1999 and reported to the FDA in February 2000, yielded no adverse
effects at SEPA doses up to 50 mg/kg/day. At the two highest doses used in the
study, skin injury and inflammation preceded the development of papillomas in
the treated animals.

                                       10
<PAGE>

In addition to the transgenic mouse study, MacroChem has completed and submitted
to the FDA results from a range of genetic and dermal toxicity studies of SEPA
in animals, as well as a two-year rat carcinogenicity study. Results from these
studies showed that SEPA was not genotoxic and not carcinogenic.

There can be no assurance that the Company will succeed in its attempts to have
the clinical hold lifted, nor can there be any assurance that the FDA will
ultimately approve any of MacroChem's investigational drugs. Certain risks and
uncertainties associated with the filing and the FDA review of any future NDA
and FDA regulation of the Company's proposed products are described or
referenced elsewhere in this Quarterly Report on Form 10-Q and in the section
entitled "Risk Factors" contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001.

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 Company's Annual Report on 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 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. The
impact of the FDA's clinical hold decision may have an impact on the carrying
value of certain of the Company's patent assets, amounting to $615,000 at
September 30, 2002. The impact, if any, cannot be currently determined.
Accordingly, the Company has not recorded a reduction in value to its patent
assets.

                                       11
<PAGE>

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

There were no revenues for the three-month period ended September 30, 2002,
compared to research contract revenues of $189,000 for the three-month period
ended September 30, 2001. For the nine months ended September 30, 2002 and
September 30, 2001, there were revenues of $43,000 and $189,000, respectively.
The decrease in revenues during the nine-month period ended September 30, 2002
is the result of the Company having obtained a small business grant in September
of 2001, funded by the Department of Health and Human Services, which was
completed in January 2002.

Research and development expenses decreased $1,452,000, or 59%, to $1,004,000 in
the three-month period ended September 30, 2002 from $2,456,000 in the
three-month period ended September 30, 2001 and decreased $4,277,000, or 57%, to
$3,204,000 from $7,481,000 in the nine-month period ended September 30, 2002.
The decrease in the three and nine-month period is primarily attributable to the
funding of Topiglan Phase III clinical trial studies being performed during 2001
and costs of research and terminated manufacturing agreements in 2001. The level
of research and development expenses is highly dependent on the timing and
extent of new and ongoing research performed in our in-house laboratories as
well as outside contract laboratories.

Marketing, general and administrative expenses decreased $387,000, or 41%, to
$555,000 in the three months ended September 30, 2002 from $942,000 in the
three-month period ended September 30, 2001 and decreased $21,000, or 1%, to
$2,841,000 in the nine months ended September 30, 2002 from $2,862,000 in the
nine months ended September 30, 2001. The decrease in the three-month period is
primarily attributable to the reversal of management bonuses of $228,000 accrued
through June 30, 2002, and to less being spent on public and financial relations
firms, marketing trade shows and related travel expenses. The decrease in the
nine-month period is primarily attributable to normal yearly salary increases
and additional administrative personnel, offset by the reversal of management
bonuses of $228,000 accrued through June 30, 2002, and a decrease in public
relations and financial advisory services. The Company anticipates a decrease in
expenses for the next quarter as a result of the staff reductions implemented on
November 8, 2002.

Other income decreased $143,000, or 77%, to $42,000 in the three-month period
ended September 30, 2002 from $185,000 in the three-month period ended September
30, 2001 and decreased $368,000, or 69%, to $162,000 in the nine-month period
ended September 30, 2002 from $530,000 in the nine months ended September 30,
2001. The decrease in the three and nine-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 $1,511,000, or 50%, to
$1,528,000 in the three-month period ended September 30, 2002 from $3,039,000 in
the three-month period ended September 30, 2001 and decreased $3,789,000, or
39%, to $5,881,000 in the nine-month period ended September 30, 2002 from
$9,670,000 in the nine months ended September 30, 2001.

                                       12
<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 nine months of
2002, the Company did not receive any net proceeds from the exercise of stock
options and warrants compared to approximately $2,352,000 from the exercise of
stock options and warrants for the nine months ended September 30, 2001.

At September 30, 2002, working capital was approximately $10,255,000, compared
to $15,700,000 at December 31, 2001. The decrease in the Company's working
capital was due primarily to the use of funds 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 nine months
ended September 30, 2002 were approximately $71,000. The Company anticipates
additional capital and patent expenditures of approximately $110,000 for the
remainder of the current year.

On November 8, 2002, in light of the recent FDA action described above, the
Company reduced its staff by 14 employees, representing approximately one-half
of its work force. This action was taken to reduce cash expenditures in the
short term and concentrate the Company's resources on addressing the FDA
clinical hold, while attempting to minimize the impact on the future development
of the Company's products. The Company expects to take a one-time charge during
the quarter ending December 31, 2002 of approximately $269,000 relating to the
November 8, 2002 staff reduction. Dr. Dennis Fowler, the Company's Vice
President, Clinical Affairs and Drug Development, was dismissed as a part of
this workforce reduction.

In addition to approving the staff reduction described above, in order to
enhance retention of the remaining employees of the Company, the Compensation
Committee of the Board of Directors has approved retention payments for most
remaining employees other than executive officers and severance augmentations
for certain key employees including certain executive officers. The Company
anticipates the aggregate expense of this retention program will be
approximately $290,000, approximately $181,360 of which represents severance
augmentation to be paid to certain executive officers upon termination. As of
the date of this Quarterly Report on Form 10-Q, the documentation of these
arrangements has not yet been finalized.

                                       13
<PAGE>

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, 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
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.

                                       14
<PAGE>

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
-------------------------------------------------

As of September 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 nine months ending September 30, 2002.

ITEM 4.    CONTROL AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures. Our chief executive
     officer and our chief financial officer, after evaluating the effectiveness
     of our "disclosure controls and procedures" (as defined in the Securities
     Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the
     "Evaluation Date") within 90 days before the filing date of this quarterly
     report, have concluded that as of the Evaluation Date, our disclosure
     controls and procedures were adequate and designed to ensure that material
     information relating to the Company would be made known to them by others
     within the Company.

(b)  Changes in internal controls. There were no significant changes in our
     internal controls or to our knowledge, in other factors that could
     significantly affect our internal controls and procedures subsequent to the
     Evaluation Date.

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

                                       15
<PAGE>

PART II - OTHER INFORMATION


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

        (a) The following exhibit is filed herewith:

            99.1   Certification Pursuant to Section 1350, Chapter 63 of Title
                   1, 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.

                                       16
<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)



November 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)

                                       17
<PAGE>

                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


CERTIFICATIONS

I, Robert J. Palmisano, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of MacroChem
     Corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)   Designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

b)   Evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

c)   Presented in this quarterly report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

a)   All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

                                       18
<PAGE>

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:    November 14, 2002
         -----------------



                                           /s/ Robert J. Palmisano
                                           -------------------------------------
                                           Robert J. Palmisano
                                           President and Chief Executive Officer

                                       19
<PAGE>

                            CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


CERTIFICATIONS

I, Bernard R. Patriacca, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of MacroChem
     Corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this quarterly report, fairly present in all
     material respects the financial condition, results of operations and cash
     flows of the registrant as of, and for, the periods presented in this
     quarterly report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)   Designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly report is being
     prepared;

b)   Evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and

c)   Presented in this quarterly report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):

a)   All significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

b)   Any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and

                                       20
<PAGE>

6.   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:    November 14, 2002
         -----------------





                                         /s/ Bernard R. Patriacca
                                         ---------------------------------------
                                         Bernard R. Patriacca
                                         Vice President, Chief Financial Officer
                                           and Treasurer


                                       21
<PAGE>

                                  EXHIBIT INDEX


The following designated exhibit is filed herewith:

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.


                                       22