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 March 31, 2001

                                       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 April 30, 2001:
----------------------------                      ------------------------------
Common Stock, $.01 par value                               25,750,848



<PAGE>

                             MACROCHEM CORPORATION

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


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

Item 1      Unaudited Financial Statements

                Balance Sheets
                March 31, 2001 and December 31, 2000                3

                Statements of Operations
                Three Months Ended March 31, 2001 and 2000          4

                Statements of Cash Flows
                Three Months Ended March 31, 2001 and 2000          5

                Notes to Unaudited Financial Statements            6-7

Item 2      Management's Discussion and Analysis of
            Financial Condition and Results of Operations          8-10

Item 3      Quantitative and Qualitative Disclosures About
            Market Risk                                             10

PART II     OTHER INFORMATION

Item 6      Exhibits and Reports on Form 8-K                        11

SIGNATURES                                                          12


                                       2
<PAGE>
ITEM 1.       FINANCIAL STATEMENTS

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

                                                                   March 31,         December 31,
                                                                     2001               2000
                                                                 -----------         ------------

<S>                                                                <C>                <C>
                                                ASSETS
Current Assets:
       Cash and cash equivalents                                   $    372           $    589
       Short-term investments                                        13,914             16,179
       Accounts receivable                                                0                 31
       Receivable due from related party                                 23                 23
       Prepaid expenses and other current assets                        378                241
                                                                     ------             ------
           Total current assets                                      14,687             17,063
                                                                     ------             ------

Property and equipment, net                                             363                377
                                                                     ------             ------

Other assets:
       Patents, net                                                     525                513
       Deposits                                                          29                 29
                                                                     ------             ------
           Total other assets                                           554                542
                                                                     ------             ------

Total assets                                                       $ 15,604           $ 17,982
                                                                     ======             ======

                                              LIABILITIES
Current liabilities:
       Accounts payable                                            $    150           $    331
       Accrued expenses                                               1,477                763
                                                                     ------             ------
           Total current liabilities                                  1,627              1,094

Deferred rent                                                            42                 37
Total Liabilities                                                     1,669              1,131
                                                                     ------             ------
       Commitments and contingencies

                                          STOCKHOLDERS' EQUITY
Preferred Stock                                                         ---                ---
Common Stock, $.01 par value, 60,000,000 shares authorized;
       25,734,517 and 24,730,783 shares issued at March 31,
       2001 and December 31, 2000, respectively                         257                247
Additional paid-in capital                                           61,036             60,787
Accumulated deficit                                                 (46,220)           (43,040)
Unearned compensation                                               (    39)           (    25)
Less treasury stock, at cost, 272,403 and 276,174 shares at
       March 31, 2001 and December 31, 2000, respectively           ( 1,099)           ( 1,118)
                                                                     ------             ------
           Total stockholders' equity                                13,935             16,851

Total liabilities and stockholders' equity                         $ 15,604           $ 17,982
                                                                     ======             ======
</TABLE>

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

                                       3
<PAGE>
                              MACROCHEM CORPORATION
                            STATEMENTS OF OPERATIONS
               For the three months ended March 31, 2001 and 2000
                                   (Unaudited)
                  (Amounts in thousands except per share data)


                                            For the three months ended March 31,
                                            ------------------------------------
                                                      2001           2000
                                                   ---------     ----------

Research contract revenues                         $    ---       $    543

Costs and expenses:
       Research and development                       2,544          1,026
       Marketing, general and administrative            775            604
       Consulting fees with related parties              16             12
                                                     ------         ------
           Total costs and expenses                   3,335          1,642
                                                     ------         ------

Loss from operations                                ( 3,335)       ( 1,099)

Other income (expense):
       Interest income                                  154            193
       Interest expense                                 ---        (     1)
                                                     ------         ------
           Total other income                           154            192
                                                     ------         ------

Net loss                                           $( 3,181)      $(   907)
                                                     ======         ======

Net loss per common share - basic and diluted      $(  0.13)      $(  0.04)
                                                     ======         ======
Weighted average common shares
       Outstanding (basic and diluted)               24,454         22,438
                                                     ======         ======




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

                                       4
<PAGE>

                              MACROCHEM CORPORATION
                            STATEMENTS OF CASH FLOWS
               For the three months ended March 31, 2001 and 2000
                                   (Unaudited)
                             (Amounts in thousands)

                                                            For the three months
                                                            --------------------
                                                               ended March 31,
                                                            --------------------
                                                               2001       2000
                                                               ----       ----

Cash flows from operating activities:
       Net loss                                              $(3,181)   $(  907)
       Adjustments to reconcile net loss to net cash
           used by operating activities:
           Depreciation and amortization                          41         47
           Stock-based compensation                               64         94
           401(k) contribution in Company common stock            21         16
           Deferred rent                                           5         22
           Deferred revenue                                      ---     (  500)
Changes in assets and liabilities:
                Accounts receivable                               31         24
                Prepaid expenses and other current assets     (  137)    (  102)
                Accounts payable and accrued expenses and
                other liabilities                                533     (  238)
                                                               -----      -----

Net cash used by operating activities                         (2,623)    (1,544)
                                                               -----      -----

Cash flows from investing activities:
       Sales of short-term investments                         2,265      2,061
       Expenditures for property and equipment                (   21)    (   61)
       Additions to patents                                   (   18)    (   37)
                                                               -----      -----
Net cash provided by investing activities                      2,226     (1,963)
                                                               -----      -----

Cash flows from financing activities:
       Purchases of treasury stock                               ---     (   21)
       Proceeds from exercise of common stock options            180         62
                                                               -----      -----
Net cash provided by financing activities                        180         41
                                                               -----      -----

Net change in cash and cash equivalents                       (  217)       461
Cash and cash equivalents at beginning of period                 589        318
                                                               -----      -----

Cash and cash equivalents at end of period                   $   372    $   779
                                                              ======      =====


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


                                       5
<PAGE>

                              MACROCHEM CORPORATION
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

(1)      BASIS OF PRESENTATION

         The financial statements included herein have been prepared by
         MacroChem Corporation ("MacroChem" or the "Company") without audit,
         pursuant to the rules and regulations of the Securities and Exchange
         Commission. Certain information and footnote disclosures normally
         included in financial statements prepared in accordance with generally
         accepted accounting principles have been condensed or omitted pursuant
         to such rules and regulations. In the opinion of management, the
         accompanying unaudited financial statements include all adjustments
         (consisting only of normal recurring adjustments) necessary to present
         fairly the financial position, results of operations and cash flows of
         the Company at the dates and for the periods indicated. The unaudited
         financial statements included herein should be read in conjunction with
         the audited financial statements and the notes thereto included in the
         Company's Annual Report on Form 10-K for the fiscal year ended December
         31, 2000.

         The results disclosed in the Statement of Operations for the three
         months ended March 31, 2001 are not necessarily indicative of the
         results to be expected for the full year.

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


(2)      BASIC AND DILUTED LOSS PER SHARE

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

                                                   Three Months Ended March 31,
                                                   ----------------------------
                                                      2001              2000
                                                   -----------      -----------

          Numerator for basic and diluted
          loss per share:
            Net loss                             $( 3,181,000)     $(   907,000)
                                                   ==========        ==========

          Denominator for basic and diluted
          loss per share:
            Weighted average shares outstanding    24,454,000        22,438,000
                                                   ==========        ==========

          Net loss per share - basic             $(      0.13)     $(      0.04)
                                                   ==========        ==========

          Net loss per share - diluted           $(      0.13)     $(      0.04)
                                                   ==========        ==========

         Potential common shares are not included in the per share calculations
         for diluted EPS, because the effect of their inclusion would be
         anti-dilutive. Anti-dilutive potential shares not included in per share
         calculations for the three months ended March 31, 2001 and 2000 were
         5,680,366 and 3,995,625 respectively.

                                       6
<PAGE>
(3)      STOCKHOLDERS' EQUITY

         The Company granted options to purchase 446,500 shares of Common Stock
         under the 1994 Equity Incentive Plan (the "1994 Plan") during the three
         months ended March 31, 2001. During this same period, no options under
         the 1994 Plan were exercised. In addition, options to purchase 52,500
         shares of Common Stock under the 1994 Plan were canceled in the three
         month period. All options were issued with an exercise price at the
         fair market value of the underlying common stock determined on the date
         of grant.

         During the three months ended March 31, 2001, options to purchase
         410,580 shares were exercised under the 1984 Non Qualified Plan and
         options to purchase 34,000 shares expired.

         Warrants to purchase common stock were issued in connection with the
         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. 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
         registration statement. The warrants may be exercised on a "cashless"
         basis. Through March 31, 2001, 591,580 of the $.01 warrants had been
         exercised.

         Granted during the three months ended March 31, 2001 was an option to
         purchase 1,000,000 shares of common stock to the new Chief Executive
         Officer, a portion of which vest immediately, with the remainder
         vesting over three years, with an exercise price of $3.02 per share.

(4)      COMPREHENSIVE INCOME

         The Company reports comprehensive income in accordance with Statement
         of Financial Accounting Standards ("SFAS") No. 130, "Reporting
         Comprehensive Income", which requires businesses to disclose
         comprehensive income and its components in their general-purpose
         financial statements. Comprehensive income (loss) is equal to the
         Company's net loss for the three months ended March 31, 2001 and 2000.

(5)      RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
         SFAS No. 133, "Accounting for Derivative Instruments and Hedging
         Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting and
         reporting standards for derivative instruments, including certain
         derivative instruments embedded in other contracts (collectively
         referred to as derivatives), and for hedging activities. The adoption
         of SFAS No. 133 on January 1, 2001 had no impact on the Company's
         financial statements.


                                       7
<PAGE>

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

GENERAL

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

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

RESULTS OF OPERATIONS

Revenues, consisting of research contract revenues, decreased $543,000, or
100%, to $0 in the three month period ended March 31, 2001 from $543,000 in the
three month period ended March 31, 2000. The decrease in revenues during the
three month period ended March 31, 2001 is principally a result of the
Company's recognition of $500,000 in deferred revenue upon the termination of
the AHP Agreement in 2000 and no contract revenue in 2001.

Research and development expenses increased $1,518,000, or 148%, to $2,544,000
in the three month period ended March 31, 2001 from $1,026,000 in the three
month period ended March 31, 2000. This increase is primarily attributable to
Topiglan Phase III clinical trial studies being performed throughout first
quarter 2001.

Marketing, general and administrative expenses increased $171,000, or 28%, to
$775,000 in the three months ended March 31, 2001 from $604,000 in the three
month period ended March 31, 2000. The increase is primarily attributable to an
increase in legal, financial advisory and directors' fees.

                                       8
<PAGE>

Other income decreased $38,000, or 20%, to $154,000 in the three month period
ended March 31, 2001 from $192,000 in the three month period ended March 31,
2000 primarily due to lower cash balances available for investment.

For the reasons described above, net loss increased $2,274,000, or 251%, to
$3,181,000 in the three month period ended March 31, 2001 from $907,000 in the
three month period ended March 31, 2000.

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 three months of
2001, the Company received aggregate net proceeds of approximately $180,000
from the exercise of stock options, compared to approximately $62,000 for the
three months ended March 31, 2000.

At March 31, 2001 working capital was approximately $13,060,000, compared to
$15,969,000 at December 31, 2000. The reduction in the Company's working
capital was due primarily to the use of cash by operating activities. Until
such time as the Company obtains agreements with third-party licensees or
partners to provide funding for the Company's anticipated business activities
or the Company is able to obtain funds through the private or public sale of
its securities, the Company's working capital will be utilized primarily to
fund its operating activities.

Pursuant to a plan approved by the Company's Board of Directors, the Company is
authorized to repurchase 1,000,000 shares of its Common Stock to be held as
treasury shares for future use. During the three month period ended March 31,
2001, the Company did not repurchase any shares of Common Stock, although the
Company retained shares as payment for cashless warrant exercises. At March 31,
2001, 272,403 repurchased shares remain available for future use and 679,587
shares remain available for repurchase under the plan.

Capital expenditures and additional patent development costs for the three
months ended March 31, 2001 were approximately $39,000. The Company anticipates
capital expenditures of approximately $211,000 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 additional licensing
arrangements or other strategic alliances; the ability of the Company to
manufacture products under those arrangements and the demand for its products
or the products of its licensees or strategic partners if and when approved for
sale by regulatory authorities. In any event, substantial additional funds will
be required before the Company is able to generate revenues sufficient to
support its operations. There is no assurance that the Company will be able to
obtain such additional funds on favorable terms, if at all. The Company's
inability to raise sufficient funds could require it to delay, scale back or
eliminate certain research and development programs.

                                       9
<PAGE>

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 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"). SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. The adoption of SFAS No. 133 on January 1, 2001 had no impact on
the Company's financial statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

As of March 31, 2001, 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, three months 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 have resulted in an increase or decrease of
approximately $15,000 on interest income within the Company's statement of
operations for the three months ended March 31, 2001.

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


                                       10
<PAGE>

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, 2000
AND, IN PARTICULAR, THE SECTION ENTITLED "RISK FACTORS".ED DECEMBER 31, 2000

PART II - OTHER INFORMATION

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

                  (a)      The following exhibits are filed herewith:

                           None.

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


                                       11
<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)



May 15, 2001                                      /s/ Robert Palmisano
------------                                      --------------------
                                                  Robert Palmisano
                                                  President and Chief Executive
                                                  Officer
                                                  (Principal Executive Officer)

                                                  /s/ Bernard Patriacca
                                                  ---------------------
                                                  Bernard Patriacca
                                                  Chief Financial Officer,
                                                  Treasurer, and Secretary
                                                  (Principal Financial Officer)





                                       12
<PAGE>