UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 10-Q

             [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended July 31, 2000

                                       or

             [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                        For the Transition Period From to


                         Commission File Number 0-22354

                         MARTEK BIOSCIENCES CORPORATION

             (Exact name of registrant as specified in its charter)


                               Delaware 52-1399362
           (State of Incorporation) (IRS Employer Identification No.)

                   6480 Dobbin Road, Columbia, Maryland 21045

                    (Address of principal executive offices)

        Registrant's telephone number including area code: (410)740-0081

                                      None

(Former  name,  former  address and former  fiscal year,  if changed  since last
report)



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. X Yes No



      Common stock, par value $.10 per share: 17,800,059 shares outstanding
                             as of September 6, 2000





                                  Page 1 of 15
<PAGE>
                                       PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MARTEK BIOSCIENCES CORPORATION

Balance Sheets
($ in thousands)
--------------------------------------------------------------------------------
                                                      July 31,      October 31,
                                                        2000            1999
--------------------------------------------------------------------------------
                                                    (Unaudited)
Assets:

Current assets

     Cash and cash equivalents                           $4,631          $1,180
     Short-term investments and marketable securities    19,451          15,178
     Accounts receivable                                  1,437           1,116
     Inventories  (Note 3)                                4,383           5,216
     Other current assets                                 1,981           1,013
                                                      --------------------------
Total current assets                                     31,883          23,703
Property, plant and equipment, net                       15,716          15,469
                                                      --------------------------

Total assets                                            $47,599         $39,172
                                                      ==========================


Liabilities and stockholders' equity:

Current liabilities

     Accounts payable                                    $1,430            $693
     Accrued liabilities                                  1,559           1,329
     Current portion of notes payable                       747           1,479
     Current portion of unearned revenue (Note 6)         2,143           - - -
                                                      --------------------------
Total current liabilities                                 5,879           3,501
Long-term portion of notes payable (Note 2)               - - -             472
Long-term portion of unearned revenue (Note 6)            2,451           - - -
Commitments (Note 2)
Stockholders' equity
     Preferred stock, $.01 par value,
         4,700,000 shares authorized;
         none issued or outstanding                       - - -           - - -
     Series A junior participating preferred
         stock, $.01 par value, 300,000
         shares authorized; none issued or outstanding    - - -           - - -
     Common stock, $.10 par value; 30,000,000
         shares authorized;  17,793,759
         and 16,492,229  shares issued and
         outstanding at July 31, 2000 and
         October 31, 1999, respectively                   1,779           1,649
     Additional paid-in capital                         123,059         107,447
     Accumulated deficit                                (85,569)        (73,897)
                                                      --------------------------
Total stockholders' equity                               39,269          35,199
                                                      --------------------------

Total liabilities and stockholders' equity              $47,599         $39,172
                                                      ==========================

See accompanying notes.

                                  Page 2 of 15
<PAGE>

Martek Biosciences Corporation

Statements of Operations
(Unaudited - $ in thousands, except for per share data)

                                             Three months        Nine months
                                             ended July 31,     ended July 31,
--------------------------------------------------------------------------------
                                           2000       1999      2000      1999
--------------------------------------------------------------------------------

Revenues:
      Product sales:
          Nutritional product sales      $1,858       $677     $3,921    $2,092
          Stable isotope and other
             product sales                  338        484      1,495     1,748
                                       --------------------  -------------------
      Total product sales                 2,196      1,161      5,416     3,841
      License fees and related revenues      34          6         45         6
      Royalties                             110         79        308       245
      Research and development revenue      109         71        838       278
                                       --------------------  -------------------
Total revenues                            2,449      1,317      6,607     4,371
Costs and expenses:
      Cost of product sales               2,005        853      4,507     2,934
      Research and development            2,789      2,602      9,201     7,325
      Selling, general and administrative 1,804      1,586      5,357     5,202
                                       --------------------  -------------------
Total costs and expenses                  6,598      5,040     19,065    15,460
                                       --------------------  -------------------
Loss from operations                     (4,149)    (3,723)   (12,458)  (11,090)

Other income, net                           360        103        786       226
                                       --------------------  -------------------

Net loss                                ($3,789)   ($3,620)  ($11,672) ($10,864)
--------------------------------------------------------------------------------

Net loss per share, basic and diluted    ($0.21)    ($0.23)    ($0.68)   ($0.71)
--------------------------------------------------------------------------------

Weighted average common
  shares outstanding                 17,641,407 15,971,019 17,165,319 15,273,640
--------------------------------------------------------------------------------

See accompanying notes.

                                  Page 3 of 15
<PAGE>

MARTEK BIOSCIENCES CORPORATION

Statements of Cash Flows
(Unaudited - $ in thousands)

                                                      Nine Months ended July 31,
--------------------------------------------------------------------------------
                                                           2000           1999
--------------------------------------------------------------------------------

Operating activities:

     Net loss                                           ($11,672)      ($10,864)
     Adjustments to reconcile net loss to net cash
         used in operating activities:
         Depreciation and amortization                     1,144          1,087
         Other non-cash items                              - - -            348
         Changes in assets and liabilities:
             Accounts receivable                            (321)          (173)
             Inventories                                     833           (993)
             Other current assets                           (968)           144
             Accounts payable                                737            292
             Accrued liabilities                             230           (506)
             Unearned revenue                              4,594             19
                                                 -------------------------------
     Net cash used in operating activities                (5,423)       (10,646)

Investing activities:

         Purchase of short-term investments
            and marketable securities                    (22,023)       (18,593)
         Proceeds from sale of short-term
            investments and marketable securities         17,750         15,124
         Purchase of property, plant and equipment        (1,391)          (352)
                                                 -------------------------------
     Net cash used in investing activities                (5,664)        (3,821)

Financing activities:

         Proceeds from the issuance of common stock
            in private placement                          10,249         13,770
         Proceeds from the exercise of warrants
            and options                                    5,493            672
         Repayment of notes payable                       (1,204)          (994)
                                                 -------------------------------
     Net cash provided by financing activities            14,538         13,448
                                                 -------------------------------

     Net increase (decrease) in cash
            and cash equivalents                           3,451         (1,019)
     Cash and cash equivalents at beginning of year        1,180          4,498
                                                 -------------------------------

     Cash and cash equivalents at end of period           $4,631         $3,479
--------------------------------------------------------------------------------

See accompanying notes.

                                  Page 4 of 15
<PAGE>

MARTEK BIOSCIENCES CORPORATION

Statements of Stockholders' Equity
(Unaudited - $ in thousands)

                                                   Additional
                                      Common Stock   Paid-in  Accumulated
                                    Shares   Amount  Capital    Deficit    Total
--------------------------------------------------------------------------------
Balance at
October 31, 1999                  16,492,229 $1,649  $107,447 ($73,897)  $35,199
--------------------------------------------------------------------------------

Issuance of common stock in
private placement                    845,652     85    10,164    - - -    10,249

Exercise of warrants, stock
options and other                    455,878     45     5,448    - - -     5,493

Net loss                               - - -  - - -     - - -  (11,672) (11,672)
--------------------------------------------------------------------------------
Balance at
July 31, 2000                     17,793,759 $1,779  $123,059  ($85,569) $39,269
--------------------------------------------------------------------------------

See accompanying notes.

                                  Page 5 of 15
<PAGE>

Notes to Financial Statements (Unaudited)


1.  Basis of Presentation and Accounting Policies

Basis of Presentation. The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the quarter  ended July 31, 2000 are not
necessarily  indicative  of the results  that may be expected for the year ended
October 31, 2000. For further information, refer to the financial statements and
footnotes thereto included in Martek Biosciences  Corporation's annual report on
Form 10-K for the year ended October 31, 1999.

Revenue  Recognition.  Revenues on cost  reimbursement and fixed price contracts
are generally recognized on the percentage of completion method of accounting as
costs are  incurred.  Revenue  is  recognized  on  product  sales when goods are
shipped.  Revenue from  licensing  agreements  is recognized in general over the
term of the agreement,  or in certain  circumstances,  when  milestones are met.
Revenue  recognized in the accompanying  Statements of Operations is not subject
to repayment.  Revenue received that is related to future performance under such
contracts is deferred and recognized as revenue when earned.

Foreign Currency Transactions. Foreign currency transactions are translated into
U.S.  dollars  at  prevailing  rates.  Gains or losses  resulting  from  foreign
currency transactions are included in current period income or loss as incurred.
Currently,  all material  transactions  of the Company are  denominated  in U.S.
dollars, and the Company has not entered into any material transactions that are
denominated in foreign currencies.

Inventories.  Inventories  are  stated at the lower of cost or market  including
appropriate elements of material,  labor and indirect costs and are valued using
the average cost method.  Inventories  include  products and materials  held for
sale as well as products and  materials  that can  alternatively  be used in the
Company's  research  and  development  activities.  Inventories  identified  for
development  activities are expensed in the period in which such inventories are
designated for such use.

Impairment  of Long Lived  Assets and Long Lived  Assets to be Disposed  Of. The
Company  reviews  long-lived  assets and certain  identifiable  intangibles  for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying  amount of an asset
to future undiscounted net cash flows expected to be generated by the asset. For
purposes of estimating  undiscounted cash flows, the Company does not group cash
flows  on  different  levels  as  only  one  significant  line  of  business  is
identified.  If such assets are considered to be impaired,  the impairment to be
recognized  is  measured  by the amount by which the  carrying  amount of assets
exceed the fair value of the assets.  Assets to be  disposed of are  reported at
the lower of the carrying  amount or fair value less costs to sell. In the past,
the Company has not incurred any impairment expense.

Segment  Information.  The Company  currently  operates in one business segment,
that  being  the  development  and  commercialization  of  novel  products  from
microalgae.  The Company is managed and  operated  as one  business.  The entire
business is comprehensively  managed by a single management team that reports to
the Chief  Executive  Officer.  The Company does not operate  separate  lines of
business or separate  business  entities with respect to its products or product
candidates.  Accordingly,  the Company does not  accumulate  discrete  financial
information  with respect to separate product areas and does not have separately
reportable  segments as defined by SFAS No. 131,  "Disclosures about Segments of
an Enterprise and Related Information."

Short-term Investments and Marketable Securities. The Company has classified all

                                  Page 6 of 15
<PAGE>

debt securities as available-for-sale. Available-for-sale securities are carried
at specific  identification cost and consist of U.S. government obligations with
average  maturities  of less than six  months.  Realized  gains and  losses  and
declines  in value  judged to be other  than  temporary  are  included  in other
income,  with  material  unrealized  gains and  losses  reported  as a  separate
component of stockholders' equity.

Reclassification.  Certain  amounts in the prior period's  financial  statements
have been reclassified to conform to the current period presentation.

2.  Notes Payable and Commitments

The Company had commitments at July 31, 2000 to fund up to $1.5 million of Phase
III Small Business  Innovation  Research ("SBIR")  technology  commercialization
expenses,  provided the  technology  under  existing Phase II SBIR grants yields
commercial opportunities favorable to the Company.

Costs under U.S.  Government  contracts are subject to audit by the  appropriate
U.S. Government agency.  Management  believes that cost  disallowances,  if any,
arising from such audits of costs charged to government  contracts  through July
31, 2000, would not have a material effect on the financial statements.

The  Company  has  entered  into  various  collaborative  research  and  license
agreements. Under the agreements, the Company is required to fund research or to
collaborate  on  the  development  of  potential  products.   Certain  of  these
agreements  also  commit the Company to pay  royalties  upon the sale of certain
products resulting from such collaborations.

Martek  currently   contracts  with  a  third  party  supplier  to  produce  its
arachidonic  acid oil. At July 31, 2000, the Company had  outstanding  inventory
purchase commitments to this supplier totalling approximately $3 million.

The Company is required to meet certain covenants in relation to its outstanding
term loan, which had an outstanding  balance of $747,000 at July 31, 2000. These
covenants outline minimum cash,  current ratio and net worth  requirements.  The
Company was in compliance with all of these covenants at July 31, 2000.

3.  Inventories

Inventories consist of the following:
                                                July 31,          October 31,
                                                 2000                1999
                                          -----------------    ---------------

            Finished Products                  $3,206,758         $2,206,051
            Work in Process                       779,250          2,683,477
            Raw Materials                         397,353            326,737
                                          -----------------    ---------------
                                               $4,383,361         $5,216,265
                                          =================    ===============

4.  Income Taxes

At  July  31,  2000,  the  Company  has  net  operating  loss  carryforwards  of
approximately  $99,945,000  for income tax  purposes  that  expire in years 2000
through 2020.

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.  The Company's  total net
deferred tax assets,  which resulted  primarily from net operating losses,  were
$39,978,000 and $34,235,000 at July 31, 2000 and 1999, respectively.  Because it
is more likely than not that some  portion or all of these  deferred  tax assets
will not be realized,  they were fully reserved for by a valuation  allowance at
July 31, 2000 and 1999.

                                  Page 7 of 15
<PAGE>

5.  Private Placement of Common Stock

On June 1, 1999,  1,528,935 shares of the Company's common stock and warrants to
purchase  458,679  shares of common  stock  were  issued in a private  placement
resulting in net proceeds to the Company of  approximately  $13.8  million.  The
stock was issued at a thirty day average  trading price of $9.03 per share.  The
warrants  are  exercisable  for a period of three years from date of issuance at
$10.84 per share.

On February 8, 2000, the Company  exercised its option to close a $10.25 million
private  financing in which  845,652  shares of the  Company's  common stock and
warrants to purchase  253,695  shares of common  stock were issued to a group of
accredited  investors  pursuant to a 1998 private placement funding  commitment.
The stock was issued at a thirty day average  trading price of $12.12 per share.
The warrants are  exercisable  for a period of three years from date of issuance
at $14.55 per share.

6.  Unearned Revenue

On March  31,  2000,  Martek  entered  into a  non-exclusive  license  agreement
relating  to the use of the  Company's  proprietary  long-chain  polyunsaturated
fatty acids in infant formulas.  The total consideration received by the Company
was $4.5  million,  which  consisted of $3.5 million  prepaid and $1 million due
upon the first year anniversary of the agreement. These amounts, which represent
license fees and royalty prepayments,  have been recorded as unearned revenue as
of July 31, 2000. The license fees are  non-refundable and will be recognized as
revenue on a modified  straight-line basis over the twenty-five year term of the
agreement. The royalty prepayment,  as well as potential ongoing royalties, will
be  recognized  as  revenue  as  products  are  introduced  by the  licensee  in
accordance  with the  terms  of the  agreement.  The  license  agreement  may be
terminated  by the licensee  upon proper  notification  subsequent  to the first
anniversary  of the date upon which the  licensee  has made all  payments to the
Company in accordance with the agreement.

                                  Page 8 of 15
<PAGE>

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

General

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking  statements concerning Martek's business and
operations,   including   among  other  things,   statements   concerning:   (1)
expectations   regarding   future   revenue   growth,   product   introductions,
distribution,  sales,  applications and potential  marketing  partnerships,  (2)
expectations  regarding sales and royalties by and from formula  licensees,  (3)
expectations  regarding  Martek's GRAS  Notification  with the FDA and potential
approval of the  Company's  licensees to market DHA and ARA oils in U.S.  infant
formula,  (4)  expectations   regarding  future  efficiencies  in  manufacturing
processes  and  the  cost  of  production  of  Martek's  nutritional  oils,  (5)
expectations   regarding   future  research  and  development   costs,  and  (6)
expectations  regarding  additional capital  expenditures  needed in relation to
fermentation and oil processing activities.  Forward-looking  statements include
those   statements   containing  such  words  as  "will,"   "should,"   "could,"
"anticipate,"  "believe,"  "plan,"  "estimate,"  "expect,"  "intend,"  and other
similar expressions.  Such statements involve risks and uncertainties and actual
results may differ  materially  due to a variety of risk  factors set forth from
time to time in Martek's filings with the Securities and Exchange Commission.

Martek, founded in 1985, is a leader in the development and commercialization of
high value products derived from  microalgae,  including  nutritional  products,
pharmaceutical research and development tools and diagnostics.  Martek develops,
manufactures and sells products from microalgae.  Martek's products include: (1)
specialty, nutritional oils for infant formula, nutritional supplements and food
ingredients   that  may  play  a  beneficial   role  in  promoting   mental  and
cardiovascular  health,  and in the  development of the eyes and central nervous
system in newborns,  (2) stable isotope  products and  technologies to visualize
molecular interactions for drug discovery and development, and (3) new, powerful
fluorescent markers for diagnostics,  rapid miniaturized  screening and gene and
protein  detection.  In 1989, Martek began to realize revenues from sales of its
stable  isotope  products.  In 1992,  Martek  realized its first  revenues  from
license fees related to its  nutritional  oils containing  docosahexaenoic  acid
("DHA") and  arachidonic  acid ("ARA") and sales of sample  quantities  of these
oils. In 1995,  Martek  recognized  its first product and royalty  revenues from
sales of infant  formula  containing  these oils,  and in 1996,  Martek began to
realize revenues from the sale of Neuromins(R), a DHA dietary supplement.

Martek has incurred  losses in each year since its inception.  At July 31, 2000,
Martek's  accumulated  deficit was  $85,569,000.  Martek expects to continue its
development,  production  optimization and product marketing activities and as a
result,  expects  losses  to  continue  for at  least  the next  year,  or until
significant  sales of its  nutritional  oils and/or  Neuromins(R)  DHA  products
occur. In addition, Martek expects to continue to experience  quarter-to-quarter
and year-to-year  fluctuations in revenues,  expenses and losses,  some of which
may be significant.  The timing and extent of such  fluctuations will depend, in
part, on the timing and receipt of oils-related revenues. Because the extent and
timing of future  oils-related  revenues  are largely  dependent  upon  Martek's
licensees  and/or  other  future  third-party   collaborators,   the  timing  or
likelihood of future  profitability  is largely  dependent on factors over which
the Company has no control.

Management Outlook and Regulatory Issues

Management  believes  that while  quarterly  results  may show  fluctuations  in
product sales,  the outlook for future revenue growth remains  positive and that
fiscal  2000 sales will  surpass  prior year  levels.  Specifically,  management
believes  that  for  fiscal  2000 as a whole,  term  infant  formula  containing
Martek's oils will be introduced in additional countries and sales and royalties
related to Martek's nutritional oils will continue to grow.

                                  Page 9 of 15
<PAGE>

Management  believes  that  recent  scientific  evidence  further  supports  the
contention that humans  throughout  life will benefit from DHA  supplementation.
This could represent a far larger market for DHA than the market for infants. To
realize this market,  Martek is pursuing long-term  marketing  partnerships with
large nutritional products and/or  pharmaceutical  companies to promote Martek's
non-infant formula nutritional oil products. Because of this objective,  certain
shorter-term  marketing arrangements of lesser scope have not been entered into,
thus modestly  sacrificing  short-term  product sales. On March 31, 2000, Martek
entered into a non-exclusive license agreement with Abbott Laboratories relating
to use of the Company's  proprietary  long-chain  polyunsaturated fatty acids in
infant  formulas.  The total  consideration  received  by the  Company  was $4.5
million,  which  consisted of $3.5  million  prepaid and $1 million due upon the
first year anniversary of the agreement.  These amounts, which represent license
fees and royalty prepayments,  have been recorded as unearned revenue as of July
31, 2000. The license fees are  non-refundable and will be recognized as revenue
on a  modified  straight-line  basis  over  the  twenty-five  year  term  of the
agreement. The royalty prepayment,  as well as potential ongoing royalties, will
be  recognized  as  revenue  as  products  are  introduced  by the  licensee  in
accordance  with the  terms  of the  agreement.  The  license  agreement  may be
terminated  by the licensee  upon proper  notification  subsequent  to the first
anniversary  of the date upon which the  licensee  has made all  payments to the
Company in accordance with the agreement. Martek now has license agreements with
manufacturers  making  approximately  85% of U.S.  and 60% of  worldwide  infant
formula.   Management  believes  that  broad  introductions  of  infant  formula
containing  Martek's  nutritional oils and/or a strategic  alliance with a large
scale  nutritional  products  and/or  pharmaceutical  company  will occur in the
future.  However,  management is unable to  accurately  predict when such events
will occur.

Four of Martek's infant formula licensees have obtained the regulatory approval,
where required,  to sell infant formula  supplemented with the Company's oils in
over 60 countries for term or pre-term infant formula  products.  Martek and its
licensees are in the process of responding  to certain  questions  raised by the
FDA in  connection  with  evaluating  the  Company's  oils for inclusion in U.S.
infant formula.  Additionally,  during  February 2000,  Martek filed a Generally
Recognized As Safe ("GRAS") Notification with the FDA for the use of its DHA and
ARA in infant  formula.  Management  believes that the data  establish  that its
sources  of ARA and DHA are GRAS when used in infant  formula.  Management  also
believes  that the FDA  review of the GRAS  notification  will have a  favorable
outcome.  In the event that the FDA review results in a favorable outcome,  each
licensee will still need to obtain a separate FDA authorization before marketing
an  infant  formula  with  the  Company's  sources  of DHA and  ARA in the  U.S.
Management believes that this regulatory process will take a minimum of three to
six  additional  months.  There  can be no  assurance  that the FDA will  have a
favorable  review of the GRAS  notification,  that a  licensee  will  pursue the
regulatory authorization to market an infant formula containing Martek's DHA and
ARA in the U.S.,  that the FDA will  authorize  the  marketing of such an infant
formula,  or that the regulatory process will not involve  significantly  longer
delays that may materially and adversely  affect the timing and  introduction of
infant  formula's   containing  Martek's  products.   Nevertheless,   management
anticipates  that during the next twelve  months,  new infant  formula  products
containing  Martek's oils will  continue to be  introduced in various  countries
around the world and overall product sales,  including sales from infant formula
related products, will increase over the prior year.

Results of  Operations -  Comparison  of Quarters and Nine Months Ended July 31,
2000 and 1999

Revenues for the quarter  ended July 31, 2000 were  $2,449,000,  an 86% increase
from  revenues  of  $1,318,000  for the same  period in 1999.  Revenues  for the
nine-month period ended July 31, 2000 were $6,607,000, an increase of $2,237,000
or 51%,  from the same period in 1999,  primarily  due to increased  nutritional
product  sales.  Total  product  sales  during the  quarter  ended July 31, 2000
increased by  $1,034,000  or 89% from the same period in 1999,  and increased by
$1,575,000  or 41% for the  nine-month  period ended July 31, 2000 from the same
period in 1999.  Sales of nutritional  products  increased by $1,181,000 or 174%
for the quarter  ended July 31,  2000 over the  quarter  ended July 31, 1999 and
increased  $1,829,000 or 87% for the nine-month  period ended July 31, 2000 when
compared to the same period in 1999. The majority of the increase in nutritional
product  sales is due to sales of oil to an  infant  formula  licensee  under an
existing royalty  agreement.  A smaller portion of the increase,  19%,  resulted
from  product  sales  to  a  licensee  under  an   all-inclusive   flat  pricing
arrangement.  This  contrasted to the Company's  traditional  sales to licensees
where an initial  transfer  price is charged and a trailing  royalty is received
six to nine months  later.  The Company is in the process of offering all of its
infant formula  licensees an all-inclusive  flat price for bulk oil, which would
incorporate a slightly  discounted  royalty up-front into the sales price of the
Company's oils. If the  traditional  transfer price had been billed for all bulk
oil sales during the quarter  ended July 31,  2000,  total  nutritional  product
sales  would  have been  $228,000  lower,  and would  have  increased  only 141%
compared to the quarter ended July 31, 1999.

                             Page 10 of 15
<PAGE>

Sales of products  for drug  discovery  and  diagnostics  decreased  30% for the
quarter  ended July 31, 2000 and decreased by 15% for the nine months ended July
31,  2000,  when  compared  to the same  periods in 1999.  These  decreases  are
primarily due to a focus on higher margin isotope sales and a de-emphasis on the
sale of low margin reagent products.  Royalty revenues  increased by 39% for the
quarter ended July 31, 2000 compared to the same quarter in 1999 and 26% for the
nine months ended July 31, 2000 compared to the first nine months of fiscal year
1999. Management  anticipates that royalty revenues may decline in the future if
Martek   increases  sales  of  bulk  oil  to  infant  formula   licensees  under
all-inclusive pricing arrangements.  Revenues from research and development work
increased  by $38,000 in the quarter  ended July 31,  2000 when  compared to the
same quarter in 1999 and  increased  $560,000 for the nine months ended July 31,
2000  from the same  period in 1999,  mainly  due to a  third-party  development
project  completed  during  the second and third  quarters  of 2000 at  Martek's
Winchester plant.

Cost of product  sales  increased to 91% of revenues  from product sales for the
quarter  ended July 31, 2000,  up from 73% for the same period in 1999.  For the
nine-month  period ended July 31, 2000 cost of product sales increased to 83% of
revenues from product sales,  up from 76% for the  nine-month  period ended July
31, 1999. The majority of the increase for the quarter and the nine-month period
ended July 31, 2000 relates to a  significant  increase in the sales of bulk oil
to infant formula licensees under a royalty-bearing  arrangement.  Cost of sales
will  continue to  fluctuate on a  quarter-to-quarter  basis based on the mix of
sales,  with lower margins  experienced  when the mix includes higher volumes of
sales to infant formula  manufacturers  under Martek's existing  royalty-bearing
arrangements.  Martek is in the  process of offering  all of its infant  formula
licensees an  all-inclusive  flat price for bulk oil, which would  incorporate a
slightly discounted royalty up-front into the sales price of the Company's oils.
The overall economics of an all-inclusive  price closely match those of Martek's
existing royalty bearing  arrangements,  however,  the all-inclusive  flat price
positively  impacts the Company's margins at the time of initial sale. For those
licensees who continue to purchase oil under a royalty  arrangement  rather than
pay an  all-inclusive  initial price, a transfer price is paid to Martek for the
oil at the time of purchase and a trailing  royalty is earned at the time of the
final  product  sale  by the  licensee.  Under  this  arrangement,  there  is an
approximate  six to nine month  delay  after the  initial  sale of oil by Martek
until royalties are received and recognized as revenue, creating a significantly
higher cost of goods sold as a percentage  of revenues than would be the case if
royalties were  incorporated into the product price and recognized as revenue at
the time of the product sale. For the quarter ended July 31, 2000, approximately
two-thirds of Martek's oil sales to licensees were made under  existing  royalty
agreements.  Had all sales to licensees  been made using all inclusive  pricing,
cost of  product  sales for the  quarter  would have been  approximately  75% of
revenues from product sales.

The high cost of sales  incurred in 2000  reflects  the cost of  inventory  when
certain production  efficiencies had not yet been realized due to the low volume
of  production  and  because  the  production  process  had not been  optimized.
Management   believes  that  in  the  future,  as  sales  volumes  increase  and
manufacturing  efficiencies are realized,  the cost of production of nutritional
oils  products  will  decrease,  resulting in a positive  impact on gross profit
margins.

Research and  development  costs  increased  by $188,000,  or 7%, in the quarter
ended July 31, 2000 as compared to the same period in 1999.  For the  nine-month
period ended July 31, 2000, research and development costs increased  $1,877,000
or 26% when  compared to the same period in 1999.  The  majority of the increase
for the  quarter  ended July 31, 2000  relates to the  continued  refinement  of
Martek's fermentation and oil extraction processes and other R&D efforts related
to  production  of the  Company's  oils at the  Winchester  plant.  Research and
development  costs for the nine-month  period ending July 31, 2000 were impacted
by  expenses  incurred  relating  to a  third-party  development  project at the
Company's  Winchester Plant.  Management believes that as sales volumes increase
and  production  optimization  occurs,  development  costs  related to  Martek's
Winchester plant will decrease, reducing the Company's overall R&D expenditures.

                                 Page 11 of 15
<PAGE>


Selling,  general and  administrative  expenses  increased by $218,000,  or 14%,
during the quarter  ended July 31, 2000 and  increased by $155,000 or 3%, in the
nine  months  ended July 31, 2000 over the third  quarter and nine months  ended
July 31, 1999, respectively. This increase in the quarter ended July 31, 2000 is
mainly due to the timing of various corporate administration expenditures.

As a result of the foregoing,  net loss for the quarter ended July 31, 2000 was
$3,789,000, or $.21 per share, compared to a net loss of $3,620,000, or $.23
per share for the same period in 1999.  Net loss for the nine months  ended July
31,  2000,  was  $11,672,000  or  $.68  per  share,  compared  to a net  loss of
$10,864,000 or $.71 per share for the same period in 1999.

Recent Accounting Pronouncements

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities,"  which requires companies to recognize all
derivative financial  instruments as either assets or liabilities on the balance
sheet and measure those  instruments at fair value.  This Statement is effective
for fiscal years beginning after June 15, 2000. Adoption of this standard is not
expected  to have a  significant  impact on the  Company's  financial  position,
results of operations, cash flows, or the presentation of its disclosures.

Liquidity and Capital Resources

Martek has  financed  its  operations  primarily  from the  issuance and sale of
equity  securities,  debt  financing,   revenues  received  under  research  and
development  contracts  and grants,  product  sales and receipt of license fees.
Since its inception,  Martek has raised  approximately  $125 million from public
and  private  sales of its  equity  securities,  as well as option  and  warrant
exercises,  including  approximately  $13.8 million from a private  placement of
stock in May,  1999 and  $10.25  million  in  February,  2000  related to a 1998
funding commitment.

Through  July  31,  2000,   Martek  has  incurred  an  accumulated   deficit  of
$85,569,000.  Martek's balance of cash and cash equivalents at July 31, 2000 was
$4,631,000.  In addition, at July 31, 2000, Martek had $19,451,000 in short-term
investments and marketable securities.  These investments and securities,  which
consist of U.S.  Government  securities with average maturities of less than six
months,  are available to meet the future cash needs of the Company.  Cash, cash
equivalents,   short-term   investments  and  marketable   securities  increased
$7,724,000  during the first  nine  months of 2000,  primarily  due to the funds
received  from the private  placement  of Martek's  common stock and warrants in
February, 2000.

Martek will require  substantial  additional funds to continue its research and
development  programs,  to conduct  pre-clinical  and clinical  studies,  to
maintain   compliance  with  its  loan  covenants,   and  to  commercialize  its
nutritional oils,  Neuromins(R)  DHA, and its other products under  development.
The ultimate levels of funding required will depend,  in part, on whether Martek
seeks independently,  or with other parties through collaborative agreements, to
develop, manufacture and market its products. The capital requirements of Martek
will depend, among other things, on one or more of the following factors: growth
in the Company's  infant formula and nutritional  product sales;  the extent and
progress of its research and development programs;  the progress of pre-clinical
and clinical studies; the time and costs of obtaining regulatory  clearances for
those  products  subject  to such  clearances;  the costs  involved  in  filing,
protecting  and enforcing  patent  claims;  competing  technological  and market
developments;  the  cost  of  capital  expenditures  at  Martek's  manufacturing
facilities;   the  cost  of  acquiring   additional  and/or  operating  existing
manufacturing  facilities  for  its  various  products  and  potential  products
(depending on which  products  Martek  decides to  manufacture  and continues to
manufacture  itself);  and the costs of marketing and  commercializing  Martek's
products.  The continued  development and  optimization  of Martek's  production
facility  has had,  and  will  continue  to have,  a  material  effect  upon the
Company's  liquidity  and  capital  resources.  Additional  plant  modifications
costing at least $500,000 are expected in fiscal 2000. Plant expenditures beyond
2000  will  depend  in part on  production  capacity  needs,  and the  extent of
development and implementation of process improvements.


                                Page 12 of 15
<PAGE>


Management  believes that its existing  capital  resources will provide adequate
capital  for at least the next 18  months.  However,  Management  believes  that
additional funds will be needed in the longer term to continue Martek's research
and development, manufacturing and marketing efforts. Management intends to seek
additional  funding through  commercial and government  research and development
contracts and grants,  product sales and license fee  arrangements,  asset-based
borrowing,  equity  issuances,  additional lease financing and/or  collaborative
arrangements  with  partners  if such  methods  are  available  to Martek and on
favorable terms.  There can be no assurance that such funds will be available to
Martek on acceptable terms, if at all.

                                  Page 13 of 15
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

Martek is not a party to any material legal proceedings.

Item 2.  Changes in Securities.

None

Item 3.  Defaults Upon Senior Securities.

Not Applicable

Item 4.  Submission of Matters to a vote of Security Holders.

None

Item 5.  Other Information.

None

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

(a)      Exhibits

i.       Exhibit 27.01 Financial Data Schedule.

ii.      Exhibit 99.1:  Cautionary  Statements for Purposes of the "Safe Harbor"
         Provisions of the Private  Securities  Litigation Reform Act of 1995.

(b)      Reports on Form 8-K:  None

                                  Page 14 of 15
<PAGE>

                                   SIGNATURES

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

                                            MARTEK BIOSCIENCES CORPORATION

                                                            (Registrant)






Date:  September 14, 2000                  /s/ Peter L. Buzy
       -------------------                --------------------------------------
                                          Peter L. Buzy,
                                          Chief Financial and Accounting Officer




































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