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 January 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 0-22354

                         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: 19,136,999 shares outstanding
                              as of March 12, 2001





                                  Page 1 of 16

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MARTEK BIOSCIENCES CORPORATION

Balance Sheets

 ($ in thousands, except share data)
--------------------------------------------------------------------------------
                                                      January 31,    October 31,
                                                         2001           2000
--------------------------------------------------------------------------------
                                                      (Unaudited)
Assets:
Current assets

     Cash and cash equivalents                             $1,428        $2,682
     Short-term investments and marketable securities      11,791        16,582
     Accounts receivable                                    3,554         2,520
     Inventories  (Note 3)                                  5,721         5,126
     Other current assets                                   2,025         1,883
                                                      --------------------------
Total current assets                                       24,519        28,793
Property, plant and equipment, net                         16,069        16,146
Other assets                                                  640           503
                                                      --------------------------

Total assets                                              $41,228       $45,442
                                                      ==========================


Liabilities and stockholders' equity:
Current liabilities

     Accounts payable                                        $800          $948
     Accrued liabilities                                    3,309         3,979
     Current portion of notes payable                         191           472
     Current portion of unearned revenue                    2,107         2,128
                                                      --------------------------
Total current liabilities                                   6,407         7,527
Long-term portion of unearned revenue                       2,434         2,460
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; 17,852,512 and 17,806,079 shares
        issued and outstanding at January 31, 2001 and
        October 31, 2000, respectively                      1,785         1,781
     Additional paid-in capital                           123,937       123,474
     Deferred compensation                                  (141)         (173)
     Accumulated other comprehensive income/(loss)              7           (2)
     Accumulated deficit                                  (93,201)      (89,625)
                                                      --------------------------
Total stockholders' equity                                 32,387        35,455
                                                      --------------------------

Total liabilities and stockholders' equity                $41,228       $45,442
                                                      ==========================

See accompanying notes.




                                  Page 2 of 16

<PAGE>

MARTEK BIOSCIENCES CORPORATION

Statements of Operations

(Unaudited - $ in thousands, except share and per
share data)

                                                Three months ended January 31,
--------------------------------------------------------------------------------
                                                        2001               2000
--------------------------------------------------------------------------------

Revenues:
    Product sales:
       Nutritional product sales                      $2,515               $912
       Stable isotope and other product sales            472                676
       Royalties                                         472                 91
                                                 -------------------------------
    Total product sales and royalties                  3,459              1,679
    Research and development contracts and grants          9                112
    Licensing fees and other revenue                      27                ---
                                                 -------------------------------
Total revenues                                         3,495              1,791
Costs and expenses:
    Cost of product sales                              2,340              1,228
    Research and development                           3,007              2,837
    Selling, general and administrative                1,760              1,613
    Other operating expenses                             245                ---
                                                 -------------------------------
Total costs and expenses                               7,352              5,678
                                                 -------------------------------
Loss from operations                                  (3,857)            (3,887)
Other income (expense):
    Miscellaneous income                                  34                 31
    Interest income                                      254                199
    Interest expense                                      (7)              (126)
                                                 -------------------------------
Total other income                                       281                104
                                                 -------------------------------

Net loss                                             ($3,576)           ($3,783)
                                                 -------------------------------

Net loss per share, basic and diluted                 ($0.20)            ($0.23)
--------------------------------------------------------------------------------

Weighted average common shares outstanding        17,811,565         16,503,972
--------------------------------------------------------------------------------

See accompanying notes.















                                  Page 3 of 16

<PAGE>

MARTEK BIOSCIENCES CORPORATION

Statements of Cash Flows
(Unaudited - $ in thousands)

                                                  Three Months ended January 31,
--------------------------------------------------------------------------------

                                                         2001             2000
--------------------------------------------------------------------------------

Operating activities:
  Net loss                                          ($3,576)            ($3,783)
  Adjustments to reconcile net loss to net cash
     used in operating activities:
     Depreciation and amortization                      431                 376
     Other non-cash items                                66                  87
     Changes in assets and liabilities:
        Accounts receivable                          (1,034)               (173)
        Inventories                                    (595)                395
        Other assets                                   (287)               (183)
        Accounts payable                               (148)                 61
        Accrued liabilities                            (670)                (36)
        Unearned revenue                                (47)                ---
                                                   -----------------------------
  Net cash used in operating activities              (5,860)             (3,256)

Investing activities:
     Purchase of short-term investments
          and marketable securities                  (2,700)             (1,047)
     Proceeds from sale of short-term
          investments and marketable securities       7,500               5,000
     Purchase of property, plant and equipment         (346)               (161)
                                                   -----------------------------
  Net cash provided by investing activities           4,454               3,792

Financing activities:
     Proceeds from the exercise of warrants
          and options                                   433                 122
     Repayment of notes payable                        (281)               (353)
                                                   -----------------------------
  Net cash provided by (used in) financing activities   152                (231)
                                                   -----------------------------

  Net (decrease) increase in cash and cash
          equivalents                                (1,254)                305
  Cash and cash equivalents at beginning of year      2,682               1,180
                                                   -----------------------------

  Cash and cash equivalents at end of period         $1,428              $1,485
--------------------------------------------------------------------------------

See accompanying notes.











                                  Page 4 of 16

<PAGE>

MARTEK BIOSCIENCES CORPORATION

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

<TABLE>
<CAPTION>

                                                                     Accumulated
                                             Additional                 Other
                             Common Stock     Paid-in    Deferred   Comprehensive Accumulated
                            Shares   Amount   Capital  Compensation Income (Loss)   Deficit    Total
------------------------------------------------------------------------------------------------------
<S>                       <C>         <C>     <C>            <C>             <C>    <C>       <C>

Balance at
October 31, 2000          17,806,079  $1,781  $123,474       ($173)          ($2)   ($89,625) $35,455
------------------------------------------------------------------------------------------------------

Exercise of stock
   options, warrants and
   other                      46,433       4       429          ---           ---        ---      433
Deferred compensation
   on stock options              ---     ---        34         (34)           ---        ---      ---
Amortization of deferred
   compensation                  ---     ---       ---          66            ---        ---       66
Net loss                         ---     ---       ---          ---           ---     (3,576)  (3,576)
Other comprehensive
   income:
  Unrealized gain
  on investments                 ---     ---       ---          ---             9        ---        9
                                                                                              --------
    Comprehensive loss                                                                         (3,567)
-------------------------------------------------------------------------------------------------------
Balance at
January 31, 2001          17,852,512  $1,785  $123,937       ($141)            $7   ($93,201) $32,387
-------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.


























                                  Page 5 of 16

<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 January 31, 2001 are not
necessarily  indicative  of the results  that may be expected for the year ended
October 31, 2001. 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, 2000.

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
exceeds 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."

                                  Page 6 of 16

<PAGE>

Short-term Investments and Marketable Securities. The Company has classified all
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. Unrealized gains and losses on these
securities are reported as accumulated other comprehensive  income (loss), which
is a separate component of stockholder's  equity.  Realized gains and losses and
declines  in value  judged to be other  than  temporary  are  included  in other
income, based on the specific identification method.

Comprehensive  Income  (Loss).  Comprehensive  income (loss) is comprised of net
loss and other comprehensive income. Other comprehensive income includes certain
changes  in  equity  that are  excluded  from net  income,  such as  translation
adjustments,  and  unrealized  holding  gains and  losses on  available-for-sale
marketable securities. Comprehensive loss for the three months ended January 31,
2001 was $3,567,000 versus $3,767,000 for the comparable period in 2000.

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

2.  Commitments and Notes Payable

The Company had  commitments  at January 31, 2001 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
January 31, 2001, 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 January 31, 2001, the Company had outstanding inventory
purchase commitments to this supplier totaling approximately $4.0 million.

The Company is required to meet certain  covenants in relation to its term loan,
which had an  outstanding  balance  of  $191,000  at  January  31,  2001.  These
covenants outline minimum cash,  current ratio and net worth  requirements.  The
Company was in compliance with all of these covenants at January 31, 2001.

3.  Inventories

Inventories consist of the following:
                                              January 31,         October 31,
                                                  2001                2000
                                            -----------------    ---------------
               Finished Products                  $5,026,000         $3,850,000
               Work in Process                       747,000          1,035,000
               Raw Materials                         278,000            521,000
                                            -----------------    ---------------
                                                   6,051,000          5,406,000
               Less Inventory Reserve               (330,000)          (280,000)
                                            -----------------    ---------------
                                                  $5,721,000         $5,126,000
                                            =================    ===============




                                  Page 7 of 16

<PAGE>

4.  Income Taxes

At January 31,  2001,  the  Company  has net  operating  loss  carryforwards  of
approximately  $109,175,000  for income tax  purposes  that expire in years 2001
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
$43,670,000   and  $42,239,000  at  January  31,  2001  and  October  31,  2000,
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 January 31, 2001 and 2000.

5.  Unearned Revenue

On March  31,  2000,  Martek  entered  into a  worldwide  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 of $4.5  million,  which  represents  license  fees and  royalty
prepayments,  has been  recorded as unearned  revenue as of January 31, 2001. Of
this  amount,  $500,000  may be credited  against  on-going  royalties or Abbott
Laboratories'  purchase from the Company of its  products.  The license fees are
non-refundable  and will be recognized as revenue on a straight-line  basis over
the  twenty-five  year  term  of  the  agreement.   The  non-refundable  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.  The Company recognized  approximately $25,000 in license fee revenue
and no royalty revenues from this agreement during the three-month  period ended
January 31, 2001.

6.  Subsequent Event

On March 2, 2001, 1,279,237 shares of the Company's common stock and warrants to
purchase  319,811  shares of common  stock  were  issued in a private  placement
resulting in net proceeds to the Company of approximately $19 million. The stock
was issued at the closing  market  price as of February  27, 2001 of $15.875 per
share.  The warrants are exercisable for a period of five years from the date of
issuance at $19.05 per share.

                                  Page 8 of 16

<PAGE>

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

Cautionary Note

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations  contains  forward-looking  statements  concerning  our  business and
operations, including, among other things, statements concerning our:

- expectations   regarding   future  revenue  growth,   product   introductions,
  distribution, sales, applications and potential marketing partnerships;
- expectations  regarding sales and royalties by and from our formula licensees;
- expectations regarding our GRAS Notification with the FDA and potential
  marketing of our oils by our U.S. infant formula licensees;
- expectations regarding future efficiencies in manufacturing processes and the
  cost of production of our nutritional oils;
- expectations   regarding  future  research  and  development   costs;  and
- expectations regarding additional capital expenditures needed in relation to
  our fermentation and oil processing activities.

Forward-looking statements include those statements containing words such as:

- "will,"
- "should,"
- "could,"
- "anticipate,"
- "believe,"
- "plan,"
- "estimate,"
- "expect,"
- "intend," and other similar expressions.

All of these  forward-looking  statements involve risks and uncertainties.  They
are all made pursuant to the safe harbor  provisions  of the Private  Securities
Litigation  Reform Act of 1995.  We wish to caution you that our actual  results
may differ  significantly  from the  results  we discuss in our  forward-looking
statements.  We  discuss  the risks that could  cause such  differences  in this
Management's  Discussion and Analysis, in Exhibit 99.1 to this Form 10-Q, and in
various other filings with the Securities and Exchange Commission ("SEC").

General

Martek Biosciences  Corporation ("We," "Martek" or "the Company") was founded in
1985.  We are a leader in the  development  and  commercialization  of  products
derived  from  microalgae.  Our leading  products are  nutritional  oils used as
ingredients in infant formula and foods, and as ingredients in, and encapsulated
for use as, dietary  supplements.  Our  nutritional  oils are comprised of fatty
acid  components,  primarily  docosahexaenoic  acid,  commonly known as DHA, and
arachidonic  acid,  commonly known as ARA. Many  researchers  believe that these
fatty acids may enhance  mental and visual  development  in infants,  and play a
pivotal role in brain function throughout life. Low levels of DHA in adults have
also been  linked  with a  variety  of health  risks,  including  cardiovascular
problems,  cancer,  and various  neurological and visual  disorders.  Additional
applications of our patented  technology based upon microalgae include our algal
genomics  technology and our currently  marketed  stable isotope and fluorescent
detection products and technologies that can be used by researchers as an aid in
drug discovery and diagnostics. In 1989, we began to realize revenues from sales
of our stable  isotope  products.  In 1992, we realized our first  revenues from
license fees related to our nutritional oils containing DHA and ARA and sales of
sample quantities of these

                                  Page 9 of 16

<PAGE>

oils. In 1995, we recognized  our first product and royalty  revenues from sales
of infant  formula  containing  these  oils,  and in 1996,  we began to  realize
revenues from the sale of Neuromins(R),  a DHA dietary  supplement.  In 1998, we
first  realized  revenues  from  the sale of our new  phycobilisome  fluorescent
detection  products.  We  currently  have license  agreements  with seven infant
formula  manufacturers  representing  over  60%  of  the  estimated  $6  billion
worldwide  market for infant formula.  Five of these licensees are now marketing
term  infant  formula  products  containing  our oils in fifteen  countries  and
pre-term  infant  formula  products  containing  our  oils in  approximately  70
countries around the world.

We have incurred  losses in each year since our inception.  At January 31, 2001,
our accumulated deficit was $93,201,000.  We expect to continue our development,
production optimization and product marketing activities and as a result, expect
our losses to continue for at least the next year, or until significant sales of
our  nutritional   oils  and   Neuromins(R)  DHA  products  occur  and/or  until
significant  royalties from sales of infant formula products containing our oils
are   recognized.   In   addition,   we  expect  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.  The extent and timing of future  oils-related  revenues  are  largely
dependent upon:

- FDA and other regulatory  approvals for products containing our oils;
- market introductions  of  products by our  licensees;  and/or
- agreements  with other future third-party collaborators. Because of this, the
  timing or likelihood of future  profitability is largely  dependent on factors
  over which we have no control.

Management Outlook and Regulatory Issues

We believe that while quarterly  results may show fluctuations in product sales,
the outlook for future revenue growth remains positive and that, in fiscal 2001,
term  infant  formulas  containing  our oils will be  introduced  in  additional
countries and revenues from the sales of our  nutritional  oils will continue to
grow. To date, five of our infant formula licensees have obtained the regulatory
approval,  where required,  to sell infant formula supplemented with our oils in
approximately  70 countries for term or pre-term  infant  formula  products.  No
company has yet  launched an infant  formula  containing  our oils in the United
States.

We believe that our DHA and ARA are  generally  recognized as safe ("GRAS") when
used as  ingredients  in infant  formulas  and,  as such,  are  exempt  from the
pre-market approval requirements for food additives.  In February 2000, we filed
a GRAS  Notification  with  the FDA  for  the  use of our DHA and ARA in  infant
formula.  We  believe  that  the FDA  review  of the  GRAS  Notification  should
ultimately have a favorable outcome, but that it is likely that this review will
not be completed for at least another three to six months from the date of this
Form 10-Q. In addition,   each  of  our  licensees  must  file an infant formula
pre-market  notification  and  meet  the  statutory  and regulatory requirements
established for such notifications  before  launching  an infant  formula in the
United States that contains our oils.  There can be no assurance that:

- the FDA will  take the  position  that DHA and ARA are GRAS  ingredients  and,
  therefore, exempt from the definition of food additives;

- the FDA will complete its review of the GRAS Notification in the next three
  to six months;

- a licensee  will  pursue the  necessary  regulatory  steps to market an infant
  formula containing our DHA and ARA in the U.S.;

- a licensee's infant formula  pre-market  notification will provide  sufficient
  data to support the marketing of an infant formula containing our DHA and ARA;
  or

- the regulatory process will not involve  significantly  longer delays that may
  materially and adversely affect the timing and introduction of infant formulas
  containing our products.

Notwithstanding  this continued  uncertainty in the U.S.  regulatory process, we
anticipate  that  during  the  next  twelve  months,   infant  formula  products
containing our 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.

                                  Page 10 of 16

<PAGE>

Results Of Operations

Revenues  increased to  $3,495,000  in the quarter ended January 31, 2001, a 95%
increase  from  revenues  of  $1,791,000  for the same  period  last year.  This
increase is primarily due to increased  nutritional product sales and royalties.
Our total product sales and royalties increased  $1,780,000 in the quarter ended
January 31, 2001, a 106% increase over the quarter ended January 31, 2000. Sales
of  nutritional  products  increased by  $1,603,000 or 176% in the quarter ended
January  31,  2001 over the same period  last year.  Our  royalties  on sales of
infant  formula  products  increased  $381,000 in the quarter  ended January 31,
2001, a 419% increase  over the quarter ended January 31, 2000.  The increase in
our  nutritional  product  sales is primarily  due to increased  sales of oil to
infant  formula  licensees.  The increase in  royalties is primarily  due to the
increased volume of oil sales to licensees under royalty-bearing arrangements in
the third and fourth  quarters of fiscal year 2000 for which trailing  royalties
were not earned until the first quarter of fiscal 2001.

Sales of stable  isotopes and other products  decreased  $204,000 in the quarter
ended January 31, 2001 or 30% when compared to the first quarter of fiscal 2000.
This decrease is primarily due a change in our focus to higher margin  isotopes,
de-emphasizing sales of low margin reagent products in markets where prices have
declined due to strong competition.

Our  revenues  from  research and  development  work  decreased  $103,000 in the
quarter  ended  January  31, 2001  compared  to the same  period last year.  The
decrease was due to a decrease in grant-related research during the quarter.

Our revenues from license fees and other revenue increased  $27,000 in the
quarter ended January 31, 2001 when compared to the quarter ended January 31,
2000,  primarily due to license fees earned from our license agreement with
Abbott  Laboratories, which was entered into on March 31, 2000.

Cost of  product  sales and  royalties  decreased  to 68% of  product  sales and
royalties  in the quarter  ended  January 31,  2001,  down from 73% for the same
period last year.  This  improvement  in margin is  primarily  due to the mix of
sales, which in the quarter ended January 31, 2001, included a higher percentage
of sales to infant formula licensees under all inclusive  pricing  arrangements.
We are in the process of finalizing  all-inclusive pricing arrangements with our
most active infant formula licensees, and for the first quarter of fiscal year
2001,  approximately 95% of our sales of oil to infant formula licensees
were made under all-inclusive pricing arrangements.  The change to all-inclusive
pricing  will not have a material impact on our overall  financial   results  as
the  economics of all-inclusive pricing are similar to the economics of existing
royalty-bearing arrangements,  with the current  transfer  price and royalty
combined into one initial price with a slight  discount.  All-inclusive  pricing
does, however, eliminate the time lag in recognizing trailing royalty  revenues,
which has generally  been 3 to 4 months after the initial sale of oil. If all of
our sales to licensees during the quarter ended January 31,  2001 had been  made
using all-inclusive pricing, our revenues would have been approximately $100,000
higher,  resulting in a cost of product sales and royalties of approximately 66%
of revenues from product sales and royalties.

In addition to the above, our gross margin improved in the quarter ended January
31, 2001 over the same period last year due to production  efficiencies realized
at our Winchester, Kentucky plant as a result of increase production volume to
keep up with the increased  demand for our nutritional  oils. We anticipate that
as sales volumes continue to increase,  and new, more cost effective  strains of
algae are introduced,  the cost of production of Martek's  nutritional oils will
continue to  decrease,  resulting  in  additional  positive  impact on our sales
margins.

Our research and  development  costs  increased by $170,000,  or 6%,  during the
quarter  ended  January  31, 2001  compared  to the same  period last year.  The
majority  of  this  increase   relates  to  the  continued   refinement  of  the
fermentation  and oil  extraction  processes at our  Winchester,  Kentucky
production plant. We



                                  Page 11 of 16

<PAGE>

anticipate that R&D expenditures may remain high and potentially increase in the
future  as new,  more  cost-  effective  strains  of  algae  are  developed  and
introduced  into  full-scale  production  and our oil  extraction  and  refining
processes are optimized.

Selling, general and administrative expenses increased by $147,000, or 9% in the
first quarter of fiscal 2001 over the first quarter of fiscal 2000, primarily as
a result of increased corporate administration expenditures  and the  timing  of
print  and  other  advertising campaigns.

We  incurred  other  operating  expenses of  $245,000  during the quarter  ended
January 31, 2001. These expenses  related  primarily to start-up and other costs
associated with obtaining  additional capacity for the production of our DHA and
ARA oils.  We  anticipate  that these costs may increase in the future as demand
for our oils increase  and start-up costs from existing and potential new
third-party manufacturers are incurred.

Other income, net increased $177,000,  or 170%, during the quarter ended January
31,  2001 over the same  period in fiscal year 2000, primarily due to  increased
interest earned on investments as a result of fundraising  activities  during
fiscal year 2000, as well as a decrease in interest expense on outstanding debt,
which is due to be extinguished during the second quarter of fiscal year 2001.

As a result of the  foregoing,  our net loss for the quarter  ended  January 31,
2001 was $3,576,000, or $.20 per share, as compared to a net loss of $3,783,000,
or $.23 per share, for the quarter ended January 31, 2000.

Liquidity and Capital Resources

We have financed our operations primarily from:

- the issuance  and sale of equity  securities;
- product  sales and receipt of license fees;
- the exercise of stock options and  warrants;
- debt  financing; and
- revenues received under research and development contracts and grants.

     Since our inception,  we have raised approximately $146 million from public
and  private  sales of our  equity  securities,  as well as option  and  warrant
exercises.  We recently raised approximately $10.25 million in February 2000 and
approximately $20 million in February 2001 from private placements of our common
stock.

Through   January  31,  2001,  we  have  incurred  an  accumulated   deficit  of
$93,201,000.  Our balance of cash and cash  equivalents  at January 31, 2001 was
$1,428,000.  In addition,  at January 31, 2001, we had $11,791,000 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 our future cash needs. Our cash, cash equivalents,
short-term investments and marketable securities decreased $6,045,000 during the
quarter ended January 31, 2001, primarily due to our continued operating losses.
In addition,  our  first  quarter  cash  outlay  was  adversely  impacted by an
inventory build up of approximately $600,000 to meet anticipated future  demand,
and an increase  in trade  receivables  during  the first quarter of fiscal year
2001 of approximately $1.0 million.

In the future we will require substantial additional funds to:

- continue our research and development  programs;
- conduct  pre-clinical  and clinical studies;
- maintain compliance with our loan covenants; and
- commercialize our nutritional  oils,  Neuromins(R) DHA, and our other products
under development.

                                  Page 12 of 16

<PAGE>

The ultimate  amount of funding that we will  require will depend,  in part,  on
whether we seek  independently,  or with  other  parties  through  collaborative
agreements,  to  develop,  manufacture  and market  our  products.  Our  capital
requirements  will depend,  among other things,  on one or more of the following
factors:

- growth in our infant formula and  nutritional  product sales;
- the extent and progress  of  our  research  and  development   programs;
- the  progress  of pre-clinical and clinical studies;
- the time and costs of obtaining  regulatory  clearances  for our products that
  are 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 our manufacturing  facilities;
- the cost of acquiring additional and/or operating existing manufacturing
  facilities for our various products and potential products (depending on which
  products we decide to manufacture and continue to manufacture ourselves); and
- the costs of marketing and commercializing our products.

The continued  development and optimization of our production  facility has had,
and will  continue to have,  a material  effect upon our  liquidity  and capital
resources.  We expect to make additional plant modifications which will cost  at
least $1 million in fiscal  2001.  Capital  expenditures  beyond  2001  will
depend in part on our production  capacity needs, and the extent of development
and  implementation of process improvements.

We believe  that,  with the approximately $20 million  raised on March 2, 2001,
our  existing capital  resources  will  provide us adequate capital for at least
the next 24 months.  However, we believe that additional funds will be needed in
the longer term to continue our  research  and  development,  manufacturing  and
marketing efforts. We intend to seek additional funding through:

- equity issuances;
- asset-based borrowing;
- product sales and license fee  arrangements;
- additional lease financing;
- collaborative arrangements with partners; and/or
- commercial and government research and development contracts and grants.

   We can offer no assurance that such financing  alternatives will be available
to us on terms that would be acceptable, if at all.

Item 3.   Quantitative and Qualitative Disclosure About Market Risk

Quatitative and qualitative disclosures about market risk are not required
because the underlying risk items are not material

                                  Page 13 of 16

<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

None

Item 2.  Changes in Securities.

The following  information relates to the issuance of Martek securities on March
2, 2001 under a private placement:

                                                           Number of warrants to
                                                             purchase shares of
                                      Shares of Martek      Martek common stock
Name of  Shareholder                common stock received         received

Nations Small Company Fund                   100,000               25,000
Catalyst Partners, L.P.                       45,827               11,457
Catalyst International, Ltd.                   1,417                  354
Royal Bank of Canada                         125,984               31,496
Domain Public Equity Partners L.P.            80,000               20,000
Cross Atlantic Partners K/S                   31,496                7,874
Cross Atlantic Partners II, K/S               50,394               12,599
Cross Atlantic Partners III, K/S             170,079               42,520
Cross Atlantic Partners IV, K/S              100,787               25,197
Unibank A/S                                   25,197                6,299
Black Bear Fund I, L.P.                       11,575                2,894
Black Bear Offshore Fund                     114,402               28,601
Horse Eye Level Partners, L.P.                 6,299                1,575
State of Wisconsin Investment Board          258,300               64,575
George W. Haywood                            125,984               31,496
Roseheart Associates LLC Property Management  15,748                3,937
DePFA Investment Bank Ltd.                    15,748                3,937
                                           ---------              -------
                                           1,279,237              319,811

The private  placement  brought gross proceeds to Martek of $20.3  million.  The
warrants are exercisable for a period of five years from the date of issuance at
$19.05/share.  The common  stock and  warrants  were  issued to accredited
investors in a private placement in  reliance on the exemption set forth in
Section 4 (2) of the Securities Act of 1933.

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

                                  Page 14 of 16

<PAGE>
Item 6.  Exhibits and Reports on Form 8-K

(a)  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:

    Form 8-K filed on March 8, 2001 (announcing a $20  million financing via a
    private placement of Martek stock).

                                  Page 15 of 16

<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:  March 16, 2001                     /s/ Peter L. Buzy
---------------------                     --------------------------------------
                                          Peter L. Buzy,
                                          Chief Financial and Accounting Officer



































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