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 SEPTEMBER 30, 1997

                               OR

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


      Commission File Number:  0-21022   


                SHAMAN PHARMACEUTICALS, INC.
   (Exact name of registrant as specified in its charter)


                  Delaware                                          94-3095806
(State or other jurisdiction of incorporation or organization)  (I.R.S. Employer
                                                          Identification Number)

    213 East Grand Avenue, South San Francisco, California            94080
             (Address of principal executive offices)               (ZIP Code)


Registrant's telephone number, including area code:      650-952-7070


Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d)of the Securities Exchange Act of 1934  during  the
preceding 12 months (or for such  shorter  period  that the registrant was 
required to file such  reports), and (2) has been  subject to such  filing  
requirements  for the past 90 days.

                   Yes           X                  No       

Number of shares of Common Stock, $.001 par value, outstanding as of October 31,
1997:  17,740,943

                                      -1-
<PAGE>


                          SHAMAN PHARMACEUTICALS, INC.

                               INDEX FOR FORM 10-Q

                               September 30, 1997
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                          PAGE
                                                                         NUMBER

PART I             FINANCIAL INFORMATION

Item 1.            Financial Statements

                   Condensed Balance Sheets as of September 30, 1997 and      3
                   December 31, 1996

                   Condensed Statements of Operations for the three and       4
                   nine months ended September 30, 1997 and September
                   30, 1996

                   Condensed Statements of Cash Flows for the nine            5
                   months ended September 30, 1997 and September 30,
                   1996

                   Notes to Condensed Financial Statements                    6

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


PART II            OTHER INFORMATION

Item 1.            Legal Proceedings                                         16

Item 2.            Changes in Securities                                     16

Item 3.            Defaults in Senior Securities                             16

Item 4.            Submission of Matters to a Vote of Security Holders       16
                   
Item 5.            Other Information                                         16

Item 6.            Exhibits and Reports on Form 8-K                          16


SIGNATURES                                                                   17

</TABLE>

                                      -2-
<PAGE>

PART I.  FINANCIAL INFORMATION.
 
     Item 1.  Financial Statements
<TABLE>
<CAPTION>

                          SHAMAN PHARMACEUTICALS, INC.
                            CONDENSED BALANCE SHEETS
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                   September 30,    December 31,    
                                                       1997             1996
                                                   -------------    ------------
                                                    (Unaudited)
    ASSETS

    Current  assets:
       Cash and cash equivalents                    $ 21,084,671   $ 16,051,251
       Short-term investments                          6,537,678        481,677
       Prepaid expenses and other current assets         839,106        938,872
                                                     -----------    -----------

    Total current  assets                             28,461,455     17,471,800

    Property and equipment,  net                       4,163,093  `   4,776,925

    Other assets                                         708,067        128,080
                                                     -----------    -----------

    Total assets                                    $ 33,332,615   $ 22,376,805
                                                    ============   ============

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
       Accounts payable and other accrued expenses   $ 1,141,275    $ 1,445,616                                 
       Accrued clinical trial costs                      458,355      1,233,014
       Accrued professional fees                         623,385        689,216
       Accrued compensation                              344,976        332,738
       Advances - contract research                    1,633,605      1,883,605
       Current installments of long-term obligations   2,361,561      2,246,795
                                                     -----------    -----------

    Total current liabilities                          6,563,157      7,830,984

    Long-term obligations,                             
    excluding current  installments                    4,941,878      2,568,931
    Senior convertible notes                          10,400,000              -

    Stockholders' equity:
       Preferred stock                                       400            400
       Common stock                                       17,741         13,921
       Additional paid-in capital                    116,674,771     94,604,455
       Deferred expenses and other adjustments          (733,280)       (20,250)
       Accumulated deficit                          (104,532,052)   (82,621,636)
                                                    ------------   ------------

    Total stockholders' equity                        11,427,580     11,976,890
                                                    ------------    ------------

    Total liabilities and stockholders' equity      $ 33,332,615   $ 22,376,805
                                                    ============   ============            
                       
 
</TABLE>
   NOTE:  The balance sheet at December 31, 1996 has been derived from the 
   audited financial statements at that date but does not include all of the  
   information and footnotes required by generally accepted accounting 
   principles for complete financial statements.

   See notes to condensed financial statements.
   

                                   -3-
<PAGE>

<TABLE>
<CAPTION>
                          SHAMAN PHARMACEUTICALS, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)



              Three Months Ended September 30,   Nine Months Ended September 30,                   
              --------------------------------   -------------------------------

                              1997         1996            1997         1996
                           ----------   ----------      ----------   ----------
<S>     <C>    <C>    <C>    <C>    <C>    <C>


Revenue from collaborative
  agreements                $  875,000  $  531,251    $  2,625,000 $  1,531,252

Operating expenses:
Research and development     5,525,369   4,754,440      17,078,567   14,225,376

General and administrative   1,207,184     862,477       3,916,530    2,634,951
                            ----------  ----------      ----------   ----------

Total operating expenses     6,732,553   5,616,917      20,995,097   16,860,327
                             ---------   ---------      ----------   ----------

Loss from operations        (5,857,553) (5,085,666)    (18,370,097) (15,329,075)

Other income(expense):

 Interest income               327,047     246,159         881,787      833,917
 Interest expense (cash)      (449,583)   (145,876)       (729,966)    (471,884)
 Interest expense(non-cash) (3,692,140)          -      (3,692,140)           -             
                            ----------  ----------      ----------   ----------

Net loss                   $(9,672,229)$(4,985,383)   $(21,910,416)$(14,967,042)
                           =========== ===========    ============ ============

Net loss per share         $     (0.55) $    (0.37)    $     (1.31) $     (1.12)
                           =========== ===========    ============  ===========

Shares used in calculation 
of net loss per share       17,555,000  13,430,000      16,758,000   13,381,000

                           =========== ===========     ===========  ===========

</TABLE>



   See notes to condensed financial statements.


                                      -4-
<PAGE>

<TABLE>
<CAPTION>

                          SHAMAN PHARMACEUTICALS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents
                                   (Unaudited)


                                     
                                                Nine Months Ended September 30,  
                                                -------------------------------
                                                      1997             1996
                                                  ------------     ------------
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Operating activities:

Net loss                                             $(21,910,416) $(14,967,042)
                            
Adjustments to reconcile net loss to net cash used in
 operating activities:

  Depreciation and amortization                         1,523,267     1,847,177
  
  Interest expense on issuance of sr. convertible notes 3,692,140             -
   
  Changes in operating assets and liabilities:
    
    Prepaid expenses, other current assets and                        
        other assets                                      388,766      (177,749)
     
    Accounts  payable, accrued expenses and            
       contract research advances                      (1,382,593)    1,950,989
                                                     ------------  ------------   
                                   
Net cash used in operating activities                 (17,688,836)  (11,346,625)
                                                     ------------  ------------


Investing activities:

  Purchases of short and long-term investments         (7,039,457)  (10,951,386)              
                                                              
  Sales of available-for-sale investments                       -     1,494,000

  Maturities of available-for-sale investments            986,097    24,300,934

  Capital expenditures                                   (699,151)     (684,468)
                                                     ------------  ------------
                                  

Net cash provided (used in) by investing activities    (6,752,511)   14,159,080
            

Financing activities:

  Proceeds from issuance of preferred stock, net                -     3,060,160

  Proceeds from issuance of common stock, net          17,456,041     3,337,156
                  
  Proceeds from long-term obligations                   5,000,000       600,000

  Proceeds from issuance of sr. convertible notes, net  9,531,013             -

  Principal payments on long-term obligations          (2,512,287)   (1,166,369)
                                                     ------------  ------------                                 
Net cash provided by (used in) financing activities    29,474,767     5,830,947
           

Net increase (decrease) in cash and cash equivalents    5,033,420     8,643,402

Cash and cash equivalents at beginning of period       16,051,251     9,210,123
                                                     ------------  ------------

Cash and cash equivalents at end of period            $21,084,671   $17,853,525
                                                     ============  ============

</TABLE>
See notes to condensed financial statements.


                                      -5-


<PAGE>


                          SHAMAN PHARMACEUTICALS, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

                               September 30, 1997
                                   (Unaudited)

1.   Basis of Presentation

     Shaman  Pharmaceuticals,  Inc. ("Shaman" or the "Company")
discovers and develops novel pharmaceutical  products for major
human  diseases by isolating  active  compounds  from  tropical
plants.   The   Company   has  four   compounds   in   clinical
development:  Provir,  an oral  product  for the  treatment  of
watery diarrhea;  Virend, a topical antiviral for the treatment
of herpes;  nikkomycin Z, an oral  antifungal for the treatment
of endemic  mycoses;  and  SP-13401,  an oral  product  for the
treatment of Type II  diabetes.  Shaman also has an active Type
II diabetes  research program which serves as the basis for its
collaborations    with    Lipha,     Lyonnaise     Industrielle
Pharmaceutique  s.a., a wholly-owned  subsidiary of Merck KGaA,
Darmstadt,    Germany    ("Lipha/Merck"),    and    with    Ono
Pharmaceutical Co., Ltd. ("Ono") of Osaka, Japan.

     The accompanying  unaudited condensed financial statements
have  been  prepared  in  accordance  with  generally  accepted
accounting  principles for interim financial information and in
accordance  with the  instructions  to Form 10-Q and Rule 10-01
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 only of
normal recurring  adjustments)  considered necessary for a fair
presentation  have been  included.  The  results of  operations
for the  interim  periods  shown  herein  are  not  necessarily
indicative of operating results for the entire year.

     This   unaudited   financial   data   should  be  read  in
conjunction  with the audited  financial  statements  and notes
thereto  included  in  the  Company's  Annual  Report  on  Form
10-K/A,  for the fiscal year ended  December  31,  1996,  filed
with the Securities and Exchange Commission on March 13, 1997.


2.   Senior Convertible Notes
 
     In June 1997, the Company  privately  issued $10.4 million
of senior  convertible  notes ("The 1997  Private  Placement").
The notes mature in August 2000 and bear interest  at a rate of
5.5% per  annum.  Interest  on the  notes may be paid in Common
Stock or cash at the  Company's  option.  Initially,  the notes
are  convertible  into  Common  Stock of the Company at 100% of
the low trading price during a designated  time period prior to
conversion  provided that the conversion price will not be less
than $5.50 per share.  Starting  in  November  1997,  the notes
are  convertible  into  Common  Stock of the  Company  at a 10%
discount  from the low trading  price during a designated  time
period prior to the

                                      -6-
<PAGE>

conversion.  The Company filed a  registration  statement  with
the SEC for the  resale of shares  issued  upon  conversion  of
these  notes, which   registration   statement   was   declared
effective on August 29,  1997.  Of the notes  issued,  $400,000
were  issued to the  placement  agent as part of the  placement
fee.  The  Company  paid  the  placement  agent  an  additional
$300,000 in cash.  The placement  fees and other offering costs
have been  capitalized  in other  assets as  deferred  issuance
costs and are being  amortized  to  interest  expense  over the
life of the  notes.  The  net  proceeds  totaled  approximately
$9.5  million  after  the  placement  agent's  fees  and  other
offering expenses.

     The SEC has  promulgated  requirements  for  charges to be
recognized  by  companies   which  issue  certain   convertible
notes.  In  connection  with the  issuance  of the  Notes,  the
Company   recognized  a  non-cash   charge  in  the  amount  of
$3,692,000  in the third  quarter  ended  September  30,  1997.
This amount was calculated as required by the SEC.


3.   Loss per Share

     In  February  1997,  the  Financial  Accounting  Standards
Board issued  Statement No. 128,  Earnings per Share,  which is
required  to be adopted on  December  31,  1997.  Under the new
requirements  for calculating  primary  earnings per share, the
dilutive  effect  of  stock  options  will  be  excluded.   The
Company  does  not  anticipate  any  material   impact  on  the
calculated loss per share because common stock  equivalents are
currently  excluded  from the  computation  as their  effect is
antidilutive.


                                      -7-
<PAGE>

                 SHAMAN PHARMACEUTICALS, INC.

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

Overview

     Shaman  Pharmaceuticals,  Inc. ("Shaman" or the "Company")
discovers and develops novel pharmaceutical  products for major
human  diseases by isolating  active  compounds  from  tropical
plants.   The   Company   has  four   compounds   in   clinical
development:  Provir,  an oral  product  for the  treatment  of
watery diarrhea;  Virend, a topical antiviral for the treatment
of herpes;  nikkomycin Z, an oral  antifungal for the treatment
of endemic  mycoses;  and  SP-13401,  an oral  product  for the
treatment of Type II  diabetes.  Shaman also has an active Type
II diabetes  research program which serves as the basis for its
collaborations    with    Lipha,     Lyonnaise     Industrielle
Pharmaceutique  s.a., a wholly-owned  subsidiary of Merck KGaA,
Darmstadt,    Germany    ("Lipha/Merck"),    and    with    Ono
Pharmaceutical Co., Ltd. ("Ono") of Osaka, Japan.

     The  Company  began  operations  in March  1990.  To date,
Shaman  has not sold  any  products  and  does  not  anticipate
receiving  product  revenue in the near future.  The  Company's
accumulated  deficit at September 30, 1997, was approximately $
104.5   million.   Shaman   expects   to   continue   to  incur
substantial and increasing  losses over the next several years,
due primarily to the expense of preclinical  studies,  clinical
trials and its ongoing  research  program.  The Company expects
that losses  will  fluctuate  from  quarter to quarter and that
such  fluctuations  could be  substantial.  Shaman has financed
its  research,   development  and   administrative   activities
through  various  private and public equity  financings,  loans
and  debt  financings,   and   collaborative   agreements  with
pharmaceutical  companies  and,  to a  lesser  extent,  through
equipment and leasehold improvement lease financings.

Results of Operations

Nine Months Ended September 30, 1997 and September 30, 1996

     The Company  recorded  collaborative  revenues of $875,000
and  $531,000  for the quarters  ended  September  30, 1997 and
1996, respectively,  and $2,625,000 and $1,531,000 for the nine
months  ended  September  30,  1997  and  1996,   respectively.
Revenues  for the quarter and nine months ended  September  30,
1997 and for the prior year  comparable periods,  resulted from
the Company's  on-going  research funding from Ono and research
funding  from  Shamam's  collaboration  with  Lipha/Merck.  The
increases  in  the  1997  periods are primarily due to the fact 
that the  Lipha  Joint  Venture was  not  entered  into until  
September 1996 and is therefore  not  included in the full 1996  
periods.  The  Company   expects   that   revenues   from   
collaborative agreements   will  continue  to  fluctuate in the  
future as development of its various compounds proceeds and new 
products are partnered for development and commercialization.


                                      -8-
<PAGE>

     Research and  development  expenses  were  $5,525,000  and
$4,754,000 for the quarters ended  September 30, 1997 and 1996,
respectively,  and  $17,079,000  and  $14,225,000  for the nine
months ended September 30, 1997 and 1996,  respectively.  These
increases   reflect   additional   funding  for  the   clinical
development  of  Provir,  partially  offset  by a  decrease  in
expenditures   for  the  Company's   Virend  and  nikkomycin  Z
development  programs.  While  at a reduced  level, funding for
Virend and  nikkomycin Z remains at  a  level that  the Company 
believes will  enable it  to  meet its target for completion of 
clinical trials for these compounds.  Research and  development  
expenses are likely to increase  in the fourth  quarter of 1997 
and fiscal year 1998 as  products  continue through development   
and the Company maintains an active diabetes research program.

     General and  administrative  expenses were  $1,207,000 and
$862,000 for the quarters  ended  September  30, 1997 and 1996,
respectively,  and  $3,917,000  and  $2,635,000  for  the  nine
months ended September 30, 1997 and 1996,  respectively.  These
increases   are   primarily   attributable   to   increases  in
compensation  and  marketing  research  related  to late  stage
clinical  products  as well  as,  for  the  nine  months  ended
September  30,  1997,  additional  legal  expenses  related  to
certain   disputes   related  to  the  Company's   intellectual
property  rights.  The  Company's  general  and  administrative
expenses  are likely to increase in the fourth  quarter of 1997
and fiscal year 1998 as a result of continued  market  research
and business development  activities as well as increased legal
expenses related to the Company's intellectual property rights.

     Interest   income  was   $327,000  and  $246,000  for  the
quarters ended September 30, 1997 and 1996,  respectively,  and
$882,000 and $834,000 for the nine months ended  September  30,
1997 and 1996,  respectively.  Interest  income  increased  for
the  quarter  ended   September  30,  1997,   compared  to  the
comparable  1996  period,   due  to  higher  average  cash  and
investment balances from the senior convertible notes financing 
in August 1997.  Interest income increased for the nine  months  
ended September  30,  1997, compared with the nine months ended  
September 30, 1996, due to higher average cash balances  during 
the 1997 period.  Interest expense was $4,150,000  and $146,000  
for  the   quarters   ended   September  30, 1997  and  1996, 
respectively, and $4,430,000 and $472,000  for the nine  months  
ended  September  30,  1997 and 1996,   respectively.  Interest  
expense  increased for  the quarter ended  September  30, 1997,  
compared with the quarter ended  September 30, 1996, due to the  
Company's  secured  debt financing  in May 1997 and  the senior  
convertible  notes issued in August 1997,  including a non-cash 
interest  charge of  $3.7 million.  Interest expense  increased 
for the nine months ended September  30,  1997,  compared  with  
the nine months ended September 30, 1996 due to higher  average 
debt balances and the non-cash interest charge of $3.7 million.

Liquidity and Capital Resources

     As  of  September  30,  1997,  the  Company's  cash,  cash
equivalents,  and short-term investments totaled $27.6 million,
compared  with $16.5  million at  December  31,  1996,  with an
average  investment  maturity of five months and three  months,
respectively.  The Company invests excess cash according to its
investment  policy  that  provides  guidelines  with  regard to
liquidity, type of investment,  credit rating and concentration
limits.

                                      -9-
 
<PAGE>

    In June 1997, the Company  privately  issued $10.4 million
of senior  convertible  notes ("The 1997  Private  Placement").
See Note 2 to  Notes to Condensed Financial Statements.

                                   
     In   May   1997,  the  Company  obtained  a  $5.0 million, 
36-month term  loan  to  pay  off  pre-existing  debt,  finance 
capital  asset acquisitions and finance continued  research and 
clinical   development  of  the  Company's  existing    product 
candidates.  The loan carries an interest rate of 14.58% and is 
payable in equal monthly  installments.  The lender was granted  
ten-year warrants to purchase 200,000 shares  of  the Company's  
Common Stock at $6.25 per  share.  

     In April  1997,  the  Company  sold  1,600,000  shares  of
Common Stock at $4.97 per share in a registered  direct  public
offering,  marketed solely by the Company,  which yielded gross
proceeds of $7.95  million.  The net proceeds of  approximately
$7.75   million  from  this  offering  will  be  used  for  the
continued  research and clinical  development  of the Company's
existing product candidates.

     In January  1997,  the Company  sold  2,000,000  shares of
Common Stock in a registered  direct public  offering for gross
proceeds of $9.0  million.  The net  proceeds of  approximately
$8.11   million  from  this  offering  will  be  used  for  the
continued  research and clinical  development  of the Company's
existing product candidates.

     In September  1996,  the Company  entered into a five-year
collaborative  agreement with  Lipha/Merck  to jointly  develop
Shaman's  antihyperglycemic  drugs. In exchange for development
and  marketing  rights in all  countries  except  Japan,  South
Korea,   and  Taiwan   (which  are  covered  under  an  earlier
agreement between Shaman and Ono),  Lipha/Merck will provide up
to $9.0 million in research  payments  and up to $10.5  million
in equity  investments  priced at a 20%  premium to a multi-day
volume weighted  average price of the Company's Common Stock at
the time of  purchase.  Complete  research  funding  under  the
collaboration   is  dependent  upon  the  initiation  of  human
clinical  trials  of at least one  compound  by  September  23,
1998. The agreement  also provides for  additional  preclinical
and  clinical  milestone  payments  to the Company in excess of
$10.0  million per  compound  for each  antihyperglycemic  drug
developed  and   commercialized.   Lipha/Merck  will  bear  all
preclinical,   clinical,   regulatory  and  other   development
expenses  associated  with the  compounds  selected  under  the
agreement.   In  addition,   as  products  are  commercialized,
Shaman will receive  royalties on all product sales outside the
United  States  and up to 50% of the  profits  (if the  Company
exercises its co-promotion  rights) or royalties on all product
sales in the United  States.  Certain  milestone  payments will
be credited  against  future royalty  payments,  if any, due to
the Company  from sales of products  developed  pursuant to the
agreement.

     In July 1996, the Company closed a private  placement (the
"1996  Private  Placement")  pursuant to Regulation S under the
Securities Act of 1933, as amended,  in which it received gross
proceeds  of $3.3  million  for the sale of  400,000  shares of
Series A Convertible  Preferred Stock and for the issuance of a
six-year  warrant to purchase  550,000  shares of the Company's
Common  Stock at an  exercise  price of $10.184  per share.  In
addition  to the  sale of  Preferred  Stock  and  warrant,  the
Company  has the  right,  from time to time  during  the period
beginning  January  1997 and ending  July  2000,  to sell up to
1,200,000  additional shares of Common Stock to the investor at
a formula  price of 100% or 101% of a multi-day  average of the
Company's  Common  Stock  price  at the  time of  sale.  If the
Company  

                                      -10-

<PAGE>

exercises  this right, the investor has the option to increase 
the shares purchased by up to an aggregate of 527,500  shares.   
Pursuant  to the  terms  of  the 1997 Private  Placement,  the  
Company may not  exercise this right until late February 1998.

     The Company expects to incur substantial  additional costs
relating to the continued  preclinical and clinical  testing of
its   products,   regulatory   activities   and   research  and
development  programs.  The  Company  believes  that its  cash,
cash  equivalents  and  investment  balances  of  approximately
$27.6 million at September 30, 1997, the collaborative  revenue
committed by Lipha/Merck and Ono,  Lipha/Merck's  commitment to
purchase additional equity,  Shaman's additional rights to sell
Common  Stock under the 1996  Private  Placement,  and proceeds
from  the  1997  Private  Placement  (see  Note 2 to  Notes  to
Condensed  Financial  Statements)  will  be  adequate  to  fund
current  operations,  including  payments  due under  long-term
obligations,  through  the  end  of  1998.  Milestone  payments
which may be received by the Company  from Ono and  Lipha/Merck
would extend the Company's  capacity to finance its  operations
beyond  that time.  However,  there can be no  assurances  that
these   milestones  will  be  achieved,   nor  that  additional
funding,  if needed,  will be available on reasonable terms, or
at all.

Future Outlook

In addition to  historical  information,  this report  contains
predictions,  estimates,  and other forward-looking  statements
within  the  meaning of Section  27A of the  Securities  Act of
1933,  as amended and Section  21E of the  Securities  Exchange
Act  of  1934,   as  amended.   Actual   results  could  differ
materially  from  any  future  performance  suggested  in  this
report as a result of the risk  factors  set forth  below under
the caption "Risk  Factors" and elsewhere in this report and in
the  Company's  Annual  Report on Form  10-K/A,  for the fiscal
year ended  December 31, 1996,  filed with the  Securities  and
Exchange Commission on March 13, 1997.


                                      -11-


<PAGE>

Risk Factors

     History   of   Operating   Losses;   Products   Still   in
Development;    Future   Profitability   Uncertain.    Shaman's
potential  products are in research and  development.  In order
to generate  revenues or profits,  the  Company,  alone or with
others,  must  successfully  develop,  test,  obtain regulatory
approval for and market its  potential  products.  No assurance
can be given that these  product  development  efforts  will be
successful,   that  required   regulatory   approvals  will  be
obtained,  or that the products,  if developed and  introduced,
will be successfully marketed or achieve market acceptance.

     No  Assurance  of  Successful  Product  Development.   The
Company's  research  and  development  programs  are at various
stages  of  development,  ranging  from the  research  stage to
clinical  trials.  There  can be no  assurance  that any of the
Company's   research  and  development   efforts  on  potential
products,  including Provir, Virend,  nikkomycin Z and SP-13401
will lead to  development of products that are shown to be safe
and effective in clinical trials. In addition,  there can be no
assurance   that  any  such  products   will  meet   applicable
regulatory   standards,   be  capable  of  being   produced  in
commercial  quantities  at  acceptable  costs,  be eligible for
third  party   reimbursement   from   governmental  or  private
insurers,   be   successfully   marketed   or  achieve   market
acceptance.  Further,  the Company's products may prove to have
undesirable  or  unintended  side  effects  that may prevent or
limit their  commercial use. The Company may find, at any stage
of this complex  product  development  process,  that  products
that appeared  promising in preclinical  studies or Phase I and
Phase  II  clinical  trials  do  not  demonstrate  efficacy  in
larger-scale,  Phase III  clinical  trials  and do not  receive
regulatory  approvals.  Accordingly,  any  product  development
program undertaken by the Company may be curtailed,  redirected
or  eliminated  at  any  time.  In  addition,  there  can be no
assurance that the Company's testing and development  schedules
will be met.  Any failure to meet such  schedules  could have a
material  adverse effect on the Company's  business,  financial
condition and results of  operations.  The  Company's  clinical
trials may be delayed by many  factors,  including  slower than
anticipated  patient   enrollment,   difficulty  in  finding  a
sufficient  number of patients  fitting the  appropriate  trial
profile  or  in  the  acquisition  of  sufficient  supplies  of
clinical  trial  materials or adverse events  occurring  during
the clinical trials.  Completion of testing, studies and trials
may  take  several  years,   and  the  length  of  time  varies
substantially with the type,  complexity,  novelty and intended
use  of  the  product.   In  addition,   data   obtained   from
preclinical and clinical  activities are susceptible to varying
interpretations,   which   could   delay,   limit  or   prevent
regulatory  approval.  Delays or rejections  may be encountered
based  upon  many  factors,  including  changes  in  regulatory
policy during the period of product  development and could have
a material adverse effect on the Company's business,  financial
condition and results of operations.

     Dependence on Collaborative  Relationships.  The Company's
research and development  efforts in its diabetes  program and,
to a lesser extent,  in its other  programs,  is dependent upon
its  arrangements  with  Lipha/Merck and Ono and the compliance
of  such  partners  with  the  terms  and  conditions  of  such
collaborative   agreements   including,   without   limitation,
providing funding for research and development  efforts and the
achievement  of  milestones  and  assisting  the Company in its
research and  development  efforts.  These partners may develop
products  that  may  compete  with  those of the  Company.  The
amount and timing of resources  they allocate to these programs
is not

                                      -12-
<PAGE>

within the Company's  control.  There can be no assurance  that
these  partners will perform their  obligations  as expected or
that any  significant  revenues will ultimately be derived from
such  agreements.  The  Company's  agreement  with  Ono  may be
terminated in the event Ono determines  further  development of
compounds is not warranted,  provided  certain other conditions
are met, and the  Lipha/Merck  agreement  may be  terminated in
September   1998   if  no   compound   discovered   under   the
collaboration  has entered human clinical  trials.  Termination
of  either   agreement   is  subject   to   certain   surviving
obligations.  If one or more such partners elected to terminate
their  relationships with the Company, or if the Company or its
partners fail to achieve targeted  milestones,  it could have a
material  adverse effect on the Company's  ability to fund such
programs,  or to develop any products on a collaborative  basis
with such partners.

     Additional Financing  Requirements and Uncertain Access to
Capital   Markets.   The  Company  has  significant   long-term
capital   requirements   and,  in  the  event  Shaman  receives
regulatory  approval  for any of its  products,  it will  incur
substantial  expenditures to develop  manufacturing,  sales and
marketing  capabilities.  In addition, Note Purchase Agreements
entered  into  by the  Company  in  connection  with  the  1997
Private  Placement,  provide that under certain  circumstances,
the Company  would be required to redeem all or some portion of
the $10.4 million  principal due thereunder,  which  redemption
could significantly  accelerate the Company's cash expenditures
and   capital   requirements   beyond  the   levels   currently
anticipated.  The Company will need to raise  additional  funds
through  additional  equity or debt  financings,  collaborative
arrangements with corporate partners or from other sources.  No
assurance  can be  given  that  any  additional  funds  will be
available to the Company on  acceptable  terms,  if at all. The
Company  may seek to raise  funds  through  private  or  public
issuances  of  equity  securities  at any  time or  times as it
deems market conditions to be favorable.

     Uncertainties  Associated  with  Clinical  Trials.  Shaman
has conducted, and plans to continue to conduct,  extensive and
costly  clinical  trials to assess the safety and  efficacy  of
its  potential   products.   The  rate  of  completion  of  the
Company's  clinical  trials  is  dependent  upon,  among  other
factors,   the  rate  of  completion   and  approval  of  trial
protocols,  the  availability  of funds for trials and the rate
of patient  enrollment.  Patient  enrollment  is a function  of
many factors,  including  the nature of the Company's  clinical
trial  protocols,  existence  of competing  protocols,  size of
patient  population,  proximity  of patients to clinical  sites
and  eligibility  criteria  for the  study.  Delays in  patient
enrollment  will result in  increased  costs and delays,  which
could have a material  adverse effect on the Company's  ability
to timely complete  clinical trials.  The Company cannot assure
that patients  enrolled in its clinical  trials will respond to
the Company's product  candidates.  Setbacks are to be expected
in conducting  human  clinical  trials.  Failure to comply with
the  U.S.  Food  and Drug  Administration  ("FDA")  regulations
applicable  to such testing can result in delay,  suspension or
cancellation  of such  testing,  and/or  refusal  by the FDA to
accept  the  results  of  such  testing.  One of the  Company's
clinical  trials for  nikkomycin  Z is being  conducted  in the
United  Kingdom  not  pursuant to an  Investigational  New Drug
application ("IND") filed with the FDA.  Accordingly,  the data
collected  from such trial may not be accepted by the FDA,  and
for this or other  reasons,  the  Company  may need to  conduct
additional  Phase I trials  pursuant  to an IND filed  with the
FDA. In addition,  the FDA or the Company may suspend  clinical
trials  at any  time if  either  of  them  concludes  that  any
patients  participating  in any such trial are being exposed to
unacceptable health risks.  Further,  there can be no assurance
that human clinical  testing will  demonstrate that any current
or

                                      -13-
<PAGE>

future  product  candidate  is safe or  effective  or that data
derived from any such study will be suitable for  submission to
the  FDA  or  other  regulatory  authorities.  Failure  of  the
Company's  clinical trials to demonstrate safety or efficacy in
humans could have a material  adverse  effect on the  Company's
business, financial condition and results of operations.
 
     No Assurance of FDA  Approval  for  Marketing;  Government
Regulation.   The   Company's   activities   with   respect  to
research,    preclinical    development,    clinical    trials,
manufacturing  and  marketing  in the  United  States and other
countries  are  subject to  extensive  regulation  by  numerous
governmental  authorities  including,  but not  limited to, the
Food and Drug Administration  ("FDA"). The process of obtaining
FDA and other  required  regulatory  approvals  is lengthy  and
requires the  expenditure  of  substantial  resources.  Success
cannot  be  assured.  In  order to  obtain  FDA  approval,  the
Company  must  perform  clinical  tests to  demonstrate  to the
FDA's  satisfaction  that a product is safe and  effective  for
its  intended  uses.  The  Company  may  encounter  problems in
clinical  trials  which  could  cause the FDA or the Company to
delay or suspend  clinical  trials.  Further,  the Company must
demonstrate  that it is capable of  manufacturing  bulk product
to the relevant  standards.  There can be no assurance that any
of  the  Company's  future  studies  will   demonstrate   their
intended  result,  that the  Company's  products  will not have
undesirable  side  effects  that may  prevent  or  limit  their
commercial  use, or that the FDA will otherwise  approve any of
the Company's products.

     Dependence  on Sources of Supply.  The  Company  currently
imports all of the plant  materials from which its products are
derived from countries in South and Latin  America,  Africa and
Southeast  Asia.  To the  extent  that its  products  cannot be
economically  synthesized  or otherwise  produced,  the Company
will  continue  to be  dependent  upon a  supply  of raw  plant
material.  While  Shaman  believes  it has  good  relationships
with  the  local  governments  and  suppliers  of  these  plant
materials,  the  Company  does not have  formal  agreements  in
place with all of its suppliers.

     Limited   Manufacturing   and  Marketing   Experience  and
Capacity.  The  Company  currently  produces  products  only in
quantities  necessary for clinical trials and does not have the
staff  or  facilities  necessary  to  manufacture  products  in
commercial  quantities.  As a result,  the Company must rely on
collaborative    partners    or    third-party    manufacturing
facilities,   which  may  not  be  available  on   commercially
acceptable  terms adequate for Shaman's  long-term  needs.  The
Company  currently  has no  marketing  or sales  staff.  To the
extent  that the  Company  does not or is unable to enter  into
co-promotion   agreements   or  to  arrange   for  third  party
distribution of its products,  significant additional resources
will be required to develop a marketing and sales force.

     Rapid  Technological  Change and Substantial  Competition.
The   pharmaceutical   industry   is   subject   to  rapid  and
substantial  technological  change.  Technological  competition
from  pharmaceutical  companies,  biotechnology  companies  and
universities   is  intense.   Many  of  these   entities   have
significantly  greater  research and development  capabilities,
as well as substantial marketing, manufacturing,  financial and
managerial  resources,  and represent  significant  competition
for the Company.  There can be no assurance  that  developments
by others will not render the Company's products or

                                      -14-
<PAGE>

technologies  noncompetitive  or that the Company  will be able
to keep pace with technological developments.

     Uncertainty  Regarding  Patents  and  Proprietary  Rights.
The Company's  success depends in part on its ability to obtain
patent  protection  for its  products and to preserve its trade
secrets.  No assurance can be given that the  Company's  patent
applications  will be  approved,  that any patents will provide
the Company  with  competitive  advantages  for its products or
that they will not be  successfully  challenged or circumvented
by the  Company's  competitors.  In  addition,  patents  do not
necessarily   prevent   others  from   developing   competitive
products.  The Company has not conducted an  exhaustive  patent
search and no assurance  can be given that patents do not exist
or could not be filed  which  would have an  adverse  effect on
the Company's ability to market its products.
 
     Uncertainty  of  Health  Care  Reimbursement  and  Reform.
Shaman's  ability to  successfully  commercialize  its products
may  depend in part on the  extent to which  reimbursement  for
the  cost of  such  products  and  related  treatments  will be
available from government  health  administration  authorities,
private health  insurers and other  organizations.  Significant
uncertainty   exists  as  to  the  pricing,   availability   of
distribution   channels  and  reimbursement   status  of  newly
approved healthcare products.

     Possible  Volatility  of Stock Price.  The market price of
the  Company's  Common  Stock,  like the  stock  prices of many
publicly  traded   biotechnology  and  smaller   pharmaceutical
companies, has been and may continue to be highly volatile.

     Environmental   Regulation.   In   connection   with   its
research   and   development   activities   and  its   periodic
manufacturing  of  clinical  trial  materials,  the  Company is
subject to federal,  state and local laws,  rules,  regulations
and  policies  governing  the  use,  generation,   manufacture,
storage,  air  emission,   effluent  discharge,   handling  and
disposal  of  certain   materials  and  wastes.   Although  the
Company  believes  that it has  complied  with  these  laws and
regulations in all material  respects and has not been required
to take any action to correct any  noncompliance,  there can be
no  assurance  that the  Company  will not be required to incur
significant  costs to comply with  environmental and health and
safety regulations in the future.


                                      -15-
<PAGE>

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

PART II         OTHER INFORMATION

Item 1.         Legal Proceedings

                None.

Item 2.        Changes in Securities

               None.

Item 3.        Defaults in Senior Securities

               None.

Item 4.        Submission of Matters to a Vote of Security Holders
 
               None.

Item 5.        Other Information

               Ms.Jacqueline Cossmon's, Vice President, Corporate Communications
               employment was terminated November 7, 1997.

Item 6.        Exhibits and Reports on Form 8-K

               (a) Exhibits  
 
               27.1 Financial Data Schedule
 
               (b) Reports on Form 8-K
 
               The Company did not file any reports on Form 8-K during the three 
               months ended September 30, 1997.

 
</TABLE>
                                      -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.

Dated:  November 13, 1997


                           Shaman Pharmaceuticals, Inc.
                           (Registrant)


                           /s/ Lisa A. Conte
                           ___________________________________
                           Lisa A. Conte
                           President,  Chief Executive Officer
                           and Chief Financial Officer
                           (on behalf of the Company and as principal
                           executive officer & principal financial and
                           accounting officer)


                                      -17-