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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-Q

(Mark One)

|/x/                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|----------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended October 31, 2000
|/ /                                             | 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 1-8366                  
|                                                |                                                                                         

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POLYDEX PHARMACEUTICALS LIMITED(Exact name of registrant as specified in its charter)

Commonwealth of the Bahamas(State or other jurisdiction of
incorporation or organization)

None(I.R.S. Employer Identification No.)


421 Comstock Road, Toronto, Ontario, Canada M1L 2H5(Address of principal executive offices)

(416) 755-2231Registrant's telephone number, including area code

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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 Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

Indicate
the number of shares outstanding of each of the issuer's classes of common shares, as of the latest practicable date.

Common Shares, $.0167 Par Value(Title of Class)

3,030,717 shares(Outstanding at December 6, 2000)


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POLYDEX PHARMACEUTICALS LIMITED       TABLE OF CONTENTS

|        |  |                                                                                                                                    |  | PAGE
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ----
|PART I  |  | FINANCIAL INFORMATION                                                                                                              |  |     
|Item 1  |  | CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                                                                                      |  |     
|        |  | Consolidated Balance Sheets
October 31, 2000 and January 31, 2000                                                                  |  | 3   
|        |  | Consolidated Statements of Operations
Three Months ended October 31, 2000 and 1999 and Nine Months ended October 31, 2000 and 1999 |  | 4   
|        |  | Consolidated Statements of Shareholders' Equity
Nine Months ended October 31, 2000 and 1999                                        |  | 5   
|        |  | Consolidated Statements of Cash Flows
Nine Months ended October 31, 2000 and 1999                                                  |  | 6   
|        |  | Segmented Information
Three Months ended October 31, 2000 and 1999 and Nine Months ended October 31, 2000 and 1999                 |  | 7   
|Item 2  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                              |  | 8   
|Item 3  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                         |  | 11  
|PART II |  | OTHER INFORMATION                                                                                                                  |  |     
|Item 6  |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                                   |  | 13  
|        |  | Signatures                                                                                                                         |  | 14  

2

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## 

PART IFINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements.

POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

Consolidated Balance Sheets

(Expressed in United States dollars)

|                                     |                                              | (Unaudited)
October 31
2000 |                                                               | January 31
2000 |          
|------------------------------------ | -------------------------------------------- | --------------------------- | ------------------------------------------------------------- | --------------- | ---------
|Assets                               |                                             
|Current assets:                      |                                              |                             |                                                               |                 |          
|                                     | Cash                                         |                             | $                                                             | 476,282         |          
|                                     | Trade accounts receivable                    |                             |                                                               | 1,455,519       |          
|                                     | Inventories:                                 |                             |                                                               |                 |          
|                                     |                                              | Finished goods              |                                                               |                 | 1,280,604
|                                     |                                              | Work in process             |                                                               |                 | 110,712  
|                                     |                                              | Raw materials               |                                                               |                 | 609,294  
|                                     |                                              |                             |                                                               |                 |          
|                                     |                                              |                             | 2,000,610                                                     |                 |          
|                                     | Prepaid expenses and other current assets    |                             |                                                               | 111,089         |          
|                                     |                                              |                             |                                                               |                 |          
|                                     |                                              |                             | 4,043,500                                                     |                 |          
|Property, plant and equipment, net   |                                              |                             | 5,080,116                                                     |                 |          
|Patents, net                         |                                              |                             | 136,974                                                       |                 |          
|Due from Sparhawk Laboratories Inc.  |                                              |                             | 9,328                                                         |                 |          
|Due from shareholder                 |                                              |                             | 1,381,394                                                     |                 |          
|Deferred income taxes                |                                              |                             | 615,002                                                       |                 |          
|Other assets                         |                                              |                             | 38,320                                                        |                 |          
|                                     |                                              |                             |                                                               |                 |          
|                                     |                                              | $                           | 11,304,634                                                    |                 | $        
|                                     |                                              |                             |                                                               |                 |          
|Liabilities and Shareholders' Equity |                                             
|Current liabilities:                 |                                              |                             |                                                               |                 |          
|                                     | Bank indebtedness                            |                             | $                                                             | 85,784          |          
|                                     | Accounts payable                             |                             |                                                               | 1,062,577       |          
|                                     | Accrued liabilities                          |                             |                                                               | 695,983         |          
|                                     | Income taxes payable                         |                             |                                                               | 18,335          |          
|                                     | Current portion of long-term debt            |                             |                                                               | 336,854         |          
|                                     | Current portion of capital lease obligations |                             |                                                               | 119,841         |          
|                                     |                                              |                             |                                                               |                 |          
|                                     |                                              |                             | 2,319,374                                                     |                 |          
|Long-term debt                       |                                              |                             | 942,028                                                       |                 |          
|Capital lease obligations            |                                              |                             | 494,814                                                       |                 |          
|Due to shareholder                   |                                              |                             | 710,178                                                       |                 |          
|Deferred income taxes                |                                              |                             |                                                              |                 |          
|                                     |                                              |                             |                                                               |                 |          
|Total liabilities                    |                                              |                             | 4,466,394                                                     |                 |          
|Shareholders' equity:                |                                              |                             |                                                               |                 |          
|                                     | Capital stock                                |                             |                                                               |                 |          
|                                     |                                              | Authorized:                 |                                                               |                 |          
|                                     |                                              |                             | 100,000 Class A preferred shares, par value $0.10 per share   |                 |          
|                                     |                                              |                             | 899,400 Class B preferred shares, par value $0.0167 per share |                 |          
|                                     |                                              |                             | 10,000,000 common shares, par value $0.0167 per share         |                 |          
|                                     |                                              | Issued and outstanding:     |                                                               |                 |          
|                                     |                                              |                             | 899,400 Class B preferred shares                              |                 |          
|                                     |                                              |                             | 3,030,717 common shares (20003,021,917)                      |                 |          
|                                     | Contributed surplus                          |                             |                                                               | 23,169,085      |          
|                                     | Deficit                                      |                             |                                                               | (15,541,311     | )        
|                                     | Accumulated other comprehensive income       |                             |                                                               | (854,894        | )        
|                                     |                                              |                             |                                                               |                 |          
|                                     |                                              |                             | 6,838,240                                                     |                 |          
|                                     |                                              |                             |                                                               |                 |          
|                                     |                                              | $                           | 11,304,634                                                    |                 | $        
|                                     |                                              |                             |                                                               |                 |          

3

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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(Expressed in United States dollars)

|                                                                    |                                                  | Quarter Ended
October 31
2000 |           | Quarter Ended
October 31
1999 |      | Year to Date
October 31
2000 |         | Year to Date
October 31
1999 |           
|------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------- | --------- | ----------------------------- | ---- | ---------------------------- | ------- | ---------------------------- | ----------
|Sales                                                               |                                                  | $                             | 4,053,774 |                               | $    | 3,674,392                    |         | $                            | 10,552,501
|Cost of products sold                                               |                                                  |                               | 3,027,483 |                               |      | 2,562,712                    |         |                              | 7,746,123 
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|                                                                    |                                                  |                               | 1,026,291 |                               |      | 1,111,680                    |         |                              | 2,806,378 
|Other Revenue                                                       |                                                  |                               | 182,400   |                               |      |                             |         |                              | 182,400   
|Expenses:                                                           |                                                  |                               |           |                               |      |                              |         |                              |           
|                                                                    | General and administrative                       |                               |           | 408,630                       |      |                              | 431,887 |                              |           
|                                                                    | Research and development                         |                               |           | 348,635                       |      |                              | 186,608 |                              |           
|                                                                    | Depreciation                                     |                               |           | 149,494                       |      |                              | 124,399 |                              |           
|                                                                    | Interest expense                                 |                               |           | 73,915                        |      |                              | 44,476  |                              |           
|                                                                    | Selling and promotion                            |                               |           | 40,447                        |      |                              | 33,479  |                              |           
|                                                                    | Amortization                                     |                               |           | 5,546                         |      |                              | 5,480   |                              |           
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|                                                                    |                                                  |                               | 1,026,667 |                               |      | 826,329                      |         |                              | 2,734,952 
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|Income (loss) from operations                                       |                                                  |                               | 182,024   |                               |      | 285,351                      |         |                              | 253,826   
|Other income:                                                       |                                                  |                               |           |                               |      |                              |         |                              |           
|                                                                    | Interest and other                               |                               |           | 5,004                         |      |                              | 7,818   |                              |           
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|Income before the undernoted                                        |                                                  |                               | 187,028   |                               |      | 293,169                      |         |                              | 279,360   
|Provision for income taxes                                          |                                                  |                               | (124,727  | )                             |      | (77,020                      | )       |                              | (291,739  
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|Net income (loss) for the period                                    |                                                  | $                             | 62,301    |                               | $    | 216,149                      |         | $                            | (12,379   
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|Per share information:                                              |                                                  |                               |           |                               |      |                              |         |                              |           
|                                                                    | Earnings (loss) per common share for the period: |                               |           |                               |      |                              |         |                              |           
|                                                                    |                                                  | Basic                         |           | $                             | 0.02 |                              | $       | 0.07                         |           
|                                                                    |                                                  | Diluted                       |           | $                             | 0.02 |                              | $       | 0.07                         |           
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           
|Weighted average number of common shares outstanding for the period |                                                  |                               | 3,030,717 |                               |      | 3,016,917                    |         |                              | 3,026,942 
|                                                                    |                                                  |                               |           |                               |      |                              |         |                              |           

4

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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity and Comprehensive Income (Unaudited)

(Expressed in United States dollars)

|                                        |                                                | Year to Date
October 31
2000 |         | Year to Date
October 31
1999 |  
|--------------------------------------- | ---------------------------------------------- | ---------------------------- | ------- | ---------------------------- | -
|Preferred Shares:                       |                                                |                              |         |                              |  
|                                        | Balance, beginning of period                   |                              | $       | 15,010                       |  
|                                        | Private placement of preferred shares          |                              |         |                             |  
|                                        |                                                |                              |         |                              |  
|                                        | Balance, end of period                         |                              | $       | 15,010                       |  
|                                        |                                                |                              |         |                              |  
|Common Shares:                          |                                                |                              |         |                              |  
|                                        | Balance, beginning of period                   |                              | $       | 50,203                       |  
|                                        | Sale of shares under purchase contingency      |                              |         |                             |  
|                                        | Common share options exercised                 |                              |         | 147                          |  
|                                        |                                                |                              |         |                              |  
|                                        | Balance, end of period                         |                              | $       | 50,350                       |  
|                                        |                                                |                              |         |                              |  
|Contributed Surplus:                    |                                                |                              |         |                              |  
|                                        | Balance, beginning of period                   |                              | $       | 23,121,345                   |  
|                                        | Sale of shares under purchase contingency      |                              |         |                             |  
|                                        | Common share options exercised                 |                              |         | 29,740                       |  
|                                        | Common share options granted                   |                              |         | 18,000                       |  
|                                        |                                                |                              |         |                              |  
|                                        | Balance, end of period                         |                              | $       | 23,169,085                   |  
|                                        |                                                |                              |         |                              |  
|Deficit:                                |                                                |                              |         |                              |  
|                                        | Balance, beginning of period                   |                              | $       | (15,528,932                  | )
|                                        | Net income (loss) for the period               |                              |         | (12,379                      | )
|                                        |                                                |                              |         |                              |  
|                                        | Balance, end of period                         |                              | $       | (15,541,311                  | )
|                                        |                                                |                              |         |                              |  
|Accumulated Other Comprehensive Income: |                                                |                              |         |                              |  
|                                        | Balance, beginning of period                   |                              | $       | (692,992                     | )
|                                        | Currency translation adjustment for the period |                              |         | 743,342                      |  
|                                        |                                                |                              |         |                              |  
|Balance, end of period                  |                                                | $                            | 50,350  |                              | $
|                                        |                                                |                              |         |                              |  
|Comprehensive Income for the period:    |                                                |                              |         |                              |  
|                                        | Net income (loss) for the period               |                              | $       | (12,379                      | )
|                                        | Currency translation adjustment for the period |                              |         | 743,342                      |  
|                                        |                                                |                              |         |                              |  
|                                        |                                                | $                            | 730,963 |                              | $
|                                        |                                                |                              |         |                              |  

5

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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Expressed in United States dollars)

|                                             |                                                             | Year to Date
October 31
2000                         |          | Year to Date
October 31
1999 |        
|-------------------------------------------- | ----------------------------------------------------------- | ---------------------------------------------------- | -------- | ---------------------------- | -------
|Cash provided by (used in):                  |                                                             |                                                      |          |                              |        
|Operating activities:                        |                                                             |                                                      |          |                              |        
|                                             | Net income (loss) for the period                            |                                                      | $        | (12,379                      | )      
|                                             | Add (deduct) items not affecting cash:                      |                                                      |          |                              |        
|                                             |                                                             | Depreciation and amortization                        |          |                              | 448,629
|                                             |                                                             | Imputed interest on long-term debt                   |          |                              | 62,437 
|                                             |                                                             | Expenses related to granting of common share options |          |                              | 18,000 
|                                             |                                                             | Deferred income taxes                                |          |                              | 238,159
|                                             |                                                             | Legal expenses charged to deferred gain              |          |                              |       
|Change in non-cash operating working capital |                                                             |                                                      | (247,118 | )                            |        
|                                             |                                                             |                                                      |          |                              |        
|                                             |                                                             |                                                      | 507,728  |                              |        
|                                             |                                                             |                                                      |          |                              |        
|Investing activities:                        |                                                             |                                                      |          |                              |        
|                                             | Additions to property, plant and equipment and patents      |                                                      |          | (521,102                     | )      
|                                             | Repayment of due from shareholder, net                      |                                                      |          | 15,221                       |        
|                                             |                                                             |                                                      |          |                              |        
|                                             |                                                             |                                                      | (505,881 | )                            |        
|                                             |                                                             |                                                      |          |                              |        
|Financing activities:                        |                                                             |                                                      |          |                              |        
|                                             | Proceeds from long-term debt                                |                                                      |          | 49,896                       |        
|                                             | Repayment of long-term debt                                 |                                                      |          | (448,937                     | )      
|                                             | Repayment of capital lease obligations                      |                                                      |          | (85,727                      | )      
|                                             | Payment of mandatorily redeemable capital stock             |                                                      |          |                             |        
|                                             | Proceeds from (repayment of) advances from shareholder, net |                                                      |          | 37,412                       |        
|                                             | Increase (decrease) in bank indebtedness                    |                                                      |          | 85,784                       |        
|                                             | Exercise of common share options                            |                                                      |          | 29,887                       |        
|                                             |                                                             |                                                      |          |                              |        
|                                             |                                                             |                                                      | (331,685 | )                            |        
|                                             | Effect of exchange rate changes on cash                     |                                                      |          | 6,555                        |        
|                                             |                                                             |                                                      |          |                              |        
|Increase (decrease) in cash position         |                                                             |                                                      | (323,283 | )                            |        
|Cash, beginning of period                    |                                                             |                                                      | 799,565  |                              |        
|                                             |                                                             |                                                      |          |                              |        
|Cash, end of period                          |                                                             | $                                                    | 476,282  |                              | $      
|                                             |                                                             |                                                      |          |                              |        

6

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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

Segmented Information (Unaudited)

(Expressed in United States dollars)

All operations are carried out through Dextran Products Limited ("Dextran") in Canada and through Chemdex, Inc. ("Chemdex") in the United States. The operations of Chemdex
represent the veterinary products business and the operations are carried out through its wholly-owned subsidiary, Veterinary Laboratories, Inc. Each of Dextran and Chemdex operates as a
strategic business unit offering different products. Each subsidiary comprises a reportable segment as follows:

|Dextran             |  | Manufactures and sells bulk quantities of dextran and several of its derivatives to large pharmaceutical companies throughout the world.                                                                                
|-------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Veterinary Products |  | Manufactures and sells veterinary pharmaceutical products and specialty chemicals in the United States. The primary customers are distributors and private labelers, who in turn sell to the end-user of these products.

|                        |                                            | Quarter Ended
October 31
2000 |   | Quarter Ended
October 31
1999 |  | Year to Date
October 31
2000 |           | Year to Date
October 31
1999
|----------------------- | ------------------------------------------ | ----------------------------- | - | ----------------------------- |  | ---------------------------- | --------- | ----------------------------
|Sales:                  |                                            |                               |   |                               |  |                              |           |                             
|                        | Dextran                                    |                               | $ | 1,295,709                     |  | $                            | 1,317,412 |                             
|                        | Veterinary products                        |                               |   | 2,886,175                     |  |                              | 2,527,543 |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|                        | Total segment sales                        |                               |   | 4,181,884                     |  |                              | 3,844,955 |                             
|                        | Less: intercompany sales elimination       |                               |   | 128,110                       |  |                              | 170,563   |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|                        | Total consolidated sales                   |                               | $ | 4,053,774                     |  | $                            | 3,674,392 |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|Income from operations: |                                            |                               |   |                               |  |                              |           |                             
|                        | Dextran                                    |                               | $ | 118,097                       |  | $                            | 283,534   |                             
|                        | Veterinary products                        |                               |   | 357,310                       |  |                              | 210,062   |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|                        | Total income from operations from segments |                               |   | 475,407                       |  |                              | 493,596   |                             
|                        | Less: Unallocated corporate expenses       |                               |   | 293,383                       |  |                              | 208,245   |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|                        | Total consolidated income from operations  |                               | $ | 182,024                       |  | $                            | 285,351   |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|Assets:                 |                                            |                               |   |                               |  |                              |           |                             
|                        | Dextran                                    |                               |   |                               |  |                              |           |                             
|                        | Veterinary products                        |                               |   |                               |  |                              |           |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|                        | Total assets from segments                 |                               |   |                               |  |                              |           |                             
|                        | Corporate assets                           |                               |   |                               |  |                              |           |                             
|                        |                                            |                               |   |                               |  |                              |           |                             
|                        | Total consolidated assets                  |                               |   |                               |  |                              |           |                             
|                        |                                            |                               |   |                               |  |                              |           |                             

7

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## 

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

(a) Results of Operations

During the fiscal quarter ended October 31, 2000, the Registrant's pre-tax income from operations amounted to $182,024, as compared to
$285,351 for the third quarter of fiscal 2000, ended October 31, 1999. This decrease in results is primarily due to a decrease in operating profits during the quarter, as compared to the third
quarter of fiscal 2000, at Dextran Products Limited ("Dextran") of $165,437 and an increase in corporate expenses of $85,138. These decreases were partially offset by an increase in operating profits
during the quarter, as compared to the third quarter of fiscal 2000, at Veterinary Laboratories Inc. ("Vet Labs") of $147,248. The increase in operating profits at Vet Labs is primarily
attributable to an increase in margin resulting from sales increases and a decrease in research and development expenses as compared to the same quarter last year. The decrease in operating profits at
Dextran is primarily attributable to a significant decrease in margin as compared to the same quarter last year.

Sales
volume for the third quarter of fiscal 2001 increased from $3,674,392 to $4,053,774, representing an increase of $379,382 or 10%.

Vet
Labs experienced an increase in sales of $358,632 or 14% in the third quarter of fiscal 2001, compared to the third quarter of fiscal 2000, due to increases in all product lines
resulting from increased demand. Vet Labs continues to have strong sales of the injectable vitamin products. As in the previous quarter, there continues to be regulatory problems with the raw material
supplier of the euthanasia products. The shortage of raw materials did not have a significant impact on sales in third quarter and is not expected to have a significant impact on sales in the fourth
quarter. Sales at Dextran remained constant as compared to the third quarter in fiscal 2000.

Gross
margins decreased from 30% in the third quarter of fiscal 2000 to 25% in the third quarter of fiscal 2001. Dextran's quarter over quarter gross margin decreased from 41% to 31%
while Vet Labs' gross margin increased from 19% to 22%. The increase in margin at Vet Labs is a result of the
significantly increased sales levels, particularly in the higher margin injectable product line. Management expects the gross margin at Vet Labs to continue to be in the range of 20% to 22%.

The
margin decrease at Dextran is primarily due to increased utility costs. Increased oil and gas costs in the third quarter of fiscal 2001 have contributed to higher utility costs at
Dextran. The new production equipment uses more power because of its increased capacity. Management expects to realize significant cost savings from the more efficient new production equipment once
the plant refurbishment is completed and production capacity is increased. These higher oil and gas costs have also contributed to higher costs of raw materials.

Management
expects sales and margins at Dextran to continue at levels consistent with the sales and margins achieved during the third quarter of fiscal 2001. Management expects sales
levels in the fourth quarter of fiscal 2001 to be consistent with sales levels in the fourth quarter of fiscal 2000 at Vet Labs. Third quarter is typically the highest sales levels of the year at Vet
Labs due to distributors stocking up on inventory for the winter season as animals are brought in from pasture.

Other
revenue in the third quarter of fiscal 2001 amounted to $182,400. This revenue resulted from the sale of a developmental batch of raw material for a human injectable product.
There was no similar revenue in the prior year.

General
and administrative expenses in the third quarter of fiscal 2001, as compared to the third quarter of fiscal 2000, decreased by $23,257 or 5% from the third quarter of fiscal
2000 due primarily to general cost control measures. Depreciation and amortization in the third quarter of fiscal 2001 increased by $25,161 or 19% from the third quarter of fiscal 2000 due primarily
to the capital expenditures at Dextran relating to plant refurbishment.

8

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Research and development expense in the third quarter of fiscal 2001, as compared to the third quarter of fiscal 2000, increased by $162,027 or 87% due to the continued development of
a raw material for a human injectable product and the cellulose sulfate project at Dextran, and the development of new products at Vet Labs. Development costs for these products are expected to
continue for the remainder of the year.

Research
and development, in conjunction with the Rush Medical Center in Chicago, relating to Cellulose Sulfate gel is progressing. Pre-IND tests have indicated that this
gel holds great promise as a topical prophylactic for sexually transmitted diseases, including AIDS, and as a contraceptive. One Phase I human clinical trial to test the safety and tolerance of this
gel was successfully completed. This trial was funded by the Consortium for Industrial Collaboration in Contraceptive Research (CICCR). The project team is moving ahead to prepare clinical supplies
for long-term toxicology and further clinical trials. Management expects funding to continue from CICCR for this project.

Interest
expense in the third quarter of fiscal 2001 increased by $29,439 or 66% as compared to the third quarter in fiscal 2000 due to imputed interest of $26,246 on
long-term payables incurred in the fourth quarter of fiscal 2000 and the financing of capital expenditures for production equipment in fiscal 2000.

Selling
and promotion expenses in the third quarter of fiscal 2001 increased by $6,968 or 21% as compared to the third quarter of fiscal 2000 primarily due to imputed compensation
costs related to common share options granted to independent contractors.

Operating
results for the quarter ended October 31, 2000 are not necessarily indicative of the results that may be expected for the year ended January 31, 2001. For
further information, refer to the consolidated statements and footnotes thereto included in the Registrant's annual report on Form 10-K for the year ended January 31, 2000.

(b) Liquidity and Capital Resources

The Registrant in the third quarter of fiscal 2001 generated cash flow from operations of $19,039 compared to the third quarter of fiscal 2000 cash flow from
operations of $570,745. This decrease of $551,706 is primarily attributable to the large increase in accounts receivable during the quarter, resulting from the significant increase in sales during the
quarter.

There
were no significant changes in inventory levels at either Dextran or Vet Labs during the quarter.

The
majority of the $130,662 of capital expenditures on plant and equipment during the third quarter of fiscal 2001 related to production equipment at Dextran. For the nine months
ended October 31,
2000, approximately $300,000 has been spent on plant refurbishment at Dextran. Although plant refurbishment is continuing at Dextran, there are no major capital expenditures planned during the fourth
quarter of fiscal 2001. There are no production interruptions planned for the next quarter due to this refurbishment.

During
the third quarter of fiscal 2001, management negotiated an extension of payment terms on the long-term debt due to ContiGroup Companies, Inc. Under the new
terms, semi-annual repayments of $90,000 will be required on May 1 and November 1 each year commencing May 1, 2001 with a final lump-sum payment of
$105,343 on November 1, 2004.

Long-term Objectives

At the beginning of the year, two critical long-term objectives were identified.



9

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FORWARD-LOOKING STATEMENTS SAFE HARBOR

This Form 10-Q, including the Management's Discussion and Analysis of Financial Condition and Results of Operations, contains various
"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, which represent the Company's expectations or beliefs concerning future events, including, but not limited to statements regarding management's expectations of regulatory approval and the
commencement of sales. In addition, statements containing expressions such as "believes", "anticipates", "plans" or "expects" used in this Form 10-Q, the Company's Annual Report,
and the Company's periodic reports on Forms 10-K and 10-Q previously filed with the Securities and Exchange Commission are intended to identify forward-looking statements. The
Company cautions that these and similar statements in this Form 10-Q, the Company's Annual Report, and in previously filed periodic reports including reports filed on Forms
10-K and 10-Q are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors
include, without limitation, changing market conditions, the progress of clinical trials, and the results obtained, the establishment of new corporate alliances, the impact of competitive products and
pricing, and the timely development, FDA approval and market acceptance of the Company's products, none of which can be assured.

The
accompanying unaudited condensed consolidated 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 normally recurring accruals) considered necessary for a fair
presentation have been included.

10

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## 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

October 31, 2000

Interest Rate Sensitivity

The table below provides information about the Company's financial instruments that are sensitive to changes in interest rates. All financial instruments are
held for other than trading purposes. The Company does not have a material exposure to interest rate risk.

The
table presents principal cash flows and related weighted average interest rates by expected maturity dates.

|                  |                     | Expected Maturity Date |         |      |         |     
|----------------- | ------------------- | ---------------------- | ------- | ---- | ------- | ----
|
|
|Assets            |                     |                        |         |      |         |     
|Notes receivable: |                     |                        |         |      |         |     
|                  | Variable rate ($US) |                        | 34,272  |      | 10,630  |     
|                  |                     | Average interest rate  |         | 8.87 | %       | 9.00
|Liabilities:      |                     |                        |         |      |         |     
|Long-term debt:   |                     |                        |         |      |         |     
|                  | Fixed rate ($US)    |                        | 388,570 |      | 331,646 |     
|                  |                     | Average interest rate  |         | 9.19 | %       | 9.13
|                  | Fixed rate ($CDN)   |                        | 159,180 |      | 180,820 |     
|                  |                     | Average interest rate  |         | 9.04 | %       | 9.03
|                  | Variable rate ($US) |                        | (53,547 | )    | (46,820 | )   
|                  |                     | Average interest rate  |         | 9.00 | %       | 9.00

11

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POLYDEX PHARMACEUTICALS LIMITED AND SUBSIDIARIES

October 31, 2000

Exchange Rate Sensitivity

The table below provides information about the Company's financial instruments that are sensitive to changes in foreign currency exchange rates. All financial
instruments are held for other than trading purposes. The Company's major exposure to exchange rate risk is that the Canadian dollar rises dramatically in relation to the U.S. dollar and that this
significantly reduces the gross margin experienced at Dextran Products. Management monitors the margin at Dextran to ensure that an acceptable margin level is maintained. Management has the ability,
to some extent, to adjust sales prices to maintain an acceptable margin level.

The
table presents principal cash flows and related weighted average interest rates by expected maturity dates.

|                |                   | Expected Maturity Date |         |      |         |     
|--------------- | ----------------- | ---------------------- | ------- | ---- | ------- | ----
|
|
|
|Liabilities:    |                   |                        |         |      |         |     
|Long-term debt: |                   |                        |         |      |         |     
|                | Fixed rate ($CDN) |                        | 159,180 |      | 180,820 |     
|                |                   | Average interest rate  |         | 9.04 | %       | 9.03

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## 

PART IIOTHER INFORMATION

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



|3.1 |  | Memorandum of Association of Polydex Pharmaceuticals Limited, as amended to date (filed as Exhibit 3.1 to the Annual Report on Form 10-K filed April 30, 1997, and incorporated herein by reference)     
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2 |  | Articles of Association of Polydex Pharmaceuticals Limited, as amended to date (filed as Exhibit 3.2 to the Quarterly Report on Form 10-Q filed September 13, 1999, and incorporated herein by reference)
|27  |  | Financial Data Schedule                                                                                                                                                                                  





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## 

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.

|Date: December 14, 2000 |  | POLYDEX PHARMACEUTICALS LIMITED (Registrant)
|----------------------- |  | --------------------------------------------
|                        |  | By:                                         
|                        |  | By:                                         

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## 

EXHIBIT INDEX

|Exhibit Number |  | Exhibit Description    
|-------------- |  | -----------------------
|27             |  | Financial Data Schedule

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