UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)

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

                  For the quarterly period ended March 31, 1999

                                       OR

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

        For the transition period from            to
                                       ---------     ---------
                          Commission File No. 000-20139

                                  Diacrin, Inc.
             (Exact name of registrant as specified in its charter)


             Delaware                                   22-3016912
  (State or other jurisdiction of                   (I.R.S. Employer
   incorporation or organization)                   Identification No.)


                 Building 96 13th Street, Charlestown Navy Yard,
                   Charlestown, MA 02129 (Address of principal
                     executive offices, including zip code)

                                 (617) 242-9100
              (Registrant's telephone number, including area code)

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

                           YES       X      NO
                                 -------        -------
     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

         As of April 30,  1999,  14,357,493  shares of the  registrant's  Common
Stock were outstanding.


<PAGE>


                                  Diacrin, Inc.
                                      Index




                                                                            Page
PART I. -         FINANCIAL INFORMATION

Item 1.           Financial Statements

                    Balance Sheets as of
                    December 31, 1998 and March 31, 1999.....................  3

                    Statements of Operations for the Three Month
                    Periods Ended March 31, 1998 and 1999....................  4

                    Statements of Cash Flows for the Three Month Periods
                    Ended March 31, 1998 and 1999............................  5

                    Notes to Financial Statements............................  6

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

Item 3.           Quantitative and Qualitative Disclosure About
                    Market Risk.............................................. 11

PART II. -        OTHER INFORMATION

Item 2.           Changes in Securities and Use of Proceeds.................. 12

SIGNATURES................................................................... 13


                                     - 2 -

<PAGE>


                                                              Diacrin, Inc.
                                                              Balance Sheets
                                                               (Unaudited)
<TABLE>
<CAPTION>

                                                                          December 31,                 March 31,
                                                                             1998                        1999
<S>                                                                 <C>                         <C>

ASSETS
Current assets:
     Cash and cash equivalents                                        $    4,995,054             $     2,719,629
     Short-term investments                                               18,670,392                  19,833,106
     Interest receivable and other current assets                            394,413                     527,052
                                                                  ------------------          ------------------

         Total current assets                                             24,059,859                  23,079,787
                                                                    ----------------            ----------------

Property and equipment, at cost:
     Laboratory and manufacturing equipment                                  878,208                     891,753
     Equipment under capital lease                                           675,262                     675,262
     Furniture and office equipment                                          293,873                     297,607
     Leasehold improvements                                                   76,827                      77,529
                                                                 -------------------         -------------------
                                                                           1,924,170                   1,942,151
     Less- Accumulated depreciation and amortization                       1,199,673                   1,264,461
                                                                    ----------------           -----------------
                                                                             724,497                     677,690
                                                                   -----------------          ------------------

Long-term investments                                                      2,605,010                   2,031,480
Investment in joint venture                                                   94,508                      38,002
                                                                  ------------------          ------------------
                                                                           2,699,518                   2,069,482
                                                                    ----------------            ----------------

                                                                     $    27,483,874             $    25,826,959
                                                                     ===============             ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                              $         268,002            $        174,249
     Accrued expenses                                                      1,359,982                   1,101,670
     Deferred revenue                                                        338,855                     360,833
     Current portion of long-term debt                                       280,724                     228,762
                                                                  ------------------          ------------------
         Total current liabilities                                         2,247,563                   1,865,514
                                                                   -----------------           -----------------

Long-term debt                                                               391,702                     353,043
                                                                   -----------------          ------------------

Stockholders' equity:
     Preferred stock, $.01 par value, authorized--
         5,000,000 shares; none issued and outstanding                        -                           -
     Common stock, $.01 par value; authorized-- 30,000,000
         shares; issued and outstanding--14,327,218 shares
         and 14,355,493 shares at December 31, 1998
         and March 31, 1999, respectively                                    143,272                     143,555
     Additional paid-in capital                                           64,191,075                  64,219,493
     Accumulated deficit                                                 (39,489,738)                (40,754,646)
                                                                    ----------------            ----------------
              Total stockholders' equity                                  24,844,609                  23,608,402
                                                                    ----------------            ----------------

                                                                    $     27,483,874             $    25,826,959
                                                                    ================             ===============

</TABLE>

                 See Accompanying Notes to Financial Statements

                                     - 3 -

<PAGE>


                                                             Diacrin, Inc.
                                                        Statements of Operations
                                                              (Unaudited)
<TABLE>
<CAPTION>

                                                                       Three Months
                                                                      Ended March 31,
                                                               1998                    1999
                                                            ----------                -------
<S>                                                      <C>                    <C>

REVENUES:
   Research and development                               $  1,142,746           $    798,016
   Interest income                                             351,185                358,226
                                                            ----------             ----------
       Total revenues                                        1,493,931              1,156,242
                                                            ----------             ----------

OPERATING EXPENSES:
    Research and development                                 1,839,443              1,616,616
    General and administrative                                 402,177                322,030
    Interest expense                                            26,438                 15,496
                                                            ----------             ----------
       Total operating expenses                              2,268,058              1,954,142
                                                            ----------             ----------

EQUITY IN OPERATIONS OF JOINT VENTURE                          (54,989)              (467,008)
                                                            ----------             ----------

NET LOSS                                                  $   (829,116)       $    (1,264,908)
                                                          =============       ================

BASIC AND DILUTED
     NET LOSS PER COMMON SHARE                           $        (.06)          $        (.09)
                                                         ==============         ==============

SHARES USED IN COMPUTING BASIC AND
     DILUTED NET LOSS PER COMMON SHARE                      13,657,209             14,350,539
                                                            ==========             ==========

</TABLE>






















                 See Accompanying Notes to Financial Statements

                                     - 4 -

<PAGE>


                                                             Diacrin, Inc.
                                                        Statements of Cash Flows
                                                              (Unaudited)
<TABLE>
<CAPTION>


                                                                                       Three Months
                                                                                      Ended March 31,
                                                                                  1998              1999
                                                                                 ------          ---------
<S>                                                                         <C>              <C>  

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                  $ (829,116)     $ (1,264,908)
    Adjustments to reconcile net loss to net
       cash used in operating activities-
          Depreciation and amortization                                           75,736            64,788
          Equity in operations of joint venture                                   54,989           467,008
    Changes in assets and liabilities-
       Interest receivable and other current assets                               57,408          (132,639)
       Accounts payable                                                           24,719           (93,753)
       Accrued expenses                                                         (145,847)         (185,317)
       Deferred revenue                                                          152,061            21,978
                                                                             -----------       -----------

              Net cash used in operating activities                             (610,050)       (1,122,843)
                                                                             -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Increase in short-term investments                                        (1,224,837)       (1,162,714)
    Purchases of property and equipment, net                                      (7,509)          (17,981)
    (Increase) decrease in long-term investments                              (1,297,942)          573,530
    Investment in joint venture                                                 (117,492)         (749,501)
    Return of capital for services provided on behalf of joint venture             -               266,005
                                                                             -----------       -----------

              Net cash used in investing activities                           (2,647,780)       (1,090,661)
                                                                             -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from sale of common stock                                     9,447,142            28,701
    Principal payments on long-term debt                                         (81,537)          (90,622)
                                                                             -----------       -----------

              Net cash provided by (used in) financing activities              9,365,605           (61,921)
                                                                             -----------       -----------
NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                                       6,107,775        (2,275,425)

CASH AND CASH EQUIVALENTS, beginning of period                                 5,015,777         4,995,054
                                                                             -----------       -----------

CASH AND CASH EQUIVALENTS, end of period                                   $  11,123,552     $   2,719,629
                                                                           =============     =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Interest paid during the period                                        $      26,438    $       15,496
                                                                           =============    ==============


</TABLE>

                 See Accompanying Notes to Financial Statements

                                     - 5 -

<PAGE>



                                  Diacrin, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

1.       Operations and Basis of Presentation

         Diacrin, Inc. (the Company) was incorporated on October 10, 1989 and is
developing  transplantable  cells for the treatment of human  diseases which are
characterized by cell dysfunction or cell death and for which current  therapies
are either inadequate or nonexistent.

         The  financial  statements  included  herein have been  prepared by the
Company,  without audit, pursuant to the rules and regulations of the Securities
and  Exchange  Commission  and  include,  in  the  opinion  of  management,  all
adjustments,  consisting of normal, recurring adjustments,  necessary for a fair
presentation  of  interim  period  results.  Certain  information  and  footnote
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to such rules and regulations.  The Company believes, however, that its
disclosures are adequate to make the information  presented not misleading.  The
results for the interim  periods  presented  are not  necessarily  indicative of
results to be expected  for the full fiscal  year.  These  financial  statements
should be read in conjunction  with the audited  financial  statements and notes
thereto  included in the Company's  latest Annual Report on Form 10-K filed with
the Securities and Exchange Commission.

2.       Summary of Significant Accounting Policies

         (a)      Research and Development

         In  September  1996,  the Company and Genzyme  Corporation  ("Genzyme")
formed a joint  venture  (the  "Joint  Venture")  to develop  and  commercialize
NeuroCell(TM)-PD  for Parkinson's disease and  NeuroCell(TM)-HD for Huntington's
disease (the "Joint Venture  Products").  The Joint Venture is funded by Genzyme
and the Company in  accordance  with the terms of the joint  venture  agreement.
Collaborative  revenue  under  the  joint  venture  agreement  with  Genzyme  is
recognized as revenue to the extent that the Company's  research and development
costs are funded by Genzyme  through the Joint  Venture.  The  Company  receives
non-refundable  monthly  advances  from  the  Joint  Venture.  Deferred  revenue
represents  amounts  received  prior to  recognition  of revenue.  Research  and
development costs are expensed as incurred.

         (b)      Net Loss per Common Share

          In  accordance  with  Statement  of  Financial   Accounting  Standards
("SFAS") No. 128,  Earnings  per Share,  basic and diluted net loss per share is
calculated  by dividing the net loss  applicable to common  stockholders  by the
weighted average number of common shares  outstanding for all periods presented.
Diluted weighted average shares  outstanding for all periods  presented  exclude
the potential  common shares from stock options and warrants of 401,741 at March
31, 1999 because to include such shares would be antidilutive.


                                     - 6 -

<PAGE>


                                  Diacrin, Inc.
                          Notes to Financial Statements
                                   (Unaudited)

         (c)       New Accounting Standards

         The Company has adopted SFAS No. 131,  Disclosures about Segments of an
Enterprise and Related Information,  in the fiscal year ended December 31, 1998.
SFAS No. 131 requires  certain  financial and  supplementary  information  to be
disclosed  on an annual  and  interim  basis for each  reportable  segment of an
enterprise.  SFAS No. 131 also  establishes  standards  for related  disclosures
about products and services,  geographic  areas and major  customers.  Operating
segments  are  defined as  components  of an  enterprise  about  which  separate
discrete  financial  information is evaluated  regularly by the chief  operating
decision maker or decision making group,  in deciding how to allocate  resources
and assess performance. Unless impracticable,  companies are required to restate
prior period  information  upon  adoption.  To date,  the Company has viewed its
operations and managed its business as principally one segment. As a result, the
financial   information  disclosed  herein  materially  represents  all  of  the
financial information related to the Company's principal operating segment.

     The Financial  Accounting Standards Board ("FASB") has issued SFAS No. 132,
Employers'  Disclosures about Pensions and Other Postretirement  Benefits.  SFAS
No. 132 is effective for years  beginning after December 15, 1997. The Company's
adoption  of this  statement  did not have a  material  impact on the  Company's
financial statements.

         In June 1998,  the FASB issued SFAS No. 133,  Accounting for Derivative
Instruments  and Hedging  Activities.  The  statement is effective  for the year
ended  December 31, 2000.  SFAS No. 133  establishes  accounting  and  reporting
standards for derivative  instruments  including certain derivative  instruments
embedded in other contracts  (collectively  referred to as derivatives)  and for
hedging  activities.  The Company does not expect  adoption of this statement to
have a material impact on the Company's financial statements.

3.       Cash Equivalents and Investments

         The  Company's  cash  equivalents  and  investments  are  classified as
held-to-maturity  and are carried at amortized cost, which  approximates  market
value. Cash equivalents,  short-term  investments and long-term investments have
maturities  of less than three  months,  less than one year and greater than one
year,  respectively.  Cash  equivalents  consisted  primarily  of a money market
mutual fund at December 31, 1998 and March 31, 1999. Short-term  investments and
long-term  investments  consisted  of  corporate  notes at December 31, 1998 and
March  31,  1999.  At  March  31,  1999  short-term  investments  and  long-term
investments  had a  remaining  average  maturity  of 6  months  and  16  months,
respectively.


                                     - 7 -


<PAGE>






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

Overview

                  Since its inception,  the Company has principally  focused its
efforts  and  resources  on research  and  development  of cell  transplantation
products to treat  neurodegenerative  and other human  diseases.  The  Company's
primary source of working capital to fund such activities has been proceeds from
the sale of equity and debt securities. In addition, commencing October 1, 1996,
the Company has received  funding from the Joint Venture with Genzyme in support
of the NeuroCell(TM)-PD and NeuroCell(TM)-HD  product development programs.  The
Company has not received any revenues from the sale of products to date and does
not expect to generate product revenues for at least the next several years. The
Company has  experienced  fluctuating  operating  losses since its inception and
expects that the additional activities required to develop and commercialize the
Company's  products will result in increasing  operating losses for at least the
next several years. At March 31, 1999, the Company had an accumulated deficit of
$40.8 million.

                  In September  1996,  the Company and Genzyme  formed the Joint
Venture to develop and commercialize  NeuroCell(TM)-PD and NeuroCell(TM)-HD.  In
connection  with the  formation  of the Joint  Venture,  the Company  granted an
exclusive right and license to the patent rights and technology  relating to the
Joint  Venture  Products.  This  right  and  license  was  considered  to be the
Company's initial capital  contribution to the Joint Venture.  The Company has a
50% ownership  interest in the Joint  Venture.  Under the terms,  and subject to
certain conditions, of the joint venture agreement,  which was effective October
1 1996,  Genzyme has agreed to provide  100% of the first $10 million in funding
and  75% of the  following  $40  million  in  funding  for the  development  and
commercialization  of the Joint Venture Products.  The Company agreed to provide
the remaining 25% of the following $40 million in funding. All costs incurred in
excess of $50 million are to be shared equally  between  Genzyme and the Company
in  accordance  with the terms of the  agreement.  The Joint  Venture plans that
Diacrin  and  Genzyme  will  perform,  on  behalf  of  the  Joint  Venture,  the
development  activities in connection  with the Joint Venture  Products and that
Genzyme will market and sell the Joint Venture Products on a cost  reimbursement
basis on behalf of the Joint Venture.

                  For 1996 and 1997,  the  Company  expensed  all  research  and
development costs related to the Joint Venture Products incurred by it on behalf
of the Joint Venture and recognized an equal amount of research and  development
revenue due to the fact that costs  incurred  were  funded by the Joint  Venture
exclusively out of  contributions  made to it by Genzyme.  Through  December 31,
1997,  Genzyme made 100% of the total cash contributions to the Joint Venture on
a monthly  basis,  in  advance.  During  the first  quarter  of 1998,  the Joint
Venture's  cumulative  funding  requirements  since its  inception  exceeded $10
million. As such, the Company, as required by the joint venture agreement, began
making  cash  contributions  to the  Joint  Venture  equal  to 25% of the  Joint
Venture's monthly funding requirements. The Joint Venture's funding requirements
are  determined  on a monthly  basis by the  Company  and Genzyme and are met by
monthly  contributions from both parties in percentages  prescribed by the terms
of the joint venture  agreement.  To the extent the Company's  contributed funds
are used to fund  expenses  incurred by Genzyme on behalf of the Joint  Venture,
the Company  recognizes  an expense in its  statement  of  operations  captioned
"equity  in  operations  of  Joint  Venture."  Furthermore,  to the  extent  the
Company's contributed funds are used to fund expenses incurred by the Company on
behalf of the Joint Venture,  the Company  reduces the research and  development
revenue  recognized  by it from the  Joint  Venture  by an  amount  equal to the
Company-funded portion of such expenses.


                                     - 8 -

<PAGE>

         Any profits of the Joint  Venture  are to be shared  equally by Genzyme
and the  Company.  Losses of the Joint  Venture are  allocated  to each party in
proportion to the funding provided by each party.

Results of Operations

Three Months Ended March 31, 1999 Versus Three Months Ended March 31, 1998

                  Research and development revenues were approximately  $798,000
for the three  months  ended March 31,  1999  versus $1.1  million for the three
months ended March 31, 1998 and were derived exclusively from the Joint Venture.
This  reduction in research and  development  revenues was  attributable  to the
reduction  from 100% to 75% in the  percentage  of funding for the Joint Venture
provided by Genzyme which took effect in the first quarter of 1998.

         Interest  income of $358,000 and  $351,000 for the three month  periods
ended March 31, 1999 and 1998,  respectively,  was relatively  unchanged between
periods.  As a result of the Company's  private placement in February 1998 which
raised approximately $9.45 million, the average cash equivalents and investments
balance for both three month periods remained consistent.

         Research  and  development  expenses  were $1.6  million  for the three
months ended March 31, 1999 versus $1.8 million for the three months ended March
31,  1998.  This 12%  decrease  was  primarily  due to the  production  costs of
clinical grade antibody produced during the prior year period for use in certain
of the Joint Venture's planned phase 2/3 clinical trials of NeuroCell(TM)-PD.

         General and administrative  expenses were $322,000 and $402,000 for the
three months ended March 31, 1999 and 1998, respectively.  This 20% decrease was
primarily due to decreased salary costs.

         Interest  expense was $15,000  and $26,000 for the three  months  ended
March 31, 1999 and 1998, respectively.

         For the three  months  ended  March  31,  1999 and  1998,  the  Company
recorded an expense of $467,000 and $55,000, respectively, related to its equity
in operations of the joint venture. This expense was due to funds contributed by
the Company to the Joint  Venture  that were used to fund  expenses  incurred by
Genzyme on behalf of the Joint  Venture.  The Company  was not  required to make
contributions  to the Joint Venture prior to the quarter ended March,  31, 1998.
The  increased  charge in the current  year period is  primarily a result of the
timing of the  commencement of contributions by the Company to the Joint Venture
in the prior year quarter.

         The Company incurred a net loss of  approximately  $1.3 million for the
three  months ended March 31, 1999 versus  approximately  $829,000 for the three
months ended March 31, 1998.

Liquidity and Capital Resources

         The Company has financed its activities primarily with the net proceeds
from its equity  offerings  aggregating  $63  million and with  interest  earned
thereon.  In addition,  the Company has recorded  approximately $10.2 million in
revenue from the Joint  Venture  since it commenced on October 1, 1996. At March
31, 1999, the Company had cash and cash equivalents,  short-term investments and
long-term investments aggregating approximately $24.6 million.

         In November 1997, the Company borrowed $650,000 at the Prime Rate + .5%
under  an  unsecured  five-year  term  loan  with a bank to  finance  production
equipment   acquired  during  1997.  As  of  March  31,  1999  the  Company  had
approximately $582,000 outstanding under the 


                                     - 9 -

<PAGE>

term  loan  with  the  bank  and  under a master  lease  agreement  for  capital
equipment.  The Company had no material  commitments for capital expenditures as
of March 31, 1999.

         Under the joint venture agreement with Genzyme,  the Company's two lead
product development programs,  NeuroCell(TM)-PD for the treatment of Parkinson's
disease and  NeuroCell(TM)-HD  for the treatment of  Huntington's  disease,  are
being  developed by the Joint Venture.  Both Genzyme and Diacrin are responsible
for funding the Joint Venture in accordance  with the terms,  and subject to the
conditions,  of the joint venture agreement.  Genzyme agreed to fund 100% of the
first $10 million of  development  and  commercialization  costs  incurred after
October  1,  1996,  75%  of the  next  $40  million  and  50%  of all  remaining
development and commercialization  costs in excess of $50 million. After Genzyme
funds the first $10 million,  the Company is responsible  for funding 25% of the
next $40  million  and 50% of all  development  and  commercialization  costs in
excess of $50 million.  As of March 31, 1999,  approximately  $18.0  million and
$2.6 million has been  contributed  to the Joint Venture by Genzyme and Diacrin,
respectively.  The  Company's  obligation  to  fund  25%  of the  program  costs
commenced  in the first  quarter of 1998.  The  Company  expects  that the Joint
Venture's 1999 product development plans, which are 25% funded by Diacrin,  will
significantly  increase the Company's net loss and cash and investments  used in
1999 as compared with 1998.

         The Company  believes that its existing  funds,  together with expected
future  funding  under  the  joint  venture  agreement  with  Genzyme,  will  be
sufficient to fund its operating expenses and capital  requirements as currently
planned through at least mid-2001.  However, the Company's cash requirements may
vary  materially  from those now  planned  because of  results of  research  and
development,  the scope and results of  preclinical  and clinical  testing,  any
termination of the Joint Venture, relationships with strategic partners, changes
in the focus and direction of the Company's  research and development  programs,
competitive and technological advances, the FDA's regulatory process, the market
acceptance  of any  approved  Company  products  and other  factors.  For a more
detailed  discussion  of these and other  factors that may affect the  Company's
future operating  results,  see the Company's Annual Report on Form 10-K for the
year  ended  December  31,  1998,  as filed  with the  Securities  and  Exchange
Commission.

         The Company expects to incur substantial  additional  costs,  including
costs  related to  ongoing  research  and  development  activities,  preclinical
studies,  clinical  trials,  establishing  pig production  capabilities  and the
expansion of its laboratory and administrative  activities.  Therefore, in order
to achieve  commercialization  of its potential products,  the Company will need
substantial additional funds. There can be no assurance that the Company will be
able to obtain the additional  funding that it will require on acceptable terms,
if at all.

Impact of the Year 2000 Issue

         The Company is in the process of completing its assessment of Year 2000
issues and their  potential  impact on its  information  systems  and  business.
Generally,  the  Company has  potential  Year 2000  exposure in four areas:  (i)
financial and management operating computer systems used to manage the Company's
business,  (ii) operating  computer  systems used in the Company's  research and
product  development  laboratories,  (iii)  microprocessors and other electronic
equipment used by the Company  ("embedded chips") and (iv) computer systems used
by third  parties,  in particular  financial  institutions  and suppliers of the
Company.

         At March 31, 1999,  the Company had  completed  its  assessment  of its
financial and management  operating computer systems and has identified software
that is not Year 2000 compliant.  The Company  estimates the cost to update this
software,  through the purchase of an off-the-shelf  software package,  together
with hardware and network server  software,  will be  approximately  $8,000.  At
March 31, 1999, the Company had spent  approximately  $5,000 in this effort. The
Company  is  substantially  complete  with its update of the  systems  that were
identified as not being Year 2000 compliant.


                                     - 10 -

<PAGE>

         At March 31, 1999, the Company had also completed its assessment of its
Year 2000 exposure to operating  computer systems used in the Company's research
and development  laboratories and embedded chips in its facilities and equipment
used in its facilities. The Company has not identified any non-compliant systems
that play a significant role in the Company's  research,  product development or
facilities management.

         The Company continues to interview  financial  institutions and vendors
to determine  their exposure to year 2000 issues,  their  anticipated  risks and
responses to those  risks.  To date,  the Company has not  obtained  information
suggesting any critical  vendors or financial  institutions  will not be able to
service or supply the Company on or after January 1, 2000.

         The Company  does not  separately  track the  internal  costs  incurred
related to its year 2000  compliance  efforts  and,  therefore,  these costs are
unknown.  To date, costs incurred  principally relate to employee payroll costs.
Although  the  aggregate  additional  costs of the  Company's  year 2000 program
cannot be known at this time, it is not currently expected to be material.

         If  the  Company  is   unsuccessful   in  completing   remediation   of
non-compliant  systems,  or if any of the  Company's  third party  suppliers and
partners do not timely complete their remediation programs, additional costs may
be incurred to develop  alternative  methods of managing the effected aspects of
the Company's  business.  In addition,  the Company's  clinical and  preclinical
trials  for  all of its  product  candidates  could  be  delayed.  Based  on the
information  currently  available  to the  Company,  Year  2000  issues  are not
expected  to have a  significant  impact on the  Company's  ongoing  results  of
operations.  Accordingly,  the Company has not developed a contingency  plan but
will do so in the future if necessary.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

         The Company owns  financial  instruments  that are  sensitive to market
risks as part of its investment  portfolio.  The investment portfolio is used to
preserve  the  Company's  capital  until  it is  required  to  fund  operations,
including  the  Company's  research and  development  activities.  None of these
market-risk sensitive instruments are held for trading purposes.  The investment
portfolio  contains  instruments  that are  subject  to the risk of  decline  in
interest rates.

         Interest  Rate  Risk  - The  Company's  investment  portfolio  includes
investment  grade debt  instruments.  These bonds are  subject to interest  rate
risk, and could decline in value if interest rates fluctuation. Due to the short
duration  and  conservative  nature of these  instruments,  the Company does not
believe that it has a material exposure to interest rate risk.





                                     - 11 -

<PAGE>



                           PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

         (c) The Company did not sell any equity  securities  during the quarter
ended March 31, 1999 that were not registered under the Securities Act.

         (d) The following  information  updates and supplements the information
regarding use of proceeds  originally filed by Diacrin on Form SR for the period
ended May 12,  1996,  as amended to date and relates to  securities  sold by the
Company pursuant to the  Registration  Statement on Form S-2  (Registration  No:
33-80773) which was declared  effective on February 12, 1996:  Through March 31,
1999,  the Company has used  approximately  $9,800,000 of the total net proceeds
from its  initial  public  offering  of  $20,911,755.  Of the  $9,800,000  used,
approximately  $283,000 was used for the purchase of  machinery  and  equipment;
approximately $672,000 was used for repayment of indebtedness; and approximately
$8,845,000 was used for working  capital.  The unused proceeds of  approximately
$11,112,000  are in temporary  investments  consisting of corporate  notes and a
money market mutual fund.  All proceeds used or invested were direct or indirect
payments to others.




                                     - 12 -

<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.


                                                              Diacrin, Inc.



May 13,  1999                                           /s/  Thomas H. Fraser
                                                     --------------------------
                                                             Thomas H. Fraser
                                                             President and Chief
                                                             Executive Officer



                                                        /s/  Kevin Kerrigan
                                                     --------------------------
                                                             Kevin Kerrigan
                                                             Controller






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