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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-Q

                                 ---------------

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                       OR

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


                                 ---------------

                         Commission file number 000-26883

                                 MEDSCAPE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

          DELAWARE                    7375
(STATE OR OTHER JURISDICTION    (PRIMARY STANDARD            13-3879679
      OF INCORPORATION           CLASSIFICATION      (I.R.S. EMPLOYER INDUSTRIAL
      OR ORGANIZATION)            CODE NUMBER)           IDENTIFICATION NO.)

                                 ---------------
                              134 WEST 29TH STREET
                          NEW YORK, NEW YORK 10001-5399
                                 (212) 760-3100
                                 ---------------
   (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                    REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                                 ---------------
                                 PAUL T. SHEILS
                      PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                 MEDSCAPE, INC.
                              134 WEST 29TH STREET
                          NEW YORK, NEW YORK 10001-5399
                                 (212) 760-3100
            (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                    INCLUDING AREA CODE OF AGENT FOR SERVICE)
                                 ---------------

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 |_| No |X|


    As of October 31, 1999, there were 44,843,533 shares of the Registrant's
common stock outstanding.
================================================================================


                                       1
<PAGE>


                                TABLE OF CONTENTS

                                                                            PAGE
PART I.     FINANCIAL INFORMATION

Item 1.     Financial Statements

            Condensed  Consolidated  Balance  Sheets - September 30, 1999
            and December 31, 1998                                              3

            Condensed  Consolidated  Statements  of  Operations  -  three
            months and nine months ended September 30, 1999 and 1998           4

            Condensed Consolidated Statements of Cash Flows - nine months
            ended September 30, 1999 and 1998                                  5

            Notes to Condensed Consolidated Financial Statements               6

Item 2.     Management's  Discussion and Analysis of Financial  Condition
            and Results of Operations                                          9

Item 3.     Quantitative and Qualitative Disclosures About Market Risk        14

PART II.    OTHER INFORMATION

Item 1.     Legal Proceedings                                                 15
Item 2.     Changes in Securities and Use of Proceeds                         15
Item 3.     Defaults Upon Senior Securities                                   15
Item 4.     Submission of Matters to a Vote of Security Holders               15
Item 5.     Other Information                                                 16
Item 6.     Exhibits and Reports on Form 8-K                                  16

            SIGNATURES                                                        17


                                       2
<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                                 MEDSCAPE, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

                                                     SEPTEMBER 30,  DECEMBER 31,
                                                         1999          1998
                                                     (UNAUDITED)   (AS RESTATED)
ASSETS
Current Assets:
  Cash and cash equivalents............................  $ 60,878       $ 1,595
  Accounts receivable..................................     4,588         1,350
  Prepaid expenses and other assets....................    12,256            93
                                                         --------       -------
          Total current assets.........................    77,722         3,038
Fixed Assets - net.....................................     5,536           380
Intangible Assets - net................................    10,909            46
Goodwill - net.........................................     2,300         2,410
Investment in Softwatch................................     3,154            --
                                                         --------       -------
          Total assets.................................  $ 99,621       $ 5,874
                                                         ========       =======

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities:
  Accounts payable and accrued liabilities.............  $  8,286       $   870
  Deferred revenue.....................................     2,790           800
                                                         --------       -------
          Total current liabilities....................    11,076         1,670
                                                         --------       -------
Stockholders' Equity:
  Common  stock,  par value  $.01;  100,000,000  shares
   authorized,  44,843,533  issued and  outstanding  at       448            --
   September 30, 1999..................................
  Common stock, Class A -- par  value  $.01; 15,000,000
   shares authorized and 1,079,000 issued and
   outstanding at December 31, 1998....................        --            11
  Common  stock,  Class B -- par value $.01; 15,000,000
     shares authorized and 5,792,318 issued and
     outstanding at December 31, 1998..................        --            58
  Preferred   stock,   Series  A --  par  value   $.01;
   1,000,000  shares   authorized  and  788,200  shares
   issued and outstanding at December 31, 1998..........       --             8
  Preferred   stock,   Series  C --  par  value   $.01;
   4,000,000  shares  authorized  and 2,410,760  issued
   and outstanding at December 31, 1998................        --            24
  Warrants.............................................     5,145            --
  Additional paid-in-capital...........................   266,180        14,158
  Treasury stock.......................................        (3)           (3)
  Notes receivable.....................................      (628)         (628)
  Deferred Stock Compensation..........................    (7,073)         (715)
  Contribution of Services.............................  (153,361)           --
  Accumulated deficit..................................   (22,163)       (8,709)
                                                         --------       -------
          Total stockholders' equity...................    88,545         4,204
                                                         --------       -------
          Total liabilities and stockholders' equity.    $ 99,621       $ 5,874
                                                         ========       =======

           See notes to condensed consolidated financial statements.


                                       3
<PAGE>


                                 MEDSCAPE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (UNAUDITED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED               NINE MONTHS ENDED
                                                 -----------------------------   -----------------------------
                                                 SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,   SEPTEMBER 30,
                                                     1999            1998            1999            1998

<S>                                              <C>             <C>             <C>             <C>
Revenues.......................................  $     2,209     $       479     $     7,138     $     1,556
                                                 -----------     -----------     -----------     -----------
Operating expenses:
  Editorial, production, content and technology        3,229             528           7,067           1,381
  Sales and marketing..........................        4,527             613           8,004           1,424
  General and administrative...................        2,286             431           4,273           1,224
  Deferred stock compensation..................          537              --           1,317              --
  Depreciation and amortization................          193              50             418             146
                                                 -----------     -----------     -----------     -----------
          Total operating expenses.............       10,772           1,622          21,079           4,175
                                                 -----------     -----------     -----------     -----------
Loss from operations...........................       (8,563)         (1,143)        (13,941)         (2,619)
  Interest income..............................          191              72             487             221
                                                 -----------     -----------     -----------     -----------
Net loss.......................................  $    (8,372)    $    (1,071)    $   (13,454)    $    (2,398)
                                                 ===========     ===========     ===========     ===========

Basic net loss per share.......................  $     (0.43)    $     (0.35)    $     (1.19)    $     (0.83)
Weighted  average  number  of  shares of common
  stock outstanding............................   19,256,621       3,029,567      11,287,450       2,900,228
</TABLE>

           See notes to condensed consolidated financial statements.


                                       4
<PAGE>


                                 MEDSCAPE, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                        ----------------------------
                                                                        SEPTEMBER 30,  SEPTEMBER 30,
                                                                            1999           1998
<S>                                                                       <C>            <C>
OPERATING ACTIVITIES
  Net loss .........................................................      $(13,454)      $ (2,398)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Deferred stock compensation expense ...........................         1,317             --
     Amortization of license fees ..................................           184             --
     Non-cash advertising and promotion expense ....................           375             --
     Depreciation and amortization .................................           418            146
  Changes in assets and liabilities:
     (Increase) decrease in accounts receivable ....................        (3,238)           481
     (Increase)  decrease in prepaid  expenses and other assets ....        (3,342)           (50)
     Increase (decrease) in accounts payable and accrued liabilities         7,415           (211)
     Increase (decrease) in deferred revenue .......................         1,991           (463)
                                                                          --------       --------
          Net cash used in operating activities ....................        (8,334)        (2,495)
                                                                          --------       --------
INVESTING ACTIVITIES
  Investment in Softwatch ..........................................        (3,154)            --
  Purchases of fixed assets ........................................        (5,462)          (202)
  Acquisition of intangible assets .................................           (50)            --
                                                                          --------       --------
          Net cash used in investing activities ....................        (8,666)          (202)
                                                                          --------       --------
 FINANCING ACTIVITIES
  Proceeds from issuance of common stock ...........................        53,908             --
  Receivable from underwriter ......................................        (6,696)            --
  Proceeds from issuance of preferred stock ........................        28,870          4,000
  Proceeds from exercise of stock options ..........................           201              9
  Payment of loan ..................................................            --           (359)
  Purchase of treasury stock .......................................            --             (3)
                                                                          --------       --------
          Cash provided by financing activities ....................        76,283          3,647
                                                                          --------       --------
Increase in cash and cash equivalents ..............................        59,283            950
Cash and cash equivalents, beginning of period .....................         1,595          3,628
                                                                          --------       --------
Cash and cash equivalents, end of period ...........................      $ 60,878       $  4,578
                                                                          ========       ========
</TABLE>

           See notes to condensed consolidated financial statements.


                                       5
<PAGE>


                                 MEDSCAPE, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

1. ORGANIZATION AND NATURE OF BUSINESS

Medscape,  Inc.  ("Medscape") was formed and incorporated  under the laws of the
State  of New  York in March  1996,  and  commenced  operations  in April  1996.
Medscape was  reincorporated  in Delaware in December  1998.  Medscape  operates
Medscape.com,   a  healthcare  Web  site  for  physicians,   allied   healthcare
professionals    such   as   pharmacists   and   nurses,   and   consumers   and
CBS.Healthwatch.com, a separate Web site to enhance and personalize the consumer
experience.  The Medscape Web sites are a valuable resource that enables members
to make better informed healthcare decisions.  Medscape provides  comprehensive,
authoritative and timely medical  information,  including  original  proprietary
articles  written by renowned medical  experts.  Medscape sells  advertising and
sponsorship,  market  research  and other  services to  pharmaceutical,  medical
device and other  healthcare  companies.  Medscape also sells products,  such as
medical books, to physicians, allied healthcare professionals and consumers.

Effective  October 27, 1998,  Medscape  consummated an acquisition in accordance
with a purchase agreement with Healthcare  Communications  Group, LLC, ("HCG") a
Maryland  corporation.  HCG is a medical  communications/education  company that
develops,   produces   and   distributes   unique  live,   print,   digital  and
Internet-based  programs for healthcare  professionals  funded by pharmaceutical
companies.  The agreement provided for the purchase of the membership  interests
of HCG.

2. BASIS OF PRESENTATION

Medscape has prepared the condensed  consolidated  financial statements of which
these notes are part,  pursuant to the rules and  regulations  of the Securities
and Exchange  Commission (the  "Commission").  Certain  information and footnote
disclosures  normally  included  in  annual  financial  statements  prepared  in
accordance with generally accepted accounting  principles have been condensed or
omitted  pursuant to these  rules and  regulations;  however,  in the opinion of
Medscape's  management,  the Condensed Consolidated Financial statements include
all  adjustments,  consisting only of normal  recurring  accruals,  necessary to
present fairly the financial information for the nine months ended September 30,
1999.

These Condensed  Consolidated Financial Statements should be read in conjunction
with the  Consolidated  Financial  Statements and notes thereto  included in the
Registration  Statement  filed with the  Commission on Form S-1 on September 27,
1999.

Basic loss per common  share was  computed by dividing  net loss by the weighted
average  number of shares of common stock  outstanding.  Diluted loss per common
share has not been  presented  since the impact for options and  warrants  would
have been anti-dilutive.

Certain prior period  amounts have been  reclassified  to conform to the current
period presentation.

3. STOCKHOLDERS' EQUITY

On  May  17,  1999,  Medscape  effected  a  2.5-for-one  stock  split  for  each
outstanding  share of each class of common shares.  In connection with the stock
split, the number of authorized  shares of Class A Common Stock was increased to
an aggregate of 1,079,000  shares,  the number of  authorized  shares of Class B
Common Stock was increased to an aggregate of 6,701,363 shares and the preferred
stock  became  convertible  into 2.5 times as many  shares of the Class A Common
Stock and each outstanding  warrant and option became exercisable into 2.5 times
as many  shares  of the  Class B  Common  Stock.  The  2.5-for-one  stock  split
described above has been applied retrospectively for all periods presented.

On  September  27, 1999,  Medscape  completed an initial  public  offering  that
ultimately, after inclusion of the exercise on September 30, 1999 of the 900,000
share underwriter's over-allotment, resulted in the issuance of 7,650,000 shares
of common stock.


                                       6
<PAGE>


Net proceeds  received,  after deducting offering costs,  totaled  approximately
$54.4 million,  including approximately $6.7 million received on October 5, 1999
from the exercise of the  over-allotment.  Simultaneous with the offering,  each
outstanding  share of Class B Common  Stock was  converted  into  Class A Common
Stock  on a  one-for-one  basis  and  Class  A  Common  Stock  was  concurrently
redesignated as common stock. Additionally,  each outstanding share of Series A,
Series C-1, and Series D Preferred Stock was converted into 2.5 shares of common
stock,  Series C Preferred Stock was converted into 2.68 shares of common stock,
and Series E Preferred  Stock was  converted  into 3.125 shares of common stock.
The conversions of preferred stock resulted in the issuance of 13,908,685 shares
of common stock. An increase in the number of authorized  shares of common stock
to 100,000,000 was also effected simultaneous with this offering and a new class
of 5,000,000 shares of undesignated preferred stock was also authorized.

4. INCOME TAXES

No  provision  for income taxes has been made  because  Medscape  has  sustained
cumulative losses since the commencement of its operations.

At September 30, 1999, Medscape had net operating loss carryforwards ("NOLs") of
approximately  $28,872,000  which will be  available  to reduce  future  taxable
income. The NOLs are scheduled to expire in the following years:

                         2011.    $   663,000
                         2012.      3,306,000
                         2018.      3,583,000
                         2019.     21,320,000

In  accordance  with SFAS No. 109,  Medscape  has  computed  the  components  of
deferred income taxes as follows:

                                        DECEMBER 31,  SEPTEMBER 30,
                                            1998          1999
             Deferred tax assets...     $ 3,419,911   $13,276,000
             Less valuation allowance    (3,419,911)  (13,276,000)
                                        -----------   -----------
             Net deferred tax assets    $        --   $        --
                                        ===========   ===========

Medscape's  deferred tax assets are primarily generated by net operating losses.
At December 31, 1998 and September  30, 1999, a valuation  allowance is provided
as the realization of the deferred tax benefits is not likely due to the lack of
an earnings history.

5. SIGNIFICANT TRANSACTIONS

TRANSACTIONS WITH CBS CORPORATION

On July 7, 1999, Medscape entered into a Common Stock Purchase agreement, and on
August 3, 1999,  in related  transactions,  we entered into an  Advertising  and
Promotional   Agreement,   and  a  Trademark  and  Content  Agreement  with  CBS
Corporation (CBS). Under the Stock Purchase  Agreement,  Medscape sold 7,397,208
shares of Class A Common Stock and  6,541,160  shares of Class B Common Stock to
CBS for an aggregate purchase price of $157,000,000,  of which $139,384 was paid
in cash,  $149,860,616  is to be paid  through  the  advertising  services to be
provided by CBS in accordance with the Advertising and Promotion Agreement,  and
$7,000,000  is to be paid  through the grant of rights under the  Trademark  and
Content  Agreement.  Subsequent to the execution of the  agreement,  the Class B
Common Stock was converted on a one-for-one basis into Class A Common Stock that
was concurrently redesignated as common stock (Note 3). Over the seven-year term
of the Advertising and Promotion  Agreement,  CBS will arrange for the placement
of approximately  $150 million of advertising and promotion in the United States
for Medscape's  consumer and professional Web sites and their other products and
services.  Under the Trademark  and Content  Agreement,  CBS granted  Medscape a
license  to the "CBS"  trademark  and "Eye"  design and to health  related  news
content for a seven-year  period.  Under the agreement  CBS retains  significant
control  over  the  use  and  presentation  of the CBS  health  content  and CBS
trademarks.

The $149,860,616 of advertising  services to be provided by CBS will be expensed
as used over the life of the agreement.  In addition,  the trademark license fee
of $7,000,000  will be amortized on a  straight-line  basis over the life of the
agreement.


                                       7
<PAGE>


TRANSACTIONS WITH NATIONAL DATA CORPORATION

On August 4, 1999, Medscape sold 400,000 shares of Series E Preferred Stock at a
purchase price of $25 per share and 1,000,000  shares of Class A Common Stock at
a purchase  price of $10 per share to National  Data  Corporation  (NDC),  which
included a $10,000,000 cash investment and an additional  $10,000,000 attributed
to  licensing  and  promotion to be provided by NDC and credits  against  future
commission  amounts  due by Medscape  to NDC.  The Series E Preferred  Stock was
subsequently  converted  into  1,250,000  shares of common stock and the Class A
Common  Stock was  redesignated  as common  stock (Note 3).  $6,000,000  will be
expensed as used over the  three-year  life of the agreement.  In addition,  the
license fee of $4,000,000  will be amortized on a  straight-line  basis over the
life of the agreement.  In accordance  with  instructions  by NDC, 25,000 of the
1,000,000  shares of Class A Common  Stock and 10,000 of the  400,000  shares of
Series E  Preferred  Stock  were  delivered  to NDC's  financial  advisor in the
transaction, Lazard Freres & Co., LLC.

TRANSACTION WITH AMERICA ONLINE, INC.

On September 3, 1999,  Medscape  entered  into a 3 year  agreement  with America
Online, Inc. (AOL), under which AOL has agreed to promote Medscape's  co-branded
Web sites,  through  contextual links and banners,  on AOL, AOL.com,  CompuServe
Service,  Netscape  Netcenter  and Digital City,  which are all AOL  properties.
Medscape  has paid AOL $3 million at  contract  closing,  $10 million in October
1999,  and will pay an  additional  $20 million  over the next two years.  These
amounts will be charged to earnings over the life of the contract.  In addition,
Medscape granted AOL two seven-year  warrants,  each to purchase up to 1,352,158
shares of Medscape's  common stock.  One of the warrants is fully vested and has
an  exercise  price  of $10 per  share.  The  other  warrant  will  vest  over a
three-year  period based on AOL meeting specified  performance  requirements and
will have exercise  prices equal to the fair market value of  Medscape's  common
stock  at the  time  of  vesting.  Each  warrant  has a value  of  approximately
$2,530,000,  as determined  using the Black Scholes option  pricing  model.  The
value of the fully vested  warrant will be charged to earnings  over the life of
the  contract  and the  warrant  that vests over three  years will be charged to
earnings adjusted variably over the vesting period.


                                       8
<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS


FORWARD LOOKING STATEMENTS

The following  discussion of our financial  condition and  operations  should be
read in conjunction with the consolidated  financial  statements and the related
notes included  elsewhere in this report.  This report contains  forward-looking
statements  based  on  our  current  expectations,  assumptions,  estimates  and
projections   about   Medscape  and  our   industry.   We   generally   identify
forward-looking  statements  in this  prospectus  using  words  like  "believe,"
"intend,"  "expect," "may," "will," "should," "plan," "project,"  "contemplate,"
"anticipate"  or similar  statements.  The  cautionary  statements  made in this
document  should  be read as being  applicable  to all  related  forward-looking
statements wherever they appear in this document.  These statements are based on
our beliefs as well as assumptions we made using information currently available
to us.  Because these  statements  reflect our current views  concerning  future
events,  these  forward-looking  statements  involve  risks  and  uncertainties.
Factors  that  could  cause or  contribute  to such  differences  include  those
discussed  below, as well as those  discussed in our Prospectus  dated September
27,  1999.   Medscape's  actual  results  could  differ  materially  from  those
anticipated  in these  forward-looking  statements  as a result of many factors.
Medscape  undertakes  no  obligation  to  update  publicly  any  forward-looking
statements for any reason,  even if new information  becomes  available or other
events occur in the future.

OVERVIEW

We  operate  Medscape.com,  a  healthcare  Web site for  physicians  and  allied
healthcare  professionals,  such as  pharmacists  and  nurses.  To  enhance  and
personalize  the  consumer  experience,  we launched a separate  consumer  site,
CBS.Medscape.com,   in  the  third   quarter  of  1999.  On  November  1,  1999,
CBS.Medscape.com was relaunched as CBS.Healthwatch.com. We intend to develop and
launch  several  additional  co-branded  consumer sites in the fourth quarter of
1999 and the first quarter of 2000 under an agreement with America Online,  Inc.
Medscape,  Inc. commenced operations in April 1996. In October 1998, we acquired
Healthcare  Communications Group, LLC, which operated a leading HIV Web site. In
the first quarter of 1999, we acquired the trademarks and hired key employees of
Bonehome.com,  a leading  orthopedic Web site,  and CompuRx,  Inc., a healthcare
market research company serving  pharmaceutical and other healthcare  companies.
The  Bonehome.com  and CompuRx  transactions  were not material to our financial
statements.  These  transactions  are  consistent  with our  strategy  to be the
leading  online  information  source for  selected  medical  specialties  and to
broaden our revenue streams.

Since our  inception,  we have derived  substantially  all of our revenues  from
advertising and sponsorships  from  pharmaceutical  companies.  We also generate
revenues from our e-commerce partners who either provide us with a placement fee
or a commission on sales of their  products  generated  through our Web site. We
offer banner  advertising to  third-party  advertisers  and generally  guarantee
delivery of a specified number of advertising impressions. We derive sponsorship
revenues from the development of client-sponsored content,  including modules on
disease  topics and  editorial  coverage of medical  conferences.  We expect our
revenues to be seasonal due to the scheduling of major medical conferences.

We  recognize  banner  advertising  revenues  in the period  that we display the
advertisement, provided that no significant obligations remain and collection of
the resulting  receivable is probable.  We recognize  revenues from modules on a
cost of completion  basis and editorial  coverage of medical  conferences in the
period in which the conference was held. We recognize  revenues from  e-commerce
based on  commissions  when earned from our  third-party  partners  or, in cases
where  third-party  partners  pay  placement  fees to us,  over  the life of the
product  placement.  We generally invoice for our services at the inception of a
project and record a receivable.  Accordingly, our receivables have increased in
connection with our increase in revenues and due to an increase in the number of
large scale  sponsored  programs  which have become a more prominent part of our
business following our acquisition of Healthcare Communications Group, LLC.

To date, we have incurred  substantial  costs to create and enhance our content,
build brand awareness,  develop our  infrastructure  and grow our business,  and
have yet to achieve significant revenue. As a result, we have incurred operating
losses in each fiscal quarter since we were formed.  We expect  operating losses
and negative  cash flow to continue for the  foreseeable  future as we intend to
significantly increase our operating expenses to grow our


                                       9
<PAGE>


business.  These  costs  could  have an adverse  effect on our future  financial
condition or operating results. We believe that  period-to-period  comparison of
our financial results is not necessarily meaningful and you should not rely upon
them as an indication of our future performance.

RESULTS OF OPERATIONS

REVENUE AND EXPENSE COMPONENTS

The following  descriptions  of the components of revenues and expenses apply to
the Comparison of Results of Operations:

     REVENUES.  Revenues consist  primarily of sales of advertising  banners and
sponsorships  for  developing  content  for  modules  and  medical  conferences.
Revenues also include commission  revenues or placement fees from product sales,
such as medical books, and market research services to pharmaceutical  and other
healthcare companies.

     EDITORIAL, PRODUCTION, CONTENT AND TECHNOLOGY. Product development expenses
consist  primarily of  salaries,  third-party  content  acquisition  costs,  the
development of sponsored  content and  expenditures  associated with maintaining
and enhancing our Web site.

     SALES AND  MARKETING.  Sales and marketing  expenses  consist  primarily of
salaries, commissions, advertising, promotions and related marketing costs.

     GENERAL AND  ADMINISTRATION.  General and  administration  expenses consist
primarily of salaries, facility costs and fees for professional services.

     DEPRECIATION AND AMORTIZATION. Depreciation expense reflects the charge for
depreciation of capitalized fixed assets, including computer equipment, Web site
servers  and  related  equipment,  and  the  amortization  of  office  leasehold
improvements. Additionally, this category includes goodwill amortization related
to corporate acquisitions.

     INTEREST  EXPENSE/INCOME.  Interest  expense  is  related  to loans  that a
related party provided to Medscape,  which were fully repaid by the end of 1998.
Interest  income  consists  primarily  of  interest  earned  on  cash  and  cash
equivalents invested in money market funds.

COMPARISON OF THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Revenues and  operating  expenses for the three and nine months ended  September
30, 1999 include Healthcare  Communications  Group, which we acquired in October
1998.

     REVENUES.  Revenues  increased  361% to $2.2  million for the three  months
ended  September  30,  1999 from  $479,000  for the  comparable  period in 1998.
Revenues  increased 359% to $7.1 million for the nine months ended September 30,
1999 from $1.6  million  for the  comparable  period in 1998.  The  increase  in
revenues was driven by an increased advertiser and sponsor base and an expansion
of product lines  resulting from the  acquisition  of Healthcare  Communications
Group in October 1998.

     EDITORIAL,  PRODUCTION,  CONTENT AND  TECHNOLOGY.  Product  development and
content  expenses  increased  512% to $3.2  million for the three  months  ended
September  30, 1999 from  $528,000 for the  comparable  period in 1998.  Product
development  and content  expenses  increased  412% to $7.1 million for the nine
months ended  September 30, 1999 from $1.4 million for the comparable  period in
1998.  The  increase in costs was  primarily  due to  increased  variable  costs
related to the  development  of  sponsored  content  and costs  associated  with
expanding  and  enhancing  editorial  content,  an  increase  in the  number  of
employees in our Editorial and Information  Technology groups and the associated
recruitment  costs, and costs incurred in upgrading the functionality of our Web
site and our internal networks.

     SALES AND MARKETING.  Sales and marketing  expenses  increased 638% to $4.5
million for the three  months  ended


                                       10
<PAGE>


September 30, 1999 from $613,000 for the  comparable  period in 1998.  Sales and
marketing  expenses  increased  462% to $8.0  million for the nine months  ended
September  30, 1999 from $1.4  million for the  comparable  period in 1998.  The
increase in costs was primarily due to increased  costs related to the continued
development  and  implementation  of our marketing and branding  campaigns,  the
commencement of marketing activities  associated with our agreement with NDC, as
well as additional sales and marketing personnel.

     GENERAL AND ADMINISTRATION.  General and administration  expenses increased
430% to $2.3 million for the three months ended September 30, 1999 from $431,000
for the comparable period in 1998. General and administration expenses increased
249% to $4.3  million for the nine  months  ended  September  30, 1999 from $1.2
million for the comparable period in 1998. The increase in costs was primarily a
result  of  expenses   related  to  increased   personnel  and  other   employee
compensation   expenses,   professional  service  fees,  and  facility  expenses
necessary to support our growth.

     DEPRECIATION  AND  AMORTIZATION.  Depreciation  and  amortization  expenses
increased  286% to $193,000 for the three months ended  September  30, 1999 from
$50,000  for the  comparable  period  in  1998.  Depreciation  and  amortization
expenses increased 186% to $418,000 for the nine months ended September 30, 1999
from  $146,000  for the  comparable  period in 1998.  The  increase in costs was
attributable to increased purchases of fixed assets and amortization of goodwill
related to the Healthcare Communications Group acquisition in October 1998.

     DEFERRED  STOCK  COMPENSATION.  In  connection  with the  issuance of stock
options during the second half of fiscal 1998 and the first half of fiscal 1999,
our  management  determined  that the  valuation  of such  issuances  should  be
revised.  As a result, an amount equal to the excess of the fair market value of
our common stock over the option  exercise  prices is being  amortized over four
years,  the vesting  period of the options.  The  amortization  commenced in the
fiscal 1998 fourth quarter.  Additionally,  deferred stock compensation includes
the amortization of the fair value of the warrants issued to AOL.

     INTEREST  EXPENSE/INCOME.  Net  interest  income for the three months ended
September 30, 1999 was $191,000 compared to $72,000 for the same period in 1998.
Net interest  income for the nine months ended  September  30, 1999 was $487,000
compared to $221,000 for the same period in 1998. The higher interest income was
due to a higher average of net cash and cash equivalents  balance as a result of
our financing activities in 1999.

     INCOME TAXES. As of September 30, 1999,  Medscape had federal net operating
loss  carryforwards  of  approximately  $13.7 million which will be available to
reduce  future  taxable  income.  The federal net operating  loss  carryforwards
expire  beginning in 2011 through 2019. A valuation  allowance has been recorded
for the entire  deferred tax asset as a result of  uncertainties  regarding  the
realization of the asset due to our lack of earnings history.


LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have largely financed our operations through the private
placement of equity securities and, to a lesser extent,  from revenues generated
from advertising and sponsorship  sales and loans received from a related party.
On August 4,  1999,  we  entered  into a  strategic  development  and  marketing
agreement with NDC (see Note 5). As part of this  transaction,  NDC invested $10
million  cash in  Medscape,  and has  agreed,  over the  three  year term of the
agreement, to provide $10 million in licensing and promotional value and credits
against  future  commission  and product  purchase  amounts due by us to NDC. On
September 27, 1999,  we completed an initial  public  offering that  ultimately,
after  inclusion  of the  exercise on  September  30, 1999 of the 900,000  share
underwriter's  over-allotment,  resulted in the issuance of 7,650,000  shares of
common stock. Net proceeds  received,  after deducting  offering costs,  totaled
approximately  $54.4 million,  including  approximately $6.7 million received on
October 5, 1999 from the exercise of the over-allotment.

     Net cash used in operating  activities was $8.3 million for the nine months
ended  September  30, 1999 compared to $2.8 million for the same period in 1998.
Cash used in operating  activities for both periods was  attributable to funding
net  operating  losses and, for the 1999  period,  also  reflected  increases in
deferred revenues and accounts payable and accrued liabilities, partially offset
by increases in accounts receivable and prepaid expenses.


                                       11
<PAGE>


     Net cash used in investing  activities was $8.7 million for the nine months
ended  September 30, 1999 compared to $277,000 for the same period in 1998. Cash
used in  investing  activities  for the nine  months  ended  September  30, 1999
related  primarily  to  the  investment  in  Softwatch  and  investments  in our
technology  infrastructure  including the  development  of our consumer Web site
launched in September 1999.

     Cash provided by financing activities was $76.3 million for the nine months
ended  September  30, 1999 compared to $4.0 million for the same period in 1998.
Cash provided by financing  activities  for the nine months ended  September 30,
1999  reflects net proceeds  received  from the initial  public  offering of our
common  stock as well as the  issuance of Series D and Series E Preferred  Stock
and Class A and Class B Common Stock. Cash provided by financing  activities for
the nine months ended September 30, 1998 reflects net proceeds received from the
issuance of Series C Preferred Stock.

As of September 30, 1999, the primary source of liquidity for Medscape was $60.9
million of cash and cash  equivalents.  As of this date,  we had no bank  credit
facilities.

We expect to incur  significantly  higher costs,  particularly  content creation
costs and sales and marketing costs to grow our business and pursue our branding
and marketing campaign. We launched CBS.Medscape.com (subsequently relaunched as
CBS.Healthwatch.com),  our separate consumer site, in the third quarter of 1999,
and we plan to launch our AOL co-branded consumer sites in the fourth quarter of
1999 and first quarter of 2000. CBS.Healthwatch.com and the AOL co-branded sites
will provide  consumer-oriented  information organized by health topic and offer
community  features and interactive  healthcare  information  programs.  A large
portion of our  promotional  expenditures  for our consumer sites will be funded
through the  approximately  $150  million in  advertising  and  promotion  to be
provided  by CBS  over  the 7 year  term of the  agreement  and the $33  million
contract with AOL of which $3 million was paid at contract  closing in September
1999,  $10 million was paid in October 1999,  and an additional $20 million will
be paid over the next two years.

We believe that our current  cash and cash  equivalents  and any cash  generated
from  operations,  will be sufficient to meet anticipated cash needs for working
capital and capital  expenditures for at least the next 12 months.  However,  if
during or following that period we are not  successful in generating  sufficient
cash flow from  operations  or in raising  additional  capital when  required in
sufficient  amounts and on terms  acceptable to us, these  failures could have a
material  adverse  effect on our business,  results of operations  and financial
condition.  If  we  raise  additional  funds  through  the  issuance  of  equity
securities,  the percentage  ownership of our then current stockholders would be
reduced.


YEAR 2000

Many currently  installed  computer  systems and software  products are coded to
accept  only  two-digit  entries  in the date  code  field and  cannot  reliably
distinguish  dates  beginning  on January  1, 2000 from dates  prior to the year
2000.  Many  software and computer  systems used by companies  and  governmental
agencies may need to be upgraded or replaced in order to correctly process dates
beginning in 2000 and comply with Year 2000 requirements.

We are  conducting a  comprehensive  review of both  information  technology and
non-information  systems  to ensure  that they are,  or prior to the end of 1999
will be, Year 2000 compliant. Significant information technology systems include
our  production  system,  composed of the servers,  networks  and software  that
comprise the underlying  technical  infrastructure  that runs our business,  and
various  internal office systems.  Our  significant  non-information  technology
systems include the telephone systems, air conditioning and security system. Our
Year 2000 review project includes the following phases:

     o  conducting a  comprehensive  inventory  of our internal  systems and the
        systems acquired or to be acquired by us;

     o  assessing and prioritizing any required remediation;

     o  remediating any problems by repairing or, if appropriate,  replacing the
        non-compliant systems; and


                                       12
<PAGE>


     o  testing all remediated systems for Year 2000 compliance.

Based  upon the  results of our  review to date,  it  appears  that there are no
significant  Year 2000  issues  within  our  systems  that would have a negative
effect on our ability to conduct business.

In  addition  to  assessing  the  readiness  of our  systems,  we have  gathered
information from, and have directly communicated through written correspondence,
telephone  calls and in face-to-face  meetings with our third-party  systems and
software  vendors,  as well as other  suppliers,  to identify and, to the extent
possible,   resolve   issues   involving  the  Year  2000   problem.   Based  on
representations  made  to  us by  applicable  suppliers,  we  believe  that  the
third-party software and systems that are material to our business are Year 2000
compliant.  We have approximately six major vendors with whom we have met and/or
corresponded to determine Year 2000 issues and appropriate compliance.  However,
we have  limited or no control  over the actions of our  third-party  suppliers.
Thus,  while we expect that we will be able to resolve any significant Year 2000
problems with our systems,  we cannot  guarantee that our third-party  suppliers
will resolve all Year 2000 problems with their systems  before the occurrence of
a material  disruption  to our  business.  Any failure of  material  third-party
suppliers to resolve Year 2000  problems  with their  systems in a timely manner
would have a negative effect on our ability to conduct business.

To date, we have spent an immaterial  amount on Year 2000 compliance  issues but
expect  to  incur   additional  costs  in  connection  with
evaluating and addressing these issues. We expect to pay for these expenses from
our working  capital.  Most of our  expenses  have  related to  operating  costs
associated  with the time spent by employees and  consultants  in the evaluation
process and Year 2000 compliance  matters generally.  These expenses,  if higher
than anticipated, could have a negative effect on our financial condition.

We expect to resolve  all Year 2000  problems  that could  materially  adversely
affect our  business,  financial  condition or  operating  results and expect to
certify by year-end all elements of our information  technology  systems as Year
2000 compliant.  We cannot assure you,  however,  that we will achieve full Year
2000 compliance before the end of 1999. A failure of our computer systems or the
failure of our suppliers or customers to effectively  upgrade their software and
systems for transition to the year 2000 could have a material  adverse effect on
our business, financial condition and results of operations.

In addition, we cannot be certain that governmental agencies, utility companies,
Internet access companies,  third-party  service providers and others outside of
our control  will be Year 2000  compliant.  The failure by these  entities to be
Year 2000 compliant could result in a systemic failure beyond our control,  such
as a prolonged Internet,  telecommunications  or electrical failure,  that could
prevent us from  delivering our services to our  customers,  decrease the use of
the Internet or prevent users from  accessing  our Web site,  any of which could
have a material adverse effect on our business,  financial condition and results
of operations.

We completed an acquisition  during 1998 and are  finalizing the  integration of
the systems of the acquired  business  into our  operations.  Those  systems are
included  in our  Year  2000  review.  For any  other  acquisitions  that we may
complete  prior to the end of 1999, we will evaluate the extent of the Year 2000
problems  associated with the potential  acquisitions and the cost and timing of
remediation. This work will be done as part of the due diligence process as well
as post-acquisition integration. We cannot assure you, however, that the systems
of any acquired  business  will be Year 2000  compliant  when we acquire them or
will be capable of timely remediation.

As discussed  above,  we are engaged in an ongoing Year 2000 assessment and have
not yet  developed  any  contingency  plans.  We will  take the  results  of our
assessment  into account in determining the nature and extent of any contingency
plans.


                                       13
<PAGE>


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE SENSITIVITY. The primary objective of our investment activities is
to preserve  principal  while at the same time  maximizing the income we receive
from our investments without significantly  increasing risk. Accordingly,  we do
not enter into financial instrument  transactions for trading purposes.  Some of
our  investments  may be  subject to market  risk  which  means that a change in
prevailing  interest  rates may cause the principal  amount of the investment to
fluctuate.  To minimize this risk, we invest our cash in money market funds.  In
general,  money market funds are not subject to market risk as the interest paid
on these funds fluctuates with the prevailing interest rate. As of September 30,
1999, all of our investments mature in less than one year.

EXCHANGE RATE SENSITIVITY. We consider our exposure to foreign currency exchange
rate  fluctuations  to be minimal  as we  currently  do not  derive any  revenue
denominated  in a foreign  currency and have minimal  expenses paid in a foreign
currency.


                                       14
<PAGE>


PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          There are no pending legal proceedings to which we are a party.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

          The effective date of our  registration  statement,  filed on Form S-1
          under the Securities Act of 1933 (File No. 333-77665)  relating to our
          initial  public  offering of  7,650,000  shares of common  stock,  was
          September  27, 1999. A total of 6,900,000  shares of common stock were
          sold in this offering to an underwriting syndicate, 6,000,000 of which
          were issued on September 30, 1999 and 900,000  additional  shares were
          issued on October 5, 1999 in  connection  with the  September 30, 1999
          exercise   of   the   underwriter's   over-allotment.   The   managing
          underwriters  were Donaldson,  Lufkin & Jenrette,  Credit Suisse First
          Boston,  Bear,  Stearns  & Co.  Inc.,  Wit  Capital  Corporation,  and
          DLJDIRECT  Inc.  Additionally,  750,000 shares of common stock in this
          offering  were  sold  directly  to  three  purchasers.   The  offering
          commenced  immediately  following  the effective  date and  terminated
          following the exercise of the over-allotment.

          Net proceeds from the offering were $54.4 million which  reflects $3.9
          million for the  underwriting  discount  and $2.6  million of offering
          costs applied to the gross proceeds of $60.9 million. The net proceeds
          will be used to finance the  remaining  $30 million of payments  under
          our  agreement  with AOL, for general  corporate  purposes,  including
          funding operating  losses,  working capital and capital needs. We also
          may use a portion  of the net  proceeds  to  invest  in  complementary
          businesses or technologies, although we have no present commitments or
          agreements  with respect to any material  acquisition  or  investment.
          None of the net  proceeds  from  the  offering  was paid  directly  or
          indirectly  to  any  director,   officer,  general  partner  or  their
          associates,  or to any  persons  owning  10% or more of any  class  of
          equity securities. Pending application of the net proceeds towards one
          of the above uses,  the net proceeds have been invested in short-term,
          interest-bearing, investment-grade securities.


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not applicable

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          (a) Pursuant to an Action by Written  Consent of the  Stockholders  in
          Lieu of a  Meeting  which was first  sent to  stockholders  on July 1,
          1999, our  stockholders  entitled to vote approved an amendment to our
          Amended and  Restated  Certificate  of  Incorporation  to increase the
          authorized  shares of Class A Common  Stock and Class B Common  Stock.
          The  amendment  was  unanimously  approved by the holders of 1,079,000
          shares of our Class A Common  Stock,  788,200  shares of our  Series A
          Preferred  Stock,  1,478,359  shares of our Series C Preferred  Stock,
          932,401 shares of our Series C-1 Preferred Stock and 1,757,683  shares
          of our Series D Preferred  Stock,  representing all voting shares then
          outstanding.  This  amendment  was  incorporated  into an Amended  and
          Restated  Certificate  of  Incorporation  that  was  approved  by  the
          Stockholders in a later action and filed on July 30, 1999.

          (b) Pursuant to an Action by Written  Consent of the  Stockholders  in
          Lieu of a Meeting  which was first  sent to  stockholders  on July 16,
          1999,  our  stockholders  entitled to vote approved (i) an Amended and
          Restated  Certificate  of  Incorporation  to increase  the  authorized
          shares of Class A Common  Stock (and to reflect the prior  stockholder
          approval of the  increase to the  authorized  shares of Class B Common
          Stock)  and to  authorize  a new Series E  Preferred  Stock and (ii) a
          separate  form of Amended and Restated  Certificate  of  Incorporation
          which became  effective on September  30, 1999 upon the  completion of
          our initial public offering and which Amended and Restated Certificate
          of Incorporation  reflects (A) the automatic  conversion of all shares
          of Class B Common  Stock  into  Class A Common  Stock  and the Class A
          Common


                                       15
<PAGE>


          Stock's   redesignation   as  Common  Stock,  and  the  conversion  of
          outstanding  Preferred Stock into Common Stock,  which events occurred
          upon the consummation of our initial public offering, (B) the increase
          of our authorized Common Stock to one hundred million shares,  (C) the
          authorization  of five million shares of Undesignated  Preferred Stock
          and (D) the creation of a three class  staggered  Board of  Directors.
          The amendments were  unanimously  approved by the holders of 1,079,000
          shares of our Class A Common  Stock,  788,200  shares of our  Series A
          Preferred  Stock,  1,478,359  shares of our Series C Preferred  Stock,
          932,401 shares of our Series C-1 Preferred Stock and 1,757,683  shares
          of our Series D Preferred  Stock,  representing all voting shares then
          outstanding.  The Amended and Restated  Certificate  of  Incorporation
          increasing  the  authorized   shares  of  Class  A  Common  Stock  and
          authorizing  a new Series,  Series E, of Preferred  Stock was filed on
          July  30,   1999  and  the  Amended  and   Restated   Certificate   of
          Incorporation  approved to be effective upon the  consummation  of our
          initial public offering was filed on September 30, 1999.

          (c) Pursuant to an Action by Written  Consent of the  Stockholders  in
          Lieu of a Meeting which was first sent to  stockholders  on August 26,
          1999, our  stockholders  entitled to vote approved an amendment to our
          Amended and  Restated  Certificate  of  Incorporation  to increase the
          number of authorized shares of Class A Common Stock. The amendment was
          unanimously approved by the holders of 9,476,208 shares of our Class A
          Common  Stock,  788,200  shares  of  our  Series  A  Preferred  Stock,
          1,478,359  shares of our Series C Preferred  Stock,  932,401 shares of
          our  Series  C-1  Preferred  Stock,  1,757,683  shares of our Series D
          Preferred  Stock and 400,000  shares of our Series E Preferred  Stock,
          representing all voting shares then outstanding. This amendment to our
          Amended  and  Restated  Certificate  of  Incorporation  was  filed  on
          September 3, 1999.


ITEM 5.   OTHER INFORMATION

          Not applicable


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

               Not applicable

          (b)  No  reports  on Form 8-K were  filed  during  the  quarter  ended
               September 30, 1999.


                                       16
<PAGE>


                                   SIGNATURES

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

                               MEDSCAPE, INC.

Date: November 15, 1999        By: /s/ PAUL T. SHEILS
                                   -----------------------------------------
                               Name:  Paul T. Sheils
                               Title: President and Chief Executive Officer
                                      (Principal Executive Officer)


Date: November 15, 1999        By: /s/ STEVEN R. KALIN
                                   -----------------------------------------
                               Name:  Steven R. Kalin
                               Title: Chief Operating Officer and Chief
                                      Financial Officer (Principal Financial and
                                      Accounting Officer)


                                       17