FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


[X]                 Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the quarterly period ended March 31, 1997


[  ]            Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                        For the transition period from to

                         Commission file Number 0-16109

                         ADVANCED POLYMER SYSTEMS, INC.
                         ------------------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                 94-2875566
               --------                                 ----------
     (State or other jurisdiction of                  (IRS Employer
      incorporation or organization)                 Identification No.)


                    3696 Haven Avenue, Redwood City, CA 94063
                    -----------------------------------------
                    (Address of principal executive offices)

                                 (415) 366-2626
                                 --------------
              (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

   At April 30, 1997 the number of outstanding shares of the Company's common
                     stock, par value $.01, was 18,418,492.



                                      INDEX



PART I.          FINANCIAL INFORMATION                                  Page No.
                                                                        --------
      ITEM 1.    Financial Statements (unaudited):

                 Condensed Consolidated Balance Sheets                        3
                 March 31, 1997 and December 31, 1996                       
                                                                            
                 Condensed Consolidated Statements of Operations              4
                 for the three months ended March 31, 1997 and 1996         
                                                                            
                 Condensed Consolidated Statements of Cash Flows              5
                 for the three months ended March 31, 1997 and 1996         
                                                                            
                 Notes to Condensed Consolidated Financial Statements         6
                                                                         

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


PART II.         OTHER INFORMATION


      ITEM 1.    Legal Proceedings                                           11

      ITEM 6.    Exhibits and Reports on Form 8-K                            11

                 Signatures                                                  12


                                        2


                         ADVANCED POLYMER SYSTEMS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                                     March 31,      December 31,
                                                       1997            1996
                                                   ------------    -------------
ASSETS
Current assets:
    Cash and cash equivalents                      $  5,436,700    $  5,394,509
    Marketable securities                             1,596,617            --
    Trade accounts receivable, net                    2,092,257       1,666,148
    Inventory                                         2,707,728       2,085,073
    Prepaid expenses and other                          354,688         328,028
    Receivable from/and assets held for sale            731,306       2,181,004
                                                   ------------    ------------

             Total current assets                    12,919,296      11,654,762

    Property and equipment, net                       4,642,670       4,681,292
    Deferred loan costs, net                            551,142         616,958
    Prepaid license fees                                145,034         165,752
    Intangible assets, including goodwill, net        1,209,261       1,265,801
    Other assets                                        153,780          59,603
                                                   ------------    ------------

                                                   $ 19,621,183    $ 18,444,168
                                                   ============    ============

LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable                               $    809,029    $  1,543,143
    Accrued expenses                                  1,924,428       1,456,512
    Accrued melanin purchase commitments              1,800,000       1,800,000
    Accounts payable, Johnson & Johnson                 359,872         814,509
    Deferred revenues                                 2,225,000         750,000
    Current portion - long-term debt                  1,825,371       1,490,779
                                                   ------------    ------------

             Total current liabilities                8,943,700       7,854,943

Long-term debt                                        4,958,070       5,578,849
                                                   ------------    ------------

             Total liabilities                       13,901,770      13,433,792
                                                   ------------    ------------

Shareholders' equity:
    Common stock and common stock warrants           76,881,495      76,591,381
    Accumulated deficit                             (71,162,082)    (71,581,005)
                                                   ------------    ------------

             Total shareholders' equity               5,719,413       5,010,376
                                                   ------------    ------------

                                                   $ 19,621,183    $ 18,444,168
                                                   ============    ============

                             See accompanying notes.

                                        3


                         ADVANCED POLYMER SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                 3 Months Ended   3 Months Ended
                                                 March 31, 1997   March 31, 1996
                                                 --------------   --------------

Microsponge product and technology revenues        $  3,547,132    $  1,448,745
Sales of consumer products                                 --         3,704,727
Milestone payment                                     1,500,000            --
                                                   ------------    ------------

Total revenues                                        5,047,132       5,153,472

Cost of sales                                         1,491,515       3,304,806

Operating expenses:
Research & development                                  932,474         889,956
Selling, marketing & advertising                      1,173,812       2,037,568
General & administration                                843,294         670,021
                                                   ------------    ------------

Total operating expenses                              2,949,580       3,597,545
                                                   ------------    ------------

Operating income (loss)                                 606,037      (1,748,879)

Interest income                                          79,300          38,956

Interest expense                                       (271,392)       (299,078)

Other income (expense)                                    4,978         (10,296)
                                                   ------------    ------------

Net income (loss)                                  $    418,923    ($ 2,019,297)
                                                   ============    ============

Net income (loss) per common share                 $       0.02    ($      0.12)
                                                   ============    ============

Number of shares used in
    computing per share amounts
    (the 1997 and 1996 number of shares
    include 1,286,824 and 0 shares,
    respectively, relating to common
    stock equivalents)                               19,692,958      17,354,858
                                                   ============    ============

                             See accompanying notes.

                                        4


                         ADVANCED POLYMER SYSTEMS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               for the three months ended March 31, 1997 and 1996
                                   (Unaudited)

                                                   March 31, 1997 March 31, 1996
                                                   -------------- --------------
Cash flows from operating activities:
Net income (loss)                                    $   418,923    ($2,019,297)
Adjustments to reconcile net income (loss) to net
    cash provided from (used in)
    operating activities:
       Depreciation and amortization                     251,947        353,135
       Change in allowance for doubtful accounts            --           (1,308)
       Provision for deferred compensation                45,000           --
       Changes in operating assets and liabilities:
             Trade accounts receivable                  (426,109)    (1,699,365)
             Inventory                                  (622,655)     1,282,946
             Prepaid expenses and other                  (26,660)       103,650
             Deferred loan costs                          65,816         16,961
             Other assets                                (94,177)        68,875
             Accounts payable and accrued expenses      (750,835)    (1,827,610)
             Deferred revenue                          1,475,000           --
                                                     -----------    -----------

Net cash provided from (used in) operating
     activities                                          336,250     (3,722,013)
                                                     -----------    -----------

Cash flows from investing activities:
Purchases of fixed assets                               (136,067)       (61,225)
Purchase of marketable securities                     (1,596,617)      (512,513)
Maturities and sales of marketable securities               --          506,396
Proceeds from assets held for sale                     1,449,698           --
                                                     -----------    -----------

Net cash used in investing activities                   (282,986)       (67,342)
                                                     -----------    -----------

Cash flows from financing activities:
Proceeds from the exercise of common stock options       275,114        730,309
Proceeds from note payable                                  --          500,000
Proceeds from long-term debt and warrants                   --          150,000
Repayment of long-term debt                             (286,187)      (192,389)
Proceeds from private placement,
  net of offering costs                                     --        2,976,044
                                                     -----------    -----------

Net cash (used in) provided from
  financing activities                                   (11,073)     4,163,964
                                                     -----------    -----------

Net increase in cash and cash equivalents                 42,191        374,609

Cash and cash equivalents, beginning of the
    period                                             5,394,509      5,172,809
                                                     -----------    -----------

Cash and cash equivalents, end of the period         $ 5,436,700    $ 5,547,418
                                                     ===========    ===========

Supplemental disclosure of non-cash financing transactions:
   During the first  quarter of 1996,  the  Company  acquired  all rights to the
     Polytrap  technology from Dow Corning Corporation in exchange for shares of
     Common Stock valued at $1,200,000.
   During the first  quarter of 1996,  the Company paid  Biosource  for the 1995
     purchase  commitment  totalling $600,000 by issuing 94,000 shares of Common
     Stock.

                             See accompanying notes.

                                        5


                         ADVANCED POLYMER SYSTEMS, INC.
              Notes to Condensed Consolidated Financial Statements
                             March 31, 1997 and 1996
                                   (Unaudited)


     (1)  Basis of Presentation

          In the opinion of management,  the  accompanying  unaudited  condensed
          consolidated financial statements contain all adjustments,  consisting
          of normal  recurring  adjustments,  necessary  to  present  fairly the
          financial position of Advanced Polymer Systems,  Inc. and subsidiaries
          ("the Company" or "APS") as of March 31, 1997 and the results of their
          operations  and their cash flows for the three  months ended March 31,
          1997 and 1996.

          These condensed consolidated  statements should be read in conjunction
          with the Company's audited  consolidated  financial statements for the
          years ended December 31, 1996, 1995 and 1994.

          The condensed  consolidated financial statements include the financial
          statements  of  the  Company  and  its  subsidiaries,   Premier,  Inc.
          ("Premier"),  Advanced  Consumer  Products,  Inc.,  and APS Analytical
          Standards, Inc. All significant intercompany balances and transactions
          have been eliminated in consolidation.

          Effective January 1997, as part of the Company's  long-term  strategic
          plan to move away from the direct marketing of consumer products,  APS
          licensed its consumer  products to Lander  Company.  The Company is no
          longer  generating  revenues  from  sales  of these  products,  but is
          receiving  revenues from  royalties on product sales and the supply of
          Microsponge(R) systems incorporated into various products.  Prior year
          results  include the sales of consumer  products and related  selling,
          marketing and distribution expenses.

          The Company  considers all short-term  investments which have original
          maturities  of  less  than  three  months  to  be  cash   equivalents.
          Investments  which have original  maturities  longer than three months
          are classified as marketable  securities in the  accompanying  balance
          sheets.

          Certain  reclassifications  have been made to the prior year financial
          statements to conform with the presentation in 1997.


                                        6


  (2)  Common Shares Outstanding and per Share Information


       Common stock outstanding as of March 31, 1997 is as follows:

                                                              Number of Shares
                                                              ----------------

       Common stock outstanding as of December 31, 1996         18,359,744
       Options exercised after December 31, 1996                    58,748
                                                                ----------
              Total shares                                      18,418,492
                                                                ==========

       In 1996, the number of shares used in calculating  earnings per share was
       the weighted average number of shares of common stock outstanding. Common
       stock  equivalents were not considered since they were  antidilutive.  In
       1997,  the  number  of  shares  used in  calculating  earnings  per share
       included the effect of common stock equivalents.

(3)    New Accounting Standard

       In  February  1997,  the  Financial  Accounting  Standards  Board  issued
       Statement of Financial Accounting Standards No. 128, "Earnings per Share"
       (SFAS 128), which will be effective for financial  statements for periods
       ending  after  December  15,  1997,   including   interim  periods,   and
       establishes  standards for computing and  presenting  earnings per share.
       Earlier  application  is not  permitted.  In its  consolidated  financial
       statements  for the year ending  December 31, 1997, the Company will make
       the required  disclosures  of basic and diluted  earnings per share.  All
       prior period earnings per share data will be restated by the Company upon
       adoption of SFAS 128.

(4)    Milestone Payment

       In February 1997,  upon receipt of marketing  clearance from the Food and
       Drug  Administration  ("FDA") to market Retin-A(R)  Micro(TM)  (tretinoin
       gel)  0.1%  -  microsphere  for  the  treatment  of  acne,  APS  received
       $3,000,000 from Ortho McNeil Pharmaceutical  Corporation, a subsidiary of
       Johnson  &  Johnson.  One half of the  amount  received  was a  milestone
       payment which was recognized as revenues in the first quarter of 1997 and
       the other half was  prepaid  royalties  which was  recorded  as  deferred
       revenue.

(5)    Inventory
       The major components of inventory are as follows:

                                            March 31, 1997    December 31, 1996
                                            --------------    -----------------
       Raw materials and work-in-process       $   668,257         $   604,852
       Finished goods                            2,039,471           1,480,221
                                               -----------         ------------
       Total inventory                         $ 2,707,728         $ 2,085,073
                                               ===========         ===========

                                        7



  Item 2.
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations
              (all dollar amounts rounded to the nearest thousand)

Results of Operations for the Three Months Ended March 31, 1997 and 1996

Except  for  statements  of  historical   fact,   the   statements   herein  are
forward-looking  and are  subject  to a number of risks and  uncertainties  that
could cause actual results to differ  materially from the statements made. These
include, among others,  uncertainty associated with timely approval,  launch and
acceptance of new products,  establishment of new corporate alliances,  progress
in  research  and  development  programs  and  other  risks  described  below or
identified from time to time in the Company's Securities and Exchange Commission
filings.

The Company's revenues are derived principally from product sales,  license fees
and royalties. The Company is currently manufacturing and selling Microsponge(R)
delivery systems for use by customers in almost 100 different  personal care and
cosmetic  products.  Under  strategic  alliance  arrangements  entered into with
certain  multinational  corporations,  APS  generally  receives an initial  cash
infusion,  future  milestone  payments,  royalties  based on third party product
sales and revenues from the supply of Microsponge systems.

These strategic alliances are intended to provide the Company with the marketing
expertise and/or financial  strength of other  companies.  In this respect,  the
Company's periodic financial results are dependent upon the degree of success of
current  collaborations  and  the  Company's  ability  to  negotiate  acceptable
collaborative agreements in the future.

Revenues for the three months ended March 31, 1997 were  $5,047,000  compared to
$5,153,000 in the corresponding  quarter of the prior year.  Microsponge product
and technology revenues were $3,547,000 in the first quarter of 1997 compared to
$1,449,000,  an increase  of  $2,098,000  or 145% over the first  quarter of the
prior year. This was due primarily to increased shipments of Microsponge systems
to  manufacturers  of personal  care and  cosmeceutical  products,  and up-front
technology  revenues received from corporate partners.

The current quarter included a milestone payment of $1,500,000 from Ortho McNeil
Pharmaceutical  Corporation  ("Ortho"),  a subsidiary of Johnson & Johnson, upon
the Company's receipt of marketing  clearance for Retin-A(R)  Micro(TM) from the
Food and Drug  Administration  (FDA).  Retin-A Micro was launched in March 1997.

The first  quarter  of 1997 did not  include  revenues  from  sales of  consumer
products which were licensed to

                                        8


the Lander Company  effective January 1, 1997. Sales of consumer products in the
year-ago   quarter  were  $3,705,000   which  consisted  of  sales  of  products
subsequently licensed to the Lander Company and sales of suncare products.

Gross  profit on product  revenues  for the  quarter  was  $1,256,000  or 46% of
product revenues compared to $1,799,000 or 35% in the year-ago period reflecting
increased  manufacturing  volume and sales of higher margin products,  primarily
proprietary cosmeceuticals.

Operating  expenses  decreased  by $648,000  or 18%.  Research  and  development
expense  increased  by  $43,000  or  5%  to  $932,000.  Selling,  marketing  and
advertising  expense  decreased  by  $864,000  or 42% to  $1,174,000.  This  was
primarily  due to the fact that the Company  licensed its  consumer  products to
Lander  Company  effective  January  1,  1997,  thus  avoiding  the  advertising
expenditure  and  variable  selling  expenses  such as  commission  and  freight
associated with promoting and distributing  consumer products.  This decrease is
expected to continue.  General and administrative  expense increased by $173,000
or 26% due primarily to higher professional fees.

Operating  income of $606,000  represented an improvement of $2,355,000 over the
prior year's first  quarter loss of  $1,749,000.  This was due  primarily to the
milestone payment received from Ortho,  up-front technology  revenues,  improved
margins on product sales and a significant reduction in operating expenses.

Interest  income of $79,000  for the first  quarter of 1997 was higher  than the
prior  year by  $40,000  due  mainly to  higher  cash and  investment  balances.
Interest expense for the quarter of $271,000 was lower than the year-ago quarter
by $28,000 due mainly to principal repayments.

The net income for the period was $419,000  compared to a net loss of $2,019,000
in the corresponding period of the prior year.


Capital Resources and Liquidity

Total assets as of March 31, 1997 were $19,621,000  compared with $18,444,000 at
December 31, 1996, and working capital  increased to $3,976,000 from $3,800,000.
In the same period,  cash, cash equivalents and marketable  securities increased
to $7,033,000  from  $5,395,000.  During the first quarter,  Company  operations
provided  $336,000  of cash.  The  Company  invested  approximately  $932,000 in
product  research and  development  and  $1,174,000 in selling and marketing the
Company's products and technologies.

The  Company  has  financed  its  operations,  including  product  research  and
development,  from  amounts  raised in debt and equity  financings,  the sale of
consumer products,

                                        9


Microsponge delivery systems and analytical standard products; payments received
under licensing agreements; and interest earned on short-term investments.

In the first  quarter of 1997,  upon receipt of approval  from the FDA to market
Retin-A  Micro  (tretinoin  gel)  microsphere  for the  treatment  of acne,  APS
received  $3,000,000  from Ortho McNeil  Pharmaceutical  of which one half was a
milestone  payment which was  recognized as revenue in the first quarter of 1997
and half was prepaid royalties which was recorded as deferred revenue.

The  Company's  existing  cash,  cash  equivalents  and  marketable  securities,
collections  of trade  accounts  receivable,  together with interest  income and
other  revenue  producing  activities  including  licensing  fees and  milestone
payments,  are expected to be sufficient to meet the Company's  working  capital
requirements  for the  foreseeable  future,  assuming  no  changes  to  existing
business plans.


New Accounting Standard

In February 1997, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 128, "Earnings per Share" (SFAS 128), which
will be effective for financial statements for periods ending after December 15,
1997,  including  interim periods,  and establishes  standards for computing and
presenting  earnings per share.  Earlier  application is not  permitted.  In its
consolidated  financial  statements  for the year ending  December 31, 1997, the
Company will make the  required  disclosures  of basic and diluted  earnings per
share.  All prior period earnings per share data will be restated by the Company
upon adoption of SFAS 128.



                                       10



PART II.

       Item 1. Legal Proceedings

               None


       Item 6. Exhibits and Reports on Form 8-K

               (a)   Exhibits:    27        Financial Data Schedules

               (b)   Reports on Form 8-K:  None




                                       11


                                   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.




                                        ADVANCED POLYMER SYSTEMS, INC.





Date: May 14, 1997                      By: /s/ John J. Meakem, Jr.
     -------------                         ------------------------
                                               John J. Meakem, Jr.
                                               Chairman, President and
                                               Chief Executive Officer



Date: May 14, 1997                      By: /s/ Michael O'Connell
     -------------                         ----------------------
                                               Michael O'Connell
                                               Executive Vice President,
                                               Chief Administrative Officer and
                                               Chief Financial Officer


                                       12




                                  EXHIBIT INDEX

                                    Form 10-Q

                         ADVANCED POLYMER SYSTEMS, INC.

27       -Financial Data Schedules.

 


5 1 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 5,436,700 1,596,617 2,092,257 40,888 2,707,728 12,919,296 13,558,040 8,915,370 19,621,183 8,943,700 4,958,070 0 0 184,185 5,535,228 19,621,183 2,455,132 5,047,132 1,491,515 1,491,515 2,949,580 0 271,392 418,923 0 418,923 0 0 0 418,923 0.02 0.02