<PAGE>   1
                                                                   Exhibit 10.65


                        FIRST AMENDMENT TO LOAN AGREEMENT
                                     BETWEEN
                  ARRIS PHARMACEUTICAL CORPORATION, AS BORROWER
                                       AND
                     THE SUMITOMO BANK, LIMITED, AS A LENDER
                                       AND
                        SILICON VALLEY BANK, AS A LENDER
                                       AND
                      THE SUMITOMO BANK, LIMITED, AS AGENT


      THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "First Amendment") is made and
entered into as of January 8, 1998 by and between ARRIS PHARMACEUTICAL
CORPORATION, a Delaware corporation ("Arris" or the "Borrower") and THE SUMITOMO
BANK, LIMITED, a Japanese banking corporation and SILICON VALLEY BANK, a
California banking corporation (collectively "Lenders" and individually a
"Lender") and THE SUMITOMO BANK, LIMITED, as agent for the Lenders (in such
capacity, the "Agent").

                                    RECITALS:

      A.    The Borrower, the Lender and the Agent entered into that certain
loan agreement dated September 29, 1997 (the "Loan Agreement"). Any capitalized
terms which are not defined herein shall have the meaning ascribed to such
capitalized terms in the Loan Agreement.

      B.    Pursuant to the Loan Agreement, the Lenders together agreed to make
a loan to Arris in the aggregate principal amount of Twenty Million Dollars
($20,000,000) with the sum Eleven Million Eight Hundred Thousand and No/100
Dollars ($11,800,000) being the initial loan disbursement under the Loan
Agreement.

      C.    Sequana Therapeutics, Inc., a California corporation ("Sequana") and
The Sumitomo Bank, Limited, a Japanese banking corporation ("Sumitomo") entered
into that certain loan agreement dated October 23, 1996 (the "Sequana Loan
Agreement").

      D.    Pursuant to the Sequana Loan Agreement, Sumitomo agreed to make a
loan to Sequana in the aggregate principal amount of Seven Million Dollars
($7,000,000).

      E.    Sequana has reached an agreement with Arris pursuant to which Beagle
Acquisition Sub, Inc., a California corporation and wholly owned subsidiary of
Arris formed solely to effect the merger transaction, will merge with and into
Sequana pursuant to the terms of a Reorganization Agreement (the "Merger").
Pursuant to the Merger, Sequana will be the surviving corporation and Sequana
will become a wholly owned subsidiary of Arris. Pursuant to the Loan Agreement,
Arris has requested that the Lenders and the Agent consent to the Merger. The
Lenders and the Agent are is willing to consent to the Merger provided that
certain modifications to the Loan Agreement are made, including without
limitation that the Loan Agreement and Sequana Loan Agreement provide for
cross-trigger events and cross-default events.


                                       1.
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      F.    As a consequence of the proposed Merger, the Lenders, the Agent and
the Borrower desire to make certain modifications to the Loan Agreement which
shall become effective on the Effective Date (as defined in Section 1 below).
After the Effective Date, the Borrower, the Lenders and the Agent intend that
the Loan Agreement together with this First Amendment be construed together as
one fully integrated agreement.

      IN CONSIDERATION of the Recitals, the mutual covenants contained herein,
and other good and valuable consideration, the Lenders, the Agent and the
Borrower agree as follows:

                                    AGREEMENT

      1.    The effective date ("Effective Date") of this First Amendment shall
be the date that the Merger is consummated and Sequana becomes a wholly owned
subsidiary of Arris.

      2.    Borrower hereby unconditionally reaffirms each and all of its
obligations under the Loan Agreement, the Note, the Restricted Account and
Security Agreement, the Collateral Bailment Agreement, the Irrevocable
Instructions and Power of Attorney, the Custodian Agreement and each of the
other Loan Documents. Without limiting the generality of the foregoing, Borrower
hereby reaffirms its promise to pay the indebtedness evidenced by the Note and
Loan Agreement and to perform each and all of the conditions and covenants
required to be performed by Borrower pursuant to the Note, the Loan Agreement
and other Loan Documents. By executing this First Amendment, Borrower
acknowledges and covenants that, as of the Effective Date, Borrower has no
defenses, claims, counterclaims, causes of action or rights of setoff of any
kind or nature whatsoever against the Lenders or the Agent with respect to or
arising out of or relating to the Loan, the Note, the Loan Agreement or any of
the other Loan Documents.

      3.    From and after the Effective Date the following provisions shall
apply: This First Amendment and the Loan Agreement shall be construed together
as one fully integrated agreement. Except as specifically amended by this First
Amendment, the terms of the Loan Agreement and other Loan Documents shall remain
unaltered and in full force and effect in accordance with their original terms
and conditions. Any references to the Loan Agreement contained in the Note,
Restricted Account and Security Agreement, the Collateral Bailment Agreement,
the Irrevocable Instructions and Power of Attorney, the Custodian Agreement or
any of the other Loan Documents shall be deemed to refer to the Loan Agreement
as amended by this First Amendment.

      4.    The effectiveness of this First Amendment and the obligations of the
Lenders and the Agent hereunder shall be subject to the following conditions
precedent:

            (a)   the Borrower will have executed and delivered to the Lenders
and the Agent this First Amendment;

            (b)   no Event of Default (after giving effect to the amendments
contemplated in this First Amendment) shall have occurred, and be continuing,
under the Loan Agreement;


                                       2.
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            (c)   the Agent shall have received reimbursement from Borrower of
all costs and expenses incurred by the Agent and/or the Lenders in connection
with this First Amendment, including without limitation, the Agent's and/or the
Lenders' legal fees and expenses incurred in connection with the negotiation and
preparation of this First Amendment and any other fees and expenses of the Agent
and/or the Lenders for UCC searches or filing fees.

            (d)   the Borrower will have delivered to the Agent the following,
in a form and in substance acceptable to the Agent:

                  (i)   a copy of the certificate of incorporation of Arris
      certified by the Secretary of State of Delaware;

                  (ii)  a copy of the bylaws of the Borrower certified by its
      Secretary;

                  (iii) a copy of resolutions of the Board of Directors of the
      Borrower authorizing the execution, delivery and performance by the
      Borrower of this First Amendment and the reaffirmation of all obligations
      under the Loan Documents, certified by the Secretary of the Borrower;

                  (iv)  a good standing certificate for the Borrower, dated as
      of the date not more than ten (10) days prior to the Effective Date of
      this First Amendment from the Secretary of State of the State of Delaware;

                  (v)   an incumbency certificate with respect to the officers
      of the Borrower, certified by the Secretary; and

                  (vi)  evidence that Borrower is qualified to do business in
      the State of California and is in good standing as a foreign corporation.

            (e)   counsel to the Borrower (which may be in-house general
counsel) will have delivered to the Agent, for the benefit of Agent and the
Lenders, such counsel's legal opinion as to the due organization, existence and
qualification to do business, and good standing of the Borrower, due
authorization, execution and enforceability of this First Amendment, the Loan
Agreement and the other Loan Documents, the absence of pending and threatened
litigation, the non-contravention of other documents, instruments, laws and
regulations, and such other matters that the Agent may reasonably require, in
form and substance reasonably satisfactory to the Agent.

            (f)   Sequana will have executed and delivered to Sumitomo a First
Amendment to the Sequana Loan Agreement in a form and substance satisfactory to
Sumitomo.

            (g)   The Merger shall have been consummated and Sequana shall have
become a wholly owned subsidiary of Arris.

      5.    Borrower hereby represents and warrants that all representations and
warranties contained in the Loan Agreement are true and correct as of the date
of execution hereof.


                                       3.
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      6.    From and after the Effective Date, Section 5.10 is amended and
restated in its entirety to read as follows:

                  "SECTION 5.10. FINANCIAL COVENANTS. The Borrower, on a
            consolidated basis with Borrower's Affiliates other than Sequana
            Therapeutics, Inc., a California corporation ("Sequana") or
            Sequana's subsidiaries, shall at all times maintain:

                  (i)   A maximum ratio of Total Debt to Net Worth, as
            calculated on a quarterly basis of 0.5:1;

                  (ii)  A minimum Current Ratio, as calculated on a quarterly
            basis, of 1.5:1.0,

                  (iii) A minimum Net Cash Level equal to the then outstanding
            principal balance due under the Note plus the greater of (x) Ten
            Million Dollars ($10,000,000) and (y) two (2) times the preceding
            six (6) months Actual Cash Burn; and

                  (iv)  A minimum Net Worth, as calculated at the end of each
            fiscal quarter, of more than Twenty Million Dollars ($20,000,000).

The failure of the Borrower to maintain any of the covenants set forth in this
Section 5.10(i)-(iv) and/or the failure of Borrower to maintain the covenants
set forth in Section 5.12 and/or the failure of Sequana to maintain any of the
covenants set forth in Section 5.10 of that certain loan agreement dated as of
October 23, 1996 by and among Sequana and The Sumitomo Bank, Limited, a Japanese
banking corporation, as lender, as it may be amended from time to time (the
"Sequana Loan Agreement") and/or the occurrence of an Event of Default under
Section 8.1 of this Agreement shall be a "Trigger Event.""

      7.    From and after the Effective Date, new Section 5.12 shall be
applicable and read as follows:

                  "5.12 MAINTENANCE OF SEPARATE CORPORATE EXISTENCE. For
            purposes of Borrower's preparing an internal annual report under
            Section 6.1, the quarterly reports under Section 6.2, the cash and
            covenant reports required under Section 6.4 and determining
            Borrower's compliance with the financial covenants set forth in
            Sections 5.10(i) through 5.10(iv), Borrower shall maintain its own
            financial statements, balance sheets, income statements, statements
            of cash flow and other books and records separate from the financial
            statements, books and records of Sequana; provided, however, that
            such reports and such separate financial statements, balance sheets,
            income statements, statements of cash flow and other books and
            records of Borrower may be internally prepared by Borrower and need
            not be audited by Borrower's outside auditors; provided, further,
            that Borrower's outside accountant audited annual reports under
            Section 6.1 and Borrower's public reports under Section 6.3 may be
            prepared by Borrower on a consolidated basis with Sequana and
            Sequana's and Borrower's respective Affiliates. All of Borrower's
            assets, including Borrower's Cash and Cash Equivalents, and all of


                                       4.
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            Borrower's liabilities shall be maintained separate from, and not
            commingled or consolidated with, the assets or liabilities of
            Sequana. Borrower shall maintain its own corporate existence and
            shall not consolidate with, merge into or convey or transfer its
            properties substantially as an entirety to any Affiliate (including,
            without limitation, Sequana) without the Lenders' prior written
            consent."

      8.    From and after the Effective Date, Section 8.1 is amended and
restated in its entirety to read as follows:

                  "SECTION 8.1. EVENTS OF DEFAULT. If any one or more of the
            following events ("Event of Default") shall occur and be continuing,
            the entire unpaid balance of the principal of and interest on the
            Note and all other obligations and Indebtedness of the Borrower to
            the Lenders arising hereunder and under the other Loan Documents
            will (i) in the case of any Event of Default of the types referred
            to in subparagraph (f) hereinbelow, immediately become due and
            payable without notice and (ii) in the case of any other Event of
            Default, immediately become due and payable upon written notice to
            that effect given to the Borrower by the Agent, without presentment
            or demand for payment, notice of non-payment, protest or further
            notice or demand of any kind, all of which are expressly waived by
            the Borrower. Upon an Event of Default, the Agent and/or the Lenders
            shall have the rights and remedies provided for herein and in the
            other Loan Documents and under applicable law and in equity, and the
            rights and remedies provided for herein shall be cumulative and in
            addition to the rights and remedies provided for therein. Each of
            the following shall constitute an Event of Default:

                  (a)   Failure by the Borrower to make any payment within five
            (5) days of when due of any amount payable under the Loan Documents.

                  (b)   Failure by the Borrower to make any mandatory payments
            under any borrowing agreement (other than the Loan Documents) to
            which the Borrower is a party within any applicable grace period
            provided in such agreement or any other default by the Borrower
            under any such borrowing agreement and the failure of the Borrower
            to cure such default within any applicable grace period, provided
            that no Event of Default will be deemed to have occurred under this
            paragraph (b) with respect to any indebtedness under any borrowing
            agreement if payment of such indebtedness, after notice thereof
            having been given to the Agent, is being contested by the Borrower
            in good faith and by appropriate proceedings and such contest
            operates to prevent the other party to such agreement from
            exercising its remedies against the Borrower or any of its
            properties, or if such other party has agreed in writing not to
            exercise its remedies against the Borrower or any of its properties,
            and, in any case, the amount in dispute is in the aggregate less
            than $100,000.

                  (c)   Failure by the Borrower to perform or observe any term,
            condition or covenant set forth in Section 2.6.


                                       5.
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                  (d)   Failure by the Borrower to perform or observe any
            material term, condition or covenant of this Agreement or of any of
            the Loan Documents (other than the covenants set forth in Section
            5.10(i) through 5.10(iv) which shall constitute a Trigger Event and
            not an Event of Default) which failure (other than a failure which
            by its nature is not capable of cure and other than a failure to
            perform or observe any term, condition or covenant referred to or
            set forth in Subparagraphs (a), (b) and (c) hereinabove) is not
            cured within thirty (30) days of the occurrence thereof.

                  (e)   Any representation or warranty made in writing in any of
            the Loan Documents or in connection with the making of the Loan or a
            certificate, statement or report made or delivered in compliance
            with this Agreement, will have been false or misleading in any
            material respect when made or delivered.

                  (f)   The Borrower makes an assignment for the benefit of
            creditors, files a petition for bankruptcy, petitions or applies to
            any tribunal for the appointment of a receiver, custodian, or any
            trustee for it or a substantial part of its assets, or commences any
            proceeding under any bankruptcy, reorganization, arrangement,
            readjustment of debt, dissolution or liquidation law or statute of
            any jurisdiction, whether now or hereafter in effect; or there will
            have been filed any such petition or application, or any such
            proceeding has been commenced against it, which remains undismissed
            for a period of sixty (60) days or more; or any order for relief is
            entered in any such proceeding; or the Borrower by any act or
            omission indicates its consent to, approval of or acquiescence in
            any such petition, application or proceeding or the appointment of a
            custodian, receiver or any trustee for it or any substantial part of
            any of its properties; or the Borrower suffers any custodianship,
            receivership or trusteeship to continue undischarged for a period of
            sixty (60) days or more.

                  (g)   Any single judgment of $100,000 or more or a combination
            of unsecured judgments aggregating $100,000 or more against the
            Borrower not covered by insurance or any attachment or levy of
            execution against any substantial part of the Borrower's properties
            for any amount (not covered by insurance) remains unpaid, unstayed
            on appeal, undischarged, unbonded or undismissed for a period of
            thirty (30) days or more.

                  (h)   Any Loan Document ceases to be in full force and effect
            in all material respects for any reason (other than due to the
            payment in full of all amounts secured or evidenced thereby or due
            to discharge in writing by the Agent).

                  (i)   After the occurrence of a Trigger Event under Section
            5.10, the failure of the Borrower and/or the Account Holder to make
            the requisite transfer to the Custodian Account as provided in
            Section 5.11 such that, not later than 5:00 P.M. in New York, New
            York on the first Business Day following the occurrence of the
            Trigger Event, the Restricted Account Balance equals or exceeds the
            Required Restricted Account Balance.


                                       6.
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                  (j)   Upon the occurrence of a Trigger Event under Section
            5.10, the failure of the Borrower to execute and deliver, or cause
            to be executed and delivered, any additional documents reasonably
            requested by the Agent in connection with the transfer by the
            Borrower and/or Account Holder to the Custodian Account as provided
            in Section 5.11 (including without limitation any additional
            documents reasonably requested by the Agent in order to further
            implement or perfect the pledge of assets held in the Custodian
            Account).

                  (k)   Failure by the Borrower to comply in any material
            respect with its "Investment Policy", for investment of all Cash and
            Cash Equivalents or the Borrower's making a material change to such
            investment policy without the Agent's prior written approval, which
            approval shall not be unreasonably withheld.

                  (l)   After the occurrence of a Trigger Event and the initial
            transfer to the Custodian Account as provided in Section 5.11, the
            failure of the Borrower and/or the Account Holder to make, within
            two Business Days following the request of the Agent, such
            additional transfers to the Custodian Account as may be necessary,
            from time to time, to increase the Restricted Account Balance so
            that it equals the Required Restricted Account Balance.

                  (m)   The failure by the Borrower, at any time, to maintain a
            Net Cash Level equal to the sum of (i) the then outstanding
            principal balance under the Note plus (ii) the greater of (x) Six
            Million Dollars ($6,000,000) or (y) two (2) times the amount of the
            preceding four (4) months Actual Cash Burn.

                  (n)   The occurrence of an "Event of Default" under the
            Sequana Loan Agreement, as defined in Section 8.1 of the Sequana
            Loan Agreement.

                  (o)   After the Closing Date, a material adverse change in the
            business or financial condition of the Borrower occurs."

      9.    CONSENT TO MERGER. In consideration of this First Amendment, the
Agent and each of the Lenders hereby consent to the Merger.

      10.   MISCELLANEOUS.

            (a)   This First Amendment shall be governed by, construed and
interpreted in accordance with the laws of the State of California without
reference to its conflict of laws rules.


                                       7.
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            (b)   This First Amendment may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Loan
Agreement to be duly executed as of date first above written.


                               ARRIS PHARMACEUTICAL CORPORATION,
                               as Borrower



                               By: /s/ FRED RUEGSEGGER
                                   ---------------------------------------------
                               Name: Fred Ruegsegger
                                     -------------------------------------------
                               Title: Chief Financial Officer and Vice President
                                      ------------------------------------------


                               THE SUMITOMO BANK, LIMITED,
                               as Agent and as a Lender



                               By: /s/ CAROLE A. DALEY
                                   ---------------------------------------------
                               Name: Carole A. Daley
                                     -------------------------------------------
                               Title: Vice President and Manager
                                      ------------------------------------------


                               By: /s/ J. WILLIAM BLOORE
                                   ---------------------------------------------
                               Name: J. William Bloore
                                     -------------------------------------------
                               Title: Vice President
                                      ------------------------------------------


                               SILICON VALLEY BANK,
                               as a Lender



                               By: /s/ BARRY REAGAN
                                   ---------------------------------------------
                               Name: Barry Reagan
                                     -------------------------------------------
                               Title: Vice President
                                      ------------------------------------------


                                       8.