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

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**FORM 10-K/A**

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**[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934**

**For the fiscal year ended December 31, 2000**

**OR**

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

**For the transition period from ________to _________**

**Commission File Number: 0-22890**

**SANGSTAT MEDICAL CORPORATION**
(Exact name of registrant as specified in its charter)



|**Delaware**                                                   | **94-3076-069**                     
|-------------------------------------------------------------- | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification Number)

**6300 Dumbarton CircleFremont, California   94555**(Address of principal executive offices, including zip code)

****
                             510-789-4300
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

**Common Stock ($.001 par value)
                        Preferred Share Purchase Rights**(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [   ]

Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [   ]

The aggregate market value of voting stock held by non-affiliates of the
Registrant, as of March 28, 2001 was approximately $112,629,000 (based on the
closing price for shares of the Registrant's Common Stock as reported by the
Nasdaq National Market of $8.50 on that date). Shares of Common
Stock held by each officer, director, and holder of 5% or more of the
outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

On March 28, 2001 approximately 19,474,360 shares of the Registrant's Common
Stock, $.001 par value, were outstanding.









AMENDMENT NO. 1

The undersigned Registrant hereby amends Part I, to read in full as
follows:

PART I



ITEM 1. BUSINESS

The following discussion and analysis should be read in
conjunction with "Selected Consolidated Financial Data" and our Consolidated
Financial Statements and Notes thereto included elsewhere in this Annual Report
on Form 10-K. Except for the historical information contained herein, the
discussion in this Annual Report on Form 10-K contains certain forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. The cautionary statements made
in this Annual Report on Form 10-K should be read as being applicable to all
related forward-looking statements wherever they appear in this Annual Report on
Form 10-K. Our actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors," as well as those discussed elsewhere herein. In
particular, we have included forward-looking statements regarding the following:
(i) our strategy; (ii) the anticipated timing of our regulatory filings and
approvals; (iii) other product development efforts that we intend to undertake,
including expanded uses and indications for existing products, and the related
capital outlays; (iv) the growth of our product sales and markets; (v) the
results of our litigation; (vi) our future revenue and expenses; and (vii) the
anticipated timing of the sale of our division known as The Transplant
Pharmacy.

Overview

SangStat is a global biotechnology company building on its foundation in
transplantation to discover, develop and market high value therapeutic products
in the transplantation, immunology and hematology/oncology areas. Since 1988, we
have been dedicated to improving the outcome of organ and bone marrow
transplantation through the development and marketing of products to address all
phases of transplantation in the worldwide market. Our US headquarters are in
Fremont, California. We also maintain a strong European presence, including
direct sales and marketing forces in all major European markets and distributors
throughout the rest of the world. Our stock is traded on the Nasdaq under the
symbol "SANG". Our web site is located at www.sangstat.com.

Our business is currently organized into two segments: Pharmaceutical
Products and Transplantation Services (see our Consolidated Financial Statements
and Notes thereto). The Pharmaceutical Products segment consists of five
marketed products, three principal product candidates and additional product
candidates in various stages of research and development. We plan to capitalize
on our products and product pipeline by developing relationships with key
providers and managed care organizations to better integrate the management of
transplant recipients' care to improve the outcomes and lower the costs of
transplants.

In October 2000, we announced the implementation of a strategy to refocus the
company. This strategy involves building on our foundation in transplantation to
grow a core business in high value therapeutics. SangStat was a
diagnostic/pharmaceutical company focused on solid organ transplantation, with
particular emphasis on the cyclosporine market. The success of Thymoglobulin and
its potential in areas beyond solid organ transplantation has provided us with
an opportunity to pursue new markets. In addition, the changing nature of the
cyclosporine market, including other generic entrants and the increased use of
other chronic immunosuppressants, has reduced the overall potential in the solid
organ transplantation market.

We are now focusing on a variety of therapeutic products and product
candidates to address the pre-transplant, acute care and chronic phases of
transplantation as well as product candidates in hematology and immunology.

We currently sell the following products:

- Thymoglobulin®(sold under the name
Thymoglobuline®outside the US)
- Gengraf® cyclosporine capsule (co-promoted with Abbott
Laboratories in the US)
- SangCya® Oral Solution - cyclosporine
(outside the US)
- Lymphoglobuline® (outside the US)
- Celsior®

Our principal products under development include:

- A generic cyclosporine capsule
- ABX-CBL (anti-CD147 antibody in co-development with
Abgenix, Inc.)
- RDP58

We also announced in October 2000 that we hoped to sell The Transplant
Pharmacy (TTP), which comprises our transplantation services segment. In early
March, we received several non-binding offers to purchase TTP, one of which we
accepted on March 13, 2001, thus committing to a formal plan to sell this
segment. We are currently in advanced negotiations with this bidder and expect
to complete the sale of TTP by April 30, 2001. Consequently, the historical
consolidated statements of operations and cash flows have been restated for all
periods presented to account for TTP as a discontinued operation.

Background

Organ Transplantation

Organ transplantation can save or improve the lives of patients with
organ failures. Transplantation involves surgically replacing the failed organ
of a transplant recipient with a healthy organ from a donor. Each year
approximately 50,000 new patients receive donated organs. In order to prevent
rejection of implanted organs, recipients must begin a life-long regimen of
immunosuppressive therapy immediately upon receiving a donated organ. There are
more than 240,000 patients in North America and Europe that need daily
immunosuppressive therapy to prevent graft rejection and graft loss. Products
that limit the need for immunosuppression and reduce the frequency and severity
of rejection and infection episodes could significantly improve the cost-
effectiveness and health benefits of transplantation.

The Transplant Immune Response

The function of the immune system is to protect the body from damage
caused by invading microorganisms or other foreign matter. Differences between a
donor's and a recipient's antigens lead to the recognition of the donor's organ
as foreign matter by the recipient's immune system. Specifically, the donor
organ antigens (HLA molecules) are recognized by the immune system of the graft
recipient as being "non-self." When the recipient's immune system invades and
attacks the donated organ, rejection and loss of the organ often occur.

Current therapies used to reduce the occurrence of rejection episodes involve
the chronic use of immunosuppressants, which impair the entire immune system of
the recipient. However, even with the use of immunosuppressants, rejection
remains frequent. Chronic use of immunosuppressants can lead to serious side
effects, including life-threatening infections, kidney or liver toxicity and
cancers.

The Transplant Process

A typical transplant patient progresses through three phases:

- The Pre-Transplant Phase

A transplant candidate is registered on a national computerized waiting list.
A candidate usually waits months or even years for a compatible organ. Organs
harvested from donors are stored in a preservation solution such as Celsior to
prevent deterioration. Each organ is cross-matched with potential recipients.
The organ is then shipped in the same organ preservation solution to the
recipient's transplant center. The length of storage time allowed before
transplant varies among organ types and can severely limit the distance an organ
can be shipped.

- The Acute Phase (Surgery and First Year Post-Transplant)

Transplant surgery has become a relatively safe and standardized procedure.
After the transplant, however, the physician must prevent rejection for the
transplant to be a success. Consequently, the success of the transplant is
highly dependent on the immunosuppressive regimen that is initiated the day of
transplantation and continued daily for the rest of the patient's life. Organ
recipients must be regularly monitored to measure the body's immune response and
blood drug levels and to help identify acute rejection episodes. Many patients
undergo one or more rejection episodes in the first year after transplant and
require additional immunosuppressants. Thymoglobulin and Lymphoglobuline are
indicated for both prevention and treatment of rejection outside the
US.

- The Chronic Phase (Lifetime Post-Transplant)

The use of immunosuppressants such as cyclosporine, initiated during the
acute phase, is continued daily throughout the patient's lifetime to minimize or
prevent the loss of the organ by rejection. These drugs impair the recipient's
immune system in order to reduce the immune response against the graft. Even
with the use of immunosuppressants, patients have an approximate 20% to 50% risk
of losing a donated organ during the first three years following
transplantation, and less than 50% of patients have functioning grafts after
approximately ten years.

Bone Marrow or Stem Cell Transplantation

Bone marrow or stem cell transplantation is a standard therapy for
many disease states, primarily cancer or pre-cancerous diseases. Stem cells,
found in the peripheral blood or in the bone marrow, are given by an intravenous
infusion to re-establish marrow function in a patient with damaged or defective
bone marrow.

Immunosuppressive therapy, primarily anti-thymocyte globulin ("ATG") such as
Lymphoglobuline and Thymoglobulin, chemotherapeutic agents, and/or irradiation
are given as part of a conditioning regimen. The goals of this regimen are
threefold: to limit the patient's ability to mount an immune response to the new
bone marrow or stem cells, to provide space for the new cells, and to destroy
any residual cancer if the patient is being treated for a malignancy.

Some of these patients experience graft versus host disease ("GVHD"). This is
a condition in which the graft (i.e. the new immune system) begins to reject the
host (i.e. the body). ABX-CBL is initially being developed to treat steroid-
resistant GVHD and may eventually be developed to prevent it.

Aplastic Anemia

Aplastic anemia is a disease in which the stem cells disappear from
the bone marrow and primarily affects young people. Aplastic anemia has a high
mortality rate and, even with treatment, quality of life is poor. Patients with
this disease are dependent on weekly blood transfusions that require frequent
visits to the physicians' offices and are expensive ($10,000-15,000/year). Both
Thymoglobulin and Lymphoglobuline are approved for treatment of aplastic anemia
outside of the US and the majority of sales of Lymphoglobuline in Japan are for
the treatment of aplastic anemia.

Myelodysplastic Syndrome (MDS)

MDS, also referred to as pre-leukemia, is a rare disease in which the
bone marrow does not function normally and not enough normal blood cells are
made. An estimated 30,000 to 40,000 people in the US suffer from MDS.
Approximately 40% of patients will die from the consequences of ineffective
blood cell production and 30% will progress to develop acute leukemia, a form of
cancer where too many white blood cells are made. Supportive care with
transfusions remains the principal therapy for less advanced types of MDS.
Current treatments for the advanced types of the disease include chemotherapy
and/or bone marrow transplantation, however these are ineffective or not
available in the majority of cases.

As with aplastic anemia, the outcomes are generally poor, the quality of life
is reduced, and the patients are dependent on weekly blood transfusions. We have
orphan drug status for Thymoglobulin for the treatment of MDS and have a
clinical study on going to obtain FDA approval for this indication.

Crohn's Disease and Ulcerative Colitis

Crohn's disease and ulcerative colitis are similar diseases that are
often grouped together as inflammatory bowel disease (IBD). Crohn's disease is a
chronic inflammatory disease of the gastrointestinal (GI) tract. Crohn's disease
usually causes diarrhea, abdominal pain, often fever, and can cause rectal
bleeding. Ulcerative colitis is an inflammatory disease of the colon, the large
intestine, which is characterized by inflammation and ulceration of the
innermost lining of the colon. Symptoms include diarrhea with or without rectal
bleeding and sometimes abdominal pain.  Unlike Crohn's disease, which can
involve all regions of the intestine, ulcerative colitis affects only the colon.
It is estimated that there are up to 1,000,000 Americans with either ulcerative
colitis or Crohn's disease, roughly half of that number for each disease.  We
are developing RDP58 for treatment for both diseases.

Products and Product Candidates

The following tables summarize our principal products and product
candidates.

|Marketed Products                    
|-------------------------------------
|Product                              
|Thymoglobulin®1                      
|Gengraf®2                            
|Lymphoglobuline®3                    
|Celsior®                             
|SangCya®Oral Solution (cyclosporine)4



|Principal Product Candidates
|----------------------------
|Product	Candidate           
|CyclosporineCapsule         
|ABX-CBL                     
|RDP585                      

1

2

3

4

5

Marketed Products

Thymoglobulin

Description

Thymoglobulin is a pasteurized anti-thymocyte rabbit immunoglobulin that
induces immunosuppression as a result of T-cell depletion and immune modulation.
Thymoglobulin is made up of a variety of antibodies that recognize key receptors
on T-cells, the cells of a transplant recipient's immune system that recognize
and ultimately reject foreign objects such as a transplant. While the exact
mechanism is unknown, researchers believe Thymoglobulin antibodies may
inactivate and kill these T-cells, thus reversing the rejection process.

Market

We (or our distributors) market Thymoglobulin in 56 countries, though our
revenues from Thymoglobulin come primarily from Europe and North America. Our
primary European subsidiary, IMTIX-SangStat S.A.S. (also known as SangStat-
Europe) was formerly the IMTIX division of Pasteur Mérieux Connaught, now
Aventis Pasteur, a subsidiary of Aventis S.A. ("Aventis"). IMTIX has sold the
current formulation of Thymoglobulin in France since 1994 and its predecessor
product since 1984. In Europe, Thymoglobulin has the following indications:

- prophylaxis and rejection in kidney, pancreas, and liver transplants;
- treatment of rejection crisis and acute GVHD in allogeneic bone marrow
transplantation;
- aplastic anemia.

In the US, we launched Thymoglobulin in February 1999. Thymoglobulin is
indicated for treatment of acute rejection in kidney transplant recipients in
the US. We intend to seek expanded indications for other organs within solid
organ transplantation and seek new indications in hematological disorderssuch as MDS.

We market and sell Thymoglobulin outside Europe and North America through
distributors. We have a distribution agreement with Aventis, which we are
currently renegotiating, for most countries outside of Europe and North America.
We have also entered into distribution agreements with distributors in certain
Asian countries and are currently re-negotiating our distribution agreement with
Aventis to obtain the right to distribute directly in certain territories. See
"Strategic Relationships."

Clinical Studies

- Induction/Prevention

We have initiated a comparative induction study of Thymoglobulin versus
Simulect, a monoclonal antibody marketed by Novartis Pharmaceuticals Inc.
("Novartis") in high-risk renal transplant recipients. The FDA has indicated
that this trial will not be sufficient to support label indication changes or
expansion. This is a prospective, randomized, open-label study conducted in 20
transplant centers with approximately 240 patients. Primary endpoints at 6
months will be graft survival, patient survival, incidence of acute rejection,
and incidence of delayed graft function. We expect patient enrollment to be
completed by year-end 2001.

- Hematological Disorders and Malignancies

Our other ongoing study with Thymoglobulin is in MDS. We have initiated
an open-labeled, prospective, randomized, multi-center Phase IIb trial with
Thymoglobulin in MDS. SangStat received Orphan Drug Designation for
Thymoglobulin for treatment in MDS in September 2000. Orphan drug designation is
granted to applicants when the prevalence of the disease for which approval is
sought occurs in less than 200,000 patients in the US. The advantages of this
designation include a waiver of the user fee, possible marketing exclusivity and
tax credits for development costs. These advantages are intended to encourage
sponsors to develop drugs for patients with rare diseases.

MDS is a rare disorder of the bone marrow that often results in bone marrow
failure in older people and results in the need for transfusions and supportive
care. The endpoint in this trial is transfusion independence at six months post
therapy. Patient enrollment began in October 2000. In part because this is a
rare disease, as evidenced by its orphan drug status, to date patient enrollment
has been relatively slow. While we have expanded the number of centers
participating in the study with the aim of trying to meet the enrollment goal,
which is completion of enrollment of 72 patients into the study by 2001 year
end, enrollment may not be completed by that time.

Gengraf®Cyclosporine Capsules/
SangCya®Oral Solution

Description

Cyclosporine is a potent immunosuppressive agent. Gengraf cyclosporine
capsule, a product of Abbott Laboratories Inc. (Abbott) is a generic version of
Neoral®capsules, which is marketed by Novartis. SangStat and
Abbott co-promote and distribute Gengraf in the US. SangCya Oral Solution, which
is a generic version of Neoral oral solution, was withdrawn from the US market
in July 2000 and is currently being sold in a small number of countries outside
the US. We recalled SangCya Oral Solution from the U.S. in July 2000 in response
to a study in healthy volunteers that identified that SangCya is not
bioequivalent to Neoral oral solution when mixed with apple juice as recommended
in its labeling.

Cyclosporine Market

Cyclosporine is the leading immunosuppressive drug used to prevent graft
rejection in transplantation. There are approximately 140,000 transplant
recipients in the US and 250,000 worldwide who will require daily lifelong
immunosuppressive therapy. The majority of these patients are prescribed
cyclosporine. Cyclosporine is also indicated for the treatment of rheumatoid
arthritis and adult non-immunocompromised psoriasis patients. Worldwide sales of
cyclosporine are greater than $1 billion per year. The US market is
approximately $500 million.

We entered into an agreement with Abbott in May 1999 for the co-promotion,
distribution, and research in the US of SangCya Oral Solution and Gengraf. See
"Strategic Relationships." This agreement enables both companies to maximize
their strengths by combining SangStat's transplant expertise with Abbott's
pharmaceutical presence, especially in the managed care arena.

We launched Gengraf cyclosporine capsules in May 2000 in the US
through our combined SangStat/Abbott sales force. Novartis has sued Abbott for
patent infringement with respect to Gengraf.See "Item 3 - Legal
Proceedings." Gengraf's indications are identical to Neoral's indications and
include (i) the prophylaxis of organ rejection in kidney, liver and heart
allogeneic transplants; (ii) the treatment of patients with severe, active
rheumatoid arthritis where the disease has not adequately responded to
methotrexate; and (iii) the treatment of adult, non-immunocompromised patients
with severe (i.e. extensive and or disabling), recalcitrant, plaque psoriasis
who have failed to respond to at least one systemic therapy (e.g. PUVA,
retinoids or methotrexate), or in patients for whom either systemic therapies
are contraindicated, or cannot be tolerated.

We sell SangCya Oral Solution in the UK and Germany and we plan to file for
marketing authorization for our cyclosporine capsule in the UK and US. See:
"Principal Products in Development - Cyclosporine Capsules." In Europe, there
are approximately 20,000 new transplant recipients per year concentrated in 250
transplant centers and over 100,000 transplant recipients in Europe who require
daily lifelong immunosuppressive therapy from the time of transplant surgery.

Lymphoglobuline®

Description

Lymphoglobuline is an anti-thymocyte equine immunoglobulin that induces
immunosuppression as a result of t-cell depletion and immune modulation. Outside
the US, it is approved for the prevention and treatment of rejection episodes in
kidney, heart, pancreas, or liver transplantation. In hematology,
Lymphoglobuline is approved for treatment of aplastic anemia and in the
treatment of GVHD.

Market

Lymphoglobuline is marketed in over 45 countries. Our sales force markets
it in Europe and Canada. Outside these countries, it is sold through our
distribution agreement with Aventis or through other distributors. Aventis
Pharma markets it in Japan, where a high percentage of sales occur for treatment
of aplastic anemia. We have no plans to seek approval for Lymphoglobuline in the
US.

Celsior®

Description

Early graft loss remains a significant problem associated with cardiac
transplantation and damage to the heart tissue can occur due to inadequate
preservation. Effective organ preservation includes initial flushing of the
heart tissues during the recovery process and cold storage while the donor heart
is transported to the recipient. Celsior is the first and only flush and cold
storage solution approved by the FDA for cardiac transplantation. It was
designed specifically for cardiac transplantation to minimize myocardial edema,
oxygen free radical-induced reperfusion injury, and diastolic stiffness.

Market

Celsior is sold throughout Europe and was launched in the US in September
1999. It is indicated for cardiac transplantation in the US. We recently
terminated our Celsior lung trial for financial reasons given the cost of the
trial versus the sales of the product, but there is data from about seventy
patients, which may result in a publication. Outside of Europe and North
America, Celsior is sold through our distribution agreement with Aventis or
through other distributors. There are approximately 5,000 cardiac and lung
transplants each year worldwide.

Revenues from pharmaceutical products for 1998, 1999 and 2000 were
$11,294,000, $44,303,000, and $63,145,000 respectively. Revenues from
Thymoglobulin were 69% of 1999 revenues and 60% of 2000 revenues, and revenues
from Lymphoglobuline were 19% of 1999 revenues and 12% of 2000 revenues,
respectively. Combined revenues of these two products were 66% of 1998 revenues.
In addition, revenues from Gengraf were 18% of total revenues from
pharmaceutical products in 2000, and revenues from SangCya Oral Solution were
16% of total revenues from pharmaceutical products in 1998 and were immaterial
in 1999.

Principal Products In Development

We currently have three principal products in development. Our research
and development expenses were $17,688,000, $14,470,000 and $ 20,788,000 for
1998, 1999, and 2000 respectively.

Cyclosporine Capsules

We have exclusively licensed a novel cyclosporine capsule
formulation, which uses a patented technology, from TrisPharma, a small US
research and development company.  We are conducting a small pilot study in
healthy volunteers to demonstrate the new capsule's bioequivalence to Neoral
cyclosporine capsules in water. The other filing requirements include a larger
bioequivalence trial and stability testing.  If the results of the
bioequivalence trial and stability testing are positive, we expect to file a
Marketing Authorization Application (MAA) with the Medicines Control Agency
(MCA) of the United Kingdom (UK) in 2001.  We have withdrawn our MAA in the UK
for our cyclosporine capsule product known as Sang-2000 in favor of this newer
formulation. We intend to follow the European Community Mutual Recognition
Procedure for obtaining regulatory approval in multiple Member States.

ABX-CBL

In August 2000, we entered into a global co-development, supply and
license agreement for ABX-CBL with Abgenix under which we obtained an exclusive
worldwide license for the marketing and sale of ABX-CBL.  ABX-CBL is an anti-
CD147 monoclonal antibody for the treatment of steroid resistant GVHD and is
currently in a multi-center, randomized, and controlled Phase II/III study. The
study is designed to demonstrate statistically significant efficacy of a single
dose level of ABX-CBL in comparison to a control group of patients.  We received
orphan drug designation for ABX-CBL for the treatment of steroid resistant GVHD
in November 2000.

In an earlier Phase II trial completed in the fall of 1999,
52% of patients receiving 0.1 - 0.3 mg/kg ABX-CBL survived at least 100 days
following initiation of therapy, compared to 22% of patients receiving the
presumed no effect dose of 0.01 mg/kg. Approximately 25% of patients that
undergo an allogeneic bone marrow transplant develop steroid resistant GVHD for
which there is currently no standard approved therapy available.

RDP58

RDP58, a rationally designed peptide, is a novel inhibitor of TNF-
alpha synthesis and is being investigated for treatment of various autoimmune
disorders, particularly ulcerative colitis and Crohn's disease.

TNF-alpha is a cytokine released in excess in various autoimmune disorders.
It triggers activation of immune responses and inflammation. Animal models,
including studies in primates, suggest that RDP58 could decrease levels of TNF-
alpha, reduce inflammation, and improve clinical outcomes. RDP58 is different
from currently available TNF inhibitors in that it prevents the synthesis of
TNF-alpha on a translational level as opposed to binding TNF-alpha to inhibit
function. It is currently being tested in an oral formulation. We plan to file a
Clinical Trial Experiment application (CTX) with the MCA in the UK and,
following approval of the CTX, begin Phase I/II clinical trials studying RDP58
for both ulcerative colitis and Crohn's disease in the UK in 2001.

The Transplant Pharmacy®/TransplantRx.comTM

We established The Transplant Pharmacy (TTP) in September of 1996.
This program provides mail order distribution of drugs and other services for
transplant patients. In November of 1999, we introduced TransplantRx.com, the
first on-line pharmacy dedicated to organ transplantation. Designed as an
extension to the mail order service, TransplantRx.com provides patients, their
families and health care providers with a place to purchase all of their
medications and access information and resources on transplantation on-line. We
announced in October 2000 that we hoped to sell The Transplant Pharmacy (TTP),
which comprises our transplantation services segment. In early March, we
received several non-binding offers to purchase TTP, one of which we accepted on
March 13, 2001, thus committing to a formal plan to sell this segment. We are
currently in advanced negotiations with this bidder and expect to complete the
sale of TTP by April 30, 2001. We are not including the accounts receivable and
inventory in the sale, and we plan to liquidate these assets as soon as
practicable following the closing of the sale. Consequently, the historical
consolidated statements of operations and cash flows have been restated for all
periods presented to account for TTP as a discontinued operation. See Note 15 of
the Notes to Consolidated Financial Statements.

Sales and Marketing

In the US we market products through our direct sales force. As of March
5, 2001, we have 21 Transplant Account Managers, supervised by three regional
sales directors, who call on or "detail" primarily to the approximately 250
transplant centers in the US. A number of the Account Managers have backgrounds
in transplantation, either from detailing other transplant products or with
clinical backgrounds as nurses or as transplant coordinators in transplant
centers. We also have two national account directors who call on group
purchasing organizations and managed care groups and one open position for a
national account director. Sales to McKesson HBOC and Cardinal Health Inc.,
accounted for 15% and 13%, respectively, of total revenues in 2000. Sales to
McKesson HBOC accounted for approximately 11% of our total revenues in 1999. No
customer accounted for more than 10% of our total revenues in 1998.

We reorganized our European sales and marketing departments in 2000 following
the hiring of a new head of European operations and a new VP of Sales and
Marketing in Europe. We have approximately 30 sales and marketing people spread
throughout the major European markets. There are also approximately 250
transplant and hematology centers in Europe.

The marketing departments in the US and Europe work together in a
coordinated, cohesive fashion with each other and with the sales force. Product
concepts and market penetration programs are targeted to blend clinical data
with proven marketing techniques. In 2000, the marketing departments conducted
multiple faculty training meetings in which academicians and researchers
presented clinical data on our products to over 125 clinicians from transplant
centers. We also use a variety of marketing techniques to promote our products,
including sampling, journal advertising, promotional material, specialty
publications, rebate coupons, product guarantees, educational conferences and
exposure of our products on the Internet.

For certain territories and products, however, we have distributors. See
"Strategic Relationships." To the extent we enter into co-promotion or other
licensing arrangements, any revenues received by us will be dependent on the
efforts of third parties, which may not be successful.

Revenues for sales outside of the US were $8,022,000, $26,209,000 and
$21,873,000 for 1998, 1999, and 2000 respectively, the majority of which have
come from Europe since the acquisition of IMTIX in September 1998. Additional
information regarding long-lived assets and revenues outside of the US can be
found in Note 16 of the Notes to Consolidated Financial Statements.

#### Warehousing and Distribution

We use a logistics provider to store and distribute our products
from one central warehousing location in Memphis, Tennessee. When our logistics
provider receives a purchase order through electronic data input, phone, mail or
facsimile, it sends the order to the warehouse for shipment, usually within 24
hours, to the customer placing the order. The logistics provider is also
responsible for invoicing and collections.

#### Strategic Relationships

We evaluate on an ongoing basis potential collaborative
relationships with corporate and other partners where such relationships may
complement and expand SangStat's research, development, sales and marketing
capabilities. We may not be interested in or able to negotiate any additional
collaborative arrangements. If we establish such relationships, they may not be
successful.

Co-Promotion, Distribution and Research Agreement with Abbott

In May 1999, we signed a multi-year co-promotion, distribution and
research agreement with Abbott for SangCya Oral Solution (which was withdrawn
from the US market in July 2000) and Gengraf in the US.  We are the exclusive
distributor for Gengraf in the U.S. and share marketing, promotional and
development expenses as well as the profits from the co-promotion of the
products with Abbott.  The agreement ends December 31, 2004 unless both
companies agree to extend it.  In addition, either party may terminate the
agreement if the other party is acquired by Novartis or a licensee of Neoral or
Sandimmune, products sold by Novartis.  Further, if we are acquired by Novartis
or its licensee prior to May 2002, Abbott may recover from us all milestone
payments made under the agreement.  Pursuant to this agreement, Abbott made an
equity investment of $14 million during 1999 in exchange for approximately
894,000 shares of common stock, representing a premium to fair market value at
that time aggregating to $1.3 million.  In addition, Abbott made a series of up-
front and milestone payments totaling $20.8 million, including $1.9 million
received in January 2000 and $5.0 million received in May 2000, and a long-term
loan of $16 million to us received during 1999.  In January 2000, we made a
milestone payment of $4.0 million to Abbott under the terms of the agreement. No
further milestone payments are required from either company.  All up-front and
milestone payments received, net of milestone payments made, and the premium
received on the sale of common stock to Abbott are recorded as deferred revenue
and recognized ratably over the term of the agreement as revenue from
collaborative agreements.  In May 2000, Abbott and we launched Gengraf, the
cyclosporine capsule developed by Abbott.  In connection with the equity
investment, Abbott and we entered into a Right of First Refusal Agreement and a
Registration Rights Agreement, and amended and restated our existing Supply
Agreement.

Co-Development, Supply and License Agreement with
Abgenix, Inc.

In August 2000, we entered into a global co-development, supply and
license agreement with Abgenix, Inc., for ABX-CBL, an antibody developed by
Abgenix. Under the agreement, we have an exclusive worldwide license for the
marketing and sale of ABX-CBL. ABX-CBL is an anti-CD 147 monoclonal antibody for
the treatment of steroid resistant graft versus host disease (GVHD) and is
currently in a multicenter, randomized, and controlled PhaseII/III study.
Development costs will be shared equally, as would any potential profits from
the sales of collaboration products. We share responsibility for product
development with Abgenix, including the ongoing Phase II / III clinical trial.
We will market any potential products and Abgenix will be responsible for
manufacturing ABX-CBL. We also have the right, subject to the terms and
conditions of the agreement, to commercialize other anti-CD147 antibodies
developed by Abgenix.

Under the terms of the agreement, we made an initial license fee payment of
$1.0 million to Abgenix. Two additional milestone payments of $1.0 million are
due to Abgenix under the terms of the agreement contingent on achievement of
certain milestones. The license fee payment and the milestone payments, if any
are paid to Abgenix, will be non-refundable and non-creditable against any
future obligations under this agreement.

If ABX-CBL receives regulatory approval and is launched, we are required to
pay Abgenix $6.1 million for our share of development expenses incurred prior to
January 1, 2000, provided that we do not have any obligation to pay Abgenix
until the first anniversary of the launch of ABX-CBL and the timing of payment
varies depending on ABX-CBL's sales. We have also agreed to pay Abgenix for one-
half of the development costs for ABX-CBL from January 1, 2000 to August 8,
2000, with our share being approximately $1.9 million. We must pay Abgenix this
amount over a two-year period commencing with a $1.0 million payment, which has
already been paid, and two equal payments of the remaining amount payable by the
end of June 2001 and 2002. The license fee and the initial payment of
development expenses are recorded as research and development expenses. The
agreement terminates upon the later of ten years or the date on which no product
is being developed or sold. In addition, the agreement may be terminated by
either party on a product by product basis with six months notice prior to the
first regulatory approval and with twelve months notice thereafter. Under the
agreement, however, a party terminating the agreement prior to its scheduled
termination is obligated to grant certain licenses so as to allow the other
party to continue promotion of the products and to pay its share of incurred or
anticipated development expenses. If, for example, Abgenix terminated the
agreement early, we would be entitled to an exclusive, worldwide license for the
marketing and sale of ABX-CBL in return for royalty payments.

Aventis Pasteur

We entered into a Distribution Agreement with Aventis in April 1999
that expires March 31, 2002. Aventis is our exclusive distributor for
Thymoglobulin and Lymphoglobuline for most countries outside of North America,
Europe and Japan (where Thymoglobuline and Lymphoglobuline are distributed by
Aventis Pharma). The contract has minimum purchase requirements. If Aventis does
not meet these minimums, the agreement becomes non-exclusive, which means we can
sell to another distributor in the same country. In 2000, Aventis purchased
approximately $5.8 million in products under this agreement. Aventis sells these
products either through its local subsidiary or through a distributor that often
distributes other Aventis products. We are currently re-negotiating this
distribution agreement to allow us to contract directly with distributors in
countries in which Aventis has no direct presence (e.g. Israel and certain Asian
countries). The agreement automatically terminates upon our ceasing to maintain
any required licenses to distribute Thymoglobuline and Lymphoglobuline. Aventis
also performs certain steps in the manufacturing process of Thymoglobulin and
Lymphoglobuline. See "Manufacturing". In addition, pursuant to the purchase of
IMTIX on September 30, 1998, we pay Aventis royalties on Thymoglobulin and
Lymphoglobuline contingent upon the sales of these products. In 1999 and 2000,
royalty payments on Lymphoglobuline to Aventis totaled approximately $646,000
and $622,000 respectively. We expect these royalty payments to increase in
future years since we will begin paying royalties on Thymoglobulin commencing on
the third anniversary of the purchase of IMTIX (October 1, 2001).

Competition

The drug industry is very competitive. The drugs we market compete with
existing and new drugs being created by pharmaceutical, biopharmaceutical, and
biotechnology companies and universities. Many of these entities have
significantly greater research and development capabilities, as well as
substantial marketing, manufacturing, financial and managerial resources and
represent significant competition for us. Many of the competitors have developed
or are in the process of developing technologies that are, or in the future may
be, the basis for competitive products. Some of these products may have an
entirely different approach or means of accomplishing the desired therapeutic
effect than products we are developing or marketing and may be more effective
and less costly. In addition, many of our competitors have significantly greater
experience than we do in conducting clinical trials of pharmaceutical products
and obtaining regulatory approvals of such products. This could cause our
competitors to succeed in commercializing products more rapidly than we can. The
principal factors upon which our products compete are:

- product utility
- therapeutic benefits
- ease of use
- pricing, and
- effective marketing

We believe we compete favorably with respect to all of these
factors. Gengraf, however, is a generic drug, which means we compete favorably
against the branded drug, Neoral, on pricing, but some physicians may be
reluctant to prescribe generic drugs.

Competitive products with respect to our material products
include the following:

|Our Products                                            | Competitive Products                                                                          | Competitor                                                                                           
|------------------------------------------------------- | --------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------
|Thymoglobulin/Lymphoglobuline                           | Orthoclone OKT® 3                                                                             | Ortho Biotech                                                                                        
|                                                        | ATGAM®                                                                                        | Pharmacia & Upjohn Inc.                                                                              
|                                                        | Simulect®                                                                                     | Novartis AG                                                                                          
|                                                        | Zenapax®                                                                                      | F. Hoffmann La-Roche Ltd.                                                                            
|Gengraf, SangCya Oral Solution, & cyclosporine capsules | Neoral
Sandimmune
Prograf®
Rapamune
Generic cyclosporine capsule
Generic cyclosporine capsule | Novartis AG
Novartis AG
Fujisawa Pharmaceutical Co. Ltd.
American Home Products (AHP)
Eon Labs
Sidmak



Competitive products with respect to our product candidates
include the following:

|Our Product Candidates | Competitive Products     | Competitor                                 
|---------------------- | ------------------------ | -------------------------------------------
|ABX-CBL                | MEDI-507
Nuvion (HuM291) | Medimmune/BioTransplant
Protein Design Labs
|                       |                          |                                            
|RDP58                  | Enbrel®
Remicade®        | Immunex - AHP
Johnson & Johnson            



Our cyclosporine products are generic and compete against the branded
cyclosporine products as well as other generic cyclosporine products that have
been or may be approved. These products also compete against Prograf, marketed
by Fujisawa Pharmaceutical Co. Ltd, which was approved by the FDA to be taken
instead of cyclosporine. Roche's Cellcept® is indicated as a conjunctive
therapy, to be taken with cyclosporine rather than instead of cyclosporine. As
noted above, Thymoglobulin competes with OKT3, ATGAM, Simulect, and Zenapax. In
the US, Thymoglobulin has been successful in establishing a market share against
these products, which were all previously on the market. In Europe, Novartis and
Roche have just started selling Simulect and Zenapax, respectively, and we
believe that the launch of these two products may impact sales of Thymoglobulin
and Lymphoglobuline in Europe.

ABX-CBL is expected to compete against two products that are also in clinical
trials for the treatment of GVHD: Medimmune/BioTransplant's MEDI-507 and Protein
Design Labs' Nuvion. In addition, other products are used for the prevention of
GVHD and would therefore eliminate the need to use ABX-CBL for treatment.

RDP58 is an inhibitor of TNF-alpha synthesis. TNF-alpha is a cytokine
released in excess in various autoimmune disorders. For that reason, many
companies are pursuing development of a TNF-alpha inhibitor and we believe there
could be substantial competition in this area. In addition, Immunex/AHP's Enbrel
and Johnson & Johnson's Remicade are both TNF-alpha inhibitors that are
currently approved for rheumatoid arthritis and Crohn's disease
respectively.

Patents and Proprietary Technology

We have a number of issued patents and pending patent applications in the
US and in corresponding countries with respect to the products we are selling,
the products we have in development and our research areas. We aggressively seek
patent protection on our inventions and our policy is to enforce our
intellectual property rights. We have no issued patents covering Thymoglobulin
and Lymphoglobuline and rely on our manufacturing know-how to protect these
products. We have issued patents covering Celsior. SangCya Oral Solution and our
cyclosporine capsules have formulation patent protection both issued and
pending, but the cyclosporine compound is no longer patent-protected and there
are several generics on the market in the US. We are pursuing patent protection
for RDP58 and we believe that an issued patent may give us a competitive
advantage.

We have twenty-nine issued patents and sixteen pending patent applications in
the US and are pursuing corresponding patent applications in other countries.

- Two issued patents and three pending patent applications relating to our
peptide program.
- Two issued patents and two pending patent applications in the heme oxygenase
area.
- Two issued patents relating to Celsior.
- Three issued patents and four pending patent application in the general
therapeutics area, including our complexine technology.
- One issued patent and two pending patent applications relating to Anti-LFA1.
- Four issued patents and three pending patent applications that cover our
cyclosporine formulations technology for developing multiple formulations and
dosage forms of cyclosporine.
- Fifteen issued patents and one pending patent application in the diagnostic
or monitoring area.
- One pending patent application relating to the CycloTech device.

Our patents expire on various dates beginning in the year 2008 and ending in
the year 2017.

In addition, as discussed above, we have also licensed in certain patents and
patent technology. We have an exclusive, worldwide license from Stanford
University for certain issued patents and pending patent applications in the HLA
and peptide area. We have licensed from Abgenix certain patents and patent
applications that relate to ABX-CBL. We have licensed additional patents
relating to cyclosporine from several groups. The licensor for each of these
licenses is primarily responsible for prosecution of these patents and patent
applications.

Patent applications in the US are maintained in secrecy until patents issue.
Since publication of discoveries in the scientific or patent literature tends to
lag behind actual discoveries by several months, we cannot be certain that we
were the first to discover compositions covered by our pending patent
applications or the first to file patent applications on such compositions.
There can be no assurance that our pending patent applications will result in
issued patents, that any of our issued patents will afford protection against a
competitor or that our products will not infringe on other patents.

We also rely on trade secrets and proprietary know-how that
we seek to protect, in part, by confidentiality agreements with our employees
and consultants.

We have registered or applied for registration of the names of all of our
marketed products and plan to register the names of our products under
development once a name has been selected for the product candidate.

##### Manufacturing

Manufacturing pharmaceutical products is a highly regulated
process. The FDA and other regulatory agencies require that manufacturing be
done in accordance with current Good Manufacturing Practices ("GMP").
Additionally, products can only be manufactured in facilities approved by the
applicable regulatory authorities. Because of these and other factors, we may
not be able to quickly and efficiently replace our manufacturing capacity in the
event that we are unable to manufacture Thymoglobulin or Lymphoglobuline or one
of our manufacturers is unable to manufacture one of our other products for us.
See "Risk Factors - We may not be able to manufacture or obtain sufficient
quantities of our products, which could lead to product shortages and harm our
business," and "Risk Factors - Our reliance on third parties for manufacturing
may delay product approval or once approved, result in a product shortage, which
would reduce our revenues."

When we acquired IMTIX in 1998, we also acquired the manufacturing unit in
Lyon, France that manufactured Thymoglobulin and Lymphoglobuline. Currently
Aventis also performs certain steps in the manufacturing process of
Thymoglobulin and Lymphoglobuline under contract to us. We perform the remaining
manufacturing steps ourselves in manufacturing facilities that we lease from
Aventis. These agreements with Aventis expire on dates ranging from 2008 to
2013. In 1999, partially in response to a letter from the FDA, we improved
certain manufacturing processes at the Lyon facility and are continuing to
improve these manufacturing processes in 2000 and 2001 as we move part of our
operations to a new manufacturing building in the same location. Our
manufacturing operations were not materially affected and we do not believe that
they will be materially affected in the future. We believe that our facility
currently complies with GMP.

We have no other manufacturing facility and the Lyon facility could not be
used for products other than biologics. Therefore, we rely on third parties to
manufacture our other products, both those that we sell and those in
development. We depend on such third parties to perform their obligations in
compliance with all regulatory requirements and on a timely basis. If any of our
contract manufacturers fail to perform, such failure may delay our clinical
development or submission of products for regulatory approval or result in
product shortages with respect to our marketed products.

Abgenix is responsible for the manufacturing of ABX-CBL. If the supplier they
have chosen fails to perform, it would have the same results discussed above:
such failure may delay our clinical development or submission of products for
regulatory approval or result in product shortages with respect to our marketed
products.

With respect to raw materials, we have agreements for commercial scale
production of cyclosporine bulk material with Gensia Sicor ("Sicor") and Abbott.
Our Sicor agreement runs until October 31, 2013 and has an automatic five-year
term renewal unless one party gives notice. Our Abbott agreement terminates
December 31, 2004 and is automatically renewed until one party gives notice.
Bulk cyclosporine is difficult to manufacture since it must be extracted from
whole cells and carefully purified. We have an obligation to purchase a certain
percentage of our future bulk cyclosporine requirements from Sicor and a minimum
fixed amount from Abbott, subject to certain conditions being met. We believe we
have sufficient quantities of bulk cyclosporine to meet our current needs. We
believe we also have sufficient quantities of raw materials for our other
products and product candidates.

Government Regulation

FDA and Other Regulatory Authorities

Our research and development activities, preclinical studies and
clinical trials, and ultimately the manufacturing, marketing and labeling of our
products, are subject to extensive regulation by the FDA and other regulatory
authorities in the US and other countries ("Regulatory Agencies"). The US
Federal Food, Drug, and Cosmetic Act (the "Act") and the regulations promulgated
thereunder and other federal and state statutes and regulations govern, among
other things, the testing, manufacture, safety, efficacy, labeling, storage,
record keeping, approval, advertising, promotion, import and export of our
products and product candidates. Preclinical study and clinical trial
requirements and the regulatory approval process typically take years and
require the expenditure of substantial resources. Additional government
regulation may be established that could prevent or delay regulatory approval of
our product candidates. Delays or rejections in obtaining regulatory approvals
would harm our ability to commercialize any product candidates we develop and
our ability to receive product revenues. If regulatory approval of a product
candidate is granted, the approval may include significant limitations on the
indicated uses for which the product may be marketed.

The steps ordinarily required before a drug or biological product may be
marketed in the US include the following:

- preclinical studies,
- the submission to the FDA of an Investigational New Drug application
("IND"), which must become effective before human clinical trials may commence,
- adequate and well-controlled human clinical trials to establish the safety
and efficacy of the drug,
- the submission to the FDA of a New Drug Application ("NDA"), or Biological
License Application ("BLA"), if applicable, and
- FDA approval of the application, including approval of all product
labeling.

Preclinical tests include laboratory evaluation of product chemistry,
formulation and stability, as well as animal studies to assess the potential
safety and efficacy of each product. Laboratories that comply with FDA
regulations regarding Good Laboratory Practice must conduct these preclinical
safety tests. The results of the preclinical tests are submitted to the FDA as
part of an IND and are reviewed by the FDA before the commencement of human
clinical trials. Unless the FDA objects to an IND, the IND will become effective
30 days following its receipt by the FDA. Submission of an IND may not result in
FDA authorization to commence clinical trials or the lack of an objection may
not mean that the FDA will ultimately approve an application for marketing
approval.

Clinical trials are typically conducted in three sequential phases, but the
phases may overlap.

|Phase I   | Phase I clinical trials involve the initial introduction of the
drug into healthy human volunteers. In Phase I clinical trials, the drug is
tested for safety (adverse effects), dosage tolerance, metabolism, distribution,
excretion and pharmacodynamics (clinical pharmacology).                              
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Phase II  | Phase II clinical trials are conducted in a target patient
population to gather evidence about the pharmacokinetics, safety and biological
or clinical efficacy of the drug for specific indications, to determine dosage
tolerance and optimal dosage, and to identify possible adverse effects and
safety risks.
|Phase III | When a compound has shown evidence of efficacy and an acceptable
safety profile in Phase II evaluations, Phase III clinical trials are undertaken
to evaluate clinical efficacy and to test for safety in an expanded patient
population.                                                                         

Our products in clinical trials during 2001 may include
Thymoglobulin for expanded labeling, ABX-CBL, RDP58, and bioequivalence studies
for our cyclosporine capsule product.

Our clinical trials may not be completed successfully or within any specified
time period. Either the FDA or we may suspend clinical trials at any time, if
either of us concludes that clinical subjects are being exposed to an
unacceptable health risk, or for other reasons. The conduct of clinical trials
is complex and difficult, especially in Phase III. The design or the performance
of the Phase III clinical trial protocols may not be successful.

The results of preclinical studies and clinical trials, if successful, are
submitted in an application to seek FDA approval to market the drug or
biological product for a specified use. The testing and approval process
requires substantial time and effort, and there can be no assurance that any
approval will be granted for any product or that approval will be granted
according to any schedule. The FDA may refuse to approve an application if it
believes that applicable regulatory criteria are not satisfied. The FDA may also
require additional testing for safety and efficacy of the drug. Moreover, if
regulatory approval of a drug product is granted, the approval will be limited
to specific indications. Our product candidates may not receive regulatory
approvals for marketing, or if approved, that approval may not be for the
indications that we requested.

Other Regulatory Agencies follow similar procedures to those required by the
FDA and require that the safety and efficacy of our pharmaceutical product
candidates be supported through adequate and well-controlled clinical trials. If
the results of our pivotal clinical trials submitted in application for approval
do not establish the safety and efficacy of our product candidate to the
satisfaction of any Regulatory Agency, we will not receive the approvals
necessary to market our product candidate in that country.

In the European Union ("EU"), the registration process for products can be
done through a decentralized procedure. Under this procedure, the holder of a
national marketing authorization for which mutual recognition is sought may
submit an application to one or more Member States, certify that the dossier is
identical to that on which the first approval was based or explain any
differences and certify that identical dossiers are being submitted to all
Member States from which recognition is sought. Within 90 days of receiving the
application and assessment report, each Member State must decide whether to
recognize the approval. The procedure encourages Member States to work with
applicants and other regulatory authorities to resolve disputes concerning
mutual recognition. If such disputes cannot be resolved within the 90-day period
provided for review, the application will be subject to a binding arbitration
procedure.

Following approval, Regulatory Agencies continue to regulate our approved and
marketed products. We must report adverse drug events associated with our
products to Regulatory Agencies. In addition, Regulatory Agencies also inspect
on a regular basis the equipment and facilities used to manufacture our
products. A Regulatory Agency may suspend the manufacturing facilities (and
order a recall of our products manufactured in that facility) if the Regulatory
Agency believes that the product has not been manufactured in compliance with
regulations. See "Manufacturing."

Environmental Regulation

In connection with our research and development activities we are
subject to federal, state and local laws, rules, regulations and policies
governing the use, generation, manufacture, storage, air emission, effluent
discharge, handling and disposal of certain materials, biological specimens, and
wastes. Although we believe that we have complied with these laws, regulations
and policies in all material respects and have not been required to take any
action to correct any noncompliance, we may be required to incur significant
costs to comply with environmental and health and safety regulations in the
future. Our research and development involves the controlled use of hazardous
materials, including but not limited to certain hazardous chemicals and
infectious biological specimens. Although we believe that our safety procedures
for handling and disposing of such materials comply with the standards
prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated. In the event
of such an accident, we could be held liable for any damages that result and any
such liability could exceed our resources.

Third Party Reimbursement

Our operating results will depend in part on the availability of adequate
reimbursement for our products from third-party payers, such as government
entities, private health insurers and managed care organizations. Third-party
payers increasingly are seeking to negotiate the pricing of medical services and
products. In some cases, third-party payers will pay or reimburse a user or
supplier of a prescription drug product only a portion of the purchase price of
the product. In the case of our prescription products, payment or reimbursement
by third-party payers of only a portion of the cost of such products could make
such products less attractive, from a cost perspective, to users, suppliers and
prescribing physicians. Reimbursement, if available, may not be adequate. If
government entities or other third-party payers for our products do not provide
adequate reimbursement levels, our results of operations would be harmed.

A number of legislative and regulatory proposals aimed at changing the US
health care system have been proposed in recent years. While we cannot predict
whether any such proposals will be adopted, or the effect that any such
proposals may have, such proposals, if enacted, could harm our business
operations.

Product Liability Insurance

We face an inherent risk of exposure to product liability claims in the
event that the use of our products is alleged to have resulted in adverse
effects. Such risk exists even with respect to those products that are
manufactured in licensed and regulated facilities or that otherwise received
regulatory approval for commercial sale. We could be subject to significant
product liability claims. We currently have product liability insurance in the
amount of $25.0 million per claim and $25.0 million in the aggregate on a
claims-made basis. Many of our customers require that we maintain product
liability insurance coverage as a condition to their conducting business with
us. As the loss of such insurance coverage could result in a loss of such
customers, we intend to take all reasonable steps necessary to maintain such
insurance coverage. However, insurance coverage may not be available in the
future on commercially reasonable terms. Such insurance may not be adequate to
cover potential product liability claims and the loss of insurance coverage or
the assertion of a product liability claim or claims could harm our operating
results.

##### Employees

As of December 31, 2000, we employed 287 people worldwide, of
which 133 are in the US and Canada and 154 are in Europe, which includes
approximately 65 employees in our manufacturing facility in Lyon, France, most
of whom are represented by labor unions. 31 of our US employees work at The
Transplant Pharmacy, which we expect to sell by April 30, 2001. We believe that
we maintain good relations with our employees.

##### Our Executive Officers

Jean-Jacques Bienaimé, 47, has been our President and
Chief Operating Officer since June 1998 and became Chief Executive Officer on
February 1, 1999. He was elected to the Board of Directors in
March 1999. Mr. Bienaimé became Chairman of the Board of Directors
in October 2000. From September 1992 to May 1998 Mr. Bienaimé was with
Rhone Poulenc Rorer, Inc., a pharmaceutical company, rising to the position of
Senior Vice President, Corporate Marketing and Business Development. He is
currently a member of the board of Fox Chase Cancer Center and Aerogen Inc. Mr.
Bienaimé received his degree in economics from Ecole Superieure de
Commerce de Paris in France and an M.B.A. from the Wharton School, University of
Pennsylvania.

Christophe M. Bianchi, M.D., 39, has been the President of our IMTIX-SangStat
subsidiary and our Senior Vice President, Global Marketing and Business
Development since January 2000. From 1989 to December 1999, Dr. Bianchi held
various positions with Rhône-Poulenc Rorer, Inc., serving most recently as
Vice President and Head, Global Marketing. Dr. Bianchi received an M.D. from the
University of Reims in France, a degree from Ecole De Hautes Etudes Commerciales
(EDHEC graduate school of management), and a Masters of Business Administration
from the Wharton School, University of Pennsylvania.

Steve Aselage, 49, has been our Senior Vice President, North American Sales
since February 1999. From 1995 to January 1999, Mr. Aselage was the Director of
Sales and Marketing at Advanced Tissue Sciences, a tissue engineering company.
Mr. Aselage received a B.S. in biology from the University of Notre Dame.

Roland Buelow, Ph.D., 42, has been our Senior Vice President of Research and
Development since April 2000 and was Vice President of Research and Development
from 1993 until 2000. Dr. Buelow received a Ph.D. in Biology from the Max-
Planck Institute for Biology in Tuebingen, Germany. Dr. Buelow visited the
University of Texas as a Fulbright scholar and spent two years at Stanford
Medical School.

Stephen G. Dance, 50, has been our Senior Vice President, Finance since April
1999. From July 1998 to April 1999, Mr. Dance was Director of Financial
Accounting, Planning and Reporting at Plantronics, Inc., a telecommunications
company. From 1983 to July 1998, Mr. Dance held various positions with Syntex
Corporation, a pharmaceutical company, which was acquired by Roche Holding Ltd.,
also a pharmaceutical company, in 1994, serving most recently as Controller,
Syntex Laboratories, Inc. Mr. Dance holds a B.A. in French from Leeds University
in England, is a Certified Public Accountant in the State of California and a
fellow of the Institute of Chartered Accountants in England and Wales.

Ralph E. Levy, 52, has been our Senior Vice President, Operations since 1995
and Vice President, Operations from 1990 until 1995. Mr. Levy received a
B.S. in chemistry from the City College of New York and an M.S. in chemistry
from Seton Hall University.

Carole L. Nuechterlein, 40, has been our Senior Vice President and General
Counsel since February 2001 and was Vice-President and General Counsel from
October 1998 to January 2001. From 1991 to October 1998, Ms. Nuechterlein held
various positions with Roche Bioscience and Syntex Corporation, which was
acquired by Roche Holding Ltd. in 1994, serving most recently as Director of
Legal Affairs. Ms. Nuechterlein received a B.A. in 1983 from Valparaiso
University and a J.D. in 1986 from the University of Michigan.

Raymond J. Tesi, M.D., 45, has been our Senior Vice President, Medical
Affairs and Clinical Development since August 1999. From May 1997 to August
1999, Dr. Tesi served as our Senior Vice President of Marketing. From 1994 until
1997, Dr. Tesi was an associate professor of surgery and director of the extra-
renal transplantation program at Tulane Medical School in New Orleans,
Louisiana. He was a transplantation surgical fellow at the Ohio State University
Hospital. Dr. Tesi received an M.D. from the Washington University School of
Medicine in St. Louis, Missouri.

Randell J. Correia, Pharm.D, 42, has been Vice President, The Transplant
Pharmacy® of SangStat Medical Corporation since 1995. Dr. Correia received a
doctor of pharmacy degree from the University of the Pacific in Stockton,
California.

Robert C. Floc'h, Ph.D., 53, has been the General Manager of our IMTIX-
SangStat subsidiary since we acquired IMTIX in September 1998. In addition, Dr.
Floc'h has been General Manager at SangStat Atlantique, our previous operating
subsidiary in France, since 1992. Dr. Floc'h received a doctor of pharmacy
degree and a Ph.D. in medical chemistry from the University of Nantes.

Risk Factors

We have a history of operating losses and our future profitability is
uncertain. We were incorporated in 1988 and have experienced significant
operating losses since that date. As of December 31, 2000, our accumulated
deficit was $177,636,000. Our operating expenses from continuing operations have
increased from approximately $50.1 million to $74.0 million to $103.2
million over the three year period ended December 31, 2000. Total revenues from
continuing operations have increased from approximately $11.3 million to $44.3
million to $63.1 million, while losses from continuing operations decreased from
approximately $38.8 million to $29.7 million and increased to $40.0 million
over the three year period ended December 31, 2000. We expect to continue to
incur significant losses for the foreseeable future and we may not ever achieve
significant revenues from product sales and we may not achieve profitable
operations.

We may need to raise additional funds within the next 12 months and may
not be able to secure adequate funds on terms acceptable to us. Within
the next twelve months, we may need to raise additional funds through financings
and collaborative research and development arrangements with corporate partners.
We may not be able to raise funds on favorable terms, if at all, and our
discussions with potential collaborative partners may not result in any
agreements. If adequate funds are not available, we may be required to delay,
scale back or eliminate one or more of our development programs or obtain funds
through arrangements with collaborative partners or others that may require us
to relinquish rights to certain technologies, product candidates or products
that we would not otherwise relinquish. To raise funds, we may also be required
to sell shares of our common stock, which may be at prices below the price at
which you may have purchased shares. Such sales would also cause a dilution of
your percent ownership of SangStat.

Our future growth depends on sales of key products. We expect
to derive most of our future revenues from sales of Thymoglobulin,
Lymphoglobuline, and Gengraf. We have limited experience selling our products in
the US. Our sales of Thymoglobulin began in the US in February 1999. We began
distributing Gengraf in May 2000. We are marketing Gengraf in the US under a co-
promotion agreement with Abbott Laboratories. We cannot guarantee that Abbott
will be able to effectively market Gengraf, and its failure to do so may
adversely impact sales of these products.

Any factor adversely affecting the sales of Thymoglobulin, Lymphoglobuline,
and Gengraf individually or together, or regulatory approval of our cyclosporine
capsule product would harm our business and results of operations. The following
factors could adversely affect the sale or approval of these products:

- the timing of regulatory approval and market entry relative to competitive
products;
- the availability of alternative therapies;
- perceived clinical benefits and risks;
- the price of our products relative to alternative therapies;
- manufacturing or supply interruptions;
- competitive changes;
- regulatory issues;
- ease of use;
- changes in the prescribing practices of transplant physicians;
- the availability of third-party reimbursement; or
- product liability claims.

In particular, with respect to Gengraf, sales may be affected by the
following:

- perceptions of both patients and physicians regarding use of a generic
version of a critical, life-saving therapeutic;
- perception of bioequivalence;
- other generic competitors;
- number of contracts with managed care providers and group purchasing
organizations;
- our recall of SangCya Oral Solution in July 2000; and
- intense competitive pressure from Novartis and Novartis' litigation with
Abbott.

We may not be able to manufacture or obtain sufficient quantities of
our products, which could lead to product shortages and harm our business.
Our manufacturing facility in Lyon must meet FDA standards of Good
Manufacturing Practices and other regulatory guidelines. The FDA and other
regulatory authorities inspect our manufacturing facility to ensure that it
meets regulatory standards. If the FDA believes that we are not complying with
its guidelines, it can issue a warning letter or prevent the import of
Thymoglobulin into the US, which would reduce our revenues. In addition,
Thymoglobulin and Lymphoglobuline are biologics and consequently difficult to
manufacture. We acquired the IMTIX division of Aventis in 1998, including
certain manufacturing capabilities with respect to Thymoglobulin and
Lymphoglobuline. Before the acquisition, certain batches of Thymoglobulin did
not meet manufacturing specifications, resulting in a shortage of Thymoglobulin
for commercial sale. We still rely on Aventis for certain important
manufacturing services, including quality assurance, quality control, and
lyophilization. Aventis may not continue to effectively and continuously provide
us these critical manufacturing services. In addition, we may experience
manufacturing difficulties with respect to Thymoglobulin or Lymphoglobuline in
the future that may impair our ability to deliver products to our customers,
which could reduce our revenues and harm our business.

If our products do not receive regulatory approvals, or if we do not
otherwise comply with government regulations, our business would be harmed.
Our research, preclinical development, clinical trials, manufacturing,
marketing and distribution of our products in the US and other countries are
subject to extensive regulation by numerous governmental authorities including,
but not limited to, the FDA. In order to obtain regulatory approval of a drug
product, we must demonstrate to regulatory agencies, among other things, that
the product is safe and effective for its intended uses and that the
manufacturing facilities are in compliance with Good Manufacturing Practices
requirements. The process of obtaining FDA and other required regulatory
approvals is lengthy and will require the expenditure of substantial resources,
and we do not know if we will obtain the necessary approvals for our product
candidates. Moreover, for our approved products, the marketing, distribution and
manufacture of our products remains subject to extensive regulatory requirements
administered by the FDA and other regulatory bodies. Failure to comply with
applicable regulatory requirements can result in, among other things, warning
letters, fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, refusal of the government to grant
pre-market clearance or pre-market approval, withdrawal of approvals and
criminal prosecution of SangStat and our employees.

Our reliance on third parties for manufacturing may delay product
approval or once approved, result in a product shortage, which would reduce our
revenues. Except for Thymoglobulin and Lymphoglobuline, third parties
manufacture all of our products and product candidates. There are three main
risks associated with using third parties for manufacturing:

- The manufacturer may not pass a pre-approval inspection, or once approved,
may not continue to manufacture to FDA's and other regulatory authorities'
standards.
- The manufacturer may not deliver adequate supplies of a sufficiently high
quality product in the time-line that we need to meet our clinical time-lines or
to meet product demand.
- We may not be able to obtain commercial quantities of a product at an
economically viable price.

In addition, we may not be able to enter into commercial scale manufacturing
contracts on a timely or commercially reasonable basis, or at all, for our
product candidates. Abgenix, from whom we have licensed ABX-CBL, remains
responsible for entering into and maintaining the manufacturing agreement with a
third party for the manufacturing of this product candidate. For some of our
potential products, we will need to develop our production technologies further
for use on a larger scale to conduct human clinical trials and produce such
products for sale at an acceptable cost.

If our manufacturers fail to perform their obligations effectively and on a
timely basis, these failures may delay clinical development or submission of
products for regulatory approval, or once a product is approved, result in
product shortages, any of which would impair our competitive position either
because of the delays or because of a loss of revenues. Additionally, because
our products can only be manufactured in facilities approved by the applicable
regulatory authorities, we may not be able to replace our manufacturing capacity
quickly or efficiently in the event that our manufacturers are unable to
manufacture their products.

A change in marketing strategy and a delay in product approval have
created excess perishable inventories that may result in significant reductions
in our future gross margins. We have significant amounts of bulk
cyclosporine active ingredient inventory that we are not using to manufacture
finished product in the amount anticipated. This inventory was originally
purchased for use in cyclosporine finished products to be sold in the US and
Europe. However, since we are now distributing Gengraf in the US and we have
withdrawn SangCya Oral Solution from the US market, we are dependent on the
European market to use this inventory. Although we plan to obtain marketing
approval for a cyclosporine capsule product in Europe, the inherent uncertainty
of the approval process makes it very difficult to forecast a launch date for
this product. We currently expect approval of a cyclosporine capsule product in
the UK in 2002. If the approval and product launch are delayed, we may not be
able to convert all the inventory into finished product and sell it before its
expiration date. As a result, we could write off portions of our bulk active
ingredient in the future, which could significantly reduce the gross margin
reported for that future period.

If we do not develop and market new products, our business will be
harmed. To achieve profitable operations, we must successfully develop,
obtain regulatory approval for, manufacture, introduce and market new products
and product candidates. We may not be able to successfully do this. Our product
candidates will require extensive development and testing, as well as regulatory
approval before marketing to the public. Our cyclosporine capsule product
candidate in Europe has been delayed and we do not anticipate having approval of
a cyclosporine capsule product in Europe until 2002. In addition, cost overruns
and product approval delays could occur due to the following:

- unanticipated regulatory delays or demands;
- unexpected adverse side effects; or
- insufficient therapeutic efficacy.

These events would prevent or substantially slow down the development effort
and ultimately would harm our business. Furthermore, there can be no assurance
that our product candidates under development will be safe, effective or capable
of being manufactured in commercial quantities at an economical cost, or that
our products will not infringe the proprietary rights of others or will be
accepted in the marketplace.

Our recall of SangCya Oral Solution in the US in July 2000 could result
in an FDA investigation and negative marketing by our competitors. We
recalled all lots of SangCyaOral Solution from the US wholesalers in
July 2000 and at the same time announced its withdrawal from the US market. In
addition to the loss of anticipated SangCya Oral Solution revenues, the FDA may
conduct an investigation into the circumstances that led to the SangCya Oral
Solution recall. Responding to an FDA investigation could be costly, time
consuming, and may distract senior management from other tasks. Negative
marketing may reduce sales of Gengraf or Thymoglobulin as competitors attempt to
use the recall in marketing against our products and us. The FDA or other
regulatory authorities may review our future drug approval applications more
carefully, which may result in slower approval times. If approvals are delayed,
revenues from these products would also be delayed.

Our business exposes us to the risk of product liability claims for
which we may not be adequately insured. We face an inherent business
risk of exposure to product liability claims in the event that the use of our
products results in adverse effects during research, clinical development or
commercial use. We cannot guarantee we will avoid significant product liability
exposure. Our product liability insurance coverage is currently limited to $25
million, which may not be adequate to cover potential liability exposures.
Moreover, we cannot assure you that adequate insurance coverage will be
available at an acceptable cost, if at all, or that a product liability claim
would not harm our results of operations.

Our inability to attract or retain key personnel could negatively
affect our business. Our ability to develop our business depends in part
upon our attracting and retaining qualified management and scientific personnel.
As the number of qualified personnel is limited, competition for such personnel
is intense. We cannot assure you that we will be able to continue to attract or
retain such people. The loss of our key personnel or the failure to recruit
additional key personnel could significantly impede attainment of our objectives
and harm our financial condition and results of operations.

Operation of The Transplant Pharmacy may suffer while we are trying to
sell the business, resulting in a lower sales price or inability to sell the
business. On October 16, 2000, we announced that we hoped to sell The
Transplant Pharmacy, or TTP, our mail order pharmacy business. We have put a
retention program in place to encourage employees to stay while we are selling
the division. If we cannot successfully retain employees, it will be very
difficult to replace employees and we may be forced to use temporary employees.
Loss of employees or use of temporary employees could adversely affect
operations of TTP. If TTP operations are disrupted, TTP would likely produce
lower revenues and lower collections of accounts receivable, which, if either
occurred, could result in a lower sale price for TTP or an inability to sell
TTP. We are in advanced negotiations with a potential buyer and expect to
complete the sale of TTP by April 30, 2001, however there can be no assurance
that this sale will occur.

Our litigation with Novartis may be resolved adversely and will be a
drain on time and resources. While we have settled our patent litigation
with Novartis regarding SangCya Oral Solution, we are involved in litigation
with Novartis in the US and the UK, which could potentially harm sales of
Gengraf in the US (due to the US regulatory litigation which would impact the
labeling for all generic cyclosporine products), and SangCya Oral Solution and
our cyclosporine capsule product candidates in Europe. The course of litigation
is inherently uncertain and we may not achieve a favorable outcome. The
litigation, whether or not resolved favorably to us, is likely to be expensive,
lengthy and time consuming, and divert management's attention.

Novartis' patent lawsuit against Abbott with respect to Gengraf may be
resolved adversely. Novartis sued Abbott in August 2000 claiming that
Gengraf infringes certain Novartis patents. Novartis' complaint includes a plea
for injunctive relief to prevent the sale of Gengrafin the US. The
course of litigation is inherently uncertain: Novartis may choose to name us in
this suit, Abbott may not prevail, or Abbott may choose to settle on terms
adverse to our interests. Should we be named in this suit, we may incur expenses
before reimbursement, if any, by Abbott who is obligated under our agreement to
indemnify us against such suits. Should Novartis succeed in obtaining a
preliminary or permanent injunction, Gengraf may be temporarily or permanently
removed from the market. If Abbott or we were forced to remove Gengraf from the
market before our co-promotion agreement with Abbott expires on December 31,
2004, our revenues would be decreased materially.

We may have a charge against earnings if we lose a breach of contract
lawsuit. In August 2000, two affiliated suppliers sued our French
subsidiary, IMTIX-SangStat SAS, for breach of contract because we ordered lower
quantities than were anticipated by the agreements. The suppliers are asking for
damages of $5 million for lost profits and reimbursement of capital
expenditures. A hearing was held in late December 2000 and we currently
anticipate a ruling in mid-April 2001. The course of litigation is inherently
uncertain and we may not achieve a favorable outcome. If the court finds in the
suppliers' favor, we would suffer a one-time charge against earnings, which
could be material if these parties are awarded the full amount requested.

Our future success depends on our ability to successfully manage
growth. We continue to expand our operations, which places a strain upon
our management, systems and resources. Our ability to compete effectively and to
manage future growth, if any, will require us to continue to, on a timely basis,
improve our financial and management controls, reporting systems and procedures
and expand, train and manage an increasing number of employees. Our failure to
do so would harm our results of operations.

Failure to protect our intellectual property will adversely affect our
business. Our success depends in part on our ability to obtain and
enforce patent protection for our products and to preserve our trade secrets. We
hold patents and pending patent applications in the US and abroad. Some of our
patents involve specific claims and thus do not provide broad coverage. There
can be no assurance that our patent applications or any claims of these patent
applications will be allowed, be valid or enforceable. These patents or claims
of these patents may not provide us with competitive advantages for our
products. Our competitors may successfully challenge or circumvent our issued
patents and any patents issued under our pending patent applications. We have
not conducted extensive patent and art searches with respect to our product
candidates and technologies, and we do not know if third-party patents or patent
applications exist or filed in the US, Europe or other countries. This would
have an adverse effect on our ability to market our products. We do not know if
claims in our patent applications would be allowed, be valid or enforceable, or
that any of our products would not infringe on others' patents or proprietary
rights in the US or abroad. We also have patent licenses from third parties
whose patents and patent applications are subject to the same risks as ours.

We also rely on trade secrets and proprietary know-how that we seek to
protect, in part, by confidentiality agreements with our employees and
consultants. We cannot guarantee these agreements will not be breached, that we
would have adequate remedies for any such breach or that our trade secrets will
not otherwise become known or independently developed by competitors.

We have registered or applied for trademark registration of the names of all
of our marketed products and plan to register the names of our products under
development once a name has been selected for the product candidate. We have
registered or applied for trademark registration of the names of most of our
products under development or commercialized for research and development use.
However, these trademark registrations may not be granted to us or may be
challenged by competitors.

We face substantial competition, which could adversely affect our
revenues and results of operations. The drugs we develop compete with
existing and new drugs being created by pharmaceutical, biopharmaceutical,
biotechnology companies and universities. Many of these entities have
significantly greater research and development capabilities, as well as
substantial marketing, manufacturing, financial and managerial resources and
represent significant competition. The principal factors upon which our products
compete are product utility, therapeutic benefits, ease of use, effectiveness,
marketing, distribution and price. With respect to our products, we are
competing against large companies that have significantly greater financial
resources and established marketing and distribution channels for competing
products.

The drug industry is intensely price competitive and we expect we will face
this and other forms of competition. Developments by others may render our
products or technologies obsolete or noncompetitive, and we may not be able to
keep pace with technological developments. Many of our competitors have
developed or are in the process of developing technologies that are, or in the
future may be, the basis for products that compete with our own. Some of these
products may have an entirely different approach or means of accomplishing the
desired therapeutic effect than our products and may be more effective and less
costly. In addition, many of these competitors have significantly greater
experience than we do in undertaking preclinical testing and human clinical
trials of pharmaceutical products and obtaining regulatory approvals of such
products. Accordingly, our competitors may succeed in commercializing products
more rapidly than we can.

Other treatments for the problems associated with transplantation that our
products seek to address are currently available and under development. To the
extent these therapeutics or monitoring products address the problems associated
with transplantation on which we have focused, they may represent significant
competition.

We depend on collaborative relationships and any failure by our
strategic partners to perform could adversely affect our competitive
position. We have a number of strategic relationships for the
development and distribution of our products. In particular, we have entered
into a multi- year co-promotion, distribution and research agreement for Gengraf
in the US with Abbott. We are dependent upon Abbott for certain regulatory,
manufacturing, marketing, and sales activities under the agreement. Abbott may
not perform satisfactorily and any such failure may impair our ability to
deliver products on a timely basis, or otherwise impair our competitive
position, which would harm our business. We have also entered into a Co-
Development, Supply and License Agreement with Abgenix, Inc. with respect to the
development, marketing and sale of ABX-CBL. We are dependent upon Abgenix for
certain development and manufacturing activities under the agreement. Abgenix
may not perform satisfactorily and any such failure may delay regulatory
approval, product launch, impair our ability to deliver products on a timely
basis, or otherwise impair our competitive position, which would harm our
business. We may enter into additional collaborative relationships with
corporate and other partners to develop and commercialize certain of our
potential products. We cannot assure you that we will be able to negotiate
acceptable collaborative arrangements in the future, that such collaborations
will be available to us on acceptable terms or that any such relationships, if
established, will be scientifically or commercially successful.

Fluctuations in quarterly and annual operating results may adversely
affect our stock price. Our quarterly and annual operating results may
fluctuate due to a variety of factors. We therefore believe that quarter-to-
quarter comparisons of our operating results may not be a good indication of our
future performance, and you should not rely on them to predict our future
performance or the future performance of our stock. Our operating losses have
been substantial each year since inception. We also expect losses to continue in
the near future as a result of a number of factors, including:

- the uncertainty in the timing and the amount of revenue we earn upon product
sales;
- our achievement of research and development milestones;
- our funding obligations under collaborative research agreements; and
- expenses we incur for product development, clinical trials and marketing and
sales activities.

Our operating results may also fluctuate significantly as a result of other
factors, including:

- the introduction of new products by our competition;
- regulatory actions;
- market acceptance of our products;
- manufacturing capabilities;
- cost of litigation; and
- third-party reimbursement policies.

Fluctuations in our operating results have affected our stock price in the
past and are likely to continue to do so in the future. In particular, the
realization of any of the risks described herein could have a significant and
adverse impact on the market price for our stock.

Our stock price as well as the stock prices for competitors in our
industry has historically been volatile. The market prices for
securities of pharmaceutical and biotechnology companies, including ours, are
highly volatile. The stock market has from time to time experienced significant
price and volume fluctuations that may be unrelated to the operating performance
of particular companies. The market price for our common stock may fluctuate as
a result of factors such as:

- announcements of new therapeutic products by us or our competitors;
- announcements regarding collaborative agreements;
- governmental regulations;
- clinical trial results;
- developments in patent or other proprietary rights;
- public concern as to the safety of drugs developed by us or others;
- comments made by securities analysts; and
- general market conditions.

The uncertainty of pharmaceutical pricing and reimbursement may
negatively impact our results of operations. Our ability to successfully
commercialize our products may depend in part on the extent to which
reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
coverage insurers and other organizations. The pricing, availability of
distribution channels and reimbursement status of newly approved healthcare
products is highly uncertain and we cannot assure you that adequate third-party
coverage will be available for us to maintain price levels sufficient for
realization of an appropriate return on our investment in product development.
In certain foreign markets, pricing or profitability of healthcare products is
subject to government control. In the US, there have been, and we expect that
there will continue to be, a number of federal and state proposals to implement
similar governmental control. In addition, an increasing emphasis on managed
care in the US has and will continue to increase the pressure on pharmaceutical
pricing. While we cannot predict whether any such legislative or regulatory
proposals will be adopted or the effect such proposals or managed care efforts
may have on our business, the announcement of such proposals or efforts could
harm our ability to raise capital, and the adoption of such proposals or efforts
could harm our results of operations. Further, to the extent that such proposals
or efforts harm other pharmaceutical companies that are our prospective
corporate partners, our ability to establish corporate collaborations may be
adversely affected. In addition, third-party payers are increasingly challenging
the prices charged for medical products and services. We do not know whether our
products and product candidates, if approved, will be considered cost effective
or that reimbursement to the consumer will be available or will be sufficient to
allow us to sell our products on a competitive basis.

Our use of hazardous materials could result in unexpected costs or
liabilities. In connection with our research and development activities
and operations, we are subject to federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacture, storage,
air emission, effluent discharge, handling and disposal of certain materials,
biological specimens and wastes. We cannot assure you that we will not incur
significant costs to comply with environmental and health and safety
regulations. Our research and development involves the controlled use of
hazardous materials, including but not limited to certain hazardous chemicals
and infectious biological specimens. Although we believe that our safety
procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be eliminated. In the event
of such an accident, we could be held liable for any damages that result and any
such liability could exceed our ability to pay.

Our charter documents, stockholder rights plan and Delaware law may
serve to deter a takeover. Certain provisions of our Certificate of
Incorporation and our Bylaws could delay or make more difficult a merger, tender
offer or proxy contest, which could adversely affect the market price of our
common stock. Our board of directors has the authority to issue up to 5 million
shares of preferred stock and to determine the price, rights preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting stock.
Further, we have adopted a stockholder rights plan. Under this plan we may issue
a dividend to stockholders who hold rights to acquire our shares or, under
certain circumstances, an acquiring corporation, at less than half their fair
market value. The plan could have the effect of delaying, deferring or
preventing a change in control. In addition, we are subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which will
prohibit us from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. The application of Section 203
also could have the effect of delaying or preventing a change of control.

ITEM 2.	PROPERTIES

Our global headquarters are located in Fremont, California. Floor space
in Fremont is approximately 44,000 square feet, including offices, laboratory
space, storage area and specialized areas for some pilot production and
preclinical testing. The lease for the Fremont building space will expire in
2005 and may be renewed for subsequent years. Our monthly rent on this lease is
approximately $54,000.

Our European headquarters are located in Lyon, France. We lease 1,560 square
meters in Lyon, France for sales, marketing, finance, clinical, and
administration. We have one floor for which the lease expires in 2003 and for
which we pay approximately 46,700 French francs a month (approximately $6,500
based on an exchange rate of 7.2 French francs per U.S. dollar). We lease a
second floor for which the lease expires in 2004 and for which we pay 57,500
French francs a month (approximately $8,000).

We also lease approximately 38,300 square feet from Aventis in Marcy L'Etoile
(just outside of Lyon), France for manufacturing. The manufacturing leases,
which cover two different buildings, expire in 2013 but may be terminated at our
option upon giving one year's notice. The monthly rent for both buildings is
approximately 140,400 French francs (approximately $19,500). In 2001, our
monthly rent will increase by 121,250 French francs ($16,840) to reflect
completion of a new manufacturing area in 2000.

In addition, we lease small administrative offices in the other
countries.

We believe that our current facilities are suitable and adequate to meet our
needs for the foreseeable future and anticipate that we will be able to expand
our facilities to nearby locations as the need develops.

ITEM 3.	LEGAL PROCEEDINGS

The following is a description of our current litigation.
The course of litigation is inherently uncertain and we may not achieve a
favorable outcome. See "Item 1 - Risk Factors - Our litigation with Novartis may
be resolved adversely and will be a drain on time and resources."

Novartis Patent Litigation

Novartis vs. SangStat

On July 27, 2000, we entered into a global settlement
agreement with Novartis AG and Novartis Pharmaceuticals Corporation with respect
to the patent infringement lawsuits filed against us regarding
SangCya® Oral Solution, USP [MODIFIED] as well as the
counterclaim we filed against Novartis Pharmaceuticals Corporation in the US. As
part of the settlement, we have entered into a global license agreement pursuant
to which Novartis shall license US patent #5,389,382 and its foreign
counterparts to us and we shall pay Novartis a royalty on sales of SangCya Oral
Solution. The settlement and license applies only to SangCya Oral Solution and
does not apply to cyclosporine capsule products. We do not expect the terms of
the settlement to have a material financial impact on us in the foreseeable
future.

Novartis vs. Abbott

Novartis has sued Abbott claiming that Gengraf®(cyclosporine capsule, USP, MODIFIED), infringes certain Novartis patents.
Novartis' complaint includes a plea for injunctive relief to prevent the sale of
Gengrafin the US, but to date they have not moved for a preliminary
injunction. The trial date has been set for October 1, 2001. The discovery
schedule is still before the court pending resolution of differences between the
parties' proposals. Abbott has informed us that it does not believe it infringes
the Novartis patents. We have not been named a defendant in this lawsuit, and
under our agreement with Abbott, Abbott is obligated to indemnify us against
such suits. The course of litigation is inherently uncertain, however; Novartis
may choose to name us in this suit, Abbott may not prevail, or Abbott may choose
to settle on terms adverse to our interests. Should we be named in this suit, we
may incur expenses prior to reimbursement (if any) by Abbott pursuant to its
indemnity obligation. Should Novartis succeed in obtaining a preliminary or
permanent injunction, Gengraf may be temporarily or permanently removed from the
market.

Novartis Regulatory Litigation

US Regulatory Litigation

Novartis US sued the FDA on February 11, 1999 in the United States
District Court for the District of Columbia (case number 1: 99CV-00323) alleging
that the FDA did not follow its own regulations in approving SangCya Oral
Solution in October 1998. The lawsuit alleges that because Neoral oral solution
and SangCya Oral Solution are based on different formulation technologies, they
should be classified as different dosage forms. Novartis asks that the court (i)
allow Novartis to keep its microemulsion labeling; (ii) declare microemulsion to
be a separate dosage form; and (iii) rescind the AB rating that was given to
SangCya Oral Solution. We intervened in this lawsuit. The parties have all filed
motions for summary judgment with the Court and are awaiting a final ruling. The
Court has dismissed the counts that relate specifically to the approval of
SangCya Oral Solution, but Novartis may appeal this decision. Because we
permanently withdrew SangCya Oral Solution from the US market in July 2000, we
do not believe that this lawsuit will have any material impact on SangStat.

UK Regulatory Litigation - SangCya Oral Solution

On October 18, 1999, Novartis UK was granted leave to seek judicial
review of the decision by the Medicines Control Agency (the "MCA") to approve
SangCya Oral Solution (Case No. HC- 1969/99). On March 30, 2000, the High Court
in London dismissed Novartis' application for judicial review and ruled that the
MCA acted properly in granting the SangCya Oral Solution marketing
authorization. Novartis appealed the High Court's decision and the hearing was
held before the Court of Appeal on November 13 and 14, 2000. The Court of Appeal
has stayed ruling on this matter pending the answer of certain questions of law
to be submitted to the European Court of Justice ("ECJ"). We estimate that the
ECJ will issue its ruling in approximately eighteen to twenty four months.
Following the ECJ ruling, the parties would go back to the Court of Appeal who
will then apply the ECJ ruling on the law to the facts of this case.

UK Regulatory Litigation - Cyclosporine Capsules

In November 1999, Novartis filed a request with the High Court in
London for judicial review of the refusal by MCA to state that it would not
reference Neoral data in approving any cyclosporine capsule application. An
agreement was reached between the parties in which Novartis agreed to stay the
judicial review until the earlier of (i) the decision on the judicial review of
SangCya Oral Solution or (ii) MCA's approval of a marketing authorization for a
cyclosporine capsule product, and in return, we agreed that we would not launch
or commence mutual recognition procedures in relation to the cyclosporine
capsule marketing authorization (including a request to MCA to prepare an
assessment report) for a period of 28 days commencing on the day on which we
notify Novartis' solicitors of capsule approval. The parties had agreed to
continue the stay until the appeal of the High Court decision with respect to
the judicial review of SangCya Oral Solution. The stay of this application for
judicial review will remain in place pending the ECJ ruling on the questions of
law and resulting Court of Appeal judgment.

Novartis has also indicated that it will seek an injunction to prevent our
cyclosporine capsule from being sold in the United Kingdom until final
resolution of the judicial review relating to our cyclosporine capsule. Because
the High Court ruled in favor of the MCA with respect to the SangCya Oral
Solution marketing authorization and the Court of Appeal has referred questions
of law to the ECJ, we believe that it is unlikely that a court would grant
Novartis a preliminary injunction with respect to our cyclosporine capsule
marketing authorization. If the Court of Appeals reverses the High Court's
ruling following the ECJ's decisions on questions of law, either the MCA could
still approve our cyclosporine capsule as supra-bioavailable to Sandimmune
without referencing Neoral data or the MCA could decide not to approve our
cyclosporine capsule marketing authorization until the expiration of the ten
year data exclusivity period for Neoral capsules (approximately 2004).

On May 5, 2000, Novartis Farma S.p.A. ("Novartis Italy")
served IMTIX SangStat s.r.l., our Italian subsidiary, and IMTIX SangStat Ltd.
with a summons to the Milan Tribunal. Novartis Italy alleges that by requesting
mutual recognition from the Italian Health Authorities of the SangCya Oral
Solution dossier approved by the MCA, we implicitly requested that the Italian
Health Authorities review the Neoral dossier. Novartis alleges that this request
is an act of unfair competition in that (i) the Neoral data has ten year
exclusivity and (ii) the data is secret and by requesting mutual recognition, we
are responsible for the Health Authorities act of unfair competition following
use of the Neoral dossier in reviewing the SangCya Oral Solution dossier. While
the summons acknowledges that the UK High Court did not invalidate the SangCya
Oral Solution marketing authorization, it does not acknowledge that the High
Court ruled that the MCA could review the Neoral data. To the best of our
knowledge, Novartis Italy has not filed suit against the Italian Health
Authorities. The initial appearance of the parties before the Milan Tribunal was
scheduled for January 2001. We filed our response to the complaint at that time
and the hearing was postponed until September 2001.

We do not yet have marketing approval for SangCya Oral Solution in Italy.
Novartis Italy is seeking damages and an injunction to prevent the sale by
SangStat of SangCya Oral Solution, or any other product for which we may obtain
approval based upon a reference to the Neoral dossier, which we believe is
intended to block our cyclosporine capsule from sale in Italy. We believe that
resolution of this matter will depend on the resolution of the UK regulatory
litigation, since the MCA's actions are the basis for the Italian lawsuit.

Breach of Contract Suit

In August 2000, two affiliated suppliers, IFFA CREDO and Elevage
Scientifique des Dombes, sued our French subsidiary, IMTIX-SangStat SAS, for
breach of contract because we ordered lower quantities than were anticipated by
the agreements. They claim that the quantities set forth in the agreements were
fixed orders; we believe that they were forecasts only. We believe that the
agreements provide that if we purchased less than the forecast amounts, we would
pay a penalty equal to a percentage of the difference between the amount ordered
and the amount forecast. The suppliers claim this provision only applied during
the first year of the agreement. The suppliers are asking for damages of 37
million French Francs (approximately $5 million) for lost profits and
reimbursement of capital expenditures. Under our interpretation, we would owe
them 2.2 million French Francs (approximately $300,000) for 2000 and 1.6 million
French Francs (approximately $200,000) in 2001, presuming no further orders are
placed with these suppliers. The claim was filed under a "Fast Track" provision
in the Lyon Commercial Courts and a hearing on the merits occurred at the end of
December 2000. We currently anticipate a ruling in mid-April 2001. If the
plaintiffs were to prevail, the court would likely appoint an expert to assess
the exact amount of damages suffered by the plaintiffs.

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

None

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SANGSTAT MEDICAL CORPORATION

SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) 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.

SANGSTAT MEDICAL CORPORATION

By:



Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|Signature                                      | Title                                                  | Date             
|---------------------------------------------- | ------------------------------------------------------ | -----------------
|/s/ Jean-Jacques BienaiméJean-Jacques Bienaimé | CEO & Chairman of the Board of Directors               | September 7, 2001
|*Stephen G. Dance, CPA, FCA.                   | Chief Financial Officer (Principal Accounting
Officer) | September 7, 2001
|*Fredric J. Feldman, Ph.D.                     | Director                                               | September 7, 2001
|*Elizabeth M. Greetham                         | Director                                               | September 7, 2001
|*Richard D. Murdock                            | Director                                               | September 7, 2001
|*Andrew Perlman, M.D., Ph.D                    | Director                                               | September 7, 2001
|*Vincent Worms                                 | Director                                               | September 7, 2001



* By: 	/s/ Jean-Jacques BienaiméName: 	Jean-Jacques BienaiméAttorney-in-fact

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