UNITED STATES

SECURITIESAND EXCHANGE COMMISSION

Washington,D.C. 20549

FORM 10-Q

Scios Inc.

PART I.FINANCIAL INFORMATION

Item 1. FinancialStatements

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     ASSETS                                                                   March 31,                     December 31,
                                                                                2001                            2000
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------
                                                                             (Unaudited)
Current assets:
     Cash and cash equivalents                                            $                               $
                                                                          613                             3,291
     Marketable securities                                                           28,002                         35,356
     Accounts receivable                                                            12,204
                                                                                                               5,217
     Prepaid expenses and other assets                                                1,503
                                                                                                                722
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------
       Total current assets                                                         42,322                          44,586

Marketable securities, non-current                                                  33,564                          32,884
Property and equipment, net                                                           8,119
                                                                                                               8,910
Other assets                                                                          2,082
                                                                                                               2,007
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------

TOTAL ASSETS                                                              $          86,087               $         88,387
                                                                          ==================              =================

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                     $                               $
                                                                          3,919                           4,587
     Other accrued liabilities                                                      10,236                          10,749
     Deferred contract revenues                                                     16,372                          16,193
                                                                          ------------------              -----------------
       Total current liabilities                                                    30,527                          31,529

Long-term debt                                                                      39,944                          39,095
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------
       Total liabilities                                                            70,471                          70,624
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------

Stockholders' equity:
     Preferred stock; $.001 par value; 20,000,000
        shares authorized; 4,991 shares issued and outstanding                           --                             --
     Common stock; $.001 par value; 150,000,000
        shares authorized; 39,364,224 and 39,166,373 shares
        issued and outstanding, respectively                                             39
                                                                                                                 39
     Additional paid-in capital                                                   430,408                         428,987
     Notes receivable from stockholders
                                                                                (406)                          (634)
     Deferred compensation, net
                                                                                (106)                          (417)
     Accumulated other comprehensive income                                          1,311
                                                                                                               1,195
     Accumulated deficit                                                         (415,630)                       (411,407)
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------
       Total stockholders' equity                                                  15,616                           17,763
                                                                          ------------------              -----------------
                                                                          ------------------              -----------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $         86,087                $         88,387
                                                                          ==================              =================
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                                                                          Three months ended
                                                                               March 31,
                                                                   2001                          2000
                                                              ----------------              ---------------
                                                                               (Unaudited)
Revenues:
        Product sales and co-promotion commissions,
          net of expenses                                     $                             $
                                                              1,483                         1,331
        Research & development contracts
                                                                   1,097                        1,894
        Gain on sale of marketing rights
                                                                   9,363                          --
                                                              ----------------              ---------------
                                                                       11,943
                                                                                                3,225
                                                              ----------------              ---------------

Costs and expenses:
        Research and development
                                                                   9,480                        9,284
        Marketing, general and administration
                                                                   6,480                        3,476
                                                              ----------------              ---------------
                                                                       15,960
                                                                                                12,760
                                                              ----------------              ---------------

Loss from operations                                                                               (9,535)
                                                                  (4,017)

Other income (expense):
        Investment income
                                                                    812                         1,384
        Interest expense                                                (849)                        (991)
        Realized gains (losses) on securities                                                         (84)
                                                                    254
        Other expense                                                                                (299)
                                                                   (423)
                                                              ----------------              ---------------

                                                                   (206)                          10

                                                              ----------------              ---------------
Net loss                                                                                           (9,525)
                                                                  (4,223)
                                                              ----------------              ---------------

Other comprehensive loss:
        Change in unrealized gains (losses) on
             securities:                                                                              (96)
                                                                    116
                                                              ----------------              ---------------
Comprehensive loss                                                   $                      $
                                                                  (4,107)                   (9,621)
                                                              ================              ===============

        Loss per common share,
             basic and diluted                                $                             $
                                                              (0.11)                        (0.25)

        Weighted average number of common shares
            outstanding used in the calculation of
            net loss per share, basic and diluted                  39,290,982                   37,780,077
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__________                                                 SCIOS INC.                                               AND SUBSIDIARY                                    Consolidated Statements of Cash Flows                                               (In thousands)                                                                                     Three months ended                                                                                         March 31,                                                                                  2001                2000                                                                               ------------        -----------                                                                                        (Unaudited)Cash flows from operating activities:   Net loss                                                                     $ (4,223)          $  (9,525)   Adjustments to reconcile net loss to net   cash used in operating activities:      Depreciation and amortization                                                    872                                                                                                      978      Loss on disposal of property and equipment                                       365                 --      Accrued long-term interest payable                                               849                                                                                                      991      Amortization of deferred compensation                                            311                                                                                                       85      Changes in assets and liabilities:        Accounts receivable                                                        (6,987)              (265)        Accounts payable                                                             (668)                                                                                                       66        Other accrued liabilities                                                    (513)              (846)        Prepaid expenses and other assets                                            (856)                                                                                                      779        Deferred contract revenue                                                      179              (902)                                                                               ------------        -----------             Net cash used in operating activities                                (10,671)            (8,639)                                                                               ------------        -----------Cash flows from investing activities:   Purchases of property and equipment                                               (446)              (628)   Sales/maturities of marketable securities                                       43,371               6,738   Purchases of marketable securities                                             (36,581)            (2,933)                                                                               ------------        -----------             Net cash provided by investing activities                              6,344               3,177                                                                               ------------        -----------Cash flows from financing activities:   Issuance of common stock and collection of notes      receivable from stockholders, net                                              1,649                                                                                                      594   Payment of notes payable                                                             --            (2,000)                                                                               ------------        -----------             Net cash provided by (used in) financing activities                     1,649            (1,406)                                                                               ------------        -----------Net decrease in cash and cash equivalents                                          (2,678)            (6,868)Cash and cash equivalents, at beginning of period                                    3,291            11,582                                                                               ------------        -----------Cash and cash equivalents, at end of period                                    $       613         $    4,714                                                                               ============        ===========           The accompanying notes are an integral part of these consolidated financial statements.SCIOS INC.ANDSUBSIDIARY                                    Notes to Consolidated Financial Statements                                                    (unaudited)1. Basis ofPresentation         The accompanying unaudited consolidated financial statements of Scios have been prepared in accordancewith generally accepted accounting principles for interim financial information and with the instructions to Form10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not contain all of the information and footnotesrequired by generally accepted accounting principles for complete financial statements.  In the opinion ofmanagement, the accompanying unaudited, condensed consolidated financial statements reflect all adjustments(consisting of normal, recurring adjustments) considered necessary for a fair presentation of Scios' interimfinancial information.  These consolidated financial statements and notes should be read in conjunction with theaudited financial statements of Scios included in our Annual Report on Form 10-K for the year ended December, 31,2000.         The results of operations for the three months ended March 31, 2001 are not necessarily indicative ofthe operating results that may be reported for the fiscal year ending December 31, 2001 or for any other futureperiod.2. Computationof Loss Per Share         The following table sets forth the computation of the Scios' basic and diluted loss per share (in thousands, except per share amounts):                                                                                 Three months ended                                                                                       March 31,                                                                                    2001                 2000                --------------------------------------------------------- --------------- ---- ---------------                Numerator                Basic                   Net loss                                                            $            $ (9,525)                                                                                 (4,223)                                                                          ===============     ================                Diluted                   Net loss                                                            $            $ (9,525)                                                                                 (4,223)                                                                          ===============     ================                Denominator                Basic and diluted                   Weighted average shares                                    39,290,982           37,780,077                   Effect of dilutive securities:                    Employee stock options                                            --                   --                   Weighted average shares and assumed                      conversions                                             39,290,982           37,780,077                                                                          ===============     ================                Basic loss per share                                           $  (0.11)            $  (0.25)                                                                          ===============     ================                Diluted  loss per share                                        $  (0.11)            $  (0.25)                                                                          ===============     ================         The potentially dilutive effect of outstanding options to purchase common stock would have been anti-dilutive as to the reported loss per share in both 2001 and 2000, and they were therefore excluded from the diluted loss per share calculation for both periods.  Although potentially dilutive, the optional settlement of the Genentech loan through the issuance of preferred stock would have been anti-dilutive in both 2001 and 2000 and was therefore excluded from the calculations.         At March 31, 2001, Scios had 5,125,383 outstanding stock options at prices ranging from $3.6875 to $21.38 per share.  At March 31, 2000, Scios had 5,368,560 outstanding stock options at prices ranging from $3.6875 to $21.13 per share. 3.         Industry and Geographic Segment Information         Scios operates in one business segment, using one measurement of profitability for its business. Scios receives revenue from product sales and from licensing and development of products from partners in the United States, Europe and Asia Pacific.  At March 31, 2001, all long-lived assets were located in the United States and all revenues were earned in the United States in the three months ended March 31, 2001 and the three months ended March 31, 2000.4. Gain onSale of Marketing Rights          During the last two quarters, Scios solicited and received bids in connection with selling itsmarketing rights for certain products sold by Scios.  The marketing rights were sold to GlaxoSmithKline, or GSK.The marketing rights were originally licensed from GSK under a 1990 licensing agreement.  In order to effect thepurchase, the licensing agreement was terminated effective March 31, 2001, and we will receive from GSK $4.0million in 2001, $3.0 million in 2002, and $2.5 million in 2003.          We recognized a one-time gain on the sale of $9.4 million which has been classified on the statement ofoperations under the caption Gain on Sale of Marketing Rights. In addition, we ended the deployment of ourPsychiatric Sales Marketing Division sales force and terminated certain full-time support personnel. Severancepayments for these personnel amounted to approximately $788,000.5. NotesReceivable from Officers         AtMarch 31, 2001, we had notes receivable from three officers. The first note isin the amount of $179,466 with interest at 6.30% per annum, due and payable onOctober 31, 2001. The loan was granted in connection with the payment of incometaxes for restricted stock granted to the officer. This loan is collateralizedby the vested portion of the officer’s stock options and is classified withother current assets on the balance sheet at March 31, 2001.