FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

x QUARTERLY  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 1998

                                       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: 0-11749

                                   Scios Inc.
             (Exact name of Registrant as specified in its charter)

       Delaware                                              95-3701481
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

                                   Scios Inc.
                              2450 Bayshore Parkway
                            Mountain View, CA 94043x
               (Address of principal executive offices) (Zip code)

                                 (650) 966-1550
               (Registrant's telephone number including area code)

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

         Indicate the number of shares  outstanding of each of the  registrant's
classes of common stock, as of the latest practicable date.

Title                                                        Outstanding

Common Stock, $.001 par value                                38,368,652
<PAGE>

                                   SCIOS INC.
                                AND SUBSIDIARIES


PART I.  FINANCIAL INFORMATION


Item 1.   Financial Statements

<PAGE>

                                                       SCIOS INC.
                                                    AND SUBSIDIARIES

                                               Consolidated Balance Sheets
                                            (In thousands, except share data)
<TABLE>
<CAPTION>
     ASSETS                                                       September 30,        December 31,
                                                                      1998                 1997
                                                                  ------------         -----------
                                                                  (Unaudited)
<S>                                                               <C>                  <C>  
Current assets:                                                           
     Cash and cash equivalents                                         $11,034             $10,197
     Marketable securities                                               7,709              13,322
     Accounts receivable                                                 3,442               5,215
     Prepaid expenses                                                      381                 600
                                                                  ------------         -----------
       Total current assets                                             22,566              29,334

Marketable securities, non-current                                      63,587              41,181
Investment in affiliate                                                  9,050              10,537
Property and equipment, net                                             32,409              33,583
Other assets                                                             1,887               2,236
                                                                  ------------         -----------

TOTAL ASSETS                                                          $129,499            $116,871
                                                                  ------------         -----------

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                   $2,703              $1,685
     Other accrued liabilities                                           6,904              11,134
     Deferred contract revenue                                          12,562              11,652
     Current portion of long-term debt and capital leases                   16                 339
                                                                  ------------         -----------
       Total current liabilities                                        22,185              24,810

Long-term debt and capital leases                                       33,832              31,919
                                                                  ------------         -----------
       Total liabilities                                                56,017              56,729
                                                                  ------------         -----------

Stockholders' equity:
     Preferred stock; $.001 par value; 20,000,000
        shares authorized; none issued and outstanding                      --                  --
     Common stock; $.001 par value; 150,000,000
        shares authorized; issued and outstanding
        38,368,652 and 38,032,120, respectively                             38                  38
     Additional paid-in capital                                        416,044             411,045
     Treasury stock                                                     (2,292)             (4,758)
     Notes receivable from stockholders                                   (368)                (13)
     Unearned compensation, net                                           (597)                 --
     Net unrealized gains on securities                                  1,255                 288
     Accumulated deficit                                              (340,598)           (346,458)
                                                                   -----------         -----------
       Total stockholders' equity                                       73,482              60,142
                                                                  ------------         -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                       $129,499            $116,871
                                                                  ------------         -----------
</TABLE>

         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


<PAGE>

                                                        SCIOS INC.
                                                     AND SUBSIDIARIES

                                           Consolidated Statements of Operations
                                             (In thousands, except share data)
<TABLE>
<CAPTION>
                                                           Three months ended                     Nine months ended
                                                              September 30,                         September 30,
                                                         1998               1997               1998               1997
                                                    ---------------    ---------------    ---------------    ---------------
                                                                (Unaudited)                          (Unaudited)
<S>                                                 <C>                <C>                <C>                <C>   
Revenues:
      Product sales                                         $7,407             $8,750            $20,566            $22,446
      Co-promotion commissions                               1,436              1,381              4,691              4,500
      Research & development contracts                       4,747              2,445             32,220              4,841
                                                    ---------------    ---------------    ---------------    ---------------
                                                            13,590             12,576             57,477             31,787
                                                    ---------------    ---------------    ---------------    ---------------

Costs and expenses:
      Cost of goods sold                                     4,167              4,955             11,957             13,178
      Research and development                              10,071              8,261             32,535             32,200
      Marketing, general and administration                  4,985              4,941             14,178             15,289
      Profit distribution to third parties                     711              1,057              1,909              2,520
                                                    ---------------    ---------------    ---------------    ---------------
                                                            19,934             19,214             60,579             63,187
                                                    ---------------    ---------------    ---------------    ---------------

Loss from operations                                        (6,344)            (6,638)            (3,102)           (31,400)

Other income:
      Investment income                                      1,202              1,043              3,151              2,970
      Interest expense                                        (657)              (638)            (1,951)            (1,522)
      Realized gains (losses) on securities                    169                 --              8,246               (179)
      Other income, net                                        382                150                860                299
                                                    ---------------    ---------------    ---------------    ---------------
                                                             1,096                555             10,306              1,568

Equity in net loss of affiliates                              (518)              (346)            (1,343)            (1,482)
Minority interests                                              --                 --                 --                 77
                                                    ---------------    ---------------    ---------------    ---------------
      Net income (loss)                                    ($5,766)           ($6,429)            $5,861           ($31,237)
                                                    ---------------    ---------------    ---------------    ---------------

Earnings (loss) per common share:
      Basic                                                 ($0.15)            ($0.18)             $0.16             ($0.87)
                                                    ---------------    ---------------    ---------------    ---------------
      Diluted                                               ($0.15)            ($0.18)             $0.15             ($0.87)
                                                    ---------------    ---------------    ---------------    ---------------
      Weighted average number of 
         common shares outstanding
         used in calculation of:
      Basic                                             37,907,160         35,845,927         37,677,168         35,834,686
                                                    ---------------    ---------------    ---------------    ---------------
      Diluted                                           37,907,160         35,845,927         38,495,891         35,834,686
                                                    ---------------    ---------------    ---------------    ---------------

</TABLE>

                  The   accompanying   notes  are  an  integral  part  of  these
consolidated financial statements.

<PAGE>


                                   SCIOS INC.
                                AND SUBSIDIARIES
             Consolidated Statements of Comprehensive Income (Loss)
                        (In thousands, except share data)

<TABLE>
<CAPTION>

                                                           Three months ended                     Nine months ended
                                                              September 30,                         September 30,
                                                         1998               1997               1998               1997
                                                    ---------------    ---------------    ---------------    ---------------
                                                                (Unaudited)                          (Unaudited)
<S>                                                 <C>                <C>                <C>                <C>   
Net income (loss)                                   ($5,766)           ($6,429)           $5,861             ($31,237)

Unrealized gain on securities
      Holding gain arising during
        the period                                    1,140                203             1,241                  376
      Less: reclassification adjustment for
        gain included in net income (loss)              169                 --               274                   87
                                                    ---------------    ---------------    ---------------    ---------------
Net unrealized gain on securities                       971                203               967                  289
                                                    ---------------    ---------------    ---------------    ---------------

      Comprehensive income (loss)                   ($4,795)           ($6,226)           $6,828             ($30,948)
                                                    ---------------    ---------------    ---------------    ---------------

</TABLE>

                  The   accompanying   notes  are  an  integral  part  of  these
consolidated financial statements.

<PAGE>

                                                  SCIOS INC.
                                               AND SUBSIDIARIES

                                     Consolidated Statements of Cash Flows
                                                (In thousands)
<TABLE>
<CAPTION>

                                                                                  Nine months ended
                                                                                    September 30,
                                                                               1998               1997
                                                                            -----------        -----------
                                                                                     (Unaudited)
<S>                                                                         <C>                <C>   
Cash flows from operating activities:
   Net income (loss)                                                           $ 5,861           ($31,237)
   Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities:
      Depreciation and amortization                                              2,819              4,525
      Accrued long-term interest payable                                         1,913              1,275
      Equity in net loss of affiliates                                           1,343              1,482
      Minority interest                                                             --                (77)
      Change in assets and liabilities:
        Accounts receivable                                                      1,773               (944)
        Accounts payable                                                         1,018             (1,128)
        Other accrued liabilities                                               (4,230)            (3,172)
        Other                                                                      212                460
        Deferred contract revenue                                                  910              8,034
                                                                            -----------        -----------
             Net cash provided by (used in) operating activities                11,619            (20,782)
                                                                            -----------        -----------

Cash flows from investing activities:
   Purchases of property and equipment                                          (1,645)            (1,970)
   Proceeds from sale of investment in affiliate                                   144                 --
   Sales/maturities of marketable securities                                   212,029            220,220
   Purchases of marketable securities                                         (227,855)          (217,506)
                                                                            -----------        -----------
             Net cash provided by (used in) investing activities               (17,327)               744
                                                                            -----------        -----------

Cash flows from financing activities:
   Issuance of common stock and collection of notes receivable from
      stockholders, net                                                          7,448                 --
   Purchase of treasury stock                                                     (580)            (1,767)
   Payment of notes payable and capital leases                                    (323)              (227)
   Proceeds from notes payable and capital leases                                    0             30,000
                                                                            -----------        -----------
             Net cash provided by financing activities                           6,545             28,006
                                                                            -----------        -----------

Net increase in cash and cash equivalents                                          837              7,968
Cash and cash equivalents at beginning of period                                10,197              1,587
                                                                            ===========        ===========
Cash and cash equivalents at end of period                                    $ 11,034            $ 9,555
                                                                            ===========        ===========

Supplemental cash flow data:
   Cash paid during the period for interest                                        $38               $248
Supplemental disclosure of non-cash investing
   and financing:
   Change in net unrealized gains on securities                                  $ 967              $ 289
   Investment in affiliate                                                     $ 1,343            $ 4,949

</TABLE>

         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.

<PAGE>

                                   SCIOS INC.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements
                                   (unaudited)

1.       Basis of Presentation and Accounting Policies

                  The unaudited  consolidated financial statements of Scios Inc.
         ("Scios" or the "Company") reflect,  in the opinion of management,  all
         adjustments,  consisting  only of  normal  and  recurring  adjustments,
         necessary  to  present  fairly  the  Company's  consolidated  financial
         position at September 30, 1998 and the Company's  consolidated  results
         of operations for the three- and nine-month periods ended September 30,
         1998 and 1997. Interim-period results are not necessarily indicative of
         results of operations or cash flows for a full-year period.

                  These  financial  statements and the notes  accompanying  them
         should be read in conjunction  with the Company's annual report on Form
         10-K for the year ended December 31, 1997.  Investors are encouraged to
         review the Form 10-K for a broader discussion of the Company's business
         and the  opportunities  and risks  inherent in the Company's  business.
         Copies of the 10-K are available from the Company on request.

                  The  year-end  balance  sheet data were  derived  from audited
         financial  statements,  but do not include all disclosures  required by
         generally accepted accounting principles.

                  Effective  December  31,  1997,  the  Company  has adopted the
         provisions  of  Statement of Financial  Accounting  Standards  No. 130,
         "Reporting   Comprehensive   Income."  This   statement   requires  the
         disclosure of comprehensive  income and its components in a full set of
         general-purpose  financial statements.  Comprehensive income is defined
         as net income (loss) plus  revenues,  expenses,  gains and losses that,
         under generally accepted accounting  principles,  are excluded from net
         income (loss).  Specifically FAS 130 requires  unrealized holding gains
         and losses on the Company's  available-for-sale  securities,  which are
         currently reported  separately in stockholders'  equity, to be included
         in other  comprehensive  income.  Comprehensive  income  for the  third
         quarter ended  September 30, 1998 was a net loss of $4.8 million versus
         a net loss of $6.2  million  in the same  quarter  in 1997.  During the
         nine-month  period,  comprehensive  income  was  $6.8  million  in 1998
         compared to a net loss of $30.9 million in 1997.

                  Effective  December 31, 1997,  the Company  adopted  Financial
         Accounting  Standards No. 128 ("SFAS  128"),  "Earnings Per Share" and,
         accordingly,  all prior periods presented have been restated. Basic net
         income (loss) per share is calculated using the weighted average number
         of common shares outstanding for the period.  Diluted net income (loss)
         is calculated  using the weighted average number of common and dilutive
         common equivalent shares outstanding during the period.
<PAGE>

                  The  following   table  sets  forth  the  computation  of  the
         Company's  basic and diluted net income (loss) per share (in thousands,
         except per share amounts):

<TABLE>
<CAPTION>
                                                         Three months ended               Nine months ended
                                                            September 30,                    September 30,
                                                          1998            1997            1998            1997
         ------------------------------------------- --------------- --------------- --------------- ---------------
         <S>                                         <C>             <C>             <C>             <C>   
         Numerator

         Basic
            Net income (loss)                        $(5,766)        $(6,429)        $ 5,861         $(31,237)

         Diluted
            Net income (loss)                        $(5,766)        $(6,429)        $ 5,861         $(31,237)

         Denominator

         Basic
            Weighted average shares                   37,907          35,846          37,677           35,835
            Effect of dilutive securities:
              Employee stock options                     ---             ---             819              ---
                                                    ----------------------------------------------------------
            Weighted average shares and
              assumed conversions                     37,907          35,846          38,496           35,835
                                                    ----------------------------------------------------------
         Basic earnings (loss) per share             $ (0.15)        $ (0.18)         $ 0.16          $ (0.87)
                                                    ----------------------------------------------------------
         Diluted earnings (loss) per share           $ (0.15)        $ (0.18)         $ 0.15          $ (0.87)
                                                    ----------------------------------------------------------
</TABLE>

                  The outstanding options to purchase common stock were excluded
         from diluted  earnings  calculations  for the third quarter of 1998 and
         for the three- and nine-month  periods ended September 30, 1997 because
         inclusion of the options would have an anti-dilutive effect on earnings
         in these periods.


2.                Unearned Compensation

                  In September  1998, the Company  granted  shares of restricted
stock.  The shares vest over a two-year period provided that the recipient is
still employed by the Company.  The market value of the shares awarded totaled
$597,000 and has been recorded as a separate component of stockholder's equity. 
Unearned compensation is being amortized over the two-year period.


<PAGE>

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

         In accordance with Federal  securities law, the Company reminds readers
that the following discussion contains  forward-looking  statements about plans,
objectives,  future results and intentions of the Company. These forward-looking
statements are based on the current expectations of the Company, and the Company
assumes no obligation to update this information. Realization of these plans and
results involves risks and uncertainties, and the Company's actual results could
differ  materially  from the historical  results or future plans discussed here.
Factors that could cause or contribute to such differences  include, but are not
limited to, those items discussed below, as well as the considerations discussed
in the Company's Form 10-K for the year ended December 31, 1997.

Operating Results

         The Company had a net loss of $5.8 million for the  three-month  period
ended  September  30,  1998  compared  to a net  loss  of  $6.4  million  in the
corresponding  quarter of 1997.  For the nine-month  period ended  September 30,
1998,  net income was $5.9 million as compared to the net loss of $31.2  million
in 1997. For the nine-month period, the increase in net income was primarily due
to the increase in contract  revenue  from  signing an  agreement  with Bayer AG
("Bayer")  for  the  commercialization  of  the  Company's  product  Natrecor(R)
(nesiritide),  milestone  payments  from Novo Nordisk A/S ("Novo  Nordisk")  for
development  of  insulinotropin  and  contract  funding from Eli Lilly & Company
("Eli Lilly") and DuPont Pharmaceuticals ("Dupont") for the Alzheimer's research
programs.

         Total revenues for the three months ended September 30, 1998 were $13.6
million  versus $12.6 million for the  corresponding  quarter in 1997, and $57.5
million and $31.8 million for the  nine-month  periods ended  September 30, 1998
and 1997,  respectively.  The year-to-year increase was principally due to $20.0
million received from Bayer under the Natrecor  agreement,  receipt of milestone
payments  from Novo  Nordisk  related  to  development  of  insulinotropin,  and
increased funding for the Company's  Alzheimer's research program from Eli Lilly
and  DuPont.   Product  sales  from  psychiatric  products  under  license  from
SmithKline  Beecham  Corporation (the "SB Products")  decreased to $20.6 million
from $22.4 million for the nine-month periods ended September 30, 1998 and 1997,
and to $7.4 million from $8.8 million for the three months ended  September  30,
1998 and 1997,  respectively.  The Company  expects that sales of these products
will  continue to erode  because of  competition  from new market  entrants  and
generic drugs.  Revenue from  co-promotion  commissions was $1.4 million for the
third  quarter and $4.7 million for the first nine months of 1998.  Although the
revenue from  co-promotion  commissions  was little changed from the prior year,
there was a significant  change in the product line promoted by the Company.  In
April 1998, the Company entered into a new agreement with Janssen  Pharmaceutica
("Janssen")   for   the   co-promotion   of   Janssen's   product   Risperdal(R)
(risperidone).  In September  1998,  the Company  announced the signing of a new
agreement with SmithKline Beecham to co-promote Paxil(R) (paroxetine HCl) in the
United   States.   In  the  second   quarter,   the  Company  and   Ortho-McNeil
Pharmaceutical  agreed to terminate  their  co-promotion  contract for Haldol(R)
Decanoate because of new generic competition. In May 1998, the Company announced
the termination of the  co-promotion  agreement with  Wyeth-Ayerst  Laboratories
("Wyeth-Ayerst")  under  which  the  Company  had been  co-promoting  Effexor(R)
(venlafaxine HCl).

<PAGE>

         Total costs and expenses for the three- and  nine-month  periods  ended
September 30, 1998 were $19.9 million and $60.6  million,  respectively,  versus
$19.2  million and $63.2  million for the same periods in 1997.  For the current
quarter,  spending for research and  development  increased to $10.1  million in
1998 from $8.3 million in 1997,  and to $32.5  million from $32.2 million in the
nine-month periods ended September 30, 1998 and 1997. The year-to-year  increase
for the three-month period was primarily due to increased headcount and clinical
trials expenses.  For the three-month periods ended September 30, 1998 and 1997,
respectively,  marketing,  general and administration expenses increased to $5.0
million from $4.9 million.  For the nine-month periods,  expenses for marketing,
general and administration  decreased to $14.2 million from $15.3 million, which
was principally due to lower depreciation expenses for leasehold improvements in
1998 compared to 1997. The decreases in cost of goods and profit distribution to
third parties from 1997 to 1998 for both the three- and nine-month  periods were
the result of lower SB Product sales in 1998.

         Other income  increased to $1.1 million in the quarter ended  September
30, 1998 from $0.6 million in the comparable quarter of 1997. For the nine-month
periods  ended  September  30, 1998 and 1997,  other  income  increased to $10.3
million  from  $1.6  million.   The  increase  for  the  nine-month  period  was
principally  due to a gain on the sale of the Company's  entire  interest in its
subsidiary, Karo Bio AB ("Karo Bio"), a Swedish biotechnology company, through a
public stock offering completed in March 1998.  Following the sale of its stock,
the Company no longer has any financial interest in the results of Karo Bio. For
the  nine-month  periods  ended  September 30, 1998 and 1997,  interest  expense
increased due to interest on the loan from Genentech Inc.,  which was drawn down
at the end of the first quarter of 1997.

         The change in equity in the net loss of affiliates  for both the three-
and nine-month periods ended September 30, 1998, was the result of the Company's
share  of  losses  of  Guilford  Pharmaceuticals  Inc.,  in  which  it  has a 7%
ownership.

         The ability of the Company to achieve profitability depends principally
on the Company's success in developing and  commercializing its own products and
on its  ability  to  complete  agreements  with  third  parties  that  result in
additional revenue.  Among the factors that will determine the Company's success
in  commercializing  its products are: the  demonstrated  safety and efficacy of
products in  development;  the cost of and the time taken to  complete  clinical
trials and regulatory submissions; the timing and scope of regulatory approvals,
particularly   with  respect  to  the  Company's   lead   products   Natrecor(R)
(nesiritide)  and  Fiblast(R)  (trafermin);  the  Company's  ability to secure a
cost-effective  supply of  product;  the  Company's  success in  developing  and
implementing  cost effective sales and marketing  strategies,  either on its own
behalf  or in  partnership  with  other  companies;  and  the  level  of  market
acceptance if products are approved,  both at product  launch and over time. The
Company's  ability to raise  additional  revenue  through  third parties will be
dependent on the factors  described above, as well as other factors such as: its
success in marketing and selling the  third-party  products which it may acquire
the right to co-promote;  the disposition of various patent proceedings  related
to the protection of the Company's  potential  products;  the perceived value of
the  Company's  current  product  portfolio  and  research  programs  to outside
parties; and the success of third parties,  such as Bayer,  Wyeth-Ayerst (in the
United States and Europe),  Kaken  Pharmaceutical  Co., Ltd. (in Japan) and Novo
Nordisk in developing and commercializing certain of the Company's products.
<PAGE>

Year 2000 Computer Systems Compliance

         Many older computer  software programs refer to years in terms of their
final two digits only.  Such  programs may  interpret  the year 2000 to mean the
year 1900 instead.  If not corrected,  those  programs could cause  date-related
transaction  failures.  The Company has developed plans to address the potential
exposures  related to the impact on its  computer  systems for the year 2000 and
beyond.  A project team is continuing  its  assessment of key internal  computer
systems and is developing and  implementing  plans to correct the problems.  The
Company  expects the  assessment to be  successfully  completed  during 1999 and
believes  that with these plans,  the Year 2000 issue will not pose  significant
operational  problems for its computer systems.  However,  if such modifications
and conversions are not made, or are not completed in a timely fashion, the Year
2000 issue could have a material impact on the operations of the Company.

         In  addition  to risks  associated  with  the  Company's  own  computer
systems,  the Company has  relationships  with,  and is dependent  upon, a large
number of third  parties  that  provide  information,  goods and services to the
Company.  These include financial  institutions,  suppliers,  vendors,  research
partners and  governmental  entities.  If significant  third parties  experience
failures in their  computer  systems due to Year 2000  non-compliance,  it could
affect the Company's ability to process transactions or engage in similar normal
business  activities.  While some of these  risks are outside the control of the
Company,  the Company has  instituted a program to identify  key third  parties,
update contracts and address any non-compliance issues.

         The total cost of the Year 2000 systems  assessments and conversions is
funded through  operating  cash flows and the Company is expensing  these costs.
The  financial  impact of making the  required  system  changes  cannot be known
precisely  at this time,  but is not  expected to be  material to the  Company's
financial position, results of operations or cash flows.

Liquidity and Capital Resources

         Combined cash, cash equivalents and marketable securities (both current
and  non-current)  totaled  $82.3  million at September 30, 1998, an increase of
$17.6 million from December 31, 1997. The increase was due to $11.6 million from
operations  and $7.4  million  from the  exercise  of stock  options  and equity
purchases  partially offset by $1.6 million of property and equipment  purchases
and $0.6 million of treasury stock  purchases.  Included in the cash provided by
operating  activities  was $20.0 million  received from Bayer  immediately  upon
signing of the worldwide  strategic alliance to market Natrecor(R)  (nesiritide)
and $7.7 million received from the sale of all of the stock the Company owned in
Karo Bio.

         During the third quarter, the Company purchased  approximately  100,000
shares of the  Company's  common stock under its stock  repurchase  program.  In
October,  the Company announced that it had added $5.0 million to its repurchase
program and since that  announcement has bought an additional  229,000 shares of
its common stock in the open market during October.
<PAGE>

         The Company  expects to continue  to incur  losses  until it is able to
achieve significant product revenues from the sale of Natrecor(R)  (nesiritide).
Because  the Bayer agreement for  Natrecor(R)  (nesiritide) provides for sizable
milestone  payments  that are  dependent on  regulatory  approvals in the United
States and Europe,  quarter to quarter financial performance during the next few
years is expected to show significant fluctuation.  The Company's utilization of
current financial  resources will depend upon a number of factors.  With respect
to Natrecor(R) (nesiritide),  these factors include the success of Bayer and the
Company in securing  regulatory approval for the product and the level of market
acceptance  achieved.  For  additional  products or  indications,  these factors
include:  the timeliness and success of product  development  efforts,  clinical
trials,   manufacturing   capabilities,   regulatory   approvals   and   product
introduction  efforts.  Other contributing factors will be the Company's ability
to develop new revenue sources to support research and development  programs and
its success in marketing and promoting the products of third-parties that may be
licensed by the Company.

         The  Company's  cash  resources of $82.3 million at September 30, 1998,
together with revenues from product sales, collaborative agreements and interest
income,  proceeds  from the sale of stock  held as equity  investments,  and any
funding  from  existing  or future  debt  arrangements,  will be used to support
current and new clinical trials for proprietary  products under development,  to
support commercialization efforts for prospective products and for other general
purposes. The Company believes its cash resources will be sufficient to meet its
operating  and capital  requirements  for at least the next several  years.  Key
factors that will affect future cash use and the timing of the Company's need to
seek  additional  financing  include:  the results of the  Company's  partnering
efforts,  the rate of spending  required to develop the  Company's  products and
respond to changing  business  conditions,  the degree to which the Company will
incur  expenses  to launch  its  products  following  the  necessary  regulatory
approvals  and  the  net  contribution  produced  by the  Company's  ability  to
co-promote and market products for third parties.

         Over  the  long-term,  the  Company  will  need to  arrange  additional
financing   for  the  future   operation   of  its   business,   including   the
commercialization of products currently under development,  and it will consider
collaborative   arrangements  and  additional  public  or  private   financings,
including additional equity financings.  Factors influencing the availability of
additional  funding include,  but are not limited to, the Company's  progress in
product  development,  investor  perception of the  Company's  prospects and the
general conditions of the financial markets.

<PAGE>
Part II.  Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     None.    

(b)  Reports on Form 8-K

     Report on Form 8-K, dated October 27, 1998 (pursuant to Item 5) regarding
the Company's announcement of a new President and Chief Executive Officer.



<PAGE>

                                   SIGNATURES

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

                                            SCIOS INC.

November 12, 1998                   by:     /s/ Richard B. Brewer
                                        ------------------------------------
                                        Richard B. Brewer, President and CEO

November 12, 1998                   by:    /s/ David Southern
                                        ------------------------------------
                                        David Southern, Controller
                                        Chief Accounting Officer