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, 1996

                                       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.

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

          Delaware                                               95-3701481

                                   Scios Inc.
             2450 Bayshore Parkway, Mountain View, California 94040
                                  415-966-1550


         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                                35,881,277



<PAGE>


Part I. Financial Information

Item 1. Financial Statements.


<PAGE>


                           SCIOS INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                               September 30,          December 31,
                                                                                   1996                   1995
                                                                               --------------         ------------
ASSETS                                                                          (Unaudited)
<S>                                                                            <C>                     <C>    
Current assets:
     Cash and cash equivalents                                                        $2,604               $2,847
     Available-for-sale securities                                                    13,718               25,986
     Accounts receivable                                                               5,230                3,014
     Prepaid expenses                                                                    662                  869
                                                                               --------------         ------------
       Total current assets                                                           22,214               32,716

Available-for-sale securities, non-current                                            39,054               58,236
Investment in affiliates                                                               8,952                2,937
Property and equipment, net                                                           38,053               35,531
Other assets                                                                           2,672                2,130
                                                                               --------------         ------------

TOTAL ASSETS                                                                        $110,945             $131,550
                                                                               --------------         ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Notes payable to banks                                                           $3,000               $3,000
     Accounts payable                                                                  1,993                3,778
     Other accrued liabilities                                                         8,626                7,863
     Deferred contract revenue                                                         3,789                5,775
     Current portion of long-term debt                                                   590                  658
                                                                               --------------         ------------
       Total current liabilities                                                      17,998               21,074

Long-term debt                                                                           706                1,082

Stockholders' equity:
     Preferred stock; $.001 par value; 20,000,000 shares authorized;  issued and
        outstanding:
        12,632 and 16,053, respectively                                                   --                   --
     Common stock; $.001 par value; 150,000,000
        shares authorized; issued and outstanding:
        36,476,277 and 36,009,055, respectively                                           36                   36
     Additional paid-in capital                                                      404,263              399,155
     Treasury stock (595,000 and 250,000 shares, respectively)                        (2,569)                (967)
     Notes receivable                                                                    (13)                 (20)
     Unrealized gains (losses) on securities                                            (145)                 578
     Accumulated deficit                                                            (309,331)            (289,388)
                                                                               --------------         ------------
       Total stockholders' equity                                                     92,241              109,394
                                                                               --------------         ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $110,945             $131,550
                                                                               --------------         ------------
</TABLE>


                 See notes to 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,
                                                              1996             1995               1996              1995
                                                    ---------------    -------------    ---------------    --------------
                                                                 (Unaudited)                        (Unaudited)
<S>                                                 <C>                <C>              <C>                <C>    
Revenues:
      Product sales                                        $11,705           $8,289            $28,793           $29,846
      Co-promotion commissions                               2,204              563              4,490             1,605
      Research & development contracts                       2,641              548              6,543             3,393
                                                    ---------------    -------------    ---------------    --------------
                                                            16,550            9,400             39,826            34,844
                                                    ---------------    -------------    ---------------    --------------

Costs and expenses:
      Cost of goods sold                                     6,663            5,144             16,966            18,236
      Research and development                              11,129            7,654             28,914            22,379
      Marketing, general and administration                  5,106            4,725             13,996            13,648
      Profit distribution to third party                     1,668              844              3,585             3,410
                                                    ---------------    -------------    ---------------    --------------
                                                            24,566           18,367             63,461            57,673
                                                    ---------------    -------------    ---------------    --------------

Loss from operations                                        (8,016)          (8,967)           (23,635)          (22,829)

Other income:
      Investment income                                        728            1,267              2,490             4,030
      Realized gains (losses) on securities                    (35)             211               (135)             (173)
      Other income (expense), net                             (269)             112                 30               182
                                                    ---------------    -------------    ---------------    --------------
                                                               424            1,590              2,385             4,039

Equity in net gain (loss) of affiliates                      2,682             (887)             1,307            (2,697)
                                                    ---------------    -------------    ---------------    --------------
      Net loss                                             ($4,910)         ($8,264)          ($19,943)         ($21,487)
                                                    ---------------    -------------    ---------------    --------------

      Net loss per common share                             ($0.14)          ($0.23)            ($0.56)           ($0.61)
                                                    ---------------    --------------------------------    --------------

      Weighted average number of
         common shares outstanding                      35,931,277       36,005,126         35,885,377        35,469,524
                                                    ---------------    -------------    ---------------    --------------

</TABLE>


                 See notes to consolidated financial statements.



<PAGE>



                                   SCIOS INC.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                      Nine months ended
                                                                                         September 30,
                                                                                    1996               1995
                                                                                ------------        -----------
                                                                                         (Unaudited)
<S>                                                                             <C>                 <C>    
Cash flows from operating activities:
   Net loss                                                                      $(19,943)          $(21,487)
   Adjustments to reconcile net loss to net
   cash used by operating activities:
      Depreciation and amortization                                                 3,445              2,791
      Deferred contract revenue                                                    (1,986)             3,738
      Equity in net (gain) loss of affiliates                                      (1,307)             2,697
      Change in assets and liabilities:
        Accounts receivable                                                        (2,216)             1,694
        Prepaid expenses                                                              207                324
        Other assets                                                                 (542)              (286)
        Accounts payable                                                           (1,785)            (1,425)
        Other accrued liabilities                                                     763             (2,577)
                                                                               ------------        -----------
             Net cash used by operating activities                                (23,364)           (14,531)
                                                                               ------------        -----------

Cash flows from investing activities:
   Payments for property and equipment, net                                        (5,968)            (5,076)
   Sales and maturities of marketable securities                                  143,059            127,676
   Purchases of marketable securities                                            (112,331)          (136,929)
                                                                               ------------        -----------
             Net cash provided (used) by investing activities                      24,760            (14,329)
                                                                               ------------        -----------

Cash flows from financing activities:
   Issuance of common stock and collection
   of notes receivable from stockholders, net                                         407                515
   Purchase of treasury stock                                                      (1,602)                --
   Debt repayments                                                                   (444)              (457)
                                                                               ------------        -----------
             Net cash provided (used) by financing activities                      (1,639)                58
                                                                               ------------        -----------

Net decrease in cash and cash equivalents                                            (243)           (28,802)
Cash and cash equivalents at beginning of period                                    2,847             29,674
                                                                               ------------        -----------
Cash and cash equivalents at end of period                                        $ 2,604              $ 872
                                                                               ------------        -----------

Supplemental cash flow data:
   Cash paid during the period for interest                                         ($309)             ($154)
Supplemental disclosure of non-cash investing
   and financing:
   Net unrealized securities gains (losses)                                          (723)             2,687
   Investment in affiliate                                                        $ 4,708              $ 799

</TABLE>


                 See notes to 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  financial  position  at
         September  30, 1996 and the  Company's  results of  operations  for the
         three  and  nine-month  periods  ended  September  30,  1996 and  1995.
         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  thereto  should be read in
         conjunction  with the Company's annual report on Form 10-K for the year
         ended  December 31, 1995.  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.

2.       Litigation

         On May 25, 1995, the Company was served with three  complaints filed in
         the U.S.  District  Court for the Northern  District of  California  by
         three stockholders. The complaints, which were combined in August, 1995
         into a consolidated complaint,  allege violations of federal securities
         laws,  claiming  that  the  defendants  issued a  series  of false  and
         misleading  statements,  including  filings  with  the  Securities  and
         Exchange   Commission,   regarding  the  Company  and  clinical  trials
         involving one of its products, AURICULIN(R) anaritide ("AURICULIN(R)").
         The complaint sought  unspecified  compensatory  and punitive  damages,
         attorneys fees and costs.  On September 18, 1996,  the court  dismissed
         the complaint with prejudice.  Subsequent to the court's decision,  the
         plaintiffs have filed a motion to review the decision and arguments are
         scheduled to be heard in  mid-November,  1996. The Company  believes it
         has meritorious  defenses and intends to defend the lawsuit vigorously.
         The ultimate  outcome of this action  cannot  presently be  determined.
         Accordingly,  no  provision  for any  liability or loss that may result
         from   adjudication  or  settlement   thereof  has  been  made  in  the
         accompanying consolidated financial statements.

3.       Subsequent Events

         In October,  1996, the Company entered into a  collaboration  agreement
         with Wyeth-Ayerst, a division of American Home Products Corporation for
         the development and  commercialization  of Scios' FIBLAST(R)  trafermin
         ("FIBLAST(R)")  for the treatment of  neurological  and  cardiovascular
         disorders.  The two companies will  collaborate in the  development and
         commercialization  of FIBLAST(R) in North America,  while  Wyeth-Ayerst
         will have  exclusive  marketing  rights  outside of North  America  and
         certain  Pacific Rim  countries.  At signing,  Wyeth-Ayerst  made a $12
         million  payment to Scios which will be reported in the fourth quarter.
         In  addition,  Wyeth-Ayerst  has  provided a $12 million line of credit
         that  Scios  may  draw  on  to  fund   expansion   of  its   FIBLAST(R)
         manufacturing facility. Earlier in 1996, Wyeth-Ayerst and Scios entered
         into  a  co-promotion  agreement  for  Wyeth-Ayerst's   anti-depressant
         EFFEXOR(R)  (venlafaxine  HCL)  ("EFFEXOR(R)").  On September 30, 1996,
         American Home Products owned  1,579,000  shares or 4.4% of Scios common
         stock.


<PAGE>



Part I. Other Information

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

Operating Results

         The net loss for the quarter ended  September 30, 1996 was $4.9 million
compared to a net loss of $8.3 million in the corresponding quarter of 1995. For
the  nine-month  periods ended  September 30, 1996 and 1995, the net losses were
$19.9 million and $21.5 million, respectively. For both the three and nine-month
periods,  the decrease in net losses was primarily  due to higher  revenues from
co-promotion commissions,  research and development contracts and an increase in
the equity in affiliates.

         Total revenues for the three months ended September 30, 1996 were $16.6
million, versus $9.4 million for the corresponding period in 1995. Product sales
from psychiatric products under license from SmithKline Beecham Corporation (the
"SB Products") increased to $11.7 million from $8.3 million for the three months
ended September 30, 1996 and 1995,  respectively.  The increase in third quarter
1996 sales was the result of higher sales of ESKALITH  CR(R) and  PARNATE(R) and
inventory  restocking  after lower than expected  sales in the second quarter of
1996.  The increase in  co-promotion  commissions  resulted from sales growth of
HALDOL(R)  Decanoate  ("HALDOL(R)"),  a product  co-promoted  with  Ortho-McNeil
Pharmaceutical,  an affiliate of Johnson & Johnson.  Contract revenues increased
primarily  due to  receipt  of a  payment  from  Novo  Nordisk  A/S  of  Denmark
associated  with  Scios'   licensing  of  its   insulinotropin   technology  and
recognition of royalty income associated with the product approval of Gliadel(R)
wafer, a product licensed to Guilford Pharmaceuticals ("Guilford").

         For the nine months ended  September  30, 1996 and 1995,  revenues were
$39.8  million  and  $34.8  million,  respectively.  The  year-to-year  increase
resulted  from higher  revenue from  co-promotion  commissions  and research and
development  contracts which was partially offset by a decline in product sales.
The increase in contract  revenue from 1995 to 1996 for the  nine-month  periods
was the result of the third quarter items noted above, combined with a milestone
payment from Kaken Pharmaceutical Co., Ltd. for the Company's FIBLAST(R) product
and a one-time  payment  received  in the first  quarter of 1996  related to the
disposition of the Company's lung surfactant patent rights.

         Total costs and expenses for the three months ended  September 30, 1996
were $24.6 million  versus $18.4  million for the same period in 1995.  Spending
for  research  and  development  increased  to $11.1  million  in 1996 from $7.7
million in 1995 as a result of higher staffing levels, clinical trials costs and
drug  supply  purchases  to support  expanded  product  development  activities.
Expenses for marketing,  general and administration increased to $5.1 million in
1996  from  $4.7  million  in  1995.  The  third  quarter   increase  in  profit
distribution  to third  parties  from  1995 to 1996 was the  result of higher SB
Product sales.


<PAGE>


         Total costs and expenses for the nine months ended  September  30, 1996
were $63.5 million  versus $57.7  million for the same period in 1995.  Spending
for  research  and  development  increased  to $28.9  million in 1996 from $22.4
million in 1995 for the  reasons  noted in the  paragraph  above.  Expenses  for
marketing,  general and  administration  were $14.0 million and $13.6 million in
1996 and 1995, respectively.  Cost of goods sold decreased from 1995 to 1996 for
the nine-month  periods because of the lower SB Product sales,  while the profit
distribution  to third  parties  increased  slightly  because of higher  profits
associated with the SB Product sales.

         Other income  decreased to $0.4 million in the quarter ended  September
30, 1996 from $1.6 million in the comparable quarter of 1995. For the nine-month
periods  ended  September  30, 1996 and 1995,  other  income  decreased  to $2.4
million from $4.0 million.  The decrease for both periods was principally due to
lower investment income from the Company's marketable securities and an increase
in royalty expenses resulting from the higher research and development  contract
revenue. For the quarter, the decline in other income from 1995 to 1996 was also
due to a net loss on sales of  securities in 1996 versus a net gain for the same
period  in  1995.  The  increase  in  equity  in the net  gains  and  losses  of
affiliates,  for both the three and  nine-month  periods,  is the  result of the
Company's share of gains and losses of Guilford.  In 1996, Guilford has reported
operating profits versus operating losses in 1995.

         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.  The Company's success in commercializing  its own products
will depend on: the demonstrated safety and efficacy of products in development;
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,  AURICULIN(R),  NATRECOR(R)  BNP and  FIBLAST(R);  the
Company's ability to secure a cost-effective  commercial scale drug supply;  and
the level of market  acceptance of approved  products.  The Company's ability to
raise additional revenue through third parties will be dependent on: its success
in  marketing  and  selling  the SB  Products,  HALDOL(R),  EFFEXOR(R)  and  any
additional  third-party product rights which it may acquire;  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
Kaken  Pharmaceuticals in Japan, in developing and commercializing the Company's
products.

Liquidity and Capital Resources

         Combined cash, cash equivalents and marketable securities (both current
and  non-current)  totaled  $55.4  million at September  30, 1996, a decrease of
$31.7 million from  December 31, 1995.  The decrease was  attributable  to $23.4
million  used to fund  operating  activities,  $6.0  million for the purchase of
property and equipment,  $1.6 million for the  acquisition of treasury stock and
$0.7 million of unrealized losses on marketable securities during the nine-month
period.

         The Company has  experienced  net operating  losses since its inception
and  expects to continue  to incur  losses for at least the next two years.  The
Company's ability to achieve and sustain  profitability,  and therefore the rate
of utilization of the Company's current financial resources,  will depend upon a
number of  factors,  particularly  the  success  and  timeliness  of its product
development,  clinical  trials,  regulatory  approval  and product  introduction
efforts.  Other contributing factors will be the Company's success in developing
new revenue sources to support research and development programs and its success
in marketing and promoting the SB Products, HALDOL(R),  EFFEXOR(R) and any other
third-party products that may be in-licensed by the Company.

         The  Company's  cash  resources of $55.4 million at September 30, 1996,
together with revenues from product sales,  collaborative  agreements,  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
continuing research and development  programs,  to fund 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 two years.  Key  factors  which 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 and the timing
and amounts  realized from  licensing  and  partnering  activities,  the rate of
spending required to develop the Company's  products,  as well as its ability to
respond to changing business  conditions and the net contribution  obtained from
the Company's marketing of products for third parties.

         Over  the  long  term,  the  Company  may  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.

         Except for descriptions of historical information contained herein, the
matters  discussed  in this  Management's  Discussion  and Analysis of Financial
Condition  and Results of  Operations  section are  forward  looking  within the
meaning  of  the  Private  Securities  Litigation  Reform  Act  of  1995.  These
forward-looking  statements are based on current  expectations,  and the Company
assumes no obligation to update this information. As discussed, numerous factors
could  cause   actual   results  to  differ  from  those   described   in  these
forward-looking  statements. The Company cautions investors that its business is
subject to significant risks and uncertainties.





Item 6.  Exhibits and Reports on Form 8-K.

1.   Exhibits

     Exhibit 11.1.  Computation of Net Loss Per Share for the three months ended
                    September 30, 1996 and September 30, 1995

     Exhibit 11.2.  Computation  of Net Loss Per Share for the nine months ended
                    September 30, 1996 and September 30, 1995

2.   Reports on Form 8-K

     None


<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.

By:/s/ Richard L. Casey
       Richard L. Casey
       Chairman of the Board, President and CEO

Date:  November 13, 1996

By:/s/ Kevin McPherson
       Kevin McPherson
       Director of Finance (Chief Accounting Officer)

Date:  November 13, 1996

<PAGE>



                                INDEX TO EXHIBITS

                                   SCIOS INC.

                          Quarterly Report on Form 10-Q
                    For the Quarter Ended September 30, 1996

<TABLE>
<CAPTION>

Exhibit           Description                                          Method of Filing
<S>               <C>                                                  <C>    

11.1              Statement regarding computation of per               Filed electronically
                  share earnings for the three months ended            herewith
                  September 30, 1996 and September 30, 1995

11.2              Statement regarding computation of per               Filed electronically
                  share earnings for the nine months ended             herewith
                  September 30, 1996 and September 30, 1995

</TABLE>