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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549

                                  ___________
                                  FORM 10-K/A
                               (Amendment No. 1)
                                  ___________

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

                  For the fiscal year ended December 31, 2000

                                       OR

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


              For the transition period from ________ to ________

                        Commission File Number 0-11749

                                  ___________

                                   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.)


              820 West Maude Avenue, Sunnyvale, California 94086
                   (Address of principal executive offices)

      Registrant's telephone number, including area code: (408) 616-8200

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

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

                        Common Stock, $0.001 par value
                           Contingent Payment Rights

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

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

     The approximate aggregate market value of voting stock held by
nonaffiliates of the registrant as of March 16, 2001 was $737,569,844.

     As of March 16, 2001, 39,314,425 shares of the registrant's Common Stock
were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE
Documents                                                        Form 10-K Part
---------                                                        --------------

Definitive Proxy Statement with respect to the 2001 Annual Meeting of
Stockholders................................................................ III

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                               EXPLANATORY NOTE

     By filing this amendment to our Annual Report on Form 10-K for the year
ended December 31, 2000, Scios Inc. is amending the first bulletpoint of Part 1,
"Item 1. Business--Natrecor--Natrecor Clinical Trials--The VMAC Trial" of its
Annual Report on Form 10-K for the year ended December 31, 2000 to include the
percentage decreases in pulmonary capillary wedge pressure, or PCWP, for
patients treated with Natrecor and for the patients treated in the placebo group
after three hours of treatment in our VMAC clinical trial. This information was
inadvertently omitted from our Form 10-K filed with the Securities and Exchange
Commission on March 30, 2001. Other than the above-referenced change, the
information set forth below is identical to the information set forth under
"Item 1. Business" in our Annual Report on Form 10-K filed with the SEC on March
30, 2001.


                                    PART I

     In this Form 10-K, "Scios", "we"," us", and "our" refer to Scios Inc. The
following discussion contains forward-looking statements about our plans,
objectives and future results. These forward-looking statements are based on our
current expectations. We assume no obligation to update this information.
Realization of our plans and hoped for results involves risks and uncertainties,
and our actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed below in this Form 10-K for the year ended December
31, 2000, particularly in the section entitled "Risk Factors".


Item 1.  BUSINESS


Overview

     We are a biopharmaceutical company developing novel treatments for
cardiovascular and inflammatory diseases.  We are distinguished by our disease-
based technology platform, which integrates expertise in protein biology with
computational and medicinal chemistry to identify novel targets and protein-
based small molecule compounds for large markets with insufficient treatments.
Our lead product candidates include, Natrecor (nesiritide), for the treatment of
acute congestive heart failure, or acute CHF, for which we have filed a New Drug
Application, or NDA, with the FDA, and our p38 kinase inhibitor, SCIO-469, for
the treatment of inflammatory diseases such as rheumatoid arthritis, which is
currently in Phase Ib clinical trials.

     We were incorporated in California in 1981 under the name California
Biotechnology Inc. and reincorporated in Delaware in 1988.  We changed our name
to Scios Inc. in February 1992, and to Scios Nova Inc. in September 1992
following our acquisition of Nova Pharmaceuticals, Inc. We returned to using the
name Scios Inc. in March 1996. Since September 1999, our principal executive
offices have been located at 820 West Maude Avenue, Sunnyvale, California 94085.
Our telephone number is (408) 616-8200.

     Our corporate website is located at www.sciosinc.com. We do not intend for
information found on our website to be part of this document.

     We own various copyrights, trademarks and trade names used in our business
including the following: Natrecor(R), Gliadel(R) and Fiblast(R).  This document
also includes trademarks, service marks and trade names of other companies,
including the following:  Biodel(R), Enbrel(R), Remicade(R), Celebrex(R),
Vioxx(R), Tezosentan(R), Risperdal(R), Simdax(R), Paxil(R), Eskalith(R),
Eskalith CR(R), Stelazine(R), Thorazine(R) and Parnate(R).

Recent Developments

     Since December 31, 2000, the following significant developments have
occurred with respect to our business:

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Natrecor- for the treatment of acute CHF

     .    In January 2001, we filed an amendment to our NDA for Natrecor with
          the FDA. We believe the FDA will respond to our application by July
          2001.

     .    In January 2001, we entered into a marketing alliance with Innovex
          L.P. to commercialize Natrecor for the treatment of acute CHF. Innovex
          will deliver a wide range of sales and marketing solutions for us,
          including hiring, training and deploying a dedicated cardiology and
          emergency medicine sales force of approximately 180 salespeople.

p38 Kinase Inhibitor Program- SCIO-469 for the treatment of inflammatory
diseases

     .    In January 2001, we completed a Phase Ia trial of SCIO-469. The trial
          indicated that the drug is safe and well-tolerated when given as a
          single dose to healthy volunteers.

     .    In February 2001, we began a Phase Ib trial to evaluate the safety,
          tolerability and pharmacokinetics of multiple oral doses of SCIO-469.
          The results of this trial are expected in the second quarter of 2001.

Other Developments

     In March 2001, we and GlaxoSmithKline Corporation, or GSK, agreed to
terminate the exclusive marketing agreement relating to certain GSK psychiatric
products sold by us effective March 31, 2001. Under the agreement, the Company
will receive from GSK $4.0 million in 2001, $3.0 million in 2002 and $2.5
million in 2003. Approximately 40% of our total revenues in 2000 were derived
from these psychiatric products.

Our Lead Products in Development

     We currently have two lead products in clinical development: Natrecor for
the treatment of acute CHF, and SCIO-469, a novel small molecule compound for
the treatment of inflammatory diseases.

Natrecor

Congestive Heart Failure

     According to the 2001 American Medical Association Heart and Stroke
Statistical Update, five million Americans currently suffer from chronic CHF and
550,000 new cases of CHF will be diagnosed in the United States this year.
Annual expenditures for CHF are estimated to be $38 billion, including $23
billion for inpatient care.  CHF represents the largest single expenditure of
the Medicare system.

     Chronic CHF is characterized by a progressive loss in the heart's ability
to pump blood. It is attributable to weakening of the contractile cells of the
heart and accumulation of scar tissue. Different diseases can cause CHF,
including coronary artery disease, heart attacks, inflammation of the heart
tissue and diseases of the heart valves. Weakened heart muscle often results in
poor cardiac output because the heart is unable to empty blood adequately from
the ventricles to the circulation with each beat. Blood begins to back up and
pool in the ventricles, and the heart changes from its normal shape and becomes
enlarged. Subsequently, blood begins to back up into the blood vessels of the
lungs, causing marked increases in pulmonary vascular pressures. As pressure
increases, fluid moves from the pulmonary blood vessels into the air spaces,
causing pulmonary congestion. One frequently used measurement of pulmonary
vascular pressure is pulmonary capillary wedge pressure, or PCWP.

     CHF symptoms that result from the pooling of blood include dyspnea, or
shortness of breath, edema, or fluid

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retention, and swelling of the legs and feet. CHF symptoms that result from the
inefficiency of the heart to distribute or adequately pump oxygen-rich blood to
body tissues include fatigue and weakness as well as a loss of appetite. As the
disease progresses, these symptoms can severely impact the patient's quality of
life, such that even the ability to perform simple tasks, such as walking across
the room, becomes limited.

     In the early stages of CHF, the body activates several hormonal pathways
that help the heart compensate in the short-term but have adverse long-term
effects. These hormones, which include adrenalin, angiotensin II, aldosterone
and endothelin, stimulate the heart to beat faster and stronger, thicken the
wall of the heart and maintain blood pressure by constricting blood vessels and
stimulating the kidney to retain sodium. If these pathways remain activated over
a sustained period of time, the beneficial effects are lost and injurious
effects develop, contributing to an eventual deterioration of heart function.
Current medications and medications under development generally focus on one or
more of these hormonal pathways.

     Many CHF patients experience a rapid deterioration, or decompensation, of
their disease and require urgent treatment in the hospital.  This is called
acute CHF.  Acute CHF accounts for approximately one million hospital admissions
each year in the United States.  Acute CHF is the most frequent cause of
hospitalization in patients older than 65 years. In addition, patients suffering
from acute CHF have a five-year mortality rate of approximately 50%.  For more
than a decade, there have been no new FDA-approved drugs to treat acute CHF.

Current Treatments for Congestive Heart Failure

     While some cardiac risk factors such as smoking, high cholesterol, high
blood pressure, diabetes and obesity can be controlled with lifestyle changes,
the majority of patients with CHF require additional treatments to help manage
their disease. Current medications for the treatment of CHF, including
diuretics, inotropes, vasodilators and beta blockers, only focus on single
components of the diverse pathways contributing to CHF. Diuretics help the
kidneys rid the body of excess fluid, thereby reducing blood volume and the
heart's workload. Inotropes strengthen the heart's pumping action. Vasodilators,
such as ACE inhibitors, cause the peripheral arteries to dilate, making it
easier for blood to flow. Beta blockers slow the heart rate and reduce blood
pressure by blocking the effects of adrenalin.

     Upon arrival at the emergency room, patients who experience acute episodes
of CHF are typically treated with a combination of oxygen, morphine and
intravenous diuretics. A small percentage of patients respond to this initial
therapy and do not require admission to the hospital; however, the majority of
acute CHF patients require additional medical intervention and are admitted.
Additional acute CHF treatments may include intravenous administration of
inotropes, such as dobutamine, and vasodilators, such as nitroglycerin. While
each of these therapies assist in managing acute CHF, each also has inherent
limitations. Inotropes strengthen the contractility of the heart but increase
the incidence of cardiac arrhythmias, or irregular heartbeats, and are
associated with increased mortality. Intravenously administered nitroglycerin
requires careful monitoring and slow dosage increases in small increments,
resulting in delays in attaining positive responses in acutely ill patients.
Moreover, therapeutically effective doses of IV nitroglycerin are:

     .    unpredictable from patient to patient;

     .    very close to the toxic side effects of hypotension; and

     .    associated with increased tolerance or loss of effectiveness.

These complications of IV nitroglycerin often require the transfer of acute CHF
patients to more costly treatment units within the hospital, such as the cardiac
and intensive care units, in order to provide careful patient monitoring.

Natrecor: Our Solution for the Treatment of Acute Congestive Heart Failure

     Natrecor is a recombinant form of human b-type natriuretic peptide, or BNP,
a naturally occurring hormone in

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the body that aids in the healthy functioning of the heart. BNP is secreted by
the ventricles of the heart as a response to CHF. The advantage of Natrecor,
compared to existing forms of therapy for acute CHF, is that it works on
multiple components of the acute CHF disease pathway. In particular, Natrecor:

     .    dilates veins and arteries, decreasing the resistance against which
          the heart has to pump;

     .    stimulates the kidney to excrete excess fluid; and

     .    has been shown to oppose many of the long-term injurious factors
          presented by hormones such as adrenalin, angiotension II, aldosterone
          and endothelin.

     In clinical trials, Natrecor has also been shown to significantly improve
blood circulation and patient symptoms compared to IV nitroglycerin without the
need for labor-intensive monitoring, and its method of administration does not
require frequent dosing adjustments.  In addition, Natrecor is not associated
with any increase in the incidence of cardiac arrhythmia and demonstrates no
evidence of drug interactions with other agents used concurrently in the
treatment of acute CHF.

Natrecor Clinical Trials

     We have conducted numerous clinical trials evaluating Natrecor over the
past eight years. Approximately 1,000 patients have been treated with Natrecor
in 12 trials, including four pivotal efficacy trials. In all of these trials,
Natrecor administration has been associated with improved blood circulation and
vascular filling pressures in the heart and lungs. Each of the efficacy trials
further demonstrated statistically significant improvement of symptoms in acute
CHF patients.

     Amended NDA Submission Trials

     We have completed two trials since the submission of our original NDA, the
VMAC trial, or Vasodilation in the Management of Acute CHF, and the PRECEDENT
trial, or Prospective Randomized Evaluation of Cardiac Ectopy with Dobutamine or
Nesiritide Therapy, and form the basis of our amended NDA.

     The VMAC Trial.  We began enrollment in our VMAC study in July 2000 and in
October 2000, completed enrollment of 498 patients hospitalized for acute CHF in
the United States.  This trial compared the effects of Natrecor, IV
nitroglycerin or placebo, when individually added to standard therapy, such as
diuretics and inotropes.  The primary endpoints were a reduction in pulmonary
capillary wedge pressure, or PCWP - a measure of the pulmonary vascular pressure
of the heart, reflecting its workload - and improvement of the symptom of
shortness of breath.  The VMAC trial achieved both of its primary endpoints.
Key results of the VMAC trial that were presented in November 2000 at the annual
scientific meeting of the American Heart Association include:

     .    Natrecor produced a 20% decrease in PCWP at three hours, most of which
          occurred in the first 15 minutes, which was significantly better than
          a 7% decrease in PCWP at three hours for the placebo group;

     .    Natrecor improved shortness of breath significantly better than
          placebo;

     .    Natrecor decreased PCWP significantly faster and to a greater extent
          than IV nitroglycerin;

     .    Natrecor significantly improved breathing in patients receiving
          standard active therapy; in contrast, IV nitroglycerin did not
          significantly improve breathing in these patients;

     .    Natrecor-treated patients had significantly fewer adverse events than
          either placebo or IV nitroglycerin patients;

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     .    acute CHF patients experiencing active ischemia, which is impaired
          blood flow to the heart, showed no adverse side effects in response to
          Natrecor; and

     .    patients receiving Natrecor did not develop tolerance to the drug over
          time, consequently, unlike IV nitroglycerin, the effects of Natrecor
          were sustained through 24 hours at the same dosage.

     The PRECEDENT Trial.  The PRECEDENT trial compared Natrecor and dobutamine,
the most commonly used inotrope treatment for acute CHF.  Key results of the
PRECEDENT trial indicated that:

     .    Natrecor produced fewer cardiac arrythmias than dobutamine; and

     .    use of Natrecor was associated with fewer deaths than the use of
          dobutamine.

     Initial NDA Clinical Trials

     We conducted three pivotal Phase III clinical trials that were submitted to
the FDA in our original NDA for Natrecor.

     Trial 704.311. Trial 704.311 was our first Phase III clinical trial that we
conducted to evaluate the efficacy of Natrecor in patients with acute CHF.  In
this trial, we enrolled 103 patients who were treated with one of three
intravenously administered doses of Natrecor over a 24-hour period.  This trial
demonstrated that Natrecor produced significant improvements in PCWP and cardiac
pump function.  Results of this study were published in The Journal of the
American College of Cardiology in July 1999.

     Trial 704.325. Trial 704.325, our second Phase III clinical trial, was a
double-blind, placebo-controlled  trial which consisted of 127 patients and was
designed to determine the short-term efficacy of Natrecor with regard to
hemodynamic measures and symptoms.  In this trial, Natrecor demonstrated
statistically significant improvements in multiple symptoms of acute CHF, such
as severe shortness of breath and fatigue.  In addition, patients treated with
Natrecor also experienced improvements in blood circulation, vascular pressures
in the heart and lungs and cardiac pumping ability.  The results from this trial
were published in the July 2000 issue of The New England Journal of Medicine.

     Trial 704.326. In our third Phase III clinical trial, we enrolled 305
patients and demonstrated that Natrecor resulted in the rapid and statistically
significant improvement of the symptoms and clinical severity of acute CHF, when
compared to placebo. Patients not receiving Natrecor received one or more
standard intravenous drugs for acute CHF, most commonly dobutamine, milrinone or
nitroglycerin. The trial also compared Natrecor with standard intravenous agents
with respect to adverse events. The safety of Natrecor was demonstrated to be
equal to the safety of standard intravenous drugs for acute CHF. The trial also
demonstrated patients treated with Natrecor experienced a reduced need for
diuretics. The results from this trial were also published in the July 2000
issue of The New England Journal of Medicine.

     In each of these trials, Natrecor demonstrated efficacy with respect to
symptoms and hemodynamic parameters of acute CHF.  The most common adverse event
in the patients treated with Natrecor was dose-related hypotension, which was
usually asymptomatic.

     Current Clinical Trials

     In March 2001, we began a new clinical trial aimed at investigating the
potential pharmaco-economic impact of Natrecor in improving treatment and
outcomes for acute CHF patients.  This PROACTION trial, or Prospective
Randomized Outcomes Study of Acutely Decompensated Congestive Heart Failure
Treated Initially in Outpatients with Natrecor, is a pilot study designed to
compare the clinical effects, safety profile and costs of standard therapy plus
Natrecor to standard therapy plus placebo in 250 acute CHF patients treated in
the emergency room or an observation unit.  We expect to complete this study
during the third quarter of 2001.

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NDA Filings

     In April 1998, we submitted an NDA to the FDA for the use of Natrecor for
the treatment of acute CHF. This NDA was based on the efficacy trials, 704.311,
704.325 and 704.326. In January 1999, the Cardiovascular and Renal Advisory
Committee recommended that the FDA approve Natrecor for the treatment of acute
CHF. In April 1999, we received a non-approval letter from the FDA, requesting
that we conduct further studies with Natrecor. The FDA requested that in these
studies we demonstrate:

     .    the clinical utility of Natrecor as compared to the current standard
          of care vasodilator therapy, IV nitroglycerin;

     .    that Natrecor is safe in acute CHF patients experiencing active
          ischemia; and

     .    that the clinical benefits of Natrecor occur early after the
          initiation of therapy.

The VMAC trial was designed to address each of the issues raised by the FDA in
its non-approval letter.  The data from the VMAC study and the PRECEDENT study
were submitted to the FDA in our amendment to the NDA for Natrecor in January
2001.  We expect the FDA to respond to our amended NDA by July 2001.

p38 Kinase Inhibitor Program

The Immune System and Inflammation

     The immune system is composed of multiple cell types, including white blood
cells, each with a specific functional role.  This system is regulated by
cytokines, which are proteins produced by immune system cells.  When the body
encounters foreign material, or when tissue injury occurs, numerous enzymes in
the immune system are activated, causing the production of various inflammatory
cytokines such as interleukin-1, or IL-1, and tumor necrosis factor, or TNF.

     One class of the immune system's family of enzymes is the mitogen-activated
protein kinases, or MAP kinases.  The MAP kinases are a family of intracellular
signaling enzymes that are activated when cells are either stimulated or
stressed and mediate many beneficial and injurious cellular responses.  One of
the MAP kinases, p38 kinase, is responsible for increased production of IL-1,
TNF and the inflammatory enzyme cyclooxygenase-2, or COX-2.

     Autoimmune diseases occur when the immune system is abnormally activated
against its own body.  In the case of rheumatoid arthritis, the immune system is
activated against joint tissues.  White blood cells then invade the joint space,
and, when activated, produce IL-1, TNF and COX-2, which result in pain, swelling
and eventual destruction of the affected joints.  Other diseases that are
worsened by sustained high levels of TNF and IL-1 include inflammatory bowel
disease, CHF and neurodegenerative conditions such as Alzheimer's disease and
Parkinson's disease.

Current Therapy for Autoimmune and Inflammatory Diseases

     Currently, there is no cure or prevention for autoimmune disease. Optimal
medical management requires the early introduction of therapies in order to
prevent the long-term effects of the disease. In the case of rheumatoid
arthritis, long-term effects include irreversible joint damage and hypertrophy
of joint tissues limiting a patient's ability to move the affected joints.

     Traditionally, initial drug treatment of inflammatory diseases involves the
use of non-steroidal anti-inflammatory agents. Steroids, such as
glucocorticoids, are often added as the disease or symptoms progress. Although
these agents help patients increase function and improve symptoms, they do not
stop progression of the disease. Moreover, these drugs have been demonstrated to
cause both stomach and kidney problems. In addition,

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persistent steroid treatment may result in excess suppression of the immune
system, which can lead to infection, decreased bone marrow function and
osteoporosis. Recently, more selective anti-inflammatory agents, or COX-2
inhibitors, such as Celebrex and Vioxx, have been introduced for symptom relief;
however, they do not alter the progression of inflammatory disease. Sales of
COX-2 inhibitors for the treatment of inflammatory disease were approximately
$4.8 billion in 2000.

     More powerful drugs exist for patients that do not respond to initial drug
therapy.  In the case of rheumatoid arthritis, drugs such as methotrexate,
hydroxychloroquine and sulfasalazine can have individual side effects which must
be monitored closely, and a delay of one to six months for a clinical response
is common.

     Within the past four years, inhibition of inflammatory cytokines has become
an established treatment for autoimmune disease. In the case of rheumatoid
arthritis, two new protein therapeutics, Enbrel and Remicade, were introduced to
inhibit the effects of TNF. These treatments have been shown to be effective at
reducing disease activity; however, they must be given by injection or infusion
on a repeated basis, which is cumbersome for chronic diseases. In addition, when
taken on a chronic basis, increased rates of infections have been reported in
patients taking these medications because these new therapies result in an
excessive inhibition of TNF upon injection due to the limited ability to adjust
the dose of drug administered. Resistance to the treatment is also an issue with
these new drugs. This is due in part to increasing production by a patient's
immune system of antibodies that neutralize administered proteins.

     We are focusing our initial drug development efforts on creating an orally
available small molecule drug for the treatment of rheumatoid arthritis. The
Arthritis Foundation estimated that approximately 2.1 million Americans
currently suffer from rheumatoid arthritis. Decision Resources, an independent
market research group, suggests that the global market for rheumatoid arthritis
therapies will be approximately $6.6 billion by 2009, up from almost $1.5
billion in 1999.  Rheumatoid arthritis patients generate more than nine million
physician office visits and more than 250,000 hospitalizations each year.  It is
estimated that, in aggregate, the average yearly earnings deficits for all
working individuals with rheumatoid arthritis is approximately $6.5 billion.

SCIO-469: Our p38 Kinase Inhibitor for the Treatment of Inflammatory Diseases

     A small molecule inhibitor of p38 kinase may have advantages in the
treatment of inflammatory disease since it could inhibit the production of TNF,
IL-1 and COX-2. Our lead p38 kinase inhibitor is SCIO-469. We believe that
patients treated with a p38 kinase inhibitor could experience a reduction in
both the symptoms of rheumatoid arthritis and the progression of the disease. We
also believe another key potential advantage of our approach resides in the
ability of our oral product to be prescribed in a manner that allows for careful
dosage adjustment. Dosage adjustment may allow the physician to inhibit TNF
sufficiently to obtain a useful therapeutic effect without subjecting the
patient to the risk of infection associated with complete TNF inhibition.

     In preclinical studies of acute and chronic inflammatory arthritis, orally
administered doses of SCIO-469 reduced cellular production of COX-2 in a dose-
dependent manner and reduced COX-2 and TNF levels in whole blood assays.
Statistically significant reductions in inflammation also were observed in
animal models of arthritis.  In October 2000, we presented preclinical data
involving our p38 kinase inhibitors at the annual scientific meeting of the
American College of Rheumatology.  The study demonstrated that our p38 kinase
inhibitors had statistically significant anti-inflammatory effects in both acute
and chronic animal models of inflammation.

     In January 2001, we completed a Phase Ia trial of SCIO-469 in which single
oral doses were shown to be safe and well tolerated. This Phase Ia trial
enrolled 30 volunteers.  In February 2001, we initiated a Phase Ib clinical
trial with SCIO-469.  This Phase Ib trial is a double-blind, placebo-controlled,
multiple oral dose study to evaluate the safety and tolerability of multiple
doses of SCIO-469.  This trial is designed to enroll 20 healthy volunteers.  If
the results of our Phase Ib clinical trial are favorable, we plan to initiate a
Phase II trial in rheumatoid arthritis patients in the fourth quarter of 2001.
This will consist of testing the drug in patients with active disease,
evaluating for both safety and efficacy over a range of doses.

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Marketing and Sales

Natrecor

     Pre-launch Objectives

     In anticipation of possible FDA approval in July 2001, we are working to
position Natrecor for maximum market penetration in the United States at the
time of launch.  We are developing awareness for Natrecor among key target
audiences through a variety of tactical programs, including medical seminars,
continuing medical education programs, advisory boards and publications.  We
have identified and are developing relationships with physicians and nurses who
play a leading role in the diagnosis and treatment of CHF.  We intend for these
individuals to communicate the benefits of Natrecor through a series of medical
symposia and lecture programs.

     Our Agreement with Innovex

     In January 2001, we entered into a marketing alliance with Innovex, which
will deliver a wide range of sales and marketing solutions for us. We will lead
strategic and tactical planning for the sales and marketing of Natrecor, and we
will also maintain control over the clinical development for additional
indications for Natrecor. Innovex will identify, hire, train and deploy a
dedicated cardiology and emergency medicine sales force of approximately 180
people to launch Natrecor. Together with Innovex, we have established hiring,
training and deployment criteria for the sales force. Commencing three years
after Innovex begins to supply us with dedicated salespeople, we have the option
to acquire all or any portion of this sales force from Innovex for a fee upon 90
days notice.

     We will create a field support team of approximately 32 people. Twelve
scientific affairs managers have already been hired and trained and are
currently working in the field to build relationships with opinion-leading
cardiologists.  We have hired two area business directors and have begun the
recruitment efforts to hire and train 18 area business managers to support the
Natrecor sales force.

     PharmaBio, an affiliate of Innovex, has agreed to fund $30.0 million of our
costs to launch Natrecor over the first 24 months of Natrecor's
commercialization and to loan us up to $5.0 million. Of the $30.0 million, we
anticipate that $10.0 million will paid to us in 2001 following FDA approval of
Natrecor.  We will receive 100% of the revenues from sales of Natrecor.  In
turn, we will pay PharmaBio a declining royalty rate on those revenues for the
period from 2003 to 2007.  We also granted PharmaBio a warrant to purchase
700,000 shares of our common stock at an exercise price of $20.00 per share.

Licensing Arrangements with Third Parties

     We have licensed some of our product candidates to third parties, who are
now responsible for product development. Under these arrangements, we typically
receive a combination of upfront payments, milestone payments upon their
achievement of scientific and clinical benchmarks and royalties on commercial
sales of products by our partners.

     BNP Diagnostics. We have licensed to Biosite Diagnostics, Inc. and Abbott
Laboratories the right to use our patents on BNP for diagnostic purposes.
Biosite has developed and is currently marketing a point-of-care diagnostic test
for BNP levels in the United States and Europe. This test is used to identify
individuals with CHF or to monitor progression of their disease or their
response to treatment. We are currently receiving royalties from Biosite on the
sales of their diagnostic products. Abbott is continuing to develop its BNP
diagnostic product.

     In 1998, we entered into a cross-license agreement with Shionogi and Co.,
Ltd. under which we granted Shionogi a royalty-free, nonexclusive license to our
BNP patent rights for the diagnostic field. In exchange, Shionogi granted us a
royalty-bearing, exclusive license under Shionogi's BNP patents to develop
therapeutic products. For

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therapeutic products, we pay royalties on net sales for the life of the patent
in countries where Shionogi holds one or more BNP patents. In countries where
Shionogi has BNP patents pending, we are obligated to pay a reduced royalty on
the net sales of our therapeutic products until the earlier of the invalidity of
the BNP patents pending or four years from the commencement of sales in that
country of such therapeutic products.

     Fibroblast Growth Factor. FGF, a naturally-occurring protein, stimulates
the growth of new blood vessels. In November 1999, we granted a license to
Chiron Corporation covering rights to FGF in the areas not previously licensed
by us. We may receive up to $12.0 million in milestone payments upon Chiron's
completion of certain development objectives. In addition, we will receive
royalties based on sales of FGF products in countries where we hold patents.
Chiron has completed separate Phase II human clinical trials evaluating FGF as
treatment for coronary artery and peripheral vascular disease. In 1988, we
licensed our FGF technology to Kaken Pharmaceutical Co., Ltd. Kaken has an
approval pending in Japan to market an FGF-based product for the treatment of
recalcitrant dermal wounds. We will receive royalties on any sales of FGF
products by Kaken in Asia. We have also granted nonexclusive licenses under our
FGF patents and technology to Orquest, Inc., for the development of products for
the treatment of bone fractures.

     We are obligated to make payments to Organon International based on amounts
received by us upon commercialization of FGF. Approximately $218,000 remains to
be paid under this obligation, which stems from our 1989 reacquisition of
certain FGF rights previously licensed to Organon.

     Vascular Endothelial Growth Factor\\121\\. VEGF\\121\\ is a naturally-
occurring protein used to stimulate the growth of new blood vessels. In May
1996, we granted a license to GenVec, Inc. for the use of the gene encoding
VEGF\\121\\ in gene therapy products. GenVec is currently conducting clinical
trials of its BIOBYPASS angiogen which incorporates the use of our licensed
technology. This product is being evaluated to treat coronary artery disease and
peripheral vascular disease. We will receive royalties on any future sales of
these products.

     Glucagon-like Peptide-1. GLP-1 is a potent peptide that stimulates insulin
release when blood sugar levels are above normal. In 1988, we licensed from
Massachusetts General Hospital the exclusive use of certain patent applications
for GLP-1 and certain analogs upon which we will pay a royalty on any future
sales. In 1996, we granted Novo Nordisk A/S an exclusive license to our GLP-1
technology and the additional rights we acquired pursuant to the Massachusetts
General Hospital license. We will receive royalties on product sales made by
Novo Nordisk A/S. Novo Nordisk A/S is responsible for development activities for
GLP-1 and has initiated Phase II human clinical trials of a GLP-1 analog that
they are developing as a treatment for Type 2 diabetes.

     Alzheimer's Disease. We have separate research collaborations with Eli
Lilly and Company and with DuPont Pharmaceuticals Corporation to develop new
therapies for Alzheimer's Disease. The joint research phase of our collaboration
with DuPont ended in November 2000. DuPont is continuing its efforts to develop
a therapeutic for Alzheimer's disease based in part on our technology. The joint
research phase of our collaboration with Eli Lilly is fully funded by Eli Lilly
and has been extended through December 2001. We are entitled to receive
potential milestone payments if certain events are achieved, and Eli Lilly is
entitled to commercialize any resulting products subject to royalty payments to
us.

     Drug Delivery Systems. Prior to our acquisition of Nova Pharmaceutical
Corporation in 1992, Nova had been developing several drug delivery systems,
including the Gliadel implant to treat primary brain cancer. The Gliadel
technology was developed pursuant to a license agreement with the Massachusetts
Institute of Technology relating to MIT's Biodel drug delivery technology. We
licensed Gliadel to Guilford Pharmaceuticals Inc. in 1994.  Gliadel was approved
for marketing in the United States in 1996. We assigned our Biodel license
rights back to MIT, which will administer the licensing of this technology,
including the license with Guilford.  We and MIT are receiving royalty and
milestone payments under the license agreement with Guilford. We conducted the
Gliadel project on behalf of Nova Technology Limited Partnership, the limited
partnership that funded Nova's research and development on these projects.

                                       9
<PAGE>

Psychiatric Sales and Marketing Division

     Since 1990, our Psychiatric Sales and Marketing Division (PSMD) has had the
exclusive right to market certain products in the United States under an
agreement with GSK, including Eskalith and Eskalith CR, Thorazine, Stelazine,
and Parnate. GSK was responsible for the manufacture and distribution of these
products. As part of our agreement with GSK, we paid GSK 40% of our net profits
from sales of these products.

     From time to time, our PSMD has also marketed various psychiatric products
on behalf of other companies under co-promotion agreements. We were compensated
for our services based upon the number of sales calls we made. The last of these
other agreements ended as of March 31, 2001.

     In March 2001, we entered into an agreement with GSK under which GSK
reacquired the right to market the GSK products. This agreement is effective as
of March 31, 2001 and entitles us to receive payments from GSK of $4.0 million
in 2001, $3.0 million in 2002 and $2.5 million in 2003. Given our decision to
exit this line of business, we decided to terminate the employment of our part-
time sales force and certain full-time support personnel in this division.

Research and Development

     Our technical capabilities now include disease-based gene microarray,
bioinformatics, structural informatics, and state-of-the-art medicinal
chemistry, including computational chemistry modeling, all of which have added
to our traditional technical strengths in protein cloning and expression.

     In order to discover new pathways of disease, our research has assembled
tissue samples from a broad array of human and experimental diseases of the
cardiovascular system. We analyze these tissues for the expression of new genes
that may be involved in particular diseases.  We do this by a technique known as
microarray gene display, in which fluorescent tags identify which genes may be
up regulated or down regulated during the course of a particular disease. We
then apply commercial and proprietary software analysis to the sequence of these
genes  and to the patterns of their expression in order to highlight cellular
pathways that may be playing a particular role in a disease process.  This
process is known as bioinformatics.

     Particular attention is paid either to the presence of a known enzyme
participating unexpectedly in a disease process or to a novel enzyme.  Our
molecular biologists then express these candidate target enzymes in an activated
state as pure proteins and develop high throughput screening assays to discover
inhibitors of those enzymes within our chemical compound library, which we have
developed over the last several years. Applying the tools of structural
informatics, our protein chemists develop computer-based three-dimensional
structures of these enzymes that guide our chemists in developing lead
inhibitory molecules with respect to potency and selectivity. Once we have
brought a drug candidate to the optimum level of potency and safety, we test the
drug at both the cellular and animal level, again applying gene microarray
technology.  This allows the rapid evaluation of the drug for efficacy while
ensuring that potential toxicities are minimized before testing in the clinic.

     We are focused on diseases of the cardiovascular system, with a particular
emphasis on inflammation in both its acute and chronic forms and scarring as a
cause of chronic organ failure. Our research has emphasized an emerging family
of protein therapeutic targets known as protein kinases.  Kinases are naturally
occurring intracellular signaling "switches" that work by attaching phosphate
groups to other proteins, thereby activating cellular processes controlled by
those proteins, including the transcription of new proteins. While the vast
majority of protein kinases are engaged in beneficial work on behalf of the
cells of the body, medical research over the last decade has clearly
demonstrated that cellular pathways abnormally activated by certain kinases
contribute to both the symptoms and progression of many diseases. By applying
the most advanced technologies available with proprietary methodology, including
the development of gene analysis software, we have dedicated ourselves to the
identification of kinases participating in diseases within our strategic focus
and developing and testing inhibitors of those enzymes for potential therapeutic
value. The rapid preclinical and clinical development of our p38 kinase
inhibitor, SCIO-469, represents the initial

                                      10
<PAGE>

success of this innovative approach.

     Our aggregate research and development expense totaled $39.3 million in
2000, $34.3 million in 1999 and $46.6 million in 1998.

Manufacturing

     Our products are manufactured for us by third parties. In 1995, we entered
into an agreement with Biochemie GmbH in Austria for the manufacture of
Natrecor.  If Natrecor is approved by the FDA in 2001, we expect the agreement
to run through 2009.  Biochemie ships Natrecor in powder form to Abbott
Laboratories in McPherson, Kansas, where it is blended, filled and packaged for
shipment. We also maintain arrangements with several companies to manufacture
our p38 kinase inhibitor compounds and intend to enter into a long-term supply
relationship if our compounds continue to proceed through development.

Patents and Proprietary Rights

     We seek patent protection for proprietary technology and products in the
United States and abroad to prevent others from unfairly capitalizing on our
investment in research.  Other companies engaged in research and development of
new health care products also are actively pursuing patents for their
technologies.  We also rely upon trade secrets and know-how to reinforce our
competitive position.  However, trade secret protection will not preclude others
from independently developing technology similar to ours, nor can there be any
assurance that third parties who have signed confidentiality agreements with us
will honor those agreements.

     We currently own or hold exclusive rights to approximately 69 issued U.S.
patents and approximately 58 U. S. pending patent applications covering our
proprietary technology and products. We also own or hold exclusive rights to
foreign patents and patent applications corresponding to most of the U.S.
patents and patent applications in our portfolio. Our issued patents include
patents on Natrecor, certain of our p38 kinase inhibitors, FGF, VEGF121 and GLP-
1. Our proprietary position with respect to certain principal products under
development is described below. If a patent issues prior to marketing approval,
as has been the case with all of our issued patents to date, we can apply for
extension of the patent term for a limited period of time to make up for a
portion of the patent term lost to the regulatory approval period. The absence
of a patent covering products which we have licensed to third parties could
reduce the royalties due to us under the agreements with those parties.

     Natrecor. We have been issued United States, Canadian and European patents
covering the endogenous form of Natrecor, human BNP. Our U.S. patents on
Natrecor are subject to possible extension due to time taken up in the
regulatory approval process. We believe our key patent on Natrecor, which
currently expires in May 2009, may be extended to late 2013 or early 2014.
Pursuant to an exclusive license granted to us by Shionogi & Co., Ltd., we also
have the exclusive right to develop therapeutic products using BNP under certain
patents and applications on BNP originally filed by Daiichi Pharmaceutical Co.,
Ltd. and subsequently acquired by Shionogi. Although we were granted a Japanese
patent on BNP, the patent was revoked in 1998 in an opposition filed against the
patent by an unidentified party. The opposition did not challenge the
originality of our BNP discovery but based its challenge solely on an
interpretation of utility requirements for patentability peculiar to Japanese
patent law. We appealed the revocation to the Tokyo High Court. On March 13,
2001, the Tokyo high court affirmed the revocation. Because we believe the
decision is contrary to both Japanese precedent and patentability requirements
in the United States and Europe, we intend to appeal the revocation to the
Japanese Supreme Court. The decision does not affect our patent rights outside
of Japan, nor does the revocation impact our ability to exclusively market BNP
in Japan insofar as our exclusive license under the patent rights of Daiichi
includes several Japanese patents of Daiichi directed to BNP.

     p38 kinase inhibitors. We have filed a series of patent applications in the
United States covering the classes of p38 kinase inhibitors that we have
identified. To date, we have been issued two U.S. patents directed to certain of
these p38 inhibitors. These patents will expire in 2018, subject to possible
extension for FDA regulatory delays. While the classes of small molecule
compounds identified by our researchers appear to be unique, we are aware that
other

                                      11
<PAGE>

companies are also working to develop p38 kinase inhibitor compounds, and have
filed patent applications on and received patents covering certain classes of
compounds that these competing companies have identified, and covering various
aspects of identifying such compounds.

     FGF. After an interference with The Salk Institute for Biological Studies,
we were awarded a U.S. patent on DNA sequences, expression vectors, and
microorganisms used in the recombinant production of human basic FGF. Our basic
FGF patent will expire in 2012, and may be extended for FDA regulatory delays.
We also hold European patents on human basic FGF. Synergen, Inc., now owned by
Amgen Inc., has obtained patents directed to a form of FGF that we believe is
different from the form of FGF produced by us. A U.S. patent issued to Salk
contains claims directed to substantially pure mammalian basic FGF containing
the 146 amino acid sequence of bovine basic FGF or a naturally occurring
homologous sequence of another mammalian species. Although we have been advised
by counsel that the Salk patent would be invalid if read broadly enough to cover
our form of FGF, there is still risk that an assertion of this patent could
block our partners' ability to develop and market human basic FGF in the absence
of a license, or if such a license is granted, could reduce the royalty income
to us. We successfully opposed Salk's European patent, the revocation of which
is currently under appeal by Salk. Our European patent was opposed by Chiron and
Pharmacia. Our patent was upheld and both opponents appealed. As a result of our
license to Chiron, Chiron, who is also a licensee of Salk, withdrew from the
opposition against our European patent, and we have withdrawn from our
opposition against the Salk patent.

     In March 1994, we obtained a non-exclusive license to make, use and sell
FGF under a U.S. patent issued to Harvard University containing claims to
purified cationic (basic) FGF. The Harvard patent is based on a patent
application having a filing date earlier than the application which formed the
basis for the Salk patent. Sublicense rights under this patent are included in
the rights granted by us to our FGF licensees, Kaken and Chiron.

     VEGF\\121\\. Seven isoforms of human VEGF (hVEGF) are known, having 121,
145, 148, 165, 183, 189 and 206 amino acids, respectively. We believe that our
researchers were the first to identify, clone and produce by recombinant DNA
technology the 121 amino acid form of hVEGF (hVEGF\\121\\). hVEGF\\121\\ is the
only human VEGF isoform known not to bind to heparin. We own two U.S. patents
issued in 1993 covering hVEGF\\121\\, and in 1996 received a European patent
covering this VEGF isoform. Our U.S. patents on hVEGF121 will expire 2010 but
may be extended for FDA regulatory delays. We have patent applications pending
in Canada and Japan. Other companies and institutions, including Genentech,
Inc., Pharmacia and the Regents of the University of California, hold patents
and pending patent applications claiming various isoforms of hVEGF and certain
VEGF variants.

Competition

     For patients treated with acute CHF, many therapeutic options are
available. Currently used drugs fall into three main categories: vasodilators,
inotropes and diuretics. Natrecor would compete against both vasodilators and
inotropes in the acute CHF market. Many of these drugs are available in generic
formulation and have an associated low cost. In addition, milrinone, an
inotrope, is currently promoted by Sanofi-Synthelabo Inc. and is expected to
lose patent protection in November 2001. We intend to price Natrecor above the
cost of these existing drugs, which may harm our competitive position relative
to these drugs. We may not be able to compete effectively with these long-
standing existing forms of therapy.

     New drugs in development for the treatment of acute CHF would compete with
Natrecor if approved by the FDA or other regulatory agencies.  Tezosentan, a
non-selective endothelin receptor antagonist, is being developed by Actelion Ltd
and is currently being used in Phase III clinical trials as a vasodilator for
the treatment of acute CHF.  Abbott had previously submitted an NDA for Simdax,
a calcium sensitizer described as an inotrope, but withdrew the application in
2000. To our knowledge, Abbott has not announced its intent to refile an NDA for
Simdax.

     Current commercial competition for the inhibition of TNF in rheumatoid
arthritis includes injectible proteins such as Johnson and Johnson's Remicade
and Immunex Corporation's Enbrel. Current COX-2 inhibitors include Pharmacia's
Celebrex and Merck & Co., Inc.'s Vioxx.  In addition, many pharmaceutical
companies have expressed

                                      12
<PAGE>

interest in pursuing the development of p38 kinase inhibitors. We are unable to
determine if they are actively developing these compounds internally. If they
are developing these or similar products, several of these companies possess
both greater access to capital and research and development resources. We may be
unable to compete effectively with any of these development projects. We are
also aware that Vertex Pharmaceuticals is conducting Phase II clinical trials of
its p38 kinase inhibitor compound. If we are successful in developing our own
p38 kinase inhibitor compound we may face intense competition.

     We expect that competition for our products, when approved for sale, will
be based, among other things, on efficacy, reliability, product safety, price
and patent position. Our ability to compete effectively and develop products
that can be manufactured cost-effectively and marketed successfully will depend
on our ability to:

     .    advance our technology platforms;

     .    license additional technology;

     .    maintain a proprietary position in our technologies and products;

     .    obtain required government and other public and private approvals on a
          timely basis;

     .    attract and retain key personnel; and

     .    enter into corporate partnerships.

Our failure to achieve any of the above goals could impair our business.

Government Regulation

     Our industry is heavily regulated. Our research and development activities
and the production and marketing of our products are subject to extensive
regulation for safety and efficacy by numerous governmental authorities in the
United States and other countries. The procedure for seeking and obtaining the
required governmental approvals for a new product involves many steps, beginning
with animal testing to determine safety and potential toxicity. In addition,
extensive human clinical testing is required to demonstrate the efficacy,
optimal dose and safety of each product. The time and expense required to
perform clinical testing can far exceed the time and expense of developing the
product prior to clinical testing. Whether undertaken by us or our commercial
partners, the process of seeking and obtaining these approvals for a new product
is likely to take a number of years and involves the expenditure of substantial
resources. In addition, there can be no assurance that any of our products will
receive the necessary approvals on a timely basis, if at all.

     Even if initial FDA approval is obtained for a product, further studies may
be required to provide additional data or to gain approval for the use of a
product as a treatment for clinical indications other than those initially
targeted. Moreover, the FDA may reconsider its approval of any product at any
time and may withdraw such approval. In addition, before our products can be
marketed in foreign countries, they are subject to regulatory approval in such
countries similar to that required in the United States. Accordingly, numerous
factors will impact the timing, extent and value of any regulatory approvals
that may be obtained for our products, including changes in regulatory
requirements, which may either decrease or increase the burden on us, the level
of side effects exhibited by our products as compared to their beneficial
effects, the availability of adequate resources to regulatory agencies which
will impact the speed of regulatory review, and the prices we are able to charge
for our products.

     FDA regulations require that any drug to be tested in humans must be
manufactured according to current Good Manufacturing Practices, or cGMPs. The
cGMPs set certain minimum requirements for procedures, record-keeping and the
physical characteristics of the facilities used in the production of these
drugs. In addition, various foreign and U.S. federal, state and local laws and
regulations relating to safe working conditions, laboratory practices, the
experimental use of animals, and the storage, use and disposal of hazardous or
potentially hazardous substances, including

                                      13
<PAGE>

radioactive compounds and infectious disease agents, used in connection with our
research and manufacturing work are or may be applicable to such activities.
They include, among others, the United States Atomic Energy Act, the Clean Air
Act, the Clean Water Act, the Occupational Safety and Health Act, the National
Environmental Policy Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act, national restrictions on technology transfer,
import, export and customs regulations, and other present and possible future
foreign, federal, state and local regulations.

Employees

     We had 194 full-time employees as of December 31, 2000.  As of December 31,
2000, we also employed 94 part-time field sales representatives whose employment
has since been terminated in our psychiatric sales and marketing division.

                                      14
<PAGE>

RISK FACTORS

     You should carefully consider the risks described below before making an
investment decision. Our business, financial condition or results of operations
could be harmed by any of these risks. The risks described below are not the
only ones facing our company. Additional risks not presently known to us or that
we currently deem immaterial may also impair our business operations.

     This document also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risks faced
by us, including those described below and elsewhere in this document.

Risks Related to Natrecor (nesiritide)

If the U.S. Food and Drug Administration, or FDA, finds that our amended New
Drug Application, or NDA, for Natrecor does not support approval for marketing,
the commercialization of Natrecor may be delayed or prevented.

     In April 1999, the FDA issued us a non-approval letter for Natrecor.  To
address the FDA's concerns, we conducted a Phase III clinical trial; and in
January 2001, we submitted an amendment to our NDA seeking approval to market
Natrecor in the United States.  We are initially seeking FDA approval for use of
Natrecor as a treatment for acute congestive heart failure, or acute CHF.  The
FDA may not find our clinical data adequate to support Natrecor as a treatment
for acute CHF or any other disease.  Moreover, the FDA may require us to
commence and complete additional clinical trials to generate additional data to
support product approval for the treatment of acute CHF, which may lead to a
substantial delay in its approval of Natrecor or prevent Natrecor from being
approved for any medical use.

If Natrecor does not gain market acceptance, our business will suffer.

     Even if clinical trials demonstrate the safety and efficacy of Natrecor and
the necessary regulatory approvals are obtained, Natrecor may not gain market
acceptance among physicians, patients, healthcare payors and the medical
community.  We will need to educate doctors and other healthcare advisors of the
safety and clinical efficacy of Natrecor and its potential advantages over other
treatments.  The degree of market acceptance of Natrecor will also depend on a
number of factors, including:

     .    the degree of clinical efficacy and safety;

     .    cost-effectiveness of Natrecor;

     .    its advantage over alternative treatment methods; and

     .    reimbursement policies of government and third-party payors.

To the extent market acceptance of Natrecor is limited, our revenues may suffer.

If the FDA determines that our third-party manufacturing facilities are not
adequate, either before or after receipt of FDA marketing approval, we may lose
the ability to manufacture and sell Natrecor.

     As part of the NDA approval process and periodically thereafter, the FDA is
likely to inspect each of the facilities involved in manufacturing Natrecor.
Natrecor is manufactured for us by Biochemie GmbH, a subsidiary of Novartis, in
Austria and is shipped in powder form to Abbott Laboratories in McPherson,
Kansas where it is blended, filled and packaged for shipment.  Although each
facility has previously passed FDA inspections, future inspections

                                      15
<PAGE>

may find deficiencies in the facilities or processes that may delay or prevent
the manufacture or sale of Natrecor. Even if the FDA approves Natrecor for
marketing, the FDA will subsequently conduct periodic inspections of these
manufacturing facilities and, if deficiencies are identified, we may lose the
ability to supply and sell Natrecor for extended periods of time.

We rely on third-party manufacturers, and if they experience any difficulties
with their manufacturing processes, we may not obtain sufficient quantities of
Natrecor to assure availability.

     We rely on third parties for the manufacture of bulk drug substances and
final drug product for clinical and commercial purposes relating to Natrecor.
Biochemie GmbH is responsible for manufacturing Natrecor in bulk quantities and
Abbott Laboratories is responsible for blending, filling and packaging Natrecor,
and if they encounter problems in these processes, our revenues from future
sales of Natrecor could decrease. Natrecor is manufactured using industry
accepted recombinant manufacturing techniques which must be conducted under
strict controls and tight timelines. Natrecor is subject to strict quality
control testing during all phases of production and prior to its release to the
market. Any quality control testing failures could lead to a reduction in the
available supply of Natrecor. Biochemie depends on outside vendors for the
timely supply of raw materials used to produce our products, including Natrecor.
Once a supplier's materials have been selected for use in Biochemie's
manufacturing process, the supplier in effect becomes a sole or limited source
of that raw material due to regulatory compliance procedures. We depend on these
third parties to perform their obligations effectively and on a timely basis. If
these third parties fail to perform as required, our ability to deliver Natrecor
on a timely basis would be impaired.

     In addition, in the event of a natural disaster, equipment failure, power
failure, strike or other difficulty, we may be unable to replace our third party
manufacturers in a timely manner and would be unable to manufacture Natrecor to
meet market needs.

The success of Natrecor is highly dependent on our partner, Innovex L.P., a
division of Quintiles Transnational Corp., for marketing, promotion and sales
activities.

     We believe that for Natrecor to be widely adopted, the efforts of an
experienced sales force are needed. We have limited experience in managing or
operating a marketing organization.  Accordingly, we have entered into an
exclusive agreement with Innovex to co-promote, sell and distribute Natrecor in
the United States.  As part of our agreement with Innovex, we intend to build a
sales force of approximately 180 people solely dedicated to the sale of
Natrecor.  If Innovex and we fail to devote appropriate resources to promote,
sell and distribute Natrecor, sales of Natrecor could be reduced.  If Innovex
breaches or terminates its agreement with us or otherwise fails to conduct its
Natrecor-related activities in a timely manner or if there is a dispute about
its obligations, we may need to seek another partner.  In that event, we cannot
assure you that we will be able to obtain another partner on favorable terms, if
at all.

The failure of PharmaBio Development, Inc., an affiliate of Innovex, to fulfill
its obligation to partially fund the commercialization of Natrecor may affect
our ability to successfully market Natrecor.

     PharmaBio has agreed to fund $30.0 million of our costs to launch Natrecor
over the first 24 months of Natrecor's commercialization and to loan us up to
$5.0 million.  Of the $30.0 million, we anticipate that $10.0 million will be
paid to us in 2001 following FDA approval of Natrecor.  If PharmaBio breaches or
terminates its agreement with us or otherwise fails to fulfill its financial
obligations under the agreement and we are unable to secure alternative funding,
we may lose our ability to successfully market Natrecor.

In the area of acute CHF, we face competition from companies with substantial
financial, technical and marketing resources, which could limit our future
revenues from Natrecor.

     Many therapeutic options are available for patients with acute CHF.
Currently used drugs fall into three main categories:  vasodilators, inotropes
and diuretics.  Natrecor would compete against both vasodilators and inotropes
in the acute CHF market.  Many of these drugs are available in generic
formulation with an associated low

                                      16
<PAGE>

cost. In addition, milrinone, an inotrope, is currently promoted by Sanofi-
Synthelabo Inc. We may not be able to compete effectively with these long-
standing current forms of therapy. In addition, we will price Natrecor above the
cost of these existing drugs, which may harm our competitive position relative
to these drugs.

     New drugs in development for the treatment of acute CHF would also compete
with Natrecor if approved by the FDA or other regulatory agencies.  Tezosentan,
a non-selective endothelin receptor antagonist, is being developed by Actelion
Ltd and is currently being evaluated in Phase III clinical trials as a
vasodilator for the treatment of acute CHF.  In addition, Abbott had previously
submitted an NDA for Simdax, a calcium sensitizer described as an inotrope, but
withdrew the application in 2000. To our knowledge, Abbott has not announced its
intent to refile an NDA for Simdax.  If any such new drug in development is
approved by the FDA or other regulatory agencies, we may not be able to compete
effectively with these new forms of therapy.

If we fail to gain approval for Natrecor and our other product candidates in
international markets, our market opportunities will be limited.

     We have not yet filed for marketing clearance for the use of Natrecor or
any other product candidates in foreign countries, and we may not be able to
obtain any international regulatory approvals for Natrecor or any other product
we develop.  If we fail to obtain those approvals or if such approvals are
delayed, the geographic market for Natrecor or our other product candidates
would be limited.

We will require a partner to market and commercialize Natrecor and our other
product candidates in international markets.

     We plan to partner with other companies for the sale of Natrecor and our
other product candidates outside of the United States. We cannot assure you that
we will be able to enter into such arrangements on favorable terms or at all.
In addition, partnering arrangements could result in lower levels of income to
us than if we marketed our products entirely on our own.  In the event that we
are unable to enter into a partnering arrangement for Natrecor or our other
product candidates in international markets, we cannot assure you we will be
able to develop an effective international sales force to successfully market
and commercialize those products.  If we fail to enter into partnering
arrangements for our products and are unable to develop an effective
international sales force, our revenues would be limited.

If we fail to obtain additional marketing approvals from the FDA for the use of
Natrecor for additional therapeutic indications or if after approval such
approval is subsequently revoked, our revenues from Natrecor will suffer.

     In order to expand the medical uses, or therapeutic indications, for which
we may market Natrecor, we must successfully complete additional clinical trials
which could be lengthy and expensive and will require the allocation of both
substantial management and financial resources.  Thereafter, we will have to
apply separately to the FDA for clearance to market Natrecor for other
indications.  We cannot assure you that we will be able to successfully complete
the required clinical trials or that the FDA will approve Natrecor for any
additional indications.  In addition, even if Natrecor is approved by the FDA,
we cannot exclude the possibility that serious adverse events related to the use
of Natrecor might occur in the future, which could either limit its use or cause
the FDA to revoke our approval to market Natrecor.

Other Risks Related to Scios

We have a history of losses, expect to operate at a loss for the foreseeable
future and may never be profitable.

     We may not be able to achieve or earn a profit in the future. We began
operations in December 1981, and since that time, with the sole exception of
1983, we have not earned a profit on a full-year basis. Our losses have
historically resulted primarily from our investments in research and
development. As of December 31, 2000, we had an accumulated deficit of
approximately $411.4 million.

                                      17
<PAGE>

     To date, nearly all of our revenues have come from:

     .    one-time signing fees from our corporate partners under agreements
          supporting the research, development and commercialization of our
          product candidates;

     .    one-time payments from our corporate partners when we achieved
          regulatory or development milestones;

     .    research funding from our corporate partners; and

     .    our psychiatric sales and marketing division.

     We expect that our research, development and clinical trial activities and
regulatory approvals, together with future general and administrative activities
and the costs associated with launching and commercializing our product
candidates and launching and commercializing Natrecor in the United States, will
result in significant expenses for the foreseeable future.

If we fail to obtain the capital necessary to fund our operations, we may have
to delay or scale back some of our programs or grant rights to third parties to
develop and market our products.

     We will continue to expend substantial resources developing new and
existing product candidates, including costs associated with research and
development, acquiring new technologies, conducting preclinical studies and
clinical trials, obtaining regulatory approvals and manufacturing products. We
believe our current working capital and future payments, if any, from our
collaboration arrangements will be sufficient to meet our operating and capital
requirements for at least the next 12 months. Our need for additional funding
depends on a number of factors including:

     .    higher costs and slower progress than expected in developing product
          candidates and obtaining regulatory approvals, particularly for
          Natrecor;

     .    acquisition of technologies and other business opportunities that
          require financial commitments; or

     .    lower revenues than expected from the commercialization of our
          potential products.

     Additional funding may not be available to us on favorable terms, if at
all. We may raise funds through public or private financings, collaborative
arrangements or other arrangements. Debt financing, if available, may involve
covenants which could restrict our business activities. If we are unable to
raise additional funds through equity or debt financing when needed, we may be
required to delay, scale back or eliminate expenditures for some of our
development programs or grant rights to develop and market product candidates
that we would otherwise prefer to develop and market internally. If we are
required to grant such rights, the ultimate value of these product candidates to
us may be reduced.

Our operating results are subject to fluctuations that may cause our stock price
to decline.

     Our revenues and expenses have fluctuated significantly in the past. This
fluctuation has in turn caused our operating results to vary significantly from
quarter to quarter and year to year. We expect the fluctuations in our revenues
and expenses to continue, and thus, our operating results should also continue
to vary significantly. These fluctuations may be due to a variety of factors
including:

     .    the timing and realization of milestone and other payments from our
          corporate partners;

     .    the timing and amount of expenses relating to our research and
          development, product development and manufacturing activities; and

                                      18
<PAGE>

     .    the extent and timing of costs related to our activities to obtain
          patents on our inventions and to extend, enforce and/or defend our
          patents and other rights to our intellectual property.

     Because of these fluctuations, it is possible that our operating results
for a particular quarter or quarters will not meet the expectations of public
market analysts and investors, causing the market price of our common stock to
decline. We believe that period-to-period comparisons of our operating results
are not a good indication of our future performance, and you should not rely on
those comparisons to predict our future operating or share price performance.

We depend on our key personnel and we must continue to attract and retain key
employees and consultants.

     We depend on our key scientific and management personnel.  Our ability to
pursue the development of our current and future product candidates depends
largely on retaining the services of our existing personnel and hiring
additional qualified scientific personnel to perform research and development.
We also rely on personnel with expertise in clinical testing, government
regulation, manufacturing and marketing. Attracting and retaining qualified
personnel will be critical to our success. We may not be able to attract and
retain personnel on acceptable terms given the competition for such personnel
among biotechnology, pharmaceutical and healthcare companies, universities and
non-profit research institutions. Failure to retain our key scientific and
management personnel or to attract additional highly-qualified personnel could
delay the development of our product candidates and harm our business.

Other than Natrecor, our product candidates are at early stages of development,
and if we are unable to develop and commercialize these product candidates
successfully, we will not generate revenues from these products.

     To date, none of our product candidates has been commercialized. Other than
Natrecor, all of our product candidates are in early stages of development. We
face the risk of failure normally found in developing biotechnology products
based on new technologies. Successfully developing, manufacturing, introducing
and marketing our early-stage product candidates will require several years and
substantial additional capital.

Our operations depend on compliance with complex FDA and comparable
international regulations.  If we fail to obtain approvals on a timely basis or
to achieve continued compliance, the commercialization of our products could be
delayed.

     We cannot assure you that we will receive the regulatory approvals
necessary to commercialize our product candidates, which could cause our
business to fail. Our product candidates are subject to extensive and rigorous
government regulation by the FDA and comparable agencies in other countries. The
FDA regulates, among other things, the development, testing, manufacture,
safety, efficacy, record-keeping, labeling, storage, approval, advertising,
promotion, sale and distribution of biopharmaceutical products. If our potential
products are marketed abroad, they will also be subject to extensive regulation
by foreign governments. None of our lead product candidates has been approved
for sale in the United States or any foreign market. In addition, we have only
limited experience in filing and pursuing applications necessary to gain
regulatory approvals, which may impede our ability to obtain such approvals.

The results of preclinical studies and clinical trials of our products may not
be favorable.

     In order to obtain regulatory approval for the commercial sale of any of
our product candidates, we must conduct both preclinical studies and human
clinical trials. These studies and trials must demonstrate that the product is
safe and effective for the clinical use for which we are seeking approval. We
are currently conducting Phase Ib clinical trials of our lead p38 kinase
inhibitor small molecule compound. The results of these or other clinical trials
that we may conduct in the future may not be successful. Adverse results from
our current or any future trials would harm our business.

     We also face the risk that we will not be permitted to undertake or
continue clinical trials for any of our product candidates in the future. Even
if we are able to conduct such trials, we may not be able to satisfactorily
demonstrate that the products are safe and effective and thus qualify for the
regulatory approvals needed to market and sell them. Results

                                      19
<PAGE>

from preclinical studies and early clinical trials are often not accurate
indicators of results of later-stage clinical trials that involve larger human
populations.

Our products use novel alternative technologies and therapeutic approaches which
have not been widely studied.

     Many of our product development efforts focus on novel alternative
therapeutic approaches and new technologies that have not been widely studied.
These approaches and technologies may not be successful. We are applying these
approaches and technologies in our attempt to discover new treatments for
conditions that are also the subject of research and development efforts of many
other companies.

Rapid changes in technology and industry standards could render our potential
products unmarketable.

     We are engaged in a field characterized by extensive research efforts and
rapid technological development. New drug discoveries and developments in our
field and other drug discovery technologies are accelerating. Our competitors
may develop technologies and products that are more effective than any we
develop or that render our technology and potential products obsolete or
noncompetitive. In addition, our potential products could become unmarketable if
new industry standards emerge. To be successful, we will need to enhance our
product candidates and design, develop and market new product candidates that
keep pace with new technological and industry developments.

Many other companies are targeting the same diseases and conditions as we are.
Competitive products from other companies could significantly reduce the market
acceptance of our products.

     The markets in which we compete are well-established and intensely
competitive. We may be unable to compete successfully against our current and
future competitors. Our failure to compete successfully may result in pricing
reductions, reduced gross margins and failure to achieve market acceptance for
our potential products. Our competitors include pharmaceutical companies,
biotechnology companies, chemical companies, academic and research institutions
and government agencies.

     For example, many pharmaceutical and biotechnology companies have initiated
research programs similar to ours.  Many of these organizations have
substantially more experience and more capital, research and development,
regulatory, manufacturing, sales, marketing, human and other resources than we
do. As a result, they may:

     .    develop products that are safer or more effective than our product
          candidates;

     .    obtain FDA and other regulatory approvals or reach the market with
          their products more rapidly than we can, reducing the potential sales
          of our product candidates;

     .    devote greater resources to market or sell their products;

     .    adapt more quickly to new technologies and scientific advances;

     .    initiate or withstand substantial price competition more successfully
          than we can;

     .    have greater success in recruiting skilled scientific workers from the
          limited pool of available talent;

     .    more effectively negotiate third-party licensing and collaboration
          arrangements; and

     .    take advantage of acquisition or other opportunities more readily than
          we can.

     In addition, our product candidates, if approved and commercialized, will
compete against well-established existing therapeutic products that are
currently reimbursed by government health administration authorities, private
health insurers and health maintenance organizations. We face and will continue
to face intense competition from other companies for collaborative arrangements
with pharmaceutical and biotechnology companies, for relationships with

                                      20
<PAGE>

academic and research institutions and for licenses to proprietary technology.
In addition, we anticipate that we will face increased competition in the future
as new companies enter our markets and as scientific developments continue to
expand the understanding of various diseases. While we will seek to expand our
technological capabilities to remain competitive, research and development by
others may render our technology or product candidates obsolete or
noncompetitive or result in treatments or cures superior to any therapy
developed by us.

If we are unable to protect our intellectual property rights adequately, the
value of our potential products could be diminished.

     Our success is dependent in part on obtaining, maintaining and enforcing
our patents and other proprietary rights. Patent law relating to the scope of
claims in the biotechnology field in which we operate is still evolving and
surrounded by a great deal of uncertainty. Accordingly, we cannot assure you
that our pending patent applications will result in issued patents. Because
certain U.S. patent applications may be maintained in secrecy until a patent
issues, we cannot assure you that others have not filed patent applications for
technology covered by our pending applications or that we were the first to
invent the technology.

     Other companies, universities and research institutions have or may obtain
patents and patent applications that could limit our ability to use,
manufacture, market or sell our product candidates or impair our competitive
position. As a result, we may have to obtain licenses from other parties before
we could continue using, manufacturing, marketing or selling our potential
products. Any such licenses may not be available on commercially acceptable
terms, if at all. If we do not obtain required licenses, we may not be able to
market our potential products at all or we may encounter significant delays in
product development while we redesign potentially infringing products or
methods.

     In addition, although we own a number of patents, including issued patents
and patent applications relating to Natrecor and certain of our p38 kinase
inhibitors, the issuance of a patent is not conclusive as to its validity or
enforceability, and third parties may challenge the validity or enforceability
of our patents. We cannot assure you how much protection, if any, will be given
to our patents if we attempt to enforce them and they are challenged in court or
in other proceedings. It is possible that a competitor may successfully
challenge our patents or that challenges will result in limitations of their
coverage. In addition, the cost of litigation to uphold the validity of patents
can be substantial. If we are unsuccessful in such litigation, third parties may
be able to use our patented technologies without paying licensing fees or
royalties to us.

     Moreover, competitors may infringe our patents or successfully avoid them
through design innovation. To prevent infringement or unauthorized use, we may
need to file infringement claims, which are expensive and time-consuming. In
addition, in an infringement proceeding, a court may decide that a patent of
ours is not valid or may refuse to stop the other party from using the
technology at issue on the grounds that its technology is not covered by our
patents. Policing unauthorized use of our intellectual property is difficult,
and we cannot assure you that we will be able to prevent misappropriation of our
proprietary rights, particularly in countries where the laws may not protect
such rights as fully as in the United States.

     In addition to our patented technology, we also rely on unpatented
technology, trade secrets and confidential information. We may not be able to
effectively protect our rights to this technology or information. Other parties
may independently develop substantially equivalent information and techniques or
otherwise gain access to or disclose our technology. We require each of our
employees, consultants and corporate partners to execute a confidentiality
agreement at the commencement of an employment, consulting or collaborative
relationship with us. However, these agreements may not provide effective
protection of our technology or information or, in the event of unauthorized use
or disclosure, they may not provide adequate remedies.

If we fail to negotiate or maintain successful arrangements with third parties,
our development and marketing activities may be delayed or reduced.

     We have entered into, and we expect to enter into in the future,
arrangements with third parties to perform

                                      21
<PAGE>

research, development, regulatory compliance, manufacturing or marketing
activities relating to some or all of our product candidates. If we fail to
secure or maintain successful collaborative arrangements, our development and
marketing activities may be delayed or reduced. We may be unable to negotiate
favorable collaborative arrangements that, if necessary, modify our existing
arrangements on acceptable terms.

     Most of our agreements can be terminated under certain conditions by our
partners. In addition, our partners may separately pursue competing products,
therapeutic approaches or technologies to develop treatments for the diseases
targeted by us or our efforts. Even if our partners continue their contributions
to the collaborative arrangements, they may nevertheless determine not to
actively pursue the development or commercialization of any resulting products.
Also, our partners may fail to perform their obligations under the collaborative
arrangements or may be slow in performing their obligations. In these
circumstances, our ability to develop and market potential products could be
severely limited.

Risks Related to our Industry

We face uncertainties over reimbursement and healthcare reform.

     In both domestic and foreign markets, future sales of our potential
products, if any, will depend in part on the availability of reimbursement from
third-party payors such as government health administration authorities, private
health insurers and other organizations. Third-party payors are increasingly
challenging the price and cost-effectiveness of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly-approved
health care products. Even if we were to obtain regulatory approval, our product
candidates may not be considered cost-effective and adequate third-party
reimbursement may not be available to enable us to maintain price levels
sufficient to realize an appropriate return on our investments in product
development. Legislation and regulations affecting the pricing of
pharmaceuticals may change before any of our product candidates is approved for
marketing. Adoption of such legislation and regulations could further limit
reimbursement for medical products and services. If the government and third-
party payors fail to provide adequate coverage and reimbursement rates for our
potential products, the market acceptance of our products may be adversely
affected.

We may be required to defend lawsuits or pay damages in connection with the
alleged or actual harm caused by our product candidates.

     We face an inherent business risk of exposure to product liability claims
in the event that the use of our product candidates is alleged to have resulted
in harm to others. This risk exists in clinical trials as well as in commercial
distribution. In addition, the pharmaceutical and biotechnology industries in
general have been subject to significant medical malpractice litigation. We may
incur significant liability if product liability or malpractice lawsuits against
us are successful. Although we maintain product liability insurance, we cannot
be sure that this coverage is adequate or that it will continue to be available
to us on acceptable terms.

We use hazardous materials in our business, and any claims relating to improper
handling, storage or disposal of these materials could harm our business.

     Our research and development activities involve the controlled use of
hazardous materials, chemicals, biological agents and radioactive compounds. We
are subject to federal, state and local laws and regulations governing the use,
manufacture, storage, handling and disposal of such materials and certain waste
products. Although we believe that our safety procedures for handling and
disposing of such materials comply with the standards prescribed by such laws
and regulations, the risk of accidental contamination or injury from these
materials cannot be completely eliminated. In the event of such an accident, we
could be held liable for any resulting damages, and any such liability could
exceed our resources. We may be required to incur significant costs to comply
with these laws in the future. Failure to comply with these laws could result in
fines and the revocation of permits, which could prevent us from conducting our
business.

                                      22
<PAGE>

Our stock price continues to experience large fluctuations, and you could lose
some or all of your investment.

     The market price of our stock has been and is likely to continue to be
highly volatile. These price fluctuations have been rapid and severe. The market
price of our common stock may fluctuate significantly in response to the
following factors, most of which are beyond our control:

     .    variations in our quarterly operating results;

     .    changes in securities analysts' estimates of our financial
          performance;

     .    changes in market valuations of similar companies;

     .    announcements by us or our competitors of significant contracts,

     .    acquisitions, strategic partnerships, joint ventures or capital
          commitments;

     .    additions or departures of key personnel;

     .    future sales of common stock;

     .    announcements by us or our competitors of technological innovations of
          new therapeutic products, clinical trial results and developments in
          patent or other proprietary rights;

     .    announcements regarding government regulations, public concern as to
          the safety of drugs developed by us or others or changes in
          reimbursement policies; and

     .    fluctuations in stock market price and volume, which are particularly
          common among securities of biopharmaceutical companies.

We are at risk of securities class action litigation.

     In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially relevant for us because biotechnology companies have
experienced greater than average stock price volatility in recent years. Several
years ago, we were the subject of a securities class action lawsuit, which was
eventually dismissed with a determination that the plaintiffs had no basis for
their claim. If we face such litigation in the future, it could result in
substantial costs and a diversion of management's attention and resources, which
could harm our business.

We have implemented provisions in our charter documents that may ultimately
delay, discourage or prevent a change in our management or control of us.

     Our certificate of incorporation and bylaws contain provisions that could
make it more difficult for our stockholders to replace or remove our directors
or to effect any other corporate action. These provisions include those which:

     .    prohibit holders of less than ten percent of our outstanding capital
          stock from calling special meetings of stockholders;

     .    prohibit stockholder action by written consent, thereby requiring
          stockholder actions to be taken at a meeting of our stockholders; and

     .    establish advance notice requirements for nominations for election to
          the board of directors or for proposing matters than can be acted upon
          by stockholders at stockholder meetings.

                                      23
<PAGE>

Moreover, our certificate of incorporation does not provide for cumulative
voting in the election of directors, which would otherwise allow less than a
majority of stockholders to elect director candidates.

     Some of the above provisions may also have possible anti-takeover effects,
which may make an acquisition of us by a third party more difficult, even if
such an acquisition could be beneficial to our stockholders.  In addition, our
certificate of incorporation also authorizes us to issue up to 20,000,000 shares
of preferred stock in one or more different series with terms to be determined
by our board of directors at time of issuance.  As of December 31, 2000, an
aggregate of 71,053 shares of preferred stock had been authorized for issuance
by the board of directors and 4,991 shares were issued and outstanding.
Issuance of other shares of preferred stock could also be used as an anti-
takeover device.

MANAGEMENT

Executive Officers

  Our executive officers and their ages at January 30, 2001 are as follows:

<TABLE>
<CAPTION>
Name                            Age                              Position
----                            ---                              --------
<S>                            <C>    <C>
Richard B. Brewer............     49  President, Chief Executive Officer and Director
George F. Schreiner, M.D.....     51  Chief Scientific Officer
David W. Gryska..............     44  Senior Vice President, Finance and Chief Financial Officer
John H. Newman...............     50  Senior Vice President, General Counsel and Secretary
Patricia Baldwin, Ph.D.......     45  Vice President, Quality and Product Development
Thomas L. Feldman............     50  Vice President, Sales and Marketing
Darlene P. Horton, M.D.......     39  Vice President, Medical Affairs
</TABLE>

     Richard B. Brewer joined Scios in September 1998 as President, Chief
Executive Officer and Director on our Board of Directors. From February 1996 to
June 1998, he served as our Executive Vice President of Operations and then
Chief Operating Officer of Heartport, Inc., a medical device company. From 1984
to 1995, Mr. Brewer served in various capacities for Genentech Europe Ltd.,
Genentech Canada, Inc. and Genentech, Inc., most recently as Senior Vice
President, U.S. Sales and Marketing. Mr. Brewer holds a B.S. from Virginia
Polytechnic Institute and a M.B.A. from Northwestern University.

     Dr. George F. Schreiner joined Scios in January 1997 as Vice President,
Cardiorenal Research. He became our Chief Scientific Officer in August 2000,
responsible for leading our research group.  From 1980 to 1992, Dr. Schreiner
served on the faculties of Harvard Medical School and Washington University
School of Medicine and in 1993 joined CV Therapeutics, Inc., a biopharmaceutical
company, as Vice President, Medical Science and Preclinical Research. Dr.
Schreiner holds an M.D. from Harvard Medical School and a Ph.D. in Immunology
from Harvard University.

     David W. Gryska joined Scios in December 1998 as Vice President of Finance
and Chief Financial Officer and became our Senior Vice President of Finance in
November 2000. From 1993 to December 1998, Mr. Gryska was Vice President,
Finance and Chief Financial Officer of Cardiac Pathways Corporation, a medical
device company. Mr. Gryska was with Ernst & Young LLP from 1982 to 1993 and
served as a partner from 1989-1993.

     John H. Newman joined Scios in 1983 as Vice President, General Counsel and
Secretary, and became our Vice President of Commercial Development, General
Counsel and Secretary in 1989, our Vice President of Legal Affairs, General
Counsel and Secretary in 1992 and our Senior Vice President, General Counsel and
Secretary in February 1998. Prior to joining Scios, Mr. Newman was an attorney
in private practice.

     Dr. Patricia Baldwin joined Scios in 1986 as a Scientist in the Novel Drug
Delivery Department.  In 1990, she

                                      24
<PAGE>

moved to the Pharmaceutical Research and Development Department and in 1995, Dr.
Baldwin became our Director of Analytical Chemistry. In September 1999, she
became our Senior Director of Analytical Methods and Quality Control and then,
in March 2000, Dr. Baldwin was promoted to our Vice President, Quality and
Product Development. Dr. Baldwin received a B.S. in Chemistry from Stanford
University and a Ph.D. in Chemistry from University of California, Berkeley.

     Thomas L. Feldman joined Scios in 1995 as Vice President of Commercial
Operations and in November 1999, became our Vice President, Sales and Marketing.
Prior to joining Scios, Mr. Feldman was responsible for sales and marketing
activities at pharmaceutical companies affiliated with Johnson & Johnson. From
1993 through 1994, Mr. Feldman was National Sales Manager at Ortho
Pharmaceutical Corporation. From 1973 to 1993, Mr. Feldman held various sales
and marketing positions at McNeil Pharmaceutical, where he most recently served
as National Sales Manager from 1990 to 1993.

     Dr. Darlene P. Horton joined Scios in July 1996 and is responsible for
directing and managing our clinical research programs. In August 2000, Dr.
Horton was appointed our Vice President, Medical Affairs. Prior to joining
Scios, she was a Pediatric Cardiology Fellow at UCSF's Cardiovascular Research
Institute, and she remains on the clinical faculty at the University of
California, San Francisco. Dr. Horton received a B.S. in Microbiology and an
M.D. from the University of Florida in Gainesville.

                                      25
<PAGE>

                                  SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   SCIOS INC.
Date: May 29, 2001                 By:       /s/ Richard B. Brewer
                                             --------------------------
                                                   Richard B. Brewer
                                         President and Chief Executive Officer

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