<PAGE>

                                    FORM 1O-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

         [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934
         For the quarterly period ended March 31, 2002

                                       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 0-19732
                                -------

                           CORVAS INTERNATIONAL, INC.
             (Exact name of Registrant as specified in its charter)

          DELAWARE                                               33-0238812
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                             3030 SCIENCE PARK ROAD
                           SAN DIEGO, CALIFORNIA 92121
              (Address of principal executive offices and zip code)

                                 (858) 455-9800
              (Registrant's telephone number, including area code)

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

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

                         Common Stock, $0.001 par value
                                (Title of class)

         Indicate by check mark whether the Registrant (l) 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
                               -------     -------

         At May 8, 2002, there were 27,507,407 shares of Common Stock, $0.001
par value, of the Registrant issued and outstanding.

<PAGE>

<TABLE>
                                        CORVAS INTERNATIONAL, INC.

                                                  INDEX
<CAPTION>

                                                                                                     Page
                                                                                                     ----
<S>               <C>                                                                                 <C>
                                     PART I -- FINANCIAL INFORMATION

     Item 1.      Financial Statements

                  Condensed Balance Sheets as of March 31, 2002 (unaudited)
                  and December 31, 2001                                                                1

                  Condensed Statements of Operations for the Three Months
                  Ended March 31, 2002 and 2001 (unaudited)                                            2

                  Condensed Statements of Cash Flows for the Three Months
                  Ended March 31, 2002 and 2001 (unaudited)                                            3

                  Notes to Condensed Financial Statements (unaudited)                                  4

     Item 2.      Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                                                  5

     Item 3.      Quantitative and Qualitative Disclosures About Market Risk                          10

                  Risk Factors                                                                        10

                                       PART II -- OTHER INFORMATION

     Item 1.      Legal Proceedings                                                                   19

     Item 2.      Changes in Securities                                                               19
                         None

     Item 3.      Defaults Upon Senior Securities                                                     19
                         None

     Item 4.      Submission of Matters to a Vote of Security Holders                                 19
                         None

     Item 5.      Other Information                                                                   19
                         None

     Item 6.      Exhibits and Reports on Form 8-K
                  (a)    Exhibits                                                                     19
                         None

                  (b)    Reports on Form 8-K                                                          19
                         None

SIGNATURES                                                                                            20

</TABLE>
<PAGE>

                         PART I -- FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

                           CORVAS INTERNATIONAL, INC.
                            CONDENSED BALANCE SHEETS
                                  In thousands
                                   (unaudited)

                                                      MARCH 31,     DECEMBER 31,
                                                         2002          2001
                                                      ----------    ----------

ASSETS
------

Current assets:
    Cash and cash equivalents                         $   4,720     $   4,332
    Short-term debt securities held to maturity
        and time deposits, partially restricted          80,729        72,359
    Receivables                                           2,123         1,865
    Note receivable from related party                      250           250
    Other current assets                                    974           382
                                                      ----------    ----------
                  Total current assets                   88,796        79,188
                                                      ----------    ----------

Debt issuance costs                                          84            89
Long-term debt securities held to maturity               20,781        35,608
Property and equipment, net                               2,559         2,118
                                                      ----------    ----------
                                                      $ 112,220     $ 117,003
                                                      ==========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
    Accounts payable                                  $   1,065     $     925
    Accrued liabilities                                   1,061         1,123
    Accrued benefits                                         28            --
    Accrued leave                                           597           546
                                                      ----------    ----------
                  Total current liabilities               2,751         2,594
                                                      ----------    ----------

Convertible notes payable                                11,937        11,736
Deferred rent                                               230           216

Stockholders' equity:
    Common stock                                             27            27
    Additional paid-in capital                          227,465       227,430
    Accumulated deficit                                (130,190)     (125,000)
                                                      ----------    ----------
                  Total stockholders' equity             97,302       102,457

Commitments and contingencies
                                                      ----------    ----------
                                                      $ 112,220     $ 117,003
                                                      ==========    ==========

See accompanying notes to condensed financial statements.

                                       1
<PAGE>

                           CORVAS INTERNATIONAL, INC.

                       CONDENSED STATEMENTS OF OPERATIONS

                       In thousands, except per share data

                                   (unaudited)


                                                           Three Months Ended
                                                                March 31,
                                                         -----------------------
                                                           2002           2001
                                                         ---------     ---------
REVENUES:
    Royalties                                            $     27      $     30
    Research grants                                            --            39
                                                         ---------     ---------

         Total revenues                                        27            69
                                                         ---------     ---------

COSTS AND EXPENSES:
    Research and development                                4,724         5,203
    General and administrative                              1,267         1,199
                                                         ---------     ---------

         Total costs and expenses                           5,991         6,402
                                                         ---------     ---------

         Loss from operations                              (5,964)       (6,333)
                                                         ---------     ---------

OTHER INCOME (EXPENSE):
     Interest income                                          980         2,017
     Interest expense                                        (206)         (195)
                                                         ---------     ---------

                                                              774         1,822
                                                         ---------     ---------

        Net loss and other comprehensive loss            $ (5,190)     $ (4,511)
                                                         =========     =========

        Basic and diluted net loss per share             $  (0.19)     $  (0.16)
                                                         =========     =========

        Shares used in calculation of basic and
           diluted net loss per share                      27,503        27,359
                                                         =========     =========

See accompanying notes to condensed financial statements.

                                       2
<PAGE>

<TABLE>
                                 CORVAS INTERNATIONAL, INC.
                             CONDENSED STATEMENTS OF CASH FLOWS
                                        In thousands
                                        (unaudited)
<CAPTION>

                                                                        Three Months Ended
                                                                             March 31,
                                                                      ---------------------
                                                                         2002        2001
                                                                      ---------   ---------
<S>                                                                   <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                            $ (5,190)   $ (4,511)
  Adjustments to reconcile net loss to
    net cash used in operating activities:

       Depreciation and amortization                                       222         137
       Amortization of premiums and discounts on investments               273         (97)
       Amortization of debt issuance costs                                   5           5
       Non-cash interest expense on convertible notes payable              201         190
       Gain on sale of property and equipment                               (5)         --
       Stock compensation expense                                           17          53
       Changes in assets and liabilities:
            Increase in receivables                                       (258)       (146)
            Increase in other current assets                              (592)       (116)
            Increase (decrease) in accounts payable, accrued
               liabilities, accrued benefits and accrued vacation          157        (292)
            Increase in deferred rent                                       14          25
                                                                      ---------   ---------

                Net cash used in operating activities                   (5,156)     (4,752)
                                                                      ---------   ---------


CASH FLOWS FROM INVESTING ACTIVITIES:
          Purchases of investments held to maturity                     (9,020)    (38,735)
          Proceeds from maturity of investments held to maturity        10,115      33,545
          Proceeds from sale of investments held to maturity             5,089         648
          Proceeds from sale of property and equipment                       5          --
          Purchases of property and equipment                             (663)       (709)
                                                                      ---------   ---------

                Net cash provided by (used in) investing activities      5,526      (5,251)
                                                                      ---------   ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Net proceeds from issuance of common stock                        18          33
                                                                      ---------   ---------

                Net cash provided by financing activities                   18          33
                                                                      ---------   ---------

Net increase (decrease) in cash and cash equivalents                       388      (9,970)

Cash and cash equivalents at beginning of period                         4,332      14,153
                                                                      ---------   ---------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $  4,720    $  4,183
                                                                      =========   =========

See accompanying notes to condensed financial statements.

                                             3
</TABLE>
<PAGE>

                           CORVAS INTERNATIONAL, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)


(1)  The Company
     -----------

         Corvas International, Inc. (the "Company") was incorporated on March
27, 1987 under the laws of the State of California. In July 1993, the Company
reincorporated in the State of Delaware. The Company is focused on development
of drugs that target serine proteases, the largest human protease gene family,
for the treatment of cardiovascular disease and cancer.

(2)  Basis of Presentation
     ---------------------

         The interim financial information contained herein is unaudited but, in
management's opinion, includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. The condensed
financial statements should be read in conjunction with the Company's audited
financial statements and notes thereto for the year ended December 31, 2001
included in the Company's Annual Report on Form 10-K. Results for the interim
periods are not necessarily indicative of results for other interim periods or
for the full year.

(3)  Net Loss Per Share
     ------------------

         Net loss per share for the three months ended March 31, 2002 and 2001
is computed using the weighted-average number of common shares outstanding.
Options totaling 3,196,000 and 2,445,000 shares were excluded from the
calculation of diluted net loss per share for the three months ended March 31,
2002 and 2001 respectively. In addition, 3,312,000 and 3,349,000 shares from the
assumed conversion of the 5.5% convertible senior subordinated notes issued in
1999 have been excluded from this calculation as of March 31, 2002 and 2001,
respectively.

(4)  Debt Securities Held to Maturity
     --------------------------------

         Certain securities that were no longer in compliance with the Company's
investment policy were sold prior to maturity during the three months ended
March 31, 2002.

                                       4
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM WHAT IS DISCUSSED
IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE HEADING "RISK
FACTORS."

          THE TERMS "CORVAS," "WE," "US" AND "OUR" REFER TO CORVAS
INTERNATIONAL, INC.

OVERVIEW

         We are a biopharmaceutical company focused on the discovery and
development of novel drugs for the treatment of cardiovascular disease and
cancer. We are currently developing our lead product candidate, a novel
proprietary injectable anticoagulant known as rNAPc2, for the treatment of
unstable angina and non-ST-segment elevation myocardial infarction, or
UA/NSTEMI. In anticipation of studies in UA/NSTEMI, we have completed a Phase
IIa safety study in patients undergoing elective coronary angioplasty. By
coupling our established expertise in medicinal and combinatorial chemistry with
a genomics-driven approach, we are also working to develop drugs to treat
cancer. Our cancer research and development program is focused on exploiting
novel and known serine proteases, which constitute the largest gene family of
proteases in the human genome. Our goal is to develop therapeutic drugs that
slow or eradicate the growth and progression of solid tumors.

         Pfizer, our partner for the development of UK-279,276, a recombinant
protein formerly known as rNIF, recently completed preliminary analyses of the
multi-center Phase IIb study of UK-279,276 for the treatment of reperfusion
injury associated with ischemic stroke. While full analysis of the comprehensive
and complex dataset from this trial in acute stroke patients is ongoing, results
from the preliminary analyses of the data relating to the primary endpoint do
not support initiation of a Phase III trial in stroke. The final results from
this trial are expected to be reported following complete data analysis and
review, which we expect will be available mid-2002.

         We currently have no products for sale and are focused on research and
development and clinical trial activities. We have not been profitable on an
annual basis since inception and we anticipate that we will incur substantial
additional operating losses over the next several years as we progress in our
cardiovascular and cancer programs. To date, we have funded our operations
primarily through the sale of equity and debt securities, payments received from
collaborators and interest income. At March 31, 2002, we had an accumulated
deficit of $130.2 million. Although we expect that our sources of revenue, if
any, for the next several years will continue to primarily consist of interest
income and payments under collaborative agreements, we currently have no
collaborative agreements that include ongoing funding of our research and
development and we may not recognize any future revenues under our existing
collaborative agreements. We may not enter into any additional collaborative
agreements and may not recognize any revenue pursuant to collaborative
agreements in the future. Since none of our product candidates has yet advanced
beyond Phase II clinical trials, the process of developing our product
candidates will require significant additional research and development,
preclinical and clinical testing, and regulatory approvals prior to
commercialization of a product candidate. Pending appropriate regulatory
approvals, we intend to initiate a Phase II clinical study of rNAPc2 in
UA/NSTEMI patients in the second half of 2002. The primary objective of the
proposed Phase II trial is to determine a safe and effective dose of rNAPc2 for
the prophylaxis of ischemic complications of unstable angina, or UA, and
non-ST-segment elevation myocardial infarction, or NSTEMI. We also plan to


                                       5
<PAGE>

continue to build our preclinical cancer programs. Accordingly, we anticipate
that our research and development expenses for clinical trial activities, as
well as preclinical research and development, will continue to increase in 2002
and beyond. Together with modest growth in our general and administrative
expenses, we expect to incur substantial operating losses for the foreseeable
future. In addition, we continue to pursue and evaluate various possible
strategic transactions, including in-licensing or acquiring complementary
products, technologies or companies. If we in-license or acquire products,
technologies or companies, we expect that our operating expenses would increase
as a result.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 AND 2001

         REVENUES. Our operating revenues decreased to $27,000 in the three
months ended March 31, 2002 from $69,000 in the corresponding period of 2001.
This decrease was primarily attributable to the completion of our malaria
research grant in August 2001.

         We do not expect to receive any revenues under any of our existing
collaborative agreements in 2002. In the event that we enter into new
collaborative agreements, it is possible that we may recognize related revenue;
however, we cannot predict whether we will enter into new collaborative
agreements during 2002 or in subsequent years. Even if we do enter into new
collaborative agreements, we may not recognize any revenue under these
agreements in 2002 or in subsequent years.

         RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in
the quarter ended March 31, 2002 decreased to $4.7 million, or 79% of our total
expenses, compared to $5.2 million, or 81% in the corresponding quarter of 2001.
This $479,000 decrease was primarily attributable to expenses associated with
the manufacturing of rNAPc2 in the first half of 2001. This decrease was
partially offset by increased labor and related costs as the number of
scientists dedicated to our cancer programs has grown.

         Pending appropriate regulatory approvals, we expect to initiate a
double-blinded, placebo-controlled Phase II clinical trial of rNAPc2 for the
treatment of UA/NSTEMI in the second half of this year. In addition, we expect
our research and development expenses will also increase as we continue to
expand our cancer programs. Increased personnel costs, as well as patent and
licensing expenses, are expected to be the primary factors contributing to the
growth in our cancer-related expenses. As a result, we currently expect our 2002
research and development expenses to increase by approximately 20% over 2001
levels.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses in the three months ended March 31, 2002 increased to approximately
$1.3 million from approximately $1.2 million in the same quarter of 2001. This
$68,000 increase was mainly the result of increased administrative staffing.

         NET OTHER INCOME. Net other income in the first quarter of 2002 was
$774,000, compared to $1.8 million one year earlier. This $1.0 million decrease
was mainly attributable to lower balances available for investment and
significantly lower prevailing interest rates.

         We expect that we will continue to incur substantial additional
operating losses over the next several years as we pursue our clinical trials
and research and development efforts. We also expect both our expenses and
losses to fluctuate from quarter to quarter and that the fluctuations may, at
times, be substantial.

                                       6
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Since inception, our operations have been financed primarily through
public offerings and private placements of our equity and debt securities,
payments received through our collaborative agreements, and interest income
earned on cash and investment balances. Our principal sources of liquidity are
cash and cash equivalents, time deposits and short- and long-term held to
maturity debt securities, which, net of $303,000 in restricted time deposits,
totaled $105.9 million as of March 31, 2002. Working capital at March 31, 2002
was approximately $86.0 million. We invest available cash in accordance with an
investment policy set by our board of directors, which has established
objectives of preserving principal, maintaining adequate liquidity and
maximizing income. Our policy provides guidelines concerning the quality, term
and liquidity of investments. We presently invest our excess cash primarily in
debt instruments of corporations with strong credit ratings and
government-backed debt obligations. In the three months ended March 31, 2002, we
used net cash of $5.2 million in our operating activities and $5.5 million was
provided by our investing activities.

         In November 2000, we raised net proceeds of $107.4 million in a public
offering of our common stock. In August and October of 1999 we issued and sold,
in two private financings, a total of 2,000,000 shares of our common stock for
$2.50 per share and 5.5% convertible senior subordinated notes due in August
2006, or the convertible notes, in an aggregate principal amount of $10.0
million. Net proceeds of $14.8 million were raised in these financings. At the
option of the note holder, the principal balance of both notes is convertible
into shares of our common stock at $3.25 per share, subject to certain
adjustments. Interest on the outstanding principal amounts of these notes
accretes at 5.5% per annum, compounded semi-annually, with interest payable upon
redemption or conversion. Upon maturity, these notes will have an accreted value
of $14.6 million. At our option, the accreted interest portion of both notes may
be paid in cash or in our common stock priced at the then-current market price.
We have agreed to pay any applicable withholding taxes on behalf of the note
holder that may be incurred in connection with the accreted interest, which are
estimated and accrued at 30% of the annual accretion. We may redeem the notes
any time after August 18, 2002 upon payment of the outstanding principal and
accreted interest.

         In April 2002, we entered into an exclusive collaboration agreement
with Abgenix, Inc. to discover, develop and commercialize fully-human monoclonal
antibodies against two selected antigens from our portfolio of membrane-bound
serine proteases. Under the terms of the collaboration, Abgenix will use its
human antibody technologies to generate and select fully-human antibodies
against the Corvas targets. Both companies will have the right to co-develop and
commercialize, or, if co-development is not elected, to solely develop and
commercialize any antibody products discovered during the collaboration. Both
companies will share equally in the product development costs and any profits
from product sales of products successfully commercialized from any
co-development efforts.

         In September 2001, we entered into a collaboration agreement with Dyax
Corp. to discover, develop and commercialize novel cancer therapeutics focused
on serine protease inhibitors for two targets that we isolated and
characterized. Under the terms of this agreement, both companies will assume
joint development of any product candidates that may be identified and will
share commercialization rights and profits from any marketed products.

         In July 2001, we entered into an agreement with Incyte Genomics, Inc.
for a multi-year subscription to Incyte's LifeSeq(R) Gold database that we are
using in our cancer research and development programs focused on serine

                                       7
<PAGE>

proteases. The LifeSeq Gold database provides researchers with a view of the
entire human genome by integrating proprietary expressed sequence tag and
full-length gene sequence information, mapping data and public genomic sequence
information. We have non-exclusive rights to Incyte's full-length gene program
in addition to sequence-verified cDNA clones, or copies of genes to facilitate
the identification and validation of new drug targets in the serine protease
gene family. Our agreement requires us to pay an annual subscription fee and, in
the event that any products based on the information acquired from this database
are developed and commercialized, we would also be required to make milestone
and royalty payments.

         We entered into an exclusive license and development agreement with
Pfizer providing Pfizer with an exclusive worldwide license to further develop,
commercialize and market UK-279,276 as a therapeutic agent for stroke and other
indications, and Pfizer funded our internal research and development over a
two-year period that ended in March 1999. Pfizer is responsible for funding all
further developmentof UK-279,276, if any. The preliminary results of the recent
Phase IIb clinical trial conducted by Pfizer do not support initiation of a
Phase III clinical trial for UK-279,276. We cannot predict whether Pfizer will
elect to terminate our collaboration or elect to pursue additional clinical
trials. In the event that Pfizer elects to proceed with further clinical studies
on any indication, Pfizer may make certain milestone payments to us. If Pfizer
terminates our agreement, we will not receive the additional $27.0 million that
we otherwise may have received in additional milestone payments. We are not
obligated to fund any further development of UK-279,276.

         Over the next several years, we expect additional operating losses and
negative cash flows from operations. We currently expect our burn rate for 2002
to be in the low $30 million range, which assumes that we receive no revenue
from Pfizer. Our current estimate assumes that we commence our Phase II
UA/NSTEMI trial in the second half of 2002 and that we enter into additional
licenses in connection with our cancer programs. Based on our current estimates,
we believe that our available cash and investments should be sufficient to
satisfy our anticipated funding requirements for at least the next two years.

         Our material external commitments for the balance of 2002 and for 2003,
based on contractual obligations and/or our current estimates, are as follows:

                                            Payments Due/Estimated by Year
                                            ------------------------------

                                                  2002      2003
                                                --------  --------
     Commitments                                  (In thousands)
     -----------

         Operating lease                        $   977   $ 1,345
         Capital expenditures 1                   1,886     1,500
         Committed research and development 2     9,635    14,375
         Withholding on accreted interest 3          --        --
                                                --------  --------
                                                $12,498   $17,220
                                                ========  ========
--------

1) Includes costs estimated in our 2002 budget and 2003 projection. These
estimates may change for many reasons including, but not limited to, the reasons
listed above.

2) Includes both contractually-committed items and costs estimated for 2002 and
2003 for rNAPc2 and for our cancer programs. These future estimates may change
for many reasons including, but not limited to, the reasons listed above.

3) Interest on the outstanding principal amounts of our convertible notes
accretes at 5.5% per annum, compounded semi-annually, with interest payable upon
redemption or conversion. We have also agreed to pay any applicable withholding
taxes on behalf of the note holder. Assumes the convertible notes are not called
prior to maturity in 2006 and, therefore, no withholding is estimated to be paid
in 2002 or 2003.

                                       8
<PAGE>

         Our current estimate of our future burn rate and capital requirements
may change for many reasons, including, but not limited to:

         o        whether and when we begin our planned double-blinded,
                  placebo-controlled, dose-ranging Phase II clinical study of
                  rNAPc2 in patients with UA/NSTEMI;

         o        the rate of patient recruitment in our planned Phase II
                  clinical study of rNAPc2 in patients with UA/NSTEMI;

         o        the timing and magnitude of expenses incurred to further
                  develop rNAPc2;

         o        the costs and timing of regulatory approvals related to
                  rNAPc2;

         o        the progress on, and scope of, our cancer programs and other
                  internally-funded research and development;

         o        our success in entering into future collaborative agreements,
                  if any;

         o        the costs of, and our success in, acquiring and integrating
                  complementary products, technologies or companies, if any;

         o        competing technological and market developments;

         o        the costs we incur in obtaining and enforcing patent and other
                  proprietary rights; and

         o        the costs we incur in defending against potential infringement
                  of the patents of others or in obtaining a license to operate
                  under such patents.

         Our expected cash requirements may vary materially from those now
anticipated. We may not receive any additional amounts under any of our existing
collaborative agreements or under any future agreements, and we may not be
successful in raising additional capital through strategic or other financings
or through collaborative relationships. Our ability to raise additional funds
through the sale of securities depends in part on investors' perceptions of the
biotechnology industry, in general, and of Corvas, in particular. Market prices
for securities of biotechnology companies, particularly Corvas, have been highly
volatile and may continue to be volatile in the future. Accordingly, additional
funding may not be available on acceptable terms or at all. If additional funds
are raised by issuing securities, our stockholders will experience dilution,
which may be substantial, especially if our stock price remains at the current
low levels. If we are not able to raise adequate funds in the future, we may be
required to significantly delay, scale back or discontinue one or more of our
drug discovery programs, clinical trials or other aspects of our operations.

CRITICAL ACCOUNTING POLICIES

         Our significant accounting policies, which have been consistently
applied in all material respects, are more fully described in Note 2 to our
Notes to Financial Statements included in our Annual Report on Form 10-K.
Certain of our accounting policies require the application of judgment and
estimates by management, which may be affected by different assumptions and

                                       9
<PAGE>

conditions. These estimates are typically based on historical experience, terms
of existing contracts, trends in the industry and information available from
other outside sources, as appropriate. We believe the estimates and judgments
associated with our reported amounts are appropriate in the circumstances.
Actual results could vary from those estimates under different assumptions or
conditions.

         We consider our critical accounting policy to be revenue recognition.
We apply Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," which reflects the SEC's views on revenue recognition. We recognize
revenue from collaborative agreements as the related research and development
activities are performed under the terms of our agreements; any advance payments
received in excess of amounts earned are classified as deferred revenue.
Non-refundable license fees are recognized when we receive such payments, absent
any continuing involvement. We recognize milestone payments as revenue upon
achievement of the milestones specified in our various collaborative agreements.
We recognize research grant revenue as the related research is performed under
the terms of the grant.


Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         In accordance with our investment policy, we do not invest in
derivative financial instruments or any other market risk sensitive instruments.
Our available cash is invested in high quality fixed income investments that we
intend to hold to maturity. We believe that our interest rate market risk is
limited, and that we are not exposed to significant changes in fair value
because our investments are held to maturity and are primarily short-term in
nature. The fair value of each investment approximates its amortized cost.

         For purposes of measuring interest rate sensitivity, we have assumed
that the similar nature of our investments allow us to aggregate their value.
The carrying amount of all held to maturity investments as of March 31, 2002 is
$101.2 million and they have a weighted-average interest rate of 3.6%.

         Considering our investment balances as of March 31, 2002, rates of
return and the fixed rate nature of the convertible notes payable that were
issued in the second half of 1999, an immediate 10% change in interest rates
would not have a material impact on our financial condition or results of
operations.

         Since the $10.0 million aggregate principal of the 5.5% convertible
senior subordinated notes that we issued is convertible into common stock at
$3.25 per share at the option of the holder, there is underlying market risk
related to an increase in our stock price or an increase in interest rates that
may make conversion of these notes into common stock beneficial to the holder.
Conversion of these convertible notes will have a dilutive effect on our common
stock.

RISK FACTORS

WE HAVE A HISTORY OF OPERATING LOSSES AND WE MAY NEVER BECOME PROFITABLE.

         We have experienced significant operating losses since our inception in
1987. At March 31, 2002, we had an accumulated deficit of approximately $130.2
million. We have not earned any revenues from commercial sales of any
therapeutic products. We have funded our operations principally from sales of
our equity and debt securities, payments received from collaborators and
interest income. We do not currently have any committed sources of external
funding and we do not expect to receive any revenue under any of our existing
agreements. We expect that we will continue to incur substantial additional
operating losses over the next several years as we pursue our clinical trials
and research and development efforts. To become profitable, we, either alone or
with collaborators, must successfully identify, develop, manufacture and market
new product candidates. We do not expect to generate revenues from product sales
or royalties for a number of years, and it is possible that we will never have
significant product sales revenue or receive significant royalties on our
licensed product candidates.

                                       10
<PAGE>

OUR LEAD PRODUCT CANDIDATE HAS NOT YET ADVANCED BEYOND PHASE II CLINICAL TRIALS
AND WE DO NOT HAVE, AND MAY NEVER DEVELOP, ANY COMMERCIAL DRUGS OR OTHER
PRODUCTS THAT GENERATE REVENUES.

         We are at an early stage of development as a biopharmaceutical company,
and we do not have any commercial products. Our lead product candidate, rNAPc2,
which has not yet advanced beyond Phase II clinical trials, will require
significant additional development, clinical trials, regulatory clearances and
additional investment before it can be commercialized. Our product development
efforts may not lead to commercial drugs, either because the product candidates
fail to be safe and effective in clinical trials or because we have inadequate
financial or other resources to pursue the program through the clinical trial
process. We do not expect to be able to market rNAPc2 or any future product
candidates for a number of years, if at all. If we are unable to develop any
commercial drugs, or if such development is delayed, we will be unable to
generate revenues, which may require that we raise additional capital through
financings or cease our operations.

PFIZER MAY TERMINATE ITS COLLABORATION WITH US AND WE MAY NOT PURSUE THE
DEVELOPMENT OF UK-279,276.

         Pfizer, our partner for the development of UK-279,276, recently
completed preliminary analyses in the Phase IIb efficacy trial of UK-279,276 for
the prevention of reperfusion injury associated with ischemic stroke. While full
analysis of the complete dataset from this trial are ongoing, results from the
preliminary analyses of the data relating to the primary endpoint do not support
initiation of a Phase III trial in stroke. The final results from this trial
will be reported following complete data analysis and review, which we expect
will be available in mid-2002. Pfizer has the right to terminate our agreement
at any time upon 60 days' written notice to us. Upon termination of the
agreement, other than due to our material breach of the agreement, the rights to
UK-279,276 revert to us and we may be granted a license to any jointly developed
patents. The license may bear royalties depending upon the timing of the
termination by Pfizer. Depending on the final results from the Phase IIb trial,
we may not pursue further development of UK-279,276.

WE ARE DEPENDENT ON THE SUCCESSFUL OUTCOME OF THE CLINICAL TRIALS FOR OUR LEAD
PRODUCT CANDIDATE, RNAPC2, AND ANY FUTURE PRODUCT CANDIDATES, IF ANY.

         We have completed a Phase IIa clinical trial of rNAPc2 in patients
undergoing elective coronary angioplasty to establish safety prior to conducting
additional clinical trials in patients with UA/NSTEMI. Subject to government
approval, we intend to enter rNAPc2 into a Phase II clinical study in UA/NSTEMI
patients in the second half of 2002.

         Our business prospects depend on our ability, alone or with
collaborators, to complete patient enrollment in clinical trials, to obtain
satisfactory results, to obtain required regulatory approvals and to
successfully commercialize our products. Many factors affect patient enrollment,
including the size of the patient population, the proximity of patients to
clinical sites and the eligibility criteria for the trial. Delays in patient
enrollment in the trials may result in increased costs, program delays, or both,
which could slow down our product development and approval process. In addition,
we may not be able to commence the planned Phase II clinical trial for rNAPc2 in
UA/NSTEMI patients when anticipated in the second half of 2002 due to regulatory
or other reasons. If clinical trials for any of our product candidates are not
completed or conducted as planned, due to any reason including, but not limited
to, the product candidate not being safe or effective, the commercialization of
our product candidates would be delayed or prevented, our business would be
materially harmed and our stock price would decline. In addition, if we do not
receive required regulatory approvals, we may never commercialize any products
and therefore will never be profitable.

OUR PRECLINICAL AND CLINICAL TESTING RESULTS ARE UNCERTAIN. IF TRIAL RESULTS ARE
NEGATIVE, WE MAY BE FORCED TO STOP DEVELOPING PRODUCT CANDIDATES IMPORTANT TO
OUR FUTURE.

         The results of preclinical studies and initial clinical trials of our
product candidates do not necessarily predict the results from later-stage
clinical trials. For example, Pfizer conducted preclinical trials, several Phase
I trials and a Phase IIa trial of UK-279,276, but the preliminary analyses of
the data relating to the primary endpoint of the Phase IIb trial do not support
initiation of a Phase III trial for UK-279,276 in stroke. Product candidates in
later stages of clinical trials may fail to show the desired safety and efficacy
endpoints despite having progressed through initial clinical testing. In
addition, the data collected from clinical trials of our product candidates may
not be sufficient to support FDA or other regulatory approval.

                                       11
<PAGE>

         Our product candidates may not be safe for human use. Administering any
product candidates we may develop to humans may produce undesirable side
effects. These side effects could interrupt, delay or cause us or the FDA to
halt clinical trials of our product candidates and could result in the FDA or
other regulatory authorities denying approval of our product candidates for any
or all targeted indications. Along with the FDA or other regulatory authorities,
we or our collaborators may suspend or terminate clinical trials at any time.

THE FDA HAS NEVER APPROVED ANY CORVAS PRODUCT CANDIDATE AND WE MAY NEVER BE
PERMITTED TO COMMERCIALIZE ANY PRODUCT WE MAY DEVELOP.

         We have never had a product candidate advance beyond the early stages
of development and none have received the regulatory clearance required from the
FDA or any other regulatory body to be commercially marketed and sold. While our
goal is to commence commercial sales of rNAPc2 and any other product candidates
we may develop, we may not achieve this goal for any product candidate in the
expected timeframe, or at all. The regulatory clearance process typically takes
many years and is extremely expensive, and regulatory clearance is never
guaranteed. If we fail to obtain regulatory clearance for our current or future
product candidates, we will be unable to market and sell any products and
therefore may never be profitable.

         As part of the regulatory clearance process, we must conduct, at our
own expense or our collaborators' expense, preclinical research and clinical
trials for each product candidate to demonstrate safety and efficacy. In
addition, it is difficult to predict if the FDA will agree with the design of
our clinical trials. Even though our Phase II trial results for a particular
compound and a specific indication may indicate that the compound appears to be
safe and effective, the FDA may suggest or even require that additional Phase II
clinical trials be completed before advancing to Phase III trials. The number of
preclinical studies and clinical trials that will be required varies depending
on the product, disease or condition that the product is in development for, and
any regulations applicable to a particular product.

         The regulatory process typically also includes a review of the
manufacturing process to ensure compliance with applicable standards. The FDA
can delay, limit or not grant approval for many reasons, including:

         o        a product candidate may not demonstrate sufficient safety or
                  efficacy;

         o        FDA officials may interpret data from preclinical testing and
                  clinical trials in different ways than we interpret it, or
                  require data that is different from what was obtained in our
                  clinical trials;

         o        the FDA might not approve our manufacturing processes or
                  facilities, or the processes or facilities of our
                  collaborators; and

         o        the FDA may change its approval policies or adopt new
                  regulations.

         The FDA also may approve a product candidate for fewer indications than
requested or may condition approval on the performance of post-marketing studies
for a product candidate. Even if we receive FDA and other regulatory approvals,
our product candidates may later exhibit adverse effects that limit or prevent
their widespread use or that force us to withdraw those product candidates from
the market. In addition, any marketed product and its manufacturer continue to
be subject to strict regulation after approval. Any unforeseen problems with an
approved product or any violation of regulations could result in restrictions on
the product, including its withdrawal from the market.

         The process of obtaining approvals in foreign countries is subject to
delay and failure for many of the same reasons. Any delay in, or failure to
receive approval for, any of our products could materially harm our business,
financial condition and results of operations.

                                       12
<PAGE>

IF WE FAIL TO OBTAIN ADDITIONAL FINANCING, WE MAY BE UNABLE TO COMPLETE THE
DEVELOPMENT AND COMMERCIALIZATION OF RNAPC2 AND ANY OTHER PRODUCT CANDIDATES WE
MAY DEVELOP, OR TO CONTINUE OUR RESEARCH AND DEVELOPMENT PROGRAMS.

         Our operations have consumed substantial amounts of cash since
inception. Our sources of revenue have been primarily limited to research
funding, license fees and milestone payments from our corporate collaborators.
In 2001, we had a net loss of approximately $23.4 million and we anticipate that
our 2002 net loss will be larger than in 2001. We expect that we will continue
to spend substantial amounts on research and development, including amounts
spent on our planned Phase II UA/NSTEMI trial of rNAPc2 and conducting clinical
trials for other product candidates, as well as expanding our cancer drug
development programs. Our future burn rate and capital needs will depend on many
factors, including, but not limited to, the timing of, and patient recruitment
in, our planned Phase II trial of rNAPc2 and progress in our cancer programs.

         We do not have committed external sources of funding. If we are unable
to raise additional capital when required or on acceptable terms, we may have to
significantly delay, scale back or discontinue one or more of our drug discovery
programs, clinical trials or other aspects of our operations. We also could be
required to:

         o        seek corporate collaborators for programs at an earlier stage
                  than would be desirable to maximize the rights to future
                  product candidates that we retain; and/or

         o        relinquish or license rights to technologies, product
                  candidates or products that we would otherwise seek to develop
                  or commercialize ourselves on terms that are less favorable to
                  us than might otherwise be available.

IF WE DO NOT FIND COLLABORATORS FOR RNAPC2 AND FOR ANY OTHER PRODUCT CANDIDATES
WE MAY DEVELOP, WE MAY HAVE TO REDUCE OR DELAY OUR RATE OF PRODUCT DEVELOPMENT
AND/OR INCREASE OUR EXPENDITURES.

         Our strategy for developing, manufacturing and commercializing our
products includes entering into various relationships with pharmaceutical and/or
biotechnology companies to advance our programs and reduce our expenditures on
each program. Currently, the only collaborative agreement that we have pursuant
to which we believe there is ongoing research and development related to a
specific compound is our agreement with Pfizer, which may be terminated based on
the final results from the Phase IIb trial in stroke. We may not be able to
negotiate additional collaborations on acceptable terms or at all. If we are not
able to establish additional collaborative arrangements, in the future we may
have to reduce or delay further development of rNAPc2 or some of our cancer
programs and/or increase our expenditures and undertake further development
activities at our own expense. Future clinical development of rNAPc2 in deep
vein thrombosis, or DVT, will depend on securing an appropriate development
partner. If we elect to increase our expenditures to fund our development
programs, we will need to obtain additional capital, which may not be available
on acceptable terms or at all.

         We will have to rely on our collaborators for all aspects of the
programs, including the conduct of research and development that the
collaborator chooses to conduct, clinical trials and the regulatory approval
process. We will have no control over the amount and timing of resources that
our collaborators dedicate to the development of our licensed product
candidates, if any. Our ability to generate royalties from our collaborators
depends on our collaborators' abilities to establish the safety and efficacy of
our product candidates, obtain regulatory approvals and achieve market
acceptance of our products. If Pfizer decides to discontinue research or
clinical trials of UK-279,276 for any indications, our potential for revenue
from UK-279,276 will be dramatically reduced. Pfizer may terminate its agreement
with us on 60 days' notice.

         Collaborative agreements generally pose the following risks:

         o        collaborators may not pursue further development and
                  commercialization of compounds resulting from collaborations
                  or may elect not to renew research and development programs;

                                       13
<PAGE>

         o        collaborators may delay clinical trials, underfund a clinical
                  trial program, stop a clinical trial or abandon a product
                  candidate, repeat or conduct new clinical trials, require a
                  new formulation or encounter other manufacturing difficulties
                  of a product candidate for clinical testing;

         o        collaborators could independently develop, or develop with
                  third parties, products that could compete with our future
                  products;

         o        the terms of our agreements with current or future
                  collaborators may not be favorable to us in the future;

         o        a collaborator with marketing and distribution rights to one
                  or more products may not commit enough resources to the
                  marketing and distribution of our products, limiting our
                  potential revenues from the commercialization of a product;

         o        disputes may arise delaying or terminating the research,
                  development or commercialization of our product candidates, or
                  result in significant litigation or arbitration; and

         o        collaborations may be terminated and we will experience
                  increased capital requirements if we elect to pursue further
                  development of the product candidate.

         In addition, there continues to be a significant number of business
combinations among and between large pharmaceutical and biopharmaceutical
companies that have resulted in a reduced number of potential future
collaborators. If business combinations involving our collaborators were to
occur, the effect could be to diminish, terminate or cause delays in one or more
of our product development programs.

IF WE ARE SUCCESSFUL IN ACQUIRING COMPLEMENTARY PRODUCTS, TECHNOLOGIES OR
COMPANIES, OUR CASH REQUIREMENTS MAY INCREASE SIGNIFICANTLY.

         We continue to actively pursue and evaluate various opportunistic
strategic transactions, including in-licensing or acquiring complementary
products, technologies or businesses. If we in-license or acquire products,
technologies or companies, we expect that our operating expenses and cash
requirements would increase as a result, and such increase could be significant.
However, we may not be successful in our efforts to acquire complementary
products, technologies or companies. Even if we are successful in integrating
third-party products or technologies that we might gain access to, such
acquisitions may not help to advance our programs and may not ultimately be
consistent with our overall objectives.

OUR COMPETITORS MAY DEVELOP AND MARKET DRUGS THAT ARE LESS EXPENSIVE, MORE
EFFECTIVE, OR SAFER, OR REACH THE MARKET SOONER, WHICH MAY DIMINISH OR ELIMINATE
THE COMMERCIAL SUCCESS OF ANY PRODUCTS WE MAY COMMERCIALIZE.

         The biopharmaceutical market is highly competitive. We expect that the
competition from other biopharmaceutical companies, pharmaceutical companies,
universities and public and private research institutions will increase. Almost
all of the larger biopharmaceutical companies have developed, or are attempting
to develop, products that will compete with products we may develop, including
some that are in advanced stage clinical trials. In particular, many other
companies and institutions have active cancer programs against which ours may
compete. It is possible that our competitors will develop and market products
that are less expensive and more effective than our future products or that will
render our products obsolete. It is also possible that our competitors will
commercialize competing products before any of our products are marketed. Many
of our competitors have substantially greater financial, technical, research and
other resources than we do. We may not have the financial resources, technical
expertise or marketing, distribution or support capabilities to compete
successfully.

                                       14
<PAGE>

FAILURE TO RETAIN OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER, OUR CHIEF
SCIENTIFIC OFFICER AND OTHER KEY PERSONNEL COULD DECREASE OUR ABILITY TO OBTAIN
FINANCING, CONDUCT CLINICAL TRIALS OR DEVELOP OUR PRODUCT CANDIDATES.

         We depend on our key personnel, particularly our President and Chief
Executive Officer, Randall E. Woods, and our Chief Scientific Officer, George P.
Vlasuk, Ph.D. The loss of either of these individuals may prevent us from
achieving our business objective of commercializing our product candidates. Both
of these employees have employment agreements with us, but the agreements
provide for "at-will" employment with no specified term. In addition, we
maintain key man life insurance for Dr. Vlasuk in the amount of $1.0 million.
Our future success will also depend in large part on our continued ability to
attract and retain other highly qualified scientific, technical and management
personnel, as well as personnel with expertise in clinical testing and
governmental regulation. We face intense competition for personnel from other
companies, universities, public and private research institutions, government
entities and other organizations. If we are unsuccessful in our recruiting and
retention efforts, our business operations will be harmed.

BECAUSE WE HAVE LIMITED MANUFACTURING EXPERIENCE AND RELY ON THIRD-PARTY
MANUFACTURERS, WE ARE UNABLE TO CONTROL THE AVAILABILITY OF, AND MANUFACTURING
COSTS FOR, OUR PRODUCT CANDIDATES.

         In order to be successful, our product candidates must be capable of
being manufactured in sufficient quantities, in compliance with regulatory
requirements, and at an acceptable cost. We have only limited experience in
pilot scale manufacturing. For larger-scale production, which is required for
clinical testing, we expect that we will continue to rely on third parties to
manufacture our product candidates. If we cannot contract for large-scale
manufacturing capabilities on acceptable terms, or if we encounter delays or
difficulties with manufacturers, we may not be able to conduct clinical trials
as planned. This would delay or cause us to halt submission of our product
candidates for regulatory clearance, and may prevent us from selling our
products and achieving profitability. Also, third-party manufacturers may be
unable to manufacture any product candidate we develop in commercial quantities
on a cost-effective basis.

         We may need to expand our existing relationships or establish new
relationships with third-party manufacturers for our current and future product
candidates. We may be unable to establish or maintain relationships with
third-party manufacturers on acceptable terms, or at all. Our dependence on
third parties may reduce our profit margins and delay or limit our ability to
develop and commercialize our products on a timely and competitive basis.
Furthermore, third-party manufacturers may encounter manufacturing or quality
control problems in connection with the manufacture of our product candidates
and may be unable to obtain or maintain the necessary governmental licenses and
approvals to manufacture any product candidates. Any such failure could delay or
preclude receiving regulatory approvals to sell our product candidates.

IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, WE MAY NOT BE ABLE TO
COMPETE AS EFFECTIVELY.

         Our success depends in part on our ability to obtain and enforce patent
protection for our products, both in the United States and other countries, and
operate without infringing the proprietary rights of third parties. The scope
and extent of patent protection for our product candidates is uncertain and
frequently involves complex legal and factual questions. We cannot predict the
breadth of claims that will be allowed and issued in patents related to
biotechnology or pharmaceutical applications. Once patents have issued, we
cannot predict how the claims will be construed or enforced. In addition,
statutory differences between countries may limit the protection we can obtain
on some of our inventions outside of the United States. For example, methods of
treating humans are not patentable in many countries outside of the United
States. We rely on patent and other intellectual property protection to prevent
our competitors from developing, manufacturing and marketing products based on
our technology. Our patents may not be enforceable and they may not afford us
protection against competitors, especially since there is a lengthy lead time
between when a patent application is filed and when it is actually issued.

                                       15
<PAGE>

Because of this, we may infringe on intellectual property rights of others
without being aware of the infringement. If a patent holder believes that one of
our product candidates infringes on their patent, they may sue us even if we
have applied, or received patent protection, for our technology. If another
party claims we are infringing their technology, we could face a number of
issues, including the following:

         o        defending a lawsuit, which is very expensive and time
                  consuming;

         o        paying a large sum for damages if we are found to be
                  infringing;

         o        being prohibited from selling or licensing our products or
                  product candidates until we obtain a license from the patent
                  holder, who may refuse to grant us a license or only agree to
                  do so on unfavorable terms. Even if we are granted a license,
                  we may have to pay substantial royalties or grant
                  cross-licenses to our patents; and

         o        redesigning our drug so it does not infringe on the patent
                  holder's technology. This may not be possible and, even if
                  possible, it would require substantial additional capital and
                  would delay commercialization.

         The coverage claimed in a patent application can be significantly
narrowed before a patent is issued, either in the United States or abroad. We do
not know whether any of our pending or future patent applications will result in
the issuance of patents. To the extent patents have been issued or will be
issued, we do not know whether these patents will be subjected to further
proceedings limiting their scope, will provide significant proprietary
protection or competitive advantage, or will be circumvented or invalidated.
Furthermore, patents already issued to us, or patents that may issue on our
pending applications, may become subject to dispute, including interference
proceedings in the United States to determine priority of invention or
opposition proceedings in foreign countries contesting the validity of issued
patents.

         We also rely on trade secrets, proprietary know-how and continuing
inventions to develop and maintain our competitive position. While we have
procedures to protect our trade secrets, some of our current or former
employees, consultants or scientific advisors, or current or prospective
corporate collaborators, may unintentionally or willfully disclose our
confidential information to competitors or use our proprietary technology for
their own benefit. Furthermore, enforcing a claim alleging the infringement of
our trade secrets would be expensive and difficult to prove, making the outcome
uncertain. Our competitors may also independently develop equivalent knowledge,
methods and know-how or gain access to our proprietary information through some
other means.

         Since we collaborate with third parties on some of our technology,
there is also the risk that disputes may arise as to the rights to technology or
drugs developed in collaboration with other parties.

IF WE BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS, THE DAMAGES MAY EXCEED OUR
INSURANCE.

         Since we conduct clinical trials on humans, we face the risk that the
use of our product candidates will result in adverse effects. These risks will
exist even for products that may be cleared for commercial sale. Although we
maintain liability insurance of $10.0 million for our product candidates in
clinical trials, the amount of insurance coverage we currently hold may not be
adequate to protect us from any liabilities. Furthermore, coverage is becoming
increasingly expensive and we may not be able to maintain or obtain insurance at
a reasonable cost or in sufficient amounts to protect us against potential
losses. We may not have sufficient resources to pay for any liabilities
resulting from a claim beyond the limit of our insurance coverage.

                                       16
<PAGE>

THE REIMBURSEMENT STATUS OF NEWLY APPROVED HEALTHCARE DRUGS IS UNCERTAIN AND
FAILURE TO OBTAIN ADEQUATE REIMBURSEMENT COULD LIMIT OUR ABILITY TO MARKET ANY
PRODUCTS WE MAY DEVELOP AND DECREASE OUR ABILITY TO GENERATE REVENUE.

         There is significant uncertainty related to the reimbursement of newly
approved pharmaceutical products. Our ability, and that of our collaborators, to
commercialize our products in both domestic and foreign markets will partially
depend on the reimbursements obtained from third-party payors such as government
health administration authorities, private health insurers, managed care
programs and other organizations. Third-party payors are increasingly attempting
to contain healthcare costs by limiting both coverage and the level of
reimbursement of new pharmaceutical products. Cost control initiatives could
decrease the price that we, or our collaborators, would receive for our products
and affect our ability to commercialize any products we may develop so that the
sale of our drug would not be economically feasible. If third parties fail to
provide reimbursement for any drugs we may develop, consumers and doctors may
not choose to use our products, and we may not realize an acceptable return on
our investment in product development.

IF WE ARE UNABLE TO CREATE SALES, MARKETING AND DISTRIBUTION CAPABILITIES OR
ENTER INTO AGREEMENTS WITH THIRD PARTIES TO PERFORM THESE FUNCTIONS, WE WILL NOT
BE ABLE TO COMMERCIALIZE OUR PRODUCTS.

         Because we do not have any marketed products, we have virtually no
experience in sales, marketing and distribution. To directly market and
distribute any products we may develop, we must build a substantial marketing
and sales force with appropriate technical expertise and supporting distribution
capabilities. Alternatively, we may obtain the assistance of a pharmaceutical
company or other entity with a large distribution system and a large direct
sales force. We may not be able to establish sales, marketing and distribution
capabilities of our own or enter into such arrangements with third parties in a
timely manner or on acceptable terms. To the extent that we enter into
co-promotion or other licensing arrangements, our product revenues are likely to
be lower than if we directly marketed and sold our products, and any revenues we
receive will depend upon the efforts of third parties, which efforts may not be
successful.

OUR OPERATIONS INVOLVE HAZARDOUS MATERIALS AND WE MUST COMPLY WITH ENVIRONMENTAL
LAWS AND REGULATIONS, WHICH CAN BE EXPENSIVE.

         Our research and development activities involve the controlled use of
hazardous materials, including chemicals and radioactive and biological
materials. Our operations also produce hazardous waste products. We are subject
to a variety of federal, state and local regulations relating to the use,
handling and disposal of these materials. We generally contract with third
parties for the disposal of such substances, and store our low level radioactive
waste at our facility until the materials are no longer considered radioactive
because there are no facilities permitted to accept such waste in California or
neighboring states. While we believe that we comply with current regulatory
requirements, we cannot eliminate the risk of accidental contamination or injury
from these materials. We may be required to incur substantial costs to comply
with current or future environmental and safety regulations. In the event of an
accident or contamination, we would likely incur significant costs associated
with civil penalties or criminal fines and in complying with environmental laws
and regulations.

OUR STOCK HAS BEEN, AND MAY CONTINUE TO BE, EXTREMELY VOLATILE, AND YOUR
INVESTMENT IN OUR COMMON STOCK COULD DECLINE IN VALUE.

         Our stock price has recently suffered a sharp decline, and will likely
continue to be extremely volatile. As with many other companies, our stock price
will likely continue to be subject to wide fluctuations in response to a variety
of factors, many of which are beyond our control, and include the following:

         o        announcements and results of our clinical trials, or those of
                  our competitors;

         o        changes in the market valuations and perceptions of
                  biotechnology companies;

         o        results of the government clearance and approval process for
                  rNAPc2 or any of our future products, as well as competing
                  products;

                                       17
<PAGE>

         o        developments in our relationships with our existing or any
                  future collaborators;

         o        fluctuations in our operating results;

         o        announcements of technological innovations or new products or
                  services by us or by our competitors;

         o        developments related to patents or other proprietary rights of
                  us or others;

         o        comments, or changes in financial estimates, by securities
                  analysts;

         o        actions by governmental regulatory agencies;

         o        announcements by us or our competitors of acquisitions,
                  strategic relationships, joint ventures or capital
                  commitments;

         o        developments in domestic and international affairs or
                  governmental regulations;

         o        additions or departures of our key personnel;

         o        sales of our common stock in the open market; and

         o        general market conditions and other events or factors,
                  including factors unrelated to our performance or the
                  performance of our competitors.

ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION, BYLAWS AND
STOCKHOLDER RIGHTS PLAN AND UNDER DELAWARE LAW MAY ADVERSELY AFFECT A POTENTIAL
TAKEOVER AND COULD PREVENT STOCKHOLDERS FROM RECEIVING A FAVORABLE PRICE FOR
THEIR SHARES.

         Provisions in our certificate of incorporation and bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in our control, even if the transaction would benefit our stockholders. These
provisions:

         o        authorize our board of directors, without requiring
                  stockholder approval, to issue up to 8.25 million shares of
                  "blank check" preferred stock to increase the number of
                  outstanding shares and prevent a takeover attempt;

         o        limit who has the authority to call a special meeting of
                  stockholders;

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

         o        require the approval of holders of at least 66 2/3% of our
                  voting stock as a condition to a merger or other specified
                  business transactions with, or proposed by, a holder of 15% or
                  more of our voting stock.

         Further, our board of directors has adopted a stockholder rights plan,
commonly known as a "poison pill," that may delay or prevent a change in
control.

ISSUANCE OF SHARES IN CONNECTION WITH FINANCING TRANSACTIONS OR UNDER STOCK
PLANS AND OUTSTANDING CONVERTIBLE NOTES WILL DILUTE CURRENT STOCKHOLDERS.

         We maintain stock plans under which employees, directors and certain
consultants can acquire shares of our common stock through the exercise of stock
options and other purchase rights. We also have outstanding convertible notes.
You will incur dilution upon exercise of our outstanding options and convertible
notes. If we raise additional funds by issuing additional stock, further
dilution to our stockholders will result, and new investors could have rights
superior to existing stockholders.

                                       18
<PAGE>

                          PART II -- OTHER INFORMATION


Item 1.  LEGAL PROCEEDINGS

         From time to time, we are involved in certain litigation arising out of
our operations. We maintain liability insurance, including product liability
coverage, in amounts our management believes is adequate. We are not currently
engaged in any legal proceedings that we expect would materially harm our
business or financial condition.

Item 2.  CHANGES IN SECURITIES

         None

Item 3.  DEFAULTS UPON SENIOR SECURITIES

         None

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

         None

Item 5.  OTHER INFORMATION

         None

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.       Exhibits

                   None

         b.       Reports on Form 8-K

                  There were no reports on Form 8-K filed for the quarter ended
March 31, 2002.

                                       19
<PAGE>

                                    SIGNATURES


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


                                   CORVAS INTERNATIONAL, INC.



Date: May 13, 2002                 By:    /s/ RANDALL E. WOODS
                                      ------------------------------------------
                                          Randall E. Woods
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)




Date: May 13, 2002                 By:    /s/ CAROLYN M. FELZER
                                      ------------------------------------------
                                          Carolyn M. Felzer
                                          Vice President and Controller
                                          (Principal Financial Officer)


                                       20